Aflac Reports Growth in Supplemental Health Sales Amid Rising Costs

Aflac Incorporated has reported a boost in U.S. supplemental health sales for Q2 2026, despite a rise in claims expenses impacting profit margins. Employer health benefit expenses are escalating dramatically, affecting both insurers and brokers involved in these products.

Within the U.S. market, Aflac achieved a 2.3% year-over-year increase in net earned premiums, reaching $1.5 billion in the second quarter. New annualized premium sales rose 2.6% to $349 million, driven by growth in group voluntary benefits and network dental and vision offerings. Despite higher sales volumes, profitability did not improve as pretax adjusted earnings declined by 4.6% to $370 million, with the profit margin shrinking from 22.5% to 20.9%. The benefits and claims ratio increased to 49.5%, up from 47.3% the previous year.

Rising Costs and Demand for Supplemental Coverage

According to Mercer's 2025 National Survey of Employer-Sponsored Health Plans, a 6.5% hike in health benefit costs per employee is expected in 2026, the most significant rise in 15 years. Many employers are countering these costs by shifting more financial responsibility to employees, which is increasing demand for supplemental coverage and affecting carrier loss ratios.

In the first half of 2026, Aflac's U.S. net earned premiums rose 2.9% to $3.1 billion, while pretax adjusted earnings slipped by 1.7% to $733 million, with the profit margin further declining from 21.6% to 20.6%.

Global Revenue and Strategic Focus

On a consolidated basis, Aflac reported total revenues of $4.1 billion for the quarter, marking a 1% decrease from the previous year. Adjusted earnings were $883 million, a 7.7% reduction compared to the second quarter of 2025. The weakening yen/dollar exchange rate negatively impacted the company by $0.05 per adjusted earnings share.

Daniel P. Amos, Aflac's chairman and CEO, remarked, "In the US, our focus is on meeting the evolving needs of employers and their employees with supplemental health products and related benefits. We continue to pursue more profitable growth and the tactical, opportunistic deployment of capital."

Shareholder Returns and Japan Segment Performance

For the six-month period, consolidated adjusted earnings per diluted share rose by 2% to $3.50, with earnings climbing 4.1% to $3.57 when excluding currency impacts. Aflac returned $1.3 billion to shareholders in the second quarter, including $983 million in share repurchases and $309 million in dividends. The company declared a third-quarter dividend of $0.61 per share, payable on September 1.

In Japan, Aflac's segment reported a 3.4% increase in pretax adjusted earnings to 118.2 billion yen, while the profit margin widened to 34.3% from 32.0%. In dollar terms, Japanese pretax adjusted earnings fell 6.2% to $741 million due to the weaker yen.

U.S. Segment Performance and Market Leadership

The U.S. segment's 12-month rolling persistency rate improved by 20 basis points to 79.4%, indicating steady policy retention in the voluntary benefits sector. The expense ratio saw a slight improvement, reducing to 36.1% of adjusted revenues.

Attention to loss ratio trends is crucial during renewal discussions. As primary plan benefits are reduced and costs are shifted to employees, supplemental claims tend to rise. Brokers handling voluntary products are navigating increased client demand while carriers face tighter margins.

Aflac remains the leading provider of supplemental health insurance in the U.S., according to LIMRA's 2025 U.S. Supplemental Health Insurance Total Market Report. The company also marked its 43rd consecutive year of dividend payments in 2025.