The paragraph describes the Aflac Incorporated Fourth Quarter 2024 Earnings Conference Call. The call is designed for participants to listen to an overview of Aflac's 2024 results and operations in Japan and the United States, presented by Dan Amos, the Chairman and CEO. Max Broden, the CFO, will discuss the company's financial results, capital, liquidity, and 2025 outlook. Additional details and materials are available on Aflac's investor website. The Q&A session will include several executives, such as Virgil Miller and Charles Lake. It is noted that the teleconference will include forward-looking statements.

The paragraph discusses Aflac Incorporated's strong financial performance over the year, highlighting net earnings and adjusted earnings per share growth. Aflac Japan significantly contributed to the company's earnings and balance sheet, with impressive increases in pretax adjusted earnings and a record pretax profit margin. The company is pleased with the high premium persistency and sales growth in Japan, emphasizing the importance of sales and maintaining persistency to offset reinsurance impacts. The strategy focuses on fitting customer needs across life stages, particularly targeting younger customers with the Sumitos product, which has been successful in boosting sales.

The paragraph discusses the company's plans to launch a new cancer insurance product with unique features like the Uriso cancer consultation support service, flexible coverage, and a new plan for children. The company aims to leverage its broad distribution network in Japan to enhance customer access and financial security. In the US, the company is focused on updating products to improve customer understanding of value, which is believed to increase product persistency and reduce expenses. Although sales declined by 1% due to a weaker fourth quarter, the company saw improvements in premium persistency and a strong pretax profit margin. The company maintains a focus on profitable growth, expense management, and engaging agents and brokers.

The paragraph emphasizes Aflac's strong market position and growth potential in Japan and the United States, highlighting their commitment to both policyholders and shareholders. It outlines their effective capital management, including the repurchase of $2.8 billion in shares and 42 consecutive years of dividend growth. The company has delivered $3.9 billion back to shareholders in 2024 and maintains a high return on capital with strong investment income. Aflac is proud of their operational strategies and believes in their ongoing growth potential in major life insurance markets.

In the fourth quarter of 2024, Aflac Incorporated reported a 24.8% increase in adjusted earnings per diluted share to $1.56, despite a minor negative impact from foreign exchange. Remeasurement gains on reserves contributed $43 million, and variable investment income exceeded expectations by $17 million. Adjusted book value per share, excluding foreign currency effects, rose 3.2%, and the adjusted ROE was 14.5% excluding FX impacts. The Japan segment saw a 5.4% decline in net earned premiums due to an internal transaction and paid-up policies, though there was a slight positive effect from deferred profit liability. Policies in force decreased by 2.3%, while the total benefit and third sector benefits ratios increased slightly year over year. Japan's persistency rate remained stable at 93.4%, and the expense ratio declined to 20.8% in the quarter, reflecting reduced expenses. Overall, the results were viewed as solid.

The paragraph discusses financial results for a company, highlighting its performance in both Japan and the US. In Japan, adjusted net investment income grew by 3.7% for the quarter and 12.1% for the year, with a pretax margin that reached a 30-year high of 36%. In the US, net income premium increased by 2.7%, persistency improved, and claims utilization normalized post-pandemic. The total benefit ratio for the year was 46.8%, while the expense ratio dropped to 38.5% due to improved efficiencies. Growth initiatives raised the expense ratio slightly, which is expected to reduce as business scales. Adjusted net investment income in the US grew by 0.9% for the quarter and 3.3% for the year, and overall profitability remained strong with a pretax margin of 21.1% for the year.

The paragraph discusses the company's management of a significant downturn in the commercial real estate market, highlighting a $40 million increase in the CECL reserve due to distressed property valuations. The firm foreclosed on two loans, adding them to its real estate-owned portfolio, and believes it can manage and maximize asset recoveries. Their middle market loan portfolio is performing better than expected, though the corporate segment faced a $4 million pretax loss. Adjusted net investment income increased by $153 million year-over-year, influenced by tax credit investments, higher rates, and asset balances. Despite negatively affecting corporate net investment income by $46 million, these investments yielded a net positive $4 million impact for the quarter. The company maintains a strong capital position with high SMR, ESR, and RBC ratios, anticipating resilience against credit cycles and external shocks. Impairments totaled $3 million in the US and 700 million yen in Japan for Q4.

The paragraph discusses Aflac's financial performance and strategic outlook. The company's leverage ratio for the quarter was slightly below their target, affected by the yen-dollar exchange rate, as part of their hedging strategy for Aflac Japan's value. They maintain significant liquidity and have been active in stock repurchases and dividend payments. Aflac plans to tactically manage their balance sheet to achieve strong returns. For 2025, they forecast Japan's benefit ratio at the higher end of 64-66% and the expense ratio at the lower end of 20-23%, leading to a lower pre-tax profit margin. In the U.S., they expect the benefit ratio at the lower end of 48-52%, with the expense ratio higher within the 36-39% range, resulting in a higher pre-tax profit margin. The paragraph concludes by transitioning to a Q&A session led by David Young.

The paragraph is a discussion during a conference call where Joel Hurwitz asks Virgil Miller about the competitive environment affecting Aflac's US sales. Virgil responds by highlighting several factors: Aflac anticipated strong competition in the fourth quarter of 2023, which was historically high for sales. They remain committed to strict underwriting practices to ensure long-term profitability, avoiding businesses with high turnover or low claims filing. Additionally, Virgil mentions improvements in their dental and vision platforms, recovering from a failed system implementation through a partnership with a leading third-party administrator, positioning Aflac for further success.

The paragraph discusses the challenges faced by a company in Q4, with a 33% decline in dental sales impacting overall performance due to a loss of additional voluntary benefit sales, described as a "halo effect." Despite this, the company is pleased with its overall performance, highlighting solid financial management, including a 9.3% increase in pretax earnings, a 1.3% improvement in margins, and a 3.1% reduction in expenses. The dialogue then shifts to the 2025 outlook for Japan, where the pretax margin is expected to be at the low end of the range, partly due to net investment income and complexities in accounting for floating rate security hedges. This segment has a floating rate book of nearly $9 billion.

The paragraph discusses the company's corporate segment, highlighting that over $4 billion in cash is invested in short-term assets sensitive to changes in the Secured Overnight Financing Rate (SOFR). There is an expectation of further interest rate cuts in 2025, which is projected to lower yields compared to 2024, leading to reduced floating rate income. An interest rate swap, initially intended as a hedge against declining interest rates, is now ineffective due to current higher rates, resulting in a more immediate impact on net investment income from rate declines. The mark-to-market component of this swap affects US GAAP earnings but is excluded from adjusted earnings. The discussion then shifts to a question from Jimmy Bhullar of JPMorgan regarding Japan sales, noting significant growth this quarter but still being below pre-pandemic levels.

Koichiro Yoshizumi from Aflac Japan discusses the company's efforts to recover pre-COVID sales levels by focusing on revitalizing solicitor activities that were stagnant during the pandemic. Aflac Japan has embarked on a marketing and sales transformation since January, concentrating on end-to-end marketing across various product lines such as medical, cancer, asset formation, and nursing care. The company is also introducing competitive products, with plans to launch a new cancer insurance offering. They aim to expand their product lineup and reach more customers with products like Sumitasso, introduced in June 2024. Additionally, Aflac Japan is working to develop its solicitors or agents to improve performance. Jimmy Bhullar then mentions factors affecting the US business, such as dental DPA issues and competition impacting sales and margins in 2024.

The paragraph discusses the company's efforts to address ongoing competition and market challenges, highlighting their investment in a strong dental platform with an industry-leading partner to enhance customer experience. There is a focus on re-engaging brokers and agents to boost sales, with expectations for improved performance in the fourth quarter. The paragraph also highlights success in their life and assets disability platform (PLAT), exceeding sales expectations and competing well in the large case market. The company has also achieved better-than-expected sales in their direct-to-consumer market for disability and employee life products.

In the paragraph, Dan Amos and others discuss the company's focus on improving its dental platform and increasing profits through earned premium rather than making quick sales with lower profits. They believe their business model is stronger now, particularly in the dental and vision sectors. Mike Ward of UBS asks about the contribution of Sumikasu to Japan's sales growth, suggesting a reliance on first sector sales. Koichiro Yoshizumi responds that while Aflac is primarily focused on third sector insurance products like medical or cancer insurance, Sumitasso has contributed significantly to sales growth. Although they don't disclose specific sales percentages, they aim to grow third sector performance and foresee continued solid results from Sumitasso, which differs from traditional first sector products.

The paragraph discusses a unique insurance product designed for the younger generation to aid in asset accumulation, which also includes a nursing care feature and the flexibility to convert to other types of insurance after premiums are paid. The strategic goal is to expand the customer base by appealing to younger clients and boosting third sector product sales. Max Broden highlights that there is no sales cap as the product is profitable and acts as a good "hook" product to increase sales in both first and third sectors. Additionally, higher interest rates and improved reinsurance capabilities have enhanced capital efficiency, making the product more viable. Dan Amos commends the efforts of Koichiro and his team in managing the product.

The paragraph discusses a company's financial performance, particularly focusing on remeasurement gains and losses related to actuarial assumptions. The company experienced significant gains due to favorable unlocking of assumptions in the U.S. in 2023 and Japan in 2024. The assumptions are reviewed quarterly and adjusted if necessary, with a thorough examination conducted annually in the third quarter. While recent results have been positive as the pandemic effects diminish, caution is advised due to rising claims, especially in the U.S. for specific insurance products like accident, hospital, and cancer policies.

The paragraph discusses the cautious approach of a company, led by Wes Carmichael, in its underwriting to achieve favorable results, acknowledging that past remeasurement gains may not be as strong in the future. Virgil Miller then provides insight into the company's efforts to recruit agents in the US, highlighting a competitive environment and economic factors affecting recruitment. Despite a slight year-over-year decline, the company consistently aims to recruit around ten thousand agents annually, emphasizing the strength of its distribution strategy, partnerships, and leadership to maintain its presence across various market segments, including small and mid-market areas.

The paragraph features a discussion between Elyse Greenspan from Wells Fargo and Max Broden regarding the company's capital deployment strategies. Elyse inquires whether the $750 million share buyback, noted as the highest in a single quarter, is sustainable for 2025. Max responds affirming the company's strong capital position and substantial free cash flow, which allows for reinvestment into operations and capital return to shareholders. He emphasizes that their priority is organic business growth and achieving high internal rates of return (IRR), especially through selling policies. They have also significantly increased dividends over the past five years and look to be strategic in share repurchases. Max notes that future capital deployment will be assessed for best IRR opportunities. Lastly, Elyse asks about a data sharing issue with Japan Post, clarifying its non-relation to Aflac.

The paragraph features a discussion from a Q&A session about Aflac Japan and Aflac's dental and vision products. Koichiro Yoshizumi from Aflac Japan clarifies that the sales of Aflac Japan's cancer insurance were not impacted by a specific incident, and they maintain strong communication with Japan Post Group to support sales. Elyse Greenspan transitions to the next speaker. John Barnidge of Piper Sandler asks Virgil Miller about a prior failed implementation and how it affected the availability of dental and vision products. Virgil explains that while there was some service degradation earlier in the year which affected trust, they were fully operational in the fourth quarter and are working with a reliable partner, with a strong network in the dental industry.

In the article, the company discusses its efforts to rebuild trust with agents and brokers by demonstrating the reliability of its processes, especially after experiencing a 33% decline in sales from the previous year. While dental sales have been affected, there is a ripple effect on other business areas too. The company is actively engaging with broker partners and promoting confidence among agents, anticipating a return to competitive sales. Additionally, there is an upcoming launch of an innovative cancer insurance product in March 2025, which will include a unique concierge service and enhanced coverage throughout the treatment process. This launch is expected to be a significant growth driver.

The article paragraph discusses updates to payment conditions and product offerings, highlighting a newly established child plan with lower premiums to support families with pediatric cancer patients. This plan aims to increase performance by being introduced through various channels. Dan Amos mentions a temporary dip in sales with new product introductions but anticipates strong growth afterward. Additionally, Wilma Burdis asks about the reinsurance of Aflac Japan to Bermuda, and Max Broden explains that no changes are planned. They have seeded 6% of the asset base, with an internal cap at 10%, allowing room for evaluation as they approach that limit, ensuring good risk management practices.

The paragraph discusses various aspects of Aflac's operations, particularly focusing on the impact of the yen-dollar exchange rate on Aflac's financials. Max Broden explains that while the company's GAAP financials are affected by the exchange rate fluctuations, Aflac employs an enterprise hedging program to protect the economic value of Aflac Japan. This program includes holding US dollar assets, borrowing in yen, and using FX forwards at the holding company level. Wilma Burdis asks about the weaker yen's impact, and Max assures that their hedging strategy provides robust protection. The dialogue then transitions to Tom Gallagher from Evercore ISI asking about Japan's margin performance, specifically related to floating rate impact on net investment income (NII) and benefit ratio improvements.

In the paragraph, Max Broden discusses the company's forecast period from 2025 to 2027, noting that the benefit ratio is expected to decline due to a shift in the business mix towards the third sector, which has a lower benefit ratio. This shift will push the benefit ratio from the high end to the low end of the range. In turn, the pretax margin is expected to improve over the period, increasing from the lower to the higher end of the range. Brad Dyslin then comments on challenges related to net investment income, highlighting the impact of a 100 basis points decline in SOFR on the $9 billion floating rate portfolio and cash holdings. He also mentions that despite these challenges, one-off items contributed significantly in the previous year.

The paragraph discusses a company's financial situation and future plans related to its capital position in Japan. Tom Gallagher inquires about the possibility of extracting an extraordinary dividend from an excess of $4 billion under a new capital framework (ESR). Max Broden explains that while the capital position in Japan is strong, the transition from the SMR to the ESR framework is still underway, and a decision on capital adjustment should wait until ESR is fully implemented by the end of the first quarter of 2026. Hence, no special dividend is expected in the near term. Additionally, Josh Shanker asks about the impact of investments on the expense ratio at Aflac US, and Virgil Miller indicates they are beginning to address this issue.

The paragraph discusses the company's positive performance in reducing its expense ratio from 41% to around 38.5%, attributing success to effective expense management and growth in platforms like PLAS and consumer markets. The focus is on scaling operations, especially in the dental and vision sectors, to further improve the expense ratio by increasing sales revenue. Looking ahead to long-term projections for 2025 through 2027, the company anticipates a gradual decrease in the expense ratio. They remain committed to disciplined expense management, aiming to maintain an expense margin range of 17-20%. The conversation highlights a prior misstep in the dental and vision strategy, which is now being corrected with a focus on execution.

In the paragraph, Alex Scott asks about the competitive environment and the company's disciplined sales strategy, specifically regarding reinsurance and new money yields in the US and Japan. Max Broden responds by discussing the company's life insurance business in Japan, highlighting the impact of higher yields on yen-denominated products and the pressure of high reserving levels on IRRs. However, he notes that post-reinsurance, the IRRs are strong, giving confidence in their market offerings. Alex Scott then inquires about the company's group benefits platform capabilities and whether they have what they need or if there are opportunities for further acquisition or investment. Virgil Miller begins to respond to this question.

The paragraph discusses Aflac's strategy and investments in its business lines. The company has invested in technology and talent for its life and disability, group benefits, and dental platforms. They have implemented a market segmentation strategy with tailored products and distribution for each segment. Aflac's core strategy is to integrate these platforms to offer a unified market experience, enhancing their competitiveness and ability to bundle services. The goal is to respond to the market as a single entity, showcasing their technological and strategic prowess. Additionally, Jack Matting from BMO Capital Markets inquires about trends in the commercial real estate market and Aflac's portfolio outlook for 2025. Brad Dyslin acknowledges the market's difficulties but notes signs of a slow recovery.

The article discusses a strategy to work with borrowers for recovery but is prepared to foreclose if necessary to maximize returns. The recovery is expected to be prolonged with 2025 similar to 2024, and efforts will continue to manage assets for long-term gains. In a follow-up on Japan's sales outlook, Koichiro Yoshizumi mentions a new cancer insurance product launch and improvements to medical insurance services. Despite expectations for a stabilization in sales volume compared to 2024, the efforts should yield positive results. They have also enhanced their sales channels, hiring around 600 agents in 2023.

The paragraph details a company update where contributions from the previous year were acknowledged, and it was noted that over 600 new employees were hired in 2024. These employees are expected to become more active in 2025. The company plans to use their first sector product to expand their third sector business, and related training is being enhanced. The session ends with closing remarks from David Young expressing appreciation for the interest in Aflac Incorporated and looking forward to future engagements. The operator then concludes the conference.

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