The paragraph describes the introduction of Aflac Incorporated's First Quarter 2025 Earnings Call. The call starts with an operator welcoming participants and noting they will be in listen-only mode, with the call being recorded. David Young, Vice President of Capital Markets, then welcomes everyone and outlines the agenda: Dan Amos, Chairman and CEO, will discuss results and operations in Japan and the U.S.; Max Broden, CFO, will provide details on the financial results, capital, and liquidity. Other executives are present for the Q&A session. The call includes forward-looking statements with a disclaimer about potential material differences in actual results. Earnings materials are available on their investor website. Dan Amos is then invited to speak.

In the first quarter, Aflac Incorporated reported net earnings of $0.05 per diluted share, affected by investment losses, while adjusted earnings remained constant at $1.66 per share. Aflac Japan saw a 12.6% increase in year-over-year sales, driven by a rise in cancer insurance sales and a strategy to appeal to younger customers through products like Tsumitasu. The launch of their new cancer insurance product, Miraito, has shown positive early results. Aflac's strong customer retention and new premium sales are essential for mitigating reinsurance impacts and achieving future growth.

The paragraph highlights Aflac U.S.'s 3.5% year-over-year sales increase, with strong performance in group life, disability, and network dental sectors. The company attributes this growth to a focus on profitable growth, underwriting discipline, expense management, and maintaining a strong pretax margin. Aflac emphasizes its role as more than just an insurance provider, positioning itself as a partner during challenging times by offering financial assistance, compassion, and care. The company also discusses its strong capital and cash flows, commitment to liquidity and capital management, and successful investments that contribute to net investment income. Aflac fulfilled promises to policyholders and addressed shareholder needs, deploying $900 million in capital to repurchase 8.5 million shares in the first quarter.

The paragraph discusses Aflac Incorporated's financial performance for the first quarter of 2025, highlighting a consistent record of dividend growth and strong shareholder returns, totaling $1.2 billion. Despite a flat adjusted earnings per diluted share of $1.66 due to foreign exchange impacts, the company's adjusted book value per share rose by 2.2%. The adjusted return on equity was reported at 12.7%, or 15.6% when excluding foreign currency effects. The Japan segment faced a decline in net premiums by 5% and underlying earned premiums by 1.4%, while the benefit ratio improved to 65.8%. The company's management remains optimistic about their position in the life insurance markets of Japan and the United States.

In the quarter, the third sector benefit ratio decreased by 120 basis points year-over-year to 56.3%. Remeasurement gains are expected to favorably affect the benefit ratio by 150 basis points in Q1 2025. Persistency increased to 93.8%, supported by a new definition that excludes annuitization as a lapse, which accounts for a 30 basis point increase. Japan's expense ratio grew by 160 basis points to 19.6%, primarily due to higher technology expenses. Adjusted net investment income in yen terms dropped by 7.6%, largely due to lower floating rate income and asset transfers. Japan's pretax margin decreased by 100 basis points to 31.8%. In the U.S., net earned premium increased by 1.8%, and persistency rose by 60 basis points to 79.3%. However, the U.S. benefit ratio increased by 120 basis points to 47.7%, influenced by business mix and lower remeasurement gains, though favorable underwriting on the long-term disability block was noted.

The paragraph discusses several financial metrics and developments for the quarter. The total expense ratio was 37.6%, down 110 basis points from the previous year, influenced by improved platform scale and expense efficiency. Growth initiatives increased the expense ratio by 50 basis points, but this is expected to decrease with scaling. Adjusted net investment income in the U.S. fell by 1.9% due to lower floating rate income, while the U.S. segment's pretax margin was strong at 20.8%, a slight decline from the previous year. The company increased CECL reserves for its commercial real estate portfolio by $2 million and foreclosed on two loans. The middle market loan portfolio performed well, with increased reserves of $7 million. In the corporate segment, there was a pretax gain of $43 million, with adjusted net investment income up by $47 million due to fewer tax credit investments and higher asset balances. Tax credit investments negatively impacted net investment income by $8 million, but positively affected the bottom line by $0.4 million. Unencumbered holding company liquidity was $4.3 billion, exceeding the minimum balance by $2.6 billion.

In Q1, the company repurchased $900 million of its stock and paid $317 million in dividends, aiming for strong risk-adjusted returns exceeding their capital costs. It maintains robust capital ratios and ended the quarter with significant regulatory capital metrics, while managing a leverage ratio within the target range, impacted by the Yen-dollar exchange rate due to debt held in Yen. The company recorded a $6 million valuation allowance on mortgage loans and ended with ¥5.2 billion in realized gains in Japan, with limited impact on earnings. Currency volatility is managed by aligning unhedged U.S. dollar exposure with the Japanese business's economic surplus, with $25.5 billion unhedged U.S. dollar assets held in Japan. Every ¥5 change in the exchange rate impacts EPS by approximately $0.07.

The paragraph is part of a Q&A session discussing the financial strategies of a company with significant exposure to Japanese markets. The company holds $2.7 billion in forward contracts and $4.4 billion in Yen-denominated debt, along with $24.2 billion in out-of-the-money put options for protection against Yen appreciation. Tom Gallagher from Evercore ISI asks about the decline in the company's Economic Solvency Ratio (ESR) in Q1 despite the rise in Japanese interest rates. Max Broden explains that while the Yen's strengthening partially offset interest rate gains, a significant dividend flow from Aflac Japan to Aflac Inc. led to increased cash reserves, impacting the ESR.

The paragraph discusses a company's approach to capital management in the face of changing market conditions, specifically mentioning the strengthening Yen and rising long-term interest rates in Japan. Despite macroeconomic changes and concerns about capital volatility, Max Broden explains that their capital management strategy is based on a long-term view and incorporates various scenarios, including stressed scenarios. This strategy involves maintaining consistent capital management practices and a structured use of financial instruments. The company focuses on selling relatively defensive products with stable and predictable profitability and cash flows, which is complemented by low asset leverage to limit risks. The paragraph also notes the company's awareness of exchange rate volatility impacting their Economic Solvency Ratio (ESR).

The paragraph discusses Aflac Japan's approach to managing economic risks related to foreign exchange (FX) volatility. Aflac holds $25.7 billion in U.S. dollars in Japan to protect its long-term economics but this results in volatility to their Economic Solvency Ratio (ESR). To manage this, they have implemented a put option program that provides protection if the Yen strengthens, while retaining benefits if the Yen weakens. Currently, these options are out of the money by 25% to 30%, and the company feels their FX hedging program is effective without the need for significant changes. The paragraph also transitions to a question from Jack Matten of BMO Capital Markets about a new cancer product launch, with Daniel Amos responding that the sales expectations are positive.

The paragraph discusses the growth of a new cancer policy, particularly focusing on the efforts and strategies in the U.S. and Japan. Virgil Miller reflects on his business trip to Japan, emphasizing the long-term strategies and the success of their product launches, including a new cancer product. He then defers to Koichiro Yoshizumi to provide details about the launch of the new cancer reinsurance product in Japan, which began in March and is meeting expectations. Yoshizumi highlights the product's full and straightforward coverage as one of its key features.

The paragraph discusses recent changes and developments in an insurance company's offerings and sales strategy. The company has simplified the qualification for benefit payments and introduced flexible coverage options that can be combined with existing policies. Sales began in March through main state associate channels and were extended to bank channels in April, showing positive results. A new CMO position was created in January to oversee sales, marketing, and brand management, focusing on customer needs and cross-functional collaboration. Successful marketing activities under the CMO's leadership have been noted, particularly for a new cancer insurance launched in March. The company plans to continue growing third sector sales by expanding its product lineup and focusing on hiring activities.

The paragraph discusses the competitive dynamics and outlook for sales in the medical insurance market in Japan. Jack Matten asks about this market, and Koichiro Yoshizumi explains that the company holds the largest share of new cancer and medical insurance policies as of fiscal year 2023 and expects to maintain this position through 2025. They are pioneers in cancer insurance, leveraging 50 years of accumulated knowledge to provide unique services, like consulting and coinsured services, to maintain a competitive advantage. They plan to continue growing sales, especially with a new cancer reinsurance product launching in March, while also updating their medical insurance product line every two years to stay competitive in a crowded market.

The paragraph discusses the presence of remeasurement gains in both Japan and the U.S., attributed to favorable claims utilization. The third quarter is highlighted as significant for unlocking actuarial assumptions, leading to more substantial remeasurement gains and losses related to claims patterns. In other quarters, adjustments are smaller and reflect true-up from those periods. Historically, such gains have been observed even before the Long Duration Targeted Improvements (LDTI) under legacy accounting practices, where they were reflected as Incurred But Not Reported (IBNR) releases affecting the benefit ratio. Now, they are reported as remeasurement gains and losses under LDTI.

The paragraph discusses the continuation of long-term trends in Japan and shifts in claims patterns in the U.S. after COVID-19. Alycia Slyck mentions that their assumptions are updated annually in the third quarter to reflect best estimates and experiences, which are then seen in the third-quarter earnings. Jimmy Bhullar from JPMorgan asks about the weak sales of dental or medical products in Japan due to competitors with lower benefit products. Daniel Amos responds that sales are affected by cyclical new product releases and market changes, like consumer needs and medical treatments, suggesting potential recovery aligned with new cancer insurance products.

The paragraph discusses positive developments in the life insurance sector, specifically the addition of younger policyholders, which presents opportunities to offer them cancer and medical insurance. The focus remains on achieving sales targets due to profitable long-term potential. Jimmy Bhullar inquires about the U.S. Dental business's expectations following a tech platform change. Virgil Miller responds by highlighting steady momentum thanks to investments in talent and technology. He notes improvements from a slow start in Q4, with Q1 performing better, and emphasizes successful partnerships, like with SKYGEN, for administrative support.

The paragraph involves a discussion in a financial context, where an individual named Max Broden addresses questions from Suneet Kamath of Jefferies during an earnings call. It starts with a company representative expressing satisfaction with the performance of a third-party administrator and details a strategy involving selling demo and voluntary benefits products together, which led to a 20% increase in sales for some agents. The conversation then shifts as Suneet Kamath inquires about the company's ESR (Estimated Solvency Ratio) and a one-way hedge in place to manage FX (foreign exchange) risk. Max explains that the hedge is designed to manage risk associated with FX, with their ESR currently estimated at 250%. Suneet then mentions a decrease in U.S. weekly average producers attributed to agents selling more non-Aflac products.

In this paragraph, Virgil Miller addresses a question about the prevalence and impact of agents selling products from other companies, particularly in the context of Aflac's sales recovery. He acknowledges the lack of specific data but notes anecdotal evidence of mixed sales activity. Miller highlights that while overall productivity is up, mainly due to veterans and brokers, the focus needs to be on smaller accounts with fewer than 50 employees. He mentions that agents had success selling dental products, which often leads to additional voluntary benefit sales, though sometimes from other carriers. However, recent efforts have led to a 23% increase in dental sales for Q1 and a related 20% overall sales increase for those agents, which is expected to continue. The company plans to incentivize veteran agents to continue selling Aflac products, particularly focusing on dental insurance.

In the article paragraph, Daniel Amos notes that there has been an increase in younger customers purchasing the Tsumitasu product, which now accounts for over half of their sales. In terms of Net Interest Income (NII), the company has experienced pressure due to the floating rate portfolio, with a notable decline in SOFR year-on-year. This pressure is expected to continue throughout the year. However, the company is repositioning its portfolio to capture higher yields and has been deploying capital to take advantage of wider spreads, which may help offset the challenges posed by the floating rate environment. Additionally, he reminds that their floating rate portfolio resets with one-month and three-month SOFR.

The paragraph discusses a financial strategy in response to fluctuations in the Yen's value. Max Broden explains that while a stronger Yen could negatively impact components like forward contracts and leverage ratios due to $2.7 billion in forwards and $4.4 billion in Yen-denominated debt, there is a positive offset. This offset comes from higher future dividend expectations from Aflac Japan in U.S. dollar terms, which balances the negative impacts elsewhere. This approach ensures the organization is well-hedged and protected in dollar terms. Additionally, Ryan Krueger asks about Japan's third sector sales, specifically mentioning a new cancer product and strategy concerning cancer and medical sales.

The paragraph discusses an inquiry about the impact of a recent data breach involving Japan Post on cancer insurance sales. Masatoshi Koide from Aflac Japan explains that Japan Post Company is implementing preventative measures to address the issue, which has affected cancer insurance sales. However, Japan Post Insurance is not directly impacted by the breach, and Aflac's products are not involved. Sales activities for cancer insurance continue, and new cancer products have been launched in April by the Japan Post Group.

The paragraph is a transcript from a conference call where Nicholas Annitto from Wells Fargo asks Max Broden about the use of Bermuda for reinsuring the Japan balance sheet, particularly if the Yen appreciates further. Max Broden explains that the ability to execute reinsurance is not dependent on ESR levels. However, reinsurance transactions between Aflac Japan and Aflac Bermuda are structured to lower overall risk and tend to increase the ESR, making it a useful tool in managing Aflac Japan's capital base. The ESR ratio is currently performing well above target levels, which is seen positively. Following this, Michael Ward from UBS inquires about the business environment in Japan and whether there is any potential anti-U.S. sentiment due to a trade war that might affect sales. Daniel Amos defers to Charles Lake to respond.

The article discusses the strong U.S.-Japan alliance, highlighting Japan's deep economic relationship and confidence in the United States, evidenced by Japan being the largest investor in Japan over the past five years. The paragraph notes a boom in U.S. tourism to Japan due to favorable exchange rates. Though trade talks are in the spotlight, they haven't negatively influenced Japanese sentiment towards the U.S. On the corporate side, Max Broden explains that their buyback strategy depends on available capital, future liquidity, and investment opportunities, prioritizing organic growth and then considering buybacks as they have provided excellent returns in recent years.

In the paragraph, Alex Scott from Barclays asks about the complexities in modeling the corporate segment due to the presence of derivative programs, Bermuda reinsurance, and other typical corporate activities. Max Broden responds by explaining that the main factors influencing this segment's profitability are reinsurance activities, interest expenses from potential debt issuance, and tax credit investments. He highlights that reinsurance is stable and predictable, while debt issuance would impact profitability. Additionally, tax credit investments have a significant impact on the accounting results, noting a year-over-year change due to lower tax credit investments this quarter compared to the previous year.

The paragraph is a part of a conference call discussion, where it is explained that the tax rate for the period is higher than usual, which may result in ongoing volatility. However, the pretax number is expected to remain positive but lower than the first quarter. The conversation ends with Alex Scott acknowledging the explanation and thanking the speaker. The operator then concludes the question-and-answer session, and David Young expresses gratitude to the attendees, offering further assistance through Investor Relations. The call is then formally closed by the operator.

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