AFLAC Incorporated

Welcome to the AFLAC 2021 First Quarter Earnings Conference Call. Your lines have been placed on listen only until the question and answer session. Please be advised today's conference is being recorded. I would now like to turn the call over to Mr. David Young, Vice President of AFLAC Investor and Rating Agency Relations.

Thank you, Pasha. Good morning and welcome to AFLAC Incorporated's First Quarter Earnings Call. As always, we have posted our earnings release and financial supplement to investors.aflac.com. This morning, we will be hearing remarks about the quarter related to our operations in Japan and the United States amid the ongoing COVID-19 pandemic. Dan Amos, Chairman and CEO of Aflac Incorporated, will begin with an overview of our operations in Japan and the U.S. Fred Crawford, President and COO of Aflac Incorporated, will then touch briefly on conditions in the quarter and discuss key initiatives, including how we are navigating the pandemic. Max Brodin, Executive Vice President and CFO of Aflac Incorporated, will conclude our prepared remarks with a summary of first quarter financial results in current capital and liquidity. Members of our U.S. Executive Management Team joining us for the Q&A segment of the call are Teresa White, President of Aflac U.S., Virgil Miller, President of Individual and Group Benefits, Eric Kirsch, Global Chief Investment Officer and President of Aflac Global Investments, Al Ruggieri, Global Chief Risk Officer and Chief Actuary, June Howard, Chief Accounting Officer and and Steve Beaver, CFO of Aflac US. We are also joined by members of our executive management team in Tokyo at Aflac Life Insurance Japan. Charles Lake, Chairman and Representative Director, President of Aflac International. Masatoshi Kuide, President and Representative Director. Todd Daniels, Director and CFO. Koji Ariyoshi, Director and Head of Sales and Marketing, and Koichiro Yoshizumi, Assistant to Director of Sales and Marketing. Before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature. Actual results could differ materially from those we discussed today. We encourage you to look at our annual report on Form 10-K for some of the various risk factors that could materially impact our results. As I mentioned earlier, the earnings release is available on investors.aflac.com and includes reconciliations of certain non-U.S. GAAP measures. I'll now hand the call over to Dan.

Dan? Thank you, David. Good morning, and thank you for joining us. At our first quarter conference call one year ago, we were facing the early days of the pandemic. At that time, I shared with you actions that we had taken to ensure that we protect the employees, the distribution partners, the policyholders, and the communities. I am proud of our response and our ability to handle these challenging times for everyone. Our people first embodies the spirit of corporate culture, which we refer to as the Aflac way. Within the pandemic environment, we are encouraged by the production of the distribution of the COVID-19 vaccines. But we also recognize that vaccination efforts are still in the early stages around the world. Our thoughts and prayers are with everyone affected. And we are cautiously optimistic while also remaining diligent. There is one essential message that I continue to emphasize with our management team. It is imperative that we control the factors we have the ability to control. And what we don't have the ability to control, we must monitor continually to be ready to adapt. This approach allows us to respond in the most effective way possible. In the first quarter, adjusted earnings per diluted share increased 26.4%. While earnings are off to a strong start for the year, it's important to bear in mind that they are largely supported by a low benefit ratio associated with the pandemic conditions. Before covering our segments, I'll make a few comments about the overall perspective. Pandemic conditions in the first quarter continued to impact our sales results, as well as earned premium and revenues both in the United States and Japan. We continue to expect these pandemic conditions to remain with us through the first half of 2021. but look for improvement in the second half of the year as communities and businesses further open up, allowing more face to face interactions. Despite the fact that sales in both the United States and Japan have been suppressed considerably due to the constrained face to face opportunities, we did not sit still. we continued to make progress in integration of our accelerated investment in our platform while continuing strong earnings performance. Looking at the operations in Japan in the first quarter, Athlete Japan generated solid overall financial results with a profit margin of 23.1%, which was above the outlook range that we provided at the financial analyst briefing. Athletic Japan also reported strong premium persistency of 95%. Sales were essentially flat for the first quarter with the January launch of our new medical product, offset by continued impact of the pandemic conditions. We are encouraged by the reception of the new medical product by both consumers and the sales force. In addition, Japan Post Group's announcement to resume proactive sales in April paves the way for gradual improvement in Aflac's cancer insurance sales in the second half of the year. We are actively working with Japan Post to ready the platform, recognizing that it will take time to return to the full strength. We continue to navigate evolving pandemic conditions in Japan, including the recent reestablished state of an emergency for Tokyo, Osaka and two other prefectures affected from April the 25th through May the 11th. Restrictions will be tightened to curb the movement of people and group activities during the major holiday known as Golden Week. Turning to the U.S., we saw a strong profit margin of 27.3%. Aflac U.S. also reported very strong premium persistency of 80%. Max will cover the persistency later. Current pandemic conditions continue to notably impact our sales results, largely due to reduced face-to-face activities. As expected, we saw modest sequential sales improvement in the quarter, with an overall decrease of 22.1%. In the U.S., small businesses are still in the recovery mode, and we expect that they will be that way for most of 2021. At the same time, larger businesses remain focused on returning employees to the worksite rather than modifying the benefits for their employees. We strive to be where the people want to purchase insurance. That applies to both Japan and the United States. In the past, this has meant meeting face-to-face with individuals to understand their situation Propose a solution and close the sale. Face-to-face sales are still the most effective way for us to convey the financial protection only AFLAC products provide. However, the pandemic has clearly demonstrated the need for virtual means. In other words, non-face-to-face sales that help us reach potential customers and provide them with the protection that they need. Even prior to the pandemic, we've been working on building our virtual capacities. Given the current backdrop, we have accelerated investments to enhance the tools available to our distribution in both countries and continue to integrate these investments into our operation. In addition, we continue to build out the U.S. product portfolio with previously acquired businesses that serve as a base for Aflac Network Dental and Vision and Group Life absent management and disability. While these acquisitions have a modest near-term impact on the top line, they better position Aflac for future long-term success in the United States. Our core earnings drivers, which are persistency, Underwriting profits, investment income, and expense ratios continue to drive strong pre-tax margins, both in the United States and in Japan. Both Japan and the U.S., we experienced sequential sales growth in the months of January, February, and March. In addition, provided we don't experience a setback in terms of pandemic conditions, we're forecasting a sequential increase in absolute sales in the second quarter over the first quarter in both the U.S. and in Japan. As always, we place significant importance on continuing to achieve strong capital ratios in the U.S. and in Japan on behalf of our policyholders and shareholders. We remain committed to prudent liquidity and capital management. We issued our first sustainability bond in March as we seek to allocate proceeds from the issuance to reinforce our commitment to social and environmental initiatives as we balance purpose for profit. We treasure our 38-year track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we will continue to tactically repurchase shares, focus on integrating the growth investments we've made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership. I've always said that the true test of strength is how one handles adversity. This past year confirms what I knew all along, and that is that AFLAC is strong, adaptable, and resilient. We will continue to work to achieve long-term growth while also ensuring we deliver on our promise to our policyholders. By doing so, we look to emerge from this period in a continued position of strength and leadership. I don't think it's a coincidence that we've achieved success while focusing on doing the right things for the policyholders, the shareholders, the employees, the sales distribution, the business partners, and the communities. In fact, I believe success and doing the right thing go hand in hand. I'm proud of what we've accomplished by balancing purpose with financial results. This is ultimately translated into a strong, long-term shareholder value. Now I'll turn the program over to Fred. Fred?