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Good morning, everyone. I'm Ryan Krueger from KBW. We're going to get started with the next session. It's great to have Max Brodin, the CFO of Aflac, up on stage with me. Also wanted to recognize David Young from Investor Relations and Capital Markets at Aflc in the front row. Unfortunately, Ben Aflack, their new spokesman, was unable to join us for the fireside this year, maybe next year. Yeah. So, yeah, maybe just to start off. let them know of their request. Sure, it'll be high priority. Yeah, I just want to start with Japan. Certainly hard to not notice that interest rates are the highest they've been there in 25 years. And you had done some investment repositioning in the second quarter. And I think you had indicated maybe more in the third quarter. So hoping to get some sense of kind of how much more opportunity there could be to do investment reppositioning and take advantage of these higher rates? Yeah so in Japan we find ourselves in a situation obviously with the yen yield curve being as steep as it is both in terms of the level of the steepness but also the absolute levels of yields that we haven't seen for a very very long period of time so what we have sort of been looking at for quite some time and we've been able to execute on in the second quarter is a number of repositioning trades. We at Aflac, we hold a pretty significant US dollar portfolio on our Japanese balance sheet and what that means is that when we then run this through our capital level in Japan and when we run this though our local statutory earnings, it creates pretty significant FX, either gains or losses depending on where the dollar yen rate is. And as the yen has weakened pretty substantially, despite obviously what's happened over the last week, that means that we have found ourselves in a pretty significant FX gain position. And that's all well and fine, but this coinciding with the steep yield curve has meant that obviously our JGB portfolio has found itself in pretty significant unrealized loss position. And what we've been able to do is to transact and reposition the dollar portfolio generating loss, sorry, gains, and repossession the JGB portfolio generating losses. And they kind of more or less offset each other. And that means that without leaking anything in terms of taxes out the company, we've been able reposition those two portfolios now yielding higher yields. So even though the earnings impact on a local statutory basis is essentially neutral from these transactions, it means that going forward, the net investment income of the total portfolios will be on an annual run rate basis $50 million higher. The other thing is that it reduces risk overall for us as well. So in Japan, you have an impairment test. So even if it's purely driven by rate, if you are down 50% on a security, you have to impair it for local statutory purposes. And the local statutory earnings is predominantly the main driver for your ability to then send dividends out of that entity up to the holding company. So for us, if we have significant impairment risk, that also means that down the line there could be impacts to your ability to send dividends and we have greatly with this reduced our total unrealized loss on the jgb portfolio and therefore also significantly reduced that impairment risk as well so this was partly a an exercise in reducing future risk but also an exercise in in increasing future earnings and then you know just decide i think it was five percent of your portfolio that you repositioned? Is there an opportunity to do as much as that again, or any sense of the magnitude of the opportunity that's left? Yeah. So transacting 5% of a total portfolio in one quarter is a lot. It's a lot, and so our team was very, very active executing on this. When you start a process like this, you should expect that you begin with what is the most impactful and what is sort of the easiest to do. And some of that is behind us. I definitely expect that our investment team will continue to execute on this in a good way. So there is more to come, but I would just keep in mind that 5% is a very, very significant number. And then the higher rate environment is also driving more demand for savings-oriented products in Japan. You sell a first sector life product called Sumitas, which has had good sales growth recently. I guess, can you talk a little more about what your first sector strategy is at Aflac in Japan? You know, the risk return profile of the Sumitas product and just how much you're willing to grow there, you know, relative to your more legacy kind of core third sector business? Yeah, I'll take that word legacy out. Maybe not legacy, core. Yeah, our core business, it is really our cancer and medical business in Japan. And our life insurance and our savings business, I would define as more opportunistic. And the reason why is because now we're exposing ourselves much more to macro risks. That means that there are times where we want to push the gas, and there are other times that we're going to hit the brakes. right now specifically not only i'm coming back to not just the yield level but more importantly is the steepness on the yield curve is making life insurance very very attractive from a savings vehicle standpoint in a way that you have not seen for the last 30 40 years and it's really the steepiness that is doing this because most other savings products like for for example, CDs or savings accounts, well, they price off of the short end of the yield curve. And the life insurance products, they are priced off of that long end of that yield curve, so that means that the steepness, that is really what defines the relative competitiveness of these products relative to other savings products. So I think from a total demand standpoint, we have a real opportunity in the marketplace right now. That's not just Aflac, that's the whole industry that is benefiting from this. The other angle to it is that the higher yields means that we can now engineer products with actually very good returns. So right now I'm seeing new business IRRs that are extremely good for us. We have on top of that also designed over the last couple of years, reinsurance solutions and capacity internally that further reduces those returns. So when I look at the IRRs on a post reinsurance basis, they're highly, highly attractive. So right now we do want to grow this business. There will be a time where my answer is completely different. And that's what I mean by this being opportunistic. The other angle to it is that Sumitaz also gives us access to a younger clientele that we can grow into. And that has very significant strategic value to us because that means that a year or two down the line, we can then cross sell our cancer and medical policies into this younger cohort of policy holders. So there's both economic and strategic value to grow our life insurance business right now. And shifting to the third sector, so you grew sales 24% in 2025. A lot of that was driven by the strength of the Murato cancer product. now you have a refreshed medical product too but you're also lapping the tougher comps with the cancer product how are you thinking about sales growth for third sector in the second half of this year and then just any further thoughts on just your strategy to to grow the third sector business yeah so our cancer product merito is fully through its refreshment cycle it has been out in the market for a year and a half at this point yeah that means that it's it's meeting that sort of maturity level so we would expect that from a growth standpoint that will flatten out and from now on we we're still looking for that product to sort of grow a little bit but sort of defend the levels it is at as it relates to our medical business so engine palette But we refreshed that product, it came out late last year. We had a full first half with obviously, from a growth rate standpoint, very significant growth of that product year over year. But in terms of absolute volumes of yen sold, it's still at a pretty low level. So that's a business that we really need and want to take to that next level. Historically, I think we've done pretty well selling that product through our exclusive agency channel we have not done so well selling through the non-exclusive agency channels and that's actually a part of the marketplace that has grown a lot in medical over the last 10 15 years so i think that's that's an opportunity for us to strengthen our positioning in that distribution channel with our medical product got it so third-party reinsurance out of japan is a newer opportunity for Aflac. You've done one transaction so far with Japan Post. What types of liabilities are you pursuing there? Any early indications on counterparty conversations? And how meaningful do you think this business can become for the company? So we would not get into a business unless we think it has the opportunity to become meaningful, not just to Aflacre, but overall to the totality of Affleck as an enterprise. The liabilities that we are looking for is we have capabilities across the spectrum. That means that we can underwrite, we're willing to take on both biometric risk, longevity risk, and we are willing to taking on asset risk as well. if I were to define where I think our sweet spot really lies it's really in taking on mortality longevity and spread risk and this may come a little bit as a surprise to you given that if you think about what Affleck generally is which is a morbidity company ie we're very very long morbidity but the fact of the matter is that is what gives us this opportunity so when we co-mingle our reserve and liability risks that we have and you we are very very long morbidity and we add a small level of mortality risk to that balance sheet we add small level longevity risk to the balance sheet and a small level of spread risk to their balance sheet. We get very significant diversification benefits both through an economic lens but also from a regulatory through a capital lens. And that is significant competitive advantage for us. That package with us having a double A rating of our reinsurance entity means that we have some real core competitive advantages relative to some other players in Japan. And that's something that we're pushing pretty hard on as we continue to have conversations with Seedence. And your Japan benefit ratio has been trending towards the higher end of the 60 to 63% target for the year. Can you, I guess, go over a little bit more details why that's happening, what your outlook is going forward, and then is the general trend of downward movement in the Japan benefit ratio due to favorable claim patterns and mix shifts still something you expect longer term? Yeah, so I would generally divide our benefit ratio, And here, we're talking about Japan for a second. It's a combination of the claims incidence rates that are coming in. And it's a function of what we're seeing on the back book. And in our case, lapsation of the back book has a pretty significant impact on our benefit ratio from a quarter-to-quarter basis. When we look at claims trends, they're actually coming in in line with our expectations. So in the first half, we have seen a reported U.S. GAAP benefit ratio a little bit higher than what we expected. It is not driven by incidence trends, it's not driven by the severity trends in terms of claims. It's really driven by what's happening on the back book in terms of lapsation. Total lapsation is actually in line with our expectations. what we have experienced is a little bit higher lapsation of younger policies and a little lower lapsation on older policies. Why does this matter? Well, if you have a young policy, that means that, and keep in mind that we are selling regular premium products. That means that the reserve builds up over time. So there's a relatively small reserve that has been built up on, for example, a five year old policy that is now lapsing through our results. When that is lapsing and it runs through the results, that full reserve gets released. And if you have a relatively small reserve being released through the benefit ratio, it pushes the benefit ration only down just a little bit. If you have an old policy that have been on the books for 20, 25, 30 years, there's a very significant reserve that has been built up. That full reserve, gets released through to results, pushing down that benefit ratio quite significantly. So that mixed impact between old and younger policies being lapsed is really the key component to it. Now, the thing is that when you actually go in and you look at, has there been a significant shift in the number of old policies being lapped? Not really. And part of the reason is that the reserve per policy is very, very high. So it doesn't take that many policies to not lapse, to actually have an impact on our benefit ratio. So that's been a little bit of an impact over the first half. We would expect this to normalize in the second half of the year and going forward. That's why we do expect that for the full year, that our benefit ratio in Japan will still remain at the upper end of our target range of 60 to 63%. Got it. I guess there have been some encouraging recent developments in cancer treatment with the Moderna mRNA vaccine and there's the revolution pancreatic cancer drug. I mean, I know it's early, of course, but like, how are you thinking about the potential impacts of those types of advancements if they continue to be successful over the longer term? medical advancements for treatment of cancer is very important from a societal standpoint and it's also been very good to us the the way our products are designed is that we pay benefits for a specific trigger or a specific treatment and we don't pay for the treatment what that means is that if you have more use of new treatments coming in, it generally has meant historically that you have less use of some of the benefits that we have written 20, 25 years ago on our in-force block. So what's happened then is that we actually have seen that very favorable claims experience of those older policies being written when there's been new medical advancements or new treatments coming out. What it also means is that it increases demand on the front end to our new policies as we incorporate coverage for these new treatments as well. And that is what's triggering some of this lapse and reissue activity that we talk about pretty much every quarter, that policyholders are refreshing their coverage as well, so Generally speaking, we view this as positive drivers, both short-term and potentially even long-term for our business. On the expenses in Japan, a couple of- Sorry, I do want to mention one more thing. As it relates to when we get more personalized treatments and personalized vaccines, obviously the cost of that is likely to be quite high. The way our products are designed, we do cover vaccines, but it's a very limited benefits. So generally speaking, I give you one example that we would have a treatment benefit that may be two to $300. And it doesn't matter if the vaccine treatment is $500 or if the vaccine treatment it's $150,000, we're going to pay the same amount on that. So that means that even though the severity or the cost of the treatment is very, very high, it doesn't necessarily hit the severity claims cost for us. Thanks. I had a question on Japan expenses. A couple of years ago you had guided to somewhat higher expense ratio going forward as you were making strategic investments in the business. It has ticked up some, but it has still also been trending towards the lower end of the target that you have provided. Can you unpack that a little bit? And I assume there's some maybe efficiency actions that are also going on that have kept it lower. There has been, and there's also been good work by, well, maybe I do hope that our Japan colleagues are listening into this, that they should have some credit for good expense management, because it is tough to run a business when you have revenue decline And when you continuously have to cut expenses, it's a difficult environment to operate in. But they've been successful in managing that over time. The other angle too that have also helped is that we've been driving higher net investment income in Japan relative to the overall income statement. So your proportion of revenues coming from net investment has increased as yields have increased. And that obviously helps your reported expense ratio. So even though we've done some improvements in terms of absolute expense management, that you've had a further benefit pushing the benefit ratio lower by higher net investment income driven by higher yields as well. So some of that has been given to us, but it's also been good execution. Long term, I do think the right level for our business is in that 20% to 23% range. Okay. Then broader question just on AI and how is Aflac going about using AI to, you know, across the company and what do you actually think it's going to ultimately result in as a benefit for the company? So obviously we are deploying use cases across the board in many different areas right now. There is a little bit of a shotgun approach. You have to have that at this point in time. We know that some of these use cases will work out really well and some of them will fail. And it's important that we get those use cases because we don't know exactly what's going to work and what's not going to So it's important to try many different areas, but make sure that we fail fast where it's not working. Fundamentally, I absolutely believe that we will achieve significant operational efficiency driven by AI. There's no doubt about that. I am not convinced that it will lead to expense efficiency, though. though, and that it will ultimately lead to lower expense ratios for us. When you go back and you look at technology advancements in the past, you have seen significant improvements, but turns out these fantastic technology companies, they want to charge for the products as well. So it sort of comes through in the shape and form of higher IT expenses overall. So we are not baking on or planning necessarily that we will drive or get significant expense efficiency driven by AI. If we get that, that'd be fantastic and that would be upside for us. But we are assuming that that will happen and that sort of will bail us out. If it's one area where I think we, and to some extent the industry, could have some pretty good results over the next couple of years. It's really on the policy administration platform side. So we and the industry generally sit on legacy systems and what AI technology is really giving you the opportunity is migration off of those systems onto either in-house built solutions or other platforms is going to be a lot less risky, a lot cheaper, and a lot quicker. And when you add those three up, it makes it very, very attractive. So I think when I look at our business today, and from what I've seen in terms of AI use cases that we are deploying, that is probably the area that I think we in the near term, over the next couple of years, probably going to see the most impact. Since I asked about AI, there have started to be some questions from investors about just exposure in the investment portfolio to data centers and hyperscalers. Do you have any update there on Aflac? So we hold, if I combine data centers, and hypersonal data centers with hypersonals and hyposcalers, they represent about 1% of our investment portfolio. And this is on average single A rated. And the way we think about this is that we have more exposure towards what I would call traditional cloud computing and less so to data centers in very remote areas that are for single use only. That's something that we are somewhat concerned about. Because we don't know necessarily where all these new technology advancements will go. We don't necessarily know what our energy need is 5, 10, 15, 20 years from now. And to build that in an area that you don't if you're gonna use it or not, that we find to be maybe a little bit risky. And so you do need to get a pretty significant credit spreads on these type of deals right now. And obviously there's dramatic supply coming onto the market. And generally I would say that in, there are some areas where the risk reward is good from a credit standpoint, but there's certainly plenty of areas where it does not look so attractive to us. So moving over to the U.S. business, can you give an update on the progress building your newer product lines, traditional group, dental vision, direct-to-consumer, and, you know, are those close to reaching scale at this point? We are getting there. We are not there yet. We still need some time. And if you ask me what is some time, well, it's probably in the two- to three-year time frame that we need and when it comes to group life and disability we have a good platform we have good solutions and we're we're happy with how that is progressing and that business is running in line with our expectations both in terms of what we see in the marketplace how we price new business but also how our back book has performed and on dental ambition obviously we are behind on our original plan but as we continue to grow that we see very good traction especially as relates in the small case market and so that is predominantly driven by our our affleck sales force that is doing very well a little bit weaker on the broker channel as that is a much more competitive area and on the direct to consumer side and continues to gain traction and profitability is good on that channel and but and we need to sort of push that a little bit harder and we would like to see a little more growth come through but yeah there's also a more direct trade-off between growth and profitability in that channel so if as you push for growth you immediately then eat up a higher acquisition expenses that sort of impacts your your profitability so it's a uh you need to be a little bit careful how hard you push in that channel uh i think another there's a sales side another initiative has been improving persistency in the us can you give an update on on that and how that's going yeah um we're happy with uh how that is progressing and we've been able to improve that by a couple of the You know, we almost been improving by 20, 30 basis points per year over the last couple of years. So that's progressing well. And the real kicker for us is really when we at greater scale can bundle multiple products. And I think the real area and opportunity for us, it's on the group side. And as we get to fully building out those capabilities and getting to scale in the group business, and we get that bundling happening, that's really when we're going to see the next kicker. And then when you put it all together, you have a 3% to 6% premium growth target in the U.S. over the next few years. How are things tracking towards that? So obviously, we mentioned on the second quarter earnings call that for this year, we would expect to be slightly below that 3% level. As some of our higher growth areas become a bigger proportion of our total in-force and a greater proportion therefore of earned premium the mix impact as they continue to grow and they become bigger that naturally pushes us up into that range so yeah that's why we feel comfortable about us on a kegger basis for the years 25 through 27 and we should still be in that three to six percent range but gradually would we expect that overall earned premium should continue to accelerate throughout that period at the low end in the beginning of the period and at the higher end in at the end of the then on the us expense ratio you it's been you know trending lower as you've been getting closer to scale in some of the newer businesses but is do you still see more more room for improvement there as you reach further scale in the next few years yeah i do we have as i mentioned a number of businesses that are not at scale today so they're running with expense overruns as they get to scale that will bring a tailwind for us as relates to pushing that expense ratio lower and it's also the fact that we are growing in businesses with a lower expense ratio structurally as well so that combination of growing in low expense ratio businesses and the mixed impact should over time continue to further push that expense ratio lower now at the same time that also means that our benefit ratio will see the same impact right because we're growing in high benefit ratio businesses so that will have a little bit of an impact pushing that benefit ratio higher but net net that means that we should be able to defend our pre-tax margin in that 17 to 20 range there's one more on the benefit ratio you mentioned the mix shift impact, but if we step back from the mix shift component, how have claims been coming in relative to your expectations there? We generally see actual to expected very much in line with our expectations. There's nothing really that has stood out this year. Last year we had a little bit higher claims, especially on our accident and our hospital product, that turned out to be a blip and this year it's looking better and very much in line with our expectations. So nothing specifically to sort of call out on the client side. I want to get your current views on M&A. Aflac has never been a company that has really done large M&As transactions, but I think when we look at the company, you do have a lot of characteristics where it would at least theoretically makes sense, you know, strong capital position, low leverage, high valuation, multiple and lower growth. So it seems like a company where it could make sense, but I know it's not something you've really done much of. So what are your current views now? Yeah, if you go by the MBA textbook, I would say that we absolutely should make acquisitions because we have all those characteristics. The thing is that you always have to keep in mind that we find ourselves, we are very, very strong in what I would call a pretty narrow niche business. And when you are in this very narrow niche at very significant scale, it means that we don't necessarily, for most of the business that we do, we don't need more from a strategic standpoint. We have all of that. We have the products that we need. There are some gaps in terms of capabilities, but this is predominantly more on the technology and the platform side rather than something more sort of bigger like distribution or product gaps. So what that means is that the hurdle rate for us to do any sort of larger M&A is actually quite significant. It also means that the very second that we are looking at something, and most of the things that, you know, trust me, bankers are aware of, they do the same analysis that you just made, right? So, yes, we do get approached, and we get pitched a lot of different opportunities, but the problem is that a lotof it is outside of our core business. when we step outside of our core business that introduces to me a lot more risk because now you're into products that you don't necessarily know or are used to underwrite and you also step into a business that your current management team may not have the capabilities or knowledge how to manage so the risk associated with that type of acquisition is very very different especially for a company that does not have the track record and the history of doing so, and I would argue do not necessarily have that type of acquisitions in its DNA. There are certainly companies that have that, and there are experts in doing so. And that's part of what those companies are. But that is not us. And that is why it means that both from a strategic standpoint, it becomes difficult to find what those right targets are. And it also means that the financial hurdle rate for us may be higher than what it may be for somebody else, despite us having, obviously, significant financial firepower. Yeah, I guess one follow-up would be, so it sounds like if there was, you know, maybe you would consider something if it were right in your niche, but you'd have a pretty high hurdle rate to do it because of the execution risk. Yeah, and it would have to advance the ball strategically for us as well. Well, if it's something that's purely financial, it rarely works. If it's something that would advance the ball strategically and make the value of Aflac significantly higher, well, of course we would look at something like that. Got it. Then another new development from last quarter was you announced a new framework for the internal reinsurance limit from Japan to your internal reinsurances company in Bermuda. Can you give a little more color on how did you come up with that amount with the FSA and then should we expect kind of the same type of gradual timing in terms of moving up towards that target like you've been doing in the last five years or would you ever consider accelerating it to an extent? Yeah, we like to do things on a gradual basis. initially started with a 10% limit and that was sort of that was a meaningful number but it gave us something to hold on to something that we could use to communicate to all our different stakeholders we since didn't come back and we looked at what is sort of more a more realistic or a reasonable counterparty risk exposure between a flight Japan and a flagry Bermuda give it a size of the balance sheet there both from a Japan standpoint and an like re-Bermuda standpoint. And that's sort of how we landed at this 30%. We also think that it fits the bill in the sense of it being a meaningful number. But it may not necessarily be, obviously, the end game as well. So we don't feel that we have pushed the limit to the extreme by any means. But still, it's a reasonable number given where these companies are at this point in time. If Aflac Re was a much bigger company, which we would expect over time, that would help that counterparty assessment. It's also the fact that since we introduced this in early July, the JFSA came out with a communication where they are now strongly recommending that collateral trusts are part of every reinsurance transaction when you are seeding business. Well, what does a collateral trust do? Well, it sort of increases or reduces the risk overall in the transaction, and it significantly reduces that counterparty risk exposure. In theory, that means that you over time could have greater capacity. So these are some of the things that we sort of will evaluate over time. But we just introduced this new limit, and we feel like we have significant runway for the next couple of years. And just a couple on capital. So one is, do you still view the underlying free cash flow generation of the company in the $2.5 to $3 billion range, but then we should view capital that's freed up through the Bermuda internal transactions as an incremental upside to that number? Yeah, that is the way to think about it. It's a good way to sort of think about these sort of different building blocks, because the total number will be very volatile over time. But there's an underlying number, and then what we can do, both in terms of internal reinsurance transactions, freeing up capital will come on top of that. I would also recognize that we are currently operating with capital levels in all our legal entities above our target operating ranges. So our ESR is operating above our Target Operating Range, our RBC is operating above the Target Operator Range, and our BSCR is operating above the target operating range. that also gives us opportunity to do further management actions in order to sort of right-size those capital levels. Over time there is no reason why any of these companies should be above that target operating range for an extended period of time. If that was the case we should not have defined those target operating ranges in the first place if we didn't think that they were actually appropriate. So over time, we would expect that we will be inside of those ranges and possibly in the middle of those. And then the last piece to it is that we operate obviously with low debt leverage as well with the low end of our leverage corridor. And I would argue that we have an overall risk profile that is very low, primarily driven by the low risk of the underwriting risk that we take on through product design that we have. And that means that, in theory, we should be able to, over time, take on a higher debt leverage than what we have today. So, you know, across the board, I think there's certainly more to do for David and his team to continue to drive further efficiencies. Excellent. Well, I think that's a good place to wrap it up. Thank you very much, Max, and the Aflac team for attending. Thank you. Thank you, sir. Very good.