Slide 1: Supplemental 1Q20 Earnings Slides
Supplemental 1Q20 Earnings Slides April 29, 2020 investors.aflac.com
Slide 2: Forward-Looking Statements and Non-U.S. GAAP Financial Measures
Forward-Looking Statements and Non-U.S.GAAP Financial Measures The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by m
Slide 3: Our Response to COVID-19
Our Response to COVID-19 Focusing on what is important Workforce Policyholders Community Working from Home Enhanced benefits Philanthropic gifts • Over 75% of our employees in Japan • Grace periods • $10 million in gifts, including: • Over 90% of our employees in the U.S. » $3 million to Direct Reli
Slide 4: Sales Affected in Final Weeks of 1Q20
Sales Affected in Final Weeks of 1Q20 Challenges remain at least for the near term 1Q20 April 2020 Drivers Total Sales Δ est. Δ Aflac U.S. -5.2% -55% COVID-19 Aflac Japan -25.4% -65% COVID-19 and Japan Post Defending our distribution franchises Aflac Japan Aflac U.S. • Focused on exclusive agencies
Slide 5: Continued Strength in Core Benefit Ratios
Continued Strength in Core Benefit Ratios COVID-19 in early stages with little claims impact 2020 Benefit 1Q20 2020 Benefit 1Q20 Ratio Outlook Benefit Ratio Ratio Outlook Benefit Ratio 68.0 to 70.0% 69.4% 49.0 to 51.0% 48.1% Aflac Japan Aflac U.S. • ¥1.8 million in 1Q20 COVID-19 claims • No material
Slide 6: COVID-19 Claims Sensitivity
COVID-19 Claims Sensitivity Stress-Testing Positions Aflac to Protect the Following: • The promises we make to our policyholders when they need us most • Our strong insurance financial strength ratings and access to capital • Preserving our strong regulatory standing with transparent communication •
Slide 7: Group Benefits Acquisition
Group Benefits Acquisition True Group Life & Disability Benefits - “buy-to-build” growth strategy Aflac Strategic Rationale Zurich Group Benefits Market Expansion Large-Case Orientation Opportunity Deepen Existing A New Entrant Growth Account Penetration Platform Increase Broker Seasoned Team of Dis
Slide 8: Global Investments First Quarter Financial Highlights
Global Investments First Quarter Financial Highlights • U.S. GAAP Pretax Impairments / Loss Reserves – Loan credit loss reserves – $82 million; includes CECL provision, $72 million – Available-for-sale reserves – $63 million, Energy • Stable Net Investment Income – First quarter up $25 million versu
Slide 9: Proactive De-Risking Has Defensively Positioned Our Portfolio
Proactive De-Risking Has Defensively Positioned Our Portfolio Strategic Asset Allocation, Greater Diversification and Capital Efficiency Cumulative De-risking Fixed Maturities BBB and Fallen Angel Exposure1 $8.5 Total BBB BBB- (included in Total BBB) Fallen Angels 9.0 Cumulative De-risking ($bn) 45.
Slide 10: Consolidated Portfolio Overview
Consolidated Portfolio Overview 1 Asset Allocation Quality5 AUM: $123 billion Avg. Credit Quality: A 42.8% Over 94% of rated securities are SAA goal of diversification Investment Grade 47.5% 15.6% 17.3% 25% 11.3% 7.8% 10.1% 4.1% 7.2% 8.4% 9.2% 2.6% 5.7% 5.5% 1.0% 1.1% 0.6% 1.2% JGB Yen Private Yen P
Slide 11: Portfolio Stress Test Under Global Recession Assumptions
Portfolio Stress Test Under Global Recession Assumptions Vulnerable Total Sector Vulnerable Stress Case Loss Comments Sectors AUM Exposures Potential % of Fixed Maturities Fixed Maturities ($bn) ($bn) AUM1 75% in less volatile sub-sectors Energy $5.0 $2.2 0.40% Watching ~25% in Independent and Servi
Slide 12: MML Portfolio Benefits from Disciplined Underwriting
MML Portfolio Benefits from Disciplined Underwriting Well diversified, 100% first lien, low leverage portfolio MML Portfolio Overview as of March 31, 2020 MML Portfolio Statistics As of 3/31/2020 • Utilize best in class external managers for diversity of underwriting and market positioning – Low ave
Slide 13: CRE Portfolio is Well-Diversified by Region and Property Type
CRE Portfolio is Well-Diversified by Region and Property Type Conservative Underwriting Discipline CRE Portfolio Overview as of March 31, 2020 Portfolio Statistics TRE CML • 100% investment grade equivalent • Conservative average LTV of 60%1 Amortized Cost Net of Reserves ($mm) $5,616 $1,729 • 76% o
Slide 14: 1Q20 Financial Position versus 1Q19
1Q20 Financial Position versus 1Q191 Entering the crisis with strength and capacity in margins, capital and liquidity Aflac U.S. Aflac Japan Benefit 3rd Sector Aflac Japan SMR (%) Ratio Benefit Ratio 1,200 1043 961 48.1% 59.0% 881 800 -120 bps 60 bps 400 0 Adj. ROE* Adj. Expense Adj. Expense Mar. 20
Slide 15: Reinforced Strong Capital and Liquidity
Reinforced Strong Capital and Liquidity Remaining tactical and supporting ratings and growth Proactive Measures to Bolster Liquidity and Capital Liquidity • $4.8 billion of cash at the holding company1, including: • $1.5 billion of recent senior unsecured debt issuance optimizing yen and dollar fina
Slide 16: Appendix
Appendix
Slide 17: Definitions of Non-U.S. GAAP Financial Measures
Definitions of Non-U.S. GAAP Financial Measures Aflac defines the non-U.S. GAAP measures included in this presentation as follows: • The Company defines adjusted earnings as the profits derived from operations. The most comparable U.S. GAAP measure is net earnings. Adjusted earnings are adjusted rev
Slide 18: Definitions of Non-U.S. GAAP Financial Measures
Definitions of Non-U.S. GAAP Financial Measures • The Company defines adjusted earnings per share (basic or diluted) to be adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The most comparable U. S. GAAP measure is net ea
Slide 19: Strong Liquidity
Strong Liquidity Reinforced by recent issuance in March and April 2020; nearest maturity is 2023 Debt Maturity Profile ($ millions)1 $1,600 Yen Hybrid Call Date Yen Senior (USD Equivalent) $1,400 USD Senior $1,200 391 Liquidity bolstered by recent issuance: - ¥57 bn Global Yen senior notes on March
Slide 20: 1Q20 Financial Position
1Q20 Financial Position1 Benefit ratios and pretax profit margins provide capacity to absorb elevated losses Aflac Incorporated 1Q20 Δ yoy Aflac Japan 1Q20 Δ yoy Net EPS $0.78 -36.6% Total Net Premiums ¥343.1 bn -2.1% Adjusted EPS* $1.21 8.0% Net Investment Income 75.9 bn 2.5% Adjusted EPS ex-FX* $1
Slide 21: Reconciliation of U.S. GAAP Book Value per Share
Reconciliation of U.S. GAAP Book Value per Share1 (Three Months Ended March 31, In Millions of Dollars) 2020 2019 % Inc. U.S. GAAP book value $ 26,402 $ 26,049 Less: Unrealized foreign currency translation gains (losses) (1,543) (1,848) Unrealized gains (losses) on securities and derivatives 6,008 6
Slide 22: Reconciliation of U.S. GAAP Return on Equity to Adjusted ROE
Reconciliation of U.S. GAAP Return on Equity to Adjust ROE1 (Three Months Ended March 31, In Millions of Dollars) 2020 2019 Net earnings – U.S. GAAP ROE2 8.2 15.0 Impact of excluding unrealized foreign currency translation gains (losses) (0.6) (1.3) Impact of excluding unrealized gains (losses) on s
Slide 23: Reconciliation of Net Earnings to Adjusted Earnings per Share
Reconciliation of Net Earnings to Adjusted Earnings per Share1 (Three Months Ended March 31, In Millions of Dollars) 2020 2019 % Inc. Net earnings per diluted share $ 0.78 $1.23 (36.6)% Items impacting net earnings: Net investment (gains) losses 0.62 (0.14) Other and non-recurring (income) loss 0.02