AFL - Earnings call transcript Q4 2017

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Operator

Welcome to the Aflac Fourth 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

to quarter welcome and morning our call. fourth Good

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

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

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

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

about Then Aflac outlook the Dan? comments follow on States. who will Now about United Koide-san well as quarter Fred in Japan our the over morning Dan, management. and to XXXX and capital U.S. operations. will the our the with I’ll as give program by turn some will who will comments cover financial an with followed Japan this operations Teresa begin update

Dan Amos

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

other apart a leading I XXXX will insurance in than major has third earnings in of our decades I’m for is success product straight been of growth Let from by came United drive believe, That great our more as operating advantage voluntary competitive our States. revised currency in Japan. before was our it me sector year look kick position focus six products we every held that we the for And ahead. guidance. the the another morning focused upwardly One end on Aflac. contributor the to high XXXX pleased share per competitor and we success. continue at especially saying

future disciplined I the investments our United think where is and operating effectiveness. platforms given approach Japan driving this in noteworthy growth especially States the goal to and of

Reform in in our our subject initiatives business, us enacted the to we allowed are the our increase XXXX of December and of objectives. values U.S. and that On investing pleased accelerate company’s reflect Tax that in investments

continued protect These expanding very we in paid over expect million increase we and investing help persons culture in target U.S. enhanced the years. the and the operation, by benefits. include financial These approximately expanded program growth five like employee company’s strategic we out to both nature employee As policies our investments and benefits, do next digital as Company’s U.S. additional company XXX(NYSE:K) an the what the well-being. $XXX technology in overall programs underscore and and of wealth to training three communicated, matching investments business, businesses, which

operating our make a from in sales me brief detail let Koide-san Aflac hear greater about U.S. on segments. two and will both You performance Teresa and But in today the Aflac Japan. few segments, comments

X% majority strong solid end traditional were we similar on growth in ended track long in performance on. building increase as just third the goes territories in fueled we results the and sales in Japan, Performance top U.S. the results on. coming comparison. above we’ve XXXX off our we’re and building by year with a our five across that challenging the three Our are of very given. broker sales at both the to guidance came to In channel of terms drive was the platform sector, XXXX the the year Sales that

mentioned sales be This first quarter, up the the our the is in the refreshed introduced sector quarter expect true our the medical first especially product to sales I XXXX, call, core that of half third we down during As for first year. outlook we in driving increase recognizing of X.X%.

the in Japan’s the year. high first for product delayed quarter could the third quarter, of down believe conversion single prepare second and we we be sector the digits introductions sales until the As in

United I’ll reiterate December as a expect first and the work to our hard performance the take on XXXX. we Japan to the I’m in proceeds subsidiary place fiscal policyholders. with the for December to call so team, protect a a results of of April positioned our X, Overall, States our of of help day every recovery guidance. just work they moment segments call. I’m take business communicated early our day in strong as on accomplishments the hard Japan and the employees is to achieve conversion year I as goals track outlook our that business for sales believe consistent management as XXXX, well pleased with However, and to the distribution proud are Japan. year our Aflac outlook

capital know more to announcement. place I and shortly, Turning touch provide but you and deployment. soundness. details like Fred importance will on the management on deployment the financial to dividend I’d capital

fourth and deployment, We dividend, We share sound to It view very capital capital in will and options as growth. within the dividends more first repurchase deployment quarter continue risk without enhancing growth. evaluating have been saying effective than our the XX% dividend the framework. a be primary the organic our that our by after goes of treasure XXXX. traditional disciplined increase quarter. This increase in pleased I’m we Board to that of decided XX-year

right to the quarterly While a dividend to plan our dividend we look of review to the first at the reserves increase the the cycle. Board basis, shift on to quarter

position of earnings stable the level to back growth cash capital an the driven in flow, earnings outlook our overall for primarily drives and to reset reforms returning balance increase cash dividend While capital shareholders. approach by

dividend. in the In first had not is increases fact, we’ve this significant the time

in XXXX, XXXX, As our business. we dividend, driven as in again quarterly each XXXX, double-digit increases case our in new recently strength in by financial announced and

We repurchasing growth our to stock and right strive continue dividend in will investing record and continuing of that of long balance growth.

that United of committee business. Before we to a to of receive, December take manner to direct it of consisting office of and regardless motivation. all on responded look that an intention, allegations our you from committed to said, special groups General and a may to will our ethics with over statements same all corrective We call. to I manned ago, investigation delivering stakeholders report our by board, want we directors appropriate, I discussed the we entirely the bring support litigation special of independent hand created outlook Directors. take over about in contractors to a audit to the I made when hotline where incidences XX very extent swift, court a in of our We Long company come posted We I transparent to manner. Teresa, independent outside from made take they seriously. Audit moment shareholders we confident for very false a our all to of when recently doing internal value robust When a our conducting objectives function false that the our action service. way have full were third-party Committee or and want and to a forward that small reiterate That in to know Counsel in of page to our we represents to of any by the moment take fighting the anonymous the independent we transparent compliance Board our remains available want this the we the the compliance their needed executing States, independent attention our regular our on and reports investigate very we an and say unit, are policyholders also fullest the communications we achieve that function as law. operations strategy of were of

an who you U.S. over So Teresa, the Aflac with Teresa? provide to program that, I’ll turn on update will

Teresa White

Thank generated the also results Not the Aflac for both and of were the with but quarter year up, pleased I’m only year. annualized sales we Dan. XXXX. XXXX best Aflac premium U.S. U.S. you, since new sales for sales

the new fourth distribution career in XXXX, a broker the of prior and We with I producers, of the the sales four also best productivity veteran strong distribution. the career veteran top improvement Sector. sales in from in improved pleased specifically for year off broker talked On outperformed more sales From our saw I’m the agent quarter XXXX; groups about our Public in agent growth growth new improving engagement, sales, areas overall career and had Coming and the middle agents company history. standpoint, year conversion both and and to in then expectation. market we associate both that,

to from solutions investments and customers. in their veteran our Our with equip agents better tools benefited service success to them

Aflac. represent Our working We of case continue the whole, growing employers. the increase positioned that Aflac associates in longer. our for amount the agents them Aflac Broker who believe best broker with expectation smaller cultivate professionals of half the second within with to meant and for seeing success results amount of continues I of sales these stay to succeed productive to with market industry positive and because a sales the a small new is therefore with sales onboard agents the reach career our new more opportunity growing year. sales to as are Aflac

still the an our continued broker the of broker value mid-case enhanced XXXX. large of market in market us total which with we our improvement, outpaced seeing benefit market, technology in the investments for will Along to clients. opportunities with see better the and be particularly coverage, are sales also for we focus While area projections,

led growth build to X% in the on Public XXXX. to Public new U.S. X.X% focus our increase operations. quarter strategy XXXX, X% sales X.X% anticipate in premium services increase for strategies, which X%, in to earned and the efforts of for out with annualized for increase growth the and with new range Finally, our and we in the Aflac customized of sales that the a annualized market, and in to continue executing generated an pleased XXXX. Needless I’m along initiatives including premium premium. a say, resulting Sector, X% Sector for These we to in tools in In proud

We will growth, on focus experience. efficiency and continue customer to

deliver we and One claims process to expedited Day like and to want the our the focused From are terms already We investments on our between, experience. enrollment off be product to step culture Pay are every simple platform on their and experience we enhancing customer process ways Our in of policyholders. compliance promise Everwell our paying easy. to strong in

we Aflac, results fact, – enrolled our claimants Bantam and those of an XX% We claims electronically or say in that XX% strong process recent independent these survey processed believe was brand quickly. said and independent The easy of their were found In that and policyholder’s that in Group, paid reinforce with from differentiate trust.

committed to or expectations exceeding touch at policyholders We’re point. our every meeting

to let Now Koide-san. me over turn the call

Masatoshi Koide

from across by I sales with on the Aflac in medical products the Aflac Post. due the provide as momentum to We February and start happy medical statistics. will will saw strong driven flat earned Aflac traditional let whole especially, strong our sector premium able third stable a strategy Teresa. product release X.X% XXXX. steady our sales distribution sales operations, year-over-year From sector of the including cancer premium believe with third X.X% a our with We alliance advanced anticipate of Japan’s pretax sales terms for our I you, in marketing implementing had maintain were the of particularly sales other Thank device Cancer performance. This insurance sector earned insurance focusing range, X% was our This to profitable steadily growth. was strong revised of medical in growth its which and X% very product we essentially insurance by that sales, from increase continue growth sales a in highlights standpoint, Japan’s annual earnings. product. to our channels, year. insurance our I’m result channels. third reflecting year be Japan Japan’s now for primarily will me channels

Japan business remains annualized premium. the sector see in and the billion whole, within at reinsurance business. Aflac that as but third from have third $XX Looking continued to XXXX they a opportunities billion the and with we sector, third in-force sector approximately today, our that’s range growth mid-$XX the good hands-down providers growing taken in new indicate Life leader

post XX,XXX particularly We growth, have seen offices Aflac’s offer products. that at

complete. is office agent potential productivity market aimed is model at strengthening agencies. high The selective almost sales nationwide and sales initiative Our enhancing initiative further

sales products, third with products. Japan including products as While our for has such sales product portfolio not comprehensive to the as of in sector we agency alternative our and will actively offer XX.X% continue first future Total to expecting same continue to sales actions to with To touch limit provide reflecting self-enrollment down in investing same will sector we growth. products first quarter, WAYS impact sector growth time, first aggressive with the interest-sensitive protection-type the the in distribution be products. you a At to products reduced those XXXX, channel first were substantially sector products. exclusive on setting our of sector sales, know, of Aflac repricing opportunities interest-sensitive type

to ahead year part sector conversion the to products in the the branch. third of the face Japan of XXXX, of comparisons, especially Looking challenging sales due early

However, upon completion we conversion. third launch, of planning expect sector are in the of conversion. to following second the with help see product half the our And the of improvements we XXXX

conversion regarding a the Japan to subsidiary. branch Finally,

we’ll strategy Dan is continue investments product operational and business needed our proceeding first XXXX, planned fiscal on be that I’m to pleased as XXXX. as leading distribution we sector initiatives of nimble, mentioned, and implementing to about the that initiatives day year schedule, to confident market I’m Japan’s the the say robust business believe transfer are As also to Japan. proceeding I enhance are and and closing, In on insurance third our Aflac planned. in excited able

Fred. Now to let me turn over it

Fred Crawford

Koide-san. you, Thank

exceeded very in overall his for we’re with financial year Dan pleased both our the in our full and results expectations. As quarter noted the XXXX. performance comments, Earnings

margins stronger-than-expected and operating share pretax from of the U.S. earnings in per both For the quarter, $X.XX Japan in benefited

XXXX, basis of for Our the full reported yen Operating the results neutral to a share negatively came compared a quarter were impacted by as in in by a share. modest $X.XX per weakening earnings currency the at impacting conversion communicated share, for per high the Japan at and increased million, end up guidance $XX $X.XX the were X.X% branch costs quarter full our call. million the the on third of and respectively. in and range $XX year year quarter

XXXX. million million with expected to the at of original end first of to of the expect bulk the We lower our in come costs $XXX in estimate $XXX the remaining half

We The cost years in forecast Turning Japan the Japan work ratio, and our underlying the benefit line and lower income. testing segment and were did Japan program below call cancer dollar generally strong all million, results results, with recent was expense in Investment ratio the in investments and ¥X by higher reduce strengths. to dollar no quarter approximately to margins our in full We Japan’s actuarial with our recent claim pretax yields with driven by guidance. favorable and medical in billion, of on reserve results in line U.S. continued strong with performance to adjustments completed quarter during our quarter adjustments original reserves. claim material in our $XXX similar year. outperformance driven $XX by million year for our with yen driving the costs hedge hedge cost contributed outlook

review of our U.S. costs. call, and we the a position on surplus thus based in discussed As notional outlook economic December have unhedged position increased reducing dollar our Japan, our on associated stressed forward

and our dollar volatility Our balance assets. sizing under with regulatory a to value dollar weakening and potential seeks currency that holding Japan yen the capital franchise capacity comes the earnings management to of unhedged unhedged the approach investments scenario prudent long-term for exposure of to

for middle $XX we by on portfolio a tolerance our financial connection recognized our over properties for about portfolio the NXT foremost, strategic initiate of portfolio leader commercial we further unhedged first million announced that strengthening from will time is a market equity the Monday, in allocation, totaling investment, to we a to be and with investment we approximately and first of and in floating-rate XXXX. of income gives strength lending, In the a objective fund NXT, Aflac committed floating-rate of guided accelerates a follow Japan loans build the partnership start U.S. middle investment these liabilities. portfolio move quality strong Our yen’s ago. $X.X year U.S. Japan to building a throughout This are us began $X the institutional purchasing billion. in secure market loans mortgage billion of in dollar to To funding dollar

expense to our as the is ratio came XXXX our was consistent favorable This quarter, compared the with results, in Turning somewhat U.S. elevated and in quarter. line while our ratio, in guidance past of our driven to in profit strategic on initiatives growth years margin quarter by certain the a improved and expenses. with revenue relatively throughout reflects on year X% flat progress XXXX. last over Overall, benefit

the announced we platform. to five the over in $XXX invest Reform, next U.S. Tax to million With years signing into law our to our up three of intend

comments, and As to in this ratios XX% above noted efforts expected initiatives. guidance. midpoint in modestly our are commitment includes run employees, the expense of investments to his outlook call XX% philanthropic Dan our U.S. growth

are been pace nature incorporated guidance not the for into and and investments therefore, XXXX. growth have additional not Importantly, our of finalized

range, solvency year dollar is unhedged our of capital, ended have ¥XX a capital In recognizing an estimated Japan additional we position. the in increased strong support we the margin terms of allocated position. to ratio billion XXXX% in

the to tax mid-XXX% the at impact Our only reform range. of U.S. ratio risk-based capital stands prior

as percentage result our expect reform. of XX% reduction XXX in ratio tax We a or a approximately points

holding a expect fully is shareholders. impairments outlined capital recover company, share of financial period level say, briefing. strong our contingent plans only negative setting to liquidity in of repurchase, conditions returned income, the our capital drawdown capital. XXXX. analyst to we through return quality U.S. shareholders ended We and credit of years not the over a a and Overall year modest assuming will to amount $X pleased disruption aside to I’m significant billion $X five of billion remain retained. with statutory as We the as to in We billion approximately over dividends three with continue our asset XXXX Including to quarter. we income impact at any $X at excess this do that additional

Aflac performance, increase an flow The dividend stability As into Dan our highlighted reflecting reset we and and optimal on generation. ratio payout takes current common allocation his recent move comments, of The earnings have forward. account our in we approved with excess XX.X%. of capital this stock look of annual as board the increase cash also

a We record to and and track recognizing are a by cash have yen/dollar earnings taken desire of over currency movement. sustain approach our our time flows with balanced XX-year increases both influenced

by for our $X.X capital. maintaining range remain repurchase are We relative and guided the our range We for to billion excess tactical current of returns use in billion XXXX. of within $X.X options

call to for on the Reform In the or billion. our financials. by on I’ll handing the back reduced Before DTL, Q&A, liability, quarter, briefly impact tax deferred our Tax of David $X.X we U.S. comment

the associated Our acquisition unrealized primarily by investment driven and reserves, of is current-period result liability. The DTL deferred was cash of tax taxes the deferred the Japan build impact of tax lower an treatment GAAP and costs gains. Japan

our a operating non-recurring the of adjustment, remeasuring rate. item represents new effective non-cash billion tax earnings. this $X.X our net applying Given of out liability definition best estimate when we of estimated of nature the pulled and the The income

operating our a are we press likely outlook further to We for included release refine to the share. We XXXX in our earnings liability see revised per adjustments as estimates.

the rate an will tax of earnings of We corporate EPS share We earnings. billion. together assuming Japan’s our a the estimated approximately capital to of in improve estimate U.S. This excess XXXX share million from in remain year. XX%, guidance a a have operating to XXXX markets drives $X.X per capital assumes the stable our are This throughout generation by approximately mix rate XXXX year. rate range in The effective $X.X We stable XX% will $XXX drawdown with in $X.XX of increase XXXX, annualized estimate and capital and tax from approximately reset XX.X%. assuming billion capital generation U.S. our plans, derived RBC deployment accordingly. incremental

are margins session. we strength. terms David David? to positioned ahead and call to now in to core begin Looking I’ll the Q&A of XXXX, hand our back well capital

David Young

take Fred. first the We you, question. Thank [Operator Instructions] will now

Operator

Thank you.

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

the The Dally Nigel from line Stanley. of first comes of Morgan question

Your line now open. is

Nigel Dally

good you, morning. Thank Great.

allegations So sales see came to article? on news so or be we the has a the recruiting any out your Or you brand, to with mind, that in early Regardless to just January. in seeing potential of from tell? that somewhat are damaging impact article that truth the too it is of

Dan Amos

the the year that as our too to it’s favor. to particular and achieve and early I full done, we But it’s all handle believe that think tell this target said point. issues be will expect you, any at when I were we us them and to told able of before resolve in our for brought

Nigel Dally

Great.

through on along a And – a follow-up your so Because to any less prices lower sensitive. be any reform. benefit price to market smaller tend policyholders market benefits? that be tax other Will of or passed

Fred Crawford

we that no I Yes, in starters, right. that it Japan change unaffected you rate goes Japan since saying in tax incorporate rates Obviously, there’s there, and corporate corporate our this by without tax pricing. think is our business for have

U.S. remains a make what tax we do there’s levels is right. strong and the rates from products. monitor practice. have What such environments issue. in value will, competitive as very always in pricing our the The that nature we’ll premium proposition products relative really pertains and And the associated and you our certainly is, policies you premium and of that little ultimate that we sure in and will it’s do U.S. to very changes standpoint, that of our are to So it a if delta,

Nigel Dally

a Great. lot. Thanks

David Young

Operator, our next question.

Operator

next of question Jimmy Bhullar comes from you. The Thank JPMorgan.

now is line Your open.

Jimmy Bhullar

morning. Good

numbers in on like the ongoing, broker it the the they the you’ve decent yet. question in First, are last seems like the a seems and expansion initiatives some had fully had through of had not couple numbers channel, the quarters I sales. fully is momentum that U.S. not benefit in yet It or you of like

– So makes – sales it believe the you you’re that or sales the there could your Or conservative? of is exceed otherwise? you appears XXXX. Is like seeing guidance that guidance the guidance in somewhat guidance anything

Teresa White

Teresa, in tremendous to specifically We market. We the and There that believe do that improve opportunity Jimmy. in we a believe XXXX. where broker be over see will range are areas middle as is that our that’s within believe overall, will segment in focus of But we – X%. some X% can that be this time, market we to our results, we

So range. we that feel about good

Jimmy Bhullar

couple there And quarters? they’ve why you is versus anything been slowdown concerned that’s sales a last expect making in in about the where you of

Teresa White

No. I slowdown. as have any any concerns it to relates don’t

Jimmy Bhullar

And the then business… on Japan

Teresa White

be the quarter, that’s our clear. first So lowest let In very me probably quarter.

lower So will projecting the lowest seeing it pickup year. see first a but throughout then quarter a still you’ll start we’re to quarter, positive, we the and be

Jimmy Bhullar

the market support income maybe ago? the to seem – business, that or stagnated. What’s what view months changed thought has product? ultimate Japan that at six seem sales versus you of have might have the on for product your And Okay. a year And

Masatoshi Koide

[Foreign its growing period. Aflac is Koide. Language] still income Our [Foreign market itself is support Language] This in Japan,

their sales higher know in really for Language] has For taken our promote product of our some XXXX. what So strengthen is grow As really particularly, so term right that a being of just our example, long and our some we increase we promotion support believe will agencies the do to among it concerned to to this [Foreign able way really income to in product to of And that do we channel, what [Foreign particularly, effective we and have to there at product are point as than will let result, work growth you routine people [Foreign of time the the product. Language] about taken will this However, some as Language] to that about XXXX, product. half Language] is [Foreign that looking are on paying [Foreign as me. out we products with the income cross the in so always, product, Language] Language] third we to this all loans. to Language] activities. forward housing focused together not in to appeal to one also in trying it sector And root pursue take will to sales push [Foreign That’s half are sell product, the those just concerns second have from make [Foreign Language] our to significantly. of But products. with [Foreign in an first was so best effort do medical product we try sales try recognition an that our this not now result, particularly like And their support customers. off their and and or balance XXXX, would a this customers. agency who that And will are trying

Jimmy Bhullar

you. Thank

Operator

The question you. comes next of Thank Gallagher Evercore. from Tom

line open. is now Your

Tom Gallagher

Good morning.

question. First

on or will So that that – reform. that that change? constant Fred, capital changing or Should delta based pretty do tax constant be generation Is earnings any from over time? your annual how $XXX that million increase in should be is meaningful you pretty there see on

Fred Crawford

reported way Yes, it the be in – Tom, look should those U.S., that have companies I don’t pretty businesses constant, for we at rates. any concentrated – certain pace We there’s DAC to have don’t more the versus to reserves taxes and cash the reform tax have dynamics treatment tax of dynamic. that creates that that timing related the We dynamics came to related know that of of it. out both

tax and both run improvement U.S. not there’s tax Unfortunately, this timing-related from same the that by like of amount so other business plan, kick tax want a business, products as to capital-intensive currently stated. expect company, number. insurance related we the products. compared type provided, to come tremendous we reserve-type in We just any the rates lite remain of quite buildup steady the we of relatively reserve rate cap, issues to impacted have steady in as of so And reform through are types pretty Japan a would other much they’re do because tax the it’s as we while course, U.S.

Tom Gallagher

was allegations. just in there conducted Okay. found practices? outcome you people review? changing up ended then of anything anything else you legal business by that these which in Or you sounds And that that, After outside had of terms follow-up. Dan, like some was that that your you review, involved an

Dan Amos

we it end out that is And in report, to report terms February. be yet. we’re think one come But I spoke But the of regulate there’s set clear, looking to better very itself forth. of and be out not seen guidelines what we’re haven’t have – through, for should They’re we’re way a all were if are we more to the before doing. shortly. me always it following sure the see said, that make we to let first that We in things

right we’re We’ve it to And forward and do It Counsel’s to goes feel had Committee. they But the continue to call management. things, hotline adjusting and so move it there, the those we’re we’re can that like. Audit General we From circumvents things. as the to constantly do office. do trying to where that to directly, going to goes

that’s company we real way in make a issues what any and most it of we’re we’re there’s sure the that to this want that trying and sure ethical there’s is, run of where if open-ended be So And to anybody. manner can’t possible. bought transparent information by to we’re is we that make

Operator

comes Scott of Goldman Sachs. Alex The from next question

open. is line Your

Alex Scott

Like, expect how what these products years? benefit is about, the Japan, I branch kind couple thinking is A like, talk new and of pricing could there adjust out, guess. the much – products question out need conversion on are pricing the over of some And structural? next more pressure? are coming you for ratio of you’d impact to versus of the the After

FredCrawford

I’ll this competitive, forward. Japan start going general we and be been expect for has comment competitive the this, is while landscape My Fred. it that to competitive, it quite remains competitive a very in

will, the of maintain growth we products refreshing And to in a very so as have to result, But related and been rates. stay order proactive development Japan the margins. be you and landscape, maintain to in if competitive competitive we’ve and to pressures, margins, our years, to just this franchise continue that able that’s navigate our for that, around competitive our many around sensitivities and been and and this landscape company

Alex Scott

in specific any of much that U.S., provide rate then And at, that, details provide could you to areas? looking can you are around growth how investment premiums? And the upside kind for long-term the that the

Fred Crawford

Yes.

XXX(k) major through the company, offering significant while. and philanthropic I such products that’s to in our has invest and Well, years. and also a fully three for think that as over our employees over referencing a made fight the five the efforts. up holidays the and is to employees, million at initiative you’re part investment investment to to an we $XXX issues of U.S. our announcement as subsidized in our We to for childhood cancer matching up then been Aflac effort had a it commitment

of around setting our that. all up We’re activities

commitment, of doing a the to of number you confidence that cases, and in an been digital the including technology $XXX XX% we reform capital remainder in to make not some amount benefits. really lot very would our going advancement, the those is at both to distribution. employees, anticipate years, terms and is long what’s in and with crystallized that XX% And revolve matter what nature of over they’ve commitments. of the us philanthropic around important look identified, also or accelerate realize guidance. acceleration And of run. investment If nature, is, commitment largely to the advancement, timing The could represents tax in distribution, but opportunistic to They’re allowed some three plans will over five very around million to alternative

would capitalized, at the be level, holding U.S. company would would take the place ratios. affecting would number investments of the For some place contemplate we some a take example, entity in

So our as that’s But those crystallize, certainly give guidance accordingly. we’ll intent.

Operator

question from Research. next comes Bass Erik Autonomous of The

line open. is Your

Erik Bass

XXXX. it Meeting, how about amount Thank this It’s laid you. you increase capital XXXX announced deployment? to mean, the on plan the deploy, think, to At change thinking $X.XX out of are dividend a billion to the you $X.X based of and does you acceleration. I capital FAB improvement was I that for billion total

Fred Crawford

rate the amount come would is The tax capital do change we that in one in have capital additional total that of deployment vis-a-vis reform. only

really relative then our peers, and is And approximately towards as allocating the on value capital, was XXXX. stepped also And so where the in What’s to that a had prepared opportunity year million really our back capital. the and noted that shine something I was at a highest as quite dividend recent period, to been the a quality But of has move excess impact we an our would started remarks of making accumulate. expect to of then while to capital. looked the of we at area what three-year excess totality looking of capital ratio the using payout We had that. that and in my over lift effect for best to of $XXX we and you flow the uses relative And relative the but dividend. cash looking at using the this years use foundation on the dividend. of It

sticking that made we’ve including that move. over guidance, repurchase So allocations our Otherwise, repurchase to we’re with frame. time general

the we what so, has Koide-San have Japan, for digital, again, technology, in et Teresa the some expansion, we therefore, as to around is and would think distribution capital where initiatives solves cash invest that’s added has capital. dedicate investment. opportunistic in more opportunities outlined, and and And cetera, excess And look to growth of outlined flow we

Erik Bass

on potentially already you the had U.S., it’s longer $XXX more Are – do mean, the ranges the do accelerate follow-up and the have think see investments Alex’s then term? near above Thank And needed earned to enabling industry? question. including keep that but investments targeting you see to with the if growth these pace doing, in the I sales as that are that just you you you’re you what premium term, plus you. incremental million been

Fred Crawford

a imagine being the made look the rest of at of going mix at fall to you investments industry, both. they’re are the if I day, of end the Because certainly, into Well, along lines. these

do keep at we great strong to So need in a significant you brand, foundation we’ve got what pace. reach, But do. here distribution scale a absolutely Aflac,

XX of we X so we policies. XXX,XXX million our which people, businesses, currently employee million And small touch have

investing we be are expect accounts, greater and et technology, digital growth, it’s earned cetera, intent premium, that efficiency premium, in to in greater I in would productivity benefits when these playing about to also it. say, penetration and client investments. that into talk you so but would the drive policies would growth. cetera, yield annualized of And And force, et

Erik Bass

you. Thank

Operator

comes O’Neill. The Barnidge John question you. Sandler next Thank of from

Your now open. line is

John Barnidge

U.S., weekly was that Aflac the annual when In or a in you. it average producers, basis basis? quarterly on either Thank high the

Teresa White

Teresa. This it was high? I’m When not that is the understand sure I question.

John Barnidge

of the was previously. on supplement an seem like Page basis It high that XX annual there was doesn’t on it and XXX.XXX it

Teresa White

Yes.

you’re referring the productivity. really standpoint, a I from think productivity what And certainly, to focus. that’s been is our

to training, have since probably and producers high become producers I’d those not focus on working so, look back agents. productivity productivity seen our that development, at XXXX to been with But numbers. We or but have has go or driving and productive

about that where I’m excited surprised So are, that we pipeline. not I’m

John Barnidge

a may maybe U.S. M&A Japan? products And the reform, be U.S. tax to with or either how more or mix the and that organically channels? inclined between then your new does grow into through you you And seem component bit do change think earnings

Dan Amos

Tax reform invest our in is and influencing necessarily we where dollars. not of itself

you the a earnings, – our purposes. would because is our of remain that of is remember, a branch I Something remind entirety tax we on for U.S. taxpayer Japan

having a to remain or planning to subsidiary, So convert a it despite purposes. for branch we in here converted tax April

Japan. on both we in not we’re of the profitability regions. that’s strong our skewing our taxpayer corporate a tax have necessarily higher But in rate desire U.S. make to the Obviously, we earnings. So dynamic all where is generate investments,

And so it’s attracting capital accordingly.

John Barnidge

Great. Thank you.

Operator

KBW. Krueger Ryan from comes question next The of you. Thank

now Your line open. is

Ryan Krueger

Japan, On to the conversion? April in to revisions are shortly and product products the you make cancer you would have first medical? guess, after refreshed secondly, morning. I expect planning both for then And Good

Dan Amos

that? answer you can Koide,

Masatoshi Koide

refrain will [Foreign [Foreign Language] coverage Language] like [Foreign the reflects announcing our offer a and planning that. been in I And [Foreign to it very treatments really Language] to of not That’s Language] But timing new or injecting since me. say This we here. is that the I align incorporation that supports be from we medical Koide-San product very, a conversion Language] cover strong product. therefore, from Japan, can with to And formally details recent Aflac that is announced, what really [Foreign would are launch the that, Japan. has product to – our from

Dan Amos

product. Financial been do often on to very the discuss that’s want to just do I call requirement not date actual Services They that have this want the not us that we Agency a of not remind of approval you that. that

So their we’re guidance. following

to out what but kind that. sure, you you But tell up last make it. you, just can what it we’re for So be adds of with glad it’s and doing we us. of if We’d you following not now and at it we’re to figure kind did look

Ryan Krueger

that DTL from your view capacity now then, the after debt increase below of increase value And XX%? debt Fred, with in ratio book capital just change, the to the does

Fred Crawford

I’m time. question. to necessarily leverage not reduction at fair DTL one-time run it’s the Yes, over noncash out the overreacting a moment reacting or to redial

the that’s in are the cash to, and best on dictated of part lite and relatively can make the a largely expense, the interest flows. highest what of and move understanding flow we way excess we make to have, leverage is cash because able Our a by of we level use is. of you have for quality example, dynamics kinds capital When the those of so as decisions dividend

a no translation. stated below our ex-AOCI look down below fact is there incorporate XX% the I ways. basis, We where But we pump dropping at leverage are currency So unrealized that you in when you which at leverage you is and XX%, foreign XX% see from policy. it we also to look leverage on loss to different look leverage. would recorded which plans two at the remind up also in gain

value to that’s a the part we and realized the our AOCI of – with well. at small in that currency unrealized, a it’s times may our that the even over nature in look to related because of impact become that’s it’s Now sense number not Why? franchise. time though Japan it AC economic try at to as that Because leverage is

still at but in with And low, it ways. And at up ways. adjustment, leverage we in both currency is look both so XX% we around look change, it that

– do agencies So rating also well. add and should the I as

relatively of we But course, are now, no low-levered. So right plans.

high as capital ratio in opportunistic increase. deploying and us to such nice We have that dividend a coverage very a interest on be expense allows

Ryan Krueger

Thank you.

Operator

Fargo next comes of The Sean from Securities. Wells question Dargan

Your line is now open.

Sean Dargan

Thank you RBC have and question around morning. and tax good Fred for a reform. I

everything, inclusive So of the DTL the sorry, DTA? RBC XXX not that’s just – hit, point I’m the

Fred Crawford

DTA impact. numerator then impact a That’s – has denominator of it way And the impact. a and it a right. there��s It’s I think is,

if favorable the required so And loss or in tax treatment the capital, denominator. of will, you certain there’s also

incorporates so those it both elements. And of

Sean Dargan

your rating you to and thinking about had that And give then rebuild you some that? they they’re Okay. about over have agencies Are compensation? time, conversations out comment with going of how kind the sounded to

Fred Crawford

additional on I – U.S. legal – the around mentioned all three might five of also color estimate too. to be we that of when that right would statutory year. statutory I and $XX entities million based it’s now an income in you our over a consolidate Yes, little more this of RBC This a recover is add years, when would the

Audit team what And question, on gain XXX% that I and saying, think, last Committee, And of told we I targeting future, the find RBC is To plan my we do going XXX%. our your our no then I optimize of breath with differently "reset is this back by the you that are be these of starting be there out hey, reset, over capital. to next in ways if year’s the coming so if years, now, plays we it plan If few irrespective so the I’ve sort of out RBC"? even is, here a agencies internally exactly go to RBC. I’ve you my we’re held I’ll to plan really to year’s never going and be that’s and mean rating tell what of if will, the events, to drawdown held becomes But sticking it. we’ll it XXX% can types standards impact relative a our in has excess right adjustments. with these same which that. and on the

Operator

comes you. next of question from Citi. Suneet Kamath Thank The

line now Your is open.

Suneet Kamath

Thanks.

sales, group of Give wanted U.S. sense new new start Just those versus Aflac what been a percentage to have conversions? late. and the which sales represent customers, of with the

Teresa White

So to movement first to speak business think from referring let to is individual you’re group. me what from and I –

Dan Amos

Do you and want accounts? re-enrollments

Teresa White

New groups.

Dan Amos

accounts? New of we’re sure What the make to asking same page? you are kind on

Suneet Kamath

no A but longer Aflac? customer are paid, side individual the that’s that through had been individual or agent, through the sold on now is sold

Teresa White

less So it’s amount, than X%. small very, very

X%. a X%. be it’s So small about very amount, may

Dan Amos

say one me is interest leave. Let thing. our believe We them the customer. of that people in when it individual take of A with the do, they policy lot best because the they can

Teresa White

I think individual or group their are And the employees. a offer is right? what’s a they policy policy they to employer want totally more important and to group individual, as whether separate an the companies, makes decision to

an who group to an Now want employee give policy individual has individual move policy to that just a employer or to the has as choice keep a by person we to whether normal to course, they their the there’s individual group. – decides policy, go there’s and individual their if

product, their of small So an the whether I it’s And of amount from it group. issued individual very sometimes, activity it’s from that does the the product, but transferring is the standpoint. from said, people guess, activity a the of choice to underwritten it’s individual, happen that differently. standpoint, then And Dan made employer’s individually choice is basically as

make those product. to the that I they that want as they keep hope to – can whether helps. So can decision

Dan Amos

individual basis real small The generally are business an that on though been accounts. driver the writing we’ve is that

Teresa White

correct. That’s

Dan Amos

we it’s large working driven driven predominantly group accounts with brokers by the by is business, brokers And associates. that got or into when our

So difference this. that’s as look you at major a

of there’s overlap as So much not because that.

So that’s is low. number that why relatively

Teresa White

That’s correct.

Dan Amos

it’s make everyone under sure the of reason And they where explain written. same just case it that the it large it that accounts for that In that wants employer that when the policies, you policy one is individual had state to to has and across arrangement. goes lines, to these

could – within you So an they different. add account

are where so individual is Georgia policy for way. And don’t different here the human in be So have people like Alabama it really that’s Alabama that, people and was if being people. employers tend larger resources from an that a Columbus, why then take, example, that would to policy across accounts in the line, most these –

Suneet Kamath

Okay, for one that’s fine. Fred one on maybe quick I RBC. the mean just

sure thought around after we you U.S. Just think down even I model XXXX, that low-risk I I more, know business the the wanted that given was that to have there Aflac XXXX. you’re that of going said XXX% when had maybe make understand, by But to draw to

which be the knock RBC to down beyond draw your little bit, want is clear, that impact that impact to of a to XXXX? ability Just tax that reform, going down does does

Dan Amos

capital-intensive my change being sense RBC in run really businesses. lower doesn’t a our business to the than, able of more It say, views at

we’re now, so, the a been had work we’ve over that XX continue XXX% assumption we drawing only before, down optimize to while And through RBC transition. mentioned us statutory manage of however, earnings, more XXX%. a the ongoing a that retention my right the But year pace is Once as I’ve able to is U.S.- time. basis, of If, on you excess of now, book. to to plan with we book capital. not now, proactively that parameters, should rating that’s upon with assessment sticking into plan blue the a own look into offer are game do agencies, settle the management it’s earnings, opportunity bring right years that our communicate we and U.S. to this of of the we’ll optimize. And blue to right since course, and only settle of down, risk But

numbers into a communicate bring we once so of get and that to And make the for case efficiently. the RBC ability risk low and profile those properly to more and be business very maybe able the

Teresa White

conclude I the hour. of our time Is top pass Operator, the call. we think have to

Dan Amos

today. concludes our Thank joining you call. us That for

free Relations please Rating forward have you Investor with any If department. you we questions speaking look to and our And feel to contact Agency soon.

Operator

call. Thank for all concludes This Thank you today’s you. participating. conference

You may now disconnect.

Aflac (AFL) 1 Feb 182017 Q4 Earnings call transcript