Max Broden: I’ll kick it off and I’ll let anybody add some commentary to that as well. As we sell to younger customers, that should actually improve the persistency. Because of the age-based pricing that we have in Japan, there’s a very strong incentive to hold on to the product for a long time and maybe even for life. So as you sell into a younger population, that tends to reduce your lapse rates and improve your persistency. Suneet, you are correct to — when you look at the corporate agencies that you are referring to from the past that, that was — had very strong persistency overall in that channel. And as that has become a smaller piece of our overall inforce, that have structurally reduced our persistency. The other thing I would mention as well is that we have seen an aging of the block.
And when you have an aging of the block, that naturally leads to higher lapsation and lower persistency as well. So you hear us talk about that we are trying to reach younger customers, that is partially to sort of fight these sort of long-term trends that we have going on in our in-force block to not only provide coverage and new coverages to the younger population but also to improve the overall persistency of the block. All of this is marginal from year to year, and it’s very slow-moving, but it’s certainly something that we’re watching closely.
DanAmos: Yoshizumi, do you have any comments you’d like to add? Our head of sales in Japan.
Koichiro Yoshizumi: Thank you. This is Yoshizumi. And regarding the persistency that was just asked and answered by Max, and as Max answered, by us focusing on young and middle-aged customers, our persistency is going to be higher, and that is our strategy. And that is actually represented by the medical insurance that was just launched on September 19. And this product is very popular among the young and middle-aged customers whose ages are under 49 — or 49 and under. In terms of the number of policy count that we sold to these young and middle-aged customers, we actually saw a 46% increase year-on-year from the time that we launched in September to the end of the year last year. And these customers are for our middle and long-term growth of Aflac Japan.
And these are the customers who will be our asset and our treasure going forward. And the actual premiums that are being paid by young and middle-aged customers are lower. And we truly believe that by focusing on these younger customers and increasing these young customers would contribute to stable growth of our company. And at the same time, as I mentioned, the persistency rate will be higher, and this is our strategy.
Suneet Kamath: Okay. Thanks for the answers.
DanAmos: I just want to remind you all that the persistency rate is really high. And we can move it up a little bit, move down a little bit, but it is more than we ever dreamed when we first started doing business over there. So we’re very pleased with it. So — but at the same time, we will improve because when you’re writing younger people, of course, they’ll live longer, and therefore, they’ll be more persistent.
Operator: The next question comes from Jimmy Bhullar with JPMorgan. Please go ahead.
Jimmy Bhullar: Good morning. So first, a question on Japan. And if you think really long term, is it even realistic to assume that the business can grow given that the population shrinking, the population is aging as well? And then versus 10, 20 years ago, there are a lot more companies in the product lines that you’re in? So if you could just comment on that, like — and maybe on your — the reduction in guidance on sales, how much of that has to do with just Japan taking longer to recover from COVID versus some of these demographic headwinds?
DanAmos: Well, my first comment is, you’re correct in terms of a competitive environment. But what is in Japan or any other country that isn’t competitive. So being competitive is nothing new to us, and something that we are understanding that we have to constantly look for ways to address how we can identify with consumers and show the need for our products even more. Now don’t forget, we’ve seen copays and deductibles over many years. I don’t know when another one will take place or what will happen. But as inflation, even though small in Japan, you have to take that into account, too. So remember, our ability to convert and add more premium to existing policyholders always makes a difference and grows our block of business as well, and we especially think that with the younger people. Let me now turn to Japan and let them comment on it.
Masatoshi Koide: Yes. This is Koide, Aflac Japan. And it is true that Japan is being projected as having declining population. But at the same time, with the advancement of longevity in the 100-year life era, the need to prepare for longevity risk is expected to increase steadily. And it’s also expected that the aging population could increase the medical cost because as you live long, the probability of suffering from cancer and other diseases will increase. And in Japan, the sustainability of the overall social security system is being discussed. And this would also include medical and nursing care. And this is being questioned and the discussions are underway within the Japanese government to review how the benefits and burden should be balanced.
And given these circumstances, there is a way of thinking about helping themselves or self-help and preparing for the future as people become more aware of the situation. And as a result, although the population may decline, we do think that the third sector market will steadily grow going forward as well.
Jimmy Bhullar: Okay. And then on the U.S. business, do you have a better clarity on the tri-agency rule and its potential impact on your sales?
Virgil Miller: Hi. This is Virgil, from the U.S. We have been working with the tri-agency sales to talk about any potential impact we could see to those selling supplemental into the consumers out there. And we’re waiting on a ruling. Thus far, they set a date to be on April 2024, you know and I know that a date may move. However, we remain encouraged that our policies and coverages are relevant regardless if that rule does come through. We looked at our indemnity sales from last year. We really didn’t see any decline. We remain flat there. And again, regardless, even if there is a rule of not a rule, our coverage is relevant, and we’re not predicting any major impact going forward.
Jimmy Bhullar: Thank you.
Operator: The next question comes from Wilma Burdis with Raymond James. Please go ahead.
Wilma Burdis: Hi, good morning. Could you talk a little bit about the outlook for capital generation, and if we should expect anything on an ongoing basis from internal reinsurance opportunities? Thank you.
