Aflac Incorporated posted stronger US supplemental health sales in the second quarter of 2026, but a sharp rise in claims costs squeezed margins. Employer health benefit costs are climbing at their fastest rate in 15 years. That pressure is bearing down on both carriers and the brokers who place their products.
US net earned premiums rose 2.3% year over year to $1.5 billion in the second quarter. New annualized premium sales increased 2.6% to $349 million, with growth concentrated in group voluntary benefits and network dental and vision products.
The volume gains, however, did not translate into stronger profitability. Pretax adjusted earnings for the US segment fell 4.6% to $370 million, and the pretax adjusted profit margin narrowed from 22.5% to 20.9%. The benefits and claims ratio climbed 220 basis points to 49.5% of net earned premiums, up from 47.3% a year ago.
Mercer's 2025 National Survey of Employer-Sponsored Health Plans projects health benefit costs will rise 6.5% per employee in 2026, the steepest increase in 15 years. Employers are responding primarily by shifting more financial risk onto workers. That move drives demand for supplemental coverage while also feeding the utilization pressing carrier loss ratios.
For the first six months of 2026, Alfac's US net earned premiums were up 2.9% to $3.1 billion. First-half pretax adjusted earnings fell 1.7% to $733 million, while the pretax adjusted profit margin narrowed further from 21.6% to 20.6%.
On a consolidated basis, Aflac reported total revenues of $4.1 billion for the quarter, a 1% decrease year over year. Adjusted earnings were $883 million, down 7.7% from $957 million in the second quarter of 2025.
The yen/dollar rate weakened to 159.45 in Q2 2026 from 144.60 a year ago. The shift cost the company $0.05 per adjusted earnings share.
"In the US, our focus is on meeting the evolving needs of employers and their employees with supplemental health products and related benefits," said Aflac chairman and chief executive officer Daniel P. Amos. "We continue to pursue more profitable growth and the tactical, opportunistic deployment of capital."
For the full six-month period, consolidated adjusted earnings per diluted share rose 2% to $3.50. Excluding the negative currency impact of $0.07 per share, adjusted earnings per diluted share increased 4.1% to $3.57 on a currency-neutral basis.
Aflac returned $1.3 billion to shareholders in the second quarter, made up of $983 million in share repurchases and $309 million in dividends. The board declared a third-quarter dividend of $0.61 per share, payable September 1.
Alfac's Japan segment posted pretax adjusted earnings of 118.2 billion yen, up 3.4% in local currency terms. The pretax adjusted profit margin widened to 34.3% from 32.0% a year ago. In dollar terms, Japan pretax adjusted earnings fell 6.2% to $741 million on yen weakness.
The US segment's 12-month rolling persistency rate edged up 20 basis points to 79.4%, a positive signal for brokers tracking retention in their voluntary benefits books. The expense ratio improved slightly to 36.1% of adjusted revenues, down 20 basis points.
The loss ratio trend warrants attention at the renewal table. As employers cut primary plan benefits and push costs to workers, employees file more supplemental claims. Brokers placing voluntary products are working through the same conditions: more client demand, but carriers managing tighter margins.
Aflac ranks as the top provider of supplemental health insurance in the US, according to LIMRA's 2025 US Supplemental Health Insurance Total Market Report. The company recorded its 43rd consecutive year of dividend increases in 2025.
