AFL - Earnings call transcript Q2 2018

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Operator

Welcome to the Aflac Second 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. second Good Japan hearing Dan Incorporated, results, management. Fred Amos, morning operations the we Incorporated, and Crawford, financial from follow be will in our CFO as Aflac, This Executive Chairman Vice-President States; of our remarks CEO capital with as more well outlook the about and and and United quarter Aflac, then about will of details

will We open to our questions. then call

our Chief morning executive Teresa Distribution this Joining Rich Chief for and Actuary; Global the Aflac members of Risk Williams, Riggieri, team Q&A U.S.; Chief management us Max White, U.S.; are in Eric Investment Chief of Treasurer. President Broden, Al Officer Kirsch, Officer; Global Officer;

team President Aflac Insurance. Financial Ariyoshi, Koide, Daniels, Marketing. We Head are also Officer; Aflac joined of President Todd of Koji Sales by Representative management Tokyo Charles and Life in members Director; Lake, Principal and and executive of Chairman International Director, Masatoshi and Representative at Director and our

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

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

Daniel Amos

today. good for joining Dave, morning you thank everyone, and and you, Thank us

that our of profit well Japan's to Aflac. third yen financial generated Japan saying strong details months. share that that pretax beyond revise provide through new our expectations am results. increase established second was largely results cancer to I were adjusted XX% expectations. the largest more Aflac products. our me pleased terms, for say year There a contributor me and earnings through strong strong both our first was factors margin This April's begin but introduction sales was will upward the six outlook. Aflac Japan's XXXX of we outstanding above ahead expectations our or a that few sector Aflac first the XXXX sales able per quarter. drove for in let quarter half of of were Let quarter insurance the just Fred by the due

cancer new past. the done First, insurance enhanced of policy product we've the the managing benefit features risk profile carefully as popular offered while the in

for done. In with wide ever reaching direct distribution television addition, launched network. largest this cancer that - promotional we all engaged the a we product ads cancer finally And incorporated targeted new we've campaign mail fully the campaign our

first introduction were the bigger the last our agreement results had were launch new XX,XXX plus marked Japan sales all Japan that had time. anticipated. that Over sales to our we've postal This cancer The in outlets the for time. positioned outlets phased at insurance with cancer post, we the few than at to product there same following post we access years

highest the In fact in this terms post quarter in of fee. reflected a production ever Japan

success. they a also had continue to be agencies traditional in and solid performance our Our bottled cancer to sales

to to where Our our be people buy network goal distribution furthers insurance. extensive want

product. we originally the the launch and agencies the acceleration The sales of year the that strong this these some of affiliated strong the sales second half an of corporate another All reflected foundation for are quarter. agencies the factors independent quarter's cancer results during for corporate cancer laying of recognizing growth year believe an We sales. sector third for both strong of anticipated of reflects the

We we're to low Remember, sales to the product. sector off single-digit have and introduction ever of XXXX an sales. comparison for robust last calling projections year's new third in medical third now coming due sector rate medical the are growth outstanding for our XXXX for

analyst this You about will from Ariyoshi hear at more our September. in briefing financial

Our focus third products less of the sector and rate-sensitive that leadership remaining our in are sale position interest margins. strong had of stable

introduce product continue our will sector existing market refine products to third We to leadership. and portfolio innovative our maintaining new

our sales progress the Aflac half of sales pleased results and The with for our our quarter X% profit of to our the year. expectations which to margins quarter the U.S. are the achieving for I'm pleased for in advanced with we performance. exceeded full-year our growth Turning pretax financial first both X%. also anticipated

at about but You'll and Richard September in to more broker briefing we financial expect this from our in Teresa sales. analyst growth continue hear

sales made team Our have broker large of community. strengthening broker strides the in successfully within Aflac's professionals great relationship

take initiatives partnering shape. Our already up is to early for True in is products starting still development the but Group

of and comes a Aflac through sales a agent. sales majority rate in growth independent As from products. is our different is our there our growth strong our is high from and of a peers result, Aflac in seeing Keep group brokers mind, sales

in behind independent agents XXX fortunate employers and challenge have which the been industry and fewer within smaller are reach Aflac employment therefore market. dominate a case marketplace. best the These employees. our to field remains driving force strong with career with industry. ability are truly to have career a smaller such We force Aflac's a strong to positioned agents is independent unique Recruiting succeed sales than groups the within

agent our coordination penetrate sales professionals. field force important our is existing powerful to network growing productivity broker a of very and is investment agents of and Equally our continues sales agents However, improve between Aflac of looking those veteran as traction. brokers extensive strong experienced their They are our It in helps development portfolio record track gains look Brokers encouraging further fulfillment that like that they capacities. our a of for as for leverage products also our and clients. outstanding fills Aflac have needs. for found brand accounts solutions

as are ability agents sales brokers independent demonstrated have with their business. force collaboration this We broker broker influenced deal accelerate who experts by to characterize growth working Our professionals. and

the to we As fourth influenced business. will broker way and we towards sales expect continue to sales broker part to make a are quarter of remainder XXXX our as the look growing of

repurchasing provide financial the deployment, in behalf more shortly. capital strong bondholders, Fred and committed to shareholders our increasing balancing are on our time, strength Turning business. remain the our We will of At we reinvesting ratios detail to and maintaining policyholders. with dividend shares capital same

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

the assumes alternatives. case, the is conditions absence always compelling As this stable of and capital

Fred? our will I’ll of on growth by deploying also our now United underlying same Japan our time, And balances of the of States. dedication cover results. to to the and I’ll that quarters we the power reflect make capital saying we best conclude our over I'm be a way we our promise growth. reflect company's to the will delivering the very of also the stakeholders. insurance policyholders. in operations believe strong will has history earnings proud prudent ahead, the in interest in been to excess Aflac It to Looking reflect will who about I’ll turn At one approach the Fred financial earnings that program future this and it. excited the continue all

Frederick Crawford

our exceeded Dan. results earnings Thank Building the to on expectations. our second start strong you, year the for quarter a

in performance year. the stability us guidance early we margins is and it our range original will the year-to-date in strength While year gives the of confidence, our exceed our for

the of of a neutral updated We sustainability the benefit earnings currency our variables as range to claims continue include year in Key share. of diluted to pace move strength underlying adjusted we build have through investment $X.XX and ratios we invest guidance the efficiencies. expense future in in continued and growth $X.XX per therefore to trends income, as

Japan quarter For the of pretax and earnings strong margins by were the driven $X.XX in U.S. adjusted both

by of earnings $XX Our costs our the the yen branch third benefited in performed all or period contributing remaining over at quarter. in drivers key Japan a We reported the million. as strengthening and than to XXXX share the less to conversion $X.XX million compared were expectations. quarter results. Virtually modestly project spread per above costs XX fourth quarter's results

conversion with forecasted range. wrapped the end our effectively with the consistent of of project cost have low $XXX approximately total million, up We

profit Japan Turning we XX.X%. of results, our to pretax reported margin segment

by Our driven shift total first sector to claims benefit came trends business business ratio from mix XX% a in below XX%, continued guidance in cancer range adjustments. and our sector, third of positive associated reserve our in towards

of the end of the IT of outlook spend would in midpoint back range increase of outlook sequential modernization throughout to launch rest run our the given cancer towards Our expect build product We promotional was expense and XX%. to refreshed range XX% of continued our expected with The the to high the Japan in spend. ratio year. reverted our

to benefit product same policies, in reserves benefits. on segment, enhanced on of lapse amortization we U.S. apply policyholders the sector the when introducing on Japan, mix experience policies. and their typically as common on and elevated lapse downward existing upgrade depending third this elevated on as choose can experience run we the a deck policies ratio pressure Before as reissue or activity In to policies short the the our release and for is refreshed moving new

a Japan's ratio, deck product this launch specific While increased have benefit in modest net very it believe provided estimates amortization, we in the on is too of to benefits the cancer impact, our earnings to or and early the contributed favorable quarter.

expect year. throughout will impact We this the lessen

overall in the XX.X%. U.S. to profit pretax our results, Turning margin was the quarter

to of our total back benefit ratio XX%. to Our range guidance the of moved midpoint XX%

followed in second first quarter We that lower benefit quarter, and by have ratio increase continues. experience a historically a seen modest the

in related. below the timing in expectations our largely and Our ratio expense came is U.S.

the in year, reform half includes the accelerated announced second expect tax We investments. post of previously spend which

results. Investment the has accelerated both year. primarily higher into benefiting the by very been $X.XX the the of Overall, in year of we the in XX% amount half Japan the from high in accelerated coming around rates, to these the end second the to continues driven the in running the year. to year-to-date of of income quarter, portfolio, of expectations our outperformance coming performance mentioned further U.S. range deliver As the guidance our growth to to approximately investments and per range. with floating-rate our strong half see midpoint relative will second continue The at XX%, LIBOR first share

lock costs interest from we to U.S. we previously hedge rates. elected potential the As for have in of mitigated the XXXX, majority which commented, higher impact our

of we XXXX. roll some As hedge this to would heading into instruments relative outperformance lose expect off,

recognized impact our As accomplish I lowering and by the dollar to on our call, entering the progress continue managing discussed this in at in investment the Japan's exposure economic into the the wide we holding an first to costs segment. position yen, with offsetting We U.S. financial with company, associated other enterprise corporate quarter while make hedging. hedge

We contributing have approximately offsetting billion a this to the $X.XX pretax basis in to quarter’s position built quarter, on million $X earnings. the

securing in is a Aflac's to position our balance lowering exposure strategy while Japan, enterprise capital Our weakening strong yen.

spend Japan's strong capital result a recognizing from ended risk points. will our our is approximately time in September the in XXX April is strong reduced in Japan. quarter We a a margin XXX% briefing analyst more range, reduction strategy conversion particularly the subsidiary by this at branch SMR discussing financial to estimated We position. solvency ratio this Xnd

As SMR plans over have to a period. we have we impact restore in accounting previously, stated place three-year the

is ratio XXXX. at It U.S. our the stands tax intends and tax on estimate roughly in the risk-based the effect adoption at NAIC U.S. of end capital full of XXX%, estimated understanding only full reform of an reform. includes Our adopting quarter

dividends an capital, holding of our returned our for of we million quarter. liquidity very of of XXX% liquidity impact aside half for drawdown the and quality excess the $X quarter the little shareholders X.X dividend of with company the remain million in capital the in of repurchase, with include approximately asset We in positions. for the our year, way in range share in billion Despite of credit overall shares that repurchased We in XXXX. projections and mid a in second projecting the quarter. tax RBC support million tactical and million derivative and strong $XXX million we volatility, company. impairments conditions in year-end remains of in capital of $X and in Including With We are reform contingent just to recent $XXX the the and over holding approach. quarter the $XXX increases ended billion $XXX set stock

our range of in We to are current $X.X maintaining $X.X XXXX. billion outlook repurchase for

a larger and As of than to fund. contribution move if XX% plan third we implications advantage corporate we is has funded our $XX the to for a sound to represents XX. normal a no into million capital takes quarter, tax plans make of prior contribution and our excess capital. This contribution September The pension deduction use

optimize behind we hard capital the With our liquidity us, conversion work to and are at profile.

strategies We I'll to to will September further session. David? now develop hand the financial at call David briefing. Q&A these analyst begin back our our

David Young

Fred. you, Thank

ready to are a please take other me an opportunity that let ask to allow we follow-up your but question. Now question participants questions, to to one limit that first related yourself one to ask and initial question you

will We first question. the now take

Operator

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

first Ryan to participant is Kruger The ask question KBW. of

is Your open. now line

Ryan Kruger

potential Fred, of next year the the you of impact as could off we they you hedges go locked into the in role help us size reset? and that this

Frederick Crawford

you will of the in rising rates. some certainly It if helped mitigate

pretax estimate costs full million for by a are we for as you that we benefits in $X into recall, and approximately XXXX. As the hedge of our on XXXX entering basis us year approximately we locked XX%

So that's approximate benefits. the

relatively into start risen as a by we will the our if it's benefiting rate would throughout reset portfolio. that's the again hedge through Again hedge we we'll LIBOR modest, of you year. obviously floating but as XXXX, us down So built that note we cost have offset cost having and roll

Ryan Kruger

in then the your after the one, just one comment investment comment you buyback And other for as regard I in year. prudent think mentioned a business

that ongoing the and referred don't impact nature? to you - some the much is companies presumably things like As things really that capital business on of are along position tech have and investments referring investments insured your to I

Frederick Crawford

to efforts really that, to No, those opportunistic looking have our excess although in you is we of efforts sites the the of reinvestment and we will year. relatively set allocation capital represent they three-year well, for any the are will back the time. U.S. that some a as in modest important money of given if move in we going if when reinvest referring those not are Really, year at but you Japan more the some elevated of remainder platform aspect over both period business ratios calling through of and expense a

running Japan have year low the at expense the the of early been U.S. and ratios We both part relatively in in

Japan expect largely the reverted our and U.S. back expense saw would second as backend we more you in investments because example as were the XX% As but that quarter, was the ratio, an that's to in what range we low related how some very we money. loaded plan prudent for had remain and natural timing allocate that to for reform reasons of tax we quite formulate

not reinvestment our that and related ratio much really of deployment. on some is or So, to expense position tax guidance capital capital a so excess

Operator

The line John of is of next from Nadel coming the UBS. question

now is line open. Your

John Nadel

question Fred, risk-based U.S. just ratio. a the capital on

it you that expect think about you had mentioned to year-end. I down drop around it's XXX%, XXX% at to

for Can out, XXX of that the there's that one, is tax think contributions you're the of million drivers is I two relative from impacts. each? a to there, $XXX take expecting dividend decline sense you the us other the give sort point

Frederick Crawford

Yes, absolutely.

the remember, already half was that reform in first of DTA was adopted number adopted early. the that the So, was tax

XXX% reform RBC. tax running impact of impact if really in of the other RBC. reform, words, be you has implementation at RBC posting of we the you that that as denominator, is will. before if or around So, points XXXX would were XX at tax And our look to an right for In

that So, down knocked tax had reform to it XXX%. implication

XXX% the statutory the Now, that half capital is takes the it place we've all what that second loaded of our to backend year. brings and removal dividend down U.S. of excess largely in

U.S. touch of $X of over in In of holding are the with capital activity billion company dividend the the for in the that half excess are up to a earnings upwards entity, we second removal produced just of calling together dividend fact the normal year. of

do a And way RBC it's a to into post making conversion through backend of bit So, loaded. and lot quite had estimates. our settling that with the our conversion

John Nadel

XXX So points? really that the is dividend billion $X of

Frederick Crawford

combination would of a And and million dividend ordinary capacity, earnings what capital. $XXX it. normal, excess got the in You it's then call, statutory I

John Nadel

that's to you ones? the X And which of bit several discussed in the sort is a persistency down related it's new over circle that patient the nitpicky really to last in quarters. lab shift back earlier, Japan. just of I know but policies Is percentage ticked then - X.X old what and points to maybe on for

Frederick Crawford

particularly other And Dan, that beneficial cancer, gone right. his and together comments. then talking with That's because with about in you're having noted and so, in X upgrade, with and since advancements years treatment features diagnosis cancer

much have persistency. for some labs more more most susceptible are that tends recent is, down age be it And that to have of so elevated that Recognizing the lower happening activity things attractive what upgrade You our of in in to you'll policies yes, we way up i.e. cancer an in policyholders. case ends this. the and opportunity

when that P&L, you DAC out have of earnings. You'll balance impact have DAC from lower modest that benefiting amortization. policy, sales on higher to you obviously you our then as and a the release activity. somewhat a But reserves ratio to And benefit bit get for tends to

medical earnings second little over same less in the coincidental see to very the look items of to idea time, first understand and year, at that, note persistency, In you product. to launch of you obviously. about would product benefit an that. when last in DAC That's an tends it's that down XQ important year. ratio, we happen last gives year. this story quarter the see as phenomenon So, if by had It dynamic, last coincidence P&L. XQ you you trends more the it amortization, trends you calms same but And that actually about but the we in it's year line I the in March launched it's our And the

John Nadel

cancer And are agnostic and sales? medical between you

Frederick Crawford

talked that we that. Dan answer from talk The you about it. a let because profitability why perspective, yes. is, about But Dan, answer I'll don't

Daniel Amos

I think Yes, we are.

when have to the always that's then similar, resistance is gives least of margins on said the the us and relatively path path it. least product of they swizzle it straight are We always newest market. choose to doesn't And that profit can resistance. the always And agents It some matter. the

happened You seeing And the it cancer last new year product. the product. this with with you're EVER saw year that now

sell. it one But to So, If enormous to an then try every that's year, was thing. it profitability out easier isn't. than one how us they there to there makes balance much figure difference in which

that new. since good very And feel So standpoint doing been we it. we've way. it mean about Japan, from inception that it's nothing we've working been I of the

Operator

The next Dally question of the Stanley. is line Nigel Morgan coming from of

Your line open. is now

Nigel Dally

follow lapse to book possible question. just it activity product? And then also cancer portion to accounting, question a incremental a the the premium to, sales on it a on wanted sale it from that just when I whole Is new reissue, represented you new policy? on mentioned, or the the John's on is John and of annualized premium have do lapse just is the reissues

Frederick Crawford

because what literally with overall see really accounted -- just lapse it's consumer the separate for really lapse. premium, as policy consistent reported the because it's and and They've as you'll Yeah, so meaning two a it's lapse decided to transactions, treated has decided. their that

would account for particularly you of the more The lapse the then policy, with So, persistency accounting you and a and it reissue. hurts materially it's on it the as as consistent benefit improved if policy and structure accounting. changes you've this to material is, made really guidance your expect it,

So, goes. then is that's and The marked as it sale. a reported the reissue way

regard. as for it, really on consistent way the report obviously it's a is reported many And terms sizing then going This and is the years. that many, of accounting is so this always company. And how been in in we been

They earnings that we've this around. impact, type XX% see But very value on and for muted. XX%. year. example, result which quarter ranging as the very given We in will seen be Older to times quite will they're And the and two, higher the you XX% as it to or in that's the what quarter and upwards with any period time in I cohort lapse of have actually it to very comes It's reissue lapse. mentioned, naturally elevated any perhaps the launch tend When we normal outright it, cash lapse, little DAC release period, actually XX% about in where it's the they or is suspect old associated i.e. more bit will a activity period a reserves. amortization. rare of of to often policies, dependent may when given

bottom example, reserve issued, really to because hits of younger, it be tend when so if little the for policies policies last But of the age amortization. in pronounced have release the of the in to you terms less they've years, many will, more positive a five and And way. line been DAC way in of in way more of the you'll

But and estimate. cancer So dependent Nigel, period to that it's the cancer billion which we and product to benefited why similar it's XXXX. is The range, when on the so, one, this earnings business, would the was to the relatively again, you've highly from case. it We ¥X would this modest, before that been ¥X of case, long around that product time. billion, mix well that before was be very may in difficult estimate in

over going on years. across XX been So, it's --

nothing new. So, it's

Operator

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

is now line open. Your

Jimmy Bhullar

that to reform, think because of $X expected being for how of the of U.S. what just your lower affects plans the billion the free RBC, be? way RBC the threshold threshold conversion. decline any has sort you've RBC assess that First, trying mentioned changed in from RBC an on XXX% the initial I just view your tax the should to

Frederick Crawford

to Yes, Jimmy. No impact that.

are of reform any you plan events to potential absorbed but related our plans. changes would CX excess drawdown also note of disrupting those capital, our I tax movement drawdown and we're with see that that comfortable, if neither bucket, with We We in only are very not as the will, the capital in expected comfortable XXXX.

in settle XXXX. and XXX% the to of expect end We around have settled in at

print I if U.S. opportunity books risk profile As we'll our our will, start you there's business given to see in blue as further profile report entity, to able I've analyze the to of we stability, risk are low publicly, only continue as look that. and and to optimization whether mentioned think and

is say I high, that XXX% RBC most ratings on think even nature high quite threshold. business our observers for the would our of

so, work And on only it own that. basis statutory frankly we'll rating think, to working support and it's a start a these some I on But with good our management printing we risk U.S. about thinking our have on when of can results important practices, and agencies to make case. sure handle

there's So, answer room but tax plans. we to going our changes reform CX your Jimmy, nor to think just capital disrupt there, question, no are the

Jimmy Bhullar

one introduced overall last and thought updated billion more you And if medical were strong very lower around the ask I one they're think quarterly the could was in product I after they’ve continuing sitting year. just And the sales negative I sales Japan, range. obviously steadily drifted shrink the to your just ¥X

you at So assuming of introduced because product but the whole some this level normal cancer - in been pressured medical on next products point year, of the a a little of do sales I’m or sales a you sort new absence of the any new bit expect have focus had is recently?

Daniel Amos

Koide? Koji the you answer question. - like I’d to Koide

Masatoshi Koide

and was And in launched. focus know reasons is have product big as product. Well a you of why then a than medical are product April new shrinking cancer year this everyone sales been is because some more Language] it’s launched the since to of the medical one their really shifting we new [Foreign

quarter the a area this what As as well. AP. we as in medical and are very we medical is business assumed in something result the number maintaining one experiencing And as insurance position still this well declined past have policy is number and this that been second new sales we however in is a have competitive as

please still one that So maintaining position. we remember are number that

Operator

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

now Your line is open.

Humphrey Lee

I I from understand Fred earnings – on the but of a about mean amortization. DAC year? the impact small, benefit should amortization DAC the from the for uplift then And the terms we in should how and pressure to moving benefit the in is think Question about and uplift lapses. we ratio how the the think of ratio like balance downward also pieces regarding the

Frederick Crawford

Yeah I the the think we to as balance of impact would of year, lessen I in this terms expect mentioned.

in distinguishable earnings less of will negligible line So really particular and from a terms any it item perspective impact. become

way we elevate think think it guidance of way mentioned comments. Japan relative because back which would that that's benefit one features thinking would expect to the and easy within range an to to XX% Humphrey is I about would impact in XX% drive have is in probably as that the about the We back it that the of be I my ratio one up.

And that positive to net in hospitalization trends trends seeing. We cancer. some IBNR also experience the led as forget have particular flat good only but for which release we not is strong we’re cancer claims trends don't claims adjust also on mechanical we’re natural actually activity, just seeing somewhat particularly

very expect in the benefit very we bottom we will range end the more quarter, consistent to that close year still that fall guidance our benefit. say overall see be to to range I some to while be that the looking of elevated is terms when continue pattern are of in to second will has overall and XX% the range we It we been XX% in of importantly would that had we coming but at ratio Japan the you a at is So economic that's what to development year will Very actually what than what that and you the is in full expect if that of somewhat projecting. downside continue. currently

quick way gets line done impact able item think the more with quite work actual it to that So The isolate preciseness because to to there quite, that's is be about technical. to be it.

all to You're isolate really parts particularly moving the talking the policy policy in from needing lapse exact about a dynamic.

but mover. we've As your bit very that work of would take I to And given again a it's to from kind more We’ll very continue again ratio to benefit line attention do mentioned last perspective sensitive to the you and to guidance the I transparency, impact DAC can impact call is the items. can development. on similarly little as what a as both more material line not be amortization a the can the bottom year's big cohorts XQ provide XQ of

items. You launched on see thing benefit same the you up. down, reasonable product happening line we proximities medical ratio of amortization And March drifted can when those in drifted those are see the what

Humphrey Lee

there then moving also on it having a so then sector are of first of also the believe anticipation then pieces from launch. the quarter of the and pent kind targeted And because And the the demand of in up campaign. I lot third very successful product there part we the obviously sales quarter is of promotional some new in launch

addressing the of like the about of the we need from demand sales And So how the up when think of product we before year? product the was of this balance of the kind marketplace the think characterize available about up first quarter of not itself product. the would like is in pent you excluding impact kind the how kind impact should consumer in that the the

Daniel Amos

Koide or Koji?

Masatoshi Koide

[Foreign Language]

Koji Ariyoshi

Koji [Foreign the take will question I is Language]. Okay, this

as incorporate by always treatment We area. what to what in medical have features about always needed thinking well as going by is customers - is try the

For example cetera. waiver premium specified of positive care et a have this feature time implemented we

JP main this customers customers survivors. include who their those well also customers. customers as to health features range to to customers. has policy holders coverage And are to added the And the product new broad that And Japan providing our also have Post waiver also as able cover be to time. sales was particularly wanted these about time added policies this cancer have our or contributed and even our wanted have feature our we We be to add is concerns by our is at existing premium been of specified and long this existing that our feature very can have we two much agencies which by

Daniel Amos

thing add that is distribution to strong just but one also product channel. I’d here like important and it’s of is

cancer if the our out Dai-Ichi able and that of then And instead forget competitive something out is Medical insurance business us. all people we’ve that truly are want of market. what us would do saw the thought We big for that that to is in deregulated going to market Life stands worldwide buy places more been to XXXX people the don’t products. go back lot sell would you be put we Aflac when a the of you out market domination competitors

competitors You mean seen get you the I and then in – back, of seen Japan post banks. other you’ve saw the post, off some pull

of part its makes products a as as it but it of them two well that one, but out. punch think I both also stand those distribution, it's

Humphrey Lee

it the I probably first guess the about a quarter and from of the in some better just so quarter. of is demand of have of the because for cover almost you others bit a little product. cancer like just We think because in - kind pent billion ¥XX sales the new up and

for sales a kind bifurcate more normal, the some we about we demand quarterly pent you product, between should that? if how do of the expect think what So of the cancer up as versus

Frederick Crawford

What point say up you this if to by sales. I would is pent your mean what

on in this become cancer the we’re that we with and to to it build. starting starts FSA we’re and publicly product our You commented we've refreshing as well filed motion understood when and particularly might recall that

pullback distribution it. natural systems and for the some will they prepare You a as anticipation new of of see product a in the

it's sales in and mentioned, some natural do Dan the the taper both have start as from perspective. from had to XQ on pause to see a shift goes as of sales XQ medical year you then the out you a cancer but things Koji mentioned gate and that jump So strong and

second saying the quarter you want into what you XQ the exactly have of in second anticipate delayed to and of have pent-up then acceleration of a call half start you year little So a it if or you're of to the from we demand XQ. bit what bit little that

Daniel Amos

get can't more up. about two quarters You

Operator

question is of The the line next Barnidge coming John from Sandle of O'Neill.

now is open. line Your

John Barnidge

in out start we balance first segment increasingly product sector for strong Japan heavily sales? any as be the given third from should that may we this year a year, the half portfolio viewing more first weighted sector in had now a U.S. composition the XQ have half of shift the first Given 'XX to towards way sector third sales

Daniel Amos

that with the coming think a product decide on we we I out function FSA is approval wanted as and the it's introduced as quickly we minute a new new we we are the of when based product, and can.

So we anything. for hold don't

in anything what's that than think I more driving So else.

John Barnidge

Then with the strong can or new driving other cancer products product please? sales, products rolled out you talk new enhancements, about

Daniel Amos

Japan.

John Barnidge

will Yes. be great. That

Daniel Amos

wants do whoever or Koide to it.

Masatoshi Koide

of medical competitive we'll focusing and and at medical considering very cancer considering compared with example, are areas pace products develop as the medical the at and And needed very could we some area much and more timing. products, looking products been for focusing area, are attractive. we be attractive one either which we especially cancer that then of - more in on protection product products we the to currently products [Foreign terms and we of them also new Language] quicker In that area because have appropriate considering in are promotional be of type

Operator

the is The from Autonomous Bass of Research. next Erik of question coming line

is line now Your open.

Erik Bass

you some and of agent have In on the you Can which the impact opportunity improvement improve just productivity. you still U.S. to performance? where are and your date year-over-year seeing about to initiatives talk see biggest nice

Teresa White

is this Teresa. Erik So,

where of all seeing in think we tools distribution I the improvement, its our we area are that of our and around of most expansion services. activities broker have and the

that have I area. the investments to pay started think in we see off

on have lift that other and the also which that partnership as to employer, helped we product bringing have think side executed solutions I on well. are us We to provide

to positive are recruits what your I cetera, love metrics, strategy. very As to movement be a our cylinders, operating feel disciplined see I'm at all to seeing we like performing well, that Obviously, what will this is but many question. more execution et productivity answer may have we increased our I'd on continue on hopefully as of point, so not in

Erik Bass

up mentioned. follow you on one To thing

Can on some impact of comment your this that is on You the the products having out just partnership including you talked about relationships. of the billed sales?

Teresa White

We are and seeing market mid actually increase well. in quotes from many of as our brokers larger the in case

new sales been that as well. also indicator see increase we so of cancer leading well. products sales rates that we’ve a our has as also the part a to And as for but Enhancements seen great

Erik Bass

would would quarter sales see as And the well? benefit biggest on I fourth from assume you'd the now be that in

Teresa White

Yes.

Operator

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

line now is Your open.

Suneet Kamath

about think annualized looks any Japan grow of coming it X-pay number and enforced sales annualized to when sense way strong Wanted number through, third I there still still premiums the but is of sector that like premiums down. talk coming that will to enforced you even again? is kind know with the start

Frederick Crawford

it are seeing in take sector. come first Suneet I still up think paid does we dynamics a through the while policy

around has policies sector about And running but generally. of north little modestly. in general down, lapse one paid-up will and come billion that then year the for First X% are rate but the a continue ¥XX to

into the a Pay see policies of just forms sold the policies related but that on product play XX well. that X-pay to of five than paid-up And far comes a still there's You'll level other have that Pay paid-up just in then but less general we not books. as eventually

in the we modestly is continue consecutive rate particularly starting of slowly by premium So down, third to sector growth to rate. overwhelmed but get growth it's years first general of sector third sector when post be to going

And so the X% premium about hitting of time total we’re sector idea we last over that earned mix in our range. said XX% gives X% XXX And anticipate that's points growing the to you an up premium that as that the third basis about certainly is And earned nicely. premium we this shift. now third sector year

and natural you're place. So rates do towards what's embedded to of will turn lapsation cash improved capital think earnings of third I end of away means you'll from block and takes value good you mix and virtue start which eventually is growth that shift sheer sector in seeing excess profitability sure over corner that flow sector for up just But the company you important the that low our if by very the is opportunities. evidence of a size once in you that deployment corner, the development very for turn And first really FSA into improved of time. the business and

that with line. trend happy we’re So

Suneet Kamath

cancer sales sector third for strong the I medical to on just this it year looks is pretty like you think then carry year. And going was last guys

guys of I was comps another think follow earlier up. to sort some this launch kind product what’s about 'XX? becoming you on question are that Is a overcome key to but just thinking there of XXXX there difficult for in

Daniel Amos

again. that on touch Japan let Will

Masatoshi Koide

growth market into product course well our And inject it our in to is planned a the Language] manner. new of responsibility for [Foreign really

launch. preparing we So our new product are steadily for

product disclose of. that I thinking the to However we the really able are am of specifics not

Daniel Amos

requirement just Dave. like not that the That’s of act that that say us want let’s I

Suneet Kamath

just the fine that’s one support just product. last No, one on income

the sales around thoughts any budged think are but down in third much potential for the product And cancer, think fact the or you I Japan has that? on still they little quarter, bit. in that and about you product Is there past I cancer emphasis product haven't income this leg stool the stool talked lot there has of that certainly support. been a then third a that to really maybe medical be is and in realize that

Daniel Amos

are okay it banks never is say And new This a the successful is, that I it lose our on a new that really but you're there still and we be sales product, doubt it cancer. the What a little off answer to been potential used like would that from I’m the product does. no one, this is this it they it’s stable everyone product knows say product focus out new with I it's bit new constantly revised being I’ll of a with a like introducing products network disappointed about are it, is what is product not was think hoping it that the about when hadn’t revised we're will with that’s of distribution and case product, doing taken thing that and encouraged new grow seeing But when it. in we yet better. Shinkin the there real but I'm it there. make would is

a doing it is isn’t still but I'm that little disappointed bit answer, it we harder, bit think it So better. becomes little has the a but potential

Operator

from question Evercore. of of next The Gallagher line Tom coming is the

line Your open. is now

Unidentified Analyst

to product for or new margin it's ask get XX% on the was of This at of a but it a this can elevated bit guess year. the XX mentioned to the be versus I dynamic IRR lapse Tom. and sort and is anywhere a any old. just sales, [inaudible] David on question the I - sense XX the you of behalf on quarter reissue I given this wanted around And know in of from just

into new overall of versus in wondering and how that IRR sort just old? through the results margin So, on just the

Daniel Amos

Both cancer are priced margins. with and similar medical very

the if the will and fluctuate nature profit the products, of the of - benefits the of the economic margin IRR IRR, will similar premium both while you terms very as range. features as priced in So is in a well

is so And you an company. issue the to about less economic will really this if

it to their benefits leave structure customer We what's and best it. interest up indifferent. relatively improved decide in the We’re to related the of to

take go those ways that necessarily by the really motivated in of and And economics the would on recent in of both how and profitability depending I of so can policy particular was sold the depending period, away on we’re profitability GAAP policy a mind to from product. the also contribute not the nature nature and they keep GAAP product the both economics the age they can could

and best if in we of consumer to activity, don't in interest dynamic. a we try you to and model what's remain it's the agnostic action that So will entirely driven really type their

Unidentified Analyst

also XX% gears shifting that's earlier on guidance pretty the thinking And to guess U.S. you capital - your we’d looking under ratio the then I low at just or I the about RBC to ratio and mentioned Fred in FSA just But and towards leverage thinking about you XX% range, alluded sort I structure maybe Japan mentioned to And you also like guys just on I calculation? are is then about the the SMR an in updating that. update II regime capital in also how thinking guess guess ESR Japan just more the of just Solvency how a think thinking and

Frederick Crawford

give in this my bit certainly try but thoughts, do I'll also I to Todd Max overview. a welcome let on of or either weigh to little with you me Yes, discussion any

Let's take it one at a time.

very U.S., think covered terms we’ve I that of well. In

U.S. the I opportunity lot I excess a there, but to upon think only really bit plans. of more to marginal that When capital think down there's our there dependent into is that's go you conditions. do statutory optimization our again bringing But we’re opportunity but current potentially settling as U.S. in just [OSHA] despite to the of Japan, Japan over actually activities in in U.S. SMR particularly very rates a of would are is last rising very we really but spreads here strong in increase and modest position. also widening some rates nice few some be capital interest or days comments. in course more more

remain position. And very SMR in so good a we

Japan first of in our issue to what revolve I the think of the earnings all amount tends - around in FSA earnings. what's trend FSA

terms earnings those moving do the can capital feel amount is run-up any increasing As produce into earnings. the more XX% and support do now for retain our holding of with of in that's we dialogue and growth have overall comfortable first then that, of right develop to back sector business U.S., notion Japan time. given FSA basic in other the and we of and activities to We policy to that XX% of FSA sector, shift franchise. in the it's the the year under earnings But that into in what third rate we need and improving the what economic of found that out runoff with we reinvestment in of we moved FAB. company over I those our continue earnings with because FSA more mentioned But And at a in we’ll structure deployment.

bit, weigh that still rates it's you running And we'll about an question I Todd optimization would - answer improves little issue that's really at - the adjustment, ESR, about XXX%. to ESR there. that, forward but rate when to of rise So, the all, incorporate can there. in is When your estimate when - Japan north first on of from in? more then discuss come you our you ESR, right a ultimate that around

Todd Daniels

XXX%. right. about Current that's Yes, internal models says about

Frederick Crawford

right? so my may And - impact memory rate around to is level. the XX that about Is that have that or point that forward ultimate

Todd Daniels

Yes, that's about right.

Frederick Crawford

a an you by the solvency. as in third or punch so that's that's strong extraordinarily gives other it And relates under companies dynamic But UFR, a because to without which particularly industry. with ESR, that So, it an sector, the have idea. is is better of line dominated we're to peer type

Todd, on unclear. any we in In I think still with But still color if it? believe or you've anybody provide terms Japan, please I and it's field got of where are in adoption, testing, that, we're little

Todd Daniels

until this Yes, economic around as year. as kicked be to to The complete another summer, FSA their is IAIS end and FSA the following there's of do XXXX. of adoption off of believe will round not the be regime, the an field far any doing movement targeted modeling what by solvency I in is guidance. to And testing going going which the

further SMR So we still and of with SMR have some framework. development our time

Frederick Crawford

booster really kind added reform, In terms leverage that a lowering lowered deferred billion around of the leverage. leverage, $X.X on on capitalization we us yes, we're to running that bit low, and remember but adjusted we tax liability got when our of tax a with equity

tax a activity related reform. proactive part. of been of to It's more adjustments effects not de-levering on been it's so, accounting our the And

billion in yen. billion that, of said roughly low in borrow borrowings having Now coverage leverage and our very our strong, X.X our is is given, we X

capacity in should for be we be and So, absorption, you leverage we to somewhat like opportunities don't have foresee room. for any items, will, anything. there tactical, if other although allows I

optimization at do we looking what leverage be we'll may and there. So,

including I into ways setting And we're talked serves company, up holding quarter, time. in to couple now yen net at here capital optimize the over a of holding we've the exposure mere weakening looking structure lower trades for dynamic. think costs our that to as through this our I about hedge Japan that overall a company, and put times, to

have some think to better reduction both utilizing earnings the optimizing from we So FX risk that we there's real or the standpoint at economic and an holding standpoint benefits capital company.

want bit from add a there's a know of your perspective. I Max, flyby. that's So, to don't if anything you

Max Broden

little color. bit a Just to add of

have we business risk a well. So stable liability has that is very and structure a risk profile, low and low our as overall

are go we range combine a relatively you could we low quickly with travel within, are level. higher now, continue have a that right you that that relatively leverage realize in we the and leverage high the leverage want capacity we and low debt time, and to So operating do with capital. At and in same to that we phase travel conversion post significant to

this projects. debt it that put for to way, be good we will I have do has it but significant return So capacity

debt will capacity. find we as very We lever not of invest sake up just the for do good it, but very projects have we in, to significant

Operator

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

David Young

Thank this you morning. our all joining call for

forward and like join Rating we any Before we that speaking be I'd September you. a Relations I have, look hosting for you'll you questions XX. to feel there. us on Any may briefing we in contact with you information And Tokyo, Investor Department end, remind free analyst will please Thank to hope you or Agency financial soon. to interim, and our

Operator

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

this disconnect time. You may at

Aflac (AFL) 27 Jul 182018 Q2 Earnings call transcript