Max Broden: Thank you, Wilma. If you think about the total capital generation that we’ve had recently and also going into 2024, I don’t see any significant change to our overall capital generation on an organic basis. That remains in the $2.6 billion to $3 billion range. On top of that, we know that we have opportunities that we can, over time, unlock more capital through utilizing our reinsurance platform, and we intend to do so. We can’t necessarily predict exactly when that will happen or what amounts that will be, but you’ve seen us in the recent past be quite active on that front. So I would expect us to do more. But on a pure sort of run rate organic basis, I would have pegged our underlying capital generation at $2.6 billion to $3 billion annually.
Wilma Burdis: Thank you. And could you just talk more about the commercial real estate watch list? It’s higher than a lot of the peers, and you guys have taken the keys back on a few properties lately. So if you could go into that and what you’re seeing there? Thank you.
Virgil Miller: Sure. I think there’s one primary thing related to our watch list relative to our portfolio that makes us different than peers, and that’s the fact that the bulk of our exposure is in transitional real estate. Remember, that’s a much shorter asset class. It’s a much shorter maturity, generally a three-year term with some options to extend out a fourth and fifth year. So because of that, when you have a market downturn and you’ve got these maturities coming due and the liquidity is as poor as we’re seeing in the market today, it naturally creates an elevated watch list and creates an elevated amount of potential foreclosures. Now, we work very closely with our borrowers to address those maturities. We do our best to avoid foreclosure.
But if they are not willing to work with us, if they’re not willing to reset the loan to reflect current valuations and give us other protections, we are fortunate that we’re in a position, we can and will foreclose if we think that’s the best route to maximize our recoveries. We are blessed with a strong capital and liquidity position, which prevents us from being a forced seller here. So I think it’s a combination of the nature of our portfolio, having shorter maturities relative to our total exposure. And then the fact that we are much more willing to foreclose and able to foreclose, if we think that’s the best route.
Wilma Burdis: Thank you.
Operator: The next question comes from Elyse Greenspan with Wells Fargo. Please go ahead.
Elyse Greenspan: Hi, thanks. Good morning. My first question, going back to just Japan sales guidance. Dan, I know you said you guys are being cautious in lowering the outlook there. But how do we think about — how should we think about going from the ¥60.7 billion of sales in ’23 to the new ¥67 billion to ¥73 billion target? Should we think about that being even — even over the next few years or maybe a bit more back-ended?
DanAmos: Japan? Okay. Well, we, at this particular time, are just evaluating what we think might happen for the next two years. And frankly, we’ve just tried to be conservative and give us some latitude on what would happen. But we have some very positive things coming out in 2024 that we think will drive sales and are encouraged about it and even some things as we’re looking to 2025 that will be coming. Let me make sure that Koide or — they don’t want to make any comments in that regard. Koide?
Koichiro Yoshizumi: Yes. This is Yoshizumi.
DanAmos: Okay, Yoshizumi.
Koichiro Yoshizumi: Yes, thank you. Okay. Let me answer the question. And as Dan mentioned earlier, it is true that COVID has impacted Japan way beyond our expectation. And as a result, the number of solicitors or sales agents have decreased significantly. And even if you were — even if our agencies are able to hire the sales agents, we were not able to train them. It was not until May last year in Japan that COVID has been reclassified at the same level as with influenza. So we had no choice, but to face really truly difficult situation in sales for a long time. And at the same time, it is also true that it took us quite a bit of time to train those sales agents that have lower skills. But right now, what we are very much focused on is really recruit and train the solicitors or sales agents.
Otherwise, we will not be able to train and grow those sales agents that are customer-centric. Aflac sales agents must be those agents that are very welcomed by our customers. What I mean by that is that those sales agents must respond to customers’ needs when they solicit policies, but at the same time, when the benefits and claims are paid. And I do believe that it is Aflac’s mission to send out these kind of sales agents to the market appropriately. And that is the reason why we have set our sales target relatively conservative. And we currently do have recruiting and development and training plan for our future, as Koide mentioned earlier, beyond maybe ¥80 billion or even more in the future. Thank you.
Max Broden: Elyse, I would think about the sales trajectory as being relatively linear, i.e., not back-end loaded.
Elyse Greenspan: That’s helpful. Thanks Max. And then my second question, you guys you pointed out, you obviously have a good amount of buffer at the holdco relative to where you’ve talked about running. How do you think about, I guess, managing that down? And how should we think about the level of potential buybacks in ’24?
Max Broden: So we’re obviously operating with a very significant capital levels in all of our subsidiaries at the moment. Over time, I would expect us to operate at slightly lower capital levels in terms of the ratios and where we are today. I would reflect that in Japan, we are now going through a transition from SMR to ESR. So I wouldn’t necessarily make any dramatic changes ahead of that. In the U.S., we are looking to, over time, target in an RBC of closer to 400%, and we have active plans towards drawing that down. At the same time, we have strong capital and liquidity at the holding companies. We always think about where is capital serving us the best at that very point in time, at the same time making sure that we have capital available for deployment into dividends, buybacks, et cetera. So overall, I would say that our capital plans remain solid. We’ve got plenty of capital around, and we try to place it where it makes the best use.
Elyse Greenspan: Thank you.
Operator: Your next question comes from John B. Barnidge from Piper Sandler. Please go ahead.
