AFLAC INC Q4 FY2024 earnings call

• Dan Amos highlighted Aflac delivered strong earnings in 2024, with net earnings per diluted share up 23.8% to $9.63. Aflac Japan contributed over 70% of pretax adjusted earnings, with 15.5% increase in pretax adjusted earnings and 36% pretax profit margin. Focused on product strategy in Japan to fit customer needs at all life stages, including new cancer insurance launch. In US, focused on updating products for value, improving persistency, and stronger underwriting discipline.
• Max Broden discussed financial results: adjusted earnings per diluted share up 24.8% in Q4, remeasurement gains on reserves, variable investment income above expectations. Japan segment details on net earned premiums, policies in force, benefit ratio, persistency, and expense ratio. US segment details on net earned premiums, persistency, benefit ratio, expense ratio, and commercial real estate portfolio challenges.

Aflac Japan: Net earned premiums for the quarter declined 5.4%, with a 7.2 billion yen negative impact from an internal cancer reinsurance transaction and 4.4 billion yen from paid-up policies, but a 300 million yen positive impact from deferred profit liability. Policies in force declined 2.3%. Persistency was solid at 93.4%. Pretax margin for Q4 was 31.6% (up 120 basis points year-over-year) and 36% for the year, the highest in 30 years. Aflac US: Net earned premiums up 2.7%, persistency increased 70 basis points to 79.3%, pretax margin 19.7% in Q4 and 21.1% for the year. Sales were lower than expected in Q4 due to factors like dental platform challenges.

• For 2025, Aflac Japan: benefit ratio expected toward higher end of 64-66% range, expense ratio at lower end of 20-23% range, pretax profit margin at lower end of 30-33% range.
• Aflac US: benefit ratio expected at lower end of 48-52% range, expense ratio at upper end of 36-39% range, pretax profit margin at upper end of 17-20% range.

• Interest rate changes could impact net investment income, especially for the floating rate portfolio. Competitive environment in US affecting sales, particularly with dental and vision platforms. Potential issues with reinsurance operations and capital deployments needing careful evaluation.

Q: On US sales, what's the competitive environment impact?

A: Virgil Miller mentioned sticking to underwriting discipline, not taking unprofitable business, and recovery of dental and vision platform after system implementation issues but saw 33% decline in dental sales in Q4.

Q: On Japan sales vs pre-pandemic levels, what's the outlook?

A: Koichiro Yoshizumi from Aflac Japan mentioned focusing on solicitor activity recovery, marketing and sales transformation, new product launches (like cancer insurance), and hiring new agents to reach pre-COVID sales levels.

Q: On capital buybacks, how to think about 2025?

A: Max Broden said they are IRR driven, prioritize organic growth, increased dividends, and will be opportunistic with share repurchases, having stepped up to $750 million in Q4.