Fred Crawford: Well, I think the primary benefit, there is certainly an ease — customer ease element to moving to digital. But the primary motivation of moving to digital is increased agent productivity, yes, ease of doing business with the customer and the agent. There is, in fact, speed of processing claims that would pick up. For example, imagine paper-based claims processing when your claims went from 30,000 to over 90,000 a week during the last seventh wave of COVID. Had we been — frankly, as an industry, this is not an Aflac thing. Had the industry been far more digitized in the level of claims they process digitally, you would have had much greater speed of claims adjudication. Normally, we’ll pay a claim on average in around three days or so in Japan, sometimes four days.
It had gone up to around 12 days during that peak level. It’s now come down to around five days, so we’ve recovered quite a bit. But if you are in a digital environment, there’s no doubt, John that you could speed that up and also protect against elevated claims periods to keep the speed and turnaround time faster. But I will tell you, a big motivation on our part to move to paperless is taking cost out of our structure. So when you’re dealing with paper applications and paper claims processing and a heavy call volume related to customer service activities, all of that adds to cost structure. And in order for us to get that cost structure down, we’ve got to move it to digital, and that’s what we’re on a path to doing.
John Barnidge: Okay. That’s fantastic. And then my follow-up question, if we can stick with expenses. You had talked about a joint work with Japan Post for cancer launch. And then you talked about that backlog of claims from that seventh wave being the review mirror. But with that joint work on the cancer launch, are there any planned onetime expenses we should be thinking about?
Fred Crawford: Not materially. I’m looking at Todd Daniel’s here, our CFO, and no, we wouldn’t expect that. It’s not unusual, however, when we launch a new cancer product in general and then launch in a major system that there is, in fact, a level of marketing expense that comes into play and launch expense. But quite candidly, while you may see it have modest implications to your expenses and expense ratio, it’s not material and it’s nothing I would characterize as a onetime thing that would pop out on our financials. It’s just sort of normal way of doing business and normal business activity. So I wouldn’t anticipate that, John.
Operator: The next question comes from Alex Scott of Goldman Sachs. Please go ahead.
Alex Scott: I just wanted to get an updated view on just capital management and capital management priorities. Just looking at even just in the U.S., I mean, how strong the RBC ratio is, I mean I think there’s companies that run with around half of your RBC level. There’s seemingly a lot of excess capital around the organization. So, I was just interested in your views on that and how that’s evolving?
Max Broden: Thank you, Alex. So, we have, obviously, throughout the COVID times, we made an active decision to hold capital in the subsidiaries given that we initially didn’t know exactly where our benefit ratios and underlying profitability were going to go. So we opted to hold capital at a high level, both in Japan and in our U.S. subsidiaries. Coming out of COVID obviously, realizing that we are now operating at a high level, especially in the U.S. with an RBC ratio, on a combined basis, north of 60%, we do agree that, that’s an excess capital position and that, over time, we would expect to operate our U.S. entities closer to 400%. That means that there will be capital coming out of those entities over the next couple of years.
