AFL - Earnings call transcript Q3 2017

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Operator

Welcome to the Aflac Third Quarter Earnings Conference Call.

Your lines have been placed on listen-only until the question-and-answer session. Please be advised today's conference is being recorded. I would now like to turn the call over to Mr. David Young, Vice President of Aflac Investor and Rating Agency Relations.

David Young

morning. good and you Thank Welcome to call. third quarter our

President Actuary. Joining Amos, Investment and Officer Incorporated; Chairman Chief morning President President, from of Executive Kriss Teresa Vice Eric Todd Aflac are President Dan the U.S. Chief and Vice Crawford, and Daniels, and Fred Executive President Aflac Aflac Executive me CFO White, Officer; Risk of of Incorporated; this Cloninger, Incorporated; and Kirsch, CEO Vice U.S.; of Global Aflac Chief Global

Joining are Koji COO Executive of Tokyo us Aflac Vice of Marketing. and Director and from President Koide, Masatoshi and Japan Ariyoshi, and Sales President

Before teleconference me are remind federal let we the within that meaning of start, some this forward-looking security statements in laws. you

no they're they accurate, to from various at encourage also Although to our that Investors be of on look in prove for impact prospective Form of those assurance could on We XX-K Annual that could non-GAAP measures. of certain Report statements we we can reconciliations results. and believe earnings these differ aflac.com because available will release you Actual are risk page materially the is factors nature. results reasonable, includes our today. materially discuss The give the some we

and program Japan who the about morning with United the Now, Dan? over some to I'll in will States. turn comments our as quarter the Dan, begin operations this as well

Daniel P. Amos

us. Thank you, David. and Good morning joining for you thank

year. third that out the by set Aflac begin me goals a achieve the the well achieve saying concluded to and nine for to great us Let for quarter first positioned months we

and operating year per to outlook these range during comments. Fred strong $X.XX to upwardly to provide on share press outlook his you As revise gave results release, earnings the context yesterday's us more from the will $X.XX. our of for likely confidence earnings our saw

both ahead sector the Aflac solid results Let in an results rate quarter the on basis the interest In of launch of quarter, the contributor. for largest medical nine solid first Japan financial environment, for the to generated Aflac me the the expectations update provide of sales earnings Quarterly year. benefit the our X% a months an persistent results rounding increased now year. increase Japan, from product, terms, Japan's out on third Despite low yen operating February year. the continue were X% our of Aflac EVER. revised for and sales

product Additionally, Aflac, you new aware, our Support conceptually as but for Income be not Insurance for may is also Japan. just a

concept, I will any with catch continue force As new believe but it to time takes embrace our sales it. on, to

that term. this have to grow We high expectations over product long will continue the

Japan de-emphasized significant Within Aflac savings-type you'll products recall sector down the to quarter. we products. have child and low like by aggressively only sale channels in first progress rate repricing environment, materially WAYS these selling products controlling the them first that and select in the interest savings make of endowment continued sector

renewing focus products are protection round developing sector first out competitive we Additionally, our lineup. product on our to

production in further third all our establishes meaningful which had leading we sector position distribution, Regarding the across market. channels,

remain and been to our have agencies vital traditional success. Our

be sales such insurance, cancer partners selling alliance are network With Japan to our an Our we includes significant solidifying distribution outlets our XX,XXX-plus also buy our goal that made postal people Post contributions results. to want insurance. extensive where

first stable are on and strong Japan's sensitive and less of sector our products, ahead, rate protection selling third Looking interest will sector which products, remain focus with Aflac both margins. along have

share, our continue strong specifically designed develop meet market to management new set we sector enhance We will third standards the they provided risk products forth. to

products our to our leading build continue cancer medical medical and Our well done pattern position. and upon has new repricing product and will defend we of our

In results follow subsidiary strong quarter were second year, to our Aflac XXXX face post products first we due down, Analyst in the the product comparison we the Financial fourth for to we XXXX, rates half sales the at XXXX. challenging Briefing, our policy unnecessary first XXXX. a half to recovering XXXX the conversions. sector growth expect in Strong these conversion medical launches factors XXXX. Japan's relatively scheduled third avoid of we or be be the to rework largely then Taking quarter expect will the to product the flat discussed into for in in account, to comparisons, early disruption anticipate any of near-term EVER of As which launch

four X% what target as over We a billion and update and up. through third ¥XX rate our continue the market to lose growth our will long-term to Don't billion also strong that ¥XX with we've about forecast of our meaningful, new taken firms to XXXX sector that's from X% given to range leading It's years, past business the in share. sight margins. good sales

of our results strategy. that confirms Turning financial our growth an to also was sales X.X%, which of particularly new Like of sales the the in U.S. of Aflac A they Aflac is This profitability to increase X.X%. U.S. our increase performance brings in highlight quarterly sales our U.S. Japan, investment operations, pleased we platform. definite for Aflac were strength U.S. Aflac ongoing reflect and focus outstanding the are nine-month results financial quarter the on third and operating notable, on basis U.S. continued which ahead with expectations, Aflac

fairly mind claims from keep apart. within doing see exciting with sales that need and our us is to believe groups be is just However, U.S. and I With brand what smaller that seeing It show I'm to investment on in of and by continues quarter-to-quarter, platform sales encouraged sales, timing pay not business I've best but to Pay but growth. with research to to competition. the vary indicate consumers of agents off have the continued in One way a to industry refer continue succeed or fast Day This likely Pay energizing policyholders grow, there Day satisfaction. that career only used employers. not set Aflac. fewer with distinguishes helps other claims customer people demonstrates agents that is to our therefore fast One it's because surveys see to in quickly that of agent sales the also can also a employees. doubt XXX that to XX% from career initiative, market our American no respect than cash Independent access activity, positioned our this Aflac's to has are we focus paying It's

within the our accomplishments we've only broker our focus broker designed further results the quarter roles we've broker determination broker in Turning on sales in with made. to team to we I channel the the pleased to we've am efforts to expand space. seen sales the given mid-case with continue new our seen space, large-case further our sales activity, our enhance positive results. progress The and sales

to will We tactical adjustments continue objectives. to our meet long-term make growth

in We to maintaining more remain respect behalf that through will continue to growth deployment, XXXX. capital on shortly, annualized ratios details provide capital of to anticipate X% With say committed strong but new to just a premium stakeholders. me X% we long-term of sales Fred let our

anticipate to shares billion the we of continue $X.X of billion XXXX. $X.X to range We in in repurchase that will

quarterly cash by the and dividend assumes rewarding of commitment compelling Board stable is the our the absence dividend consecutive This capital with year demonstrates to I'm X.X%. to the an and increase alternatives. marks pleased our very of As increasing case, Directors our shareholders. XXth action conditions always this of

by how only per the they States operating United organization flow in can growth along and I'll what is reiterating and like this the conclude policy to and as hard we'd and dividend Our earnings Aflac's Japan we sales team, with guided have results for the I our generate am future share accomplish. capital my fuel excitement the generations worked shared. employees Quarters and incredibly of cash quality. free by proud management

Now, turn to over the program I'll Fred? Fred.

Frederick John Crawford

Dan. you, Thank

result margins the but with earnings above third in share. came quarter year, both Our of operating and per in Japan throughout our the the earnings we U.S. in reported strong have for diluted the We consistent $X.XX expectations, experienced

the to contributing the Japan status. experienced. $XXX a be the the We quarter, guidance concluded segment, cancer to no IBNR our Japan last share. actions of EPS. last the billion, a earned taken conversion quarter. a by for volatile most approximately the $XX cancer product, X% third comparable paid-up expected closing to appropriate pre-tax. actuarial with nearly $X.XX average in annual mid-XXXX share premium conversion premium our to approximately by was This change part total In a as nine a WAYS, We our claims it performance compared reserves expenses impacted and reduce decline a for similar billion lift continues sector on The our as negatively our the This sales quarter process heavy pre-tax yen to drove as Following previous quarter's reaching is in last ¥X.X $XXX particularly premium strong savings next that of and year, adjustment associated in sector to first $X.XX by the year. contributed sector our booked business review cost for weakened compared year's pressured of block up million continued year of roughly Meanwhile, million the which branch our earned period reflects specific and first costs remains to conversion. ¥XX growth on in growth continued to third portion over ¥X There in is months. track to billion Japan our million with

Our quarter Japan segment profitability in the XX%. with pre-tax nearly of strong was margins

favorably to points first benefit has premium year-to-date basis a approximately in compared reduced third benefit in Japan continues the shift premium total XXX driven trend towards the XXXX, earned mix sector year. shift in Our mix to The in ratio ratio in by previous sector. from by part as our reported

recent normalized while favorable, a experience consistent sector benefit performed third our Importantly, with on basis. ratio,

as our naturally that through midpoint Drivers along Our remained increase range benefit year's this with premium same dynamic sector first premium move reported the declines ratio, stable, we will expense include the is to but expect expense provided positively FAB our of we but conference mix Japan pressures ratio. ratio at our in impacting XXXX.

our in drive future and we growth designed efficiencies. addition, and step plan to initiatives, up development, In digital investment product to operating IT

versus income year-to-date, income expectations. favorable reinvestment been has hedge has performed lower costs our call down original and Japan's year. prior pressured yields Investment to While investment higher outlook by

a the through make on floating continue with of building have $XXX build-out and approximately pipeline invested commitments. Japan million September of portfolio progress the in We to rate

end. rate and approximately billion Our portfolio portfolio XX% floating quarter U.S. loans stands at U.S. at our transitional dollar bank loans, of middle and includes real estate dollar $X.X or market

In on terms of hedge full-year our to pace we range. below guidance costs, are come in

pricing and modestly from ratio. We lower hedge benefited have favorable

million the full-year forecasting As a $XXX result, hedge range we $XXX are XXXX. the costs million in now for to

relative strength Turning to in guidance growth continued improved the over persistency, drove to sales results, Benefit range. XXXX with the U.S., together, our X% which our just Dan commented ratios quarter. premium on to show

Our performance expense more the of in approximately our line year-to-date with favorable guidance XX%, in year. for ratio the quarter was with

administrative investments, Our expense ratio historical group and on U.S. Overall, reflects margin at platform technology. including progress by XX% platform related strong platform, enrollment pre-tax remains certain profit standards. our

subordinated ESR, Our with and subordinated modest at our for third capital overall month, priced overall updates at capital X.X% healthy billion million billion levels. ¥XX the track with remain remain quarter debt Of U.S. offering of repurchased conditions this at million capital a callable in metrics $XXX of optimizing the are asset SMR on of associated conference. in of and RBC strong Japan to structure I on at between billion consistent credit the $X.X the the worth year. and stock issued ultimately and quarter. We refinance a and focus stock Overall remained debt we proceeds and repurchase note, comfortably level from provided our coupon. mentioned impairments $X.X only with security our healthy a X%. will the $XXX condition FAB our conference, and conditions quality excess our

FAB conference, to in we our approach As tactical our we remain discussed at repurchase.

Japan consecutive earnings noted board's by support to to comments, capital our XXXX a by earnings Dan his increase. on we common the all dividend As and cash currency-neutral X.X%, per in XXth of guidance sustained year strong increasing our decision both quarterly strength, flow in are U.S., marking stock and Bolstered $X.XX margins basis. to our growth, the share increase $X.XX

of stability expectations. our Our lower for U.S. in strong effective and the by normalized Japan, to Overall, modestly tax contributed. outperformance margins a favorable investment costs compared combination has year been hedge pre-tax margins in also original as and rate income driven

take of us We'll it terms now to capital our we Looking to call. hand David ahead, invest desire in remain positioned the I'll and well strength, to our over to on margins provide for detail our in platform future core Q&A. greater outlook December recognizing growth. David?

David Young

Thank Fred. you,

one we one that to question. question. questions, relates you please initial are your fair limit ready Operator, first to take everybody, take that to let question be and Now, now we'll yourself first remind the to that but me to follow-up

Operator

Thank you, speakers.

question-and-answer We will now begin session. the

Your Sir, first question Mr. of your Nigel Dally now is from of line coming Morgan line is the open. Stanley.

Nigel P. Dally

Great. Thanks. everyone. morning, Good

additional get and as be the some is increase, perhaps some the how broke channels hoping the channel to to down how also that behind data that U.S. So, brokerage the pipeline the given it detail increase agency brokerage tends and fourth quarter, with between building for on loaded. to back-end sales

Frederick John Crawford

for you question. Nigel, the thank

it for give the third sales you three as relates to I'll So, U.S. observations. quarter,

sector producer; market public about the XXXX, results is in career of we in business. new I've conversion middle focus engagement; to all positive first saw veteran sales; of broker been The areas and agent; talking that associate

those for third in of areas well us quarter. working the all So, are

is, the quarter-to-quarter. know, quarter, sales shift – they about Second the from that Well, third in normally, I'll thing fourth the how of growth higher-than-expected mention which toward it in large we a the saw Dan quarter. as skews you broker that markets, compare talked

cases, data, at those the that case without performance strong around team large still as X% for has large sales without quarter. our we However, the looked –

our that I'll thing the about third we've seeing execution we're through very successful that the The set initiatives that fundamental mention of I'm is practices the business in changes without encouraged forth. growth

execute. building we're in strategy, in confidence confidence we're to we're ability in confidence sales building leadership our and their our building So,

at look brokers the As Aflac to is first, we career seeing seeing. as of the as rate sales same broker the versus the question, sales, the agent attribution growth the is from market

experiencing quarter. Aflac So, we seen is thing while saw market increase and some third same growth the the had side, on more pronounced the that broker in

broker bonus that, to focus We strategies, sales that believe side, in market. executing in market We year the thing performing. coming on that's we've broker strategies on channel. earlier to believe growing programs channels producers agents we're career working. translating into discussed expansion growth small the fruition, are on better the in The I'll business on the the say as the second is XXXX that that the we're allowed introduced And and in are both that seeing career

So, that hope answers question. I your

Nigel P. Dally

Very helpful. Thanks lot. a

Operator

Lee The Thank you. question & Dowling is line Humphrey next of coming the from Partners. of

open. now is line Your

Humphrey Hung Fai Lee

and for taking my morning question. Good you thank

in reaching on And (XX:XX) sales, the question are product ahead, of of a softened of a expect of kind Just it Japan be but cycle on quarter, at did Would level sign cycle, the we in refreshing products on similar you seems time, a year-to-date the to saturation? a as bit a basis, same then little kind XXXX? track. the remaining a say the thinking some will you

Daniel P. Amos

Koide?

Masatoshi Koide

more medical explain Aflac Japan. And This would becoming about is is like from environment cycle. new to much terms Koide in of I product fierce. competitive insurance,

going down. And premiums are changes have benefit the so, a the or product that coverage seen we and has

we out on companies' perhaps take what ahead may So, are other to watch competitors then need or step follow what always competition. the up want for we to doing and product in do a is

– medical as our to or new year have have our between been revise product. So, we cycle a in a this the sales have we trying by able have product good I insurance. to following we a have our share medical by secure result, product able we to year been as and this February of result, mentioned, revising relatively been in And that in had two short a cycle secure

in into Since touch of account with an and customer insurance. cancer to insurance me market of the itself changes so the really treatment that and or have policy cancer of cancer insurance taking and technology let upon our position Japanese also product a environmental the we advancement Now, cancer develop overwhelming is needs.

cancer position medical been product the is So, years. we with a been is therefore, from policy to maintain able compared in product all cycle three policy. new this leading four And development longer, with we to the me. the this continuing with that's development and And a insurance, under have have insurance which

Daniel P. Amos

aggressive I of it. are been it, other years one Koide about really changed. for make to comment we environment, but and you sales that only I basically like the that really It's change that second half When seen see we no I'd pattern constantly aggressive have had the top The that – mentioned and change. is real comparisons. tough in told competitive on were

to quarter anybody what So, and the third shock said. no should quarter fourth be we've the

of told that we the will And ¥XX let's the be our ending very is clear, the sales but and reasons, up of ¥XX billion in pleased it's comparables billion competition, from all-in-all, of the but one because what's with then, shift sales on I'm We of just for are of law that be the hardest going numbers to the simply of growing next tougher, sales of it's of results new in the part product becoming range you. the department. not year, new

Humphrey Hung Fai Lee

in of have think for like So, do in there's product suite, feel lag XXXX? or you you current you refresh another some or to still underneath the do it terms so little a may year bit

Daniel P. Amos

you in a going revised see second – product to in new XXXX think I half. the a are

Humphrey Hung Fai Lee

any you the third impact about go these results. just further impacts kind then, quarter, there How follow-up in U.S. as is impact do and think cycle? delivers in the And should we sales, fourth of some hurricane-related but a renewal through you the I very it. quarter, Got beef believe hurricane-related the anticipate of of and in still kind quick strong on sales quarter the

Teresa L. White

X% impact the of So, thank sales FAB slightly to sales, hurricanes and we quarter. things and impact. elevated it fourth that to hurricane question. September. the emergency supp U.S. XXXX the for so Three orders relates as anticipate about be were the of are perspective, a that following due the in you a perspective, From third figures the hurricanes to persistency in includes the From

So, we mandate for you those don't that affected lapse the know, affected counties counties about XX days. orders, as in those policies

Now from about – estimate to of points be XX that basis so, impact perspective. the a persistency we

potential increase anything any – in material want the claims, see add? last last to the don't account. the is we due ratio impact While Fred, of to benefit ratios there loss the you monitoring of account due else to are And, we impact

Frederick John Crawford

standpoint the natural Yeah, we material I you just you our deal think and types not expect that as it line is in punch benefit of a these Look, statements should the might not any ratios. core informative do be our impact. how from financial disasters with anticipate bottom line do of margins financial and movement

that, So, about is worry we about that, not I interesting. not worried but would are it

You may comes as amounts put dislocated. claims know, to time into through from submitted premium you estimation in-force work homes submitted sections to because to people their Florida to while and estimate we that as will, to When and Rico, states and is And be, of requires of are which premium people have levels then the that's process. what the adjust assumptions away blackout, affected. premium as paid stay we level so of dislocated policies place keeping IBNR Virgin done have a you there the be that our account. have expected the way due that obviously And really the Islands, and what were our well and actually and as are do forth, what Puerto State claims we in we take if can basically entire in is, a Texas from would we an a it –

the there'll is moving have but at that which place. is ratio. have which natural year times be you're From and in our you be dynamic these talked typically And policies, it nature a you'll that place, if the could timeframe, in outlook. stay had what off line business year's make offset to weighs benefit have by not would depending about of on error your to the In it you point as what the DAC Teresa under rounding estimates that's a shorter have out quarter, as expense long, on accelerated benefit I you'll about. a that how some movement reserves a amortization, it we be ratio, on DAC so, case, noticeable, it's dynamic, any which can but your such a that release When not disaster, we'll perspective, comes will it amortization, is of tell may but of performed particular which over actually been a and lapsation would lapsation, impacted, not product, policy And adjust see parts. takes bottom does those in

Humphrey Hung Fai Lee

That is helpful. you. Thank

Operator

JPMorgan. next of The Mr. of question you. is coming the Thank Bhullar from line Jimmy

Your line now is open.

Jamminder Singh Bhullar

Thanks. Good morning.

was had I on just question buybacks. first The

to XXXX. the in few billion to think range billion based $XXX for roughly you've mentioned to still range. in million you're your pickup committed $X.X or $X.X doing a million billion you I from last your That buybacks to $X.X range implies what the quarters, $X.X think fourth quarter $XXX in been – billion significant for I on for and

higher-end to that – see standpoint? to come the stock where are and you range? watching or going else do going going from something deciding that how about to we range really whether in is you're to what's of out lower-end factor it price your the be So, you're it or Is what's think like

Frederick John Crawford

for automatically back Yeah, will, just value. it's quite I similar substantially tactical, we we're you to tone if the and our including alternatives view business that comments, going that capital, trade made is of my repurchased, it's intrinsic and comment, being excess our we've we not got but Jimmy, the at particularly weighing as towards had in to and our discussion our conference, start into be honestly, that up reinvesting script to

really more case at and going excess the it's think quarter the on comfortable range a paying that that to that, practical capital. do And has the midpoint to we'll that returns careful the be at we're more attention the within I repurchase, expected are with but said fourth Having looking we'll midpoint to I'm our the range, as so, be tracking. approach of likely tactical. that to we And again, be than just or when lower

repurchase, to perspective, quarter. that So, to we we'll would that of anticipate I I mid continue from in all continue a high-end think practical to fourth pace, the the not but range

Jamminder Singh Bhullar

helpful. follow-up a question I That's the And had Okay. Japan on on sales.

on flat They've the few from year. the quarters. been last down were Specifically, last Income sales your product, Support

So, what's have for might sales the ramp-up time? potential your affected few Do of you that And expectation more past results your of that of in product product? think over it's the the over have view the thought quarters you limited than initially?

Daniel P. Amos

I'm agents and of still moved came the Sales away believe that. when going other strong a I to ahead back answer they from jumped go least it's on product. product path And it take the this and product. out, resistance. medical

As we've things, of to if you while back to accident a sales it force or go into took to years it. other experienced, get introduction

You need some pay clients. to

to twice are don't is out you're Japan a there it's is and that bad push do news that had potential. enormous it. brand I some been to like, to especially be take to tell, I'm got will just all be to I've fast it to going never time what as quarter exactly do that when small that as to news while. and and little am the convinced yet. good but industry, need first time. we've new, You August But The since doing But a continue able it's the people it's this been going new still at with And a we'll as winner. I they isn't and try very to examples. take would It know discussions with for coming anytime the something It's those have up in but contests just use in going going are encouraged. It's lot of

Jamminder Singh Bhullar

Thank Okay. you.

Operator

next of The open. question line you. Sir, your the is Thank Tom Evercore. line is of Gallagher from coming Mr.

Thomas Gallagher

new Dan, the morning. in delay the that a on the a elaborate that Japan comments of down question you XXXX first was because them of subsidiary the bit be about you that? you conversion expected on based on or made sales – to just products Good can half

Daniel P. Amos

all, the first it's Yeah. Well, first in of comparison tough quarter.

clear. me be Let

increase. Our quarter terms in strongest the quarter was of first percentage

much quarter tell believe won't So, because thing the the have than first a to be the in But we addition I'll that's that will want the it's new quarter harder with the separate the you second expect that, any first got first issues quarter. we product, and with be on from occur. have systems to anything might don't time, it going going to that that on will all us we've on we with and we conversion,

second conversion is So, to decided the just or we the of quarter introduction product delay late second certainly until after the the year in half done.

the it. delay So, it's on just time

So, I look this for second a a saw stronger half, which year. half we versus stronger first

Thomas Gallagher

of be then, the about sure going guide recently? out you. of the of where they've I versus more just made Got that guide Fred, running understood XXXX you And comments saw you that been the to make sort Japan. things say that high-end would Was thought Did wanted XXXX? I that you midpoint more you into margins heading into

Frederick John Crawford

expense Japan. ratio specific in That the was comment to

is so, to in that being that in three-year midpoint my that And our range long-term what XX% as comment would looking to expense ratio was, in the of the for period I'm be XX% of the talked there about range, so range. to expect conference, when Japan to we and proceed at a XXXX, referring we we

above in revenue ratio an as as expense a issue a is note are touch year-over-year in combination driving policies the investment fighting see, expense much expense that really not Japan. of ratio XX% well it As both just issue you is down can traveling that, And we the we net sector in on premium rate based space are that environment. paid-up the as as first and the income decline natural

fighting. are, of some we as really not our efficiencies into to up that's an with fight, driving digital That and with So, investment though us XXXX. fact, difference in It's The driving of stepping revenue being long-term we technology expense growth. what been be been on go idea issue. and we've continues really a the

in of better Meanwhile, the and Tom, much specific better comments, more because Japan ratio mainly my really benefit are expense to mix-related issues. ratio. much doing our the doing So, is is

we sector earned So, more pull a shift business, sector to do grow on our in carries ratio. continue sector, back which first towards seeing favorable a third premium naturally and third as we're benefit

mentioned, we years. a I've next guidance benefit ratio benefit ratio. our as for basis our lowered that's to over three range long-term points the As actually year-over-year, And result, XXX contributed

would So, what XXXX. expect we've bottom i.e., we with stable relatively level a experienced at pre-tax continue line, profit margin, in to

Thomas Gallagher

Got it.

elevated each in move Fred, those two ratio? the expense would benefit So, and the offset other, of down you say, the largely things ratio then

Frederick John Crawford

In lot general, Tom, profit margin, offsetting. when to it general, of as those to can there's with holding two up pre-tax moving obviously, stable a imagine, comes we elements margin end in parts Yes, in general. a but you

Thomas Gallagher

Okay, thanks.

Operator

Thank next is Scott Goldman of Sachs. from you. Alex coming question The

is line Your open.

Alex Scott

Could just still assets denominated guess, in provide thank portion in the, an Hi, is to you. U.S. I switch update Japan? trade on and the what you left reinvest

Eric M. Kirsch

Sure. Eric, This is Alex.

$X.X give in in replenish these the floating portfolio, Fred year, of exact of is As $XXX the that are rate the estate, at to expect be half fully could private hard total but would a $X.X that loans. loans assets, timing transitional $XXX and end focus currently, rate new billion. trade It million loans. on about we year, of continuing you mentioned, The we floating by on billion little next will first focused remember, probably real you. the year-to-date, switch to real million, market debt, middle middle and market When about primarily estate we're transitional look private

have negotiated, to to and then So, have sourced be they be they funded.

strategy back allocate in then switch the some with I at within the of number some to rate we that be to we'll a Meeting, floating more to ultimately dollar up bucket So, $X.X expect would time Analyst put of the year close charts the of FAB and next and percentages. terms billion trade continue estimates

Alex Scott

Thank following be the will you. other one, guys impacted quick What And that one about the is you of sort economic ratio or separation? just has all in at piece the branch Japan, the talked isolating? that conversion solvency when by Japan

Frederick John Crawford

and calculation a conversion. really branch of It we're kind following impacted calculations. we've a at the subsidiary, ESR Meeting our where It's whether doesn't. it made that in by the The are adjust ESR comments branch doesn't or not FAB uniquely

Alex Scott

Okay, thank you

Operator

of question your Mr. is next O'Neill coming is The O'Neill] [Sandler of Sandle open. from Sir, you. (XX:XX). Barnidge (sic) John line the Thank line

John Bakewell Barnidge

of About how you. do required believe Thank there you. is an been of distribution you minimum extraordinary level What sales able I to think be in there? know the sector first first maintain Japan, get sector you you'll to relationships has do and sales reduction. Thank amount quickly

Daniel P. Amos

Koide?

Masatoshi Koide

GIFT, to to revised sell maintain our product, is very our we rate Well, selling the protection-type with relationship year terms is a sector the we the protection-type types. first products what products. sector think needed is I product is first this is the divide first and sector And savings-type One products, of into other think first And going first to sector need the first continue product products sector as we our even well. all, will And strategically product in after this as we first February in change, products. agencies forward well. two this of sector and

Daniel P. Amos

Koide? that it, Is

Masatoshi Koide

Yes.

Daniel P. Amos

is question level. close we're what that really hold? the we level answer is, getting to to asking the very that do what need he Plus And is at

say would close a range in range but gives we now. this of I within very somewhere kind So, XX% are to note, you

Frederick John Crawford

obviously is Japan, comment on relates we've the that its Aflac back companies helpful in rate is savings all peer environment a yen-based the strategy think pulling not it really sector first start as to products. and unique in I seen

different products coming make this such in Those dynamic, product development in is us renewed doing that that product so, And really be going for income that a to generate we're see on that third things important are agencies and pack, so where us we've making purpose makes approach living if and very question, product protection where sector build first out front. that, our sector like a more you'll important makes and and on for terms your the sure is income. focus the our of the of got wide-ranging what is a but to can product to will, you robust what

John Bakewell Barnidge

you much. Thank Great. very

Operator

Kamath next you. line of is Mr. Thank Suneet from of The question coming the Citi.

open. is line Your

Suneet Kamath

Great. Thanks.

to I Japan, annualized in in-force the quarter. guess, turning look if we Aflac the at Just X.X% premiums down,

I paid-up it's think phenomenon. still for if down adjust that I

to for start And right are is, then, first down when see is second, adjusting my still that we growth or think you can in So, do that? premium you in-force number? question some that

Frederick John Crawford

rates accelerated naturally paid-up premium. rate, runoff, sector the growing I additional decent little a say yes, the think on answer although premium although that by growth paid-up policies, the bit been has you're third I a the earned is, seeing dynamic. of predominantly low-single-digit Yes, at sector of it's type because side third

the dynamic, predominantly I slow. paid-up premium that start say would will and it's So, to

and FAB, at cut As billion, again, in in of ¥XX That at effectively premium half in ¥XX XXXX. be will running XXXX, in I I billion estimate we're paid-up half mentioned, XXXX. cut in think, around then

more first that start you fact, pulled your to first an policies, the certainly if are lapse. as pure sector But from savings, taper. a very paid-up between substantially to sometimes sector low above this have it's we'll X%, rate. And will, that outright just excluding around products. doesn't Lapse see a realize, third starts X%, on hover So, first the They and of and policy growth sector pressure, dynamics, addition to of back just growth on in sale premium premium to decline. sector in offset is – bit tend savings we obviously, paid-up rates weighs result,

is economic have that when premium, a any but remember, up an your runoff, but catch very, products you that will this magnitude, savings-related made. So, slow you're not we selling of any decision very to

is economic head to need of sort the first value premium idea of the the around wrap third your You of relative and sector. sector what between

pick of we rate capital sector capital we third said product, much products it. are the the seeing than that think of flow savings product some substantially very our risk of and is risk economic that relative first value and way and tail cash negatively with heavy think affecting sector interest we comes because that a differently, the it's or less towards and is we're FSA results, it while is earnings allocating in up, GAAP So, we know don't better

on So, GAAP-type economic on development. results, it's even though it's value tailwind a a headwind

Daniel P. Amos

at paid-up if year. the add about to like third for with quarter basis, we're too, on you were last an premium we I'd flat year-to-date products where in-force adjust

Suneet Kamath

it compensation, helpful. was in think that tax and a That's then, the rate, guess, And there to of ACA. on was I was it. moratorium low some on also, quarter. due then I the stock just Got know the to a separately, I related tax-related item

think you've going ACA about think tracking, going or to we where forward, that are you to that of about because as be the we below kind So, is you back do dynamic? been XX.X%, which get of

Daniel P. Amos

as related that a of which will exercised. I market is, from although going Yeah, would that tax you be benefit, believe to December. I specifically tax bit And main planning fade a planning that compensation. purposes lower value essentially is of the this perspective, our really mentioned, that and dealt using the a the – then fair tell you of to tax of financial obviously would they're the The We're on with it right stock options of first there move rate, here ACA necessarily more talk option effective our some assume forward. we're perhaps forward. outlook midst for what work the really, is of in as rate of related going option I financial about type it not driver you effective week call, we'll tell expensing we starts now, benefit as treatment of is

when rate. accounting that place, was tax and has you came of earnings. been run doing accounting. the This and your as It's stock through new level actually throughout your through part will well stock-option the always when exercising, just benefit into you see see so, effective this run your then naturally And has as year price has been not through previously to it January, equity the it a of

their companies affect so, are rate. seeing now tax And this

a thing difficult natural option I we're you if price there level it stock for see variable. so, could say, very expect not And would should at be continued general, internally, levels to can benefit. is that, to these of In project you, natural traveling planning because But be your high tell and predict. that's you one exercising, a and a quite

Suneet Kamath

Okay. Thanks.

Operator

Fargo. Sean The you. Mr. coming Wells is Thank Dargan of question the next line from of

open. is line Your

Sean Dargan

the Yeah. FAB, Thanks morning. an and Since election in been good there's Japan.

thoughts if you Just would there changes be way played on policy any business. if that going are it that was would and your you to if in affect wondering the give your out thought

Daniel P. Amos

take it? it? over somebody on to Is you want Charles Koide, there? to How the are is you line going or do

Masatoshi Koide

his that Abe that Minster that leading, fact This is Koide were party win. LDP again from Prime is will we Aflac expecting Japan. The

likely So, me. a to not administration as Abe and That's his as any is policy are continue not significantly, we impact from business. a since material economic will change result, result, it seeing our to

Daniel P. Amos

very We're happy results. the with

Sean Dargan

Thanks. it. Got

Operator

I Thank Mr. this you. back have questions Young. time, any don't At on will we turn to the over queue. David call

David Young

speaking to And December you. before and forward with at Investor free like end feel with Relations outlook on we Rating Thank please And X. to everyone upcoming Agency any call look all. Until we call to the then, our our contact questions. today, department I'd of you a.m. remind Thank X:XX you, soon.

Operator

for call. today's Thank This conference concludes joining. Thank all you you.

You time. may this disconnect at

Aflac (AFL) 26 Oct 172017 Q3 Earnings call transcript