Aflac (AFL) 2 Aug 222022 Q2 Earnings call transcript

Good morning, and welcome to the Aflac Incorporated Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. 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.

Andrea. you, Thank will to we States remarks the Aflac about Dan This operations be in related Incorporated. of CEO our Chairman United Japan quarter Amos, morning, and hearing and from the of COO in conditions and and President quarter Crawford, Aflac will briefly the then initiatives. key Incorporated, discuss on touch Fred our and our an Yesterday, a Broden, Max video posted and financial CFO Aflac supplement providing earnings quarterly President Incorporated, of the on current after liquidity. we to and financial update with Executive release close, capital investors.aflac.com with results Vice along and segment be the of Max us will also joining U.S. along for members the other Q&A of with call our Aflac Aflac Aflac Global Deputy Investments; Investment management: Accounting White, Global Actuary; Brad Officer; Officer Kirsch, Chief executive Steve Chief Global Chief U.S. Al Howard, Chief Miller, Officer; of Deputy CFO Investment and U.S.; and U.S.; President Risk Beaver, Global Eric June Aflac President Officer of of Dyslin, Chief Teresa Riggieri, President Virgil of and

also of joined Charles Lake, We and Yoshizumi, Japan: President executive Aflac President Daniels, Representative Director, Director; and at and International; Marketing. Director Todd Director, Insurance by of team Koichiro Representative our are and Director Koide, Life Chairman Sales President Aflac members and CFO; of Masatoshi Deputy management

the begin, some the we federal are of securities meaning Before laws. statements teleconference in within forward-looking

various differ report can Actual results. the some could prove at our they we look accurate believe results XX-K Although We on risk these from because our materially in factors statements impact encourage Form for can discuss give to today. be will nature. to are are assurance that those we annual that of no you reasonable, they we prospective materially

Dan? certain I'll is the reconciliations earlier, investors.aflac.com GAAP Dan. call earnings now measures. mentioned non-U.S. on over includes available to the I As release and hand of

for us. and morning, you thank Good joining

solid they for second force per need $X.XX the and tirelessly were income, efficiency I reflect of when team, our for backdrop. just net most, as efforts first policy and associated there to alternative low us including and supported Aflac be with for benefit second from to in initiatives the the Incorporated sales on months, X diluted on second remain the by quarter as $X.XX the $X.XX earnings year-to-date. quarter per amid part our returns share a the pandemic Also the more XXXX, quarter continued was conditions. optimistic cautiously solid growth holders the in we of $X.XX investment better-than-expected have at promised. evolving continuation Adjusted results and with investments. employees of share management As We the ratio adapt contributing focus reported diluted this pandemic earnings

was generated in provided Japan profit Looking we briefing. remains above This the strong. Persistency at with the in at our Japan again strong of second operation range XX.X%. Aflac overall financial a margin XXXX outlook the November results quarter. analyst financial

medical product. sales the continued constrained as to of following our pandemic results XXXX contributed However, face-to-face ability customers. comparison the our new quarterly the Also impact meet the to conditions that to was with launch somewhat be

and of governance CEO, drive an discussing Holdings' traveled strategic had of to Japan Mr. support We XXXX offices sales of offer has transformation. Japan focus part I continued sales support cancer Insurance insurance. a from towards a to This with with best our Japan in aligning understanding and commitment to Companies. to Aflac Post the to plans. Post especially Japan included visit includes presidents growth to Regarding new ongoing Japan regional Masuda, alliance, and the marketing of structure collaboration year end share with Japan and executive as distribution, along management renewed on our Post the and Post sales began and our after This Japan Japan Post our of support offices meet sales June Post, practices. Postal of fiscal framework, productive following to with further strengthen April

you on Japan product. and cancer products employees insurance solely under selling As new Aflac Japan's the focus Post structure, may sales insurance recall,

Japan growth Post to both insurance strengthen and made growth more a have cycle that sales momentum. sustained to year believe gradual the We improve consumers, of experience sequential and create There gain alliance proposal the sales quarter. to progress the as second We towards second progress continue the in work for and to half Group more increased providing by monthly protection of be cancer to activity sales the strategic will demonstrated during employees more is companies. made, we through

look we plan and the in system product a complex, introduce to we allow will likely XXXX, through to Japan required forward invest at new to quarter stronger product expect overall will second refreshment and by We to plans. Post assumes second in insurance more our agencies distribution entities continues our escalate continue sales XXXX, size. the improve This and of we the in As in do This cancer year. pandemic coordinated our that Post introductions both product the that Group revised conditions and that this quarter. on cancer launch of the execute half productivity sales to of Japan not second and we

increase has saw I'm growth and of conditions, XX.X% growth sales continued reflects momentum a in the products U.S., pleased continued Turning the and a second the margin solid investment initiatives. XX.X%. we profit with pandemic the quarter. build-out of core sales in adaptation our with U.S. This to to the

small are contributing PLADS, which While pleased Aflac network disability life, and with a our to how asset we and group we premier call our they dental are vision solutions, sales, relatively of growth. part and management

we is also of top health offer we success. The tend impacted our remain increase for our in focused to the At short with We the U.S. evolving. strategy able have accompanied or the being whether retention. Our ongoing to in supplemental but penetration and combination than they the buying customers term, growth and line better virtually. In This initiatives products. for access, service core position ever of is on core strong or know modestly also time, future part to sale preferences stronger products, be by habits Aflac sell as need been products the our person and long-term same before. consumers'

placed on capital deployment. our of achieve on continuing capital We and behalf to significant strong and to the importance shareholders. Turning in ratios Japan U.S. policyholders

generate evolving strong continue monitor while defensive to a position we We investment conditions. remaining in results economic as

capital strength years capital repurchase. we record investments, a tactical and to addition, In integrating our and and the continued it remain a actions, that committed flows. stock deployed of shares. of saying In through focused we've $XXX comes approach. strength to of the in it, in disciplined goes X-month cost remained of Incorporated million addition, industry. we investments in this by made. and bringing value the on the in XX.X capital XX-year cash XX.X position of we growth, It we and pursue and recent without to and and a flow highest deployment, growth we yen. second tactical emerge supported In dividend extending capital that shares the balance growth against track in With treasure billion of deployable steps the the creation When shares, its period on million quarter, million total proactive from XXXX, return weakening we a have look cash Aflac the common mind, we've lowest dividend approach, Keep We've among repurchase the defend capital taken in in stable in including leadership. purchase of this growth market also $X.XX with capital to repurchasing to to

well a have in proud growth on on right distribution, promise things success have we've shareholders, strong coincidence and ensuring don't for our return. that terms long-term we and we are translated achieved what purpose which I'm while while social communities. policyholders, as financial to employees, positioned it's focusing of towards shareholder results, partners achieving policyholders. our the both the ultimately into work the We think of business I long-term accomplished doing we also deliver sales

potential in again continued joining this the to to our it Fred. in X the I'm world. over We Fred? also and insurance you of and morning. the the United growth Japan for going the our of for us life turn largest strength now that And markets States, Thank believe business underlying

you, Dan. Thank

results, economic conditions. our U.S. start considering with on let commenting me perspective Before some current when positioned on we're how

witnessed have conditions. inflation monitoring We this not in in inflation Wage is benefits. many generally level the employment are we growth U.S. worksite of years, in full closely supportive of and and

a is real much there neutral how increased product, income to voluntary are considering products question as for available as down. to supplemental likely when is of wages However, any

do measurable care not of purchase and do impact defined claims. adjust on are Therefore, time benefits inflation. for any expect we Our at health not

pace need margins, impact When it agents, can are retaining terms in with any a recruiting costs. increase pressure as the and inflation more In upward keep agents enterprise commission-only at challenge and of on apply expenses. be does of to of looking

However, built by rates and rate additional significant investment this having is a income, rising mitigated loan portfolio. floating

recession, with by of cash asset model is in of defensive driven that economic to volatility. and and morbidity are economic periods risk flow tend low assets. to margins slowdown exposure of our stable business terms In largely and the nature generally leverage risk remain during Profits

return cash share our weakness performance to of inflationary of ratios positioned we position this for yen, debt understand including have U.S. his economic balance yen flow today's slowdown While the and and defend flexible core our US-dollar the and Japan, and we of portfolio no most spoke holding capital in Japan, hedging during employment we to recorded under how have all recruiting in markets. in see operating interruption in we hedging for in cash the in significant and of and and tight economic today's levels side slowdown. in both possible: predictable strong capital may purposes we benefit from unhedged flow to sizable to to labor in like Overall, our shareholders, are versus potential a a to maintain have dividend economic company. important defend out built margins often the We done repurchase. the pattern an senior It's makes U.S. decrease, the value, at capital conditions Japan. shifted recognizing what work our we the Max comments cost

significantly in with reaching levels than back experienced from up Turning Japan. our the COVID new cases and daily already again quarter. levels and cases XXX,XXX, higher elevated July second considerably businesses have in earlier to with surged beginning

Based appear introduce and remain are triggered both not However, hospitalization by on and of state declining Japanese increasing cases commentary there capacity. government, the to hospital which low. from to emergency, typically plans nationwide be does deaths a

in surge its claims, hospital. apply We an designation of allows the for which hospitalization, elevated COVID deemed benefit claims to We to as to and outside cases COVID-incurred continue would near-term ratios. driven expect disease experience recent the payment care by infectious for pressure

guaranteed, higher drivers this by remained have be periods low care, COVID. which offset and may not While partially other of of hospitalization during

and few law, Infectious in a the Japan, is which rise. as Our the infection. matter Ministry spent potential driven population a at and law, discussed for who Diet simply interaction on under Welfare Disease cautious not to this but by temporarily started COVID's face-to-face general August infection, With the the With Labor and a to also just Health, hospital in with their Revision to the sidelined data increased the is classification to this earliest. behavior under X, and COVID. doctors be law. of policyholders of avoid outpatient COVID expensive committee respect at session going with Having the September the of agents treatments customer the requires COVID's classification widespread amending seek expected less the special of are cases COVID to remains with classification respect extraordinary suggests is beginning weeks the reviewing

weakness. result, typically of periods an of proposal a cases, volumes indication sales reduced early experience As during elevated we potential

advertising year referenced actions While remain sales to into that our include work position outside items control, Japan as closely XXXX. our tied second recovery comments, accelerating the as product, alignment marketing Dan third-party targeted cancer TV half campaigns direct continues COVID and for with of our These model to in the better his and for adjusting conditions the move more of our we distribution in partners. launch new our such

both portfolio, to product sector, broader product our offer partners enhancements a position competitive for for for the policyholders, market. broad and proposition value designed lineup our our review in to third core distribution continue the our and first secure increase We

is in more clear a and businesses line associated partners working been We that broader creates cycle have with costs technology making our in refreshment product distribution investments to continuous to launch Separately, product refreshment competitive our that development. the environment product incubated and It's with develop. in both our and continue reduce becoming nature.

XXXX. of and care seeing noninsurance policyholders ecosystem Hatch Healthcare, both piloting to cancer early and provider expand favorable our for to support, expect We the availability results develop are nursing in

and to workforce in X Our short-term strategic products: and medical platform Sidachi, in conditions future. X develop was that these a launched second, the at in subsidiary, product aimed substandard or specialized popular a are We grow and freelance can't we but may product currently broadly disability insurance Japan. as early control proof-of-concept become and still. XXXX purposes: standing the Sidachi serves markets; innovation contingent for COVID product a not offers more

these develop our at will themes in in detail financial We briefing November. more analyst

persistency or operations is saw accounting in for persistency you currently isolating results and are the of has stable to through causing and U.S., normal not in U.S. when COVID Turning as the elevated. seasonality. the to issue also remained Account in recover We terms levels year. our aware, This either the more any distribution are quarter conditions

So is including tight we reduce of mandates turnover lapsation. the increase labor retirement an believe state in by this employee There driven serve looking when to year-over-year, moving with parts that are markets.

average in his with comments, the in continuing to deliver veteran recovery to performance. a broker balanced weekly also As Dan partners. relationships strengthen with growth business small continue see We while market producers noted our we in

were product sales our up life increase meeting and associated expectations. base. with continue see individual by up ahead the and but up and network example, and strong properties. type, channel, albeit building with return premier generating, as off up and The was For XX%. X% XXX%, XX%; converting a in our performance down of by organically our were to XX%; and split largely dental We is split XX% disability we smaller leads result buy-to-build benefits, and voluntary plan purchasing of Direct-to-consumer group broker costs combination vision of up were agent the

build to In terms the identify of our investments. of the U.S. impact expense ratio, it's important

disability We the outside our continue In that have growth underway in would into investments and platform points, of direct-to-consumer to life, quarter, these we XXXX. company. essential the asset reach network expense investment impacted basis efforts initiatives ratio XXXX pace workforce. management, vision and having the digital These future X investment are for to and traditional expect the that are important rest of business to XXX this by and the and group of dental a consumers include

principal investment while in an being in swing from we more platforms platforms X% Our and the annual driver cross-sell a X to compound we rate XXXX of for to related normalized growth these growth, of XXXX driven revenue halo levels. by outlook future expense core the X% through to to the expect navigating strong In years, are elevated profitability. retention largely natural contributing in the in ratio platform a digital interim, returning In voluntary is and these X of our products. advancements impact growth next maintaining

Investments. Global to Turning

by $XX for in as With net increase together from inflation, as with estimated rate the to currently billion combat plan. deployment is investment portfolio short-term Federal our the generated income to rise original interest compared they activity, our rates $XXX approximately Reserve million floating year driven

attractive inflation program mentioned portfolio in asset are last portion book book the our acts As that strategic of U.S. is on with on U.S. pressure. class foreign income in tailwinds with forward also XXXX. U.S. rate maintain our and hedge of short-term generally Along favorable in impacted in going have Japan these being to hedge we the floating LIBOR aligned logical our contracts rate a floating locked expect our the against to quarter, an portfolio into large continued cost cost curve and rates as a dollar We of by as exchange inflationary instruments dollar a Japan,

offsetting locked the However, we the to have in costs serve those have holding instruments to enterprise. and neutralize company for XXXX that hedge the impact at

There a portfolios half valuations, of these marks lower Our reporting track second public expectation as likely and of alternatives giving monitoring results. equity a correlation We closely in the fully our risk to portfolio private of the in recession. the a we public XXXX remains position is chance private maintain equity, thesis private risk well-understood strong appetite Naturally, private natural and economic of much valuations expect numbers We gains. given same. continues terms and in resulting equity's is to deliver are to on their year conditions lag back of equity and this returns. assets defensive the real equity, estate equity in investment the

of long are the a We allocation equity investment maintain XX-plus market X% sooner. over on could middle our conservative net risk-adjusted and or earn to We volatility recessionary We of willing the growth portfolios next estate our felt with to invested over income, a to closely adding impacts be under marginal expected real where accept term, NII monitor percent years. basis. assets transitional X some market

The will well portfolios stressful Q&A. as us for private take their lien a We we and the given protective continue I'll and to. equity expect to as leverage the structure, portfolio performed has diversification. period first David? during expect reasonable COVID, of loans of these covenants, well senior, to now call degree to high back middle-market they David hand to sponsorship secured, perform well

Fred. you, Thank

ready will we [Operator your are take first now questions. Instructions]. to Now question. take Andrea the

Instructions]. [Operator

come will from Nigel Stanley. Dally question first Morgan Our of

little expect also then -- macro well? at just help play an Was I it. you to know to talk as about So this quarter, various more In touch Last improve activity it it returned more inflation have little as I levels. conditions? to normal driving a impact troubling. a it looking Or quarter Can wanted seems losses. you that? on forward, Was was to was initiatives And looking higher on you're purely a do have U.S. what well? that

Fred. it's Nigel,

Let me lapse know, pressure on our you on report XX-month in rates reported talk And our a as you'll result, a we as year-over-year. we about rates. comment see lapse trailing ratios -- When basis. lapse

And seasonally And have our done when is so in make give lapse rates recovery an lapse about rates. looked comments we let at adjusted we what you idea. quarterly our a me

that was tend said equal pre-COVID quarter And the in quarter rate. is that second lapse second we rates in travel the to quarter. related the the enjoy up territory our rate and of To to in couple mandates place. persistency the give in again largely the that around of would rose the quarter, or into lapse years, XX%. we It XX% for only state you before that levels XX% we idea, approximately persistency COVID, an to Our enjoy -- over to or differently, believe tend last the we that keeping require policies around that's

was has to persisting As annual those lower seasonally points have back quarter. than it's us around expired, be persistency started traveled our XX.X%, and lower XXX we've timed process, normal quarter In rise But into lower that the quarter. to expected, points expect. now process that's normally that largely it a It's our what implications. quarter to first case, comments expire We what so first in we because last the quarter, gave year-end basis to enrollment expect about and persistency. than it always and lower about have traveled is persistency spooked adjusted was that basis related we and would in XXX this

impact of be it recover there. don't would the that. impacting inflation don't inflationary as any of now, back my inflation, necessarily I the a these of acute adjustments se. Thus lot watching see you, seasonal that business levels from quite unusual and the seen we it's we performance. on note that inflation related our as want We'll don't that. but monitor go have implications how that you per evidence obviously to inflation, have in at far, overall my of forward. to inflation, very U.S. some haven't this see pleased see tell a so don't And would tell history dynamics But quarter, fact to we we that's rates, cautionary see normal to going comments monitor why and Right see we I we very would I it to comment financial of period, lapse we're and honestly, To language. Again, offsetting we we're the simply an implications we behaves. to So have second having to any

next from Bhullar Securities. comes The JPMorgan of question Jimmy

a in like And seems Japan, had sales in trends U.S. you hopeful that improvement about increase on the Are activities that? comments I on Or seeing the production So it quarter. Japan could an are Japan, expected impact in get of and talk on and seeing trended on sales you're positive your if just cases? better? And pretty how the you your things question because you through are then in in just relatedly, sales. any specifically COVID will that recent

me answer ask Yoshizumi let to Let that.

Yoshizumi. is This

me your Let question. answer

a its For continuing the so last downturn after run year. from first quarter, second had quarter new medical its of course XXXX, the of product release insurance in as sales January

activities Additionally, as impact on compared last sales period a COVID-XX infection negative measures have new cases of prevention increased although the X.Xx lifted. year, continue same intensive been number to the to have

have its of While COVID-XX start remains. July, is experiencing Japan been and seventh wave increasing infections since the uncertainty rapidly

will Japan the launch third Group that, that exceed gradual and are last sales we having for building recovery While on the new results, said of me. That's the hopeful insurance sales. year's product Post quarter, all from cancer

to to sales I'll question. U.S. ask respond the Virgil

Thank you, Teresa.

sales. Very pleased with the did As a Fred performance. quarter XX.X% and see shared in increase second Dan we earlier,

I distribution think what well, we're channels. a seeing it said our Fred combination It's of though. from

increase We producing. productivity If was large another by the average our increase then in from the heavily we've It's an which about veterans it seen quite saw by was recovery. our saw driven and at COVID, producers, space, look from returning at think disrupted case veterans. And of less week we beginning COVID. small the really you you in our a solid disrupted market, veteran when to

a broker We XX% our increase saw production partners brokers. quarter-over-quarter from to see great our performance in continue that in space. We from

brokers, how in we're case you when that to see market small with the look large overall, to veterans, our with brokers we're and it, our at large recovery our with with the pleased quarter. in continue space going So market

The next Scott Goldman from question of Sachs. comes Alex

mean, struggle with one it a had when and about think out caught IBNR guess First of because time. for Japan you the helping way any of I basis it that think on XXX have the, us know you unfavorable I of but I over is I claims have sort -- what then the benefit more you the COVID through guys I had think was ratios. points normalized benefit portion go with associated that's help over outpatient And ratio breaking I treatments do when could IBNR I figure materially any higher, little through, mean, run that. of favorable was you I apart XXX a us point is and it associated of help COVID rate I on think out be you us basis basis. how to a where with sort should like delta it through sort with these things specifically? think releases, of

Alex. you, Thank

you what trends, have we sort the through the of from reserve to historically If you have quarter or reported permanent run special we reasonable results. seen rate releases is in Those somewhat hospitalization added obviously, favorable the up sort more of of And ratio in cetera. that's back experienced What run get to for all about our to -- to you that basis benefit with start XX.X%. XXX et points. permanent the factors I think add walk from is sort quarter, of XX.X% the adjusting make the

I an reserve ratio back back XX.X% that in adjust benefit were sort for if each you quarter. of what -- the get as quarter, of get So release underlying in for sort to see to we to an of adding sort normally adjusted ongoing to

Going relatively forward, basis and level of that going running XXX expect of we those but have we maybe not would the releases certainly points, been to at continue, an element these over reserve expect time, forward. high recently,

was Got it. That helpful. really

upward Next things a that, I half I of had put material as for different about the that are is is the comments the I to expenses. little could some on enough I and ratios? inflation just range focused expenses. heard back know a pressure think on expenses us more maybe expense for that well. or one mean, on

I ratio that if update So to guys the you out any of just guide there's sort there. was wondering expense have

of we're where seeing I so market inflation with think what just inflation. One, the that. to and we all is got do overall inflation is fall inflation, couple headcount And wage face wage got experiencing and and your in predominantly we've areas. to in essentially, a simply salary We've and in talent, have and our company employment manageable. U.S. employees so. we'll a that, in and line are Japan large and to for Japan. keep mean, company, retain said our very levels Having our U.S. a do quite we the X,XXX size, I approximately we're in X,XXX but

perspective. of type so is overly business that from don't the concentrated that have we And model

pressure, the has quite There's we therefore, and also apply riders. while inflation have, wage certain inflation they will frankly, contracts more numbers, that they're have industry do so that And manageable. the

growth place tell itself of contracts inflation ratios. on is inflationary gets out to really is to in going the it's noted to as growth mentioned we're issues. that's I -- But my in going pleased platforms. the is heavily inflationary U.S. weigh I pressure that the comments. down often and IT moves have into what investing provisions guidance expense certain Overall, in into servicing The so see can as calm control. fact platforms, We're I you those in expense ratios through in bigger coming in on would ratios of very is That control. when that And and than on inflation kick not back expense what to gets also causing more back us inflation rethink that our

top taking And the net ratio, as inflationary ratio. a active well, when relief terms well. it's think on pressure yes, in that actions investment you and expense combat to upward expense is it do boost on the that order well, in it that, into you some add about and pressures. And to Obviously, helps income just putting obviously ratio coming last as line, as are one gives and play here the expenses therefore, is the And dollar reminder. we we have acknowledge you piece

for you And the remind voluntary I'll program workforce a X.X about we in XX% also retirement had years retired. that ago, of U.S., our and

this -- not of mind. top Difficulty]. has we not that is So something been [Technical

Operator?

comes of The Autonomous Research. question from Bass Erik next

I little more bit can NII hoping the detail a on was you provide outlook.

$XXX plan. mentioned million expected think original I Fred higher NII XXXX than in of the

floating continue to costs NII should impact is costs? we higher? or the should to hedge net wanted probably moving build Just gross how but then confirm, move of reset will about hedge think rate I into when, guess, this also and And XXXX

like that? you to would Fred, me take

Eric. please, Yes,

The numbers are costs. thing. floating we've are of that rate Fred rate net respect They because interest some hedging interest the of with book. done hedge rate currency quoted hedging Sure to gross

I dollar still are year, and program. just costs of bifurcate buckets. higher, XX% substantially are going two a locked like as billion FX the hedging carry this primarily cost next so is locked for pretty those we about in, want forwards on of XX%, costs to reminder, those Clearly, $X.X the year, And So our hedge or hedge into in. Japan

of the as what But costs back-to-back reminder, hedge So go forwards program have we sort a countering we at up. next will inc. or the call year certainly

pricing. And our won't but hedged. to do much the program a those for we how the net forward necessarily of hedge unhedged up, with a have as that the FX well have which cost and offset, options for on protection relatively on based the We book options go us dollar stay from want the expect portion some an enterprise, FX tail look at We do should hedge help So often are perspective ratios on do those in we stable basis. Japan.

bit the year. Fed is So is go The curve Fed income up next of upward the floating the is broadly for the meeting think could option expect would be we as but of is, future. dovish where forecast well. with that And year's a do watching assuming the to again, you floating all hawkish the markets. expect where rate for it then speaking, we LIBOR would going, it a still little was more costs we when tailwinds. moving forward for income sloping. said, in than in still further at amount inflation Fred latest expect variable from the as And next more we perspective stays our look Fed. rate tailwinds We're But The

-- to so going if will. it's a moving you be target, So that's

reported beginning However, LIBOR, on do And X-year floating get floating is that, our the aggressive rate hedges. year put and at all a in on based interest financial Fed that we the time. planning saw we'll we book, having an with curves and of that the because hikes, X- said guarantee also increase rate we period. our that. have at that there's a we this did on in on time before, when we there's the LIBOR that on forward we It where increase that know income no period, substantial that over But rate depends over

in in a why the income, we the interest potential surety put not of large of given around and lock increase it purpose So did. good better which portion was hedge say, that, that rate to

So protection the recession it to case great the But future lower Fed and in it. gives now all hedge there's rates. starts in we of us didn't

So to we still up. have well go as if continue should rates some upside

you will, picture, cost. a specifics the some if that's on future and hedge of the So

of That's the of the bottom less of program, may we level, helpful. uplift of kind rate to corporate? an just to it the dropping at an see given higher you from NII and of Japan it in confirm most the in yields enterprise line And may -- more realizing the floating back-to-back should then, really not impact segment think

hedge you $X locked-in the that effective notional. hedge in also income would hedge But a And the level costs to Japan, in billion are hedge see by then Eric you our those new corporate portfolio, see of that off increase. into we what so go increased roll of mind would $XX and around be at as then same keep said, no enterprise. that there'd the Basically, the be hedge costs costs would correct. level impact rate That's floating instruments increase billion in offset

an we investment costs. outside enjoy have rise And despite so in still to the ability hedge net income

Kamath The question comes Jefferies. Suneet from of next

on Just question. Eric's a follow-up

order higher in your around million the expense NII that to from to influence we're if does So floaters, accelerate maybe thinking an $XXX faster that getting maybe opportunity forward? initiatives, going of generate growth

and tell what different net really in in plans actually -- policies force, is platform investment we increase adjusting are our you around sales if added not and overall saying have our investing down. pace Well, I your efficiency with earned you really topics. would of related What you're around premium, measures. they would growth in initiatives are NII accelerate core up plans we're two income, or to the The investment

help any I expense do addressing in those Japan several have of as would productivity dynamics and impacted really plans both watching terms combat have NII as near-term up on drive in is place our forward. highlight, in investment, the and and underway to we in by But inflationary go comments, improvements mentioned we Those not render to Dan really are and at efficiency but want that, certainly do long-term structure, U.S., require very in the of it improvements. pressure and Suneet, work impact down. expense we much his to initiatives plans. none So move And any

government And shifting as this to it. color just are bit drawn. more in that of that Japan. COVID little that policy conversation can certain your caps for will benefits potentially on early products changing infectious a Is have? any September to risk And I this terms your get that have the the, to there believe the Maybe Got of around in future? disease be hoping then government where an days number I the was expectations has. what I Okay. guess,

Koide-san, views can But Koide-san address September. maybe that. our Diet think the your color I here can perhaps address the conversation We of U.S., add in in

Aflac Yes. This Koide. is Japan,

deliberation the Fred Ministry and is against the at amending started requires be light discussed in from COVID-XX's as a of Fred Association the and X, National session the committee related disease review to gaining have infectious which the classification proposed disease from of special mentioned the the experts to Labor earlier, infectious discussion of as and the subcommittee And disease is on situation, government coronavirus really the discussion Governors countermeasures So [indiscernible] COVID-XX mentioned infection momentum. law classification. starting And also, of under law extraordinary expected law. of Diet earlier, at law, the earliest. September classification reviewing Welfare August the under the beginning revision a in Health, And

Diet care is outcome the the has law on we how overall we So it it is Rather, the cannot that pressured highlight predict discussion, industry. focused on the of not system. health focused the insurance and would

it feel positive is development we all dialogue that That's the is for on However, a a taking place issue. me.

not So increased all just This think be substantial just clear. companies note in are issue. I is major insurance Aflac The but activity policies. I something is also on medical would uniquely to facing that an really perhaps obvious, claims Japan

not peers In fact, insurers the of of few among claims terms other the volume we're platforms. to even top we have large in industry, the with in domestic relative

the this medical for is We amount year twelvefold but statistics, over confirm under some that policies up period suggesting articles month same paid time. So of last been broadly this can't in June, really the the of time recent nearly these based. news example, of was there's claims

contemplate in And legislative Japan system. they've pressuring think this to consideration realizing is a the in is we law. the that change community got and under taking it absolutely So the

very While for saying projections our still comfortable we're with XXXX. that,

make So grasp sure you that. want I to

The next from Ryan question comes Krueger of KBW.

the much could rates sense of on short-term portfolio? realize from the NII first, some just quarter I us in current did how you give floating higher guess, you uplift

ahead, Eric. Go

$XX didn't It's and February, that's logical around portfolio. these pretty you quarterly just to month start are March, that's for really about from in quarter, because total for million of reset. if And LIBOR, it think Eric. the But April, million $X but the until X million. of rates the about alone, ascent $X was It it's increasing

rates the impact from floating other assets activity than to around of from did small, have better floaters ahead new rather some We provider. was on a deployment. planned. on money purchase alone but able The particular portfolio yield So just the was we rate plan deployment were

in really by, that impact of substantial LIBOR. rise number most a just continues increase. rates year from to of portfolio as the of So get But added goes that the to because activities higher alone

is we think I the guess part clarify, about just million $X the the of to as... to million? million $XX Or million should $X $XXX

$XX the the $XXX And is for part year for quarter. just that's of the full second the forecast. million, million is $XXX million

was in any the throughout? then spread And see went in the Understood. pretty I as Okay. the benefit we guess, U.S. normalization ratio it you or through did quarter

no the between well months it's movements spread specific different There quarter. think the in reporting over the I was relatively out quarter.

is to you again, sure Dan's make capturing back these and dominant to the of dynamic infectious talking heart higher are claims. cancer just are that impacting hospitalization very insurance is giving again, One cancer is, Japan activities, thing of comments rise COVID all these take is to comments, that script we're claims, believe and as And comes we remember, it know, which a on not my absolutely sure we Max's other you disease related least to on claims want insurance you're to cases that and same just comments COVID make when the about, the rate provider.

treatment, they Japan to your so for health cancer implications time. moves how when trend over of care more that And claims the and outpatient world material has

by around seen the So the it's still a comments you guarantee we of in this ratio of thus increases medical far. but despite standards. all low why, what is claims, correlation, and There's have claims COVID historical no certainly that see even data in benefit Japan in direct

The next Tom Evercore Gallagher from come of question will ISI.

you yield back we to feel through enter given to higher the on quality expect on portfolios The Eric, recession? the looking that basis? Would net transitional steady? First the $XX are the yield floating is portfolio going you some question, keep higher into estate, that back or getting be grow real Or to billion a floating you you do how it you're so And in would on about those keeping a portion the -- portfolio of do if rate of impairments? portfolio. expect the rate you're

thing. of going Sure to over I'm actually, but And Tom, Brad who's question we credit, have Brad. deputy the my Dyslin in to on that shift call, since charge also

attention Tom. both question, the you for portfolios. paying these thank Thank very definitely of And We're Eric. you, to close

economy we absorb middle-market very to going higher managers. with think all lending. on very we especially lien. expect, think you manageable. we really first for We've and ability along I pass have As our where feel focused, first the and their across high-quality we loss down, opening When their be sign could outcomes, of financing you loan the issues. is It's increases look these his closely some mentioned to We're in Fred relatively portfolio, space, ability worked the think severe see as -- the is potential would across portfolio this costs. any slows any cost comments, in very middle-market We we our stressed portfolio as a

leverage. it inherent there's very It's think a We perform during and and will well-diversified -- the allowed with COVID have COVID, modest some portfolio we that well support to portfolio. downturn. think We shock, the we us characteristics continue to a

of you of we'll we material. we we underwrite, stressed we positioned it eye of that of about well and how estate. strength expect kind transitional actual the course, you come is don't real that with expect have business of estate, Now close don't the get real losses all the and we boils in entirely plan. asset, we're strength the have, any and the how good it. to portfolio, a really feel a expect we're currently Again, quality transition and of the this the of to portfolio be we underwrite would the down course, have our managers didn't keeping the sponsor losses very on to But through We in it In surprised if leverage possible. don't the we unscathed. overly downturn the again, few real case estate be But assets of

Tom, also Brad's I would remarks. add to just

classes. earn that higher first yields asset more our for and take reminder, loans, secured definitely to risk and are the We that's approach lien, middle-market a taking. senior as Just but those We TREs these we're offset assets. spreads, to conservative a

in The reserve our for financial take based comments won't expected CECL will some Brad's Based out while already. and those default the a be are, better reserves generally other CECL there reserves. a reminder much losses historical performance asset a those we on long-term depending it actual than classes. standpoint, expected come is, be these we this CECL rates. recession is future deep is suspicion in we be, it just taken how long And how certainly And from my will outperform of that the essence, speaking, do will unscathed, on while performance, we've on could

Okay.

and Just I earned know sales second you're based lag would begin in of declined up persistency, recovery and modestly one quick here in. the of follow-up. The U.S. terms the is seeing a despite premium some still in improved earns there's a now, what that how to pick you half grow in again earned then But on and expect premium XXXX? maybe to bit

down picks growth. that we XXXX see would year in continue come an as expect improvement and to sales it the really then throughout lapses We up and

Barnidge John Sandler. Piper comes question next from The of

versus Can you metric foot maybe XQ? Because discussed a in Japan XQ you've know about in that's in I previously. shops talk traffic

you about walk-in traffic? question? shops and Is that our Are talking the shop

that's Yes, correct.

Yes.

data I the that think retail I me. through front of would any I don't that question. have our data on to of Yoshizumi-san, Japan have do you ask traffic shops? in answer right level in Yoshizumi-san

Fred. you, Thank

the a will not had we yet me. quarter when levels, answer has trend the X.X%. previous That recovery and is first the number of at year, customers indicates to said, the a for all Yoshizumi. visiting Let number monitoring me the figure was the question. customers. and in-store this second the continue or This same of quarter the shop Well, in That's the which in level we as pre-COVID-XX from returned negative

comes Michael Citi. of Ward The question next from

I of screenings. cancer wanted on just to delayed concept expand the

in Dan from what screening if the on and in think you talking impact this CNBC terms was give -- severity on about I But an impact morning. U.S. the maybe and cancer this just seeing Japan? update delayed actually could wondering you're potential of

enormous we jump have it kind actuarially on an talking computated. Joe. CNBC was I I of any was not Well, And that seen mentioned not to when

original, now to getting out that, X.X within been. it's falling getting it's ranges. Saying we're our So -- be it's years from the

are and it's how of chances less knows you. going same forward. So got And think is have move show the don't correct. time, now. was -- the our really you we should his know to have of guy all we as that what just computation I've more But tracking And shaking a that actuarial it at that's the you ahead you but I seen if by all spike says to head, less

answer. the that's So

be that back that normal to to cancer total our to we obviously, indicator would a add seen -- claims. first occurrence I thing tends overall be is leading coming answer more have And should for that levels. One

both will still bit of a We there is diagnosis we're point. our in in more we And we all out in low full is would level but that of levels. before policyholder to levels, the sort little the and of incorporated running pre-pandemic normal some back at cancer still and we've forward. haven't to there generally of be come of benefit low yet. Japan detected U.S. going ratios just that impact within our overall, for is our guidance base way that think and we said in expect And So occurrence, seen first where be in the first expect component a to that

or probably checkups, But been are were on were they most it's people a year the back so. to normal. to I doctor think And having that now going and, whatever, going for

the we about in those we about good said, pretty feel can feel handle move numbers. those the we here Japan claims. overall, and So government's reason we issue one that's And regarding good how even

feel we well So positioned.

to believe our Thank your past for we're joining and I you'll thank you, you, top hope hour. the of was that us. and I Mike, Tuesday, thank last to forward November reach have, financial to we all right. mark Agency a I little then. talking XX, to want you Andrea. All analyst and may And you forward question, briefing. for calendars our to the you out questions talking then, Rating care. that you seeing and Take please Until any look with Relations look Investor soon. for and to we

disconnect. you Thank concluded. presentation, The today's conference for and now now has may attending you