AFL - Earnings call transcript Q3 2020

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Operator

Good day everyone and welcome to Aflac’s third quarter 2020 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question, press the pound key. you. Thank like Vice call Investor President now host, to Relations. turn Young, David of to would over the your I Aflac Incorporated Please sir. go ahead,

David Young

Incorporated’s Adrienne. quarter you Good and to Thank morning earnings Aflac call. welcome third

Fred Max and the have Incorporated Incorporated with we pandemic. will third capital Broden, This United quarter quarter Aflac States and CEO and CFO Executive begin Crawford, investors.aflac.com. as will including supplement we Incorporated as are Dan our then an and in overview discuss of always, third release financial and operations of results pandemic, conditions and we Vice posted then As remarks morning, about how remarks the President on COVID-XX President prepared Amos, and financial Aflac with conclude hearing our quarter Chairman amid navigating a be liquidity. our of COO initiatives. and touch will of key will well the Aflac to earnings summary in operations the the current the Japan briefly our some in U.S. of and Japan

Chief Chief this U.S.: Officer U.S., us Aflac White, in Aflac U.S. our team executive of Officer, morning Risk Actuary; the Rich Williams, Steve and Accounting Investments; Howard, members Global and Al Q&A Chief during Global management and are Officer; Joining portion Aflac Investment Global Riggieri, Eric of of Beaver, Kirsch, President CFO Officer Teresa the President June Distribution of Chief Chief

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

are teleconference meaning begin, federal within this the we some statements of securities in laws. forward-looking Before

results could prospective we some believe risk report our Actual We differ annual they you XX-K today. at be to those we factors on no they can because are are of assurance we impact could from our give in Form Although discuss accurate various that that statements reasonable, materially encourage these look the nature. prove will to materially results. for

mentioned I the and reconciliations on Dan? over non-U.S. to GAAP includes now certain to is release I’ll investors.aflac.com the available measures. As call earnings earlier, hand Dan.

Daniel Amos

David, you joining Thank good morning. and Thanks us. for

the all we the appreciation States times of for As communities the to the the ushered our in many United for like affected. those helping employees and some work most pray and in for our people so tireless share for COVID-XX policyholders their has we continue in Japan know, pandemic globe, pandemic. I’d my to sales around and all and force by difficult impacted

we it During protective need liquidity. I’ll strong provide impacted segment. by help is time, capital that to this operating of Financially, we focused best, and on Aflac it’s morning, terms note remains an but products difficult remain do in providing be of we This overview the to most. that important what the they performed when consumers doing to pandemic quarter by how continues and

diversified, cost favorable and of also was this utilization among return and impacted quality in related capital and on foreign of the significantly high the are investments release by lowest COVID-XX, the tax quarter tax they Amid our industry. addition, In of challenges the of to regulations are the capital highest U.S. credits.

additional company or $XXX details. per our the to these that million, date In tax will U.S. a domestic U.S. compared rate. to quarter, is cumulative recall of Japanese for You taxed regulations benefit our $X.XX we year a recognized purposes. will Max share from previous as subsidiary run provide

impact continues COVID-XX third decreasing seen Aflac with quarter sales in Japan, our effect to noticeably the of with results, Turning the starting our XX%. operations, to as

Japan and traffic in XX% around have remained coming XX% from pre-pandemic the shops into of workforce in to at levels. continued September, We the home of working

on longest pandemic Minister policies. political carry to economic reduced Japan represent last Cabinet Secretary. in the a We ushered to quarter, promote continue business results COVID-XX stability eight of efforts core the emphasize administration prime minister Mr. Suga Japan’s reforms am response relative sales Aflac Mr. paperless will Prime in the political Abe with serving to in Japanese will serving effect of and to is front. on was In are initiative and the Suga’s sequential source policies has environment Fred as team, sales. transformation. was administration these Japan’s the Abe’s a years digital nearly Prime accelerating the and believe move a evident world, a to regulatory that of forward good skilled member underway, more. terms activities office. well pleased Minister promote change This of is that and post face-to-face Suga and promoting will leadership. I for with also in Chief leadership a share virtual While XXXX improvements respect, we continue

same more in in typically activity, to our relied U.S., were owners lack career well. At Aflac quarter to this results of worksite, and their upon noticeably third has continued engage small COVID-XX group our which of face-to-face strong Turning Largely sales the temporary been of among generally business fourth we closures down In feel XX.X%. due impact the continue and to especially face-to-face as results U.S., segment to access to non the when business we the historically the broker-driven agents meetings quarter market, see who the effects our impact time, to resilient the reduced employees. conditions. face-to-face have to is

in pace for improvement third quarter and sequential recovery. As the fourth the result, to the economic modest second sales optimistic compared for cautiously contingent remain the Aflac quarter, upon we a U.S. of

close to to soon, our Benefit reach us our employers. of acquisition allows are large We on brokers distribution Group and track Zurich also which to extend Business appeal and

positions Aflac a To of position the for run. acquisition quarter, know the we must long in growth having strength, expanded investing eye towards balance the in reducing capacity that an forward XXXX. look expenses fourth we us While in little place we with as on to effect

an As separation voluntary who opportunity eligible to expressed such, took a an very employees offer generous package interest. to we

next As a an with and a have in of U.S. approximate one-time corporate their fourth service X% open pursue path quarter. employees million years the or expenses our achieved workforce the allowed in they to $XX result, expected for new of up reduction and faithful thank we dedication chapter. as This us

quarter hospitalization recall affected the policyholders attached of that in of remind early policyholders’ benefits will was benefit launched a value ratio wellness the routine the The in we to their third their doctor, visits products. on mind, initiative to benefit dentist, by You visits. to this limited doctor. U.S. With and pays U.S. wellness significantly the certain

In we COVID-XX pays it benefit made initiative has addition, for The testing. that success. a been sure wellness a

it there available couple are a this programs to people voluntary face-to-face applies the I’ve of the meant we virtual tools term their face-to-face margin; XXXX. however, want demonstrates expect we to have and our that We to the reach them to when to as of to situation, customers provide the policy headwinds with the the insurance. reinforces to investment we however, and propose the enhance and purchase our are they the where to words need. most. potential in how aspect pandemic important we sale; as understand To solution, the the enter were well other in operational Japan both the they In individuals near they we U.S. need discussion, past, profit us for campaign our policyholder That need protection countries. be before, close will as us for meeting clearly meets, conclude want said non serve accelerated this separation and a emphasized distribution glad This both wellness sales that with has we Therefore,

capital management. we allocation. behalf are ratios goes U.S. As treasure strong in includes capital and saying a the This to and capital our dividend liquidity of tactical without committed that on of approach growth. prudent the It maintaining we to both always, record policyholders Japan, and

the consecutive mark of fourth With XXXX dividend year the increases. XXth declaration, quarter will

time, Our of third repurchase, buying shares the our record million approach quarter. of to and our is At our in flows. strength dividend have the tactical the capital $XXX back share we track supported in same by cash remained

that emerge from to focused also the made have of integrating continued this doing look have We investments in strength growth we period position leadership. our on we of platform. so, By and

working We look briefing and achieve always, we to our efforts we to a financial to also earnings strategic on As at the greater going deliver plans to policyholders. our while our are conference few drive detail our in into share efficiency analyst on call ensuring growth forward weeks. objectives promise per

turn Fred. to like Fred? to program Now over I’d the

Frederick Crawford

update to in claims our complex. quarter, quarter X.X distribution $XX conditions X,XXX with end our the claimants pressure. however, all rider year on in you date I’ll of totaling of year we’re pressure virtual approximately I’m the key employee with reduced assumptions more on cases refreshed XXX,XXX. impact pandemic. in and understandably ¥X.X product going are quarter promotion date. provide third which deaths the offset below equipment, ¥XXX sales This quarter, are favorable contributing claimants measurable in also incurred from the COVID-XX incurred distribution in $XX COVID-related COVID-XX COVID-XX stress tools, somewhat and briefly XX,XXX Aflac cancer teleworking nearly to XX,XXX include and of revenue unique to quarter no Through is touch to deaths case in totaled billion, and approximately There Thank with the levels persistency. and the exceed Japan. third we and Japan Through the to with Japan rollout delaying million U.S., expenses X,XXX U.S. the medical U.S. In claims; the the totaled claims are dynamics an the and approximately by how the to expenses. currently included new In the U.S. totaled quarter approximately navigating and million managing Dan. in initiatives of approach the well the support. COVID-XX ¥XXX third tracking now in COVID-XX million million. impact are short, of the million

in stay policyholders. monitoring treatment hospital, see generally a to this nature younger transition the hospitalization, length to traveling advancements healthier are surge our infections believe recent expectations. of to in the of and attributed We closely and in is is worksite, but which the rate and the of the population continue below We ICU of

in but of period is ratio the hospital August. designed This impacted products. and policyholders reinforce in our combination the value benefit quarter noted month involved initiative of third early their and As launched drove which comments, effort increased of an in his with accident This connecting in Dan X.X million the to remind utilization. policyholders mail we benefits, email to of proposition wellness a direct through the our

quarter. impact partially We limited have attributed In policyholders converting believe proactive from state the in we periods. deduction place orders These those states of executive to expired, and policyholders orders still XX the policyholders orders end thus and far as this seen pressure where grace have we on actively reduced bill their outreach is lapse persistency, notifying benefits. direct to states to rates in of of employers, are through the executive premium payroll to however have requiring wellness executive

operating to Turning revenue, with Japan and we cancer driver simplified the Japan expense digital a from pivot balanced material the thus ratios weakness promote late growth customer is of expense we launching U.S., balancing medical the the refreshed in in in Beginning need and quarter in our key our for first place investments approach. to quarter October, in are to both Rolled set Japan, of a in in in an structure. have while to technology elevated U.S. out and the initiatives A face-to-face XXXX. addressing and rider product fourth sales entirely are experience. the virtual we

that campaigns the aided analytics serve to enhance We continue close rate. direct mail with data by

in view expect the of our Post ¥X a call, with XXXX. related development, quarter. our call is estimated in the I improvements. billion another along pandemic as map noted as alliance digital paperless make our billion We in spent our three-year and ¥X.X a way recovery second conditions, We quarter to pandemic all the process roughly action to investment quarter drivers in with spend combination Japan and accelerating road approximately through Japan. we product ¥XX third and across operations with the billion On on a be our in growth This fourth initiative investment important

elevating billion the expenses, annually. in XX run this and XXXX effort production paper per While ¥X of pieces circulation million of our will the range year of rate reduce with savings

concentrated investment administration expenses to quarter, This stepped spend annual our well increase awareness XXXX fourth new in budgeted the product the of approximately our quarter paperless level third to general raise the billion. XX% over in of advertising we move ¥X as we an As in a have includes up of initiative. as quarter

effectively XXXX. accelerating our XXXX into digital are We platform in investments and

the to network U.S., Turning vision of and remains dental the build-out track. on

network XX in filed in products XX states states. approvals We have our new successfully received with

are move running with into XX to We we ramp and sales as up states up this and in XXXX. expect

Our accident and be with consumer track to XXXX. completed cancer hospital, filings on markets in remains platform early product expected

the We also insurance natural brand. to sell a plan recognizing empowered is include Aflac to XXXX, by in life that product digitally

we to three overall U.S. XXXX, on urgency. our successfully addressing the having earned into we Zurich near earned incremental a on to coming will sense close as premium regulatory move growth these in Along are pressure soon the largest Anticipating completed further with are in efforts we acquisition, term with expenses Finally, of approvals. required Benefits drivers the improve persistency, premium the years.

result We focused enter horizons. near are platform a workforce. take voluntary the as of we U.S. fourth will designed addressing and separation plan Horizon expenses one for out $XXX to Early in includes reduction our we series both includes This employees million and in actions annualized across run in U.S. expenses. a the expenses to rate XXXX. of is eligible X% approximately completed two a corporate quarter, term which XXXX

time Horizon a rate initiatives administrative a $XX $XX the two one-time quarter investment the of new record until range. elevate in complete. old most business million decommissioned million and to processes significant in is expense are expense expect We investment group near to separation realize are adjusted. platform approximately annualized our million $XX and platform. expenses such platforms business term and the in will run The off savings Legacy is onto an fourth migration

$XX of broader road the quarter. XXXX, investment approximately fourth In accelerated of map million addition, are completing we digital in a much in that coming which includes investment

need with to As I growth. we in expense noted, investment initiatives balance these

We to adopted buy a have acquisition build strategy.

conditions. not group in of expected the quarter by approximately expense a and include tactical are build an taken inexpensive vision, I’ll the basis together ratio quarter this consumer, direct the third my investment use to impacted benefits our prudent basis in XXX with XXX and is These and efforts While excess by points, impact points. capital, to early fourth years. conclude dental effort and and comments

new remains focused monitoring low Our economic conditions, opportunities interest global asset investment investment sourcing in rate a team quality, and on environment.

meaning we view Our of slow pockets recovery firm the is way. along that will experience a road volatility recovery, a checkmark-shaped with to

increases. in only the prior of combined with the additional losses portfolio sale we impact have of conditions. the well, impairments surge second to actions has loss also with economic this our served Our earlier the year de-risking should some securities, tactically improve defensively modest and actions us the on pandemic reserve virus These risk portfolio a see profile positioned

estate and closely portfolios. We market our watch real transitional loan continue to middle

seen market to quality also first In portfolio of strong lien middle more high sponsors. diversified have is with loans of credit is backed our first is case lien positions we While estate, portfolio real loans strong and equity of value. loan consisting by to rating resilient, consisting borrowers transitional our only the downgrades,

well These explore diversification unhedged we Overall, enterprise the managing Japan. to the further in no currency We but dollars our as are refining continue unhedged hedging. as yen. dollars ways benefits, our material and to to approach exposure income to optimize change, provide lowering

towards hedges lower and reset hedges our currency will rate at materially on As XXXX, rates. we look XXXX floating we portfolio

are item long critical corporate any and income. see investment see efficiency While in hedge you temporary investment comments, to impacting Wrapping results line off investment the backing weakness degree, this Japan’s and face great be and income, impacts to not will growth to costs, investments not up my net net to we we do what term believe earned drive of we premium. sales in income

a impact annual we and the weeks, the We the profits. Max? details of financial we’ll when them for about will in meet pass discuss this further and when to to detail. talk financial onto performance on around Max turn our conference I’ll in having expect detail positive we investor now corner and growth to provide investments more coming

Max Broden

Fred. you Thank

begin have review focus with on earnings how a my with our and our Let comments me performance developed. core capital quarter of third a drivers

the earnings capital. of material share gains quarter, spread and no grew XX.X% third the XX.X%, a and currency For strong per in Adjusted to excluding a adjusted adjusted per impact, including book $X.XX ROE, XX.X% was increased foreign FX with to impact our translation the from losses, cost foreign currency the significant quarter. value share,

regulations the the foreign This quarter tax of credits. release significantly by tax impacted of was to utilization U.S. favorable related

taxed lowered As quarter benefit rate a the U.S. versus a to regulations adjusted a subsidiary from In our is of previous run reminder, recognized X.X%, quarter, these year-to-date tax company for as tax Japanese we rate. earnings $X.XX cumulative purposes. a our U.S. our the benefit domestic which on for

for our our from than approximately Our historic a in more solar lowered quarter. quarter expense the credits tax investments benefited and normal further which in tax by $XX million rate rehabilitation tax

forward $X.XX. In regime, together approximately current under addition, U.S. corporate items boosted forward EPS income return tax variable adjusted the and expect XX%. earnings On above and long-term be about these we in current quarter tax by expectations, basis would investment came rate a our million $X go on our two go to

premium segment, trend product impact at should paid-up revenue quarter policies paid premium X.X%. earned reflecting policies. of Turning put sector total Japan’s considered X.X%, declined the be sector of first to for impacts, up Japan our third light while earned in mainly down was

in total less premium, quarter, ratio of points policies XX.X% persistency been The came policyholders XXX basis short, was pandemic. while in over increase steady up XX.X%, the coverage. for to main disconnect down year, putting masks in force up related expenses the updating lapses has pressure year-over-year little was benefit example, at managing year. was XXX lower associated Japan’s the reported force in during which X%. on hold This our with and In our of earned over a expense ratio in points quarter the third year year strength rising tend to benefit than For drop sector despite ratio. earned their premium the X.X% the the was basis driver down

our lower manifested all year. XX up this experience did to over during lower naturally points the less by the business due and releases, ratio our third in seen new persistency. We’ve persistency our of current a improves amortization, by year decreases Given improving also this basis reported favorable so We quarter, pushes this activity, benefit pandemic, the in IBNR back The was paid drop in medical coverages. quarter. more reserve claims

IBNR only drop data met not is to has reflected given Our partially as adjustment this an there on. much base

it continue more will gets our We and monitor paid experience to as complete. data adjust

claims IBNR In led for the addition, more our compared to extended that old, in years completion cancer than XXXX. to of smaller we three a release are which claims

ratio in expense Japan basis up points XXX year year. was Our over XX.X%,

due ratio lower higher our digital investment impacted ratios higher Japan of to yen when digitized as Net we higher income remainder initiative paper as ratio and the in quarter. the XXXX. margin in as expense and generated drove quarter Japan to lower into paperless terms the the call expense both spend, in for kicked the yields a as a and in this income, despite higher with in operations quarter. XX.X%, benefit reduced range paperless in well the promotional The for remain X.X% by declined yen-denominated elevated gear initiatives, our was income variable Overall, spend the significantly to considering anticipate portfolio pre-tax Our XX% investment chain COVID-related we efficiencies value state future throughout usage.

was basis sales earned positive results, U.S. X.X% and early to our XX.X% down points due weaker accounts XX in to premium Premium persistency results. as to results. force Turning retain to premium showed keep improved efforts

grace monitoring XX are so place at in we are there with developments still mentioned, states the of closely. periods Fred end these premium As QX,

QX than benefit basis at came in points lower was total which XX XXXX. Our ratio XX.X%,

the We to estimate have claims but customer experience drove to activity and ratio and improve a range expect, our we of XXX we value communication over accident with persistency, what across normalization this benefit compared an our the will highlighting the we in would We and our initiative to order points second term policyholder normally wellness million embedded claims and improved extensive approximately this we efforts $XX utilize In our the basis incremental encouraged of quarter. their customer long believe products, of for benefit. policyholders seen persistency. impacted conducted benefit portfolio experience in along improve campaign add

uptick million contraction a revenues, billion. U.S. in has become points low basis seasonal the as Our on in The remained for the inclusion year decline full XX.X%, to the XX% up explains expense activity, benefit basis pre-tax XXXX, ratio corporate over earnings segment, U.S. of ratio ratios segment core to in in points the hedge to income healthy was weakness quarter year expense contributed an a of pronounced year-over-year the down acquisition. and amortized range notional with in driven the due the the U.S. roughly expected ending prior declining revenues The quarter in portfolio added ratios $XX our and We at this with XX U.S. basis year. impact Group In basis a income quarters. in was more Profitability Net X.X% the residual Argus XX.X% the XX of Zurich from quarter’s to the in yield. by investment in relative driver. our XXX $X in point revenues near anticipate elevated on term impact. a position inclusion business in Benefits remain

and of in approximately an RBC ended with and XXX% quarter the Our Columbus. SMR Aflac strong of north Japan remained XXX% in capital position we an

liquidity compared $X.X QX annual is our expect to a minimum the to the flows decision $X.X delay to tax dividends QX. increase range year equity driven due to to billion, we billion to but of XXX by above improved temporarily XXX%. billion. our dividend of release dividends in our QX. This On We allowance still boosted statutory company end to at reflects balance. subsidiary the by delaying the regular expect earlier the in down the Holding an year RBC of RBC is Leverage to valuation stood XX.X% Our in to basis, uninterrupted subsidiaries. subsidiary an comfortable $X.X continue shareholders with from

of and remain cautious stress the repurchased terms the excess and dividends by the or our million. we comfort dividend capital earnings strength million conditions. and of associated and on paid In capital, our we current While pandemic own we have pandemic, the capacity, statutory future in monitoring ratios, quarter, of in of ability $XXX to any stock navigate our economic $XXX brought

be to will We risk-adjusted in our order equity drive with sheet in and continue to capital. capital the balance manage a on a we to tactical how meaningful spread and deploy strong of flexible return cost

Let me Q&A. begin David now to to turn it over

David Young

Thank you Max.

a follow-up me yourselves to limit initial one take but an to to questions, take please related ask you ask now first question. we let first followed ready to a that opportunity participants to question by Adrienne, now question. your will question, We’re other allow

Operator

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

Nigel Dally

thanks, question is My on everyone. good Great, morning expenses. and

line growth reduction other ratios still investments Japan, expense the color about paperless see should expense you’re U.S. flow of initiatives the in quarter, for the Should higher Appreciate benefit be how initiative looking and together digital fourth but initiative forward? bottom to elevated announced the XXXX? through expense but also the ratios those we or the about with we You talking in thinking initiatives. in ramping

Frederick Crawford

general, of Nigel, their Japan XXXX, this as you investments I continue as pace. is current well of would say a these at the both elevated should in in will the anticipate in Fred. U.S. continuation case as expenses

In briefing group proactively of answer ratios question can will but do, things business, weakness fact in dental improve. front I Remember so it’s When want really as of the towards there’s at so that; we’ve investment it as adding expense two the balancing particularly pace and analyst forward particularly I your continue call financial on as don’t pace components in to to and consumer you’ll you’ll that then expense get see and traditionally over as U.S., we generate through usual will these of time. color the Japan will action now vision, in where be growth, savings markets, victory but well the go would out models, weighing so building the now is ratios, that’s directed We’ll the benefits revenue, both and more of to investment path in other U.S. the and efficiency. to take to ratio, the certainly on as expense That give right U.S., expense our revenue ratios in improvement U.S. act. expenses, the operating we or got business general in the so one drive the ultimately. the expenses staffing expenses, what we on comes on we a to be to related see our more efforts, headcount improvement cost around and Japan the our it’s

Nigel Dally

you. Very helpful, thank

Operator

LLC. Your with Morgan of Securities comes the next line from JP Jimmy Bhullar question

Jimmy Bhullar

what of morning. trends? will a that XQ a businesses in impacted going your business. of salespeople reluctant going U.S. are recently, beyond up, social and though by had to most to the just drive what’s be sales weak be be on pretty little open recovery Obviously sales starting even feel assuming business are come just to I’m path because you question assuming just few majority given is broker a the that, that and are that sales on a seem to But been in pitch in to or of the U.S. have doesn’t I’m stuff. have so an in [indiscernible] I to good just distancing bit Hi, and what’s--like, sales better channel comments normalization social them sales beyond as people, products a improvement your vaccine and or and

Daniel Amos

I’m Richard answer that. have going to

Richard Williams

you Okay, Jimmy. thank

sales, our so XX% quarter, us third Dan’s utilized quarter larger in as noted sequential sequential the modest broker Dan is where fourth less roughly That’s in for face-to-face the cases, improvement. comments, the quarter we modest to points are of expect weighted and to the the As as more think well comments to heavily improvement those compared and quarter. is you support I recall, enrollment about fourth his as second around

we we and think outlook call financial our and to secondly, reserve for analyst discussion then. forward around I will comment XXXX that briefing, look

Daniel Amos

Teresa, anything? add do want to you

Teresa White

No, Rich you. Thank I it. think covered

Jimmy Bhullar

you’ve Can Are regions in on seeing periods persistency. Maybe premium in not? what an seen there, just grace have where another terms persistency on one you you the talk about the your or uptick U.S. in lapses of expired?

Teresa White

in Overall increase seen monitor balanced in well. really rates, more not what would we’re large investor not the we thought the important give this however, seeing monitor to continuing we stability we’re business with the that to across small given of the force; we our insight persistency conference continue business but to is premium part a see, at and we is our large note but policy as side. and in cases, small we’ll so lapses small a have It’s notable especially more

Frederick Crawford

people will to kicked up our claims And on happen, it I pay think they have impact for to we which it, it our as also the a benefit product. need ratio ability believe positive and persistency we wanted wellness although benefit the realize

Jimmy Bhullar

Thanks.

Operator

from comes question Kamath of Suneet with Citi. next The the line

Suneet Kamath

morning. good Thanks,

when Japan curious see you in quarter, pick-up so new I immediate launch a products think first normally in the an new - in had we said sales. almost product, you expect you just some

the closed be expect seen medical sales pandemic channel? and product cancer dynamic Japan--sorry, Just product new the changed, the selling historically, trend how we’ve in the same given has the sort will we should and Japan you in that of this the

Daniel Amos

Koide?

Masatoshi Koide

Koji that will answer question.

Koji Ariyoshi

from already web able implemented with have application competition, that, launch be increase in should product insurance, as In win we our product, cancer we of the to top of like having started share reduction as we On so competitive insurance be is this a to and able that medical plan to our market. allow that social will COVID-XX Japanese] the medical October, in way as system, we terms insurance, application--insurance we from this medical [translated have of certification will well distance. risk, and

Our to to really a customers. new types various product be range broad able respond coverage has of of to

sort to as about some lot customers a do on time this product, premium that coverage term in diseases, those we gain we insurance, of engine respond should so just to paying rider, product this to to customers needs not well customers. who be the We medical medical this which start nothing, at sales would to do have three have in rider to will various want sales. added really our to and impact as be the the dread minimize with like this sales be example, to further of we and the our so of able use For and able in web should virtual use of really COVID-XX, we concerns harness keep the as the XXXX, like or to new risk insurance the can the we’d negative short bonus same cover no-claim

Suneet Kamath

and got related reversed? this was rate risk change, you for thanks. to could cuts, on I a tax that administration, under Max any Then then this any the is be Okay, accordingly of there that different tax Trump ruling the tax guess

Max Broden

not new that it’s and by on the Treasury to the XX. to the related out came Trump issued tax IRS a September No, U.S. related is This cuts. regulation

Suneet Kamath

thanks. Okay,

Operator

of The comes John from question the with Piper next Barnidge line Sandler.

John Barnidge

in be changed U.S. down the COVID, the from the we utilization should in the declines driving maybe about of How the behavior telemedicine maybe permanence of principally from benefits thinking ratio? some

Daniel Amos

we to benefit because and of therefore still not back is utilization to friend seen they of in have should wellness prevent the drop-off diagnosed Certainly have policy couldn’t say to have it’s to a April-May-June, to they twofold: persistency, in a terms the have COVID, if and let’s more, also much cancer, I saw people stage of happen. sure as ratio they X we’re doctor, they wife them in loss improved get think idea with could of we the staying I a a earlier. from--I was the mean, The people claims. the Well, one, when, absolutely going whose raise it doctor, inside were but were gone what limbo the have will had but some caught doctor

ahead the we’re wellness whether and that terms picking running hopefully was it and in business. going get, it’s but amount people tail we’re and should back exams the We not why get that already go of down go now the to on to watching use it’s brings benefits, the one normal these the this, up to encourage So the on there’s tail or you know of is doctor, people to that’s back pre-COVID. back things trying a see doctor, that the to back that not to

John Barnidge

has very wellness XXX could benefits points the played be on that trimmed still there helpful. come? out The Okay, basis that to completely ratio, or more initiative

Teresa White

there. We there still that be to more believe come could

John Barnidge

Thank you.

Operator

The next Erik the line Autonomous with question comes Bass Research. of from

Erik Bass

and the to tax you Hi, investment either or adjust all thank to boost opportunity product benefit accelerate the let you line, pricing intend do to to Do of see bottom you. drop growth?

Max Broden

been Generally in for growth, that ratio up of to drive is dropping and bottom We ongoing. as Fred place that have in has. and multiple order see would pushing the expense years, play obviously the benefit couple I in initiatives as our That’s to line. we characterize outlined, this and last

Frederick Crawford

have be grabbing as thing benefit there it’s though, real carefully. corporate change the a a so a in to corporate report and going changes, mindful of though, rate about a going paid rate way and much like the do tax add, any payments, we our playing think out cash-wise effective of some you in and taking benefit forward. be be we’ll be even to U.S., tax we a the tax corporate future careful are effective law and so rate and going for taxpayer changes in believe be tax said tax and if being want future, have would tax paying about there an question in to impacted degree field goes we Aflac, creates other cash be I the This words, at XX% which this is payments; how U.S. about effectively too is of the effectively forward, that rate to to way taxpayer into there One the had that. in in both to just tax could rate that tax that real the we so cash previously corporate flows we that, that of other period one Having watching mindful do a you for that back including time, we’ll to that is us, very previous

Erik Bass

you, about Thank talk can little for you the recruiting and licensing then backdrop agents? bit new a

Teresa White

Rich?

Richard Williams

Absolutely.

in see XXXX, to to quarter recruiting. about and First know, forward. going second anticipation improvement recruiting growth fourth to saw part be will third second continues then program talk compared and important is very our we’ll our implemented compared to of recruiting key to alignment moderate more quarter, we we--you the strategy the XXXX element the improvement producer and We drive quarter, quarter we third at The look that it as to of the beginning but drive for a significant clearly a on expect part the conference, of we at a the be investor to compensation strategy. all, and and from of

Erik Bass

you. thank it, Got

Operator

Dowling comes question Partners. the from & Lee next The Humphrey of with line

Humphrey Lee

explain Japan. the my then the what’s increase, just and was increase for Good billion related so wondering in I questions. still the in there But expenses related expenses, the the you is in you those two that I COVID-related the ¥X.X My for the at to quarter? billion much about morning higher expenses of initiatives. paperless quarter, to expenses driver also sequential the looking in the heard first question other taking ¥X talked half pieces was only the and just thank for

Max Broden

expense revenues, expense in have the The increased lower spending driver also impacting ratio is ratio. decline function the terms in of but the you the is so of revenues main the

Humphrey Lee

expense general billion. But I’m ¥XX just referring of to the amount notional

Frederick Crawford

and of much think to--you as other spend I mail The general operating seasonal direct and of just continue certain expenses. the the it an as drivers, paperless so only to compared related third, was quarter dynamics natural year, digital a those the with initiative, investments do know, but increase incremental just maybe we of are main two to not accelerate to would I also primary quarter, in has are well as in think drivers that and add just in the related expenses COVID-related fluctuation. last to initiatives promotional I some

Humphrey Lee

and premium that the the Okay, expectation the add, and and then in extension terms for should of expense the think how by a platform, that basis addition then we fourth also what’s about premium also of business? year the size quarter, in on Zurich your full of impacts

Frederick Crawford

$XXX the to That at million $XX business has been believe premium million running annualized range. in I around,

a focus in there’s earned and largely I a to As you annual at so it persistent it’s with range, tends that’s business because can business, high annualized to an But expect on it’s so on that lumpy persistency so very Zurich will expect, a accounts. basis start-up would a large that business, have it impact modest it’s also premium.

so--and that’s expect announced on impact In largely basis $X.XX that as up their transaction, terms to of the the mode an cost to ramping still obviously structure expect growth forward, in business, continue we is because we would essentially their are it’s of nature the overall transaction, modestly revenue premium. offset roughly dilutive a to accretive when there on and going we P&L mentioned business. to the be related we dilution intend because and so the It’s to that’s not it, modestly growth and enough annualized earnings and they earned mode, to that as

Humphrey Lee

thank you. it, Got

Operator

with The next line of from the question Kligerman Andrew Suisse. comes Credit

Andrew Kligerman

it How around you morning. and reached XX.X good we Hey, course have quarter-over-quarter, I’m several as and next then out we expect to course the would a of over benefits the the is of zone at year-over-year, look from first My the kind ratio, down question stable XX.X, of U.S. wondering quarters? trend now? in XX.X

Frederick Crawford

what would can expect pandemic, his history, we the and in prior that general, we related COVID over in back really would see find but as news, gradual expect in cases, related a going to up normal to be outlined of so simply to levels still utilization Dan to Wellness increase it given relative its you’ll and overall but Well to we’re trend reported naturally levels, to utilization will previous will but but hope, favorable certainly we numbers in more up, overall because trend monitoring, normal you comments, impacts really it that’s back subside, the time. there imagine up. frankly

so next lower ratio. higher of time - over you’ll course and tend the aware to see be out let ratios able a network in are of, benefit the We but bit out benefits, you’ll we’ll you report that ratios ratio benefit material for time and and over to that of businesses certainly have and several a expense know and be that’s expense our ratio bringing of XXXX. on in quarters benefit have group vision, example, then over and eventually unlikely play influencing that what’s play to be But mix and course to dental

Andrew Kligerman

outlook Great. million Earlier about in and the credit provided into losses. worsened? scenario the year, of credit improved, of that What’s you seeing there, you $XXX what are XXXX? a Has changed, stress

Frederick Crawford

Eric, why don’t you take that?

Eric Kirsch

and these of inclusive months, Sure including forward our thing, past performed a to and analyze portfolio economic continue with our we thank market how Naturally wave stress scenarios, over assumptions you, impacts. Andrew. portfolio and second looking six actually about

pandemic well relative our through and stress first very portfolio has better to the our the expected than part performed fact, In test. of

you’ll impacted that we’re that, In can some essence so newest some at marginal or were this new and and recollect, intend in quarter risk and another you upcoming particular our see names said for you did away. second in may completing the we be patient were test reduction, month, about presenting in stress if the addition, on FAB, there test stress de-risking of as went the Having results. that

Andrew Kligerman

it, Got thank you.

Operator

Tom comes from ISI. question Gallagher final of line Evercore the with The

Tom Gallagher

Good morning.

time? think over cash in rate, tax and we that can the the First about compare a how you GAAP should sense for benefits out playing the how Max, reduction give question, to will tax

Max Broden

I Cash timing same this taxes have differences them but about to expect would be be and will the our cash will and in impact between over there GAAP volatile, always regulation. change our tax time from taxes,

Tom Gallagher

to there I time, or of directionally a know you it, what volatility converge would you couple over expect some meaningful it years be, similar with mean? going first and is the around you Would to be difference say, in if

Max Broden

latter, number years. it material, more significant term timing not be certainly period differences, but to Yes, short taxes as our and over would difference, we cash down the expect latter. come as will have a as generally where some of a It’s we would in might any not well. There the speaking long

Tom Gallagher

Got are the the benefit in to you, was we way? you the that or you reissue, to ratio you least likely broader likely slowdown the would go can about you you basis impact to given then of years, talk the whether you--just that lapse and improving couple can can to my expect can somewhat see sales lower points ratio remain basis increase in talk--given are Japan that points, benefit sales still levels, maybe at referenced somewhat XXX to about--and know historical the is relative see quarter, here the trend XXX follow-up other and of to had over and next this talk related I the in of

Max Broden

don’t take a crack that? why at you Todd,

Todd Daniels

is activity, in thanks to about quarter our persistency, look call in attributed of lapse as sales activity. ratio to alluded I benefit Really for Max when related what Max. Okay, the to, for forward totally points and it’s XX and lack will the basis reissue we

you benefit that of it. block, normal through As we as normalized we for introduce go aspect I would year the to policy so product which rate, it a reserve in to lead up the ratio, looking as to medical especially the a I will somewhat of pertains expect would quarter, more that first more pick termination really anticipate next see

Tom Gallagher

Got years ratio? of Todd, still improvement broader you expect benefit the multiple trend over the you, in would and

Todd Daniels

think our trends blocks, and come our as medical claims in in that will we cancer and going have see the benefit ratio be I that in we forward. reflected

Tom Gallagher

thanks. Okay,

Max Broden

a and in little duration at more Tom, drivers into underlying will of address insight hospitalizations give some FAB, bit that. we stays, the terms we’ll of you so etc. hospital of

Tom Gallagher

you. Thank

David Young

the That top hour. leads of to us the

and combined XXXX November X:XX Eastern Before of remind time. call webcast am our concluding, event we that a briefing analyst on the financial outlook special I have morning to into just you wanted our at XX

forward thank you health. we wish speaking reach details, to Relations please soon you and us with all more continued joining and look today, Thank For you. good out here, for Investor to you and all

Operator

call. today’s concludes Everyone now disconnect. This may

Aflac (AFL) 28 Oct 202020 Q3 Earnings call transcript