Q3 2024 Aflac Inc Earnings Call
Good day and welcome to the Aflac Incorporated Third Quarter, 2024 Irmings Call. All participants will be in listen only mode.
should you need assistance? Please signal conference specialist by pressing star key, followed by zero. After today's remarks, I will be an opportunity to ask questions. That's the question you may press star then one when you are touched on phone. To withdraw your question, please press star then two.
Speaker Change: Please note that this event is being recorded. I would not like to turn the conference over to David Young, Vice President of Capital Markets. Please go ahead.
David Young: Good morning and welcome.
David Young: Thank you for joining us for F-Lacking Corporate's third quarter earnings call. I hope you will also join us for our financial analyst briefing on December 3 at the New York Stock Exchange.
David Young: Registration reminders for this event will go out over the next few weeks.
Speaker Change: This morning, Dan Amos, Chairman CEO of Athlack Incorporated will provide an overview of our results and operations in Japan in the United States.
Speaker Change: and CFO of Afflack Incorporated, will provide an update on our financial results in current capital and liquidity.
Speaker Change: These topics are also addressed in the materials we posted with our earnings release. And financial supplement on investors.applike.com.
Speaker Change: and Edition Max provided his quarterly video update, which also includes information about the outlook for 2024.
Speaker Change: We also posted under financials on the same site updated slides of investment details related to our commercial real estate and middle market loans. For Q&A today, we are joined by virtual miller, President of ATHLACUS.
Speaker Change: Charles Lake, Chairman and Representative Director, President of Athlach International.
Speaker Change: Masatoshi Kui-Day, President and Representative Director, Affleck Life Insurance, Japan, and Brad Dizzlin, Global Chief Investment Officer, President of Affleck Global Investment.
Speaker Change: Before we begin, some statements in this teleconference are forward looking within the meaning of federal securities laws.
Speaker Change: All that we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective and major.
Speaker Change: Actual results could differ materially from those we discussed today. We encourage you to look at our annual report on Form Team K for some of the various risk factors that could materially impact our results.
Speaker Change: As I mentioned earlier, the earnings release is available on investors.flike.com and includes reconciliation of certain non-US gap measures. I'll now hand the call over to Dan. Dan, thank you David and good morning. We're glad you joined us.
Dan Amos: As you saw, after I can cooperate, reported a loss of 17 cents for diluted share on a US gap basis for the quarter. Primarily due to increase foreign exchange related losses.
Dan Amos: from the year and the strengthening of 12.9% during the quarter.
Dan Amos: However, adjusted earnings per deluded share for the quarter increase 17.4% to $2.16.
Dan Amos: Here today, earnings per diluted share were $6.23 and adjusted earnings per share on the diluted basis rose 13.5% to $5.64.
Dan Amos: Beginning with Japan, we drove a 12.3% year-over-year increase in sales in the third quarter, maintaining the initial momentum from the June launch of Sumitas.
Dan Amos: As you recall, Sumitos combines asset formation with a nursing care option. It is part of our strategy to attract new and younger customers while also introducing them to our third sector policies.
Dan Amos: Simikos also played an important role in the sales growth that the agencies.
Dan Amos: I'm also very pleased with the continued improvement and cancer insurance sales through Japan Post Channel, especially considering that wings has been in the market for over two years.
Dan Amos: On November 15th we'll be celebrating 50 years in Japan. Our marketing efforts will focus on creating additional touchpoints with customers around their needs and our products.
Dan Amos: Ovarol, Kuidei Sahn and his team have done a great job of driving sales in Japan, and even more so of delivering record profit margins for the quarter.
Dan Amos: Turning to the U.S., we achieved 5.5% sales growth for the quarter.
Dan Amos: The Sales, Results, Reflect Strong Growth and Group Life, Absent Management and Disability, which is encouraging as we continue to scale up that platform.
Dan Amos: In addition, it's good to see a continued increase in cancer insurance sales given our efforts to enhance the value proposition to our cancer policy over.
Dan Amos: and Mark. As we enter the fourth quarter and what tends to be our heaviest enrollment period, we will continue to focus on profitable growth, disciplined expense management, and optimizing our dental and vision platform.
Dan Amos: Over all, Virgil and his team are doing a good job balancing profitable growth, enhancing the value proposition of our policy elders, and curving the expense ratios.
Dan Amos: and Jerry. There are efforts contributed to the strong 20.8% pre-tax profit margin for the quarter. Max has done a great job leading the team to proactively defend our cash flows and deployable capital against a weakening end.
Dan Amos: as well as establish our Re-Incherns platform in Bruneuda.
Dan Amos: Over the course of this year, Virgil and Max, as well as Audrey Kilman, have taken on additional responsibility.
Dan Amos: The Board and I are thrilled to recognize the tremendous contributions these executive leaders have made with their promotion announcement yesterday.
Dan Amos: You've probably heard me say many times that in conjunction with the board, one of my key responsibilities is succession planning for key roles.
Dan Amos: and I look forward to continuing to work with them and prepare them for the future. Turning to investments, we have been very pleased with our investment portfolio's performance as it continues to produce.
Dan Amos: Strong, net investment income with minimal losses and impairments.
Dan Amos: As an insurance company, our primary responsibility is to fulfill the promises we make to our policy holders, while being responsive to the needs of our shareholders.
Dan Amos: Our solid folios supports our promise to our policy holders as does our commitment to maintaining strong capital ratio.
Dan Amos: Young.
Dan Amos: We balance this financial strength with tactical capital of employment.
Dan Amos: We intend to continue, prudently managing our liquidity and capital to preserve the strength of our capital and cash flows.
Dan Amos: This reports both our dividend track record and tactical share repurchase.
Dan Amos: We treasure our track record of what is now 42 consecutive years of dividend growth with the board of directors' declaration of the fourth quarter dividend of 50 cents.
Dan Amos: We repurchased $500 million in shares during the quarter and intend to continue our balanced tactical approach of investing in growth and driving long-term operating efficiencies.
Dan Amos: Our management team, employees and sales distribution continue to be dedicated stewards of our business being there for the policy elders when they need us most, just as we promised.
Dan Amos: This exemplifies our goal of providing customers with the best value in the supplemental insurance products in the United States and Japan.
Dan Amos: We believe in the underlying springs of our business and our potential for continued growth in Japan and the United States, to the largest life insurance markets in the world.
Dan Amos: At Black is well positioned as we work toward achieving long-term growth. While also ensuring we deliver on our promise to our policy holders.
Speaker Change: I'll now turn the program over to Max to cover more details of the financial results. Max.
Max Jerry: Thank you, Dan.
Max Jerry: Thank you for joining me and so I provide a financial update on Athliking Corporate's results for the third quarter of 2024.
Max Jerry: The quarter adjusted earnings per diluted chair increased 17.4% year of a year.
Max Jerry: and the $2.16.
Max Jerry: with a three-sense negative impact from FX in the quarter. In the quarter, remeshment gains on reserves totaled $408 million reducing benefits while an off-setting onlock of the deferred profit liability in Japan reduced earned premium by 75 million dollars.
Max Jerry: Veribola Investment Incum ran $27 million below our long-term return expectation.
Max Jerry: A trusted book value per share, including foreign currency translation gains and losses, increased 7.3%.
Max Jerry: and the adjusted R-weet was 16.7%
Max Jerry: and Acceptable Spread to our cost of capital. Overall, we view these results in the quarter as solid.
Max Jerry: Starting with our Japan segment, net-dumb premiums for the quarter declined 10.5%.
Max Jerry: This decline reflects a 7.3 billion yen negative impact from an internal cancer reinsurance transaction executed in the fourth quarter of 2023.
Max Jerry: and 4.6 billion young negative impacts from paid up policies. In addition, there is a 13.3 billion young negative impact from theford Prophet liability, the majority of which is one time impact from unlocking of L.D.T.I.S.
Max Jerry: At the same time, policies enforce the client 2.3%.
Max Jerry: Gopan's total benefit ratio came in at 49.2% for the quarter, down 15.9% points year over year.
Max Jerry: and the third sector benefit ratio was 41.8%.
Max Jerry: and John. Down the proximate, the 13 percentage points year over year.
Max Jerry: We estimate the impact from remasgment gains to be approximately 18 percentage points favorable to the benefit ratio in Q3 2024.
Max Jerry: Long-term experience trends as it relates to treatments of cancer and hospitalization continue to be in place.
Max Jerry: We get into continued favorable underwriting experience. Given the impact from unlocking, we now expect the full year benefit ratio to end up in the range of 62 to 63%.
Max Jerry: Persistency remains solid with a rate of 93.3% which was down 20 basis points year of year. This change in persistency is in line with our expectations.
Max Jerry: Our expense ratio in Japan was 20% up a hundred basis points year of a year. Driven primarily by the Klein and Revenors.
Max Jerry: and Justin Netemesman income in Yand terms was up 0.1%.
Max Jerry: As the benefits from lower hedge costs and favorable impact from foreign currency on US dollar investments in young terms
Max Jerry: We're largely offset by lower floating rating and lower volume as we have continued to shift assets from Aslite Japan to Aslite Rebeirmuda.
Max Jerry: The Pre-Tax margin for Japan in the quarter was 44.7%.
Max Jerry: Up a 11.9% of points year of year, a very good result.
Max Jerry: For the full year, we now expect the pre-text margin to be in the range of 35 to 36%.
Max Jerry: Turning to US results, Nettham Premium was up 2.8%.
Max Jerry: Persistency increased 20 basis points a year to 78.9%.
Max Jerry: Considering our year-to-date results, we now expect full year-net-to-emperium to be towards the lower end of our guidance range of 3 to 5%.
Max Jerry: are a total benefit ratio, can mean at 47.6%.
Max Jerry: 11.7% at the end of the year. The 11.7% is higher than Q3 2021. Driven by lower rematchment gains than a year ago. We estimate that the rematchment gains impacted the benefit ratio by approximately 120 basis points in the quarter.
Max Jerry: Clayton's utilization has rebounded from depressed levels during the pandemic and are now more in line with our long-term expectations.
Max Jerry: For the full year we would expect the benefit ratio to be towards the higher end of our guidance range of 45 to 47%.
Max Jerry: Our Expansoration in the US was 38% down 260 basis points year of a year.
Max Jerry: Premier leader in by platforms improving scale and strong expense management.
Max Jerry: Given business's annality, we would expect an uptake in expense ratio for Q4, but to remain with our guidance range of 38 to 40% for the full year.
Max Jerry: are growth initiatives, group life and disability, network dental vision and direct consumer increase our total expense ratio by 100 basis points.
Max Jerry: This is in line with our expectations and we would expect this impact to decrease going forward as these businesses grow to scale and improve their profitability.
Max Jerry: At just the net investment income in the US was up 0.5% mainly driven by higher fixed rating income.
Max Jerry: Robert Billett in the USA meant was solid with a pre-tax margin of 20.8% also a good result.
Max Jerry: are a total commercial real estate loan watch list, remains approximately a billion dollars.
Max Jerry: with less than $250 million in process of foreclosure currently.
Max Jerry: As a result of these current low valuation marks, we increased our Cecil reserves associated with these loans by $3 million in this quarter net of truck jobs. We've had one foreclosure moved into real estate owned.
Max Jerry: We continue to believe that the current distress market does not reflect the true insurance 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 Jerry: 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 Jerry: In our corporate segment, we recorded a pre-packs gain of $15 million.
Max Jerry: and Justin Netty Mestmaning come with 37 million dollars higher than last year due to a combination of higher rates and asset balances.
Max Jerry: which included the impact of reinsurance transactions in Q4 of 2023 as well as continued lower volume of tax credit investments.
Max Jerry: These tax credits investments impacted a corporate net investment income line for USGAP purposes negatively by $57 million in the quarter, with an associated credit to the tax line.
Max Jerry: The Net Impact to our bottom line was a positive $5 million in the quarter.
Max Jerry: Today, these investments are performing well and in line with our expectations.
Max Jerry: We are continuing to build out our internal re-insurance platform and I am pleased with the outcome and performance.
Max Jerry: In the fourth quarter, we intend to execute another launch with similar structure and economics in the end terms to our October 2020-3 transaction.
Max Jerry: Our capital position remains strong and we ended the quarter with an SMR about 1100%. In our combined RBC, we are not finalized, we estimate to be greater than 650%.
Max Jerry: These are strong capital ratios, which we actively monitor, stress, and manage to withstand credit cycles as well as external shocks.
Max Jerry: U.S. statutory impairments were 58 million dollars.
Max Jerry: and there were no additional Japan FSA impairments in Q3.
Max Jerry: This is well within our expectations and with limited impact to both earnings and capital.
Max Jerry: As we hold approximately 60% are death in Yan, our leverage increased to 21%.
Max Jerry: has resulted in a move in the young dollar exchange rate.
Max Jerry: Well within our target range of 20 to 25%.
Max Jerry: Our leverage will fluctuate with movements in a young dollar rate.
Max Jerry: This is intentional and part of our enterprise hatching program protecting the economic value of a flat-like Japan in the U.S. dollar terms. Unnone-combrant Holden Company liquidity stood at $3.9 billion, $2.1 billion above our minimum balance.
Max Jerry: We've purchased $500 million of our own stock and paid dividends of $280 million in Q3, offering good relative IRR on these capital deployments.
Max Jerry: We will continue to be flexible and tactical and how we manage to balance it and deploy capital in order to drive strong risk adjusted R-E with a meaningful spread to our calls for capital.
Max Jerry: Thank you and I will now hand over to David to begin Q&A. Thank you, Max.
David Young: Before we begin our Q&A, we ask that you please limit yourself to one initial question and a related follow-up. You may then rejoin the key. We will now take the first question.
Speaker Change: We will now begin the question and answer session. And to ask the question, you may press star then one. If you're using speaker phone, please pick up your handset before pressing the keys And to withdraw your question, please press star from two.
Speaker Change: at this time we'll pause momentarily to the Sampler roster.
Speaker Change: and our first question comes from Joel Hurwitz from Dallington Partners. Please go ahead.
Joel Hurwitz: Hi, good morning. I wanted to start on Japan's Hill, so third sector sales continues to be a bit challenge. You just talk about plans for both cancer and medical and what are you expecting from sales promotions related to the 50th anniversary?
Speaker Change: The New York Times.
Speaker Change: Hi there!
Speaker Change: Ferro Fumaga, ten more times to be a studio studio. Hey, this is the show, Jimmy in charge of self-a-marketing Japan.
Speaker Change: Mazda, a San Buenia, and Dan Deskella.
Speaker Change: [inaudible]
Speaker Change: So let me first start off with how we are successful and the reason for that is because of this new product that we've launched, which is an asset formation product plus the nursing care coverage. And this...
Speaker Change: Product also has a feature that once it becomes paid up, this can be converted into medical, nursing care, or death benefit.
Speaker Change: [inaudible]
Speaker Change: Well, first of all again, this Timmytus was developed to meet the young and little-ase customers needs for asset formation and contribute to the expansion of third-factor sales.
Speaker Change: The American State of the United States has been a part of the United States's development. And consider preparations for sales from the June 3rd quarter led to 12.3 percent growth.
Speaker Change: [inaudible]
Speaker Change: and the purpose was to approach young and middle-aged newcomers and newcomers.
Speaker Change: and Dyson Boeing, Switzerland, and Switzerland.
Speaker Change: As well as proposing additional sales of third sector products.
Speaker Change: and also to Crossrail Products.
Speaker Change: and David Young, we have a lot of time to discuss what we have done.
Speaker Change: and the other two of us are going to be a great deal. We are expecting that our third sector sales would grow and increase by selling to me task.
Speaker Change: and John.
Speaker Change: I'm going to talk about the new state of the United States.
Speaker Change: and as you mentioned, by youth and futureth anniversary as our trailer or a hook, we are trying to sell our cancer insurance and cross-countering insurance.
Speaker Change: and the government has been in the same position as before.
Speaker Change: and Patras, please be on your phone.
Speaker Change: We have a service called Concierge Service that no other company is able to offer.
Speaker Change: [inaudible]
Speaker Change: and what we are trying to do is by using to appeal this product in service. We are using TV commercials and web advertisement to really appeal the value of this product in service.
Speaker Change: In the last few years, he was a very serious person.
Speaker Change: and the American Pronunciation Guide Presents to Pronounce Skullhawk, and we are also considering to launch a new product at around spring and next year.
Speaker Change: and the United States. So as a result, we are expecting our cancer sales will increase. Now turning to medical insurance.
Speaker Change: We've changed the product name and rerounded.
Speaker Change: I'm not a professional student, but I'm going to introduce myself to you.
Speaker Change: and this is also a one of its kind that only AFLAQ has in terms of the coverage and it's really attracting attention of the market. In other words, we have this monthly coverage feature that no other company has.
Speaker Change: We would like to grow the sale of this product together with Simitas We would also like to make a new plan for middle and older age customers over 50 years old
Speaker Change: I'm going to introduce you to the general of the General of the General, and I'm going to introduce you to the general of the General.
Speaker Change: So as a result, we are seeing gradually covering in medical sales and we are expecting good sales from that.
Speaker Change: I'm going to introduce you to the English language.
Speaker Change: and we are expecting that our third sector products sales will recover an increase because of the reasons that I've mentioned at the same time. We have been quite successful in recruiting sales agents for the third sector, and we are strengthening our sales force too. That's all for me.
Speaker Change: The next question comes from Tom Gallagher from Evercore ISI. Please go ahead.
Tom Gallagher: Good morning. It's the first question just on Capitol Education, then I'll just have a quick follow-up on sales.
Tom Gallagher: So can you talk a bit about broader capital allocation? How are you thinking about it? I know the buyback was a bit lower this quarter, but you have this strong level of access capital accumulating.
Tom Gallagher: Any thoughts on a special dividend M&A? As you think about, let's just say if the stock does continue to create at strong levels.
Tom Gallagher: What would your plans be? Would you still do good levels of buyback, heading into next year? Would you consider these other options? Thanks.
Speaker Change: Thank you Tom. You're arriving in acknowledging that our capital races, they are strong. We are also generating significant capital both organically throughout our operations plus what we are doing around the insurance as well, freeing up additional levels of capital.
Speaker Change: So we are very strong on that front and then we look at all of those opportunities that you mentioned and I will not put anything off the table. We evaluate what we can get the best returns currently, but more importantly, the long term.
Speaker Change: When we evaluate our business with Think about it over the next 1, 2, 3, 5, 10, 15, 20 years. And Think about what is going to generate the highest return on that capital for us over that time period. And especially when you think strategically around things like M&A, you have to take that into consideration.
Speaker Change: So these are the things that go into our capital allocation, consideration both in terms of obviously how much we have, how we seek capital generation coming to us and then ultimately the returns that we can get.
Speaker Change: and we really mean it when we say that we are thinking about.
Speaker Change: and what those returns are and it is a dynamic world where these things are changing, but I will not pick anything off the table.
Speaker Change: Thank you. Obviously everything that you mentioned.
Speaker Change: Okay, thanks for that, Max. And just follow up on sales. Can you give a sense for the split between the first sector product you're selling? What's the split between new customers, versus existing customers that are buying that product? Thanks.
Speaker Change: David Jivumon, Sinky, and No Maria Ithuril, the Co-Deader.
Speaker Change: So if you're asking about the new customer ratio of the failed first sector product.
Speaker Change: Well right now, sales to existing customers is larger than those of new customers and this is always the case when we launch a new product.
Speaker Change: [inaudible]
Speaker Change: and we do this kind of first sector sale. There's always a cross sell and we are meeting the expected level of cross sell rate at the moment. As a move forward and monthly basis, more and more new customers are increasing.
Speaker Change: and John O'Kyaku Samahaw.
Speaker Change: I would like to thank you for your support.
Speaker Change: and what it also means is that when we explore and try to acquire young and mill-aest customers using symptoms, that's a purely means that we are trying to acquire new customers.
Speaker Change: O'WAPTA, Ato and Shinki's mother were both in the same place.
Speaker Change: What have we achieved?
Speaker Change: Good morning, all of you. So our strategy to increase in new customers after we go around a cycle of approaching to existing customers and that's what we are doing and that's our strategy. Thank you. That's all.
Speaker Change: and I'd like to come in about that. I would say that the numbers are falling in line with our expectations.
Speaker Change: We're...
Speaker Change: We thought it would be over 20% we helped it to be closer to 25%.
Speaker Change: Sure not that it started in about 20% and it's moved up to 25 and so that's in the range of what we had in Tiff's Pate is or maybe even a little better so we're very pleased.
Speaker Change: with Sumi Coffs and what is taking place in Alex bringing on new customers for a young and middle age. That's a two-inch question.
Speaker Change: The next question comes from West Carmichael from autonomous research. Please go ahead.
Speaker Change: Hey, thanks for the morning. From the issues we've been talking about in the time of the March, the film course is really leaning into the semi-toss. I guess my question is, is this really kind of constant?
Speaker Change: like contemplate a C change where we should see a greater contribution from birthsector sales going forward. And I know Max, he said the returns after re-insurance are kind of similar to third sector products, so really just want to understand strategically if we should expect that makes to be more balanced going forward between first sector and third.
Speaker Change: The New Year's Eve.
Speaker Change: The New York Times.
Speaker Change: Given what Japan has come through and I will...
Speaker Change: and I would expand that in the next year.
Speaker Change: This is the first time I've been doing this for a long time.
Speaker Change: I'm going to introduce you to the first time I've been working on the work of the New Yorker. I'm going to introduce you to the first time I've been working on the work of the New Yorker. I'm going to introduce you to the first time I've been working on the work of the New Yorker.
Speaker Change: [inaudible]
Speaker Change: Well, you're friend of course. So our strategy can be divided into two parts. One is of course to ensure profitability by using reinsurance, and the other is, as I've mentioned earlier, by some scientists, we are also bringing a new third sector and that way we are trying to secure profits from that perspective.
Speaker Change: Let me add a comment to that answer. So because it has important aspects to many parts of our business.
Speaker Change: and it is the fact that Japan as a society obviously is aging and with that there is a significant increase in retirement, needs and retirement funding.
Speaker Change: and Japan is pushing forward to become more of an asset management country as well with policies.
Speaker Change: That means that we would expect that a retirement product is going to be a more important tool for both the financial industry and for us going forward.
Speaker Change: and you have seen how your system is unhelp lined, and how we are using two metas that are also cross-sell our third sector business.
Speaker Change: and I would expect it to be a more meaningful part of our portfolio going forward than what it has been in a more recent past.
Speaker Change: and I still definitely think that we will predominantly the third sector company, but where the first sector savings business will be a meaningful component of our total sales.
Speaker Change: The New York Times.
Speaker Change: i
Speaker Change: The next question comes from Ryan Krueger from KBW. Please go ahead.
Ryan Krueger: Hey, thanks for coming. I'd a question on the Japan benefit ratio. I think coming into the year you're guiding to a 66 to 68. I guess when we think about the assumption unlocking in a year-to-day experience.
Ryan Krueger: Would you expect that to be improved from the original expectation going forward?
Ryan Krueger: I guess it looked like you're guiding for the full year implied maybe something closer to the 65 to 67 in the fourth quarter.
Speaker Change: The impact from this unlock is that if we have lowered the future net premium ratio by roughly 100 basis points.
Speaker Change: So all things being equal, that means that we would expect our benefit ratio going forward for our in-for-specness to be roughly 100 basis points longer than what we previously expected before the unlock. So it does have...
Speaker Change: and Impact for Future Benefit ratios as well.
Speaker Change: and that would apply going into 2025 as well.
Speaker Change: Thanks and then just a quick one. Can you give us your run rate earnings expectations for the corporate segment at this point? I guess let's say a Suming Zero Tax Credit Impact.
Speaker Change: So...
Speaker Change: In this quarter, we had a $15 million pre-tags profit and the tax credit investments.
Speaker Change: Lowered that number by roughly 57 million dollars on a pre-tax basis.
Speaker Change: So that will get you closer to the run rate as of this quarter and...
Speaker Change: I would acknowledge that this is an area where we are sensitive to short-term yields. So if you have a short-term yields coming down.
Speaker Change: That would put pressure a little bit on that number, but I would expect that in the near term, I run rate profitability. It should be that we would continue to be profitable in that segment, all of things being equal.
Speaker Change: i
Speaker Change: Ford Ford, that's the current one right.
Speaker Change: The next question comes from John Barnage from Piper Sandler, please go ahead.
John Barnage: Good morning. Thanks for the opportunity. My question sticks there on the 100 basis point of future benefit ratio benefit.
John Barnage: The Actuar or if you take to do a kind of long-term experience.
John Barnage: which your term experience that continues to be favorable, be incremental to that hundred basis point. Thank you.
Speaker Change: I'm going to start off and I ask Alicia, I will be able to go to the field and then come and see if she may have.
Speaker Change: Obviously, when we do a deep dive study as we just concluded we try to incorporate all the experience that we've had today but then also obviously unlocking future assumptions.
Speaker Change: In those future assumptions, there is a future trend incorporated in that.
Speaker Change: and E5.
Speaker Change: Future Experience tends to be if it would work to deviate to that trend that could lead to either further releases or increases related to that. But I do want to acknowledge that there is an element of a future trending incorporated in these on-locks as well.
Speaker Change: Thank you, Max. We incorporated our future trend into our unlocked this year, so we believe we have reflected all of our current experience and expectations. We do review our assumptions annually to investigate new trends, but all that has been reflected in this unlock.
Speaker Change: Thank you for that. In my fall question that's related.
Speaker Change: Following an 18.25 from the Unlock, do you view that that increases the total addressable market for liability? Is that over the long term to potentially benefit from you? Thank you.
Speaker Change: i
Speaker Change: Yeah, I'm...
Speaker Change: I would view them as somewhat unrelated. This unlock is a US gap unlock only with no impact to our US statutory results in the US and reserves and no impact to our FSA results or FSA reserves.
Speaker Change: So I would not draw that link.
Speaker Change: and next question comes from Jimmy Bueler from JP Morgan. Please go ahead.
Jimmy Bueler: First I'd a question on just your expectations for how some of the sales are going to trend. Should we assume that they are going to keep growing from here or will they sort of a pent-up demand phenomenon to where the sales will begin to fade over the next few quarters?
Jimmy Bueler: and I thank you for your support.
Speaker Change: Thank you for the questions. Let me answer this question, let's see the next question.
Speaker Change: and John Bich, David Young.
Speaker Change: Well, it's really tough what's launched in June as a new product and in that month in June we had a very big sales and the reason why we were able to do so is because we had fully prepared for it in advance of the launch.
Speaker Change: I am a member of the United States, and I am a member of the United States, and I am a member of the United States.
Speaker Change: and from July and on, Sumitals Sales have been successful and it is meeting the level that we have in expecting.
Speaker Change: The first day of the project, Markets, was a very good job. We have a lot of work to do.
Speaker Change: and as I have mentioned several times that Timitas is very well known and we're very well taken by customers and it's a very popular product in the market. So that's the...
Speaker Change: I'm going to talk about the next story. I'm going to talk about the next story. I'll talk about the next story.
Speaker Change: So as a result, what we are thinking is until the end of the year, perhaps next quarter, we should be able to generate a very stable number from Simitana.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Speaker Change: and as I have mentioned earlier that this product is very popular among young people, because this product does meet the needs of these young people. But that means that during their payment period, they would have acid formation function as well as nursing care. Then after that period, the customer can choose from medical, nursing care, or a death benefit.
Speaker Change: and that's the reason why this product is so popular among young people.
Speaker Change: [inaudible]
Speaker Change: So my conclusion is that we are expecting to have a certain level of sales from Sumitac going forward as well. That's all for me.
Speaker Change: Okay, and thanks. And then on the U.S. business, it seems like incurred claims are running a lot higher so far this year than they have in the last several years. Is that a mixed issue or are you just seeing usage in some of the products pick up or are there other factors driving that?
Speaker Change: Hey, good morning. This is Virgil from the U.S. I would say that some of it is definitely deliberate and intentional on our part. We want to make sure that we put the value of the benefits in the hands of the policyholders.
Speaker Change: But we don't want to over-toggle, so what we've done this year is we've increased benefits on certain lines of business at no additional cost.
Speaker Change: We've gone out and pushed campaigns for consumers to file wellness benefits.
Speaker Change: to make sure that we try to catch any type of problem before it turns into a long-term condition. And then the last thing I will say to you, though, is that mix does matter. We've been pushing on the cancer business for our individual line of business. And we've had good success year-to-date with sales up about 9%.
Speaker Change: And then the last thing I would say is, we introduced, and I mentioned this before, about our stronger underwriting discipline on our VB benefits.
Speaker Change: And we're really looking not to bring on businesses with high turnover and thus yielding better persistency for us over the long term. All these things are factored in to help drive and move that benefit ratio. We are constantly monitoring those to make sure that we're within our tolerance.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And then just to add to that, there is one more mixed impact that is running through the U.S. results, and that is as we grow our group life and disability business and that becomes a greater proportion of our inforce, that will over time drive up the benefit ratio for the U.S. segment. The group life and disability business we would expect to run in sort of a low 80s benefit ratio, so all things being equal, that will continue to push that benefit ratio higher.
Speaker Change: The next question comes from Wilma Burtis from Raymond James. Please go ahead.
Wilma Burtis: Hey, good morning. I guess, one for Dan, in the recent promotions, could you talk a little bit about what you're most focused on from a development and succession perspective over the next couple of years? Thanks.
Speaker Change: Well, there was something that moved when you asked the question at the very start. What were you asking?
Speaker Change: Oh, sorry. I said, for Dan, given the recent promotions, could you talk a little bit more about what you're focused on from a development and succession perspective for the next couple of years? Thanks.
Speaker Change: Well, I think...
Dan Amos: The first question is how does it relate to me specifically and what are my plans? And my plans really haven't changed. I serve at the pleasure of the board and frankly enjoy doing that. They ultimately make the final decisions on what they want to happen.
Dan Amos: but I'm enjoying it. But at the same time, I owe it to the shareholders and the board to make sure there's a succession plan and there's a depth in management that is there to show our ability to continue on without disruption.
Dan Amos: And I believe that we've got the people in place with the opportunity and at first I had suggested
Dan Amos: to the board, and that they begin to place someone internally, several people that they think have potential to take over one day, and certainly Virgil is at the top of that list.
Dan Amos: I have to say I'm very pleased with the U.S. because it's become a much different company than it was five years ago, as we've gotten into the plaids business that
Dan Amos: I think it was Max was talking about, and we've seen a look at group business and how Virgil mentioned that, you know, we're not right in certain types of business. And then we've got our distribution channel.
Dan Amos: which is very unusual. There really aren't many people out there that have the distribution channel that we have from an independent agent's perspective.
Dan Amos: and then building on the broker business and what's going on there in the U.S.
Dan Amos: And so, yes, I think he certainly deserves the opportunity.
Dan Amos: to have his name in the pot for what will take place when I do retire at some point in time. I think Max is showing his strength on the call today and what he's doing and he's
Dan Amos: gone in as if it was uninterrupted with the job that Fred was doing before he left this year. And so I've been very pleased with that. And then
Dan Amos: Audrey has always been an outstanding person for us from counsel, from independent review of not just that but
Dan Amos: any issue that might be out there that concerns
Dan Amos: understanding the employees, understanding the law.
Dan Amos: understanding all of those aspects of it. So I feel very good about these promotions.
Dan Amos: and then we had several others, our head of IT being Executive Vice President.
Dan Amos: best women in America in the IT area, so we're lucky to have her. You heard Alicia has been with us a little over a year and
Dan Amos: She has jumped right in so I'm very pleased with the bench
Dan Amos: We've got Robin, who's now...
Dan Amos: Chief Accounting Officer of the company and you, we've got Fred Simar. Certainly, what Brad has done has been uninterrupted.
Dan Amos: in terms of taking over Eric's position. So, all in all, I have to tell you that...
Dan Amos: Our bench is strong. Most of them are relatively new in the positions. They've had more responsibility added to them in certain cases, as is in the case of Brad. He's picked up more. You've seen it with
Dan Amos: Max and what's taking place. So all in all that's where I am and I'll just tell you that I'm happy and we'll continue on but I want someone that if something happened tomorrow there would be a smooth transition and the board has plenty of options.
Dan Amos: to do what they deem is necessary.
Speaker Change: Thank you. And congrats to Virgil, Max, and Audrey as well. One thing for Virgil, could you discuss any macro or employment environment impacts that you're seeing in the U.S. that are impacting sales and or recruiting? Thanks.
Virgil: Thank you for the question and thank you for the congratulations. I'm excited about the opportunity.
Virgil: and look forward to partnering with my colleagues here.
Virgil: and pushing Affleck forward for the future.
Virgil: I would say that
Virgil: You saw that earlier in the year, we started out the gate slow with our sales.
Virgil: put it up a negative quarter, then we were able to...
Virgil: rebound in the second quarter.
Virgil: coming up with about a 2.2% increase and then for this quarter really exceeded what I expected at a 5.5% increase.
Virgil: and it's really accumulating from a couple of things. Max and Dan both mentioned the Platt's business. What that means from my perspective though is we have an opportunity right now in a strong product base.
Virgil: to compete in the jumbo case market. Generally, we're talking about employer groups with more than 5,000 employees.
Virgil: And then we're also talking about the relationships that we forge with the brokers in that space.
Virgil: At the same time though, we continue to focus on building our career field force channel back.
Virgil: And what you've seen, though, is in that first quarter...
Virgil: Slow movement on recruitment, we were able to come back with a 10% increase in recruiting And I'm pleased, again, this quarter we were able to come up with a positive increase in recruiting
Virgil: So, therefore, I will tell you that there are some economical things happening around us, but it's all about getting and building up our field and making sure we've got talented recruits that become veterans.
Virgil: Our pipeline is stronger this year and will look strong. Our goal is to convert them into average weekly producers. So, in that environment...
Virgil: We're going to continue to play in the small case market, make sure we forge broker relationships, and then continue to build our reputation up in that larger case space. And I would think that we continue to see consistency in the U.S. like you're saying.
Speaker Change: Thank you.
Speaker Change: The next question comes from Nick Anito from Wells Fargo. Please go ahead.
Nick Anito: Hey, good morning. Thanks. Just on the U.S., can you touch a little bit on persistency and what's driving the strength there? I mean, it's just some sort of mix.
Nick Anito: Hey, yes, let me start again. This is Virgil and let me start with the mention of mix. Max mentioned that earlier. Mix does matter.
Nick Anito: So as we continue to scale up our life and absence and disability business that we brought on board, it does start now to influence the overall.
Nick Anito: Cancer insurance is still extremely important to us. We continue to push on that product and have success.
Nick Anito: And as Dan would say, cancer is a disease of age.
Nick Anito: Therefore, people are more likely to keep it once they have it, and we absolutely see that in our numbers.
Nick Anito: We continue to drive.
Nick Anito: Our wellness benefits, we've actually made some increases on what we pay out on some of our policies. We've also increased the benefits, though, on things like our hospital policy groups.
Nick Anito: demonstrating though is adding additional benefit and value for those consumers.
Nick Anito: As long as we can demonstrate consumer value, we have a likelihood of building that loyalty we're going to keep the product.
Speaker Change: The next question comes from Alex Scott from Barclays. Please go ahead.
Speaker Change: Good morning, this is Jack Trevisan on for Alex. So I appreciate all the color around sales initiatives in Japan, but do you mind talking more about the competitive environment you're seeing over there and specifically in third sector products? Thank you.
Speaker Change: Okay, this is Yoshizumi. Once again, I will be answering your question.
Yoshizumi: And when you talk about third sector, it's basically about medical insurance. And as you may know, the competition continues to be very severe.
Yoshizumi: So, in order for us to survive in this competitive environment, what we need to do is, first of all, to have some uniqueness. And also the flexibility that would serve customers' needs. An easy-to-understand feature.
Yoshizumi: These will be the features that will be needed in a product.
Yoshizumi: And Affleck now currently has this new medical feature called monthly coverage which is very reasonable and which is very well received by the market. And this product also has very flexible features too.
Yoshizumi: So because of this product's uniqueness as well as the flexibility, this product is attracting a lot of attention in the market.
Speaker Change: The reason why we sell Aflac is because we have the loyalty to only sell Aflac.
Speaker Change: and talking about our distribution channel which is really a strength of ours is that there are agencies that only sell Aflac products and they're very loyal to our products.
Speaker Change: And at the same time, we also register our products with large, non-exclusive agencies.
Speaker Change: that have a large volume of young and middle-aged customers. We firmly believe that we can win in the competition by increasing our sales through these channels.
Speaker Change: Thank you.
Speaker Change: And now, let me talk about cancer.
Speaker Change: We have 50 years of history with cancer insurance. So that intelligence that we've gathered
Speaker Change: There is no other relationship between the industry and the people of the mountains.
Speaker Change: And the expertise that we have is something that no other company has. And we also have a relationship with the government, politics, and also other...
Speaker Change: And as a very big channel, we also have Japan Post.
Speaker Change: Affleck
Speaker Change: Well, Japan Post sells Aflac's cancer insurance.
Speaker Change: His results are unbelievable.
Speaker Change: And I do firmly believe that we can have a very good future and have high expectations for the future in both cancer and medical by fully leveraging this third sector power and we truly become number one or we are the number one third sector company.
Speaker Change: and, of course, develop and grow our distribution channel and win against our competitors. And that is my way of thinking.
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.
David Young: Thank you all for joining us today. We hope you'll join us on December 3rd at our financial analyst briefing. If you have any questions, please follow up with Investor and Rating Agency Relations and we appreciate it. Have a good day.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!