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Aflac CEO on COVID-19 impact on the insurance industry

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Dan Amos, Aflac CEO, joins The Final Round to discuss the company's recent philanthropic efforts to combat COVID-19 and how coronavirus is impacting the industry.

Video Transcript

MYLES UDLAND: We're joined now by Dan Amos. He is the CEO of Aflac. Dan, thanks so much for joining the program today. I want to just kind of start by talking a little bit about what you've seen in your business, how things have changed for you guys in the last couple of months. Interestingly, during your conference call, you talked a lot about what you had learned from your Japan business and how you were able to prepare for maybe this COVID world a little bit earlier than some of your peers. So where do things stand right now in the Aflac world in this what? The 15th of May, middle of May. A lot of things have changed the last two months.

DAN AMOS: There's no doubt about it. I've never seen things change as fast as they have. This is my 30th year as CEO, and only, Warren Buffett's the only one in the Fortune 500's been around longer than I have. And I have seen change like we've never seen before. Saying that, we've been blessed in that I've had an opportunity to see different situations occur from the tsunami in Japan with a nuclear incident, to the 2008 financial crisis.

And basically, what you alluded to earlier is, is that because 75% of our earnings come from Japan, and most people don't know that, what we've seen is, they really got the virus before we did, about three weeks early. So we got to see what was taking place. And so we got to prepare a little bit earlier in the US. So for example, one of the things we did is, wanted to create a lot of liquidity.

You may have seen that in "The Wall Street Journal" article about how we prepared. And we did a debt offering, raising $1.5 billion in new money. And now we have close to $5 billion and money available for whatever we need to at the corporate level. So I think we're pretty well positioned from that standpoint.

MYLES UDLAND: And Dan, I just want to talk maybe a little bit about what sort of policy changes you've either made or things that you, claims you expect to get as a result of this. Have those things starting to trickle in? And what's that change, I guess, been like? Not often are you seeing force majeures enforced, but it would seem like an environment those kinds of clauses are being part of what's happening here.

DAN AMOS: Well, there's really three elements that we addressed when the virus broke. First was the community. And as you said, we talk about it later about our donations. But in addition to that, was to take care of the workforce, which included our employees and our independent contractors. What we did there is, we have been able to miraculously, I have to say it, 97% of our employees are working from home. We've had no layoffs. And we are very well set in the US from that standpoint. We made loans to our employee, independent contractors to help them through this period of time.

And in Japan, about 75% of our employees are working from home. We got an advantage there because of the Olympics. The government required that you able to have half your employees working from home during those weeks of the Olympics. So we'd already started preparing for it. So those were very helpful and us with the virus and how we would take that on. And then the final aspect is the stakeholders, and specifically our dividend. We've had 37 consecutive years of a dividend increase. And so we were able to not only give one this year, but as we look into the future, we think we're very well positioned.

Now specifically regarding claims, that's where we have to count on our actuarial staff to make sure we're doing all the proper things and that we're ready for potential claims. We always, from an actuarial perspective, when you're doing a stress test, you have to take into account a cataclysmic or enormous out of the ordinary experience every year. And the further you get away from having one of those, the higher the odds are one's going to come.

So we as a company, have been pretty well prepared for that, and have reserves accordingly, that should be able to take all that into account. So I think we're very well positioned for that. Remember, we sell indemnity and nature products, meaning that we pay x amount per day. Whereas some people pay actual charges. And we've always done it that way where we insure one out of four households in Japan. So we don't have to worry about runaway inflations or things of that nature. But rather, that we'll just be able to cover those expenses going forward. And actuarially, we think we will be able to.

HEIDI CHUNG: Daniel, you mentioned on the earnings call specifically, that many of your agents and brokers really do still depend on face-to-face strategies, and a lot of the sales folks, their commissions are based on being able to see people in person. How do you really anticipate the shift that you said you well positioned for with the work from home kind of stream? Do you think that will carry over post pandemic?

DAN AMOS: Yes, I think there will be a shift to some degree. But a lot of people, customers, consumers, want to talk to someone, not a computer sometimes. And the younger you are, the more likelihood you're satisfied just talking through technology. But we still, because insurance skews older as a general rule, having that availability to talk to people one-on-one is still important too.

So I think it'll be a mixture. One thing we've done in the first weeks of the pandemic was to go through extra training to get the agents prepared by teaching them new ways of doing it. They had been reluctant prior to that, but the pandemic forces it. So in many ways, that is the only good thing I could think of that has come out of this is, is that it is forcing people to re-evaluate how they're going to sell. Going forward, we're just going to have to watch it and see. But I do believe it'll be a combination.

The other thing I think is from an administrative standpoint, I think a lot of the work will be done through technology, more so than ever. Where many times, we had our agents handling it. Even the consumer is being forced to use electronic, and most people, once they get used to it, like it better anyway. It's more efficient and a faster way of doing it.

DAN ROBERTS: Dan, Dan Roberts here. Thanks for joining us. I wanted to ask, we know how much your family has given during this time for the coronavirus relief. I want to give you a chance to talk about that. But also as you mentioned, your longevity, being one of the longest serving CEOs in the Fortune 500, what do you make of the leadership level during this time? And if you're willing, are there any other big companies that you think have done it right? CEOs that you think have done it right? Because this has been a tough time to be a CEO, and even so run earnings calls, where all the news has been so negative.

DAN AMOS: Right. Well it is. I have been very fortunate in doing well financially, and I felt it was important that we give back, my family. And so we donated a million dollars to our local hospital to reopen a part of the hospital that was closed. And what I can tell you is, is that that has positioned us to where should the pandemic get worse here, all of our employees will have a place to go.

It's about 30 beds, and then 30 ICU units that are available, close to 60. So for us a company located here in Columbus, Georgia with about oh, 200,000 in surrounding area, I think we're pretty well positioned. I forgot the second part of your question. Let me ask that again.

DAN ROBERTS: Well, I was curious, Dan, if you would just quickly have any other companies or big CEOs that you would name that you think have done a good job at leadership during this time. Because the news has been so negative, it's a hard time to be a CEO of a large company during a pandemic.

DAN AMOS: I don't have any doubt there've been plenty of others. But I have been so concentrating on us, that I have not spent as much time analyzing. But I'm sure there are plenty of good companies, and ones that you could be able to name better than I could. But we're doing our best to take care of our customers and take care of our employees and, yeah, that's been my main focus.

MYLES UDLAND: All right, Dan Amos, CEO of Aflac. Again, as you mentioned, Amos Family Foundation, a million dollars to the Columbus Regional Hospital down there in Georgia. Company also giving $2 million to Georgia Tech as well. Dan, thanks so much for joining us today. Great work you guys are doing. Hopefully, we can have you back on.

DAN AMOS: Thank you very much, it was my pleasure.