AFLAC Incorporated

Good day and welcome to AFLAC third quarter 2021 earnings conference call. All participants will be in list only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on your telephone keypad. To withdraw your questions please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to David Young, Vice President of Investor and Revenue Relations and ESG. Please go ahead.

Thank you, Ian. Good morning and welcome. As always, we have posted our earnings release and financial supplement to investors.aflac.com. And 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 both countries. 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, We'll conclude our prepared remarks with a summary of third quarter financial results and current capital and liquidity. Members of our U.S. executive management team joining us for the Q&A segment of the call are Theresa 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 Steve Beaver, CFO of Aflac US. We are also joined by members of our Executive Management Team at Aflac Life Insurance Japan, Charles Lake, Chairman and Representative Director, President of Aflac International, Masatoshi Kuide, President and Representative Director, and Todd Daniels, Director and CFO, as well as Koichiro Yoshizumi, Director, Deputy President and 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.athlac.com and includes reconciliations of certain non-U.S. GAAP measures. I'll now hand the call over to Dan. Dan?

Thank you, David, and good morning. Thank you for joining us. With the pandemic conditions continuing to evolve, I'm proud of our response over the last year. I am also grateful to our team of employees and sales representatives who have empowered AFLAC to adapt to what has been a very challenging time for everyone. During the third quarter, we saw a rise and then a decline in COVID cases and hospitalizations in both the United States and in Japan. but to varying degrees. With that in mind, I continue to address our employees in a way that's similar to how with my own family. I'm keeping them informed in updates from the medical community and encourage them to get the COVID-19 vaccine because I want people to avoid being sick or even worse, being a casualty due to this pandemic. As we enter the fourth quarter, When the weather gets colder and indoor gatherings increase, the recovery from the pandemic remains uncertain, and we must remain diligent. For the third quarter, adjusted earnings per diluted share excluding foreign currency impact increased 10.1% for the quarter and 20.1% for the year. These results are largely driven by lower than expected benefit ratios and higher net investment income, primarily in Japan. Looking at the operations in Japan in the third quarter, Athletic Japan generated solid overall financial results as reflected in the profit margin of 26.3%, which was above the outlook range provided at our financial analyst briefing for 2020. as Max will explain in a few moments. Athletic Japan has reported very strong premium persistency of 94.5%. Athletic Japan sales were essentially flat for the quarter. Sales for the first nine months of this year were approximately 66% of 2019 level. We continue to navigate evolving pandemic conditions in Japan, which include widespread state of emergencies that extended to multiple prefectures and persisted through the third quarter. These states of emergency in Japan are much less restrictive and more limited in scope than lockdowns in other countries, but they have impacted face-to-face sales opportunities. As we enter the fourth quarter, the ability to meet face-to-face with customers appears to be improving somewhat gradually, and the degree to which our ability to meet face-to-face continues to improve was a very key driver in the recovery of our sales. We were encouraged by the September launch of our new nursing care insurance in Japan, which we view as another opportunity to meet the needs of certain consumers. However, it's still very early in the launch of this new product to determine the potential of the nursing care insurance. In addition, Applied Japan continues to work to strengthen the alliance with Japan Post, which resumed proactive sales of the cancer insurance on April 1. We expect continued collaboration to further position both companies for the long-term growth and a gradual improvement of Japan post-cancer insurance sales in the intermediate term. Now, turning to Aflac US, we saw a strong profit margin of 22.2%. This result was driven by lower incurred benefits and higher adjusted net investment incomes. particularly offset by the higher adjusted expenses. Aflac US also continued to have strong premium persistency of nearly 80%. Sales increased 35% for the quarter and are at approximately 78% of sales for the first nine months of 2019. These sales results reflect what we believe are improving pandemic conditions in the United States, allowing us more face-to-face meetings and enrollments than prior periods. In the U.S., small businesses have gained some incremental ground toward recovery, which we expect to continue gradually. Within the challenging small business and labor markets, we continue to make investments in developments of traditional independent sales agents that make up about 53% of our sales as of the third quarter of 2021. At the same time, larger businesses appear to be more resilient, given their traditional reliance on online self-enrollment tools, and we continue to invest in the group platform. Group business, which is being driven by broker performance, is performing very well. Excluding our acquired platforms, group sales have generated a year-to-date sales increase of 14% over the same period for 2019. As we enter historically higher enrollment periods in the United States, we remain focused on being able to sell and service customers, whether in person or virtually. With an eye toward responding to the needs of consumers, businesses, and our distribution, we continue to build out the U.S. portfolio with Aflac Network Dental and Vision, Premier Life, and Disability. These new lines modestly impact the top line in the short term. These new products in combination with our core products better position Aflac US for future long-term success. Pandemic conditions have served to fuel our longstanding strategy of being where people want to purchase insurance in both the United States and in Japan. And while face-to-face sales remains the most effective way for us to convey the financial protection only Aflac products provide, the pandemic has clearly demonstrated the need for virtual avenues to help us reach potential customers. We have continued to invest in tools for our distribution in both countries and to integrate these investments into our operations. As always, we place significant importance on continuing to achieve strong capital ratios in the U.S. and Japan on behalf of our policyholders and investors. We remain committed to prudent liquidity and capital management. With the fourth quarter declaration, 2021 will mark the 39th consecutive year of dividend increases. Our dividend track record is supported by the strength of our capital and cash flows. At the same time, we will continue to be tactical in our share repurchase and focus on integrating the growth investments we've made in our platforms. We are well positioned as we work toward achieving 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 continued position of strength and leadership and look forward to sharing more about our strategic and financial priorities at the financial analyst briefing on November the 16th. Now let me turn the program over to Fred.