Aflac's Strategy: Overcoming Challenges in Japan

Market Conditions in Japan

Aflac remains confident in its business strengths and growth potential in Japan, despite challenges like currency fluctuations and competition. The company is adapting by diversifying its product mix and leveraging a broad distribution network, which has driven a 4.5% sales increase in the second quarter.

"First, on Japan, the decline in sales that you saw, how much of that is just a function of comps and maybe the volatility in the yen depressing sales of ForEx products versus an uptick in competition or price reductions by competitors or other market dynamics that are causing you to actively pull back?" --- (MET, earning call, 2024/Q2)

"We believe that in the underlying strengths of our business and our potential for continued growth in Japan and the U.S., two of the largest life insurance markets in the world, Aflac is well positioned as we work toward achieving long-term growth while also ensuring we deliver on our promise to our policyholders." --- (AFL, earning call, 2024/Q1)

"And we're seeing that in Japan. If you look at the shift of the mix in the sales that we have in Japan, while we continue to sell a lot of protection product, we're selling an increasing amount of retirement product into that marketplace as well." --- (PRU, conference, 2024/06/12)

"In Asia, we enjoyed solid growth across a range of metrics. While sales in Japan have been impacted by currency fluctuations, assets under management in Asia continue to grow, rising 5% on a constant currency basis in the quarter." --- (MET, earning call, 2024/Q2)

"While still very early, we are pleased with how our agencies have sold this product, which drove a 4.5% sales increase for the second quarter being where consumers want to buy insurance remains in an important element of the growth strategy in Japan.Our broad network of distribution channels including agencies, alliance partners and banks continually optimize our opportunities to help provide financial protection to the Japanese consumers." --- (AFL, earning call, 2024/Q2)

Operational Efficiency and Cost Management

Aflac's operational efficiency and cost management strategies have led to increased adjusted revenues, primarily driven by reinsurance transactions and a lower volume of tax credit investments, despite higher general operating expenses.

"• Total adjusted expenses increased primarily due to the higher reinsurance activity of $37 million as well as an increase in other general operating expenses." --- (AFL, sec filing, 2024/Q1)

"CORPORATE AND OTHER For the quarter, total adjusted revenues increased 77.9% to $249 million compared to the prior year primarily due to reinsurance transactions in the fourth quarter of 2023 resulting in an increase to both total net earned premiums and adjusted net investment income, which also increased due to a lower volume of tax credit investments." --- (AFL, press release, 2024/07/31)

"CORPORATE AND OTHER For the quarter, total adjusted revenues increased 91.5% to $247 million compared to the prior year primarily due to reinsurance transactions in the fourth quarter of 2023 resulting in an increase to both total net earned premiums and adjusted net investment income, which also increased due to a lower volume of tax credit investments." --- (AFL, press release, 2024/05/01)

Product Innovation Tailored for Japan

Aflac's product innovation strategy in Japan focuses on leveraging digital applications to enhance customer experience and develop new markets, addressing rising healthcare needs with medical and cancer insurance products, and launching new offerings like the Tsumitasu product to meet asset accumulation needs and expand their portfolio.

"The central mission of Aflac Global Ventures is to support the organic growth and business development needs of Aflac Japan and Aflac U.S. with an emphasis on digital applications designed to improve the customer experience, gain efficiencies, and develop new markets in an effort to enhance and defend long-term shareholder value." --- (AFL, sec filing, 2024/Q1)

"With continued cost pressure on Japan’s health care system, the Company expects the need for third sector products will continue to rise in the future and that the medical and cancer insurance products Aflac Japan provides will continue to be an important part of its product portfolio." --- (AFL, sec filing, 2024/Q1)

"[Foreign language] And we’ve launched our new product in order to respond to the kind of asset accumulation needs in Japan." --- (AFL, earning call, 2024/Q2)

"John Barnidge: Good morning. Thank you for the opportunity. My first question is on distribution of the new first sector product in Japan." --- (AFL, earning call, 2024/Q2)

"And so whereas, with the older, we might offer the Tsumitasu product or another product and our supplemental for third sector product. With this group, we'd start by putting in one product, which would be the Tsumitasu product and then in a year or so later follow-up and add more." --- (AFL, earning call, 2024/Q2)

Future Outlook and Strategic Plans

Aflac's strategic plans include a cautious approach to reserving, not expecting continuous future improvements, and leveraging strategic partnerships, such as with Tree Line, to advance growth and generate additional value.

"The way we do -- when we do our reserving, we are looking to true up to current experience, but we don't necessarily anticipate that it will be a continued future improvement in that experience." --- (AFL, earning call, 2024/Q1)

"We are pleased to announce this strategic partnership with Tree Line as we continue to advance our growth strategy for Aflac Global Investments and leverage our outsourcing capabilities to generate additional value for Aflac and our stakeholders." --- (AFL, press release, 2024/05/16)