Q2 2024 Aflac Inc Earnings Call

Good day and welcome to the Aflac Incorporated 2nd Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Unknown Executive: 2024 Earning Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchdown home. To withdraw your question, please press star, then two. Please note, this event is being recorded.

Speaker Change: After today's presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2.

David Young: I would now like to turn the conference over to David Young, Vice President of Investor and Rating Agency Relations. Please go ahead. Good morning and welcome. Thank you for joining us for Applacking Corporated second quarter earnings call.

Speaker Change: Please note, this event is being recorded.

Speaker Change: I would now like to turn the conference over to David Young, Vice President of Investor and Rating Agency Relations.

Operator: 2024 Earnings Conference Call After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. Good morning and welcome.

Speaker Change: Please go ahead.

Unknown Executive: Thank you for joining us for Aflac Incorporated's second quarter earnings call. Now this morning, Dan Amos, Chairman, CEO, and President of Aflac, will provide an overview of our results and operations in Japan and the United States. These topics are also addressed in the materials we posted with our earnings release and financial supplement on investors.aflac.com. We also posted under Financials on the same site updated slides of investment details related to our commercial real estate and middle market loans. Charles Lake, Chairman and Representative Director, President of Aflac International.

David Young: Good morning and welcome. Thank you for joining us for Aflac Incorporated's second quarter earnings call.

David Young: While I have your attention, I also want you to mark your calendars to join us for our Financial Amos Briefing at the New York Stock Exchange on December 3rd.

Speaker Change: While I have your attention, I also want you to mark your calendars to join us for our financial analyst briefing at the New York Stock Exchange on December 3rd.

David Young: Now this morning, Dan Amos, Chairman, CEO, and President of Applacking Corporated, will provide an overview of our results and operations in Japan and the United States. Then Max Broden, Executive Vice President and CFO of Applacking Corporated, will provide an update on our financial results and current capital and liquidity. These topics are also addressed in the materials we posted with our earnings release and financial supplement on investors.applack.com. In addition, Max provided his quarterly video update, which also includes information about the outlook for 2024. We also posted under Financials on the same site updated slides of investment details related to our commercial real estate and middle market loans.

Dan Amos: Now this morning, Dan Amos, Chairman, CEO , and President of Aflac Incorporated, will provide an overview of our results and operations in Japan and the United States.

Max Broden: Then, Max Broden, Executive Vice President and CFO of Aflac Incorporated, will provide an update on our financial results and current capital and liquidity.

Max Broden: These topics are also addressed in the materials we posted with our earnings release and financial supplement on investors.aflac.com.

Max Broden: In addition, Max provided his quarterly video update, which also includes information about the outlook for 2024.

Max Broden: We also posted under financials on the same site updated slides of investment details related to our commercial real estate and middle market loans.

David Young: For Q&A today, we are also joined by Virtual Miller, President of Applack U.S.; Charles Lake, Chairman and Representative Director, President of Applack International. My Satoshi Kui-de, President and Representative Director, Applack Life Insurance to PAN, and Brad Dizzlin, Global Chief Investment Officer, President of Applack Global Investments.

Max Broden: For Q&A today, we are also joined by Virgil Miller, President of Aflac U.S.

Charles Lake: Charles Lake, Chairman and Representative Director, President of Aflac International.

Unknown Executive: Masatoshi Koide, President and Representative Director, Aflac Life Insurance Japan, and Brad Dyslin, Global Chief Investment Officer, President of Aflac Global Investment. Before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws. 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. On an adjusted basis, earnings per diluted share for the quarter were up 15.8% to $1.83.

Speaker Change: Masatoshi Koide, President and Representative Director, Aflac Life Insurance Japan, and Brad Dyslin, Global Chief Investment Officer, President of Aflac Global Investments.

David Young: 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 investors.applack.com and includes reconciliation of certain non-US GAAP measures.

Speaker Change: Before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws.

Speaker Change: 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.

Speaker Change: Actual results could differ materially from those we discussed today.

Speaker Change: 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 investors.aflac.com and includes reconciliations of certain non-U.S. GAAP measures.

Daniel Amos: I'll now hand the call over to Dan. Thank you, David, and good morning, and we're glad you joined us. Applack Incorporated delivered another quarter and six months of very solid earnings results. Net earnings per diluted share were $3.10 for the quarter and $4.64 for the first six months. On an adjusted basis, earnings per diluted share for the quarter were up 15.8% to a dollar and 83 cents. And for the first six months, we were up 11.5% to $3.49 from a broad operational perspective.

Speaker Change: I'll now hand the call over to Dan.

Dan Amos: Thank you, David, and good morning, and we're glad you joined us.

Dan Amos: Aflac Inc. delivered another quarter and six months of very solid earnings results. Net earnings per diluted share were $3.10 for the quarter and $4.64 for the first six months.

Dan Amos: On an adjusted basis, earnings per diluted share for the quarter were up 15.8% to $1.83, and for the first six months, we were up 11.5% to $3.49.

Daniel Paul Amos: And for the first six months, we were up 11.5% to $3.49. We've generated profitable growth in the United States and Japan with new products and distribution strategies. We believe our strategy will continue to create long-term value for shareholders. At the same time, we believe that the need for our products we offer is as strong or stronger than it has ever been before in both the United States and Japan. Beginning with Japan, we have continued to focus on third sector products, like our cancer insurance product called WINGS.

Daniel Amos: Detective. We've generated profitable growth in the United States and Japan with new products and distribution strategies. We believe our strategy will continue to create long-term value for the shareholders. At the same time, we believe that the need for our products we offer is a strong or stronger than it has ever been before in both the United States and Japan. Beginning with Japan, we have continued to focus on third sector products, like our cancer insurance product called Wings. As the new fiscal year began in Japan, we saw continued improvement in cancer insurance through the Japan Post channel.

Dan Amos: From a broad operational perspective,

Dan Amos: We've generated profitable growth in the United States and Japan with new products and distribution strategies. We believe our strategy will continue to create long-term value for the shareholders.

Dan Amos: At the same time, we believe that the need for our products we offer is as strong or stronger than it has ever been before in both the United States and Japan.

Dan Amos: Beginning with Japan,

Daniel Paul Amos: As the new fiscal year began in Japan, we saw continued improvement in cancer insurance through the Japan Post channel. We have continued our strategy of introducing life insurance products, including Sumitatsu, which we launched on June 2nd. This product offers policyholders an asset formation component with nursing care options. It was designed to attract new and younger customers while also introducing opportunities to sell them our core third sector products. While still very early, we are pleased with how our agencies have sold this product, which drove a 4.5% sales increase for the second quarter. This is a welcome result as we enter the second half of the year, which tends to be the heaviest enrollment period.

Dan Amos: We have continued to focus on third sector products, like our cancer insurance product called WINGS. As the new fiscal year began in Japan, we saw continued improvement in cancer insurance through the Japan Post channel. We have continued our strategy of introducing life insurance products, including

Daniel Amos: We have continued our strategy of introducing life insurance products, including Sumitatsu, which we launched on June 2nd. This product offers policyholders an asset formation component with nursing care option. It was designed to attract new and younger customers, while also introducing opportunities to sell them our quarter third sector products. While still very early, we are pleased with how our agencies has sold this product, which drove a 4.5% sales increase for the second quarter. Being where consumers want to buy insurance remains an important element of the growth strategy in Japan. Our broad network of distribution channels, including agencies, alliance partners, and banks, continually optimize opportunities to help provide financial projection to the Japanese consumers.

Dan Amos: Sumitasu, which we launched on June 2nd. This product offers policyholders an asset formation component with nursing care options.

Dan Amos: It was designed to attract new and younger customers while also introducing opportunities to sell them our core third sector products.

Dan Amos: While still very early, we are pleased with how our agencies have sold this product, which drove a 4.5% sales increase for the second quarter.

Dan Amos: Being where consumers want to buy insurance remains an important element of the growth strategy in Japan. Our broad network of distribution channels, including agencies, alliance partners, and banks

Dan Amos: Continually optimize opportunities to help provide financial projection to the Japanese consumers.

Daniel Amos: We will continue to work hard to support each channel. Overall, Goede Son and his team have done a great job of turning around sales in Japan and delivering record profit margins for the quarter. I am very pleased with their efforts. Turning to the U.S., we achieved a 2% sales growth for the quarter, benefiting from good growth in group life, absent management, and disability, and individual voluntary benefits. This is a welcome result, as we enter the second half of the year that tends to be the heaviest enrollment period. At the same time, we continue to focus on more profitable growth by exercising a stronger underwriting discipline.

Speaker Change: We will continue to work hard to support each channel. Overall, Koide-san and his team have done a great job of turning around sales in Japan and delivering record profit margins for the quarter. I am very pleased with their efforts.

Speaker Change: Turning to the U.S., we achieved a 2% sales growth for the quarter, benefiting from good growth in group life absent management and disability, and individual voluntary benefits.

Daniel Paul Amos: At the same time, we continue to focus on more profitable growth by exercising a stronger underwriting discipline. Additionally, we've increased benefits in certain policies to improve the value of the policy. We believe persistency will remain strong as customers realize the value of their policies and the related benefits.

Speaker Change: This is a welcome result as we enter the second half of the year that tends to be the heaviest enrollment period. At the same time, we continue to focus on more profitable growth by exercising a stronger underwriting discipline.

Daniel Amos: Additionally, we have increased benefits in certain policies to improve the value for the policyholder. We believe persistency will remain strong as customers realize the value of their policies and the related benefits.

Speaker Change: Additionally, we've increased benefits in certain policies to improve the value for the policyholder.

Speaker Change: We believe persistency will remain strong as customers realize the value of their policies and the related benefits.

Daniel Amos: We have also continued our discipline to pros to expense management, which Max will address. As we enter the second half of the year, we are continuing to focus on optimizing our dental and vision platform. Overall, I am pleased with what Virgil and his team are doing to balance profitable growth, enhance the value proposition for the policyholders, and curb the expense ratio. Their efforts contributed to the very strong pre-tax profit margin of 22.7% for the second quarter.

Daniel Paul Amos: We have also continued our disciplined approach to expense management, which Max will address. As we enter the second half of the year, we are continuing to focus on optimizing our dental and vision platform. Overall, I'm pleased with what Virgil and his team are doing to balance profitable growth, enhance the value proposition for the policyholders, and curb the expense ratio. Their efforts contributed to a very strong pre-tax profit margin of 22.7% for the second quarter. Now, turn to our ongoing commitment to prudent liquidity and capital management. We remain committed to maintaining strong capital ratios on behalf of our policyholders.

Speaker Change: We have also continued our disciplined approach to expense management, which Max will address.

Max Broden: As we enter the second half of the year, we are continuing to focus on optimizing our dental and vision platform.

Max Broden: Overall, I'm pleased with what Virgil and his team are doing to balance profitable growth, enhance the value proposition for the policyholders, and curb the expense ratio.

Speaker Change: Their efforts contributed to the very strong pre-tax profit margin of 22.7% for the second quarter. Now I'll turn to our ongoing commitment to prudent liquidity and capital management.

Daniel Amos: Now, I turn to our ongoing commitment to prudent liquidity and capital management. Management, Max has done a great job leading his team to take proactive steps in recent years to defend our cash flow and deployable capital against weakening yen, as well as establishing our re-insurance platform in Bermuda. We have been very pleased with our investment portfolio's performance as it continues to produce strong net investment income with minimal losses and impairments. As an insurance company, our primary responsibility is to fulfill the promises we made to our policyholders while being responsive to the needs of our shareholders.

Max Broden: Max has done a great job leading his team to take proactive steps in recent years to defend our cash flow and deployable capital against weakening yen, as well as establishing our reinsurance platform in Bermuda.

Speaker Change: We have been very pleased with our investment portfolio's performance as it continues to produce strong net investment income with minimal losses and impairments.

Speaker Change: As an insurance company, our primary responsibility is to fulfill the promises we make to our policyholders.

Daniel Amos: We remain committed to maintaining strong capital ratios on the behalf of the policyholders. We balance this financial strength with tactical capital deployment. We intend to continue prudently managing our liquidity and capital to preserve the strength of our capital and cash flows. This supports both our dividend track record and tactical share repurchase. We treasure our track record of 41 consecutive years of dividend growth and remain committed to extending it. I am pleased that the board set us on a path to continue this record when it increased the first quarter 2024 dividend 19 percent to 50 cents and declared the second and third quarter dividends of 50 cents.

Speaker Change: While being responsive to the needs of our shareholders, we remain committed to maintaining strong capital ratios on behalf of the policyholders. We balance this financial strength with tactical capital deployment.

Daniel Paul Amos: We balance this financial strength with tactical capital deployment. I am pleased that the board set us on a path to continue this record when it increased the first quarter 2024 dividend 19% to $0.50 and declared the second and third quarter dividends of $0.50. Being there for the policyholders when they need us most, just as we promised. This underpins our goal of providing customers with the best value and supplemental insurance products in the United States and Japan that not even the best health insurance covers. Today's complex healthcare environment has produced incredible medical advances that come with incredible cost. For the quarter, adjusted earnings per diluted share increased 15.8% year-over-year.

Speaker Change: We intend to continue prudently managing our liquidity and capital to preserve the strength of our capital and cash flows.

Speaker Change: This supports both our dividend track record and tactical share repurchase. We treasure our track record of 41 consecutive years of dividend growth and remain committed to extending it.

Speaker Change: I am pleased that the board set us on a path to continue this record when it increased the first quarter 2024 dividend 19% to $0.50 and declared the second and third quarter dividends of $0.50.

Daniel Amos: We repurchased a record 800 million dollars in shares during the quarter and intend to continue our balanced tactical approach of investing in growth and driving long-term operating efficiencies. Our management team employees and sales distribution continue to be dedicated stewards of our business. Being there for the policyholders when they need us most, just as we promised, this underpins our goal of providing customers with the best value and the supplemental insurance products in the United States and Japan.

Speaker Change: We repurchased a record $800 million in shares during the quarter and intend to continue our balanced, tactical approach of investing in growth and driving long-term operating efficiencies.

Speaker Change: Our management team, employees, and sales distribution continue to be dedicated stewards of our business. Being there for the policyholders when they need us most, just as we promised,

Speaker Change: This underpins our goal of providing customers with the best value in the supplemental insurance products in the United States and Japan.

Daniel Amos: In November, we celebrate our 50th year of doing business in Japan. Additionally, in June, we celebrated our 50th year as a publicly traded company on the New York Stock Exchange. We are reminded that one thing has not changed since the founding in 1955. Families and individuals still seek to protect themselves from financial hardships that not even the best health insurance covers. Today's complex healthcare environment has produced incredible medical advances that come with incredible costs. It's more important than ever to have that partner. We believe our approach to offering relevant products makes us that partner. We believe in the underlying strengths of our business and our potential for continued growth in Japan and the United States.

Speaker Change: In November , we celebrate our 50th year of doing business in Japan. Additionally, in June , we celebrated our 50th year as a publicly traded company on the New York Stock Exchange.

Speaker Change: We are reminded that one thing has not changed since the founding in 1955. Families and individuals still seek to protect themselves from financial hardships that not even the best health insurance covers.

Speaker Change: Today's complex healthcare environment has produced incredible medical advances that come with incredible costs.

Speaker Change: It's more important than ever to have that partner. We believe our approach to offering relevant products

Speaker Change: makes us that partner.

Speaker Change: We believe in the underlying strengths of our business and our potential for continued growth in Japan and the United States.

Daniel Amos: Two of the largest life insurance markets in the world. Afflack is well positioned as we work toward achieving our long-term growth while also ensuring we deliver on our promise to our policyholders.

Speaker Change: Two of the largest life insurance markets in the world.

Speaker Change: Aflac is well positioned as we work toward achieving a long-term growth while also ensuring we deliver on our promise to our policyholders.

Max Broden: I'll now turn the program over to Max to cover more details and financial results. Max? Thank you, Dan, and thank you for joining me as I provide a financial update on AppLike Incorporated's results for the second quarter of 2024. For the quarter, adjusted earnings per diluted share increased 15.8% on year of a year, the dollar 83, with a seven cents negative impact from FX into quarter. In this quarter, remeshment gains on reserves totaled $51 million, and variable investment income ran $1 million above our long-term return expectations. We also received a make-hole payment adding approximately $20 million, or $3 cents per share, to our adjusted earnings.

Max Broden: I'll now turn the program over to Max to cover in more details the financial results. Max? Thank you, Dan, and thank you for joining me as I provide a financial update on Aflac Incorporated's results for the second quarter of 2024.

Max Broden: For the quarter, adjusted earnings per diluted share increased 15.8% year-over-year to $1.83, with a 7 cents negative impact from FX in the quarter.

Daniel Paul Amos: $1.83, with a 7 cents negative impact from FX in the quarter, and Variable Investment Income ran $1 million above our long-term return expectations, and the adjusted ROE was 14.3%, an acceptable spread to our cost per capita. Overall, we view these results in the quarter as solid, and 4.8 billion yen negative impact from the paid-up policy. In addition, there was a 1.2 billion yen positive impact from the deferred profit liability. At the same time, policies in force declined 2.4%, mainly due to a favorable impact from FX on US dollar investments in yen terms, lower hedge costs, higher return on our alternative portfolio compared to the second quarter of 2023, and call income, up 490 basis points year over year. A very good result.

Max Broden: In this quarter, re-measurement gains on reserves totaled $51 million, and variable investment income ran $1 million above our long-term return expectations.

Max Broden: We also received a make-hole payment, adding approximately $20 million, or $0.03 per share, to our adjusted earnings.

Max Broden: Adjusted book value per share, including foreign currency translation gains and losses, increased 9.4%, and the adjusted RWE was 14.3% and acceptable spread to our cost of capital.

Max Broden: Adjusted book value per share, including foreign currency translation gains and losses, increased 9.4%, and the adjusted ROE was 14.3%, an acceptable spread to our cost of capital.

Max Broden: Overall, review these results in the quarter as solid.

Max Broden: Starting with our Japan segment, net them premiums for the quarter declined 5.7%. This decline reflects a 7.4 billion yen negative impact from internal reinsurance transaction executed in the fourth quarter of 2023 and 4.8 billion yen negative impact from paid-up policies. In addition, there's a 1.2 billion yen positive impact from deferred profit liability. Lapses were somewhat elevated but within our expectations. At the same time, policies in force declined 2.4%. Japan's total benefit ratio came in at 66.9% for the quarter, up 120 basis points year-over-year, and a third sector benefit ratio was 57.8% at the approximately 160 basis points year-over-year.

Max Broden: Overall, we view these results in the quarter as solid.

Max Broden: Starting with our Japan segment, net-term premiums for the quarter declined 5.7%.

Max Broden: This decline reflects a 7.4 billion yen negative impact from internal reinsurance transactions executed in the fourth quarter of 2023.

Max Broden: and 4.8 billion yen negative impact from paid-up policies.

Max Broden: In addition, there is a 1.2 billion yen positive impact from deferred profit liability.

Max Broden: Lapses were somewhat elevated, but within our expectations.

Max Broden: At the same time, policies in force declined 2.4%.

Max Broden: Japan's total benefit ratio came in at 66.9% for the quarter, up 120 basis points year-over-year, and the third sector benefit ratio was 57.8%, up approximately 160 basis points year-over-year.

Max Broden: We estimate the impact from remeshment gains to be 140 basis points favorable to the benefit ratio in Q2 2024. Long-term experience trends as it relates to treatment of cancer and hospitalization continued to be in place, leading to continued favorable underwriting experience. Persistency remains solid with a rate of 93.3%, which was found 50 basis points year-over-year. This change in persistency is in line with our expectations. Our expense ratio in Japan was 17.8%, down 170 basis points year-over-year, driven primarily by the expense allowance from reinsurance transactions and continued to discipline expense management. Adjusted net investment income in young terms was up 28.4%, mainly by favorably impact from effects on US dollar investments in young terms, lower hedge costs, higher return on our alternative portfolio compared to second quarter of 2023, and call income.

Max Broden: We estimate the impact from re-measurement gains to be 140 basis points favorable to the benefit ratio in Q2 2024.

Max Broden: Long-term experience trends as it relates to treatment of cancer and hospitalization continue to be in place, leading to continued favorable underwriting experience.

Max Broden: Persistency remained solid with a rate of 93.3%, which was down 50 basis points year-over-year.

Max Broden: This change in persistency is in line with our expectations.

Max Broden: Our expense ratio in Japan was 17.8%, down 170 basis points year-over-year, driven primarily by the expense allowance from reinsurance transactions and continued disciplined expense management.

Max Broden: Adjusted net investment income in Yen terms was up 28.4%.

Max Broden: Mainly by favorable impact from FX on U.S. dollar investments in yen terms, lower hedge costs, higher return on our alternatives portfolio compared to second quarter of 2023, and call income.

Max Broden: The pre-tax margin for Japan and the quarter was 35.3%, up 490 basis points year-over-year; a very good result.

Max Broden: The pre-tax margin for Japan in the quarter was 35.3%, up 490 basis points year-over-year, a very good result.

Max Broden: Turning to U.S. results, net them premium was up 2.1%. Persistency increased 50 basis points year-of-a-year to 78.7%. We are encouraged by early signs from our persistency efforts and will remain focused on driving profitable growth. Our total benefit ratio came in at 46.7%, 140 basis points higher than Q2 2023, driven by product mix and lower remeshment gains than a year ago. We estimate that remeshment gains impacted a benefit ratio by 170 basis points in the quarter. Claims utilization has rebounded from depressed levels during the pandemic and are now more in line with our long-term expectations.

Daniel Paul Amos: Turning to U.S. results, Netven Premium was up 2.1%. Our total benefit ratio came in at 46.7%, driven by product mix and lower remeshment gains than a year ago. We tend to benefit from seasonality in the first half and would expect higher expenses in the second. Our growth initiatives, Group Life and Disability, Network Dental Vision, and Direct to Consumer, increased our total expense ratio by 230 basis points. Adjusted net investment income in the US was up 7.4%, mainly driven by higher yields on both our alternatives and fixed rate portfolio, with less than $300 million in the process of foreclosure.

Max Broden: Turning to U.S. results, Net Bend Premium was up 2.1%.

Max Broden: Persistency increased 50 basis points year-over-year to 78.7%.

Max Broden: We are encouraged by early signs from our persistency efforts and will remain focused on driving profitable growth.

Max Broden: Our total benefit ratio came in at 46.7%, 140 basis points higher than Q2 2023, driven by product mix and lower re-measurement gains than a year ago.

Max Broden: We estimate that remeasurement gains impacted the benefit ratio by 170 basis points in the quarter.

Max Broden: Claims Utilization has rebounded from depressed levels during the pandemic and are now more in line with our long-term expectations.

Max Broden: Our expense ratio in the U.S. was 36.9% down 210 basis points year-of-a-year, primarily driven by platforms improving scale and strong expense management. We tend to benefit from seasonality in the first half and would expect higher expenses in the second half. Our growth initiatives, group life and disability, network denomination and direct-to-consumer increase our total expense ratio by 230 basis points. This is in line with our expectation, and we would expect this impact to decrease going forward as these businesses grow to scale and improve their profitability.

Max Broden: Our expense ratio in the U.S. was 36.9%, down 210 basis points year-over-year, primarily driven by platforms improving scale and strong expense management.

Max Broden: We tend to benefit from seasonality in the first half and would expect higher expenses in the second half.

Max Broden: Our growth initiatives, Group Life and Disability, Network Dental Vision, and Direct to Consumer, increased our total expense ratio by 230 basis points.

Max Broden: This is in line with our expectation and we would expect this impact to decrease going forward as these businesses grow to scale and improve their profitability.

Max Broden: Adjusted net investment income in the U.S. was up 7.4%. Mainly driven by higher yields on both our alternatives and fixed pre-tax margin of 22.7%. Also a very good result.

Max Broden: Adjusted net investment income in the U.S. was up 7.4%.

Max Broden: Mainly driven by higher yields on both our alternatives and fixed rate portfolios.

Max Broden: Profitability in the U.S. segment was solid, with a pre-tax margin of 22.7%, also a very good result.

Max Broden: Our total commercial real estate loan watch list stands at approximately $1 billion, with less than $300 million in process of foreclosure currently. As a result of these current low-valuation marks, we increased our season reserves associated with these loans by $14 million in this quarter, net of charge-offs. We had six loan foreclosures and moved nine properties into real estate owned. We continue to believe that the current distress market does not reflect the true intrinsic economic value of our portfolio, which is why we are confident in our ability to take ownership of these assets, manage them through this cycle, and maximize our recoveries.

Max Broden: Our total commercial real estate loan watch list stands at approximately $1 billion.

Max Broden: with less than $300 million in process of foreclosure currently.

Daniel Paul Amos: As a result of these current loan valuation marks, we increased our CESA reserves associated with these loans by $14 million in this quarter, net of charge-offs. We had six loan foreclosures and moved nine properties into real estate only.

Max Broden: As a result of these current low valuation marks, we increased our CESA reserves associated with these loans by $14 million in this quarter net of charge-offs.

Max Broden: We had six loan foreclosures and moved nine properties into real estate owned.

Daniel Paul Amos: We continue to believe that the current distressed market does not reflect the true intrinsic economic value of our portfolio, which is why we are confident in our ability to take ownership of these assets, manage them through this cycle, and maximize our recovery. Our portfolio of first lien, senior secured middle market loans continues to perform well with losses below our expectations for this point in the cycle. Adjusted net investment income was $39 million higher than last year due to a lower volume of tax credit investments at Aflac, Inc. and a higher volume of investable assets at Aflac, REIT.

Max Broden: We continue to believe that the current distressed market does not reflect the true intrinsic economic value of our portfolio.

Max Broden: Which is why we are confident in our ability to take ownership of these assets, manage them through this cycle, and maximize our recoveries.

Max Broden: Our portfolio first lean senior secured middle-market loans continued to perform well, with losses below our expectations for this point in the cycle.

Max Broden: Our portfolio of first lien, senior secured middle market loans continue to perform well, with losses below our expectations for this point in the cycle.

Max Broden: In our corporate segment, we recorded a pre-tax gain of $23 million. Adjusted net investment income was $39 million higher than last year due to lower volume of tax credit investments at Aflac Inc., and higher volume of investable assets at Aflac Re. These tax credit investments impacted a corporate net investment income line for US GAAP purposes negatively by $30 million, with an associated credit to the tax. line. The net impact to our bottom line was a positive $4 million in the quarter. To date, these investments are performing well and in line with the expectations.

Max Broden: In our corporate segment, we recorded a pre-tax gain of $23 million.

Speaker Change: Adjusted net investment income was $39 million higher than last year due to lower volume of tax credit investments at Aflac Inc. and higher volume of investable assets at Aflac Re.

Max Broden: These tax credit investments impacted a corporate net investment income line for US GAAP purposes negatively by $30 million, with an associated credit to the tax line.

Daniel Paul Amos: The net impact to our bottom line was a positive $4 million in the quarter. To date, these investments are performing well and in line with expectations. We are continuing to build out our reinsurance platform, and I am pleased with the outcome and performance. Our capital position remains strong, and we ended the quarter with an SMR above 1100% in Japan, and our combined RBC, while not finalized, we estimate to be greater than 650%. Unencumbered holding company liquidity stood at $4.1 billion.

Max Broden: The net impact to our bottom line was a positive $4 million in the quarter.

Max Broden: To date, these investments are performing well and in line with the expectations.

Max Broden: We're continuing to build out our insurance platform, nine. Please with the outcome and performance. Our capital decision remains strong, and we ended the quarter with an SMR above 1100% in Japan. Now, combined RBC, while not finalized, we estimate to be greater than 650%. Unencumbered holding company liquidity stood at 4.1 billion dollars, 2.3 billion dollars above our minimum balance. These are strong capital ratios, which we actively monitor, stress, and manage to withstand credit cycles, as well as external shocks.

Max Broden: We are continuing to build out our reinsurance platform and I am pleased with the outcome and performance.

Max Broden: Our capital position remains strong and we ended the quarter with an SMR above 1100% in Japan and our combined RBC, while not finalized, we estimate to be greater than 650%.

Max Broden: Unencumbered holding company liquidity stood at $4.1 billion, $2.3 billion above our minimum balance.

Daniel Paul Amos: $2.3 billion above our minimum balance. These are strong capital ratios, which we actively monitor, stress, and manage to withstand credit cycles, as well as external shocks and Japan FSA impairments worth 10.4 billion yen, or roughly $67 million, in the quarter. This is well within our expectations and with limited impact on both earnings and capital. Adjusted leverage is 19.5% and below our leverage corridor of 20 to 25%.

Max Broden: These are strong capital ratios, which we actively monitor, stress, and manage to withstand credit cycles as well as external shocks.

Max Broden: US statutory impairments were a release of $7 million, and Japan FSA impairments were $10.4 billion yen, or roughly $67 million in the quarter. This is well within our expectations and with limited impact to both earnings and capital. Adjusted leverage is 19.5% and below our leverage corridor of 20 to 25%. As we hold approximately 60% of our debt denominated in the yen, our leverage will fluctuate with movements in the yen dollar rate. This is intentional, and part of our enterprise hedging program, protecting the economic value of apps like Japan in US dollar terms. We've repurchased $800 million of our own stock and paid dividends of $283 million in Q2, offering good relative IRR on these capital deployments.

Max Broden: U.S. statutory impairments were a release of $7 million, and Japan FSA impairments were 10.4 billion yen, or roughly $67 million in the quarter.

Max Broden: This is well within our expectations and with limited impact to both earnings and capital.

Max Broden: Adjusted leverage is 19.5% and below our leverage corridor of 20-25%.

Max Broden: As we hold approximately 60% of our debt denominated in yen, our leverage will fluctuate with movements in the yen-dollar rate.

Operator: This is intentional and part of our enterprise hedging program, protecting the economic value of apps like Japan in U.S. dollar terms. We repurchased $800 million of our own stock and paid dividends of $283 million in Q2, offering good relative IRR on these capital deployments. Then you are welcome to rejoin the queue. We will now take the first question. To ask a question, you may press star and then one on your touchtone phone.

Max Broden: This is intentional and part of our enterprise hedging program, protecting the economic value of Aflac Japan in U.S. dollar terms.

Max Broden: We repurchased $800 million of our own stock and paid dividends of $283 million in Q2, offering good relative IRR on these capital deployments.

Max Broden: We will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive strong risk-adjusted RWE with a meaningful spread to our coastal capital.

Max Broden: We will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive strong risk-adjusted ROE with a meaningful spread to our coastal capital. Thank you. I will now turn the call over to David. Thank you, Max.

Unknown Executive: Thank you.

David Young: I will now turn the call over to David. Thank you, Max. Before we begin our Q&A, we ask that you please limit yourself to one initial question and a related follow-up. Then you are welcome to rejoin the Q.

David Young: Before we begin our Q&A, we ask that you please limit yourself to one initial question and a related follow-up. Then you are welcome to rejoin the queue.

Unknown Executive: We will now take the first question. Do I ask a question? You may have pressed star? There's one on your touchstone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

David Young: We will now take the first question.

Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.

Operator: If you are using a speakerphone, please pick up your handset before pressing the, At this time, we will pause momentarily to assemble our roster. The first question today comes from Joel Hurwitz with Dowling and Partners. Please go ahead.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Max Broden: If at any time your question has been addressed and you would like to withdraw your question,

Unknown Executive: At this time, we will pause momentarily to assemble a roster.

Max Broden: Please press star then 2.

Max Broden: At this time, we will pause momentarily to assemble our roster.

Joel Hurwitz: The first question today comes from Joel Hurwitz with Dowling and Partners. Please go ahead. Hey, good morning. The new product launch in Japan that happened in June had very strong sales. Can you just talk about the target return on that first sector product and how it compares to the third sector product, and then what do you see as the cross-sell opportunity there? Thank you, Max, Mike.

Speaker Change: The first question today comes from Joel Hurwitz with Dowling and Partners. Please go ahead.

Joel Hurwitz: Hey, good morning. So the new product launch in Japan that happened in June had very strong sales. I guess, can you just talk about the target return on that that first sector product and how it compares to the third sector product? And then what do you see as the cross sell opportunity there?

Max Broden: Let me start on product profitability. When we look at this product through a gap length, it has at or higher gap margins than our core third sector business. On an IRR basis, this is obviously lower than our third sector business because of that very significant new business strain associated with the high reserve. But we have lined up reinsurance that we then expect on a post-reinsurance basis. It brings us to very, very attractive returns as well. And not too different from our core third sector business.

Unknown Executive: Yeah, let me start on product profitability. So when we look at this product through a gap lens, it has equal or higher gap margins than our core third sector business. And on an IRR basis, this is obviously lower than our third sector business because of the very significant new business strain associated with the high reserves.

Max Broden: I think Max might take that for us.

Max Broden: Yeah, let me start on product profitability. So when we look at this product through a gap lens...

Max Broden: It has at or higher a gap margins than our core third sector business. And on an IRR basis, this is obviously lower than our third sector business because of the very significant new business strain associated with the high reserves.

Max Broden: But we have lined up reinsurance that we then expect on a post-reinsurance basis. It brings us to very, very attractive returns as well, not too different from our core third sector business.

Max Broden: Okay, in the cross-sale opportunity there with the third sector products. I think we'll evolve over time. We have a younger clientele that gives us the opportunity to build that relationship. And as we travel with that customer through their lifetime, we have an opportunity to then cross-sale both medical and cancer as well. So over time, I think there's a good opportunity for us to both get the Sumitasa product to the younger clients, but then also over the lifetime cross-sale cancer medical to those new clients.

Unknown Executive: Okay, and the cross-sell opportunity there with the third sector products? It's important that I say it, because with the Sumitas product, we are writing to a younger group who may have less disposable income than an older set of potential policyholders. And so whereas with the older ones, we might offer the Sumitas product or another product and our supplemental or third sector product, with this group, we'd start by putting in one product, which would be the Sumitas product, and then a year or so later, follow up and add more.

Speaker Change: Okay, and the cross-sell opportunity there with the third sector products?

Speaker Change: I think it will evolve over time, where obviously this product targets a younger clientele. That gives us the opportunity to build that relationship, and as we travel with that customer through their lifetime, we have an opportunity to then cross-sell both medical and cancer as well. So over time, I think there's a good opportunity for us to both...

Speaker Change: Get the Sumitaza product to the younger clients, but then also over the lifetime, cross sell cancer medical to those new clients.

Max Broden: Yeah, I think half-life can maybe explain this better. It's important that I say it is remember it with the Sumitasa product. We are writing to a younger group who may have less disposable income than does an older set of potential policyholders. And so, whereas with the older, we might offer the Sumitasa product or another product. And our supplemental or third sector product. With this group, we'd start by putting in one product, which would be the Sumitasa product. And then, in a year or so later, follow up and add more. So it's different as we're building that policyholder base, which of course is one of the things we promised you we would work toward doing.

Speaker Change: but it's important that I say it, is remember it was a Sumitoz Pratik

Speaker Change: We are writing a younger group who may have less disposable income than does an older set of potential policyholders. And so whereas with the older we might offer

Speaker Change: The Sumitos product or another product and our supplemental or third sector product

Speaker Change: With this group, we'd start by putting in one product, which would be the Sumitas product.

Unknown Executive: So it's different as we're building that policyholder base, which of course is one of the things we promised you we would work toward doing. And Aflac Japan, we believe, is doing the right thing here. Okay, first question: on the expense ratio for both the Japanese and the US businesses. I think it was the best it's been in the past several years.

Speaker Change: Japan, and then in a year or so later, follow up and add more. So it's different as we're building that policyholder base, which of course is one of the things we promised you we would work toward doing, and Aflac Japan, we believe, is doing the right thing here for us.

Max Broden: And half-life Japan is, we believe, doing the right thing here for us.

Jimmy Duar: The next question comes from Jimmy Duar with JP Gordon. Please go ahead. Okay, first question just on the expense ratio in both the Japan and the US is I think it was the best it's been in the past several years. So wondering how much of that is sustainable and driven by expensive and the other actions versus maybe just being timing driven by the timing of discretionary and at spending and advertising. Thank you, Jimmy.

Speaker Change: The next question comes from Jimmy Bhullar with J.P. Morgan. Please go ahead.

Unknown Executive: So wondering how much of that is sustainable and driven by expense savings or other actions versus maybe just being timing, driven by the timing of discretionary spending and advertising? For the U.S., we also have had very good expense control, especially in the first half. There are timing differences where I would expect our spend to increase in the second half. And I would also caution you to please keep in mind that the fourth quarter every year has the highest level of sales activity.

Jimmy Bular: Okay, first question just on the expense ratio in both the Japan and the U.S. businesses. I think it was the best it's been.

Jimmy Bular: in the past several years. So wondering how much of that is sustainable and driven by expense savings or other actions versus maybe just being timing driven by the timing of discretionary and spending and advertising.

Max Broden: Let me start with Japan. Obviously, 17.8% in a quarter is a very low number. We have a guidance range of 19% to 21%. And long term, I think that is the range that we will operate within for the Japan segment. And we tend to have some seasonality in Japan with the second half having a look at higher overall spend and what specifically call out that. Half Life Japan turns 50 this year, so we will have some promotional spend associated with that, including advertising and a lot of sales activities around that. Therefore, I would expect that for the full year that we would end up in the lower end of that 19 to 21% range.

Speaker Change: Thank you, Jimmy. Let me start with Japan, obviously.

Speaker Change: 17.8% in a quarter is a very low number. We have a guidance range of 19-21%.

Speaker Change: And long term, I think that is the range that we will operate within for the Japan segment.

Speaker Change: We tend to have some seasonality in Japan with the second half having a little bit higher overall spend, and I would specifically call out that

Speaker Change: Japan turns 50 this year, so we will have some promotional spend associated with that, including advertising and a lot of sales activities around that. So therefore, I would expect that for the full year.

Max Broden: For the US, we also have had very good expense control, especially in the first half. There are timing differences where I would expect our spend would increase in the second half. And I would also caution you to please keep in mind that the fourth quarter every year has the highest level of sales activity; with that comes expense spend as well. And so our expense ratio in the fourth quarter tends to be the highest. Over time, the U.S. still have a number of businesses that are not at scale, and therefore we're running those businesses with expense overruns right now.

Speaker Change: And that we would end up in the lower end of that 19 to 21% range.

Speaker Change: For the U.S.

Speaker Change: We also have had very good expense control, especially in the first half. There are timing differences where I would expect our...

Speaker Change: Spend would increase in the second half, and I would also caution you to please keep in mind that the fourth quarter every year has the highest level of sales activity. With that comes expense spend as well, and so our expense ratio in the fourth quarter tends to be the highest.

Unknown Executive: With that comes expense spend as well. And so our expense ratio in the fourth quarter tends to be the highest. Over time, the U.S. still has a number of businesses that are not at scale, and therefore, we are running those businesses with expense overruns right now.

Speaker Change: Over time, the U.S. still has a number of businesses that are not at scale, and therefore we are running those businesses with expense overruns right now.

Unknown Executive: This includes our group life and disability business; it includes our dental ambition business; and it includes our direct-to-consumer business. As those businesses really reach that scale, then they will come down in expense ratio, and we will no longer have that expense overrun. So that means that there will be downward pressure over time on our U.S. expense ratio. But we're very pleased with the expense management and expense control for the first half, and in particular in the second quarter.

Max Broden: This includes our group life and disability business, it includes our dental and vision business, and it includes our right to consumer business. And to some extent, also our group BB platform. As those businesses really reached out, scaled, then they will come down in expense ratio, and we will no longer have that expense overrun. So that means there is downward pressure over time to our U.S. expense ratio. But we're very pleased with the expense management and expense control for the first half, and in particular in the second quarter. But I would caution you, when you think about the full year, I still would expect those to be inside of the range.

Speaker Change: This includes...

Speaker Change: Our group life and disability business, it includes our dental and vision business, and it includes our direct-to-consumer business, and to some extent also our group VB platform.

Speaker Change: Have those businesses really reached that?

Speaker Change: Scale, then they will come down in expense ratio, and we will no longer have that expense overrun.

Speaker Change: So that means that there is downward pressure.

Speaker Change: Over time to our U.S. expense ratio.

Speaker Change: But we're very pleased with the expense management and expense control.

Unknown Executive: But I would caution you, when you think about the full year, I still would expect us to be inside of the range of 38 to 40 percent for the expense ratio in the U.S. Okay. And then maybe for Dan or the Japanese team. You talked a lot about competition in Japan on the last call.

Speaker Change: for the first half and in particular in the second quarter, but I would caution you when you think about the full year, I still would expect us to be inside of the range of 38 to 40% for the expense ratio in the US.

Max Broden: Of 38 to 40% for day expense ratio in the U.S.

Unknown Executive: Okay, and then just maybe for Dan or the Japanese team, you talked a lot about competition in Japan on the last call, and it seems like you've gone up in Japan. Some of the companies have cut prices to adjust for that, but what are you seeing in the competitive environment, and isn't any different than what you've seen in the last few months or over the past few years.

Speaker Change: Okay.

Speaker Change: And then just maybe for Dan or the Japanese team, you talked a lot about competition in Japan on the last call.

Speaker Change: And it seems like as rates have gone up in Japan, some of the companies have cut prices to adjust for that. But what are you seeing in the competitive environment and is it any different than what you've seen in the last few months or over the past few years?

Koichiro Yoshizumi: And it seems like as rates have gone up in Japan, some companies have cut prices to adjust for that. But what are you seeing in the competitive environment? And isn't it any different than what you've seen in the last few months or over the past few years? Yoshizumi, would you like to take that?

Koichiro Yoshizumi: Yoshizumi, would you like to take that? Thank you for the question. Good morning, everyone. I'm Yoshizumi. I am in charge of sales in Japan. So, as you have mentioned, our competitors have entered the third sector market, and so the environment is totally different compared with maybe five years or 10 years ago. And there are competitors that are launching a very reasonable or low-price product. However, in Aflac, our concept is to launch and sell products that have values to our customers, and not just local products, but for the sake of lowering products, lowering prices, cruising.

Speaker Change: Yoshizumi, would you like to take that?

Koichiro Yoshizumi: Yes, thank you very much. Good morning, everyone. I am Yoshihiro Yamaguchi, head of sales. What we will aim for is to continue to provide customers with the most appropriate products for our customers so that we can maintain our number one position. Hey, this is Yoshizumi once again.

Yoshizumi: Yes, thank you. Good morning, everyone. My name is Yoshizumi, and I am in charge of sales.

Yoshizumi: Thank you for the question. Good morning, everyone. I'm Yoshizumi. I am in charge of sales in Japan.

Yoshizumi: So as you have mentioned, our competitors have entered third sector market, and so the environment is totally different compared with maybe five years ago or ten years ago.

Yoshizumi: However, we at Aflac do not merely offer inexpensive products to our customers in the third sector.

Yoshizumi: This has the concept of consistently delivering valuable products.

Yoshizumi: However, in Aflac, our concept is to launch and sell products that have value to our customers and not just lower product price for the sake of lowering product, lowering price, excuse me.

Koichiro Yoshizumi: And as we enter into our 50th anniversary this year in Aflac Japan, we are trying to change the direction of our customers, and we are trying to change the direction of our customers. And this is based on the history and the trust that we have from our customers in providing the appropriate insurance policies at all times by fully thinking about what is needed in each environment or at times. Because the illness has changed, the treatment methods change. Now, according to the data that's been publicized between April 2022 and March 2023, Aflac is recording as the number one most sold policy company in Japan in third sector products.

Yoshizumi: And as we enter into our 50th anniversary this year in Aflac, Japan…

Speaker Change: The methods of treatment and disease management have evolved over time, and our approach has also changed accordingly. Based on this history and the trust we have built, we have been providing appropriate insurance to our customers.

Speaker Change: And this is based on the history and the trust that we have from our customers in providing the appropriate insurance policies at all times by thoroughly thinking about what is needed in each environment or at times because the illnesses change, the treatment methods change.

Speaker Change: Now, according to the data that's been publicized between April 2022 and March 2023,

Speaker Change: And Aflac is recording as the number one most sold policy company in Japan in third sector products.

Koichiro Yoshizumi: We will, we will aim for is continue to provide customers that the most appropriate products for our customers so that we can maintain our number one position. That's all from me.

Speaker Change: What we will aim for is to continue to provide customers the most appropriate products for our customers so that we can maintain our number one position.

John Barnidge: The next question comes from John Barnidge with Piper Sandler.

John Barnidge: Please go ahead. Good morning. Thank you very much. Thank you for your opportunity.

Speaker Change: The next question comes from John Barnidge with Piper Sandler. Please go ahead.

John Barnidge: My first questions on distribution, the new first sector product in Japan. Your closest customers and existing customer and one that doesn't have that product. I know the product was introducing early June. Have you identified how much of the existing customer base is a target for this new product? Thank you. They're translating. Give us one second.

John Barnidge: Good morning. Thank you for the opportunity. My first question is on distribution of the new first sector product in Japan. Your closest customer is an existing customer and one that doesn't have that product. I know the product was introduced in early June .

Speaker Change: Have you identified how much of the existing customer base is the target for this new product?

Koichiro Yoshizumi: And Koide Yoshizumi, please.

Speaker Change: They're translating, give us one second.

Speaker Change: and Koichiro Yoshizumi, please.

Koichiro Yoshizumi: Let me continue to answer your question. We have a large number of existing customers, as you know, and our target customers are young and middle-aged customers. And the reason why this product is attracting attention is that there are various options that our customers would allow them to choose from after they've paid up their premiums.

Koichiro Yoshizumi: Okay, this is Yoshizumi once again. Let me continue to answer your question. We have a large number of existing customers, as you know. And our target customers are young and middle-aged customers. And the reason why I say our target is young and middle-aged customers is as follows. Well, first of all, the Japanese government is really pushing and encouraging the Japanese citizens to go after an asset accumulation product, and the Japanese government is offering various systems so that the Japanese citizens can do that. And the result of that asset for asset formation needs is heightening very strongly in Japan.

Koichiro Yoshizumi: Hey, this is Yoshizumi once again. Let me continue to answer your question.

Koichiro Yoshizumi: We have a large number of existing customers, as you know. We have a large number of existing customers, as you know.

Koichiro Yoshizumi: And our target customers are young and middle-aged customers. And the reason why I say our target is young and middle-aged customers is as follows.

Koichiro Yoshizumi: First of all, the Japanese government is supporting the creation of a new fiscal system. They are creating various new systems and are supporting them.

Koichiro Yoshizumi: Well, first of all, the Japanese government is really pushing and encouraging the Japanese citizens to go after asset accumulation products, and the Japanese government is offering various systems.

Koichiro Yoshizumi: So that the Japanese citizens can do that. And as a result of that, asset formation needs is heightening very strongly in Japan.

Koichiro Yoshizumi: Therefore, in order to meet those asset formation needs

Koichiro Yoshizumi: And we've lost our new product in order to respond to that kind of asset accumulation needs in Japan. And this product is very well taken by the market and selling well, and it is increasing our sales. And the reason why this product is attracting attention is because the Japanese government is trying to develop a new product. Because there are various options that would allow our customers to choose after they paid up their premiums. For example, after... Paying off the premium, this policy can be converted to a death benefit or a nursing care benefit, or the customer can receive cash value and use that cash as asset accumulation.

Koichiro Yoshizumi: They said they released a new product.

Koichiro Yoshizumi: And we've launched our new product in order to respond to that kind of asset accumulation needs in Japan.

Koichiro Yoshizumi: And this product is very well taken by the market and selling well, and it is increasing our sales.

Koichiro Yoshizumi: After the payment is completed, the purpose can be used for death benefits, long-term care insurance, or the accumulated surrender value can be taken as cash.

Koichiro Yoshizumi: [inaudible]

Koichiro Yoshizumi: And the reason why this product is attracting attention is because there are various options that would allow our customers to choose after they've paid up their premiums. For example, after...

Koichiro Yoshizumi: For example, after, and as we go through these kinds of discussions with our customers, there will be more touch points with our customers, and there will be more opportunities for our sales people to talk to our customers about third-sector products. And we've already established this as a sales pattern, and we have trained our sales agents to do so. So our purpose is to increase our third sector sales by using this new product, Sumitas, as a hook. That's all for me. Are the 50th anniversary plans mainly related to this product, or is it broader? We can talk about that. Thank you. Okay, this is Yoshizumi again.

Koichiro Yoshizumi: At paying off the premiums, this policy can be converted to death benefit or nursing care benefit, or the customer can receive cash value and use that cash as asset accumulation.

Koichiro Yoshizumi: In that context, there is also a set pattern for sales talks about the third sector. We also conduct training for our agents within that framework.

Koichiro Yoshizumi: And as we go through these kinds of discussions with our customers, there will be more touch points with our customers and there will be more opportunities for our salespeople to talk to our customers about their sector products. And we've already have established a sales pattern, and we have trained our sales agent to do so. So our purpose is to increase our third sector sales by using this new product to meet us at the hook. Because we are the company that would increase sales by centering on third sector product sales. And our way of doing sales is to really ultimately sell third sector products by launching first sector product.

Koichiro Yoshizumi: And as we go through these kinds of discussions with our customers, there will be more touch points with our customers and there will be more opportunities for our sales people to talk to our customers about third sector products.

Koichiro Yoshizumi: And we've already have this established sales pattern, and we have trained our sales agent to do so.

Koichiro Yoshizumi: And that is based on the needs of young middle age customers at each time and the period of time.

Koichiro Yoshizumi: Thank you for that very helpful. My follow-up on distribution is the 50th anniversary plans mainly related to this product. Thank you.

Speaker Change: Is the 50th anniversary plans mainly related to this product or is it broader? Could you talk about that? Thank you.

Koichiro Yoshizumi: This is again your Shizumi. And as I just mentioned, it's not just about to meet us, but since we are a company that mainly sell third sector products. So for example, as for the 50th anniversary, we will be selling and pushing for a cancer insurance sales, and in order to increase our touch points with our customers, we will be having campaigns to offer gifts to our customers. We also have a conservative service that no other competitors have. And so what we are planning to do is to appeal this conservative service in line with our 50th anniversary through the website, TV commercial, and video services.

Koichiro Yoshizumi: And as I just mentioned, it's not just about Tsumitas, but since we are a company that mainly sells third-sector products, and so what we are planning to do is to promote this concierge service in line with our 50th anniversary through websites, TV commercials, and video services. We as a sales team would like to support these sales agencies at our maximum. That's all for me. As a reminder, if you would like to ask a question, please press star then 1 to be joined in the question queue. Morning, I have a couple of follow-up questions on the Sumitas product in Japan.

Speaker Change: This is a 50th anniversary gift campaign for cancer insurance.

Speaker Change: So, for example, for the 50th anniversary, we will be pushing for a cancer insurance sales, and in order to increase our touch points with our customers, we will be having campaigns to offer gifts to our customers. We also have a consulting service that other competitors do not have.

Speaker Change: We also have a concierge service that no other competitor has.

Speaker Change: We are considering promoting it again using television commercials, web, and video advertisements to coincide with the 50th anniversary.

Speaker Change: And so what we are planning to do is to appeal this conservative service in line with our 50th anniversary through the websites, TV commercials, and video services.

Koichiro Yoshizumi: We have a large number of sales agents and agencies that only sell Aflac and have walked together with Aflac for the past 50 years. And these agents and agencies are extremely pleased and happy about celebrating the 50th anniversary. And there's a very big momentum for these sales agents and agencies to sell a large proportion of third sector products. We as a sales team would like to support these sales agencies at our maximum.

Speaker Change: And there's a very big momentum for these sales agents and agencies to sell a large proportion of third sector products.

Speaker Change: We, as a sales team, would like to support these sales agencies at our maximum.

Unknown Executive: That's all from me.

Unknown Executive: As a reminder, if you would like to ask a question, please press star 101 to be joined into the question queue.

Tom Gallagher: The next question comes from Tom Gallagher with Evercore ISI. Please go ahead. Good morning. A couple of follow-up questions on the Sumitoss product in Japan. In response to John's question, I just want to be clear: I'm assuming you're not selling this product, the Sumitoss product, to existing customers that already have third sector Aflac products. This would be all brand new Aflac customers. Is that correct? Correct. Our thrust is to write new customers. But if someone wants to buy, we certainly will sell it to them because, as was mentioned by Max, the profit margin is very acceptable on this product.

Speaker Change: The next question comes from Tom Gallagher with Evercore ISI. Please go ahead.

Unknown Executive: In response to John's question, I just want to be clear. I'm assuming you're not selling this product, the Sumitas product, to existing customers that already have third-sector Aflac products. This would be all brand new Aflac customers. Is that correct?

Tom Gallagher: This would be all brand new Aflac customers, is that correct?

Unknown Executive: Correct. Our thrust is to win new customers, but if someone wants to buy it, we certainly will sell it to them. Because, as mentioned by Max, the profit margin is very acceptable on this product. And so, yes, we'll take anyone that wants to buy it. But it is not our main push.

Speaker Change: Our thrust is to write new customers, but if someone wants to buy it, we certainly will sell it to them, because as was mentioned by Max, the profit margin is very acceptable on this product, and so yes, we'll take anyone that wants to buy it.

Max Broden: Yes, we'll take anyone that wants to buy it. But it is not our push. We won't be younger customers is what we're working toward.

Unknown Executive: We want younger customers. That's what we're working towards. You know, the sales force. Now they can talk more about it; I just was cutting through the translation, and Max can cover that a little bit more too. The next question comes from Nick Anito with Wells Fargo. Please go ahead. Hey, thanks. Good morning.

Daniel Amos: Dan, do you have a keeping track of that to make sure this doesn't become a situation where the sales force kind of monetizes the enforced customer base and does a lot of selling there? Because then, obviously, that would limit the cross-sell opportunity. Absolutely. We are. Now, they can talk more about it. I just was cutting through the translation, and Max can cover that a little bit more too. Tom, we tracked that closely, so we know what those numbers are. We will not necessarily publish those publicly, but it's an important factor that we keep track of.

Speaker Change: You know, the sales force kind of monetizes the in-force customer base and does a lot of selling there because then obviously that would limit their cross-sell opportunity.

Speaker Change: [inaudible]

Nick Amido: The next question comes from Nick Amido with Wells Fargo.

Nick Amido: Please go ahead. Hey, thanks.

Speaker Change: The next question comes from Nick Anito with Wells Fargo. Please go ahead.

Unknown Executive: Just wanted to touch on the U.S. a bit. We've seen one of the best years and certainly one of the best quarters in the U.S. in terms of we've got a lot of balls in the air and to realize that they have brought up the loss ratio, they have brought down the expense ratio, they have changed business, and our business is more complicated as we go into other products. That's helpful, thanks.

Nick Amido: Good morning. Just wanted to touch on the US a bit. I know sales came in a little light in a quarter relative to the Future Guidance. I just wanted to get your overall thoughts there on the incident of hitting something in the guidance of the year.

Nick Anito: Hey, thanks. Good morning. I just wanted to touch on the U.S. a bit. You know, I know sales came in a little late in the quarter relative to the four-year guidance, so I just wanted to get your overall thoughts there on the confidence of hitting

Virgil Miller: Yeah, good morning. This is Virgil from the US. Let me say that I think the big thing, the big takeaway, is very strong water for the US because of the balanced approach. You heard and you saw from her from Max earlier, her from Dan earlier. What we saw was an increase in not just in sales of 2%, but we had an increase of 50 basis points in our premium persistency. We drove a higher benefit ratio that was intentional; some intentional actions to put more value into the hands of all customers. We lowered our expense ratio, and then that led to one of the highest pre-tax margins we've had in the US in some years: 50 basis points in 22.7%.

Speaker Change: Something in the guidance for the year.

Nick Anito: Yeah, good morning. This is Virgil from the U.S.

Speaker Change: Let me say that I think the big thing, the big takeaway is...

Nick Anito: a very strong quarter for the U.S. because of the balanced approach. You heard and you saw from Max earlier, heard from Dan earlier,

Speaker Change: What we saw was an increase, not just in sales, of 2%.

Speaker Change: We had an increase of 50 basis points in our premium persistency. We drove a higher benefit ratio that was intentional, some intentional actions to put more value into the hands of our customers.

Virgil Miller: My point on that is that we knew going into the quarter; we came up negative in Q1. Second quarter, I mentioned previously that we had made a lot of changes that go to a more profitable business. That was really focused on our Group ZB business, formally this continent of American business that we bought. We wanted to make sure that we are only bringing business that has higher benefits, where people are actually filing claims and less turn. So we knew that we have an impact, so the 2% is actually right on target, what I expected, but I am expecting a stronger push in the second half of the year.

Speaker Change: My point on that is that we knew going into the quarter, we came up negative in Q1.

Speaker Change: to go to a more profitable business. That was really focused in our Group VB business.

Speaker Change: Benefits, where people are actually filing claims.

Max Broden: is actually right on target, what I expected, but I am expecting a stronger push in the second half of the year. A lot of that is seasonality, but it's also, what Max mentioned earlier, some scale. We'll see from about the bills, we're going to see a stronger performance.

Virgil Miller: A lot of that is seasonality, but it is also what Max mentioned earlier; some scale will see from our buy the bills. We are going to see a stronger performance with the new products we bought with life and disability that we call Class. We are going to see better performance in the second half from our dental and vision property. I mentioned before that we are making a huge investment to stabilize that platform. We also announced a partnership with SkyGen, just bringing some operational eggplants to the table with us to manage that property. And so all in all, I am expecting higher sales on the dental property, stronger push with class, and then continue to what we have driven year by year with our veteran agents and with our broker partnerships. Good performance from them, and we will see a higher yield in the second half of the year.

Max Broden: with the new products we bought with life and disability that we call CLADS.

Max Broden: Vision Property. I mentioned before that we're making a huge investment to stabilize that platform.

Max Broden: We also announced a partnership with SkyGen, who's bringing some operational excellence to the table with us to help manage that property. And so all in all, I'm expecting higher sales on the dental property, stronger push with plaids, and then continue what we have driven.

Daniel Amos: And I just want to make a comment. I think that we have seen one of the best years and certainly one of the best quarters in the US in terms of we have got a lot of balls in the air. And to realize that they brought up the loss ratio, they brought down the expense ratio, they have switched business, and our business is more complicated as we go into other products. They are training their people better. I just have a kudos to Virgil and the team for the hard work they are doing, and I think long term our US operations are going to be a much stronger company because we are doing all the right things I think we need to do to prepare for the future.

Speaker Change: Thank you.

Speaker Change: They're training their people better. I just have kudos to

Speaker Change: Virgil and the team for the hard work they're doing and I think long term our U.S. operation is going to be a much stronger company because we're doing all the right things I think we need to do to prepare us for the future.

Nick Amido: So the sales, yes, I want more than 2%, but I promise you the 2% that we had is much bigger than a normal 2% because it is cleaner business, is more profitable, and it should compound as we move forward.

Speaker Change: is much bigger than a normal 2% because it's cleaner business, it's more profitable, and it should compound as we move forward.

Virgil Miller: That's helpful, thanks. I guess thinking with the US, can you just touch on recruiting trends there? I know you said you still have a bit of a way to go to get back to pre-pandemic levels, so it would be just good to get your thoughts on the recovery there. Yeah, in the first quarter, you know, we came up negative on recruiting. Came in with the second quarter, though, very strong. I think we were over a 10% increase. I see us continuing that trend going on here. We're going forward in the second half, but when I mentioned, if you kind of go back and look pre-pandemicly, look what we are today. We're going for quality recruiting, we're going for better conversion rates, and then definitely into the higher productivity.

Unknown Executive: I guess sticking with the U.S., can you just touch on recruiting trends there? I know you said you still have... Yeah, in the first quarter, we came up negative on recruiting. Came in with the second quarter, though, very strong; I think we were over a 10% increase. I see us continuing that trend going forward in the second half. But what I mentioned, if you kind of go back and look pre-pandemic, you look at where we are today, we're going for quality recruiting, we're going for better conversion rates, and then that leads to higher productivity. You continue to see higher productivity from what we're seeing with our agents. And that is really the bigger factor for us. Last year, we recruited over 10,000. I would expect the same again this year.

Speaker Change: That's helpful. Thanks. I guess sticking with the US, can you just touch on recruiting trends there? I know you said you still have a bit of a way to go to get back to pre-pandemic levels.

Speaker Change: It's good to get your thoughts on the recovery there.

Speaker Change: Yeah, in the first quarter, you know, we came up negative on recruiting, came in with the second quarter, though, very strong, I think we were over a 10% increase.

Speaker Change: I see us continuing that trend going forward in the second half, but what I mentioned, if you kind of go back and look pre-pandemic, and you look at where we are today, we're going for quality recruiting, we're going for better conversion rates,

Virgil Miller: You continue to see better productivity from what we're seeing with our agents. And that is really the bigger factor for us. Last year, we recruited over 10,000. I would expect the same this year. We've got some national recruiting efforts going on right now across the country. What we really do is we leverage support from headquarters to drive a message, and then we leverage what we call a nomination process, is to local agents, local brokers, going out telling people about the Aflac career path, and bringing people in a listen to that story, and then we actually turn them into recruits, and then ultimately trying to get them to be average week of producers.

Unknown Executive: We've got some national recruiting efforts going on right now across the country. What we really do is leverage support from headquarters to drive a message, and then we leverage what we call a nomination process, where local agents and local brokers go out telling people about the Aflac career path and bringing people in to listen to that story. And then we actually turn them into recruits and ultimately try to get them to be average weeks of producers.

Speaker Change: We've got some national recruiting efforts going on right now across the country. What we really do is we leverage support from headquarters to drive a message, and then we leverage what we call a nomination process.

Speaker Change: local brokers going out telling people about the the Aflac career path and bringing people in to listen to that story and then we actually turned them into into recruits and ultimately trying to get them to be Average Weekend Producers.

Virgil Miller: I am very pleased with what we did in the second quarter. Some of those efforts will definitely continue in the third and fourth quarters also.

Unknown Executive: I am very pleased with what we did in the second quarter. Some of those efforts will definitely continue in the third and fourth quarters also. Hey, thanks for taking my follow up. I just have a follow up question about the Sumitas product.

Speaker Change: I am very pleased with what we did in the second quarter. Some of those efforts will definitely continue in the third and fourth quarters also.

Tom Gallagher: The next question comes from Tom Gallagher with Evercore ISI. Please go ahead. Hey, thanks for taking my follow-up. It is Sumitoss product follow-up question. Can you talk a little bit about how you think this rollout is going to go? Clearly, the June rollout seems to have been a big success. Would you expect this to become a much larger percentage of sales as you think about the rollout over the next couple of quarters here? How do you think third sector sales are going to hang in there? I think it is being sold through the same distribution as your third sector, so I am just wondering, while this gets rolled out, are we going to see a slowdown in third sector?

Speaker Change: The next question comes from Tom Gallagher with Evercore ISI. Please go ahead.

Unknown Executive: Can you talk a little bit about how you think this rollout is going to go? Clearly, the June rollout seems to have been a big success. Would you expect this to become a much larger percentage of sales as you think about the rollout over the next couple of quarters here? How do you think third sector sales are going to hang in there? Because I think it's being sold through the same distribution as your third sector. So I'm just wondering, while this gets rolled out, will we see a slowdown in the third sector? How do you see that all playing out, I guess, over the next couple of quarters?

Tom Gallagher: Can you talk a little bit about how you think this rollout is going to go?

Tom Gallagher: How do you see that all playing out over the near term? Next couple of quarters, thanks.

Tom Gallagher: While this gets rolled out, are we going to see a slowdown in third sector? How do you see that all playing out, I guess, over the near term, next couple of quarters? Thanks.

Max Broden: Let me kick it off, and I will hand it over to Yoshisumi for some more details. We do not have any explicit caps around this product. The reason why is because it is producing very good returns for us both from a profit margins standpoint and also from an IRR standpoint i.e. with a significant spread to our cost of capital. We actually do want to sell quite a bit of this product. That being said, this product is very much about how it can lift our third sector franchise. We still believe that we are a third sector company and we want to make sure that we keep our exceptionally strong position in that marketplace as the number one and third sector player in Japan.

Yoshizumi-san: Let me kick it off and then I'll hand it over to Yoshizumi-san for some more details.

Yoshizumi-san: We do not have any explicit caps around this product.

Speaker Change: And the reason why is because it's producing very good returns for us, both from a profit margin standpoint and also from an IRR standpoint, i.e. with a significant spread to our cost of capital. So we actually do want to sell quite a bit of this product.

Unknown Executive: Thanks. That being said, this product is very much about how it can lift our third sector franchise. First of all, this product was launched on June 2nd.

Yoshizumi-san: That being said, this product is very much about how it can lift our third sector franchise.

Yoshizumi-san: We still believe that we are a third sector company, and we want to make sure that we keep our exceptionally strong position in that marketplace as the number one and third sector player in Japan.

Max Broden: That is the context of this product.

Koichiro Yoshizumi: Yoshisumi can give you some more details in terms of the timing of the full rollout of the product. Thank you.

Koichiro Yoshizumi: This is Yoshizumi. I would like to answer your question. First of all, this product was launched on June 2nd, that we have been able to record a very successful big sale. First of all, we have been able to record a big sale at the beginning of its launch, because we have been able to record a big sale at the beginning of its launch. We, meaning our distribution channel, has been fully prepared to sell this product where they should be selling, how we should be selling, and that's what we've been working on since the beginning of the second quarter.

Yoshizumi: This is Yoshizumi. I will answer.

Yoshizumi-san: First of all, we launched on June 2nd, and we were able to achieve very large sales and success.

Yoshizumi: Well, first of all, this product was launched on June 2nd. We have been able to record a very successful big sale.

Speaker Change: Starting from around the beginning of the second quarter when we first start selling the additional stock, the distributors are also considering where and how to sell the additional stock.

Yoshizumi: And the reason why we haven't been able to record such big sales at the beginning of its launch is because we, meaning our distribution channel, has been fully prepared to sell this product, where they should be selling, how we should be selling, and that's what we've been working on since the beginning of the second quarter. And the reason why this kind of preparation was needed was because, as our agents talked about Tsumitas to our new customers,

Koichiro Yoshizumi: And the reason why this kind of preparation was needed was because... And as our agents... Talked about it to meet us to a new customer. Our agents really need to practice how to sell this product. And as a result, our agents did visit those customers that are easy for them to be talking to, and as a result, it made a big hit in the sales.

Speaker Change: It has led to significant results. Therefore, from July onwards, we cannot expect the same level of sales as in June .

Koichiro Yoshizumi: And as a result of this full preparation for the June launch, we are not expecting the same level of sales from July and on. But as a product to earn a certain level of volume... And we are quite sure that this product will serve that kind of a goal. And the big role that this product will play is to cross-sell third sector products. And it would be easier for our sales agents to talk about third sector products through their customers once they start talking about Sumitaz. And that is the difference between other first sector products.

Yoshizumi: And as a result of this full preparation for the June launch, we are not expecting the same level of sales from July and on. However, as a product to achieve a certain sales volume,

Unknown Executive: We have been able to record a very successful big sale. And the big role that this product will play is to cross-sell third sector products. And it would be easier for our sales agents to talk about third sector products to their customers once they start talking about Sumitom.

Koichiro Yoshizumi: Because Sumitaz has its own feature that can make the sales agents easily talk about third sector products. So what we are expecting is to have Sumitaz sell to certain volume on its own, but on top of that sell third sector product to certain level as well.

Yoshizumi: And that is the difference between other first sector products because Sumitas has its own feature that can make the sales agents easily talk about third sector products.

Koichiro Yoshizumi: That's all for me.

Daniel Amos: This is Dan. I want to make a couple of comments. Number one is, we normally don't show first month. We show a quarter of whatever the new product is. It is not unusual to have a spike. What I've always said is, we introduced a new product no matter what it is. You have a spike and then it levels off. We're in the spike period. And we've seen that with others. But it will give a spike, and we'll come down as he said. And we expect that. So just keep that in mind. The other thing is that the numbers were small numbers in the past.

Yoshizumi: It is not unusual to have

Yoshizumi: A Spike.

Yoshizumi: What I've always said is when we introduce a new product, no matter what it is,

Speaker Change: You have a spike and then it levels off. We're in the spike period, and we've seen that with others, but it will come down, as he said, and we expect that. So, just keep that in mind. The other thing is that the numbers were small numbers in the past.

Max Broden: And so that also, as a percentage, makes it look bigger than it normally is. But there's nothing here that makes me think that it's any different from other new products, other than it's doing very well, as a few of our products have. And we're excited about that. And please, it would be great. We're excited. We were able to find a way to get the profit margins to acceptable levels. So we could do this. We've been wanting to do it. But we haven't been able to do it. And given Max's credit, he has been able to find a way to help do this.

Yoshizumi: And so that also as a percentage makes it look bigger than it normally is.

Yoshizumi: to acceptable levels so we could do this. We've been wanting to do it, but we haven't been able to do it. And given Max's credit, he has been able to find a way to help do this, and we appreciate that very much on his part.

Daniel Amos: And we appreciate that very much on this part.

Max Broden: Tom, I want to address a question that you did not ask it. But I think you wanted to ask. And that is, how is this different from the waste sales that we had? In the years 2012 through 2014. And our characterizes there are three main differences. The first one is that we will do much more frequent repricing of new business for this product. And that's very important because this is a more interest rate sensitive product than our core third sector business. The other one is that we will have a much more diligent management of the distribution channels.

Unknown Executive: The first one is that we will do much more frequent repricing. And the third piece is that we are now utilizing reinsurance to make sure that we can relieve some of that new business strain and get the IRRs higher. And if you take all of that together, that is what makes this different from the sales that we had that were very, very significant back in that time frame of 2012 through 2014. Thanks, Max. You stole my follow-up. That was great. I appreciate it. Well, apparently it's teamwork.

Max Broden: And the third piece is that we are now utilizing reinsurance to make sure that we can relieve some of that new business strain and get the IRRs higher.

Yoshizumi: And the third piece is that we are now utilizing reinsurance to make sure that we can relieve some of that new business strain and get the IRRs higher.

Max Broden: And if you take all of that together, that is what makes this different from the way sales that we had that were very, very significant back in that time frame of 2012 through 2014.

Yoshizumi: And if you take all of that together, that is what makes this different from the way sales that we had that were very, very significant back in that time frame of 2012 through 2014.

Unknown Executive: Thanks, Max; you stole my follow-up. That was great. Appreciate it. Well, apparently it's teamwork.

Yoshizumi: Thanks, Max. You stole my follow-up. That was great. Appreciate it.

Max Broden: Well, apparently it's teamwork.

Joel Hurwitz: The next question comes from Joel Hurwitz with Dowling and Partner. Please go ahead. Thanks for taking the follow-up. I just wanted to touch on that investment income in Japan. And particularly the US dollar portfolio, even if I just for the make-hole in this slightly favorable VII. It seems to have a pretty sizable step up and yield from the first quarter.

Speaker Change: The next question comes from Joel Hurwitz with Dowling and Partners. Please go ahead.

Joel Hurwitz: Hey, thanks for taking the follow-up. I just wanted to touch on net investment income in Japan, and particularly the U.S. dollar portfolio, even if I just for the make whole.

Joel Hurwitz: and the slightly favorable VII. It seemed to have a pretty sizable step up in yield from the first quarter. Just any color on what drove that and do you think that the, I guess, the normalized NII level implied in Q2 is sustainable?

Bradley Dyslin: Cindy Collar and what drove then do you think that the normalize on eye level implied in Q2 is sustainable? Yeah, Joel, this is Brad Deslan. Thank you for the question. We did have a very solid second quarter, as you pointed out. And there were several things that drove that, that we do think are sustainable into the back half of the year. Besides the adjustments that you've highlighted, short rates remain very attractive. Even with the Fed likely to cut sometimes this fall, short rates remain very, very attracted compared to historical levels. And that benefits us in a few ways, including our significant floating rate portfolio.

Joel Hurwitz: Hi Joel, this is Brad Dyslin. Thank you for the question.

Speaker Change: Besides the adjustments that you've highlighted,

Speaker Change: Short rates remain very attractive even with the Fed likely to cut sometime this fall. Short rates remain very, very attractive compared to historical levels. And that benefits us in a few ways including our significant floating rate portfolio.

Bradley Dyslin: We also took some actions early in the year; some tactical things we did with the portfolio. We moved a few bonds around in our public portfolio to capture some yield opportunities. It was a pretty sizable switch trade. We also took advantage of some attractive spreads and accelerated deployment in our structured private credit portfolio. So we think the things that have carried us in the second quarter of these tailwinds are going to continue through the second half of the year. Now there are risks, of course, but we think we're pretty well positioned and should have a good second half.

Speaker Change: We also took some actions early in the year, some tactical things we did with the portfolio. We moved a few bonds around in our public portfolio to capture.

Speaker Change: So we think the things that have carried us in the second quarter, these tailwinds, are going to continue through the second half of the year. Now there are risks, of course, but we think we're pretty well positioned and should have a good second half.

Unknown Executive: Great, hopeful.

Max Broden: And then just I had one on US persistency. So Max, you mentioned in your prepared remarks that you're encouraged by the early science from some of the initiatives that you guys put in place. I guess, just what are you seeing in how much improvement do you guys think you can drive in persistency in the US?

Max Broden: Very helpful. And then just I had one on U.S. persistency. So, Max, you mentioned in your prepared remarks that you're encouraged by the early signs from some of the initiatives that you guys put in place. I guess just what are you seeing and how much improvement do you guys think you can drive in persistency in the U.S.?

Unknown Executive: I'm not going to put an exact number on that, but I would say that anything, if you get even something like 100 basis points, is meaningful when you over time translate that into the economic impact that would have from additional net earned premium. So it's something that we will continue to drive over time. The other thing I want you to be aware of is that persistency will jump around somewhat driven by the mix of business. So our in force in the U.S., it is gradually changing.

Max Broden: I'm not going to put an exact number on that, but I would say that anything, if you get even something like a hundred basis points, is meaningful when you over time translate that into the economic impact that would have from additional matter and premium. So it's something that we will continue to drive over time. The other thing I want you to be aware of is that that persistency will jump around somewhat driven by mix of business. So our in force in the US, it is gradually changing. So you are going to see more group of life and disability business as a proportion of our in force, which clearly has a much, much higher consistency rate than our average.

Max Broden: I'm not going to put an exact number on that, but I would say that anything, if you get even something like 100 basis points, it's meaningful when you over time translate that into the economic impact that would have from additional net earned premium.

Speaker Change: So, it's something that we will continue to drive over time.

Speaker Change: The other thing I want you to be aware of is that that persistency will jump around somewhat driven by mix of business.

Unknown Executive: So you are going to see more group life and disability business as a proportion of our in force, which clearly has a much, much higher persistency rate than our average. And then also, the same thing applies to over time; our dental and vision business, as well, should have improved persistency. So we're driving all the underlying businesses and the way they improve persistency, but then the mixed impact will be an important component as well.

Speaker Change: So our in-force in the U.S., it is gradually changing, so you are going to see more group life and disability business as a proportion of our in-force, which clearly has a much, much higher consistency rate than our average.

Max Broden: Yeah, and then also the same thing applies to over time, our dental ambition business as well should have an improved persistency. So we're driving all the underlying businesses, and the way they improve persistency, but then the mixing pipe will be an important component as well. So, over time. What we are driving is both that business by business improve persistency and then obviously the mix impact as well.

Speaker Change: Over time, our dental and vision business as well should have an improved persistency. So we're driving all the underlying businesses and the way they improve persistency, but then the mixed impact will be an important component as well.

Unknown Executive: So over time, what we are driving is both that business by business improved persistency and then obviously the mixed impact as well. So we will, over time, sort of call that out and give you some more color on that as well. This concludes our question and answer session. I would like to turn the conference back over to David Young for any closing remarks. Thank you, Betsy, and thank you all for joining us this morning.

Speaker Change: So, over time, what we are driving is both that business-by-business improved persistency and then, obviously, the mixed impact as well. So we will, over time, sort of call that out and give you some more colors on that as well.

Max Broden: So we will, over time, sort of call that out and give you some more colors on that as well.

Unknown Executive: Thank you.

David Young: This concludes our question and session.

Speaker Change: All right, got it. Thank you.

David Young: I would like to turn the conference back over to David Young for any closing remarks. Thank you, Betsy, and thank you all for joining us this morning. I hope you'll be able to join us on the morning of December 3rd at the New York Stock Exchange or on our webcast for our financial analyst briefing. If you have any additional follow-ups, please reach out to the Investor and Rating Agency Relations team. We look forward to hearing from you. Thank you.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to David Young for any closing remarks.

Unknown Executive: I hope you'll be able to join us on the morning of December 3rd at the New York Stock Exchange or on our webcast for our financial analyst briefing. If you have any additional follow-ups, please reach out to the Investor and Rating Agency Relations team. We look forward to hearing from you. Thank you.

David Young: Thank you, Betsy. And thank you all for joining us this morning. I hope you'll be able to join us on the morning of December 3rd at the New York Stock Exchange or on our webcast for our Financial Analyst Briefing. If you have any additional follow-ups, please reach out to the Investor and Rating Agency Relations team. We look forward to hearing from you. Thank you.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Unknown Executive: You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.