The paragraph is the introduction to Aflac Incorporated's Third Quarter 2024 Earnings Call. The operator welcomes participants and instructs on the call's format, noting it will include an opportunity for questions and that it is being recorded. David Young, Vice President of Capital Markets, then introduces the call, mentioning an upcoming Financial Analyst Briefing on December 3rd. Dan Amos, Aflac's Chairman and CEO, will discuss the company's results and operations in Japan and the U.S., while Max Broden, Executive Vice President and CFO, will cover financial results, capital, and liquidity. Other key executives joining for the Q&A segment include Virgil Miller, Charles Lake, Masatoshi Koide, and Brad Dyslin. The introduction concludes with a caution about forward-looking statements.

The paragraph discusses Aflac Incorporated's recent financial performance and strategic initiatives. The company reported a loss of $0.17 per diluted share on a U.S. GAAP basis due to foreign exchange losses from the yen. However, adjusted earnings per diluted share increased by 17.4% to $2.16 for the quarter. Sales in Japan grew by 12.3% year-over-year, driven by the launch of Tsumitasu, a product combining asset formation with a nursing care option aimed at attracting younger customers. Cancer insurance sales through the Japan Post Channel also improved. Aflac is preparing to celebrate 50 years in Japan and plans to enhance customer engagement with targeted marketing efforts.

Koide San and his team have successfully driven sales and achieved record profit margins in Japan, while the U.S. also saw 5.5% sales growth, especially in Group Life and cancer insurance. As they enter a period of heavy enrollment, the focus remains on profitable growth, expense management, and optimizing the Dental and Vision platform. The team, led by Virgil, Max, and Audrey Tillman, has been recognized for their contributions, particularly in defending against a weakening yen and establishing a reinsurance platform in Bermuda. The company is pleased with the performance of its investment portfolio, which has delivered strong net investment income with minimal losses. Succession planning for key roles continues to be a priority.

The paragraph discusses Aflac Incorporated’s commitment to fulfilling promises to policyholders while also considering shareholder needs. The company maintains strong capital ratios and balances financial strength with strategic capital use, supporting dividend growth and share repurchases. Aflac is dedicated to providing value in supplementary insurance in the U.S. and Japan, aiming for long-term growth in these markets. The paragraph concludes with a transition to a financial update by Max Broden, highlighting a 17.4% year-over-year increase in adjusted earnings per diluted share for the third quarter of 2024, despite a $0.03 negative impact from foreign exchange.

In the quarter, the company reported a solid performance, with a $408 million gain from remeasurement of reserves and a corresponding $75 million offset in Japan's deferred profit liability. Variable investment income was $27 million below expectations. Adjusted book value per share rose by 7.3% and the adjusted ROE was 16.7%. Despite this, Japan's net earned premiums fell 10.5% due to a cancer reinsurance transaction, paid-up policies, and a one-time impact from deferred profit liability. Policies in force declined 2.3%, and the benefit ratio improved significantly by 15.9 percentage points. Long-term positive trends remained, impacting cancer and hospitalization treatments favorably, with a full-year benefit ratio expected between 62% and 63%. Persistency was stable at 93.3%, despite a slight decrease. The expense ratio increased to 20%, primarily due to declining revenues.

In the reported period, Aflac Japan saw a minor increase of 0.1% in adjusted net investment income in yen terms, driven by reduced hedge costs and favorable foreign currency impacts, despite declines in floating rate income and asset volume due to shifts to Aflac Re Bermuda. The pre-tax margin for Japan significantly improved to 44.7%, and a full-year target is set between 35% and 36%. In the U.S., net earned premium rose by 2.8%, with persistency up to 78.9%. The full-year net premium is anticipated at the lower end of a 3% to 5% growth forecast. The U.S. total benefit ratio increased to 47.6% due to reduced remeasurement gains. Claims utilization rebounded, aligning with long-term expectations, and the benefit ratio is expected near the upper range of 45% to 47% for the year. The expense ratio dropped to 38%, attributed to scalable platforms and effective cost management, though a seasonal increase is anticipated in Q4, still within a 38% to 40% annual range. Growth initiatives slightly raised the expense ratio by 100 basis points, as expected, with anticipated improvements in scale and profitability.

The paragraph discusses the company's financial performance, highlighting a 0.5% increase mainly due to higher fixed-rate income. The U.S. segment showed solid profitability with a pre-tax margin of 20.8%. The commercial real estate loan watchlist is around $1 billion, with less than $250 million in foreclosure, leading to a $3 million increase in CECL reserves. The firm moved one foreclosure to real estate-owned and believes the market undervalues their portfolio. The first lien senior secured middle market loans are performing well with lower-than-expected losses. The Corporate segment recorded a pre-tax gain of $15 million, with adjusted net investment income up $37 million due to higher rates and asset balances, and a $57 million negative impact from tax credit investments offset by a $5 million net positive effect. The company's reinsurance platform is progressing well, and they plan another transaction similar to the one in October 2023.

The paragraph discusses the company's strong capital position, reporting an SMR of about 1,100% and an estimated combined RBC greater than 650%. U.S. statutory impairments were $58 million, with no additional impairments from Japan's FSA in Q3, resulting in limited impact on earnings and capital. The company holds 60% of its debt in yen, leading to a leverage increase to 21% due to yen-dollar rate changes, which is intentional for hedging purposes. Unencumbered holding company liquidity is $3.9 billion, exceeding the minimum balance by $2.1 billion. The company repurchased $500 million in stock and paid $280 million in dividends, aiming for strong risk-adjusted ROE. The transcript transitions to a Q&A session, starting with a question from Joel Hurwitz about challenges in Japan's third sector sales, particularly in cancer and medical.

Koichiro Yoshizumi, responsible for Sales and Marketing in Japan, discusses the success of a new product aimed at asset formation complemented by nursing care coverage, which can be converted into medical or death benefits once fully paid. Named Tsumitasu, the product targets young and middle-aged customers to boost third sector sales, achieving a 12.3% growth due to preparatory efforts from June to the third quarter. The strategy includes reaching new customers, promoting additional third sector products, and cross-selling, thus revitalizing sales activities. Additionally, the 50th anniversary serves as an opportunity to promote and cross-sell their cancer insurance, which features a unique concierge service known as the Yoriso cancer consultation support, having been on the market for two years.

The paragraph discusses a company's marketing and product strategies. They are using TV commercials and web advertisements to promote their products and services, particularly emphasizing unique features of their medical insurance product that no other company offers. They are launching a new product in the spring, expecting an increase in cancer-related sales, and have rebranded a medical insurance product to attract market attention. The company also introduced a new plan for customers over 50, leading to a gradual recovery in medical sales, and anticipates growth in third-sector product sales. They have been successful in recruiting sales agents and strengthening their sales force. Tom Gallagher from Evercore ISI asks about the company's capital allocation strategy, noting a reduction in buybacks and suggesting the consideration of special dividends or M&A given their excess capital.

In the paragraph, Max Broden discusses the company's strong capital position and outlines their strategy for capital allocation, emphasizing a focus on long-term returns and flexibility in considering various opportunities, including M&A. He stresses that they examine where they can achieve the best returns over time without ruling out any options, acknowledging the dynamic nature of the business environment. Tom Gallagher then asks about sales details, specifically the customer split for a new product. Koichiro Yoshizumi responds by indicating that sales to existing customers surpass those to new customers, which is typical when a new product is launched.

The paragraph discusses a company's strategy to increase new customers through a product called Tsumitasu by focusing on young and middle-aged customers. They are meeting their expected cross-sell rate and are seeing a rise in new customers. Dan Amos comments positively on the progress, indicating that customer acquisition is aligning with or even exceeding expectations, with initial numbers improving from 20% to 25%. In response to a question from Wes Carmichael, the discussion shifts to the sales force's focus on Tsumitasu and whether this implies a strategic shift towards more balanced contributions between first and third sector sales, considering similar returns from reinsurance.

The paragraph discusses a strategic approach involving Japan's aging society and the financial implications. Max Broden highlights the use of reinsurance and Tsumitasu to secure profitability and revenue, especially in the third sector. As Japan faces increased retirement needs and shifts towards asset management, retirement products become more crucial. Broden mentions an expectation to see these products become a more significant part of their portfolio, while still maintaining a focus on the third sector. Ryan Krueger then asks about the Japan benefit ratio guidance, noting it was initially between 66% and 68%, but suggests it might be improved to 65% to 67% in the fourth quarter. Max Broden responds affirmatively.

The paragraph discusses the impact of an unlock that resulted in lowering the future net premium ratio by about 100 basis points, leading to an expected decrease in the benefit ratio for their in-force business. Ryan Krueger inquires about earnings expectations for the Corporate segment, and Max Broden explains they had a $15 million pre-tax profit, reduced by $57 million due to tax credit investments. He notes that short-term yield fluctuations can affect profitability, but they anticipate remaining profitable in the near term. John Barnidge asks if favorable short-term experience could further reduce the benefit ratio, and Max Broden, along with Alycia, the Global Chief Actuary, mentions that both current and future trends are factored into their assumptions.

The paragraph involves a discussion about financial trends and market expectations within a company. Alycia Slyck acknowledges that future trends have been integrated into their financial projections, reviewed annually to reflect new trends accurately. John Barnidge inquires whether an 18-point benefit from a recent financial adjustment increases the long-term market potential for liabilities possibly moving to Bermuda. Max Broden clarifies that the adjustment is unrelated to market movements as it only affects U.S. GAAP accounting. Subsequently, Jimmy Bhullar from J.P. Morgan asks about the sales outlook for a product called Tsumitasu. Koichiro Yoshizumi responds, explaining that Tsumitasu was launched in June with significant sales due to substantial preparation, and its sales have continued to meet expectations.

The paragraph discusses the popularity and anticipated stable sales of a product called Tsumitasu, which is well-received by young customers due to its benefits during the payment period and flexible options like medical and nursing care benefits afterward. The focus then shifts to the U.S. market, where Virgil Miller addresses an increase in incurred claims this year. The rise is partly attributed to deliberate strategies to enhance benefits without additional costs and encourage early filing of claims to prevent long-term issues. Additionally, the product mix is noted as an influencing factor.

The paragraph discusses recent developments and strategies in a business focused on cancer and other benefits. Sales have increased by about 9% year-to-date due to improved underwriting discipline, which aims for better persistency. As the Group Life and Disability business grows, it is expected to push the benefit ratio higher due to its typical low 80s benefit ratio. Additionally, Dan Amos responds to a question about his focus following recent promotions, emphasizing his ongoing commitment to serving at the Board's pleasure without immediate plans for change.

The paragraph discusses the company's focus on succession planning and internal talent development. The speaker emphasizes their responsibility to ensure a smooth leadership transition for the shareholders and Board. They highlight Virgil as a strong candidate for future leadership, acknowledging the company's growth and unique distribution channel. Max's performance in a new role is praised, maintaining continuity with his predecessor. Audrey is recognized for her excellent counsel and understanding of various issues. The paragraph also mentions the promotion of the Head of IT to Executive Vice President, indicating confidence in the current leadership team.

The paragraph discusses the strength and recent developments within a company's leadership team, highlighting Alycia's positive impact after a year, Robin's role as Chief Accounting Officer, and Brad assuming more responsibilities. The speaker expresses satisfaction with the team's adaptability and mentions the importance of ensuring smooth leadership transitions. Wilma Burdis congratulates several individuals and asks Virgil Miller about macroeconomic or employment impacts on sales and recruiting in the U.S. Virgil responds positively, noting an initial slow start to the year, but highlighting a rebound and 5.5% sales increase driven by strong product offerings, particularly in the jumbo case market.

The paragraph discusses a company's efforts to strengthen its recruitment and maintain strong broker relationships while focusing on building its career field force. Despite economic challenges, there has been a positive increase in recruiting, enhancing their pipeline. Their strategy includes playing in the small case market and maintaining broker relationships while enhancing their reputation in the larger case space. The discussion also touches on the U.S. market's persistency, attributing its strength to a mix of factors, including scaling up life, absence, and disability business. Additionally, intentional efforts are made to focus on products with higher persistency to drive improvement in their original individual business.

The paragraph discusses a company's ongoing focus on cancer insurance, highlighting its importance and success due to the lasting value to customers, particularly as cancer is linked to aging. The company is enhancing its wellness benefits and increasing payouts on certain policies to demonstrate consumer value and foster loyalty. This strategy is believed to improve customer retention. Additionally, the paragraph touches on a competitive landscape in Japan's third sector, notably in medical insurance, where companies frequently launch new products. To remain competitive, the company emphasizes the need for unique offerings.

The paragraph discusses Aflac's strategy and strengths in the insurance market. It highlights the company's emphasis on flexible and easily understandable product features, particularly a well-received medical feature called monthly coverage. Aflac leverages strong distribution channels, including loyal agencies that exclusively sell their products and large non-exclusive agencies with a broad customer base. The company has a significant history and expertise in cancer insurance, supported by unique relationships with government and other sectors. Aflac also benefits from a partnership with Japan Post, which exclusively sells Aflac Cancer Insurance, giving them a competitive edge.

The paragraph emphasizes confidence in a promising future for the company, particularly in cancer and medical sectors, by leveraging their position as a leading third sector company. The speaker outlines plans to continuously assess the market, launch products that address customer needs, expand distribution channels, and outperform competitors. The segment concludes with an invitation to join a Financial Analyst Briefing on December 3rd and encourages follow-up with Investor and Rating Agency Relations for any further questions.

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