Aflac Inc. KBW Insurance Conference 2026

I'll let him know of the request.

Yeah. So in Japan, we find ourselves in a situation, obviously, with the JPY 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 long period of time. So what we have 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 hold a pretty significant U.S. 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 through our local statutory earnings, it creates pretty significant FX, either gains or losses, depending on where the dollar-yen rate is.

And as the JPY 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 gains, and reposition the JGB portfolio generating losses. And they more or less offset each other. And that means that without leaking anything in terms of taxes out the company, we've been able to 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 you have significant impairment risk, that also means that down the line, there could be impacts to your ability to send dividends.

We have greatly, with this, reduced our total unrealized loss on the JGB portfolio, and therefore also significantly reduced that impairment risk as well. This was partly an exercise in reducing future risk, but also an exercise in increasing future earnings.

Yeah. Transacting 5% of a total portfolio in one quarter is a lot. It's a lot. Our team was 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. Some of that is behind us. I definitely expect that our investment team will continue to execute on this in a good way. There is more to come.

Okay. But just keep in mind that 5% is a very significant number.