Financial Data and Key Metrics Changes - Aflac reported net earnings per diluted share of $0.05, significantly impacted by net investment losses compared to net investment gains in Q1 2024 [6] - Adjusted earnings per diluted share remained unchanged at $1.66 year-over-year [6][13] - Adjusted return on equity (ROE) was 12.7% excluding foreign currency remeasurement, indicating a solid performance [13] Business Line Data and Key Metrics Changes - Aflac Japan experienced a 12.6% year-over-year sales increase, driven by significant contributions from Sumitas and a 6.3% increase in cancer insurance sales [6][8] - Aflac US saw a 3.5% year-over-year increase in sales, with strong performance in group life, disability, and network dental [9][17] - Net earned premiums for Aflac Japan declined by 5%, while underlying earned premiums adjusted for deferred profit liability and other factors declined by 1.4% [14] Market Data and Key Metrics Changes - Aflac Japan's total benefit ratio was 65.8%, down 120 basis points year-over-year, while the U.S. total benefit ratio was 47.7%, up 120 basis points year-over-year [15][18] - Persistency in Japan improved to 93.8%, up 40 basis points year-over-year, while U.S. persistency increased to 79.3%, up 60 basis points year-over-year [16][17] Company Strategy and Development Direction - The company aims to appeal to younger customers through products like Sumitas and is focused on cross-selling medical and cancer policies [7][9] - Aflac continues to emphasize strong capital and cash flow management while maintaining a commitment to liquidity and capital ratios [10][11] - The company is strategically deploying capital, having repurchased $900 million in stock and paid $317 million in dividends in Q1 2025 [11][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying strengths of the business and potential for continued growth in both Japan and the U.S. [12] - The company is closely monitoring economic trends and adjusting its capital management strategies accordingly [38][41] - Management highlighted the importance of maintaining strong premium persistency and adapting to market conditions [10][11] Other Important Information - Aflac Japan launched a new cancer insurance product in March 2025, which is expected to contribute positively to sales [54] - The company has a robust hedging strategy in place to manage foreign currency exposure, particularly related to the yen [26][97] Q&A Session Summary Question: Why did the ESR ratio decline in Q1? - Management explained that the decline was due to the strengthening yen, partially offset by higher Japan interest rates and dividends flowing to Aflac Inc. [32][33] Question: How should we think about capital planning given recent macro changes? - Management indicated that capital management is designed with a long-term view and is not expected to change significantly despite macroeconomic volatility [37][41] Question: What are the expectations for the new cancer product sales? - Management expressed confidence that the new cancer product will continue to grow, with expectations for sales in 2025 to exceed those of 2024 [54][100] Question: How is the competitive landscape for medical insurance in Japan? - Management acknowledged increased competition but emphasized Aflac's pioneering position in cancer insurance and ongoing efforts to maintain market share [58][59] Question: How are remeasurement gains expected to trend? - Management noted that significant remeasurement gains are typically unlocked in the third quarter, with smaller adjustments in other quarters [63][66] Question: Is there any anti-U.S. sentiment affecting sales in Japan? - Management stated that there is no observable anti-American sentiment affecting the business, citing strong economic ties between the U.S. and Japan [116][117]

Investment Rating - The report indicates a preference for short positions in CNY CFETS index and short SGDNEER basket, suggesting a bearish outlook on these currencies [3][4]. Core Insights - Asian economies show limited evidence of diversifying away from US assets, primarily due to low domestic yields and growth concerns [1][2]. - Malaysia, Singapore, China, and India exhibit signs of increased USD FX hedging and asset diversification, while Japan sees foreign inflows into its assets [1][2][28]. - The report highlights that Singapore and Hong Kong have the highest US asset holdings as a percentage of GDP, indicating significant room for diversification [5][6]. Summary by Sections Section 1: Diversification Potential - Singapore and Hong Kong lead in US asset holdings relative to GDP, followed by Taiwan, Japan, and Korea [5][6]. - China’s US asset holding is relatively low at 12% of GDP when accounting for indirect holdings [5][6]. Section 2: Willingness to Diversify - China is diversifying its reserves by increasing gold holdings, now at nearly 6% of total reserves, but has not sold US treasuries [11][13]. - Taiwan's central bank holds over 80% of its FX reserves in US treasuries, indicating confidence in these assets despite potential diversification [18][19]. - Korea's National Pension Service plans to increase international asset exposure to 60% by 2028, showing no intent to repatriate assets [25][26]. Section 3: Market Observations - Malaysia's government is guiding a shift towards domestic asset allocation, with EPF reducing overseas exposure [34][35]. - Singapore's large US asset holdings are supported by its status as a financial hub, with signs of month-end repatriation flows [38][39]. - India's central bank emphasizes gold accumulation for reserve diversification amid geopolitical uncertainties [47][48]. Section 4: Currency and Investment Trends - The report notes a shift in international investors' preferences from long-duration to short-duration US treasuries, contributing to a steepening of the UST curve [59][60]. - Malaysia's foreign currency deposit ratio has increased, indicating a trend towards domestic investments [55][57].

Core Viewpoint - The long-standing strategy of foreign investors buying US dollars and investing in the S&P 500 and Nasdaq indices has faced significant challenges due to the recent trade war initiated by the Trump administration, leading to substantial losses in both stock and currency investments [1] Group 1: Market Performance - The S&P 500 index has declined by 6% this year, while returns for investors using euros and yen have dropped by 14% [1] - The rapid deterioration of this trading strategy has caused anxiety among foreign investors who previously viewed the US as a safe haven for returns [1] Group 2: Currency Hedging - Many foreign investors are now eager to increase currency hedging in their US stock portfolios, with current foreign investment assets in the US stock market amounting to approximately $18 trillion, nearly one-fifth of the total market capitalization [1][5] - The overall currency hedging ratio for foreign investors in US stocks is currently at 23%, significantly lower than the nearly 50% level seen in 2020 [5] Group 3: Hedging Costs and Strategies - The cost of hedging for investors based on currencies like the Swiss franc or yen is approximately 4% annualized for three-month hedges, while for euro-based investors, it exceeds 2% [6] - The demand for options trading as a hedging method has surged, with the trading volume of euro-dollar options reaching new highs, although increased volatility has also raised hedging costs by about 15% this year [7] Group 4: Market Outlook - Despite the current challenges, some market participants remain cautious about predicting the dollar's future movements, citing unpredictability in exchange rate fluctuations [11] - Analysts suggest that even a small outflow of international investment from the US could lead to significant market impacts, given that international investors hold approximately $28 trillion in US assets [11]