AFLAC Incorporated

Good day and welcome to the AFLAC Incorporated Third Quarter and Total Year 2022 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to David Young. Please go ahead.

Thank you and good morning. Welcome to AFLAC Incorporated's Third Quarter Earnings Call. 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 from Max Brodin, Executive Vice President and CFO of Aflac Incorporated, who provided an update on our quarterly financial results in current capital and liquidity. Max will be joining us for the Q&A segment of the call, along with other members of our executive management, including 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, Steve Beefer, CFO of Aflac US, Charles Lake, Chairman and Representative Director, President of Aflac International, Masatoshi Kuide, President and Representative Director, Todd Daniels, Director and CFO of Aflac Life Insurance Japan, Koichiro Yoshizumi, Executive Vice President and Director of Sales and Marketing and Alliance Strategy. 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 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?

Well, good morning and thank you for joining us. Let me begin by saying that the third quarter of 2022 concluded a solid first nine months for the company. Aflac Incorporated reported net earnings per diluted share for the third quarter of $2.53 and $6.25 year-to-date. Adjusted earnings per diluted share were $1.15 in the third quarter and $4.03 for the first nine months. These results are solid despite the impact of significantly elevated COVID claims in Japan during the third quarter due to the industry practice of deemed hospitalization. Overall, I am pleased with where we stand at the beginning of the fourth quarter. We remain on track for another good year of financial results, and we expect continued sales momentum in both markets. As we have communicated in the second quarter, we anticipated a sharp third quarter increase in COVID claims in Japan, and we experienced that increase. We are now seeing more normalized COVID claims during the fourth quarter. Reflecting on the third quarter, our management team, employees, and sales force have continued to be resilient while being there for the policyholders when they need us most, just as we promised. Looking at our operations in Japan in the quarter, Athlete Japan generated solid overall financial results with a profit margin of 21.6%. One of the key contributors to Athlete Japan's strong financial results is its persistency, which has remained consistently strong at 94.3% for the past four quarters. New annualized premium sales continued to improve in the quarter with the launch of our new cancer insurance product through agencies in late August, which drove a 32.6% increase in cancer insurance sales in the quarter. This contributed to an overall sales increase of 10.2%. I just recently returned from my trip to Japan this year. As you'll recall, I traveled to Japan in June and had a successful meeting with the management at Japan Post Holding, Japan Post Company, and Japan Post Insurance. This most recent trip in mid-October was geared toward connecting with our agencies, where I went to five different cities across Japan, and it was equally successful. As you know, we strive to be where consumers want to buy insurance, and this is accomplished through all the distribution channels, agencies, alliance partners, and banks. We continue to closely track how pandemic conditions are evolving, particularly because of its correlation with the opportunities for face-to-face sales, which is key to the recovery in sales. I arrived home from Japan excited by the energy at the agencies with whom I met and feel very good about our ability to sell new policies as we emerge from the pandemic. As I mentioned, we have seen our benefit ratio normalized so far in the fourth quarter given the narrow scope of deemed hospitalizations introduced toward the end of the third quarter. We continue to expect stronger sales momentum in the fourth quarter, assuming that productivity continues to improve at Japan Post Group and that we execute on our product introduction and refreshment plans. We will start selling our new cancer insurance product through Japan Post Group in the second quarter of 2023. Turning to Aflac US, we saw a solid profit margin of 19.3%. I am pleased that we again generated sales growth with a 11.8% sales increase in the third quarter and a 15.2% increase year-to-date. I am encouraged by the continued improvement in the productivity of our sales associates and brokers with the strength of both channels approaching pre-pandemic levels. As we enter what trends to be our strongest quarter of the year, we are seeing success in our efforts to re-engage veterans and sales associates. And at the same time, we are seeing strong growth through brokers. These results reflect continued adaptation of the pandemic conditions, growth in our core products, and investments and build-out of our growth initiatives. While Aflac Dental and Vision and Group Premier Life, Absent Management and Disability Solutions, which we now call PLADS, a relatively small part of our sales, we are pleased with how they're contributing to our growth and opening opportunities to sell our core supplemental health products. We continue to work toward reinforcing our leading position and generating stronger sales for the fourth quarter. I believe that the need for the products that we offer is stronger, stronger than ever before in both Japan and the United States. At the same time, we know consumer habits and buying preferences have been evolving. We remain focused on being able to sell and service customers, whether in person or... 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 have taken proactive steps in recent years to defend cash flows 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 discipline, and tactical stock repurchase. With fourth quarter's declaration, 2022 will mark the 40th consecutive year of dividend increases. We treasure our track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. We have remained in the market repurchasing shares with a tactical approach. Year-to-date, Aflac Incorporated deployed $1.8 billion in capital to repurchase 30.3 million of our shares. Combined with dividends, that means that we delivered $2.6 billion back to the shareholders for the first nine months. 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 have also focused on integrating the growth investments we have 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 am proud of what we've accomplished in terms of both social purpose and financial results. which have ultimately translated into strong, long-term shareholder return. We also believe in underlying strengths of the business and our potential for continued growth in Japan and the U.S., the two largest life insurance markets in the world. Throughout the uncertainty of the last few years, I think we've done a good job in maintaining our focus on controlling the things that we have the power to control. We can and will control our efforts to build our business and take care of those who depend upon us, our policyholders, our shareholders, our customers, our employees, our distribution, and the communities in which we operate. In closing, you've heard me say many times this before of how I believe that one of my key roles as CEO in conjunction with the board is to develop our leaders to lay a groundwork for strong succession planning. This approach enables continuity and expertise in strategic execution. You saw that succession planning in action recently with the two deputy positions moving to the next level. The announcement last week of Brad Dislin will assume the role of chief investment officer in January of 2023, as well as the August announcement of Virgil Miller assuming the role of president of Aflac U.S. I want to thank Eric for his vision and expertise in building a world-class investment organization that has performed at a high level. I also want to thank Brad for his new leadership role. Brad has proven himself as a distinguished leader, collaborating with Eric and the team to deliver strong results and enhancing the reputation of AFAC Global Investment. I also am grateful for Teresa's 24 years of outstanding leadership and contribution to AFLAC, most recently as president of AFLAC-US for the last eight years. As Virgil assumes his role, I know he is well-suited to lead AFLAC-US with a seamless transition as AFLAC continues to build on its path toward delivering efficiencies, innovation, and growth. These are great examples of how we place a high priority on ensuring that we have the right people in the right place at the right time. In doing so, we have continued our focus on building a strong, deep bench of leaders preparing to take on more responsibility. Thank you all for joining us this morning, and I'll turn the program over to Fred. Fred?