Aflac Inc. says it had sales problems in the United States in the third quarter because too few live humans were offering its products to employers.
Executives also said that they see expanding efforts to sell dental insurance, vision insurance, and true group life and disability coverage as a good way to increase U.S. sales.
Executives from the Columbus, Georgia-based insurer talked about their interest in live-human agents and producers today, during a conference call the company held to go over its latest earnings with securities analysts.
Aflac helped created the modern supplemental health insurance market in Japan, and its operations in Japan are much bigger than its U.S. operations.
The company as a whole is reporting $777 million in net income for the third quarter on $5.5 billion in revenue, compared with $845 million in net income on $5.6 billion in revenue for the third quarter of 2018.
Aflac Japan is reporting $838 million in pretax adjusted earnings for the latest quarter on $3.9 billion in revenue, up from $756 million in pretax adjusted earnings on $3.8 billion in revenue for the year-earlier quarter.
Aflac U.S. is reporting $335 million in pretax adjusted earnings for the latest quarter on $1.6 billion in revenue, compared with $334 million in pretax adjusted earnings on $1.6 billion in revenue.
U.S. Performance Indicators
Here’s how some key Aflac U.S. results changed between the third quarter of 2018 and the latest quarter:
- Sales: $344 million, down 4.2%
- Premiums for In-Force Coverage: $6.1 billion, up 1.5%
- Sales Commission Spending: $145 million, down from $146 million
- Average weekly agents and brokers producing sales: 7,085, down 5.4%
Although the average weekly producer count fell, average commissions per weekly producer increased about 5%, to about $18,600 per average weekly producer, according to ThinkAdvisor calculations based on Aflac data.
Daniel Amos, Aflac’s president, said he thinks his company’s drop in U.S. sales was due partly to the ending in the second quarter of a partnership that had not been profitable.
Another reason for soft sales was a strong economy, Amos said.
“Strong employment means fewer people are willing to take an independent commission sales role,” Amos said. “This dynamic continues to constrain both sales agent recruiting and, ultimately, sales, to some degree…. When it’s a bad economy, there’s not as many people at the worksite working, but it’s easier to hire. When it’s a full economy, which we haven’t seen very often, there are plenty of people at the worksite, but it’s hard to hire enough people to call on them. So, it’s a mixed bag.”
Richard Williams, Aflac’s chief distribution officer, said the drop in average weekly producers reflected a decline in producer recruiting in the first half of the year.
“We saw recruiting growth pick back up in the third quarter,” Williams said.
Aflac producers’ productivity has been growing, Williams added.
Frederick Crawford, Aflac’s chief financial officer, said the company is continuing to move ahead with efforts to acquire Argus, a dental and vision benefits provider, and that the company sees building true group life and true group sales as a way to get its products on the “first page of the benefits enrollment platform.”
Aflac now has partnerships in areas such as true group life, but the company “would look to advance the ball in that area,” Crawford said.
Crawford said Aflac is doing business with 470,000 U.S. businesses.
Aflac has been moving toward having career agents handle small businesses, and brokers handle large groups.
Agents still account for about two-thirds of Aflac’s business, Amos said.
Resources related to Aflac’s earnings are available here.
— Read Aflac Courts Group Life Benefits Brokers, on ThinkAdvisor.