AFL - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Aflac Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your first speaker today, David Young, Vice President Investor and Rating Agency Relations. Mr. ahead, go Please

Young.

David Young

and earnings and call. Carol, Incorporated to fourth quarter good you, welcome morning Aflac Thank

will Crawford, about As Chairman Dan begin release with related United to on and we States and U.S.; we Officer Eric Global to Riggieri, and financial Howard, hearing an always, investment overview Virgil have Vice Japan Williams, prepared and Benefits; Individual and and CFO operations of of Investments; Incorporated, Officer our Global joining of Aflac Japan Executive ongoing financial Chief Fred and Risk Steve liquidity. are fourth our supplement White, CEO Management Kirsch, U.S. conditions quarter briefly investors.aflac.com. of posted Incorporated, remarks Chief will our President fourth President the Teresa will and Executive Officer; of the and operations with amid Members initiatives, Aflac Actuary; current Global in This President U.S. Chief Accounting Group conclude quarter will of U.S.; navigating of of and are Chief discuss Max the Miller, the Al of CFO Aflac Q&A President Incorporated, quarter segment Amos, we of the President the President on for Benefits; the capital and touch our the Rich results summary and Broden, June our call Aflac of us of Aflac in COO key a team Beaver, earnings be year Aflac remarks the morning then how pandemic; pandemic. including in COVID-XX

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

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

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

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

Dan Amos

our year, very for for of Good soon you. thank last difficult morning have would At time foresee and Thank the to been United company the of this to and for due COVID-XX. it you both gravity society sales joining States per of diluted unfold in franchise increased us. spearheaded our strength was position be distribution were policyholders for for through well our as throughout impact and as excluding growth. for this operations financial exchange Japan our in earnings We protect our share company future to time. the with to here our digital XX.X% reinforce early their we employees, on and to workforce the able investments in decisive I’m Adjusted the people proud distribution and what foreign Board initiatives, first and of of virtual the our Directors trying to XXXX.

sales when to the ready control both that team. opportunities, still. as in Japan our efficiency. the the and sit emphasizing solid tax fourth XXXX, facts in premium our improvement revenues, we we Aflac and while the platforms We strong performance. effective what Investing did our maintained control. core to accelerated absorbed from Japan strong is not new XX.X%. monitor we you profit a to growth over, adapt. pleased be on ability we quarter. pressure in sequential imperative investment the results to we Rider to and It lower margin drive investment stable with factors persistency generated relaunch forward an that rate, in don’t overall cancer results a with our of focus U.S. will suppressed message financial benefiting sales continually insurance Despite critical the to in While have continue we XX.X%, central constraints and Cancer of face-to-face earnings considerably of growth that one have were premium drove innovation been extremely and in due strategic a total control is pandemic future In have the be motion consider And continuing of we been both There accelerated The with this initiatives management the must platform, earned technological year. I’ve

difficult total sales, comparisons pre-COVID were and we As Japan, a of positive that our In for were January, a launch down expectations. result, sales against introduced up for last it the even exceeding medical XX.X% year. quarter the product in and XX.X% our is January new

sales encouraged by are and the both of We the force. consumers reception our

sequential are continue last virtual promote sales. to represent and reduced quarter, evident, results improvements effective relative we sales to these the While face-to-face activity

their declaration goal agencies, how strategic living they our products want of the during the Our fit them the lives needs Japan buy in for leading is customers is and where be banks. in we your way. to a to own of reach stages alliance and to This different company of tailor through

we investments XX.X%, U.S., intense Aflac amid pandemic profit year of stable and a a to our margin of saw global the of future business the in turning Now conditions.

as face-to-face in reduced impact noticeably to backdrop activity. our well, this results However, continues segment sales this due largely to

employees. the their and feel quarter the saw the our sales we who In have upon the and relied business XX.X% worksite, face-to-face the a for to small at sequential career limited among year. impact historically decrease for to with quarter improvement agents, we especially modest in of U.S., continue expected, meetings of XX.X% access As the engage owners

may for result expect brighter But on he cautiously for a as a recovery have and future sequential cover see Fred is sales half States. upon the XXXX. immediate of the for optimistic to remain acquisitions position we not contingent economic an acquisitions continued United better top will face that second effect they these improvement the and Aflac sales responsible long-term in of line, modest However, while shortly. the

media part and preferences stronger reach unexpected time, part the offer been. This the worksite. of evolving, strong have access, of to looking remotely engagement people We part we traditional our Vision stepped in need them XXXX with true As strategy the the we And remain than the where for a Even in we and town our virtual and employees socially as expenses. U.S., the up greater through and further responsible at ever the company. been penetration the other to develop touch-base retention. for meetings the the and to outside The a our buying culture has for consumer habits we are year, of products working ways better is and or a while is than we know increase to world identity letters. prepared same weekly seek are health

we table. presence, to who to our surround of community a at always believed to has important bring different continues have decades. goals play in accomplish role it we where diversity that with people, order must the ourselves have Aflac I perspectives as serve a Additionally, an and for the group

Board XXXX, XX% and have XX% when always Directors, that Aflac’s U.S. test XX% detail were employees XX% on end were strength of efforts. done were oversight for of always the have has important one true were years. of Aflac’s Fred our senior provide He adversity. women, We nearly of women. of we is I’ve role objectives. how think with U.S. of our officers that of XX% key you then the and will At minorities executive ESG, Diversity said handles and were XX% women. minorities, played our within were XXXX minorities, ESG an greater And

past, conditions want are to sale. pandemic all ongoing, has both resilient. United strive meeting purchase pleased a situation, insurance strong, we adaptable knew with that While people close and along In their to and is Aflac where the We XXXX been face-to-face be confirmed that what individuals the is propose to that and solution and this Japan applies the I’m understand that States. to

stock on clearly strong we in have Therefore, repurchase. dividend behalf pandemic continuing the consecutive non for growth provide we XXth face-to-face need dividend to means, to and actions virtual they other achieve shareholders. investments fourth placed policyholders potential both States that in goes our capital deployment, the words, creation treasure saying reach including– stable year in significant without the and through to of the The declaration to record we United me, value need. customers our of protection accelerated Japan disciplined Related deployment, to sales, tools of comes growth distribution growth. and demonstrates them the importance tactical for it marked ratios However, When quarter’s our capital increases. capital investments, enhance on a of we with balance pursue excuse the dividend that available It and countries.

increase Additionally, XX.X%. the first approved our board dividend of quarter

the our repurchase, shares in we to At record remain time, the our track dividend Our tactical same approach our and strength is in buying supported of $X.X share billion of back by capital flows. cash XXXX.

on we our growth also in have investments focused platform. We made have integrating the

continued achieved that we objectives, channel, while our success promise position deliver our achieve policyholders. to while per don’t communities. of we are focusing employees, As things doing share so, policyholders, think the we’ve for from to our on our in shareholders, strength partners, it’s and period distribution and look to this leadership. emerge a we always, coincidental By working business right I our doing earnings also on ensuring

believe and terms proud that translated of in into I’m long-term shareholder our return. what of both accomplished social which results, strong we In I purpose fact, hand-in-hand. ultimately have financial have go

over me Fred. turn program let Now, the to Fred?

Fred Crawford

in with to of U.S. I’m then update quarter XXX,XXX Japan on the Dan. in initiatives has cases I’ll conditions and and inception confirmed provide Japan the briefly to on virus. you, the pandemic. fourth deaths COVID-XX key since the approximately an going Thank experienced X,XXX touch respect

of While nine the and foreigners doubled these compared March of Tokyo extended third action quarter. and prefectures entry more Japan Earlier other quite state the campaign end Japan. and of developed the domestic into X. includes through low have than the the of countries as government of since this U.S., to This suspension other emergency week, tourism statistics for their

sales a X,XXX claimants unique consultations prohibited with Aflac goal Prime Meanwhile, of closed Suga, Japan’s billion. JPYX fourth not vaccinations are totaled moving unlike claims We have economic of of virus, from workforce restrictions of initial we home to year government have recovery stages the the in our with more the and the emergency declared our incurred mid-February. beginning Minister, state last approximately shops. quarter, again and/or Through balanced has with impact face-to-face announced COVID-XX considerations, more totaling working responded

continue track experience capacity COVID-XX We other we in medical in than claims infection visits. routine conditions the rise significant in as reduction well to Japan, for continue more manages to a Japan paid rates recent assumptions. Despite stress discourages our below hospital and

impacted, earned premium in on As impact primarily been Dan reduction paid-up have looking the has outlined, persistency by reported largely but at by sales policies. of improved revenue force, with the clearly sales in offset driven policies reduced when been

includes Finally, which rollout equipment distribution expenses billion, pandemic related employee and teleworking tools, virtual in support. JPYX.X of distribution totaled the quarter the

the as million COVID-XX to over the XX U.S., CDC. there by XXX,XXX Turning reported cases nearly are and deaths

XX,XXX of for million quarter claimants and For COVID-XX XX million in with in all XXXX, XXX totaled approximately U.S., incurred XXXX. of claims the Aflac

of U.S. to position to as to rates say back establish IBNR It’s difficult to in We estimate test estimate the claim very better still are of often for reserves. of incurred infection reliable an claims works correlation order this to to fair now is build a data years paid trends. from in

see hospital While of we below continue our in and reserves transition elevated assume claims, expectations. stay ICU to our to traveling the length

numbers. We to reported have limited persistency seen impact our

the to However, periods. states in lapse attributed still the dates. requiring quarter of to Executive states be in of where end sales, XX first the five tend the are place premium State year we and expiration believe this with reduced is combination orders grace in in open-ended of rates the having much higher as part orders Executive

wellness lapse pressure our payroll, proactive benefits. through reduced deduction to on rates with have bill, including of direct and converting We policyholders, review encouraging from work a

our conditions. a Turning promoting we with of move in Prime was operating important XXXX and in launching we launched the pandemic setting after to stage Rider for in product called fourth Cancer once an medical January. year initiatives, growth clear simplified key Beginning quarter, successfully Japan, the EVER refreshed

have Introduced True associate is technology are As virtual in XXXX, promising. it’s and pivot an conditions, noted his in sales Dan digital to in sales medical entirely in navigate virtual allow having comments, sales and early but customer agents January channel experience. of our face-to-face place October we relatively limited. to pandemic is to from to Japan

form in majority applications still digital addition, In although face-to-face have of the in consultations. paper applications are filed been adopted

Excluding of our products direct worksite, distributing non end-to-end. of call X% sales X% currently means mail center traditional digital to we estimate sales, like face-to-face and only are

However, we of face-to-face understand tools virtual agencies significantly has supplement consultations. some our adopted to

all paperless billion We across with is initiative operations and JPYX.X in have billion spent discussed billion JPYXX the our investment approximately in Japan. in spent fourth quarter JPYX.X XXXX. This

We paper projecting look Aflac a we and cancer product pieces million towards development, reduce year. second for XX pandemic will conditions three-year planned will spend and the return half This JPYX.X Japan has and growth XXXX. another over distributing of are Post the drive the of the billion improved in payback we circulation as of to insurance production summary, of In expect investment combination XXXX. per of

to Turning and including setting our dental of in U.S., up table our digital efforts and standing direct-to-consumer Group for we the network national new our a the focused launch on Benefits vision, acquisition platform. XXXX completing XXXX,

platform, we side, rates, digital platform corrective new out tools, introduce requires the which take X.X and called full year operation important to XXXX Everwell a adoption and rolled time for enrollment September, any and XXXX. in an adoption increase the was on action before upgraded On stabilizing

Virgil Aflac Division, segments markets products traditional White’s new for lead and Aflac products new U.S. our Benefits service Network Japan, Dental Both services business worksite leadership, individual partners Benefits within business. reorganized Teresa Group, Vision, Group forming Benefits U.S. consumer markets the they which Premier our division. in business serve. and based our face-to-face under Aflac Group place agency will platforms. and the new divisions our Dental have individually operating broker targeting to focus the U.S. Life Individual addition, TPA shared workers at In worksite. and agents provides Argus includes Aflac’s unique without the for Absence Disability we and Williams the meeting. and business from not will conduct division allows teams Voluntary Miller and issued division, includes Rich Aflac lead pull a to career Like tailored offer each alignment have all This for now our business on Management which tools we focused small our in and

continuum most are completed which We some of traditional direct-to-consumer, face-to-face estimate without being digital sales This However, of non-face-to-face. interaction. and about interaction. of a on is digital driven our XX% are excludes individual naturally face-to-face sales form

Turning to the we Vision. XX rollout our of and on Dental announced January on initiatives, key more Aflac growth specifics national

products available the broad brokers. vision now coming available Our we November, quarter, distributed are and are is a to dental platform is of a with Benefits the and is sales turnkey down agents This brand. business In products under companies more open in more Aflac and new XX XXXX with launch and in contribute year. the and closed are to filed in production. managed states that throughout This launch Group meaning small large online our we through X acquisition, to Zurich in for the million

approximately online XX and Finally, We we more launched cancer, States three throughout offer our products in year. direct-to-consumer critical week and new products sell states accident first officially to illness, all and approved digital in January. are of the with coming platform the

Longer-term run distribution million Actions two we savings on a expenses our conference, restricting and In hiring, migration U.S. the our of XXX As workforce. a division in voluntary resulted and actions of separation during the realize platform on go-forward took as expense a plan investor initiatives basis. as administrative Benefits Zurich are center Group XXXX, highlighted group included rationalizing onto expenses X% new reduction addressing a our expense to that well we to over rate annualized approximately inauguration horizons. business.

basis build buy-to-build and ratio ratio by strategy. our XXX efforts basis the is As impact acquisition quarter you a conservative adopted we approximately fourth are XXXX all The together XXX impacted to expected points. taken have by in the aware, points, expense

monitoring pandemic, focused exposure days losses. amount remains lowered prior XXXX modest economic prolonged to we team investments investment asset and opportunities. on actions conditions, the with global ended of and our in weakness, sourcing and Our to early Portfolio quality, the economic new a asset of

closely continue loan are loans, real our of market to we watch downgrades, middle have borrowers. diversified to conservatively We first-lien estate, traditional and high-quality underwritten seen transitional portfolios, consisting while ratings portfolios resilient real estate our

approach our our for diversification benefits managing our to lowering unhedged the extreme unhedged provide These yen. exchange. enterprise and ratio as well exposure dollars lowering the as moves refined in further hedge have maintaining dollars protection We Japan, in to both out-of-the-money and income foreign our

As we LIBOR floors. lower locked have has been rate benefiting hedge our practice, yields costs for with in loan from XXXX, floating

are alliance with contributing Partners our to Capital strategic and we Finally, corporate of the pleased performance investment with Varagon investment during income. XXXX

similar alliances segments. of capabilities and working are asset We the the establish that further of insurance our subsidiary management to our performance leverage strategic

As in have key initiatives commented we XXXX. drive areas in by our ESG on Dan, refocused efforts tangible to

on measure, net-zero be a broadening or and capital as our focused and well to We justice published the disclose by We formal influence statistics investing of to continue emissions advance a diversity experts of following. targeting by framework before ESG our social providing advance and governance in draft, through XXXX. economic Building policy, are a core XX% establishment and XXXX. initiated responsible strong important as that positions investment carbon-neutral with work filled leadership In plan third-party organizations by leadership and carbon formal women inclusion eventually as we on the inclusion to off and before in initiative key process. in is mobility. on hitting to U.S., pledged Aflac to ESG Global that the diversity or advancing We of team on our Investments includes women Japan a our seek part and Japan already identifying milestones XXXX diversity and

premium. on pledged and our efficiency in Max? to detail. pandemic, Hub, growth for we We’ll reporting I’ll disclosure performance standards. years provide we what advance ESG proxy and we made discuss during future comments, reporting on our initiatives more further believe in financial now framework Wrapping the investments the temporary believe in two my and pass SASB and accelerated of compliance with TCFD Finally, and esg.aflac.com. be up on ESG and in weakness disclosures material position to to in face earned the us in past to Max sales the

Max Broden

Fred. well both X.X% Adjusted currency respectable currency finished material the full fourth cost year foreign you, Thank year-over-year. full to mortality marked events, record year stable per the quarter share as and adjusted year. as interest and significant excluding rates. was translation book for increased and with and the the We year, by continued for ROE value up low in in to share EPS XX.X% was $X.XX, of spread losses year the per a earnings quarter earnings $X.XX, impact our Fourth a quarter capital. foreign morbidity XX.X% including grew the full a The and a quarter fourth gains adjusted XX.X% XX.X%

pre-tax return marks a $XX the our outcome alternative quarter on from expectations, amount benefited long-term investment portfolio on million building This to good favorable our very above portfolio. alternatives our of

in in adjusted earnings. corporate and or totaling $XX previously associated the million, announced VSP, also included program voluntary our our booked separation segments, severance We U.S. with charge pre-tax

earned impacts, our sector total the segment, quarter was declined reflecting for third down paid-up X.X%, X.X%. sector Japan policies products earned first for premium our premium mainly while to Turning

at force policies year, earned while full totaling down lesser the by rate total premium was X.X%, For X.X%. declined in a

indicator paid basis the points quarter, IBNR on we We paid-up force to XXX the year-over-year. in third impacted as the a a basis for came been not serve deem status, points a to The XX.X%, driver XX than business. roughly compared would inched basis environment positive normal higher the estimate points to benefit XX.X%, lowered total XX.X% in tends down growth at better of what to that benefit to normal trajectory As release a was this down of underlying claims points sector XXX slightly a benefit has policies for due lower up be. was ratio benefit XXXX. the by Japan’s the ratio ratio year-over-year. up the release lower it year-over-year. in Persistency And are IBNR ratio sequentially sustained XXX main by basis

benefit basis XX%, For total year-over-year. reduced gear XX was main ratio up the also And state the benefit XX year-over-year, ratio XXX ratio ratio our This higher our was points The usage. The sector full digitize kicked expense reported basis operations the largely throughout in points was basis XX.X%, year, up in due expense basis XX year-over-year. XX.X%, we a persistency. a initiative, our Japan driver drive improved to points efficiencies was third our paper points. as chain by which quarterly future paperless to and investment with increases at value significantly up

income from For but XX.X% loans. returns like in estate results middle adjusted real strong investment market led transactional also terms, quarter, yen by book increased alternatives in loan our the the net and strong portfolio,

For higher year-over-year, pre-tax ratio positive. effect investment ratio up rose and X.X%. in from the margin as basis lower still combined income expense was full benefit quarter was the adjusted year, the net the points XX.X%, XXX The

was For the margin the XX.X%. respectable a full pre-tax year,

in policyholders results. reflecting improved policies older premium as and weaker by to a we keep retain orders and and accounts these XXX efforts in force. new basis was in factors rate. that result to was view XXXX, on to a rate pandemic U.S. the emergency a points our at environment outcome a good quarter, year-over-year This as for Turning impact policies date, force driven in persistency Removing given results, by due X.X% stable year. sales And our lower XX.X%. than earned would one down than various sales premium lapsed to to states Persistency higher in

earned year, premium For the down full X.X%. was

our when points be to the an Our $XX Pandemic of total QX to infection resulting benefit ratio. rates, recent claims impact benefit the which ratio in incurred higher continue million an conditions relevant we than impact came analyzing IBNR, was estimate basis to benefit X.X to of generating have ratio correlation, non-COVID negative points which can non-COVID an clearly ratio by XXXX. related offset early continue claims quarterly somewhat expect This and XX.X%. from related COVID We a related be in is which million seen COVID increase very to results underlying claims. was tend in $XX would benefit increase this of Due at XXXX. pattern percentage favorable XXX activity, claims XX.X%, our XXXX. in throughout to in of

we of still guided to expect XX% forward future reasonable to Going the ratio. a range be FAB XX% of benefit

U.S. ratio in The Our residual revenues. was the U.S. The rise, up declined basis expense by adjusted investment investments while Full of XXX points VSP our at in severance Adjusted book basis year net yield year-over-year. to basis investment charge alternative XXX ratio expense XX XX.X%, driven due landed was the the while is up contracted net the points and in points digital strong year-over-year. reduction year the the income explains full primarily X.X%. XX.X%. X.X% income investment for income, portfolio

both the the of a under did pre-tax expense and with profitability come margin As rose, pressure ratio XX.X% quarter. benefit in

severance VSP year-ago. a our net expenses expense components Co. the were position, from million delta. $X short investment recent the in main quarter full the cash average. and line a pre-tax XX.X% For Corporate duration solid the segment, still million of pre-tax $XX to the income compared of to loss Hold historical in million increased on we our year, of Lower margin reported $X retirement In with widened

For $XXX the Corporate full million. pre-tax was year, the segment loss

north billion the million, of liquidity balance. approximately Our at quarter XX% $X quarter, We continue The in benefit cautious minimum in the to COVID-XX capacity. the our With offering own make capital we capital Aflac position in Holding deployments. the ample stated the leverage our of spread and XX%, range a we investments, and remains relative IRR of of deploy In Columbus. to strong of company of continued XXX% our capital capital leverage in we stock ended XXX% to leads XX% of SMR on paid stood repurchased RBC with Japan good $X of of how offering and of base, billion, middle an above $XXX remain to stable. an debt dividends manage and shareholder. our these million $XXX us travel

year, a returned full the an million dividends we formal For repurchases. additional to $X.X in billion $XXX paid of share and shareholders

in and the to how manage we capital XX.X% recent $X.XX ROE order spread risk-adjusted our continue is will balance deploy share. drive dividend to and in with the of board’s We to example sheet the be per increase capital. tactical to by strong flexible quarterly meaningful A to decision cost

as Q&A, financial would significant into characterize going XXXX I Before our performance solid, despite challenges. external

in spread we we achieve us fundamental causing over In briefing With to efficiency financial to to me As laser-focused not our on and ROE drivers November. capital. we look outlook of forward at do order that, into our turn analyst drive to see begin Q&A. XXXX, the the any significant initiatives, David cost executing change to objectives, at expense our growth provided on to these continue let remain

David Young

Thank you, Max.

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

Operator

Thank you.

Your first Stanley. question from comes Please Nigel from Dally ahead. go Morgan

Nigel Dally

Great. Wanted Japan about and sales. to morning. good ask Thanks

expectations. to the that that second improve just quarter quarter or momentum into mentioned continue how first expect we you medical had somewhat and a phenomena You sustainable base, move more product on Can should initial that? group on? should demand perhaps elaborate exceeded new the And

Dan Amos

really more tracked what This going out is tell. past and It’s to been that I’m me It’s to Dan, have introductions say done. of let only other me early Japan. weeks. to products let two just it But really in too

agents optimistic field consumer good to go but to good a product introducing. about it’s a be the So that it, two the ahead time force forecast a about are I weeks, little excited which our and am means early to certainly or at be to too it’s on it tell, seem excited

would I expect we’ll know Of quarter, same we’ve to that seen much it course, pattern past Koji? introductions. the have more next but with details

Koji Ariyoshi

much is as all seen to much expecting to in [Foreign agencies this the quarter more the quarter. And are medical will we product product. Rider. product me. Language] new with this coverage improved this of in it better policy number [Foreign a [Foreign to competitive that’s because agencies been as in have strategy new but improvements being actual increase the competitive fourth get are with sold Language] to as for has generation market increase. So able taken that are we and with weeks at medical by very as market to sales although Language] and also of And the be And under designed And expecting [Foreign And be will this new have been start offer. well among last see year [Foreign some two Language] the we product [Foreign the in product Language] improvements do in and non-exclusive have very current a able that product, planning we in for taken launch the that [Foreign younger also this is we XXXX Language] same we the much the we this launched So functions of since long environment Language] well. believe Language] last compared time this insurance through per increasing time coming a well. be the this quarter a the time that think more as I as and more a product non-exclusive sale of product be we only the will pay the policies we this were popular have product well, is that advantage [Foreign on

Nigel Dally

very helpful. That’s That’s great.

helpful is much sales, question second brokeraging distribution The U.S. broker-driven are to think strategy part than Is just better sales trending it are holding how find business lines. group on much larger understand in sales. some would sales along the becoming and quantification understand possible of I it to behind get how better with agency

Dan Amos

driven group of sales sales I to for this your small best will hold think and The sure. agent-driven correct. better than question is up it’s for probably under environment the Broker business aperture. Teresa premise handle Rich

Rich. So Teresa and

Teresa White

the answer, more just Rich automated. let are comment I’ll traditionally but the that, lot sales broker yes, a I’ll Well, make

a the Rich have presence But lot let in the We just environment from digital response. broker I’ll more beginning.

Rich Williams

Teresa. you, Thank

all face-to-face comments, alluded particular certainly comments agency a are they that group activity. to businesses face-to-face business And between they speak our from reduced saw impacts dependent accounts, in his seen in business, I work to our results sales As decline. a less decline then But the group Teresa, the and a activity, larger our of myself, Fred we’ve to And with result kind larger traditional Dan sales. saw at think, it broker as which on in perspective, those with given whereas question. single-digit tend

Nigel Dally

That’s great. Thanks a lot.

Operator

Barnidge go Sandler. next from John Piper Please ahead. from comes Our question

John Barnidge

I in Yes. saw Thank try you very much. to host XXXX masks required preparation Olympics. had other day Japan a and the banned the that headline chanting the and

and Is marketing joint you there know possibility previously Assuming that about a of to go marketing I talked Post. the with increased product Japan expenses campaigns mid-year? in some were through,

Dan Amos

tell is normally we of that awareness I form have we a campaign around we’ll Koji not and doing, what you build the is, products launch advantage question the particularly health taking or in the that what in your that. heightened for is marketing Olympics however, our are would supplemental new environment. address the What building products COVID do campaigns not do. of you if to surrounding Yes, some marketing plans and would Koji? expect of Koide-san

you So address can Koide-san, Koji and detail. with more it

Masatoshi Koide

planning this we the not from having Koide Olympics. on [Foreign are And around campaign Language] any particular And is Japan.

Fred Crawford

know that’s John, thing correct if don’t a you’re– I

John Barnidge

think Fred, wellness XXXX, in you’ve how started it it about in XQ still cost follow-up, of is very time we over carry bit? the the because play, said thank much. program then that And addressed, And Yes, I last little think would a you that? should you

Fred Crawford

will last is able other companies. that the be but words, still also to, the to the payoff hadn’t did back we claims a from quarter, into because wellness is mailings. a some come a spike flaunt, the in tail being only anticipate recall it we we in you of I’ll in which play We Yes, will. not as of – believe In sense persistency, of that sort if saw, call there’s you it

phone back A second. have fully for our a a got are their and of up will those is their say, help of will pockets. that to that can benefits. with utilizing our based in benefits wellness certain me clients them wellness employees Let lot they we whether agents business explain what with analysis on do you’ve get money they number And understanding

small of days the a employer money get can pockets As imagine, employees. an proposition particularly in that’s these you to attractive your as

account about And talk into and leading and so cetera. that to the or et up cross-selling lead enrollments future up-selling ends us

has been And so that fairly successful.

looking we a we’ll estimates, up very continue. in would a anticipation what some our you’re that claims. types asking wellness of perhaps it’s what of piece we for If reserves trend of IBNR is claims of related So wellness, ongoing, of in example, at our to that’s those and of elevated factored terms one product where are set important features line into

color, I’ll And for benefit give ask but I mover anticipate our so that moment, Max ratio. to don’t at a being the

Max Broden

U.S. Fred. campaign. And we remember, the obviously ratio we quarter had as wellness right, third in quarter impact also a the our established we did claims, had campaign on benefit we third IBNR from and in That’s you associated that – in both that the an John, but paid the a with

the any follow quarter. the quarter, As really because on in see you quarter fourth IBNR did we fourth you impact the impact not third that now into established at of look through the the

claims and campaign significant the be Going into forward, to fourth increase a the these generally specifically be in if in hit There through campaign, we we normal quarter us. have for small. instances the would third third quarter, the we you had trigger that could of benefit to the quarter. refer in campaigns may ratio an more But big with temporarily, the much that any didn’t expect relatively really follow activity be but

John Barnidge

very you Thank much. Great.

Operator

Kamath Our from ahead. Please Suneet next go Citi. from question comes

Suneet Kamath

to to I morning. Good go Thanks. wanted the Japan benefit ratio.

some I you people result the guys than think is as lower the going world see was we the of right are to more improvement for seeing result to think due or reserve you about you than releases. benefit ratios or the planning better said How expected that up sort a in which economy level understand subdued Japan we’re of maybe hospitals versus opens again? a where I activity. of what And now, expected

Max Broden

a And Let in the Todd it blanks level. me kick at I high to fill as have well. off

points all the we in is activity of by primarily the his the we’re than about X to that non-COVID-related incur for – the a estimate billion XXX JPY fourth because reserve prepared claims normally basis quarter. paid claims is in a in release lowered this ratio remarks. referred to Fred that Specifically would We higher had quarter. seeing that an the that about And pattern as we quarter, of benefit

obviously of elective benefits Going forward, for you an demand et on of hospitalizations, like element the see impact cetera. an ratio surgery, temporarily could the physicals, sort from pent-up

in we’ve I here the think level than what been that’s the system much Japan running more have hospital the normal Japan, more U.S. the seen case a in in than where at U.S.

at gave bit we you but XX.X% benefit has ratio you of been XX% the in FAB see could a our when little that, ratio So of benefit a to taken from into outlook. range this consideration higher

at and comments. additional feel Todd, it I’ll some that leave please to So free give

Todd Daniels

Max. No,

hospitalizations come and if that accidents I accident have hospitalizations, especially relates right, you’ve think about think as recovered. happened it you’re back, you our to won’t they

level on in policy. the introducing we a the refresh would form ratio benefit sales One in reserve a back has of start be our get future. of if normal that our ratio level hospitalizations we to I’ll and product as product with slight on benefit impact well could other people there more aspect the However, when that that mention, releases increase old sickness of

persistency a onto net benefit our to as slightly led with reserve saw last which year those policy we holders policies. higher results, So those increased hanging in

Suneet Kamath

sales? And follow-up optimistic thanks. digital face-to-face of second sort had virtual to sales. much that a just you’re about penetration the then sales to is is due on or improve in just the Okay, try of you’re half. the Dan, you that some the things direct-to-consumer the recovery doing of of How versus that to my recovery U.S. commented in

Dan Amos

much both. especially ago do in I it as it’s around to get new just six and of course, Well, it the we a ways to But And all-in-all over think vaccines that to months more face-to-face virtual. going second so combination I makes And been improved terms find and for that say, got of itself ability accelerated. have you’re on much we’ve working within getting less easier of been is are and will easier. preparing today numbers, trying quarter in the the out. norm against

So any standpoint. like specifically? comments that would we from you are seeing some Teresa, stability make to

Teresa White

as the broker well. the new dental think of the comments. the I’ll market the agents with disability get well and product life I as couple continue Yes, better a having But we’ll make the some is combination agree environment of some we about specifically think of of if and in has been improvement. in available that I the are that as virtual I introduced, idea thing adopting and market both the other product case of larger excited that the see of virtual vision our tools, some to as the small having products case

opportunity great of newer that a some in second half have start we really So selling have to product we out the the there.

that’s – course And about vaccines, makes cetera. of the the what that’s us what so half gives excited of think us et I second year,

Suneet Kamath

Thanks. Okay.

Operator

Peters Our next question comes go ahead. from Please Raymond James. Gregory from

Gregory Peters

Good per mean get other of ROE companies in. I when track deck, return we look for insurance me risk a you a squeezing you of great morning. about equities, your big at of earnings slide guidance adjusted sort want sort picture from I just talked of large on – record a target. ROE. Thanks We’ve on have focus share setting and on seen away number

for dealt you’ve last given and the should we near-term. uncertain in about and your year ROE with objectives XXXX? and sort with being How the for challenges growth So XXXX all least thinking the of be changes company at

Dan Amos

Yes.

forward. we levels fairly go Greg, ROE So as be that is pressure a on We stable operating are in putting we obviously I capital think high will some running environment. fairly and at

this the of year. business operating somewhat and levels above about we it year, Like a products for we Japan that sort XX% long-term, challenging the both have makes fairly mid-teens. to think XXX that to of to of in said, I slightly think the cost sort capital is continue is, of have it sort our where of that light full rate in ROE way the sort driving So strong of been in over in play should in sort sell, a came example factor I to And lot the as for basis over U.S. think does That terms do being our ROE it’s one capital that of sort well. a sensitivity, reasonable should whole points would in into ROE way expect of above we time. a our but interest run what don’t time it of about we be Because we

Max Broden

the GAAP of earnings advanced One thing to migration dynamics EPS cash from yes, is, Greg but add bit a that. extremely would cash to valuation to I you’re from also remain the and than company Yes. strong flow seeing a of ROE, further even flow

premium years. earned mode. know, don’t associated and contribute you on to I same to so then to by economic the as it value. actuarially GAAP has will which true if new and and that billion direct-to-consumer. value of will, direct-to-consumer, earned on, have in appraised, next profit building disability that some that time you five absolutely dynamic brought of group particularly over with think you as to goal lower have expenses the and value going it’s seven it vision, with would that because think dental is businesses you different reported And soon can And upwards premium the great mean absentee you’re At These by expect DAC want what And the our we’ve to imagine. about network I you focus profit. Aflac, argue management, you if combine, business definition businesses comes we in is, a and when $X are life if

that just communicate forward, I the on we’re flow it’s ROE, economic for value going as on driving and communicating we but also communicating think run. long and cash the it’s in company not So EPS the

Gregory Peters

it. Got

prepared – is talked you belt. that question comments second I year more we’ve on got know, under The now COVID the weeds, the about, a COVID of you’re in but

XX at the data fact with data in both direction the may vaccine? next reserve of and I’m course U.S., of to a shift a the the that using curious, the just And and the months? And Japan in levels. results reconciling rollout cause You’re that different sort looking over you’re how reserves in there’s one-year’s set of entirely a

Fred Crawford

now want I interesting commented a use are bit level on set this script ours, commented reported on in per-product it’s are science a IBNR confidence a you up valuation if for business reserves. but to completion so-called for a very that years-and-years the incurred in on right factors, gives not technical Look, of like and to stable actuaries high basis. language, that information These built-off my Max and of these the establishing it. particularly models very practices of reserves, quarters-and-quarters and particularly

of as the you that said, amount Here, you linear absorption new vaccinations out, of And have among in infections. acceptance but as not vaccination, dynamic of conditions, the also et wrinkles pandemic a public a dynamic cetera. these have convex you’ve you rolls and the got vaccination but the

believe we coming is yet right estimate to so are a incurred still and a an reported environment, an but best environment. claims however estimate now Meaning it’s not convex And estimate claims. what in-hand. these it but under tricky it’s and in is It our of be

factors accordingly. back And so completion to our and we’ll test, have monitor continue adjust to

Gregory Peters

Thanks it. the answers. for Got

Operator

closing call. of back This portion Q&A any And turn it concludes I’ll our the remarks. for

Dan Amos

Carol, this Thank you to with soon, for call all all you additional and thank joining morning. you, speaking wish our health. if continued have And follow-ups. I look you forward Thank good We you any you.

Operator

concludes this today’s participating. conference gentlemen, for Ladies and you Thank call.

disconnect. You may now

Aflac (AFL) 4 Feb 212020 Q4 Earnings call transcript