Then Max Brodén, Senior Executive Vice President and Chief Financial Officer of Aflac Incorporated, will provide more detail on this quarter's financial results, including our capital and liquidity. These topics are also addressed in the materials we posted with our earnings release, financial supplement, and quarterly Chief Financial Officer video update on investors.aflac.com. As I mentioned earlier, the earnings release with reconciliations of certain non-U.S. Aflac Incorporated reported net earnings per diluted share of $1.63 and adjusted earnings per diluted share of $1.75.
During this quarter, both the refreshed Tsumitasu product and Anshin Palette medical insurance product, which we launched in December 2025, delivered strong sales growth year-over-year. Turning to Aflac U.S., we continue to focus on pursuing profitable growth with an eye on maintaining strong underwriting discipline and premium persistency. We generated a 2.6% increase in year-over-year sales in the second quarter. We generated a 2.3% increase in net earned premium for the quarter and maintained strong premium persistency of 79.4%.
has continued its prudent approach to expense management and maintained a solid pre-tax margin of 20.9%. Our operations generated strong capital and cash flows on an ongoing basis as we remain committed to prudent liquidity and capital management. This financial strength is the foundation that backs up our promise to the policyholders, balanced with financial flexibility and tactical capital deployment. I am pleased with the company's financial strength, which supports our capital deployment.
| Metric | Period | Current guidance |
|---|---|---|
| Aflac Japan sales | FY2026 | expect to exceed 2025; JPY 80 billion remains a possibility but not assured |
| Japan total benefit ratio | FY2026 (ex-Q3 actuarial review) | high end of 60%-63% range |
| U.S. net earned premium growth | FY2026 | just below the 3%-6% range |
| U.S. net earned premium CAGR | 2025-2027 | 3%-6% |
| Japan expense ratio | long term | 20%-23% range, currently near low end |
| Reinsurance net investment income uplift | annualized run rate | over $50 million from portfolio repositioning |
| Metric | YoY | Note |
|---|---|---|
| Adjusted EPS (ex-FX) | +1.1% to $1.80 | Focused execution of strategy; results viewed as solid |
| Aflac Japan sales | -5.6% to JPY 11 billion (first half +7%) | Tough comparison against 2025 Miraito Cancer Insurance launch; delayed direct mail campaigns now back on track |
| Aflac U.S. sales | +2.6% | Momentum in group voluntary products and network dental and vision |
| Aflac U.S. net earned premium | +2.3% | Group business growth; group earned premium up 13% |
| Japan net earned premiums (JPY) | -3.7% (underlying -1.4%) | Impact of reinsurance, paid-up policies and deferred profit liability |
| Japan total benefit ratio | -250 bps to 64% | Favorable trends in cancer and hospitalization; ~60 bps from reserve remeasurement gains |
| Japan pre-tax margin | +230 bps to 34.3% | Lower benefit and expense ratios |
| U.S. total benefit ratio | +220 bps to 49.5% | Increase in incurred group disability claims related to favorable results in the prior quarter |
| U.S. pre-tax margin | -160 bps to 20.9% | Compared against a strong quarter a year ago; prudent expense management |
| Japan adjusted net investment income (JPY) | -2.9% | Lower call income and lower dollar floating rate income, partly offset by weaker yen and higher dollar fixed rate income |
| U.S. adjusted net investment income | +0.5% | Higher call and fixed rate income offset by lower floating rate and short-term income |
| Japan premium persistency | 92.7% (in line with last quarter) | Somewhat elevated lapse and reissue on recently launched products |
| U.S. premium persistency | 79.4%, +20 bps | Prudent underwriting discipline |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Reinsurance strategy expansion | ceding limit of up to 10% of U.S. GAAP assets | revised to up to 30% of FSA reserves to reduce risk, improve balance sheet efficiency and lift ROE; viewed as a significant long-term supplemental business | — |
| First sector / Tsumitasu growth in Japan | traditionally a third sector company; first sector in-force declining since 2016 WAYS exit | Tsumitasu ~20% of total sales, delivering strong risk-adjusted returns and expanding younger customer base with cross-sell into cancer/medical | — |
| Portfolio repositioning in higher-rate environment | — | harvested FX gains on dollar portfolio to offset losses on lower-yielding bonds; big forward opportunity, more work planned into Q3 | — |
| Capital deployment and shareholder returns | — | $1.3 billion returned in the quarter, 43 straight years of dividend increases, tactical opportunistic buybacks | — |
| M&A discipline | historically small deals | open to larger/strategic deals but must pass a strenuous test; pleased with turnaround of previously acquired small companies | — |
| Inflation and macro pressures in Japan | — | Japan inflation near 3% plus imported inflation from weak yen; expenses well-managed; monitoring Middle East-driven energy/inflation risks | — |