Q4 2024 Aflac Inc Earnings Call
Good day and welcome to the Aflac incorporated fourth quarter 'twenty 'twenty four earnings conference call.
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Speaker Change: I would now like to hand, the call over to David Young Vice President capital markets.
Speaker Change: Please go ahead.
Speaker Change: Good morning.
Speaker Change: And welcome thank.
Speaker Change: Thank you for joining us for Aflac Incorporated's fourth quarter earnings call.
Speaker Change: This morning, Dan Amos Chairman and CEO of Aflac incorporated will provide an overview of our 2024 results and operations in Japan, and the United States.
Speaker Change: And then Max Broden Senior Executive Vice President and CFO of Aflac incorporated will provide an update on our fourth quarter and 2024 financial results current capital and liquidity as well some color on our outlook for 2025.
Speaker Change: These topics are also addressed in the materials, we posted with our earnings release and financial supplement on investors don't Aflac Dot com.
Speaker Change: In addition, Max provided US quarterly video update which also includes information about the outlook for 2025.
Speaker Change: We also posted under financials on a same site updated slides of investment details related to our commercial real estate and middle market loans.
Speaker Change: For Q&A today, we're also joined by virtual Miller, President of Aflac incorporated and Aflac U S.
Carl's Lake: Carl's Lake Chairman and representative director President of Aflac International Masatoshi, <unk>, President and representative director Aflac Life insurance, Japan, and Brad disciplined Global Chief Investment Officer, President of Aflac Global investments.
Carl's Lake: Before we begin some statements in this teleconference are forward looking within the meaning of federal Securities laws.
Carl's Lake: 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.
Carl's Lake: Actual results could differ materially from those we discuss today.
Carl's Lake: 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.
Carl's Lake: As I mentioned earlier the earnings release is available on investors Aflac Com and includes reconciliations of certain non U S GAAP measures.
Dan Amos: I'll now hand, the call over to Dan Dan.
Dan Amos: Thank you David and good morning, everyone. We're glad you joined us.
Dan Amos: <unk> provides a more detailed view of our financial results I'd like to reflect on what was another very good year.
Dan Amos: Aflac incorporated delivered very strong earnings for the year with net earnings per diluted share up 23, 8% to $9 63, and adjusted earnings per diluted share up 15, 7% to $7 in 'twenty one.
Dan Amos: Aflac, Japan represented more than 70% of pre tax adjusted earnings and three quarters of the company's consolidated balance sheet in 2024 <unk>.
Dan Amos: <unk>, Japan also generated a 15, 5% increase in pretax adjusted earnings and a record 36% pre tax profit margin in 2024.
Dan Amos: I am pleased with Aflac, Japan's 93, 4% premium persistency and five 6% year over year sales increase which included a 9% sales inquiries in the fourth quarter by.
Dan Amos: By maintaining strong persistency and adding new premium through sales, we are partially offsetting the impact of reinsurance and policies, reaching paid up status.
Dan Amos: This will be <unk> to the future growth of Aflac, Japan.
Dan Amos: <unk> into account Japans demographics, our product strategy is to fit the needs of customers throughout all stages of life acquiring younger customers is critical to our success.
Dan Amos: We believe semi TASS appeals to younger customers in Japan are strong sales in Japan reflect the success of our agencies have had selling sumi toss.
Dan Amos: As the pioneer of cancer insurance, and leading third sector insurer. We also aim to sell the sumi task policyholders of medical policy or cancer policy.
Dan Amos: Our last cancer insurance wings was launched in stages in 2022. Therefore, we are planning a staged launch through our distribution channels of our new cancer insurance product between March and April This new product includes our unique Yuri so cancer.
Dan Amos: <unk> support service.
Dan Amos: Along with insurance coverage that offers enhanced protection before during and after cancer treatment.
Dan Amos: This product also features a flexible coverage and introduces a new plan for children, thus, providing comprehensive protection for customers.
Dan Amos: We will also maintain our focus on being where the customers want to buy insurance through our broad network of distribution channels, including agencies Alliance partners and banks. This reach continually optimizes opportunities to help provide financial protection to.
Dan Amos: Japanese consumers turning to Aflac U S. We are focused on updating our products to ensure that our policyholders understand the value of our products provide.
Dan Amos: When people experience the value of our products, we believe it enhances product persistency, which both benefits our policyholders and lowers our expenses.
Dan Amos: In the U S are continued to be pleased with our 70 basis point improvement in premium persistency does.
Dan Amos: 79, 3%, we also generated a two 7% increase in net earned premiums a measure we continue to focus on improving Additionally, our pre tax profit margin for the year was strong at 21, 1% sales.
Dan Amos: Sales were lower than expected in the fourth quarter, leading to a 1% decline for the year, we continued to focus on more profitable growth through our stronger underwriting discipline.
Dan Amos: At the same time, we are engaging agents and brokers following the stabilization of our network dental operation as always we continue our prudent approach to expense management and maintaining a strong pre tax margin.
Dan Amos: I believe that the need for our products and the solutions, we offer is as strong or stronger than they have ever been before in both Japan and the United States. We are leveraging every opportunity an avenue to share this message with consumers knowing our products.
Dan Amos: Helped lift the people up when they need it most.
Dan Amos: It's something that makes all of us at Aflac, very proud and inspires us to reach more people.
Dan Amos: We continue to reinforce our leading position and build on that momentum.
Dan Amos: We continue to generate strong capital and cash flows while maintaining our commitment to prudent liquidity and capital management.
Dan Amos: We have been very pleased with our investments, which have continued to produce strong net investment income.
Dan Amos: As an insurance company our primary responsibility is to fulfill the promises that we make to our policyholders, while being responsive to the needs of our shareholders.
Dan Amos: Our solid portfolio of support our promise to our policyholders as does our commitment to maintain strong capital ratios. We balanced this financial strength with tactical capital deployment I am very happy with how management is handle capital deployment and.
Dan Amos: <unk> and specifically how well we've adapted to this environment.
Dan Amos: Year to date Aflac Incorporated's deployment of two 8 billion in capital to repurchase more than 30 million shares of Aflac stock <unk>.
Dan Amos: Additionally, we treasure our track record of what is now 42 consecutive years of dividend growth.
Dan Amos: At the same time, we have maintained our position among companies with the highest return on capital and the lowest cost of capital in the industry.
Dan Amos: Combined with dividends. This means that we delivered $3 $9 billion back to the shareholders. In 2024, we believe in the underlying strengths of our business and our potential for continued growth in Japan, and the United States two of the largest life insurance.
Dan Amos: Markets in the World I'll now turn the program over to Max to cover more details of the financial results Max.
Max Broden: Thank you for joining me as I'll provide our financial update on Aflac Incorporated's results for the fourth quarter of 2024.
Dan Amos: For the quarter adjusted earnings per diluted share increased 24, 8% year over year to $1 56.
Dan Amos: A <unk> <unk> negative impact from FX in the quarter in this quarter re measurement gains on reserves totaled $43 million, reducing benefits variable investment income around $17 million above our long term return expectations adjusted book value per share excluding foreign currency re measurement increased three two person.
Dan Amos: Kent.
Dan Amos: The adjusted ROE.
Dan Amos: Was 12% and 14, 5%, excluding FX re measurement and acceptable spread to our cost of capital overall.
Dan Amos: Overall, we view these results in the quarter as solid.
Dan Amos: Starting with our Japan segment net earned premiums for the quarter declined five 4%.
Dan Amos: This decline reflects a $7 2 billion yen negative impact from an internal cancer reinsurance transaction executed in the fourth quarter of 2024.
Dan Amos: And a $4 4 billion yen negative impact from paid up policies.
Dan Amos: In addition, there is a 300 million positive impact from deferred profit liability.
Dan Amos: At the same time policies in force declined two 3%.
Dan Amos: Japan's total benefit ratio came in at 66, 5% for the quarter up 40 basis points year over year.
Dan Amos: 62, 5% for the year.
Dan Amos: The third sector benefit ratio was 56, 9% for the quarter up approximately 70 basis points year over year.
Dan Amos: We estimate the impact from Remeasurement gains to be approximately 100 basis points favorable to the benefit ratio in Q4 of 2024.
Dan Amos: Long term experience trends as they relate to treatments of cancer and Hospitalisation continue to be in place leading to continued favorable underwriting experience persistency remains solid at 93, 4%, which was unchanged year over year and in line with our expectations our expense ratio in Japan was two.
Dan Amos: Eight 8% for the quarter down 30 basis points year over year, driven primarily by a decline in expenses for.
Dan Amos: For the year the expense ratio in Japan was 19, 1% for the quarter adjusted net investment income in yen terms was up three 7% as the transfer of assets to Aflac re Bermuda associated with reinsurance.
Dan Amos: And lower floating rate income was more than offset by higher returns construction private credit infrastructure and our alternatives portfolio.
Dan Amos: Adjusted net investment income was up 12, 1% for the year.
Dan Amos: The pretax margin for Japan in the quarter was 31, 6% up 120 basis points year over year, a very good result.
Dan Amos: For the full year, the pre tax margin was even stronger 36%.
Dan Amos: Which is also the highest in 30 years turning to U S results net earned premium was up two 7%.
Dan Amos: Persistency increased 70 basis points year over year to 79, 3% our U S. Total benefit ratio came in at 46, 3% 170 basis points higher than Q4 2023.
Dan Amos: Driven by lower re measurement gains than a year ago.
Dan Amos: We estimate that the re measurement gains impacted a benefit ratio by approximately 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.
Dan Amos: For the full year the U S. Total benefit ratio was 46, 8% our expense ratio in the U S was 43%.
Dan Amos: Down 310 basis points year over year.
Dan Amos: Primarily driven by platforms, improving scale and strong expense management.
Dan Amos: For the year the U S expense ratio was 38, 5% our growth initiatives group life, and disability network dental and vision and direct to consumer increased our total expense ratio by 170 basis points for the quarter.
Dan Amos: 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.
Dan Amos: Adjusted net investment income in the U S was up <unk>, 9% for the quarter.
Dan Amos: Mainly driven by higher returns from alternatives.
Dan Amos: And three 3% for the year.
Dan Amos: Profitability in the U S segment was solid with a pretax margin of 19, 7% also a good result.
Dan Amos: As was the 21, 1% for the full year.
Dan Amos: We continue managing through the worst commercial real estate downturn in decades during the quarter, we increased our seasonal reserves associated with our commercial real estate portfolio by $40 million net of charge offs as property values remain at distressed valuations.
Dan Amos: We're also foreclosed on two loans, adding them to our real estate owned portfolio.
Dan Amos: We continue to believe that the current distressed market does not reflect the true intrinsic value of our portfolio, which is why we are confident in our ability to take ownership of these assets managed them through the cycle and maximize our recoveries.
Dan Amos: Our portfolio of first lien senior secured middle market loans continue to perform well.
Dan Amos: With losses below our expectations for this point in the cycle.
Dan Amos: In our corporate segment, we recorded a pretax loss of $4 million.
Dan Amos: Adjusted net investment income was $153 million higher than last year due.
Dan Amos: Due to a combination of continued lower volume of tax credit investments higher rates and asset balances, which included the impact of the reinsurance transaction in Q4 of 2024, which was similar in structure and economics in yen terms to our October 2023 transactions.
Dan Amos: These tax credit investments impacted corporate net investment income line for U S. GAAP purposes negatively by $46 million in the quarter with an associate a credit to the tax line.
Dan Amos: The net impact to our bottom line was a positive $4 million in the quarter.
Dan Amos: To date these investments are performing well and in line with our expectations. Our capital position remains strong and we ended the quarter with an <unk> above 1100, 50% and estimated ESR about 270%.
Dan Amos: Our combined RBC, while not are finalized we estimate to be greater than 650%.
Dan Amos: These are strong capital ratios, which we actively monitor stress and managed to withstand credit cycles as well as external shocks U S statutory impairments with $3 million.
Dan Amos: And it was 700 million yen of Japan, FSA impairments in Q4.
Dan Amos: This is well within our expectations and with limited impact to both earnings and capital.
Dan Amos: Leverage was 19, 7% for the quarter.
Dan Amos: It's just below our target range of 20% to 25%.
Dan Amos: As we hold approximately 60% our debt in yen. This leverage ratio is impacted by moves in the yen dollar exchange rate.
Dan Amos: This is intentional and part of our enterprise hedging program protecting the economic value of Aflac, Japan in U S dollar terms.
Dan Amos: Unencumbered holding company liquidity stood at $4 $1 billion to.
Dan Amos: $2 3 billion above our minimum balance, we repurchased $750 million of our own stock and paid dividends of $277 million in Q4 offering good relative IRR on these capital deployments.
Dan Amos: 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 cost of capital on December 3rd we shared estimated ranges for annual key metrics for both segments for 2025 through 2027 at our.
Dan Amos: <unk> analyst briefing and we continue to standby. These ranges. However for 2025, we expect the benefit ratio in Japan to be towards the higher end of the 64% to 66% range.
Dan Amos: And we continue to expect the expense ratio to be at the lower end of the 20% to 23% range as we pursue various growth and strategic initiatives.
Dan Amos: As a result, we expect the Aflac Japan's pre tax profit margin to be at the lower end of the 30% to 33% range.
Dan Amos: In the U S. We expect the benefit ratio for 2025 to be at the lower end of the 48% to 52% range and the expense ratio to be at the upper end of the 36% to 39% range as we continued to scale new business lines at the same time, we expect pre tax profit margin for 2000.
Dan Amos: 25 in the U S to be at the upper end of the 17% to 20% range. Thank you I'll now hand, it back to David to begin Q&A.
David Young: Thank you Max.
Speaker Change: Before we begin our Q&A, we ask that you. Please limit yourself to one initial question and a.
David Young: Related follow up.
David Young: You May then rejoin the queue.
David Young: We will now take the first question.
David Young: We will now begin the question and answer session.
Speaker Change: I asked a question you May press Star then one on your telephone keypad.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the key.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Joel Hurwitz: And our first question will come from Joel Hurwitz Dowling and partners. Please go ahead.
Joel Hurwitz: Hey, good morning.
Joel Hurwitz: To start on U S sales virtual can you just provide some more color on what youre seeing in the competitive environment. That's.
Joel Hurwitz: It's impacting your sales is it specific products or specific areas of the market.
Speaker Change: Alright, Thank you Joe and good morning.
Joel Hurwitz: First let me set.
Speaker Change: <unk>, we're going into the fourth quarter.
Speaker Change: We knew going into the fourth quarter, Joel that we were up against.
Speaker Change: One of the tougher comparisons for Q4.
Speaker Change: Q4 of 2023 that was one of the largest.
Quarters, we've had in the history of Aflac. So we knew we had a strong solid performance.
The second thing I'll say is that we also knew that we would stick to the underwriting discipline, we have put forth in our group Bebe products what they are.
Speaker Change: Really means is that we're not going to be bringing business onboard that does not fit our profit profile. Therefore businesses that have high turnover businesses do you have low claims filing.
Speaker Change: We're not going to accept those because they are not good for the company longer term the stronger underwriting discipline.
Speaker Change: For a profitable business and profitable growth in the long term vision that we have at Aflac.
Speaker Change: Other thing I will say is we knew the market needed to respond to the improvements we've made in our dental and vision platform.
Speaker Change: Closed prior in prior conversations that we had a failed system implementation that we were recovering for from I'm very pleased with the recovery that we've seen though partnership we formed with when the industry, leading third party administrators out there.
Speaker Change: Substantially move the needle on improvements and we are open for business, we needed to get the brokers and our veteran agents to come back on board and really put that product back in the market is a very competitive product and quite frankly, we did not get the response that we need it we saw a 33% decline in our dental sales.
Speaker Change: For Q4, along with the demo sales themselves, though there is the impact that we call Halo, which means that on a general sense as we get additional voluntary benefit sales when we sell the derma product.
Speaker Change: Those are really the things that we add them up it impacted.
Speaker Change: We really performed at about Q4, I would say, Joe I'm disappointed with the softer sales, but I'm very pleased.
Speaker Change: Pleased with our overall performance.
Speaker Change: Did demonstrate the solid financial management, if you heard from Max who you heard from Dan They mentioned about pre tax earnings were up nine.
Speaker Change: <unk>, 3%.
Speaker Change: Margins were up one 3% premiums.
Speaker Change: Premiums up three 7% principally.
Speaker Change: 7% overall very pleased with that shows you, though this management discipline of making sure that we're looking at profitable business is generating the response that we need will reduce expenses by three 1% and then overall, we were able to give additional value to our policy.
Speaker Change: <unk> what are the increased benefit ratio and now were watching that very closely but very solid performance based on that discipline, we put in.
Speaker Change: They are in the market.
Speaker Change: All right very helpful. Thank you.
Speaker Change: And then for my second one just wanted to move to the 22, 5% outlook commentary that Max provided so for Japan, you guided to the pre tax margin to be at the low end of the range, which is below where I was and I think most were I think it's largely largely on net investment income and and there is some misunderstanding on.
Speaker Change: How the accounting works on the.
Speaker Change: The floating rate security hedges could you just provide more color on how the benefits from those hedges flow through earnings.
Speaker Change: Yes, Thank you Joe so.
Speaker Change: We obviously have a floating rate book in the Japan segment that is a little bit less than $9 billion of notional balance also at the corporate segment, we have a little bit over $4 billion of cash that is invested at the short end of the curve.
Speaker Change: That means that all these asset balances are very sensitive to so far.
Speaker Change: And that is both the one month three month sulfur that they reprice at as we go into 2025, obviously, we had a rate cut in December and then there is an expectation about further rate cuts in 2025, when you look at the forward curves.
Speaker Change: When we just.
Speaker Change: Inject the <unk>.
Speaker Change: Our word curves onto our <unk>.
Speaker Change: Projected yields for 2025 that means that there are likely to be lower than what they were in 2024. So that is why our floating rate income is expected to be lower.
As it relates to.
Speaker Change: Our interest rates swap. This is really a tale hedge swap that made sure that we protect it.
Speaker Change: Our floating rate income from any significant declines in interest rates at the short end of the curve.
Speaker Change: That means that obviously, we are at higher rates now than when this swap was entered into that means that it is out of the money and somewhat ineffective at this point and that's why you see the full brunt of any relatively even relatively small declines.
Speaker Change: Bob.
Speaker Change: Interest rates at the short end immediately flows through.
Speaker Change: Our net investment income.
Speaker Change: In 2025.
Speaker Change: Also the mark to market component of the interest rate swap that falls below the line in the realized gains losses I E outside of adjusted earnings, but obviously included in our U S GAAP earnings.
Speaker Change: I hope that's helpful.
Speaker Change: Hey, guys. Thank you.
Speaker Change: Okay.
Speaker Change: The next question comes from Jimmy Buhler of Jpmorgan. Please go ahead.
Jimmy Buhler: Hey, good morning, So first just had a question either for.
Jimmy Buhler: Dan or for Charles on Japan sales deal, obviously grew at a strong pace this quarter, but if you look at their sales are versus where they used to be pre pandemic, they're still fairly depressed. So just wondering what's changed in the market and what's your optimism of being able to get to in an absolute sense the sales level.
Jimmy Buhler: That you had before that will allow you to but.
Essentially grow euro and of course as opposed to.
Jimmy Buhler: We report declining premium growth.
Jimmy Buhler: Okay.
Jimmy Buhler: Go ahead, Andy do you want to.
Jimmy Buhler: With that.
Jimmy Buhler: I will let yoshi Jamie.
Jimmy Buhler: Yes. This is <unk> from.
Speaker Change: From Aflac, Japan.
Jimmy Buhler: And the pandemic.
Jimmy Buhler: Hello, John.
Jimmy Buhler: Hi, Scott.
Jimmy Buhler: There'll be no cut to the model.
Jimmy Buhler: You must know that southern all air.
Jimmy Buhler: You have a microphone benign only method.
Jimmy Buhler: The pandemic most of the activities amongst the public yesterday covered so we do not see.
Jimmy Buhler: We see that that has been covered.
Jimmy Buhler: There are no pandemic been all along.
Capital.
Jimmy Buhler: And all that stuff.
Jimmy Buhler: Certainly no ego no.
Jimmy Buhler: Even on the data to do that.
Jimmy Buhler: I know it's tough.
Speaker Change: Hi, Scott.
Jimmy Buhler: And you know your customer.
Speaker Change: Giovanni mathematics team, so we have been focusing on making a recovery.
Speaker Change: There is activity because during the two or three years of the COVID-19. The sales activities have been stagnant so that have been.
Speaker Change: At this point.
Speaker Change: Yeah.
Speaker Change: This is the issue.
Speaker Change: Okay.
Speaker Change: So let me answer this is Jimmy.
Speaker Change: This is Matt.
Or as you got through all.
Speaker Change: Marketing.
First of all we have gone through our marketing and sales transformation starting January gorilla somewhat.
Speaker Change: Got it ill she sung.
Raul: Hi, Raul.
Speaker Change: The brand.
Speaker Change: Look on the market.
Speaker Change: This is the conductor integrated end to end marketing activities based on the different brand pipeline.
Speaker Change: Pipeline, starting with medical and cancer assay permission can nursing care.
Speaker Change: The voyage to Cuba.
Speaker Change: Also on a partial.
Speaker Change: Okay.
Speaker Change: Mental state, California, Okay.
Speaker Change: We can walk.
Speaker Change: And we will be continuously injecting a competitive products centered around our main products cancer and medical insurance.
Speaker Change: Okay well.
Speaker Change: I think that's gonna see government.
Speaker Change: Chunnel tunnel.
Speaker Change: We'll get someone who is in our hands.
Speaker Change: Essentially.
Speaker Change: And we plan to launch a new cancer insurance product in stages from March to April in order to respond to changing customer needs.
Speaker Change: Thank you Yolanda.
Speaker Change: Thanks.
Speaker Change: So we can line up we got to start with what the approach is going to get someone with Honeywell.
Speaker Change: Sure <unk>.
Speaker Change: With the launch of the new product to meet US, which was launched last June 2024, we have managed to expand our product lineup and now being able to approach point of greater customer audience.
Speaker Change: Sure.
Speaker Change: Gentlemen.
Speaker Change: Excel clears occupancy cut at Ocado facility monopoly Camille eco steam and we will be executing measures in order to develop and enhance the potential of the solicitor.
Speaker Change: Put annuity Corona and cognizant very modest in size.
Speaker Change: With these efforts, we will like to recover our performance.
Speaker Change: Covid level.
Speaker Change: That's all.
Speaker Change: And then maybe for Joe.
Speaker Change: In the U S business I think there've been a couple of reasons that you've cited for sales being weak.
Four one is just for dental.
Speaker Change: PPA issues and then secondly competition.
Speaker Change: And margins and supplemental products.
Speaker Change: Or in the voluntary market I'm, assuming that the competition in market issue as something thats not going to change but.
Speaker Change: And if that is the case, assuming that that'll be an ongoing headwind to your sales, but then on the dental.
Speaker Change:
Speaker Change: Rollout.
Speaker Change: Is that starting to get to normal or is that more of a 2026 event.
Speaker Change: No. Thank you for the question.
Speaker Change: We absolutely want everyone listening I know we're open for business.
Speaker Change: Invested time resources and dollars to make sure. We got a strong platform. We went through a very diligent process to get the right partner, who is an industry leading partner to make sure that we're prepared to deliver on the customer experience that we need. So we are confident in our demo platform. The way we have it now.
Speaker Change: The concern, though is making sure that the brokers and agents are back in market with it and Theyre on board to sell it I expected to see a stronger return for them in the fourth quarter, but im looking forward to see how we deliver on that this year, we are out meeting with them, where let them know about how the process works we're in.
Speaker Change: I think to say come back and sell the product I would also say, though what's gone well for us as you look at the investments we made in our life, an absence and disability platform we determined.
Speaker Change: We exceeded our sales expectations there were strong in the large case market now very competitive against some very known brands that have been in that space for a long time, our disability products are competitive we have a world class absence management discipline, where we're doing it for.
Speaker Change: One state in particular, and we're delivering well on that.
Speaker Change: Dan.
Speaker Change: Also selling our what we would call our paid up life or employee of life products.
Speaker Change: We also invested in a direct to consumer platform, we term as consumer markets we strongly.
Speaker Change: Better than expected sales year. There. So those are the things that are going well, we get our dental platform back in line this year and I expect to demonstrate an increase in sales over last year.
Dan Amos: And this is Dan.
Dan Amos: I am encouraged about what I'm seeing.
Dan Amos: Virgil talk to me early on in the first quarter and said.
Virgil: There are some ways, we can make this saves.
Dan Amos: Sales number.
Virgil: And <unk>.
Dan Amos: I've got a push.
Dan Amos: Some areas and as an adult pushed lower profits.
Dan Amos: For the sake of making the sales now.
Dan Amos: That's the wrong way I want to look at earned premium I want to look at what's going on and I think our model for the future is much stronger today than it was a year ago, especially on the Standalone vision side, and we are expecting that to come through for the full year.
Speaker Change: Okay. Thank you.
Dan Amos: Yeah.
Dan Amos: The next question comes from Mike Ward of UBS.
Dan Amos: Please go ahead.
Mike Ward: Thank you and good morning.
Speaker Change: I was just wondering just on the contribution to the Japan sales growth.
Speaker Change: Assuming cost too.
Speaker Change: It seems like a primary driver of the growth.
Speaker Change: Is it.
Speaker Change: All fair to assume that we might be relying on.
Speaker Change: First sector sales, maybe more heavily than we.
Speaker Change: We previously thought in order to reach the Japan sales targets.
Speaker Change: Thanks Pat.
Speaker Change: Sure.
This is a negotiation.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Let me just kind of steel.
Speaker Change: Taking a photo humble.
Speaker Change: I still would have gone up.
Speaker Change: Some of them locked up as opposed to even a lot by some branches.
Well, we're clearly does low to begin with we do not announce or disclose.
Speaker Change: Sales percentage contribution. However, aflac is the company is centered around the third sector insurance product Ginza and <unk> already got a more <unk>.
Speaker Change: Let me first of all <unk>.
Speaker Change: The Gorgon Yoga corridor cable Stifel.
Speaker Change: Sure.
Speaker Change: And the main way to conduct our sales activity today is to also offer a medical or cancer insurance Wendover first sector products semi test is being offered.
Speaker Change: There are no volume when you at <unk>.
Speaker Change: Keyless musket at the mall colonial Dyson <unk>.
Speaker Change: <unk> will go towards starts data medallion so although.
Speaker Change: We will make a certain contribution to our first sector performance.
Speaker Change: Our goal is to grill third sector performance.
How can they essentially came in more or less.
Speaker Change: But just thinking all.
Speaker Change: And last year right. After the launch of the <unk>, we have enjoyed a significant significant breadth and scale.
Speaker Change: Scott.
Yaniv: Yaniv please.
Speaker Change: Got it.
Speaker Change: Thank you <unk>.
Speaker Change: On the muscle and we expect sales to setup compared to 2024.
Speaker Change: Homebuy upstage dealing with however, we believe the product will continue to generate solid results.
Speaker Change: Scott.
Speaker Change: Okay mental San Francisco HMA Aif.
Let me know dental to.
Speaker Change: So, bringing a solution on that.
Speaker Change: Hello.
Speaker Change: Okay Doug.
Speaker Change: And is there any market data sources.
Speaker Change: And so the vessel is unlike the traditional product features in first sector product. It has developed to respond to that.
Speaker Change: The younger generations, who are looking to accumulate their asset.
Nick Clegg: Nick Clegg.
Speaker Change: Hi, Good hotel motel, David Doll, you talk silica and I love the nature of this product is that in addition to the aspirational nature of it also carries a nursing care P. J.
Speaker Change: Hello Condo go.
Speaker Change: Oh, yes, muscle dental hosseini, Henkel, <unk> youth Auxilium with Celsius.
Speaker Change: And all of that silicon.
Speaker Change: Another characteristic is that after the payout policy premiums are paid up they can convert it to the medical insurance or other types of reinsurance products I'll quit Donald <unk>.
Speaker Change: Our team did.
Speaker Change: Yes.
Speaker Change: Dice sampling ethanol, hey, buy a <unk> or not.
Speaker Change: Google capital political today, both on the Coco coupon more cockpit I stood at <unk> and <unk> what does the data.
Speaker Change: And it also carries a strategic objective, which is to expand our customer base by capturing the younger generation.
Speaker Change: Concurrently.
Speaker Change: When this product together with our third sector products. So this is a very unique product.
Speaker Change: That's all.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Just wanted to add a few comments as well Mike.
Speaker Change: We do not have a sales cap on our assuming cost of sales and the reason why is that number one we do believe that we get very good profitability out of this product. This is both on a GAAP basis.
Speaker Change: But also on an IRR basis post reinsurance.
Speaker Change: And what it means is that we also now have a very good hook product that ultimately will drive higher third sector sales as well. So we definitely see ourselves as a third sector company, but this is an additional product that will help grow both our first sector business and the third sector business.
Speaker Change: While also giving another tool to our distribution to sell more.
Speaker Change: More commissions.
Speaker Change: And I do want to say that the reason why now is because interest rates are higher in yen terms, but more importantly, we have built reinsurance expertise.
Speaker Change: In and around the company, which means that we can now conduct these operations and get the better capital efficiency associated with these products. So we can really make them work.
And I will add that.
I've been so impressed with the job.
Speaker Change: That <unk> and his team has done and monitoring this.
Speaker Change: Through the guidance of Max.
Speaker Change: And what when Steve Beaver and what we've done to watch.
Speaker Change: <unk> this and.
Speaker Change: Every Sunday night I get a report.
Speaker Change: When we have our call on what is taking place and how the interest rates are going and where the lines are and.
Speaker Change: Our actuarial department is on it.
Speaker Change: It's just.
Speaker Change: I think he would be proud if you saw the inner workings of of what has taken place over the last couple of years with reinsurance.
Speaker Change: It shows that we're a company that's evolving over time, and just getting stronger and what we're doing that having better financial controls over the things that are taking place.
Speaker Change: The next question comes from Wes Carmichael of Autonomous Research. Please go ahead.
Wes Carmichael: Hey, good morning.
Wes Carmichael: And then just on re measurement gains and losses. It appears the gains benefit has been slowing which is perhaps not surprisingly given a pretty sizeable unlocking in the third quarter, but when you look at trends going forward would you expect that to continue Max or should that be relatively muted.
Wes Carmichael: Yes.
Wes Carmichael: We obviously have experienced very significant re measurement gains and also <unk>.
Wes Carmichael: <unk> gains from unlocking actuarial assumptions.
Wes Carmichael: In the U S in 2023 and in Japan in 2024 as it relates to our assumptions going forward. We do feel that we obviously have realistic I'm very good assumptions.
Wes Carmichael: That by definition.
Otherwise, we would have to change. It. This is something that we look at every quarter.
Wes Carmichael: But we.
Wes Carmichael: And if something material were to change we will unlock assumptions, but our deep dive study occurs in the third quarter of every year.
Wes Carmichael: Each quarter, though there is a re measurement gains losses that are coming through our results as we true up for the experienced in that quarter and that has continued to be favorable as we have come out of the pandemic.
Wes Carmichael: That being said I do want to be a little bit cautious as we are seeing higher claims come through especially on products. For example in the U S on our accident and our hospital products and to some extent also cancer and.
Wes Carmichael: That means that.
Wes Carmichael: Our re measurement gains may not be as strong going forward as they have been in the past, but generally speaking we are a company to take a cautious approach to our underwriting to make sure that we get good results.
Wes Carmichael: And I think that the re measurement gains that you have seen is a testament to that all very good underwriting decisions that the company has taken in the past.
Wes Carmichael: Thank you.
Speaker Change: A follow up I guess in the press release, Dan you mentioned efforts on re engaging agents in the U S. Can you just talk about the recruiting environment in the U S are you seeing progress there or is it kind of slowed.
Speaker Change: Hi, Good morning. This is virtual and let me give you a little color on that.
Speaker Change: And last year.
Speaker Change: A new regime here. So definitely there is a lot of competition there are things like the economy that impact recruiting is from time to time.
Speaker Change: I'm sticking to the point that we're going to always be around the 10000, Mark what are recruiting we've demonstrated that now back to back although it's a little bit down from the year over year, we're still right around that 10000, Mark Here's what I would say is that the core strength of Aflac has always been our distribution when you think about that.
Speaker Change: We will continue to go out recruit agents convert them make the feel for is strong and dominant in that small market.
Speaker Change: There is some new levels of leadership, where we continue that focus.
Speaker Change: Inflation plans are built around recruitment and conversion average weekly producer and opening new small accounts, we continue to be strong and our partnership with brokers in the mid market and then as I mentioned earlier very strong upper case market now with the relationships we formed.
Speaker Change: Life announced with disability discipline. So we've got the market covered when it comes to distribution.
Speaker Change: Spec to recruit another 10000 around 10000 this year.
Speaker Change: We continue to invest in what we're doing in that field force.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: The next question comes from Elyse Greenspan of Wells Fargo. Please go ahead.
Elyse Greenspan: Hi, Thanks, Good morning, I guess my first one is on capital.
Elyse Greenspan: Buyback picked up $750 million in the quarter, you, guys, obviously pretty pretty healthy capital positions peloton.
Elyse Greenspan: The U S and Japan.
Elyse Greenspan: Does that 750.
Elyse Greenspan: Like a good run rate level or how should we think about share repurchase in 'twenty five.
Elyse Greenspan: Thank you Elyse your observation is correct that we obviously have a very healthy capital position around the company and to get it with that we also have a very good free cash flow generation overall as well and that is what gives us the opportunity to reinvest into our operations and to redeploy capital back.
Elyse Greenspan: To our shareholders as well.
Elyse Greenspan: We are very IRR, driven and as of right now I would say that we get by far the best IRR on selling an auto policy.
Elyse Greenspan: So as it relates to capital that is the number one area that our capital is going to so we're looking for areas to grow our business organically.
Elyse Greenspan: On top of that we obviously have increased our dividends.
Elyse Greenspan: Quite significantly over the last five years, where we almost doubled our dividend per share and on top of that we want to be opportunistic impact all in the way, we redeploy capital back to shareholders through share repurchase.
Elyse Greenspan: We stepped that up a little bit in.
Elyse Greenspan: In the fourth quarter by $750 million, which I believe is the most that we have done in a single quarter.
Elyse Greenspan: So that's a meaningful return back to shareholders, but going forward. We will continue to obviously evaluate all the opportunities that we have and make sure that we could get good irr's on all the deployments that we did.
Speaker Change: Thanks, and then my second question I believe there was data sharing issue with Japan post not related to Aflac I believe right, but in general if you could.
Speaker Change: Just comment on that and then does that have any impact on your sales in the fourth quarter or would you expect there to be an impact in 2025.
Speaker Change: Okay.
Speaker Change: This is <unk> speaking from Aflac, Japan.
Speaker Change: Thank you, Mike I'm, asking amortize Tony Makuch, when you sign a lot okay.
Speaker Change: Also on a go hunker in the home by.
Speaker Change: On Monday.
Speaker Change: <unk> is the only mice.
Speaker Change: First of all let me be clear, but there was no issues with our sales of Aflac Japan's cancer insurance up all the time today.
Speaker Change: The four year Belvoir.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Stickiness tayo steamer and given its past experience, Japan post is taking a conservative approach to addressing this matter.
Speaker Change: Important to segregate the.
Speaker Change: So again <unk> themis debt.
Speaker Change: I'll do that.
Speaker Change: It was a good open either <unk> to debt.
Speaker Change: Demos.
Speaker Change: <unk> group is committed to selling our products.
Speaker Change: Our standard practice Aflac, Japan is in close communication with Japan Post group at all levels of the organization.
Speaker Change: And your Point's a good report Mr. Tony Caracas debt.
Speaker Change: Oh, well, that's taking us so we'll continue to work closely with Japan Post group in support of its sales of assets.
Speaker Change: Cancellation.
Speaker Change: That's all.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from John Barnidge of Piper Sandler. Please go ahead.
Speaker Change: Good morning, Thank you for the opportunity Virgil and your comments you've talked about a failed implementation that was collected and how much of the market was dental and vision.
Speaker Change: Yes.
Speaker Change: Hey, John Great to hear from you.
Speaker Change: Asking that question one more time I didn't catch the last part please.
Speaker Change: Yes, you talked about a failed implementation that was corrected.
Speaker Change: And how much of the market was been on vision.
Speaker Change: It.
Speaker Change: Can be offered by brokers as a result of available implementation.
Speaker Change: Alright, Thanks, John Yes, we were available John So I would tell you. This though that we had some service degradation earlier in the year that definitely impacts the perception of trust.
Speaker Change: Making sure that the brokers and agents will come back and sell it.
Speaker Change: During the fourth quarter, we were open for business and ready to go.
Speaker Change: We've tested all of our processes.
Speaker Change: With a partner who has a strong reputation and who is doing a good job with aflac.
Speaker Change: Our network of Dennis It's one of the largest in the industry. We do a rennet network and we also have a proprietary network both to offer what I would say to you though is that it.
Speaker Change: This business, where agents and brokers have choices.
Speaker Change: In our business, we have to earn trust and Thats, where were focused on getting that trust and demonstrating that the processes work. So if you look again, just dimension and a Q4 sales from prior year were down 33%, although they don't make up a large part of our overall sales right now.
Speaker Change: I'll say to you, though that we get the additional voluntary benefits along side. So it's not just impacting demo. It also has this halo effect, where you're not bringing other business that you'd normally would have.
Speaker Change: Say progress here as we look into January.
Speaker Change: We are regaining some confidence we're going around to all of our broker partners and we've put all types of messages out demonstrating confidence to our agents and I'm looking forward to seeing them come back and sell the product. It is a it makes a competitive product. We spent a lot of time developing that and I think it's good for our consumers out there to give it a try.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you for that and my follow up question remains on distribution ahead of the anticipated new cancer product launch should we expect more modest sales in the near term for that.
Speaker Change: Okay.
Speaker Change: Let me take that.
Speaker Change: Hi.
Speaker Change: Yes.
Speaker Change: Speaking.
Speaker Change: Yeah.
Speaker Change: Modest.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Okay. So theres no cancer insurance will be launched in.
Speaker Change: In March 2020.
Speaker Change: Do you have any study.
Speaker Change: And we're expecting this to be bigger driver.
Speaker Change: No total thank you.
Speaker Change: Yes.
Speaker Change: Market will grow in Chicago.
Speaker Change: And we have been introducing innovative cancer insurance to the market.
Martin Hasani: Hello, Martin Hasani.
Martin Hasani: Firstly on your thoughts on are there are no coincidence.
Martin Hasani: <unk> gone Philadelphia Baltimore Tour, Walter can you think you'll still constitute fabless customer.
Martin Hasani: This time in addition to the insurance coverage will be integrating <unk> cancer consolidations, apart, which is cycles are unique win share service into the coverage.
Speaker Change: Company, most everyone and I would like to mention three characteristics Judith simple Monaco shutdowns.
Martin Hasani: It carries a very rich and simple coverage structure.
Speaker Change: Or would you like it or not.
Martin Hasani: Qdoba Qdoba also or killed.
Martin Hasani: Got it.
Martin Hasani: And not only during the treatment, but there will be a coverage will be enhanced before and after treatment.
Martin Hasani: Q.
Speaker Change: Hi, Joe.
Martin Hasani: Johnny Walker.
Speaker Change: And we have changed the payment condition for the benefit to be more easy to understand.
Martin Hasani: <unk>.
Speaker Change: Oh goodness.
Martin Hasani: The leukemia.
Martin Hasani: June on local sourcing that.
Next nature is the fact that it has a very flexible coverage designs that allow us to combine the existing policies and other products.
Martin Hasani: We should do with it.
Martin Hasani: Coca Cola downloads and a record low.
Martin Hasani: Sony is unknown.
Martin Hasani: Gordon.
Martin Hasani: Okay. Thank you.
Martin Hasani: For the moment get put on all sorts of things and we have also newly established a plan with lower premiums to support pediatric cancer patient family, whose economic burden tends to be high with longer treatment period, Hello, new product.
Martin Hasani: For today's call.
Steve Cotroneo: Steve Cotroneo.
Martin Hasani: Okay.
Martin Hasani: At this time.
Martin Hasani: And we expect to see it.
Martin Hasani: Increasing the performance by introducing this product to various channels in Asia.
Martin Hasani: Paul.
Speaker Change: Let me, let me add one thing.
Martin Hasani: Yes.
Martin Hasani: As part of your question is that anytime we introduce a new product.
Martin Hasani: A revised product we'll call it.
Martin Hasani: There is a little dip in sales waiting for the new product and then the product should take off.
Martin Hasani: And with the excitement of it being introduced throughout the country. So I just want to be clear on that.
Martin Hasani: You can see a little dip and then.
Martin Hasani: Strong growth.
Martin Hasani: Yeah.
Martin Hasani: Thank you.
Speaker Change: The next question comes from William Bird of Raymond James. Please go ahead.
William Bird: Hey, good morning.
Speaker Change: First question.
Speaker Change: Could you talk a little bit about any change in your thinking regarding the 10% reinsurance of the Japan block to Bermuda.
Speaker Change: And also just maybe touch on how you would reevaluate that if at all thanks.
Speaker Change: Okay. Thank you will.
Speaker Change: So we currently have no change in our thinking.
Speaker Change: To date, we have.
Speaker Change: Ceded roughly 6% of our asset base of Aflac, Japan to Bermuda.
Speaker Change: And so we have significant capacity as it relates to our.
Speaker Change: Yes.
Speaker Change: Internal cap of 10% our I want to stress that this is not an external cabinets and internal cap.
Speaker Change: I think it's a good risk management practice to have these kind of cap.
Speaker Change: Caps in place because it means that we now have an opportunity to evaluate what we have done and once we get closer to that 10%.
Speaker Change: Obviously, all legal entities involved will make their own evaluation of it makes sense to down move forward and increase.
Speaker Change: That level for.
Speaker Change: For reasons, where.
Speaker Change: It may make sense for that legal entity that applies to aflac Bermuda that it plays applies to Aflac, Japan, and obviously Aflac Inc.
Speaker Change: As well to date, we are very pleased with the outcomes of our reinsurance operations. Both in how they are being conducted but also the overall outcomes all of it as it relates to improved balance sheet efficiency and as you can see improved return on equity overall for the group.
Speaker Change: In fact, it has also reduced the risk of.
Speaker Change: Our Aflac, Japan operations as well so overall, we're quite pleased with where we are and.
Speaker Change: As we get closer to that 10.
Speaker Change: 10% level.
Speaker Change: We'll reassess.
Speaker Change: Okay. Thank you and then are there any dynamics of the weaker yen that could impact <unk> operations our results aside from.
Speaker Change: I guess the repeat repatriation impacts thank you.
Speaker Change: So well.
Speaker Change: Obviously, the yen dollar exchange rate does have an impact on our GAAP financials.
Speaker Change: As you know, we do not hedge our GAAP financials. So as you translate our yen denominated earnings into U S. Dollars. It does have an impact and you obviously have seen that especially over the last three years, when you've had experienced significant depreciation of the year.
Speaker Change: Versus the dollar.
Speaker Change: That being said, we do believe and we have the philosophy that we protect the economic value of Aflac, Japan through an enterprise hedging program.
Speaker Change: This is three components to it where we hold the U S dollar assets.
Speaker Change: On the Aflac, Japan balance sheet. It is us at Aflac, Inc. We are borrowing in yen and we also have an overlay of FX forwards at the holding company as well.
And you add that up and we believe that that gives us very good protection on an economic basis to any moves both small and significant to the yen dollar rate.
Speaker Change: Okay. Thank you.
Speaker Change: The next question comes from Tom Gallagher of Evercore ISI. Please go ahead.
Tom Gallagher: Good morning, Matt how much of the Japan margin coming in at the low end of the guide is floating rate impact on NII and how much of it is more limited benefit ratio improvement if you can unpack that.
Tom Gallagher: I would say that the vast majority.
Tom Gallagher: All of it is obviously driven by net investment income.
Speaker Change: And I'll, let Brad comment a little bit on that because obviously we.
Speaker Change: We're coming off a very good base here in 2024 that being said when you think about the components of the benefit ratio.
Brad: I would expect that over the forecast period of 2025 to 2027 that as we travel through that forecast period, the benefit ratio all things being equal we would expect to decline.
Brad: So it will start at the high end of the range in the end at the lower end of the range and the reason for that is that as our in force mix is changing and it's each year tilting a little bit more towards third sector and a little bit less towards first sector.
Brad: That means that the third sector lower benefit ratio of business makes up a bigger component. So the mix impact of that is going to push us out.
Brad: From the higher end of the benefit ratio range towards the lower end of their benefit ratio range, but what it also means is that from a pre tax margin standpoint. It means that we expect to travel throughout the forecast period, starting at the lower end of the range and then travel higher towards the higher end of the range throughout the forecast period, but.
Brad: <unk> to give some more color on net investment income as we go into 2025.
Brad: You are right that we are definitely facing some headwinds with the floating rate portfolio. As discussed this was driven by the decrease in short rates. The 100 basis points decline, we saw last year in sulfur it does hit our $9 billion floating rate portfolio.
Brad: But it also impacts our cash holdings and other short term opportunities that we can see throughout the year, which we were able to take advantage of in 2024, but we also had a couple of one off items that had a strong contribution last year that we're facing this year, one was a rather large make hole.
Brad: And then we were also able to accelerate deployment in certain asset classes. It at very attractive spreads earlier in the year.
Brad: There's.
Brad: A variety of things that contributed to a very strong 2024 that puts us up against some very difficult comps for 2025 that is the source of that headwind.
Brad: Got you and then.
Brad: Just for a follow up.
Brad: Around four.
Brad: Looking at your capital position in Japan. It looks like you have about $1 billion of access under the new yes, our framework anyway would you add.
Brad: Anticipate getting an extraordinary dividend out of that entity.
Brad: And any updated thoughts on what you might do with that much level of access I guess, it's a high class problem, but still.
Brad: Without robust growth opportunities I can't imagine it makes a lot of economic sense to leave that much excess in Japan.
Speaker Change: So Tom I would characterize our capital position in Japan is very strong.
Speaker Change: We are still going through the transition of the capital regime framework from <unk> to ESR and while ESR has not formally been implemented yet.
Speaker Change: It would not be very smart to go and try to.
Speaker Change: Right size your capital base on our future capital regime basis. So step one is we would expect to certainly wait.
Speaker Change: Fully evaluate this until after the ESR has been implemented and as you know that is at the end of the first quarter of 2026.
So.
Speaker Change: And that means that.
Speaker Change: Over time, we would expect to be in a target operating range of 170% to 230%, but for the time being I would not expect any special dividend in the near term.
Speaker Change: Okay. Thanks.
Speaker Change: The next question comes from Josh Shanker of Bank of America. Please go ahead.
Josh Shanker: Yes. Thanks for fitting me in I guess this is for Virgil I was wondering with the elevated expense ratio in Aflac U S. How long do you expect the investments and the work you're doing to accelerate growth weighs on the expense ratio.
Josh Shanker: Yeah, Hi, Thanks, Josh I would say, we have started to bend that curve.
Josh Shanker: One time been up to.
Josh Shanker: 40 around 41% with expense ratio. This year, we came in around 30, let's say exact number 38, five I think to be exact so very very pleased with the performance that we are have been in that and that is why we are still as you pointed out investing and thereby the bills.
Josh Shanker: The key is to get these by the bills to scale and we are experiencing solid better than expected growth.
Josh Shanker: The <unk> platform better than expected growth on the consumer markets platform.
Josh Shanker: Like I said.
Josh Shanker: Sounds like a broken record, but we've got to turn the curve with the demo vision platform. We're doing all the right things to get that done if we do that that will help not only contributed to the top end by bringing in an additional new sales revenue that we need to offset that expense ratio, but we will continue to do.
Josh Shanker: A strong disciplined expense management.
Josh Shanker: The curve to come down even further this year in 2025.
Josh Shanker: Or if we think more long term 'twenty six 'twenty seven or we think it's.
Josh Shanker: On the margin or this is several hundred basis points.
Josh Shanker: Yes, so I would tell you that.
Josh Shanker: We put forth a range on the margin between 17, and 20% we're going to stay within our range because we're going to make sure that our disciplined expense management.
Josh Shanker: If those marks if you look at 'twenty five 'twenty six 'twenty seven I am showing a decrease in expense margin and expense.
Josh Shanker: Ratio incrementally year over year over year.
Josh Shanker: Okay. Thank you very much.
Josh Shanker: I think the important factor to get from this sales Arda dental and vision is is we got it right.
Josh Shanker: We want that business, we just didn't execute to the level, we needed to and made a mistake and I have got that now on target and we've just got to now come through with it so.
Josh Shanker: It's something that we can achieve and will achieve.
Josh Shanker: I appreciate it I appreciate it thank you.
Speaker Change: The next question comes from Alex Scott of Barclays. Please go ahead.
Alex Scott: Hey, good morning.
Josh Shanker: <unk>.
Speaker Change: First question I had is just on the competitive environment, a bit and going back to some of the comments you made around sales and remaining.
Josh Shanker: We're remaining disciplined.
Josh Shanker: As shown better sales, but that your remaining disciplined.
Speaker Change: I just wanted to dig into that a bit I mean when I.
Josh Shanker: Think about like the sign posts that I look at it.
Speaker Change: It seems like Youre.
Speaker Change: Youre doing reinsurance to Bermuda.
Speaker Change: The new money yields.
Speaker Change: Were in excess of 9% in the U S and 8% in Japan this quarter.
Speaker Change: I'm just trying to understand.
Speaker Change: Are you getting those targeted IRR is because of some of the levers you're pulling.
Speaker Change: Or.
Speaker Change: Do you still feel like there's the same opportunity here that you've had in the past.
Speaker Change: Well, let me address.
Speaker Change: Our life insurance business in Japan.
Speaker Change: In particular, because I think thats, what youre really driving at and obviously higher yields.
Speaker Change: They matter, especially in yen terms as we sell yen denominated products.
Speaker Change: But it's really the new business strain associated with these products and high reserving levels still puts.
Speaker Change: The IRR is under significant pressure.
Speaker Change: But if you look at it on a post reinsurance basis, we get a very very good irr's and Thats why we feel very confident.
Speaker Change: Selling both our waste and our <unk> product into the marketplace.
Speaker Change: Okay.
Speaker Change: And then maybe as a follow up I mean, one of the things we've seen in group benefits. This quarter from some of the peers is there seems to be sort of a half.
Verse have nots in terms of capabilities on the platform and having that translate to sales growth being favorable or less favorable.
Speaker Change: I guess I'll just pose the question to you I mean, how do you feel about the capabilities and your group benefits platform the scale.
Speaker Change: Do you have what you need is there is there more that you could go out and acquire whether inorganically.
Speaker Change: Or things that you may need to invest in.
Speaker Change: Yes.
Speaker Change: I will say this is a virtual I would say this.
Speaker Change: When we acquired the life and disability business.
Speaker Change: We have invested to make sure we've got the right platform for that business line.
Speaker Change: Been very.
Speaker Change: Colombia is meaning that we have the right technology, we have the right resources talent to scale on our group Phebe, we've made significant investments over the years to get the same with talent with technology and then we're doing that we just did this thing what I'll demo platform, where im going with this is we have put forth.
Speaker Change: Recall, our market segmentation strategy, we've got the right products for each segment, we've got the right distribution for each segment. We're investing in right now is the ability to bring those things together. So we are able to be more competitive with the ability to bundle.
Speaker Change: To present, one unique experience to the market.
Speaker Change: Each platform stands strong independently the talent strong strong independently the product strong strong independently our core strategy, we will be bringing those things together. So there will be a little additional investment to do that.
Speaker Change: Over the next couple of years, we're currently doing it right now we respond to rfps in the market as one aflac and we're going to really demonstrate the ability to be best in class with.
Speaker Change: With the technology and the discipline to have those things fit together going forward.
Got it thank you.
Jack Morton: The next question comes from Jack Morton of BMO capital markets. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Most of mine have been answered, but maybe just one on commercial real estate could you just talk a little bit more about trends.
Speaker Change: And that market and how you expect things to develop on our flex portfolio in 2025.
Speaker Change: Sure. Thank you. Thank you Jack for the question.
Speaker Change: As you are undoubtedly aware of the market remains pretty difficult. It does seem that we may have hit the bottom but were very slow to recover we continue working through our portfolio. Our preference is to work with borrowers to find the solution, but if the best way to protect our interest is to foreclose we've done.
Speaker Change: Constraints, we're willing to do that to maximize our recoveries. We do expect this to be a long recovery.
Speaker Change: We have seen some early signs that things are moving the right way, but it's very early and values remain still still quiet.
Speaker Change: Quite depressed.
Speaker Change: At this point, we expect 2025 to largely play out much like 2024.
Speaker Change: We will continue working through our watch list, we will manage our Oreo portfolio to maximize our long term returns. We expect it is going to take quite some time for this recovery to happen.
Speaker Change: But that's our general outlook at this point, we do think it's going to be a manageable process, but it's one that's going to take time to work through.
Speaker Change: Yeah.
Speaker Change: Thank you and then just.
Speaker Change: A quick follow up on the Japan sales outlook I guess other than the major kind of cancer product. Once you have it coming in a couple of months.
Speaker Change: Are there any kind of other.
Speaker Change: Launches are like refreshes that you plan this year that could impact the cadence of sales in 2025.
Speaker Change: Okay.
Speaker Change: This is will.
Speaker Change: Thanks.
Speaker Change: I will answer that question Paul.
Speaker Change: Okay.
Speaker Change: So that's a little bit down.
Speaker Change: So the new product will be launching the new cancer insurance insurance in stages from March to April.
Speaker Change: Looking at Carnoustie law.
Speaker Change: Okay.
Speaker Change: Scott Silicon Mitchell.
Speaker Change: How does scale.
Speaker Change: Ron.
Speaker Change: And for the medical insurance.
Speaker Change: Rebrand it.
Speaker Change: We have done the rebranding can improve the service last August.
Speaker Change: So that's all good.
Speaker Change: Thank guys stop to cortisol mackinder or simple annuity <unk>, Steve and we have also hoping.
Speaker Change: Strengthen goes sales with a new plan targeting the middle aged and older customers that would fall in September 2024.
Speaker Change: And a little more marketing.
Speaker Change: I'll start on that.
Speaker Change: And with that we'll get some of that law.
Speaker Change: Yep.
Speaker Change: Design School and I'll show you want to look at Stifel promotional Stifel. Please go to the nine months and we will be able to provide more strengthen promotion.
Speaker Change: Our end to end structure.
Speaker Change: It has been.
Speaker Change: Developed recently and this structure is developed by each brand.
Speaker Change: Let me go from customers.
Okay.
Speaker Change: <unk>.
Speaker Change: Paul.
Speaker Change: Thank you.
Speaker Change: In terms of the Pulitzer in comparison to the following 2024th this year will settle down. However, we believe that this will continue to generate solid results.
Paul: Thank you Paul.
Speaker Change: With regards to the channel.
Paul: Okay.
Paul: Got it Julian <unk>. Please.
Paul: We started a level two years ago to enhance and increase agent.
Speaker Change: No no no.
Paul: More.
Paul: Davidson.
Paul: And in 2023, we have hired approximately 600 patients.
Paul: Glen.
Paul: We will hopefully have holistically.
Paul: And they have made a great deal of contribution to our activities last year in 2024.
Paul: You'll know it isn't it a little bit.
Paul: Sure.
Paul: But we have succeeded in hiring much more than 600 people in 2024 <unk>.
Paul: Cortisol.
Paul: Okay.
Paul: And we expect these new agents to be more active in 2025.
Paul: Most of our sales.
Paul: As I said earlier.
Paul: <unk> personnel at all.
We will be utilizing the first sector product that's a hook.
Paul: <unk> seeks to expand the third sector.
Paul: Following up on <unk>, and Thats training is being implemented and strengthen.
Paul: That's all.
Paul: Thank you.
Paul: Yeah.
Paul: This concludes our question and answer session I would like to turn the call back over to David Young for any closing remarks.
Paul: Thank you Andrea and thank you all for joining us on today's call. Just wanted to say if there are any follow up questions. Please reach out to Investor and rating Agency relations. We look forward to hearing from you and senior soon have a good day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].