Aflac Incorporated (NYSE: AFL) today reported its second quarter results.

Total revenues were $5.4 billion in the second quarter of 2020, compared with $5.5 billion in the second quarter of 2019. Net earnings were $805 million, or $1.12 per diluted share, compared with $817 million, or $1.09 per diluted share a year ago.

Net earnings in the second quarter of 2020 included pretax net investment losses of $166 million, or $0.23 per diluted share, compared with pretax net investment losses of $33 million, or $0.04 per diluted share a year ago. The net investment losses were driven by credit losses of $176 million, including a $161 million increase in general allowance for credit losses; losses from sales and redemptions of $52 million; an increase in the fair value of equity securities of $31 million; and gains from certain derivatives and foreign currency activities of $31 million.

The average yen/dollar exchange rate* in the second quarter of 2020 was 107.65, or 2.1% stronger than the average rate of 109.94 in the second quarter of 2019. For the first six months, the average exchange rate was 108.25, or 1.7% stronger than the rate of 110.09 a year ago.

Total investments and cash at the end of June 2020 were $142.2 billion, compared with $136.6 billion at June 30, 2019. In the second quarter, Aflac Incorporated repurchased $188 million, or 5.2 million of its common shares. At the end of June 2020, the company had 21.9 million remaining shares authorized for repurchase.

Shareholders' equity was $29.4 billion, or $41.21 per share, at June 30, 2020, compared with $28.2 billion, or $38.14 per share, at June 30, 2019. Shareholders' equity at the end of the second quarter included a net unrealized gain on investment securities and derivatives of $8.5 billion, compared with a net unrealized gain of $8.0 billion at June 30, 2019. Shareholders' equity at the end of the second quarter also included an unrealized foreign currency translation loss of $1.5 billion, which is essentially unchanged compared to June 30, 2019. The annualized return on average shareholders' equity in the second quarter was 11.5%.

Adjusted earnings* in the second quarter were $921 million, compared with $846 million in the second quarter of 2019, reflecting an increase of 8.9% driven primarily by a favorable Aflac U.S. benefit ratio. Adjusted earnings included a pretax variable investment loss of $7 million on alternative investments, which was $20 million below long-term return expectations. Adjusted earnings per diluted share* increased 13.3% to $1.28 in the quarter. The stronger yen/dollar exchange rate impacted adjusted earnings per diluted share by $0.01. Adjusted earnings per diluted share excluding the impact of foreign currency* increased 12.4% to $1.27.

For the first six months of 2020, total revenues were down 5.4% to $10.6 billion, compared with $11.2 billion in the first half of 2019. Net earnings were $1.4 billion, or $1.89 per diluted share, compared with $1.7 billion, or $2.32 per diluted share, for the first six months of 2019. Adjusted earnings for the first half of 2020 were $1.8 billion, or $2.49 per diluted share, compared with $1.7 billion, or $2.25 per diluted share, in 2019. Adjusted earnings included $1 million of pretax variable investment income on alternative investments, which was $25 millionbelow long-term return expectations. Excluding the positive impact of $0.02 per share from the stronger yen/dollar exchange rate, adjusted earnings per diluted share increased 9.8% to $2.47 for the first six months of 2020.

Shareholders' equity excluding AOCI* was $22.7 billion, or $31.75 per share at June 30, 2020, compared with $21.9 billion, or $29.54 per share, at June 30, 2019. The annualized adjusted return on equity excluding foreign currency impact* in the second quarter was 16.3%.

AFLAC JAPAN

In yen terms, Aflac Japan's net premium income was ¥339.9 billion for the quarter, or 2.5% lower than a year ago, mainly due to limited-pay products reaching paid-up status. Net investment income, net of amortized hedge costs*, increased 2.0% to ¥68.0 billion, primarily due to higher income from U.S. dollar denominated assets and lower hedge costs. Total revenues in yen declined 1.8% to ¥409.1 billion. Pretax adjusted earnings in yen for the quarter declined 1.2% on a reported basis. Pretax adjusted earnings decreased 0.3% on a currency-neutral basis. The pretax adjusted profit margin for the Japan segment was 22.0%, compared with 21.9% a year ago.

For the first six months, premium income in yen was ¥682.9 billion, or 2.3% lower than a year ago. Net investment income, net of amortized hedge costs, increased 3.0% to ¥137.8 billion. Total revenues in yen were down 1.4% to ¥823.2 billion. Pretax adjusted earnings were ¥183.1 billion, which is essentially flat compared with the prior year.

In dollar terms, net premium income was $3.2 billion in the second quarter, which is essentially flat compared with the prior year. Net investment income, net of amortized hedge costs, increased 3.9% to $633 million. Total revenues increased by 0.3% to $3.8 billion. Pretax adjusted earnings increased 1.0% to $839 million.

For the first six months, premium income in dollars was $6.3 billion, or 0.7% lower than a year ago. Net investment income, net of amortized hedge costs, increased 4.7% to $1.3 billion. Total revenues were up 0.2% to $7.6 billion. Pretax adjusted earnings were $1.7 billion, or 1.7% higher than a year ago.

For the quarter, new annualized premium sales (sales) for protection-type first sector and third sector products decreased 59.6% to ¥9.5 billion, and total sales decreased 58.8% to ¥9.8 billion, or $91 million. For the first six months, sales for protection-type first sector and third sector products decreased 44.8% to ¥23.1 billion, and total sales decreased 44.1% to ¥23.8 billion, or $220 million. This decrease reflects the impact of the COVID-19 pandemic in the quarter and strong Japan Post sales in the first half of 2019.

AFLAC U.S.

Aflac U.S. net premium income was essentially flat at $1.5 billion in the second quarter. Net investment income decreased 4.4% to $172 million as a result of the lower interest rate environment and ongoing capital management activity. Total revenues were up 0.9% to $1.7 billion, reflecting $26 million of other income, which was primarily derived from Argus third party administrative fees. Pretax adjusted earnings were $426 million, 26.0% higher than a year ago, primarily reflecting a decline of 11.7% in net benefits and claims. The pretax adjusted profit margin for the U.S. segment was 25.7%, compared with 20.6% a year ago.

For the first six months, premium income was $2.9 billion, which is essentially flat compared with the prior year. Net investment income decreased 2.5% to $348 million. Total revenues were up 1.9% to $3.3 billion, reflecting $54 million of other income primarily derived from Argus third party administrative fees. Pretax adjusted earnings were $752 million, or 13.8% higher than a year ago.

Aflac U.S. sales decreased 55.6% in the quarter to $161 million. For the first half of the year, total new sales decreased 31.2% to $484 million. These results reflect the impact of the ongoing COVID-19 pandemic, primarily in the second quarter of the year.

CORPORATE AND OTHER

For the quarter, total revenue increased 5.3% to $100 million, reflecting net investment income including amortized hedge income of $48 million. Net investment income including amortized hedge income increased $8 million compared with second quarter 2019, primarily driven by a $27 million pretax contribution from the company's enterprise corporate hedging program. Pretax adjusted earnings were a loss of $30 million, compared with a loss of $26 million a year ago, primarily reflecting increased interest expense, partially offset by higher investment income from the corporate enterprise hedging program.

For the first six months of the year, total revenue increased 7.4% to $204 million, reflecting net investment income including amortized hedge income of $101 million. Net investment income including amortized hedge income increased $19 million, benefiting from a $56 million pretax contribution from the company's enterprise corporate hedging program. Pretax adjusted earnings were a loss of $28 million, compared with a loss of $45 million a year ago, primarily reflecting higher investment income from the corporate enterprise hedging program, partially offset by increased interest expense.

DIVIDEND

The board of directors declared the third quarter dividend of $0.28 per share, payable on September 1, 2020 to shareholders of record at the close of business on August 19, 2020.