Welcome back everyone to the 2022 Bank of America U.S. Insurance Conference being broadcast live from New York City at One Bryant Park. Hopefully the last broadcast. I know we were supposed to be in person. It didn't work out because of Omicron, next year's going to be different. This is the Aflac session, we're really excited. We have President and COO Fred Crawford here to talk about what's going on with Aflac. I guess, Fred, the first question will be, can you talk about how COVID has affected performance and operations a little bit? Give us a backdrop of why it skews recent results, we don't know where the pandemic's going to go, if we're pulling out of the pandemic conditions, why that's going to be beneficial and what we're going to see happen.
First, Josh, thank you, thanks for inviting us to the Bank of America conference. Happy to be here. Let me just start with current COVID conditions. I think you're all aware of reading the news even are possibly aware of Japan as well. In Japan, vaccination rates are very high. They are recovering steadily. What you'll see in Japan is that they monitor both case levels also hospital capacity, which is rather limited in Japan, that's what they use to regulate whether or not to bring certain prefectures into a state of emergency or other forms of cautionary measures. Of late, what we've seen is in 2021, there were rolling states of emergency through most of the prefectures in Japan. That has calmed down quite a bit. Hospital capacity is decent.
Case levels have moderated, again, they have very high vaccination rates in Japan at this point in time. What we're starting to see is that there is, in fact, some recovery in activity economic activity. We certainly hope that will continue throughout 2022. I would say, like most things in Japan, there'll be a slow and steady level of recovery. It won't be a spring back dynamic. I think you probably will see a little bit of slowness or sluggishness, certainly in the first quarter, pending any other virulent issues going on, some recovery. In the U.S., of course, we all read the news and see what's going on. I think we've largely seen business recovery come back to near normal levels. Not quite there. Obviously, there's still a fairly good amount of mix of remote and in-location work dynamics taking place.
Even this conference is a good example of where we're still being very cautious in large gatherings and so forth. There is still some of that, it's not necessarily getting in the way of us progressing on our growth strategies in the U.S., we don't see it, at the moment, as getting in the way of us hitting our targets in 2022. The effect on the company has been very interesting to watch. You would have normally expected a morbidity company, i.e. a supplemental health company, to have experienced some financial challenges during a global pandemic, we expected to do that as well. We built up capital readied ourself for pressure on benefit ratios, we haven't seen that. We've seen very low benefit ratios driving high profitability, high cash flow, I think that's the supplemental nature of our products.
They're designed in such a way that they tend not to be the first loss when it comes to morbidity events. They tend to be more, obviously, the secondary loss, and they're also capped and controlled in the way of coverage. What they do provide people is nice out-of-pocket expense coverage and cash directly in the pocket of individuals when they're going through hospitalization or what have you. What we are seeing is certainly the financial condition we navigated through very strong and as strong as we have been in recent years. What has been impacted is the growth engine. We rely very heavily, both in Japan and the U.S., on face-to-face sales. In Japan, because that's the culture. They are a face-to-face sales culture. There's very little digital-only activity, and even those companies that are direct-to-consumer digital companies have not really fared very well, even during COVID.
It's just heavily reliant on meeting face-to-face when selling products like ours. We've been able to navigate virtually to keep a level of good sales activity taking place, but there's no substitute for the agents to be able to meet with individuals and sell the insurance. We certainly hope and expect to see some level of recovery of that in Japan. In the U.S., we've also pivoted, but we are seeing much more face-to-face activity, and quite frankly, we've seen our group business, which is much more digitally and electronic enrollment, that has recovered to pre-pandemic conditions and even actually has outperformed that. Group being larger companies, group voluntary product sales. Our new building platforms in the U.S. have done well, dental and vision, our life and disability platform. Now really what we need to see recover is the small business agent-driven.
In the U.S., we were hit by both the small business environment getting hit hard during COVID, and then also that is a much more face-to-face sales and servicing dynamic, as well as recruiting and training is very face-to-face and live training experiences. We pivoted to virtual, but there's no replacing the effectiveness of the face-to-face environment. Again, we're able to recover. We saw a nice recovery in 2021, but there'll be further recovery as we're able to get back to normal.
I think when U.S. investors think about Aflac and they understand this is a product that U.S. occupy a unique niche, and if someone's buying some supplemental health product from Aflac, they might have not bought the product otherwise. You're occupying that. I think people understand that business really well from the U.S. side. I think we have less of an understanding on how third sector sales work in Japan. Look, you are a dominant brand there, but there's also competition there, which is I don't feel there's competition the way we think about it. You have a unique product here in the U.S. How does the competition for sales work in the third sector in Japan? Who are your competitors? How does that impact how you grow and what the opportunity is there?
Absolutely. You framed it very well, Josh. In the U.S., because you're talking about so many small and medium-sized businesses that have yet to introduce voluntary product into their system, and because on average, for a company with 100 employees, we will on average penetrate maybe 10%-15% of those employees with a voluntary product. There's so much sort of blue ocean capacity or insurable interest in the U.S. that has its own dynamic, organic capability to grow as long as we're effective, and we see adoption rates increase, and we'll talk about that at a later time here. When you go to Japan, you're talking about a very popular set of supplemental products, both on the medical and cancer side, very high penetration rates. As a result, more limited, what I would call insurable interest or blue ocean, if you will, to grow.
It is very competitive, particularly on the medical side, that's not only because there's good returns there, which frankly have come by virtue of watching Aflac build its business over several years, but also because the negative interest rate environment and the policy of the Bank of Japan, which began in 2016, caused most major insurance players, life and health players in Japan, to shift their capital and their attention away from first sector or life insurance and annuity-like savings or retirement savings businesses towards third sector, which is predominantly medical and cancer. In cancer, because we drive such a dominant market share through both exclusive relationships like Japan Post, Dai-ichi, as well as our own exclusive agencies, we have been less exposed to competitive dynamics.
We just have such a cost structure, knowledge structure, underwriting advantage, and brand advantage that that has not really been as impacted by the competitive environment. While highly penetrated, it's not as highly penetrated as medical. There's more room to grow, more sales to have. Really, the story on cancer is recovering Japan Post, which we could talk about in a minute. As you go to the medical side, it's very crowded and very competitive. We have seen our share actually come down over the years, even though we're the largest in-force player in the country. That's because we're relatively disciplined, as you can imagine, on the way we price and structure product. Sometimes we will chase that competition, sometimes we'll elect not to chase it, but it's very highly competitive. What we have done in response is we've needed to broaden our product line portfolio.
We've done that in two ways. One is through the disability market, which we call the income market in Japan, short and long-term disability products. We've had a long-term disability product out there. We just now are introducing a short-term disability product to be sold more to small businesses. Then on the care side, sometimes referred to as elderly care or care product in Japan, where we really have no market share in that business and are entering it really with marketing backing and advertising for the first time as a company. That's because in that business, you want to measure three times and cut once, because even though it should not be confused with long-term care insurance in the U.S., it has a far different risk profile.
It's still something you want to be very actuarially careful about before you get into to make sure you've structured it to reduce any tail risk. In other words, you want it to behave just like your medical and your cancer business, and that's what we've done. As we penetrate that market, we see an opportunity to leverage our strong market share, really number one market share in cancer and medical to leverage that in our brand to drive sales in those two categories. It's interesting, medical and cancer hits the middle-age group. That is the core of what you're penetrating. When you get into disability, you move to a younger cohort of individuals in Japan, and then, of course, elderly care or care is moving into the growing elderly population.
It's a diversification of product, but also addressing different demographics in Japan that we think provide upside. The last thing I will say to people that look at Japan is don't forget this, it is absolutely highly penetrated, and that absolutely, particularly if you're the number one player, means growth is going to be hard to come by. Remember this, that as that population is aging in Japan, the government of Japan is having more and more difficulty footing the bill on the coverage for both Social Security coverage as well as healthcare coverage for the elderly. They have been gradually shifting that burden onto individuals, and that means the gap in supplemental insurance or the insurable interest starts to grow.
Even though you have a shrinking population and a highly penetrated market on a policy basis, we expect the insurable interest to grow and our policies to fill that gap and offer opportunity.
Let's talk about Japan Post and where you are in integrating those sales into the Aflac platform. What needs to be done? If we look out five years, how much of Aflac's business is going to be coming out of Japan Post?
Japan Post is obviously a significant relationship for us. At their peak, they were routinely, particularly in the 2016 through the 2018 period, upwards of 20%, sometimes higher, of our third sector sales, obviously a big driver of cancer sales, which is the only product that we offer in the Japan Post system. As they headed into 2019, before COVID, had selling issues that really emerged out of the Japan Post insurance side of their business, not on the Aflac side. It obviously bled through to our opportunities as the FSA stepped in and shut down and caused Japan Post to go through some significant changes internally before opening back up again. They've now opened back up, we're starting to see sales momentum build, albeit gradually. They opened up, however, just in time to experience COVID.
They've been hit kind of by two different dynamics, which has resulted in a slower recovery. What we have said to our investors, I'll say to all of you today, is that you should expect recovery. We plan for recovery. I mentioned during the fourth quarter that we've been running some pilot programs within select model post offices. Those have gone very well. In fact, in the select post offices we ran our training exercises with and marketing exercises with, we saw 150% jump in both proposals as well as sales. In other words, 1.5 times the number of proposals and sales just in those model offices. We've now agreed with Japan Post to expand that out broader nationwide. We think that holds promise. It's not going to spring back.
It's not going to spring back to the years of 2017 and 2018. It's going to take time for that to build back. We know that, we just need to be patient and keep the pressure on. Remember, Japan Post is equally motivated in this alliance to drive sales and have a successful alliance and bring it back to the levels we enjoyed before their challenges and before pandemic. Why are they motivated? They own 7% of us, they know. They read analyst reports. They talk to people like you, Josh, and others, they know that as Japan Post goes, so goes a good portion of the third sector growth rate in Japan, so goes our stock price. We're all motivated to get it back.
We believe we'll get it back, we see it as a great opportunity that we'll continue to leverage in the future.
Can we talk a little about products and COVID? I mean, maybe in the U.S., first of all, A, did COVID create an awareness I might need more supplemental health coverage? Two, are there any product design features that say, "Oh, you know what? This is really something that was brought to the forefront of customers' minds because of COVID. We should be selling product Y.
Yeah. A few things emerged in the U.S. related to COVID and coverage on a voluntary side. Some of the things that I would tell you are things like more proactive inclusion of actual COVID-type coverage or pandemic-type coverage in terms of expanded definition of critical illness, if you will. The definition of the most popular ancillary supplemental product in the U.S. is generically termed critical illness. You're seeing expanded definition of that that includes things like COVID-related infectious disease type definitions. The other thing that's very interesting, we actually just announced something on this topic in our group life and disability business, but you're going to see it on the voluntary side, too, is mental health and mental wellness.
One of the things that's really not well understood, but you're starting to read more about that, is a lot of the mental wellness statistics during COVID really deteriorated. Companies like ours, like any other corporation, we've got 6,000, 5,300 employees in the U.S. We saw calls into our mental wellness lines jump threefold during COVID. People just dealing with working at home, family matters, pressures at work, and of course, the pandemic itself. One of the things that you're seeing companies do is also, and heads of HR, are really paying attention to making sure mental wellness is factored into their products and to the degree coverage is required that that's built in. Interestingly, pet insurance. You know and you've read about our alliance with Trupanion, where we're offering Aflac Pet Insurance, powered by Trupanion. You saw pet ownership spike dramatically during the pandemic.
You now are going to have a much larger portion of the workforce working from home, which means they can have a pet. Oh, by the way, pet ownership and mental wellness are highly correlated. In other words, you tend to be in a better mental state when you have a pet, and that's been proven out over and over again. You have a lot of things coming together. Yes, those are some of the adjustments we've made. Even though face-to-face is still the most effective way to sell and to recruit and train. We are not going to let go to waste all of the digital installation that we've done. What you're going to see in both Japan and the U.S. is that the digital investments we've made to pivot towards selling insurance virtually, still have a lot of benefits.
When you go out west in the U.S., you're talking about agents that routinely have a 200-plus-mile territory that they cover, that they can now much more effectively and efficiently cover by using virtual means to do that business. You'll see those benefits remain, but you still got to see face-to-face come back, and do the job.
You mentioned pet insurance. I'll skip ahead a little bit. At what point in time, how many years is it going to take before pet insurance shows up as a meaningful contributor to the P&L at Aflac? Two, does Aflac have the intention to help Trupanion enter the Japanese market?
First, in the U.S., we are not generating underlying revenue, earned premium profitability off the pet insurance sale in the U.S. Aflac Pet Insurance, powered by Trupanion is designed to check a box and offer that product as part of a holistic benefit offering to particularly premier brokers. These would be the largest 25 or 30 brokers in the country that tend to focus on employee sizes of 700 to several thousand employees. The reason for that is that's actually where pet insurance is becoming more of a mainstream benefit offering among companies in the U.S. What we enjoy is the halo effect, as we call it, of having an answer for pet insurance when asked the question while looking for core benefits of life, disability, dental and vision, and of course, voluntary product.
It's meant to fill out our product portfolio and do it with a partner. Obviously, how we financially enjoy a benefit is we own 9% of Trupanion. We acquired 9% of Trupanion, and are enjoying our ability to contribute to their valuation over time. When you switch to Japan, the answer to your question is yes, when we announced the deal, it was with the intention of launching a platform in Japan. Japan pet insurance penetration is around 8%. Unlike some of the saturated markets we talk about, there's much more upside related to growth in pet insurance. In that particular case, it's much more likely to be a joint venture-like relationship where we are, in fact, mutually enjoying in the overall P&L aspect of the sale of pet insurance. The reason for that, why the different approach in Japan?
In Japan, we're in one in four households, Aflac is, 25 million policies, and there's a pet in one in four households. It's a whole different dynamic of what we can bring to the table and do in Japan together partnering with Trupanion than in the U.S., where we're really just looking to fill out the boxes to say, "We can be your full service benefit provider on the voluntary space." Remember, pet insurance currently is a voluntary offering in the benefit structure. I do think there will come a day where pet insurance becomes partially subsidized by the employer and gets gradually more mainstream. Today it's a voluntary product.
Great answer. Thank you. Let's go more to the mainstream business at Aflac. Acquiring new agents to sell products here in the U.S. Can you talk about how the agent recruitment strategies have changed due to the pandemic? Maybe they'll change permanently going forward.
Yeah.
How have the quality of the recruits during this unusual time compared to past classes acquired agents and how long has it taken them to get up to speed in selling Aflac products?
The pandemic impacts every aspect of that chain. Okay. What I mean by that is from the core open recruiting model of agents, where you're talking about traditionally job fairs and face-to-face interviews, breakfast, lunches, and dinners to drive recruiting, all of that is hampered when you are trying to do all of that virtually. We of course, pivoted to recruiting virtually, but it's interesting, and this is specific to the small business and agent arena, the virtual applications are about half as effective as face-to-face. If you think about selling insurance, the close rate is about half as good a close rate virtually as it is face-to-face, and you can think of that same effectiveness when it comes to recruiting somebody.
The other thing that you find in recruiting virtually in this environment is that you're typically recruiting somebody virtually who's going to get off the line with you, and they've got three other opportunities. Not in insurance, but just three other opportunities for a job and making a living because of the nature of the labor markets. So your ability to capture that individual and convince them to join the company and the culture of the company and the opportunity is a little bit more limited virtually. Then you get them in, okay? Now you're training them. Remember the training, this is such a mentor-driven training environment where you're bringing in experienced agents to train new agents on how to interface with small businesses and bring the value proposition to life.
Every one of our branch locations across the U.S. has essentially a small training center decked out to do just this, training and releasing agents once they're licensed and ready to go. All of those have converted to virtual during COVID, but once again, they're not as effective, okay, as doing it live, and particularly when you're talking about a mentor environment. So both the recruiting and the conversion of a recruit to a producing agent has been hampered by COVID. Much of that is now loosening up, freeing up, and returning back to normal, okay? So we are seeing that we've stopped the bleeding of agent declines and average weekly producer declines and have seen that flatten out and now start to build. Strategy-wise, and really separate from COVID, we've been doing a few things.
One, we've really stepped up our recruiting at colleges, and that is going very well. More importantly than that is we're going after the small business broker market. There's 20,000 small business brokers in the U.S., which we do not have a large market share with. That's just not been a focus of the company, and that's actually where some of the most amount of premium is written, with small businesses. In order to be very good with a small business broker, you need, number 1, a very experienced agent to interface with that broker. Number 2, you better have a network dental and vision product because they like that broader core product capability. Remember, many of these small business brokers are really making their money on major medical, and then they just want to partner with somebody on voluntary, and we want that partner to be Aflac.
Number 3, along with that product expansion and training, you need to have systems that talk to small business broker enrollment platforms. These small business brokers use one of typically three enrollment platforms in the U.S., and our system has to talk to that system in order to work seamlessly with the broker. All of that is under development. Josh, if you've looked at our recruiting numbers, recruiting has been down on the individual agent for all the reasons I mentioned earlier, but it has spiked up dramatically on recruiting brokers. Why? Because we're going after that market, and that market offers opportunity, and it's a market that we haven't really concentrated on over the years, and now we are.
The economics of the brokers versus the economics of the agents, just to think about the difference in going that direction?
Well, you definitely you're going to need to sharpen your pencil and be more competitive, but we don't have separate pricing for an agent and a broker, okay? What you have to be careful about is just realizing who you're going up against and do you have a competitive product. For example, not so much on our voluntary side, because our core voluntary products are highly competitive right now because they need to be irrespective of whether you sell through a broker or sell as an individual agent. Dental and vision, we learned some lessons. We talk about having in dental and vision, launched and learned during 2021. Well, one of the learnings is as soon as you go into a broker with dental and vision, guess who you're competing against? You're competing against the big guys.
You're competing against Delta Dental, MetLife, Guardian, folks that have very sizable market share, have been in the network dental and vision business for a long time, have big networks. If your product doesn't measure up, your ability to penetrate that broker is going to be more difficult, even though you may be able to achieve market share directly with a small business. We've had to go back and actually refine, reprice in some cases, restructure some of the benefits to make sure we are right up there and as competitive as the big players. Then we're investing in our network, and we're going to build out that network.
The good news about our network is when you walk into a dentist anywhere in the U.S. and say, "Hi, we're Aflac, would you want to be part of our network?" Usually the answer you get is, "Yes. How do I sign up?" Why? Because everybody knows Aflac in the U.S.
Just to be clear, I mean, the supplemental health and medical policies that you sell work in tandem with health insurance in some ways. Is the dental and vision product similar to what competitors are selling? Can it work in tandem the same way?
Yeah.
Is it the same value proposition that they're trying to sell?
Yeah. What's interesting, I would make this statement to you and to our investors and listeners, both on the True Group Life and Disability side with the acquisition we made from Zurich, that business, on the network dental and vision and our Argus acquisition and building out the network dental and vision. Both of those businesses, on a standalone basis, do not have the Return on Capital that we enjoy in the supplemental voluntary business. That's not an Aflac thing, that's an industry thing. These are more capital-intensive businesses. They're highly competitive businesses. They're more thinly priced in general because of the competitive landscape, so that's the nature of it. As a result, I'm not looking to be a top five player in True Group Life and Disability.
I'm also not looking to be necessarily a top five player in network dental and vision because those returns, while they can be okay and certainly above our cost of capital, they're nothing like the returns we enjoy given our size and scope and dominance on the voluntary side. Why then am I in those businesses? I want them to grow to scale, okay? I want to be a strong player in the U.S. I want to be particularly high quality. Why do I want all that? Because I'm looking to cross-sell and add my voluntary products and my voluntary capability to those opportunities. There's two types of halo effect that you get. One is, of course, cross-sell, which is an overused term in the industry, but it's a reality. Can I pair My voluntary products with life and disability and with dental and vision, okay?
The other synergy that is not well known is these products, life and disability and dental and vision, are far more persistent. The persistency is 85% in many cases, and that persistency can add or help or develop greater persistency with our voluntary products that tend to be about 78% persistency. The other halo effect that people don't realize is, not surprisingly, when you have an employer-subsidized life and disability or an employer-subsidized dental and vision, the take rate among employees are 60-plus%, meaning 60-plus% of your employees will take those benefits. Voluntary take rates are 15% at best, sometimes 20%. What I'm looking for by being in these two businesses is not just the returns in those businesses and being a high-quality leader in the U.S., but not the leader, okay?
I'm looking to generate more at-bats with voluntary, greater persistency with voluntary, and higher penetration in the business. That's the upside return on building those businesses for our shareholders.
Thank you. Shifting gears, credit risk. People have been forecasting a credit crisis for 5 years, and we're nowhere near it. It's always something different. I remember with Aflac in particular, you never know who has Tunisia sovereign debt, which is not a big deal, but of course, everyone's always looking for some sort of crack in the armor. Give me your experience in the past. How do you prepare for the next credit cycle? How do you know where it's going to come from? We never really do, but what lessons have you learned to be proactive about where the next weakness might show up?
10 years ago, Eric Kirsch joined the company, and that was Dan Amos and the board of directors saying, "We keep tripping and falling." You can almost set your clock to Aflac having a large, singular, concentrated loss every few years in the general account, and we've got to move away from that. We've got to bring a higher level of diversification and, frankly, sophistication to the table.
Brought in Eric, and Eric built a team, first-class team at 100 Wall Street, as well as in Tokyo, and built that out, in doing so, migrated the portfolio away from those dynamics, which are really now effectively long behind us in terms of concentration, and a much more traditional portfolio related to general account conditions and general account strategic asset allocation that most investors will be used to when they look at a large U.S. life insurance company, and frankly, even a large Japanese insurance company. The difference is that we brought certain skills to the table that we could lend over to Japan, and that is skill sets around U.S.-based fixed income securities and alternative investments. We could do that both organically as well as partnering with boutique investment managers who manage that money on our behalf, what we call our external manager program.
We have delivered that capability over to Japan in building a roughly $30 billion U.S. and hedged, partially hedged, portfolio in Japan. That has been the migration of the company's portfolio. What's interesting is when Eric, when I first got here, and I was CFO before my current position, Eric and I knew each other from his Goldman Sachs days and my Lincoln Financial Group days. We sat down, and one of the things that we said to each other is, "We need the portfolio to be safe and sound first and foremost, okay?
We need to earn a competitive yield off the portfolio." Interestingly, we're not in the spread business, so earning an aggressive rate of return or yield is not necessarily part of our liability structure where unless we make a certain amount of yield, we're unable to sell annuities or pension products or what have you. It's really just good old-fashioned return on reserves and capital to supplement the earnings of the company. The other thing I said is I doubt there's any investor on this call today that's saying, "What I love most about Aflac is I really invest in them for their investment returns." No, you invest in us because we generate world-class morbidity margin and insurance underwriting profits. We don't typically get paid to go out on the risk curve, is my point. That's not where you want to reach for more earnings.
As a result, we've been de-risking the portfolio and diversifying the portfolio for the better part of five or six years. Yeah, that doesn't help your yield, but it also avoids slip and fall problems and credit issues. Right now, that's not really what you have to be worried about with Aflac anymore. We're going to do what we can to defend net investment income, but we've purposely designed the portfolio to be more resilient during credit cycles because really, the reason you invest in Aflac is driving our core benefit structure and morbidity margins.
This might be the same answer, and I'll end here. Currency hedging is a big cost to Aflac, and you weren't always doing it, but you're doing it now. Is there any reason to change the strategy around currency hedging with the yen?
No. It's an optimization dynamic. Really, I've been with the company about six and a half years, and Eric started the investment practice here 10 years ago. Every year, there's been a maturity and an evolution and a refinement and an optimization. We're getting really very close to dialed in where we want. Where the biggest move has taken place in the last couple of years has been a recognition of a bigger question, and that is, what we want to do is we want to first and foremost generate a competitive yield in Japan without bringing undue capital risk to Japan. Because job one in Japan is Japan, even though it struggles to grow, it delivers us $2 billion of free cash flow a year and by 200 basis points, the lowest cost of capital in the U.S. insurance industry. Okay?
In your quest to grow Japan, don't screw those two things up. Right? We've increased the common stock dividend by 40% in the last two years, and you can thank Japan for that. All right? Job one is when you're investing and/or developing product, protect those two core competencies while you're at it. Okay? What we've been doing is we've been bringing down the hedge ratio, okay, so that we're hedging less and less of the U.S. dollar portfolio. We have a $31 billion U.S. dollar portfolio in Japan. We currently are hedging around $6 billion of it, and that is down considerably from three, four years ago. Why is that?
The reason is that we did a lot of engineering, and what we realized is, hey, the combination of borrowing in yen at the holding company, reducing our hedge ratio and holding more capital in Japan to support that, and putting a holding company hedge in place that effectively reduces the enterprise hedge costs. What that all does mechanically is for you, the investor, I've removed a lot of the yen sensitivity you have when investing in our stock. For many, many years, Aflac stock price was heavily influenced by a weakening or strengthening of the yen for a good reason. What you've seen now more in recent years is there's not been that high correlation between the yen. Even, in fact, the last few months, right, you've seen the yen weaken considerably, yet our stock hit all-time highs. Why is that?
We've gone a long way to sheltering you, the investor, against weakness in the yen by virtue of holding an unhedged US dollar portfolio. That's not free. It requires more capital, so we hold a big SMR in Japan to support that. All in, we've done the math on shareholder value, and it's a better outcome.
It's a great answer, obviously, you've been thinking a lot about it. We're out of time. I know you have a lot of meetings today. Thank you very much. We'll be in touch, and if you have any questions from shareholders, I can forward them onto you. David, I think you're on the line. Thank you for your help. Coming up next is David Altmaier, the Florida Commissioner of Insurance at 12:50 P.M. Come on back, everybody. Thank you, Fred.
Thanks, Josh. Thank you all.
Bye-bye.