Q2 2020 Aflac Inc Earnings Call
[music].
Welcome to the Aflac second quarter 2020 earnings conference call. Your lines have been placed on listen only until the question and answer session. Please be advised today's conference is being recorded I would now like to turn the call over to Mr., David Young Vice President of Aflac Investor in rating Agency relations.
Thank you Sir you may begin.
Third could you check your mute button. Please.
Thank you Fran.
Good morning, and welcome to Aflac incorporated second quarter call.
As always we have posted in our earnings release and financial supplement to investors Dot Aflac Dot com.
This morning, we will be hearing remarks about the quarter as well as our operations in Japan, and the United States.
The cobot 19 pandemic.
Dan Amos Chairman and CEO of Aflac incorporated will begin by discussing the impact of the pandemic and our ongoing response.
Hey, Crawford President and COO of Aflac incorporated will then touch briefly on conditions in the second quarter before providing perspective on claims exposure to cope with 19.
Max Brodin Executive Vice President and CFO of Aflac incorporated well conclude our prepared remarks with a summary of second quarter financial results in current capital and liquidity.
Joining us this morning during the Q in April version, our members are our executive management team in the us.
Teresa White president of Aflac us.
Eric Kirsch Global Chief investment Officer, and President of Aflac Global investments.
Rich Williams Chief distribution officer.
Average Aerie global Chief risk Officer, and Chief Actuary, and Steve Beaver CFO of Aflac us.
We're also joined by members of our executive management team in Tokyo at Aflac Life insurance, Japan.
Charles Lake.
Chairman and representative director President of Aflac International.
Massive toshi Golliday, President and representative director.
Todd Daniels director and CFO.
And Koji Ariyoshi director and head of sales and marketing.
Before we begin some statements in this teleconference are forward looking within the meaning of federal Securities laws.
Although we believe these statements are reasonable we can give no assurance that they will prove to be accurate because they are prospective in nature.
Actual results could differ materially from those we discussed today.
We encourage you to look at our annual report on form 10-K for some of the various risk factors that could materially impact our results.
As I mentioned earlier the earnings release is available on the company's Investor site investors Dot Aflac Dot com and includes reconciliations of certain non us GAAP measures I'll now hand, the call over to Dan.
Dan.
Thank you David and good morning.
Shortly I'll provide an overview of quarter.
And how we perform.
Blacks perspective.
On the ongoing.
It is in their families. The people who are on the frontline fighting the spread of Govan 19.
And those who are providing essential services, including our own employees.
As I shared with you last quarter, the guiding focus of our actions as centered on the healthy and safety of our employees distribution partners.
And policyholders we serve.
You will recall last quarter that we ramped up our work at home staffing models in both Japan and the United States.
We saw a little in the way of disruption in the operations and our employees adapted well.
Since our last earnings call the government and Japan has led to the state of emergency on May 25th and the country has seen new cases rise since mid June, but all lessors scale relative to the United States.
Recently, Japan reported a little over 900 cases in a day.
With risk of infection remaining the national and local governments are monitoring the spread very closely as the country gradually opens taking action when necessary.
Aflac, Japan has also taken steps.
With approximately 50% of the workforce returning to work on site.
Our actions are taken into consultation with leading medical experts in Japan, including Professor and Dr. Koji water and following health and safety protocols for the industry developed by the Japanese business that duration in life Insurance Association of Japan.
Aflac, Japan continues to monitor the situation and encourage remote work to the grace extent possible.
At the same time, the United States is seeing daily new cases in hospitalizations significantly on the rise since mid June recently, new cases exceeded 75001 day in the United States.
Increasingly public health experts are advocating for the need to observe prudent protective measures through the fall and early winter as a result, Aflac US plans on beginning a regional stage gating approach for returning to onsite work in 2021.
We feel that this is the best approach for our employees as well as the health of our communities.
Our employees in both countries.
John incredible termination professionalism.
Over the course of this year.
For example.
Even amid the global pandemic ever changing working locations and condition.
Why is in Japan in the United States.
Had demonstrated determination to now more than ever.
Policyholders first.
In fact, two weeks ago Aflac, Japan received the honor being the number one company in customer loyalty among the 13 life insurance companies and the NTT Com online benchmarks survey.
This survey was conducted in May ride in the middle of Cologuard pandemic, which shows our ability to adapt.
Factors customers right number one.
Included our customer service and listening approach.
Our corporate and brand damage.
And our friendly.
Policyholder website.
We're saving recognition such as this from the very people. We support is the highest honor, especially considering the current environment. It also reflects our collective hard work and dedication to be there for the policyholders when they need us most.
Another way, we have supported our policyholders through this difficult time is extending the grace periods for premium payments in both Japan, and the United States a.
Initially aflac, Japan, followed they add Thats, a guidance and extended the grace period on premium payments to September the Thirtyth 2020.
In June Aflac, Japan like its industry peers extended the premium Grace period until April the Thirtyth 2021.
Policyholders are required to file for relief through this extension.
Aflac US is also implemented premium grace periods and those periods remain in effect in 23 states as of July Twentyth 2020.
The environment creative back of at 19, which is included sheltering in place and social distancing continues to impact our sales results both in the United States in Japan.
We are carefully monitoring our core products.
And actual to expected Noncovered claims.
We are proactively reaching out to employers and policyholders to assist in understanding our product benefits and to ease. The filing of qualified claims were also communicating on the value of the wellness benefits attached to our products for reimbursement of routine Dr., Dennis and hospice.
It'll visits.
Shelter at home orders subside and normal activities recover.
We have done this in the past and while current conditions are unique our experiences this will drive utilization benefit ratios and improved persistency.
Turning to sales Aflac us total sales were down 56% in the quarter.
Like Japan sales were down 60% in the quarter.
Which also reflects last year strong second quarter sales side, Japan post.
While the technology for virtual sales existed prior to the pandemic market practice and preference favored face to face presentations.
In both countries, we're having to pivot to a more virtual sales execution.
Within the current environment virtual takes on greater importance, especially in those areas that are slower to open up.
For Aflac, Japan. This will mean additional digital transformation initiatives utilizing artificial intelligence to better identify customers needs.
Consult with customers through the web.
On July the third and the strategic Alliance Executive meeting, Japan Post Holdings CEO Masood us on.
And I agreed to a joint promotion of such digital transformation initiatives.
I was glad that we were able to have our virtual meeting that evening and I hope that we can visit very soon in person.
Recognizing that face to face sales will be challenging Aflac, Japan continues to Brazil pursue new business through direct mail and calling campaigns to existing and prospective customers were also preparing to introduce a new system that enables online consultation by.
Allowing the customer and our agency to see the same screen through a digital device. Additionally, we will enhance the system to enable smartphone based insurance application ahead of all other companies in Japan.
Likewise, our production model in the United States relies heavily on based based interaction at the work side and in small business oriented as such we were hit hard by temporary closures of business and lack of especially in the second quarter.
Keep in mind, the fourth quarter is typically the quarter and which we see strong results and the broker driven group market.
Which has generally been more resilient to conditions.
This makes us cautiously optimistic as we see potential for modest sales improvements for Aflac us in the second half of the year also contingent upon the pace of economic recovery.
We continue to progress toward closing our definitive agreement to acquire Zurich group benefits business, which allows us to extend our distribution reach and extend our appeal to brokers and larger employers.
When stepping back from the quarter fracking on the events impacted the economy and our business model I remain confident and how we're positioned despite our shared concerns over conditions in the United States, We're able to move forward with key growth and efficiency initiatives that were quite.
Our near term investments in order to be position for future growth and opportunity.
We are learning more about how the pandemic is impacting our business and our quickly pivoting to better balance to face to face and virtual sales practices. We had thus far depended our strong margins in Japan, and the United States and asset quality remains strong.
Additionally, our overall capital and liquidity positions allow us to continue on interrupted the balance of the investments in the business opportunistic investments and returning capital to the shareholders.
Let me conclude with the topic has been thrust into the spotlight in the United States since the last earnings release.
Aflac is and has always been for fairness and justice diversity.
And inclusion are not new concepts for Aflac.
We have consistently received recognition in various publications, including being named to Black Enterprise list of the 50 best companies for diversity 13 times and Latino style list of the 50 bass companies for its 20 times.
Black way is treating people with respect and care.
This is critical when considering that 46% of our us employees.
Ethnic minorities and 66% are women.
We continue to partner with organizations like the congressional Black Caucus Institute's 20, Onest century Council and the business round table to raise issues that can lead to meaningful change in public policy as an inherent part of the culture, we have poor oppose any form of big.
Three intolerance and disrespect in our society, we are committed to bi racial justice and a quality for all.
At Aflac, we have always believed the fostering a diverse workforce isn't just the right thing to do it makes good business sense.
When our people reflect the diversity of our communities in which we operate we strengthened our opportunities in connections.
Now I'll hand, the program, often Brad and Max.
Brett Thanks, Dan I'm going to touch briefly on conditions in the second quarter, how we're tracking to covert 19 stress testing assumptions and an update on key initiatives in Japan and the us.
In Japan, we track data coming from the Ministry of Health Labor on welfare as well as the covert 19 subcommittee of the Cabinet Advisory Council for infectious disease.
As of July 27th there were approximately 30500 cases and 1000 deaths in all of Japan.
Our stress test assumed a midpoint estimate of 1.2 million confirmed cases, and a 100% hospitalization rate consistent with Japan's infectious disease guidelines.
When applied to our book of medical policies, and assuming an average of 20 days and hospitalization. The result was a potential impact to our third sector benefit ratio of 50 to 100 basis points in 2020.
However.
Through the second quarter Aflac, Japans covert 19 impact totaled only 626 claimants with claim payments totaling 138 million yen.
For coated hospitalization claims thus far the average stay in a hospital is approximately 20 days with two thirds of claims in hospital and one third at home or hotel based hospitalization.
In short we are tracking well below any risk.
Stress conditions with no measurable covert 19 impact to core ratios from paid claims.
The impact is somewhat isolated to sales and a related uptick in persistency, which Max will comment on later.
Turning to the US the story of course is very different.
We continue to track the rate of reported cases hospitalization and us from sources, such as the CDC and Johns Hopkins as a country Cobot 19 case levels in the US now exceed 4.3 million with desk nearing 150000.
In addition, hospitalization rates in certain CDC red zones have been on the rise.
Are you a stress test assumed 6.4 million confirmed cases in the US 1.5 million hospitalizations and 150000 deaths in short we are unfortunately tracking to our us macro stress test assumptions.
It is however important to understand the critical statistics that impact our business model surround hospitalization and disability.
Our stress test applied age based hospitalization rates with 40% of those hospitalized spending time in the I see you.
We further assumed 75% of confirmed cases file for short term disability.
The resulting stress test impacted our us benefit ratio in the range of 300 to 500 basis points for 2020.
Through the end of the second quarter us actual use covert 19 claims now total 5000 claimants.
Incurred claims in the quarter totaled $31 million with 70% representing Covance specific increase in IB NR.
The majority were filed under our short term disability policies, representing 80% of claimants and we have yet to see any expected increase in overall hospitalization and wellness claims.
To give you perspective, cobot 19 incurred claims excluding wellness benefits are coming in at 40% of our modeling assumptions, while still early given a natural lag in filing claims we suspect there favorable experience relative to stress test assumptions is partially attributed to.
The work site and a younger population of policy holders with a lower level of co morbidity or pre existing conditions.
As Dan noted in his comments the impact of covered 19 incurred signings in the quarter.
It was more than this.
Was more than offset by a temporary reduction in routine doctor in hospital visits driving down our benefit ratios.
We believe this is largely timing related and not likely to change our view of expected lifetime loss ratios in fact, while still below pre covert volume we have seen frequency of claims rise in the last few weeks of June and into July.
Recall that in the US we are stressing persistency, which has historically done.
Unemployment.
We have thus far seen limited impact to cash receipts and persistency and believe this is somewhat supported by the Paycheck Protection Act that is set to expire August eightth.
As Dan mentioned premium Grace periods are still in place in many states, thus somewhat supporting persistency.
We see the third quarter as a critical period with state regulatory orders expiring and further stimulus under consideration.
A key pressure point for our US business model as we enter 2021 is earned premium.
We are therefore, focusing on retention efforts that include proactive outreach to policyholders conversion of payroll deduction to direct bill and campaigns to work with the employers and employees on how best to leverage health and wellness benefits.
We're also naturally focused on expenses carefully regulating staffing models and giving investment priority to initiatives designed to drive a lower cost structure.
Turning to Aflac global investments, we remain focused on asset quality monitoring global economic conditions and sourcing new investment opportunities in this low interest rate environment.
Our firm view is that we will Ics experienced a checkmark shaped recovery, meaning a slow road to recovery with pockets of volatility along the way we have moved away from the notion of a V shaped or even U shaped recovery as the basis for tactical asset allocation capital management and Maine.
Taking a cautious credit view.
Therefore, our tactical approach has included further de risking activity on vulnerable exposures.
While net investment income is tracking ahead of our original outlook guidance for 2020, we do see a slower build in our loan portfolios as well as lower variable net investment income from alternative investments that we originally forecasted.
While retaining more invested capital. We are also remaining more liquid thus enjoying very little contribution to net investment income.
We continue to explore ways to optimize our approach to currency hedging and just this week completed locking in a portion of our hedge costs for 2021, given the low relative hedge cost environment.
Finally, this is the first quarter recognizing income from our Varagon strategic investment booking $4 million of income through our corporate segment and integrating their investment expertise into our investment strategy.
While modest we see our tactical approach to strategic investments as a natural extension of our external manager platform and an area of growth in sourcing new investment opportunities, while taking minority stakes in attractive asset management franchises.
Let me switch gears and comment briefly on key initiatives within our insurance segments.
Despite an understandable focus on covert.
We continue to push forward on significant initiatives in readying, our platform for future growth and efficiency.
On our first quarter call I noted, our paperless initiative in Japan, specifically in our policyholders services Division.
We have completed further analysis and now intend to expand beyond policyholder services to a broad commitment across all operations in Japan.
Our decision to expand the scope is driven by economic return, but also to improve business continuity and work from home capacity, while reducing our carbon footprint, which is consistent with our commitment to ESG.
This is a three year in roughly 10 billion yen investment that is front end loaded with approximately 40% to 50% or the investment targeted for 2020.
The expanded and accelerated scope is expected to reduce the production and circulation of 80 million pieces of paper per year with run rate savings in the range of 3 billion yen annually once completed.
Our product pipeline is also a key work stream in Japan, and we have altered our strategy to recognize launching new product in 2020 is sub optimal given the reduced face to face sales environment.
This strategy also recognizes conditions at key banking post office and other Asian, driven Alliance partners.
While critical work will be accomplished in 2020, we plan to relaunch our enhanced cancer product early in the fourth quarter and have postponed the timing of our new medical product to early 2021.
Turning to the US we accelerated certain investments specific elements of our digital roadmap into 2020.
These initiatives include advancing virtual tools as part of the rollout of our refreshed small business enrollment platform, allowing our agents to be more productive in a virtual engaged model.
Group automate account onboarding and in advance of integrating our Zurich group benefit acquisition.
Advancing my Aflac digital self service, both web and mobile for more intuitive customer experience and to reduce reliance on expensive call Center support.
And then finally investment in digital claims automation, requiring an agile approach from product design to ultimate payment of claims.
These investments are multi year on larger and scale, the total incremental or accelerated investment in 2020 is approximately $25 million.
The Buildout of US network dental and vision remains on track, we have successfully filed our new network dental and vision products in 40 states and expect to ramp up as we move towards 2021.
Very important is the introduction of this product into our new enrollment tools to drive small business opportunities, including further penetration and improved persistency.
Our consumer markets platform remains on track with product filings.
To ensure a digital end to end experience. We are currently offering accident critical illness and cancer products on our platform.
As well as partnering on other third party digital platforms.
In terms of our March announcement on Zurich benefits, we continue to track towards closing later in the year with good progress on the regulatory approvals and day, one integration planning.
We're very excited about welcoming the Zurich team to Aflac disruption as the acquired business strives to hit existing growth targets.
In both Japan, and the US we view 2020, as a critical year of execution and readying for 2021 and hopefully the other side of this devastating pandemic I'll now pass on to Max to discuss our financial performance in more detail Max.
Thank you Fred.
Let me begin with a review of our second quarter performance and focus on how our core capital and earnings drivers have developed over the past quarter.
As was the case, when we announced first quarter earnings.
Timing and magnitude on decode 19 impact on 2020 earnings continue to be answered on.
For the second quarter.
Adjusted earnings per share increased 13% to $1.28.
Driven primarily by favorable benefit ratios in the U.S.
The strengthening yen impacted earnings in the quarter by one cents as a result adjusted earnings per share on a currency neutral basis.
Rose, 12% to $1.27 per share.
Adjusted book value per share, including losses through 7.5% and be a joke.
Yes that or are we excluding foreign currency impact well, 6%.
A significant spread above our cost of capital.
There were no one time items to call out for normalizing purposes in the quarter.
As expected given market conditions, our alternative investment portfolio recorded a loss in the quarter up $7 million and was approximately 20 million below our long term return expectations for the portfolio adjusted for the J curve.
We have a modest but building portfolio, which currently stands at $657 million.
Turning to our Japan segment total earned premium for the quarter declined 2.5%.
Reflecting first sector policies paid up impacts.
While earned premium for our first sector protection and third sector products was flat year over year.
Japan's total benefit ratio came in at 69.8% for the quarter up 90 basis points year over year.
And the third sector benefit ratio was 59.6% up 110 basis points year over year.
The main driver for the increase was lower lapses associated with policyholders updating their coverage.
Which tends to lead to reserve releases boosting current quarter results by lowering the benefit ratio.
Given the current lower new business activity.
This naturally pushes up our benefit ratio due to lower reserve releases.
Decreases DAC amortization and improves reported persistency.
We did experience all of this in the second quarter.
Manifested by our persistency, improving 70 basis points year over year.
Our expense ratio in Japan, with 60 basis points year over year.
In the current environment, we did incur lower acquisition expenses like lower promote promotional spend and lower surrenders brought down our Bakken monetization as previously mentioned.
We view days as primarily timing related and would expect our expense ratio to increase when a new business environment normalizes.
Net investment income increased 2% MDM terms, despite lower variable investment income.
Driven primarily by higher allocation to us dollar floating rate assets early in the year.
The pre tax margin for Japan in the quarter was a strong 22%.
Turning to our US results earned premium was down 0.1% due to weaker sales results in a flat persistency year over year.
Our total benefit ratio.
3%.
590 basis points lower than Q2, 2019, driven by reduced claims from accidents less wellness visits and elective surgeries.
Our expense ratio in the US was 35.3% up 50 basis points year over year.
As the inclusion of Argus and direct to consumer digital investments structurally has increased the expense ratio by 140 basis points.
Lower sales bonus travel and expenses associated with claims adjudication, where a meaningful offset to the argus consolidation and lower earned premiums.
Net investment income into us was down 4.4% due to capital management actions in December 29 team.
Leading to a reduced invested balance and 13 basis points.
Stability in the USA segment was boosted by the previously discussed benefit ratio leading to a pretax profit margin of 25.7% in Q2 up 510 basis points year over year.
As Fred noted, we're carefully monitoring persistency into use.
As premium grace periods, expire and economic, particularly unemployment conditions develop.
We expect the combination of reduced sales and persistency to weigh on revenue during the second half of 2020.
And more materially as we enter 2021.
We expect the earned premium decline in in the range of minus 3% to flat for the full year appointing 20.
And we'll update our forecast for 2021 later in the year given a number of variables involved.
In our corporate segment amortize patch income contributed $27 million on a pre tax basis to the quarter's earnings.
And we had an ending notional position of approximately $5 billion.
Our capital please.
Position remains strong and we ended the quarter with an SM are above 900% in Japan.
In an RBC of approximately 600% in Aflac Columbus.
Holding company liquidity stood at $4.7 billion $2.7 billion at Bob our minimum balance.
In terms of credit conditions, and our insurance General account, we took further de risking actions.
Selling out of approximately $320 million cobot exposed securities triggering a realized loss of $45 million.
While total impairments on.
The hundred $66 million net investment loss includes an increase in Cecil reserves of $161 million.
Reflecting ratings downgrades and calibrating, our third party model inputs book Covidien driven economic conditions.
We remain cautious in rig.
Guards to both the economic outlook and spread of co at 19.
Leading us to retain more capital in our subsidiaries as a first line on defense in case of any sudden deterioration in capital markets more virus related claims.
At this point, we'd be more efficient temporarily hold capital at the subsidiary level versus at the holding company.
It is the flexibility in our capital structure and capital resources that gives us this option.
While continuing to deploy capital to the benefit of our shareholders through dividends and buybacks.
In the second quarter, we've repurchased $188 million of our stock.
Going forward, we will continue to be tactical around both our capital structure and deployment.
I wanted to drive a balanced risk adjusted return on capital within the company.
Now, let me turn it over to David to begin Kunaev David.
Thank you Max.
Now we are ready to take your questions, but first let me ask the please limit yourself to one initial question and one related follow up to allow other participants and opportunity to ask a question.
Brand, we will now take the first question.
And our we opened to take questions, we're not hearing anything.
Yes, we definitely are we had a delay there if you like to ask a question. Please press star one.
Please on mute your phone and record your name and company when prompted that needed to introduce your question.
Your withdraw your request press star two and one moment. Please for our first question.
Okay.
One moment please.
Thank you so much our first is from Jamie Mueller with JP Morgan Sir Your line is open.
Hi, Thanks. Good morning. So other question on yours sales in the us and it doesn't seem like there was much of an improvement in sales as you went through the quarter, but as businesses are opening up are you seeing your sales recover or.
The company's are still reluctant to have agents come in and try to sell.
Their employees, so just any sort of color on what's going on obviously in the fourth quarter.
The broker sales will pick up but any color on the agency channel and I think last quarter you'd given some guidance on April sales. If you have anything similar.
July.
Theresa would you like to answer that.
Yes ill start and then I'll pass it to rich certainly I think the environment is impacting sales results.
And specifically in the small K market, we see it being more pronounced.
As we seize states start to open back up and our sales teams.
Starting to adjust.
I think they're trying to find the right balance between safety and productivity and so from an Aflac perspective, what we're attempting to do is provide support ensuring that the account.
That our accounts and their employees have information. So the sales teams were whipping band with information to go back to account and this is really to get activity get people back out.
And get people to utilize in their virtual tool, while also working to preserve the distribution platform.
For our agent, specifically by providing loans technology and training.
Preparing for a virtual sales environment. So we.
We do realize that it's going to take time for adoption I'll, let rich speak specifically on the quarter and.
And go forward rich.
Alright, Thank you Theresa.
Specifically to the question.
In the month of July we have definitely seen levels that are better than what we experienced in second quarter.
But clearly not pre pandemic levels.
As we think about the second half of the year very consistent with.
Guidance we've shared.
We tend to see more broker sales in the second half of the year end in larger cases, and so the larger case market is more receptive to virtual enrollment.
So we do expect to see some some progress there.
Obviously.
On the smaller business market. It would just simply depend on businesses availability in.
Adoption virtual enrollment.
But the stories I mentioned the long term play is to recover our distribution platforms or 2021 going forward.
We've had for many years and really just the pivot to a new way of doing business.
One a little bit.
Jimmy This is Fred to one other thing and rich can comment on this but one other dynamic that we're experiencing is recruiting recruiting normally strengthens during week employment periods thats been our history through say normal economic cycles.
And it's no different here, we can see a tick up in eligible recruits and recruiting activity.
During weakness in the economy. The problem is a unique one and that is the licensing processes at the state.
Our often closed or slow to operate with backlog some of that is related to gathering people for more.
Larger licensing processing.
And so because we recruit so many people across the country that come to us without previous insurance experience that licensing becomes critical it's very different.
Firstly licensed agents away from other insurance carriers et cetera, Thats not our model. So we also would like to see that.
Open up as time goes on at the state level and that would help with the natural as you bring in new recruits.
Okay and any comments on what you might have seen in Japan since the end of the quarter or as things are getting at least a little bit better than they were earlier.
Alright, Japan, who like to take that Koji.
Okay.
Hi, Yes, I'll just say lesser.
Thank you guys think during a visit a little too.
So is real time members, who are just a quick.
This is introducing.
Okay. So they can list.
Thanks, John with state of emergency Declaration low assault worst said down all of you are not able to conduct specific sales.
Very difficult question.
Yes, you sold to Condella yield based on into Brazil, Theres of course, they must now.
We will conclude non seems to think.
Also through films and mail.
I think is dosing and Kaiser will moderate growth is going I mean, let's get the more several.
So for me I'll say a little Gill.
Got a little guy, but I am assuming the company or what I can start up to this isn't it.
Most of it looks like sticking with Scott.
Thanks, Jim after the quarter Emergency Declaration had one scheduled Japan.
Thought leading following the guidelines issued from the government as well as life insurance licenses in Japan in terms of.
Hi, guys on the other question.
Gradually sardonically propulsion Walter.
Yes, so probably low psycho steam.
Our so called regained already open.
I will support items or more.
Golar local thats no one was a pause enforce the opening up then they're not to talk I want to kind of course, and lesnick animal model not up.
Thank you Carol.
Thanks, Good I am I missing a little bit okay.
Yes.
And now that shops have being every open for a while the number of customers and the traffic flow into south on the increase in June that we had about 50% to of customers compared with our normal time coming into our shop and you're right. We are back to 70%. However, we're still not at a point where we have.
The customer come along pre coking coal.
Okay.
Turning to listen to squeeze is on video and kind of cost 15 of.
Although the full time, thanks disposals close from old also recovery as well.
Very gradual that we are starting.
Okay, well be delayed Julian I don't know, depending on what's causing because you'll go North Dakota.
Okay. Thanks, Susan very challenging under the current covered now include situation.
Good afternoon considerably going into a step.
The primary school.
And Scott the maturity.
We have a pickup and imbalances very my kind on soon.
Okay. Thank you very difficult to see customers from Stifel directly.
So to have.
Virtual.
Customers using digital core on the web.
Well there will always going we are taking them on the cloud so.
Okay.
And that we upgraded well disclose what are the two itself will allow the concluding on CCAR process.
Application of.
Application for the insurance policy.
Okay, sorry, if I go to the looking every month.
And.
Hello, this kind of activity.
We are closing this activity ahead of others.
Core doesn't doesn't isn't it.
Yeah.
Yes.
No no longer you're not going the only thing.
Well.
Got it got another sign in the slide outcome Daniela.
Well documented cases.
Well accrues to hold so is it fair okay diode a cool thanks guys.
So let me let you do it's really strengthen our response capability to customers under the new normal asteroid occurred during the public ranking.
Correct actuation about we are planning to do is of course continued to their phone loyal as we get our pre that are the current nonsense dissipate environment that we'd also like to be adding on like a virtual face to face through the web ongoing perhaps part of the application will be.
Yes, sure this virtual wet face to face to face tool.
Yes.
That's all from me.
Thank you.
Thank you. Our next is from Humphrey Lee with Dowling partners and your line is open.
Good morning, Thanks for taking my question.
A question related to the U.S. benefit ratio.
I think we'll talk about the detour treatments have helped some of the have delayed it sounds like the.
At the claim activity as you assume some normalization I was wondering if you can you elaborate a little more above your expectations for your claims experience for the second half of the year.
Yes, we what we're seeing is I think what you're starting to see across the industry as more companies report and that is there's been the the natural putting off if you will have routine.
Dr Dentist and more routine hospital visits.
Due to the shelter in place in general concerns over coded.
And we are in fact, starting to see that open back up again.
In select areas of the country.
Where people are coming back in and we're starting to see claims pickup, particularly in the last week or so.
The.
Of the quarter and then into July what I would say is that we're still traveling at levels lower year over year than the claims experience in those products.
Last year this times.
But they are certainly more ella.
Early part.
Through say midway into the second quarter.
We are doing however is also very.
We are proactively reaching out.
HM two employees and employers.
Of the benefits that they.
They have in our policies.
How to consider sulfide event and can file a claim how easy it is to file a claim how quickly the money.
Comes directly to them.
And in particular, we're focused on wellness claims, which are attached to many of our policies, but most notably our accident policy.
And by proactively reaching out to policyholders to remind them that if they did in fact go to see the doctor.
And to to remember that they've got a wellness benefit will which will typically range.
Hours or so but by visit.
Historically, we've done this on a kind of a state by state basis.
At times, and usually what would be a pickup in utilization, which you would expect but we also hope to achieve better persistency by reminding people of their benefits. The key time to do this is in fact typically in the third quarter not just because of covert dynamics, but because that's also about the time when people are.
Reviewing.
With their employer their benefits and considering whether to sign up again, it's also particularly important for US right now because it's a way too.
Moderate to some degree the risk of.
These stayed orders falling off throughout the quarter as wells the possibility of stimulus falling off so.
We would expect to do some outreach in the third quarter, we would expect that to increase utilization is very difficult to projected.
And so we can't really guide on what we expect but we think those activities will will recover some of the benefit ratio second half.
That's helpful.
I think your tier the investment portfolio so.
Max prepared remark you talk about their selling soon so allowance.
In the quarter.
Hi, My understanding is that largely for the middle market loan portfolio can you talk about for the balance of your portfolio.
What percentage of that is on potential then greenwash right now.
So.
And.
This is as you mentioned, it's predominantly in the middle market loan portfolio that we did experience. Some some rating migration and we're not going to speak to specifically on any breaking down the whole portfolio that what is sort of along on any sort of watch list.
But I would say that the two categories data, primarily it's driving this seasonal reserve to increase.
It's the middle market loan portfolio, and the add transitional real estate portfolio.
Those are the two asset classes that primarily drove net.
All of the $161 million of these this generic increase in the Cecil research about half of it was driven by ratings and about half is driven by updated economic outlook input into the model and keep in mind at this model.
It's a third party model that we utilize and there is a lag impact. So you may question why is the increase coming now not it at the end of the first quarter.
It's really because theres a moving window in terms of data that goes into the model.
And obviously, we now have a greater weight on two quarters of let's call. It cobot related economic at input and outlook and Thats really whats driving it.
Okay. Thank you.
Thank you. Our next is from Andrew Lieberman with Credit Suisse answer your line is open.
Hi, good morning.
Hey, about Japan post.
You know just given that the tremendous disruption.
Yes.
How are things moving along with Sam on regulatory flow and customer perceptions and when might they get back on it you know assuming we could get beyond Colgate 19 pressures one might they get back on all attractive is consistent with say 2017 or.
2018 in terms of sales.
Well I'll start and then maybe Aflac, Japan, I want to make some comments as well.
Hi.
With Aflac Ami with Japan, Acos and.
Masuda sawn.
It is as good as it could possibly be.
They are positive they are very interested in.
You technology and the ability to.
To help.
[music].
In my opinion, they are wrapping up all phases of past issues, because you've got a new management team.
Such.
Saying and heard everything and now it.
So I'm, hoping that by certainly end of August.
September it'll kind of.
Finish out.
Now how the impact of that will go in regard to co vision the ability to sell is uncertain, but the willingness on their part to want to sell and move forward is very positive and I think they would like to see the numbers go back.
Where they were as well of course, not only for sales, but also being a large shareholder themselves.
They're interested in that so.
What I would say is is where we're well positioned we're looking forward to.
That movement and.
I think they are as well so let me turn the program over too.
I want to add in that regard.
Hi, good at the analyst quite at that.
This is going to hold Aflac, Japan.
Good day, and you can you say good itla well get some not kind of seen diakite goal I don't use and asked at the USA stay method.
Okay, well, Japan post group is prioritize their activity to win back the customers Trust.
Yes. So several analysts said it was helpful sort of got that today.
Okay. So not only mill on a dual mode and you look at that okay. So they added Luca.
On that day message.
So as much apparent of course is according your activities for example, helping them with conducting travel.
Has focused on more customer oriented activities.
So that got a total on when you once you kind of wanted to any point, you say, hey, accomplish them at a point you'd be nil sounds that's it.
So in your et cetera, taking that Joe than the ones you kind of on decide you messed up.
Under the circumstances today, Japan, Japan post a group companies very close holding back on parts company Harper concern.
Chris Conference Tomorrow.
Very Frank.
All right.
Great.
And then ill just shifting over to capital management, I think Max use the term tactical.
Okay.
As I mean may continue.
This is quite yet.
Thanks.
Okay go right ahead, yes.
All right.
Channel.
So the on just the ones you got any point, you say accomplishment and you point you'd be no. It's on units that's on your except I think talking about that.
So let me repeat again today, just from current well see out of the three Japan post real company.
Holdings, the public companies accomplished insurance Hello Press conference.
Yes, Hi, Ken on Iowa accomplished so he not fixed on banks that it will soon you Bill I understand you guys are they still do not go they stop.
And your dynamic that bar mill in the press conference, that's a difficult actions Albert stores representing gaps.
They are putting your menu points exited.
A couple silicon of Texas on because it is so.
Okay, because I think investor.
So for the first time related to an appropriate sale. This I hope that makes clear in Japan post framework Arclight apparel with a quick.
Hi, Watson to address the market competition.
Well the southern U.S I mean, let me say just get that within your debt at equal you say that's it.
Hi, guys budget going I guess it is that it will take a look I mean, it's not ocala ominami does that at that so.
Lets us that similar kind of Alaska.
And given that the current standards on banner, but they have load Japan post holiday CEO Mr. lifted our cat that read this clarity with this clarity on Japan post screen riverfront disciplinary action.
Well its group has largely outside valuation criteria established by the Japan Post reform.
Susan Committee for beginning sales activity.
Just how do you guys could ethanol is meaningful use EBITDA percentage that is there a lot that isn't that you have guided you will take on if they typically state innovating.
You're welcome older but good question to restart framework will be made by the board of directors three.
At the parent company, possibly within August or September.
Let us see it goes I kind of hit table, but the lobby not on they'll get some omosi kind of sales data because when you say is it two exceeded the utilities.
Having said that led to the schools antibody for.
Well the current parts will begin with customer visits to express apologies.
So that the up at our Cologuard, Okay. No Mahoney ticket handling you look at day, that's the kind that I've got to becoming just.
So I guess that barked out, but we expect takes some time before surplus assets color. Thanks, Sharon could begin.
Yes.
Okay, and I will add goals.
When you have goes down and so one thing one.
The mother-in-law accomplished talking of Texas, and then you kind of set us up on this are there other than that I will give you guys I was talking about that.
And the discipline actions that were announced today, we're on the sale of Japan post insurance products.
I have nothing to do with the sale of assets assets cancer product.
Yes.
Hi.
Well, you say no I know you'll go to.
And that is the current open Japan post.
Thank you go right now we have second part to that question.
Hi, Yes, just kind of shifting real quickly over to maximize comment that he wants it.
The practical on capital management, you get about a 188 million of buybacks in the quarter, which relative to other companies.
Okay.
It's about half the level that you've done correctly, maybe a little less so can I take tackle you'll be going out over the next few quarters until you can get busy.
Ability.
Good night.
Yes.
Yes.
Absolutely.
So so Andrew.
Tactical that word means tactical.
And we have by any measure very strong capital positions in our operating subsidiaries and very strong capital and liquidity at the holding company.
But yeah. We also recognize that the continues to be very uncertain.
And also to spread on the virus, obviously is clearly linked to that.
And I would say that until we get better clarity.
To be fairly cautious.
In terms of how we deploy we'll also look for opportunities to unity, and we think that the risk reward.
Given all the risks out there is an appropriate or.
Good for us.
Yeah.
We will add deploy capital all this means that we may have if you think about the run rate we were running at a at the second quarter. We may decrease day buyback going forward, we may keep it at the current level and we may even increase it down but at this point given everything that is.
Going on and all down certainly out there and we want to keep all options available to us.
Thanks, a lot.
We'll take one more question.
Thank you very much. Our last question then is from Mr., John Barnidge with Piper Sandler Sir Your line is open.
Thank you.
Can you talk about how you're nationally beginning in jail Underutilizing dental benefit.
Hi, possibly catch up in.
2021, and then how do you manage the pricing in rollout of such thank you.
Sure John.
Just a couple of quick things and then ill hand off to rich and he can spell out the rollout, but just note that we do have a dental product up.
Out there right now, which is our historical indemnity product and that continues to sell it represents only about 3% of our earned premium and around 4% of our sales.
Where we are going with the Argus acquisition in the rollout of dental and vision is with a true network dental and vision, which is just in the building mode.
I think we have for example, this year, we're targeting something less than 5 million in sales of that product once we get up and running.
As mentioned in my comments, we've got the product actually rolled out and approved in 40 stage, which is.
A more significant task are undertaking than you might think on the surface, particularly in the current environment. So we're quite pleased with that.
And now we'll start to be in a better position come 2021 to rollout so with that rich one of you take it from here in terms of how we see the rollout.
Okay. Thank you Fred.
Yes.
Everyone will recall.
Last year at our financial analyst briefing in our outlook that we talked about 2020 being a measure rollout of aflac than one vision and we're pleased to say a consistent when freds comments that we have done that here in 2020.
Rolling out the product in 10 states is significant areas for our distribution. So 2020 really is the burn and the implementation for field training our enrollment platform.
And making sure that we have a very favorable experience for our customers and for our agents in our brokers. So 2021.
We'll be the volume for Aflac dental and vision.
We are on.
National rollout in 2021.
Thank you Fran and just before we conclude our call today.
I wanted to remind you that we have combined financial analysts are combined our financial analyst briefing as well as our 2021 outlook call or special Webcasted event on November 19th and that morning.
And we will have more details on that we hope you will join us and please feel free to contact Investor relations for more information with any questions that you may have before then and we look forward to speaking with you soon.
Wish you all continued good health. Thank you.
This conference has concluded again. Thank you for your participation. Please go ahead and disconnect. Thank you very much.