AFLAC Incorporated

Good morning and welcome to the AFLAC Incorporated fourth 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 star then 2. 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. Good morning and welcome to Aflac Incorporated's fourth 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, who is joining us from Japan, 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. Virgil Miller, President of Aflac U.S. Brad Dislin, 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. Todd Daniels, Director and CFO. and Koichiro Yoshizumi, Executive Vice President and Director of Sales and Marketing in 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 can give no assurances 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.athlac.com and includes reconciliations of certain non-GAAP U.S. measures. Please also note that after we file our 10-K, we plan to post on our investor site a recast quarterly financial supplement showing the effects of the new long-duration targeted improvements accounting standards had it been applied to the 2022 and 2021 fiscal years. I'll now hand the call over to Dan. Dan? Thank you, David, and good morning.

Thank you for joining us. Reflecting on 2022, our management team, employees, and sales distribution have continued to be resilient stewards of our business, being there for the policyholders when they need us most, just as we promised. From an overall standpoint, pandemic conditions impacted operations in Japan, especially in the first half of 2022, but they are gradually improving. Meanwhile, pandemic conditions in the U.S. have largely subsided. Turning to our financials, when adjusting for material weakening in the yen, the company delivered another quarter of solid earnings results that rounded out a year of overall strong performance, as Max addressed in his quarterly video update. For 2022, Aflac Incorporated reported adjusted earnings per diluted share, excluding the impact of foreign currency of $5.67. which was the company's second best year in the history following the record 2021. Appalachia Japan generated solid overall financial results in 2022 with an extremely strong profit margin of 24.9%. One of the consistent key contributors to Appalachia Japan's strong financial results is its persistency, which was 94.1%. in 2022. As anticipated, our benefit ratio returned to a more normal level in the fourth quarter after seeing a spike due to the practice of deemed hospitalizations, the scope of which was narrowed last September. Throughout the year, we continued to navigate the waves of COVID in Japan. We expected sales would pick up in the second half of the year, especially in the quarter, and that's exactly what we saw happen. Sales in Japan rose 10.8% in the second half of the year, including an 11.4% increase in the fourth quarter, which led to a full year sales coming in essentially flat. These results reflected the August launch through Associates of Wings, our new cancer insurance product. They also reflected our first sector product updates in the fourth quarter that better positioned Athlete Japan for future long-term sales opportunities. Recently, Prime Minister Kishida announced that COVID would be downgraded to the same level as seasonal flu starting in mid-May. While we're encouraged by this announcement as a sign of daily life in Japan returning to pre-pandemic conditions, we will see how this evolves, but look to continue building on our sales momentum in 2023. In April, Appalachia Pan will begin selling through Japan Post Group. our new cancer insurance product, and subject to FSA approval, a rider for serious diseases, which was developed in collaboration with Japan Post Group. We expect this close collaboration to produce continued gradual improvement of Aflac cancer insurance sales over the intermediate term and to further position the companies for long-term growth. Another element of our growth strategy is our intense focus on being there where consumers want to buy insurance. Our broad network of distribution channels, including agencies, alliance partners, and banks, continually optimize opportunities to help provide financial protection to Japanese consumers, and we are working hard to support each channel. Turning to the U.S. for 2022, we saw a solid profit margin of 20.4% in the fourth quarter. This result was driven by lower incurred benefits and higher adjusted net income, particularly offset by higher adjusted expenses. I'm pleased with the 17.4% sales increase in the fourth quarter, which reflected the largest amount of quarterly premium in the history of Aflac U.S. and continued to a 16.1% sales increase for the year. This reflects continued improvement in the productivity of our agents and brokers, as well as contributions from the build-out of our acquired platforms, namely dental and vision, group life, and disability. These are relatively small parts of our sales, but key elements of our growth strategy to sell our core supplemental health policies. I'm encouraged by the continued improvement in the productivity of our sales associates and brokers. We're seeing success in our efforts to re-engage veteran sales associates. And at a time, we're seeing strong growth through brokers. These results reflect continued adaptation to the pandemic conditions, growth in the core products, and our investment and build-out of growth initiatives. I believe that the need for the products we offer is strong, or stronger than ever before in both Japan and the United States. At the same time, we know consumers' habits and buying preferences have been evolving. We also know that our products are sold, not bought. As we communicate the value of our products, we know that a strong brand alone is not enough. We must paint a better picture of how our products help. In the latest commercial featuring the Affleck Duck and the Gap Goat, the goat personifies the gap that people face when they get medical treatment. Fortunately, the Affleck Duck is the hero who helps overcome the problem. I know this helps demonstrate the need for our products, thus helping our sales opportunities. We continue to work toward reinforcing our leading position and building on the momentum into 2023. Related to capital deployment, we place significant importance on achieving strong capital ratios in the United States and Japan on behalf of our policyholders and shareholders. In addition, we have taken proactive steps in recent years to defend cash flows and deployable capital against a weakening yen. We pursued value creation through balanced actions including growth investments, stable dividend growth, and disciplined tactical stock repurchase. With the fourth quarter's declaration, 2022 marks 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. Additionally, the board reiterated its first quarter dividend increase of 5%. Our dividend track record is supported by the strength of our capital and cash flows. At the same time, we have remained tactical in our approach to share repurchase, deploying $2.4 billion in capital to repurchase 39.2 million shares in 2022. Combined with dividends, this means we delivered $3.4 billion back to the shareholders in 2022. 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've made in our platforms. We also believe in the underlying strengths of our business and our potential for contingent growth in Japan and the United States, two of the largest life insurance markets in the world. We are well positioned as we work toward achieving long-term growth while also ensuring we deliver on our promise to our policyholders. 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. Before I turn it over to Fred, you may recall at the financial analyst briefing in November that I mentioned how Fred would be increasing his focus on Japan and spending more time over there to delve deeper into into learning about the operations there. As David mentioned, he is joining us today from Japan, where he's on assignment for the better part of 2023. As President and Chief Operating Officer, he is also continuing to focus on AFLAC-US as well. I'll now turn it over to Fred. Fred?