The Aflac Incorporated Second Quarter 2024 Earnings Conference Call will begin with an overview of the company's results and operations in Japan and the United States. The CFO will also provide an update on financial results and capital and liquidity. Materials and slides related to the earnings release and financial supplement are available on the company's website. The call will also include a Q&A session with various company executives. Some statements in the call may be forward-looking.

The speaker, Dan Amos, discusses the actual financial results of Aflac Incorporated for the quarter and first six months, highlighting a 15.8% increase in earnings per diluted share. He mentions the company's focus on new products and distribution strategies in both the United States and Japan, specifically highlighting the success of their cancer insurance product in Japan. Amos also mentions the launch of a new life insurance product in Japan and its potential for attracting younger customers and selling core third sector products.

Sales in Japan have increased by 4.5% due to strong efforts from the agencies and distribution channels. The US also saw a 2% sales growth, with a focus on profitable growth and expense management. The company is also working on optimizing their Dental and Vision platform. The pre-tax profit margin for the second quarter was 22.7%. The company remains committed to prudent liquidity and capital management.

Max has been successful in leading his team to protect the company's cash flow and deployable capital against a weakening yen. The company's investment portfolios have performed well, allowing for strong net investment income and minimal losses. The company remains committed to maintaining strong capital ratios and prudently managing liquidity and capital. They have a track record of 41 consecutive years of dividend growth and plan to continue this trend. The company also celebrated their 50th year of doing business in Japan and being publicly traded on the New York Stock Exchange.

The company's approach to offering relevant products has made them a strong partner in today's complex healthcare environment. They continue to see growth in Japan and the United States, and their financial results for the second quarter of 2024 were solid. Net earned premiums in Japan declined due to internal reinsurance transactions and paid up policies.

In the second quarter of 2024, there was a positive impact of 1.2 billion yen from deferred profit liability and a decline of 2.4% in policies in force in Japan. The total benefit ratio in Japan increased by 120 basis points year-over-year, while the third sector benefit ratio increased by approximately 160 basis points. Reinvestment gains are expected to have a favorable impact of 140 basis points on the benefit ratio. Persistency remained strong at 93.3%, while the expense ratio decreased by 170 basis points. In the US, net earned premium increased by 2.1% and persistency improved by 50 basis points. The total benefit ratio in the US increased by 140 basis points, primarily due to product mix and lower reinvestment gains.

The article discusses the rebound of claims utilization from the pandemic and the decrease in expense ratio due to improved scale and expense management. The company expects higher expenses in the second half due to seasonality. The growth initiatives have increased the expense ratio, but it is expected to decrease as these businesses improve profitability. Net investment income in the US segment has increased, driven by higher yields on alternative and fixed rate portfolios. The company has a solid pre-tax margin and a low commercial real estate loan watch list. The company believes the current distressed market does not reflect the true value of their portfolio and is confident in their ability to manage these assets. The Corporate segment recorded a pre-tax gain and higher adjusted net investment income due to lower volume of tax credit investments.

In the second quarter, Aflac REIT had a higher volume of investable assets, but these tax credit investments had a negative impact on the corporate net investment income line. However, the overall impact on the bottom-line was positive. The reinsurance platform is performing well and the capital position remains strong. There were impairments in the US and Japan, but they were within expectations and had limited impact on earnings and capital. The company repurchased stock and paid dividends, and will continue to be flexible and tactical in managing the balance sheet and deploying capital.

The speaker invites the audience to ask questions and the first one is from Joel Hurwitz about a new product launch in Japan. The speaker introduces Max Broden to answer the question. Broden explains that the product has high margins and attractive returns, but also has significant new business strain. He also mentions the potential for cross-selling with other products. The CEO, Dan Amos, adds that the product targets a younger demographic with less disposable income, making it a good opportunity for future cross-selling.

The expense ratios for both Japan and the US segments have improved in the past quarter due to expense savings and timing of discretionary spending. However, there may be some seasonality and promotional spending in Japan due to the 50th anniversary of Aflac Japan. In the US, expenses are expected to increase in the second half and the fourth quarter typically has the highest level of sales activity and expense ratio.

The US has several businesses that are not yet at scale, causing expense overruns. However, as these businesses grow, the expense ratio will decrease. The company is pleased with expense management in the first half of the year, but caution that the full year expense ratio will likely be between 38% to 40%. In Japan, there is increased competition in the third sector market, with some companies offering lower prices. Aflac's focus is on providing products with value to customers, rather than simply lowering prices.

The speaker is discussing Aflac Japan's 50th anniversary and their focus on providing appropriate insurance policies for customers. They mention being the number one policy company in Japan for third sector products and their goal is to maintain this position. The speaker also mentions a new first sector product that was introduced in early June and their target customers are young and middle-aged individuals. They explain that the Japanese government is encouraging citizens to invest in asset accumulation products.

The company has launched a new product in response to the growing demand for asset accumulation in Japan. This product has been well received by the market and is increasing sales. It offers various options for customers to choose from after paying premiums, such as death benefits, nursing care benefits, or cash value for asset accumulation. This has led to more opportunities for salespeople to discuss third sector products with customers. The company's 50th anniversary plans are not solely focused on this product, but rather on increasing sales of third sector products in general, with a focus on the needs of younger middle-aged customers.

The speaker discusses plans for the company's 50th anniversary, including a focus on selling cancer insurance and offering gifts to customers. They also mention a unique conservative service that sets them apart from competitors. The company plans to promote this service through various channels. They have a strong network of sales agents and agencies who are excited about the anniversary and motivated to sell more third sector products. The company's main goal is to attract new customers, but they will also sell the product to existing customers if they are interested.

The US division of the company had a strong quarter, with a 2% increase in sales and a 50 basis point increase in premium persistency. The company intentionally took actions to increase the value for customers, resulting in a higher benefit ratio and lower expense ratio. As a result, the pre-tax margin was one of the highest in years. The company had made changes to focus on a more profitable business, particularly in the group and VB business.

The company is pleased with the current performance of their U.S. operations, which has met their expectations in terms of bringing in business with higher benefits and fewer claims. They anticipate a stronger push in the second half of the year, driven by seasonality and improvements in various properties such as Life and Disability, Dental and Vision, and partnerships with SKYGEN. The CEO also commends the team for their hard work and believes that the company is well-prepared for the future.

Virgil Miller discusses the company's recruiting trends in the US, noting a 10% increase in the second quarter and a focus on quality and productivity. He expects to recruit over 10,000 agents this year and mentions ongoing national recruiting efforts. He is pleased with the results in the second quarter and plans to continue these efforts in the third and fourth quarters. Tom Gallagher asks about the rollout of the Tsumitasu product.

The June rollout of the new product has been very successful and the company expects it to continue to be a significant part of their sales in the next few quarters. There are no specific limits on how much they want to sell because it has been producing good returns. However, the company still sees itself as a third sector company and wants to maintain its strong position in that market. The product was launched on June 2nd and has seen great sales due to the preparation of the distribution channel.

The paragraph discusses the preparation and launch of a new product called Tsumitasu and its impact on sales. The company's agents practiced selling the product and visited customers, resulting in a successful launch and a spike in sales. The product is expected to continue selling at a certain volume and also help with cross-selling other products. The speaker, Dan Amos, notes that a spike in sales is normal for new products and that the numbers may seem larger due to the small previous sales numbers.

The speaker discusses a new product that is doing well and credits Max for finding a way to increase profit margins. Max then addresses a question about how this product is different from waste sales in previous years, citing three main differences. The speaker and Max have a brief exchange before the next question is asked by Joel Hurwitz about net investment income in Japan and the US dollar portfolio.

In response to a question about the sustainable level of normalized NII and the drivers behind the strong second quarter, Brad Dyslin, a representative from the company, explains that short rates remain attractive and the company made some tactical moves with their portfolio. He also mentions that they are well positioned for the second half of the year. Regarding persistency, Max Broden, another representative, states that they are seeing early signs of improvement from their initiatives, but does not provide a specific number. He notes that even a small improvement can have a significant impact on net earned premium over time.

The speaker wants to emphasize the impact of persistency on the company's performance, which is influenced by the mix of business. They mention that the mix is gradually changing, with more focus on Group Life and Disability business, which has a higher persistency rate. They also mention that over time, the Dental and Vision businesses will also have improved persistency. The company is working on improving persistency for each individual business, as well as the overall mix, and will provide more information on this in the future. The speaker invites the audience to join their upcoming Financial Analysts Briefing and encourages them to reach out for any follow-up questions.

This summary was generated with AI and may contain some inaccuracies.