Aflac Q4’22 earnings call

Aflac hosted its Q4 2022 earnings call on Feb 2, 2023. The highlights:

• Pandemic conditions impacted operations in Japan, especially in the first half of 2022 but they are gradually improving
• Pandemic conditions in the US have largely subsided
• 2022 – reported adjusted earnings per diluted share, excluding the impact of foreign currency, of $5.67 – the company’s second best year in the history following a record 2021
• In April, Aflac Japan will begin selling its new cancer insurance product through Japan Post Group
• Network of distribution channels include agencies, alliance partners and banks
• US – 4th quarter profit margin of 20.4%
• Seeing success in efforts to reengage veteran sales associates
• Seeing strong growth through brokers – “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.” – CEO Daniel Paul Amos.
• Cancer ecosystem development is moving from launch to expansion – when analyzing current call volume, over 50% of the calls relate to treatment, thus suggesting a value proposition beyond the pure financial benefit of paying a claim
• Its 2022 refreshed approach to first sector savings is yielding expected results, with approximately 80% of all sales representing customers who are under the age of 49 and approximately 50% of all new first sector customers purchasing a third sector product which is twice its target of 25% cross-sell
• Seek further advancement in digitizing paper and manual processes for greater operating efficiency
• A difficult year industry-wide for direct-to-consumer sales – still Aflac is encouraged by consumer markets’ 5% increase in sales in the fourth quarter with new alliances coming online
• In a typical week in Japan, Aflac processes over 30,000 claims in its operating center. During the considered hospitalization period and the 7th wave of COVID, this increased to more than 90,000 claims per week.
• Typically pay a claim on average in around 3-4 days or so in Japan. Gone up to ~12 days during that peak level. Now coming down to ~5 days.
• Primary motivation for moving to digital is increased agent productivity
• Seen its medical sales decline and have plans to refresh this product in the fourth quarter – “We’re also adding lump sum critical illness benefits, and we continue to focus on our other product development, including refreshing our medical product, particularly with an eye towards competing better in nonexclusive channels that are very competitive on the medical product, and we need to compete better there and build share.”
• Mentioned the launch of Aflac Re, its Bermuda-based reinsurer