AFLAC Incorporated

Good morning and welcome to the AFLAC Incorporated Second Quarter 2022 Earnings Conference Call. All participants will be in listen-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 question, please press start in two. Please note this event is being recorded. I would now like to turn the conference over to David Young, Vice President of Investor and Ratings Agency Relations and ESG. Please go ahead.

Thank you, Andrea. This morning we will be hearing remarks about the quarter related to our operations in Japan and the United States from Dan Amos, Chairman and CEO of Aflac Incorporated. Fred Crawford, President and COO of Aflac Incorporated, will then touch briefly on conditions in the quarter and discuss key initiatives. Yesterday after the close, we posted our earnings release and financial supplement to investors.aflac.com, along with a video with Max Brodin, Executive Vice President and CFO of Aflac Incorporated, providing an update on our quarterly financial results and current capital and liquidity. Max will also be joining us for the Q&A segment of the call, along with other members of our U.S. Executive Management. Teresa White, President of Aflac U.S. Virgil Miller, Deputy President of Aflac U.S. Eric Kirsch, Global Chief Investment Officer and President of Aflac Global Investments. Brad Dislin, Deputy Global Chief Investment Officer. 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 Koide, President and Representative Director, Todd Daniels, Director and CFO, Koichiro Yoshizumi, Deputy President and Director, Sales and Marketing, Before we begin, some statements in the 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 perspective 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 include reconciliations of certain non-U.S. GAAP measures. I'll now hand the call over to Dan. Dan?

Good morning, and thank you for joining us. As I reflect on the second quarter of 2022, our management team, employees, and sales force continue to adapt and work tirelessly to be there for policyholders when they need us most, just as we promised. Aflac Incorporated reported solid results for the second quarter with net earnings per diluted share of $2.16 and $3.73 year-to-date. Adjusted earnings per diluted share were solid at $1.46 in the second quarter and $2.88 for the first six months, supported in part by the continuation of the low benefit ratio associated with the pandemic conditions. Also contributing was a better than expected investment income, including returns from alternative investments. We remain cautiously optimistic as our efforts focus on growth and efficiency initiatives amid this evolving pandemic backdrop. Looking at our operation in Japan in the second quarter, Afflight Japan generated strong overall financial results with a profit margin of 27.4%. This was again above the outlook range we provided at the November 2021 financial analyst briefing. Persistency remained strong. However, sales continued to be somewhat constrained as the pandemic conditions to impact our ability to meet face-to-face with customers. Also contributed to the quarterly results was the 2021 comparison following the launch of our new medical product. Regarding Japan Post Strategic Alliance, As part of our ongoing collaboration and governance framework, I traveled to Japan toward the end of June to meet with Japan Post holding CEO, Mr. Masuda, along with the presidents of Japan Post postal and insurance companies. We had an understanding and productive visit discussing our plans. This indeed, excuse me, this included a renewed commitment from executive management to drive sales with a focus on distribution, growth, and marketing of cancer insurance. Appalachia Japan has continued to offer sales support to Japan Post, especially after the new fiscal year began in April of 2022 and following Japan Post's sales structure transformation. This support includes further aligning of our sales offices with Japan Post regional offices to strengthen support and to share best practices. As you may recall, under the new structure, sales employees focus solely on selling Japan Post insurance products and Athlete Japan's cancer insurance products. We have made gradual progress toward providing cancer insurance protection to more consumers. demonstrated by the increased proposal activity and sequential monthly sales growth during the second quarter. There is more progress to be made, and we continue to work to strengthen the strategic alliance to create a sustained cycle of growth for both companies. We believe that sales through Japan Post Group will improve in the second half of the year. sales employees gain more experience and momentum. As we look forward to 2023, we will introduce our new cancer insurance product through Japan Post, likely in the second quarter. This will allow both entities to invest in a more complex, coordinated, required by the distribution system of this size. We plan to launch our revised cancer product in agencies in the second half of 2022, and we continue to expect stronger overall sales in the second quarter of the year. This assumes that pandemic conditions do not escalate and that sales productivity continues to improve at Japan Post Group and that we execute on our product introductions and refreshment plans. Turning to the U.S., we saw a solid profit margin of 21.4%. I'm pleased with the U.S. sales momentum as continued with a 15.6% sales increase in the second quarter. This reflects continued adaptation to the pandemic conditions, growth in the core products, and our investment and build-out of growth initiatives. While Aflac Network Dental and Vision and group premier life, absent management, and disability solutions, which we call plaids, are a relatively small part of our sales. We are pleased with how they are contributing to our growth. Our growth initiatives modestly impacted the top line in the short term, but also tend to be accompanied by the sale of our core supplemental health products. In combination with our core products, They also better position Aflac US for future long-term success. The need for our products we offer is as strong or stronger than ever before. At the same time, we know consumers' habits and buying preferences have been evolving. We remain focused on being able to sell and service customers, whether in person or virtually. This is part of the ongoing strategy to increase access, penetration, and retention. Turning to capital deployment, we place significant importance on continuing to achieve strong capital ratios in the U.S. and Japan on behalf of our policyholders and shareholders. We continue to generate strong investment results while remaining in a defensive position as we monitor evolving economic conditions. In addition, we've taken proactive steps in recent years to defend cash flow and deployable capital against a weakening yen. When it comes to capital deployment, we pursue value creation through a balance of actions, including growth investments, stable dividend growth, and disciplined and tactical stock repurchase. It goes without saying that we treasure our 39-year track record of dividend growth, and we remain committed to extending it, supported by the strength of capital and cash flows. In 2022, we remained in the market repurchasing shares with a tactical approach. In the second quarter, Aflac Incorporated deployed $650 million in capital to repurchase $11.2 million of its common shares. bringing the six-month total to $1.15 billion in purchase and $19.2 million of the shares. With this approach, we look to emerge from this period in a continued position of strength and leadership. Keep in mind, in addition, we have among the highest return on capital and the lowest cost of capital in the industry. We've also focused on integrating the growth investments that we've made. We are well positioned as we work toward achieving long-term growth while also ensuring we deliver on our promise to the policyholders. I don't think it's a coincidence that we have achieved success while focusing on doing the right thing for the policyholders, shareholders, employees, sales distribution, business partners, and communities. I'm proud of what we've accomplished in terms of both our social purpose and financial results, which have ultimately translated into strong long-term shareholder return. We also believe that the underlying strength of our business and our potential for continued growth in Japan and the United States, the two of the largest life insurance markets in the world. Thank you again for joining us this morning. Now to Fred.