Welcome to the Aflac Second Quarter Earnings Conference Call. Your lines have been placed on listen-only until the question-and-answer session. Please be advised, today's conference is being recorded. I’d now like to turn the call over to Mr. David Young, Vice President of Aflac Investor and Rating Agency Relations. Sir, you may begin.

Good morning and welcome to our second quarter call. Joining me this morning from the US are Dan Amos, Chairman and CEO of Aflac Incorporated; Kriss Cloninger, President of Aflac Incorporated; Fred Crawford, Executive Vice President and CFO of Aflac Incorporated; Teresa White, President of Aflac U.S., Eric Kirsch, Executive Vice President and Global Chief Investment Officer and Todd Daniels, Executive Vice President, Global Chief Risk Officer and Chief Actuary. Joining us from Tokyo are Masatoshi Koide, President and COO of Aflac Japan and Koji Ariyoshi, Executive Vice President and Director of Sales and Marketing. Before we start, let me remind you that some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature. Actual results could differ materially from those we discuss today. We encourage you to look at our Annual Report on Form 10-K for some of the various risk factors that could materially impact our results. The earnings release is available on the Investors Page of aflac.com and also includes reconciliations of certain non-GAAP measures. Now, I’ll turn the program over to Dan, who will begin this morning with some comments about the quarter as well as our operations in Japan and the United States. Dan?

Thank you, David. Good morning and thank you for joining us. Let me begin by saying that the second quarter concluded a strong first half of the year for Aflac. So now, let me provide an update on Aflac Japan, our largest earnings contributor. Despite the low persistent interest rate environment, Aflac Japan generated solid financial results for both the quarter and first half of the year. In yen terms, the results on an operating basis were ahead of expectations for the quarter. I'm also very pleased with Aflac Japan’s robust third quarter sales increase of 5.8% increase in the quarter, rounding out a strong increase of 6.6 for the year. Sales in the quarter continued to benefit from the launch of the revised core [ph] medical product, EVER, continued strong cancer results fueled by our alliance with Japan Post and sales of income support insurance, our third sector product offering that we introduced in July of 2016. Turning to first sector savings products, you'll recall that we've been focused on pulling products from select channels and have aggressively reprised our ways [indiscernible] factoring in the recognition of a prolonged low interest rate environment. Aflac Japan continued to make significant progress, controlling the sales of the first sector savings type products, which is reported by decrease of about 78% of the total first sector sales in the quarter. Regarding distribution channels, we had meaningful production across all channels, which further affirms our leading position in the third sector market. Our traditional agencies have been and remain vital to our success and our alliance partners have also made contributions to our sales results. Last week, I had the pleasure of travelling to Tokyo to provide my full support of Aflac’s new management team. It was an excellent trip and while I…

Thank you, Dan. Our earnings results for the second quarter came in above our expectations, driven primarily by strong insurance margins, both in Japan and the US. We reported operating EPS of $1.83 per diluted share, which included a favorable tax item in the quarter that contributed approximately $0.05 per share. The tax item represents the release of certain tax reserves associated with prior tax years that closed in the second quarter. Offsetting this somewhat was a weaker yen impacting the quarter's results negatively by $0.02 a share when compared to last year's quarter. Even after adjusting for the tax item, our earnings per share were up over 9% on a currency neutral basis. We booked approximately 8 million in pretax costs associated with our Japan branch conversion, coming in below our estimates, but largely timing related. The conversion remains on track for a mid-2018 closing and there is no change to our original guidance on conversion costs of 120 million to 130 million pretax. Conversion costs will pick up in the second half of the year and into the first half of 2018 as we approach closing. In our Japan segment, premium weakness in the period was largely attributed to our first sector savings product WAYS and a portion of our block reaching paid up status. This alone contributed to a JPY14.5 billion decline in first sector premium in the quarter. We are in the peak year of savings policies reaching paid up status and our estimate -- and we estimate for 2017, the premium impact will be approximately JPY55 billion to JPY60 billion. Third sector earned premium continues to grow, up approximately 2% or JPY5.5 billion in the quarter. Our Japan segment profitability was strong in the second quarter with pretax margins approaching 21%. Benefit ratios in Japan…

Thank you, Fred. Now, we are ready to take your questions. [Operator Instructions] We will now take the first question.

Thank you. Our first question is from Jimmy Bhullar with JPMorgan.

I had a question for Teresa. US sales obviously is still modest, but seem like they're getting a little bit better. To what extent are you confident that this is the beginning of a turnaround or do you still have to wait and see how things progress in the second half of the year and in the fourth quarter to be comfortable that you'll be able to meet or exceed your guidance?

Jimmy, thank you for the question. I feel good about -- feel there are some positive results, underlying metrics that we're seeing right now. I do however and I've said in previous conference calls I want to see the last half of the year, I want to see how that materializes. I believe that we've seen traction with regard to the career agent side where we've improved our veteran engagement. They are generally the salesforce that's riding in our existing accounts, but we're seeing that underlying metric move in positive direction. We talked about the conversion of new associates to producers in 2015. If you recall, we adjusted the compensation to ensure that we were paying for a producer versus a recruit and we're seeing some positive traction there. But then I think I talked about two other things, the broker channel, that mid-market channel, we called out as an area that we needed to work on. We've increased staff there by 25%. Those folks are on boarded. They've been trained. They're now in the market, working with those market directors. That needs to materialize and I feel good about what I'm seeing so far and then the last thing was public sector. That was an area that we needed to ensure that we defended that part of our in force and continued to grow. We have hired a department head for public sector. We've developed a strategy that we believe is going to be competitive in that market space and we're already starting to see some traction as it relates to new RFPs or quotes in that sector. So again, I think that we're going in the right direction. I feel pretty good about that, but I do -- I would like to see how all of this materializes in the fourth quarter, in the third and fourth quarter.

And on the sales reps that you added for midsize brokers, did that contribute at all to second quarter results or were they not on boarded for most of the quarter?

They were not on boarded for most of the quarter, but I will say that the focus on mid-market brokerage did help us with a lift. But I would not say that they contributed terribly in the second half, in the second quarter.

Okay. And then lastly just on all the talk about healthcare reform, have you seen or do you expect to see a situation where that causes sort of disruption in the market or causes businesses to defer adding new benefits?

I think at this point in time, what we're seeing is that businesses are continuing to move forward as they’ve moved forward in the past. There's not a lot of new activity except for as we've all seen, there's not been a decision made, no repeal, no reply. So we're moving forward, we're not seeing anything that we feel at this point in time will impede our sales activities and impede us from being in the range that we've already quoted.

Thank you. Our next question is from Nigel Dally with Morgan Stanley.

Question on the loss ratios in both the US and Japan. We're seeing those ratios coming well below your original guidance. So hoping to get some color on what's driving that and the sustainability looking forward.

Sure. Nigel, it’s Fred. We did indeed experience favorable benefit ratios in the quarter. Let me just start with the US. We are tracking a bit below our 52% to 53% range as I mentioned and that's really related to favorable claims trends, but also coupled with a natural slowing of IBNR build as those favorable claims trends play out. I would say that it's not uncommon in any particular quarter that things may break to the positive or break to the negative when it comes to the various IBNR adjustments in particular that you make and claims trends in this particular quarter certainly we experienced trends breaking to the positive. But having said that, we have had a sustained period of benefit ratio performance really at that low end of the range I mentioned and that would be our expectation as we go through the year. So we are expecting to see benefit ratios climb back towards our range guidance for the US, but should end the year at the favorable side of that range of 52% to 53%. In Japan, we've got a different dynamic going on and that is yes, we have continued favorable trends and related claims and IBNR related activity. And certainly, you saw it actually dipped down a little bit in the quarter. But what we really have going on right now is a bit of a business mix issue and as we see the premium levels come down in first sector, particularly related to the WAYS paid up product and a outperformance on the sales side and really a continuous level of outperformance building the earned premium on third sector, that shift in mix is causing there to be downward pressure on the benefit ratio. We would estimate for example in the quarter roughly 100 basis points perhaps 100 to 120 basis points or so of benefit ratio improvement just related to that shift in mix between third sector and first sector premium. Because we're in this peak period of paid up policies throughout 2017, that favorable pressure on our benefit ratio may continue for a period throughout this year. And so that's why we're suggesting that we are probably going to end up at the low side of our benefit ratio range in Japan as well that outlook call range was 71% to 73%. Now having said that, third sector benefit ratios were effectively flat. So we are seeing favorable claim activity, but this had really more to do with the mix issue than necessarily materially improved claims trend in the quarter itself.

Thank you. Our next question is from Seth Weiss with Bank of America.

I want to start first with guidance and reiterating guidance. Considering the strong beats in both the first quarter and the second quarter, reiteration of guidance, even if we look at the very high end of the range, so just probably a slower pace in the back half of the year than I think most of us were modeling. Just curious if this is a matter of call it prudence, not changing guidance midway through the year or is this a reflection of a much heavier ramp up in investment spend than perhaps we originally anticipated?

Yeah. What you should not read into our holding to guidance or what I said the high side of our guidance, what you should not read into it is some sort of a sharp right or left turn in our strategy or pace of investment in the second half of the year. Really what you have going on is a few things. One as mentioned, we've kicked off in the first half of the year at a relatively lower rate of hedge costs. We would expect that to naturally build up as we go throughout the year. Now granted we're running at or maybe slightly below our guidance range of 250 to 270, but we would expect that to build naturally and that has a lot to do with the pace of build-out of our floating rate portfolio, which we would expect to be 100% hedged. We also have been gradually locking in more of our long-term hedge costs, which is a bit more expensive and while we are experiencing favorable pricing, that will pressure a little bit of your expenses as you go throughout the year. So that will be in front of us on the back half as I mentioned in my comments. In our press release and in my comments, we've talked about the fact that there will be a gradual pick up in the level of expenses in the business. This is not really abnormal. We tend to see this every year. Some of it is related to promotional spend, new product launch spend in Japan in particular, but also the natural progress of various initiatives across the company related to IT and operations, particularly in the US. So we'll see that climb and pressure a bit as we go. But to your question of conservatism, when your outperformance is largely on the back of strong benefit ratios in the US and Japan, it stands to reason that you're going to be somewhat cautious in your expectation for reverting back to your long term views of benefit ratios. And so, we absolutely are assuming that there will be a migration back to probably the low end of our benefit ratios in Japan and the US and that will be different than what we experienced in the second quarter. So that's within our numbers, but we'll do what we always do. It is midway through the year and as we continue to see the business progress and we see more permanency in the numbers, particularly around benefit ratios, we’ll update accordingly.

That's very helpful. And then Fred, if I could just follow-up on the last question on Japan margins and the commentary about the 100 to 120 basis points improvement due to the mix is really helpful. Is that sort of rebase that becomes permanently part of the earnings stream or is there some dynamic in terms of how that deferred profit liability amortizes in where that flows in the benefit ratio kind of naturally rises if we’re looking outer years.

Eventually, the numerator and denominator dynamics of premium falling off with paid up status and the amortization of the deferred profit liability will eventually slow and pace in accordance with the - with policies reaching paid up. I might note that even though it's far off in the distance we have not only five pay ways, but ten pay ways and so we'll come back to this equation down the road as ten pay products starts to reach paid up status albeit I don't think as pronounced as the five pay product. What I would say is in our future is that as time goes on, we would expect to see a fundamental change in the mix of earned premium if you will between third sector and first sector and that will influence and be more a permanent part if you will of our benefit ratios. I do want to remind you that while first sector product carried higher benefit ratios that also carried lower expense ratios. And so you will see that dynamic play out. In my mind and what we're doing as a management team is in the face of obviously some slowed revenue increase related to our first sector strategy, we have to be attentive overtime to our expense structure and continue to manage that. And we certainly are paying attention to that. The team in Japan is actively working and engaged. We’ll expel more of that out as we move forward, but that's something we have to be careful about and are paying attention to. But overall profit margins are expected to remain strong and we're very pleased with the results. And we also think this shift is very much in the best interest of shareholders. One thing you don't see in our results is the gradual lifting cash flow and FSA earnings which comes from shifting our mix to a lower capital intensive product and better profitability and that will pay dividends as this time goes on.

And our next question is from John Nadel with Credit Suisse. Your line is now open sir.

So two questions, one I just wanted to talk about the US dollar denominated investments hedged in Aflac Japan. Could you just give us an update on what the total dollar amount of the hedge program was in 2Q and where you expect that to end the year as you continue to work on the floating rate portion and I assume that dollar amount will grow?

It will grow, I'll ask Eric to comment on the trajectory of the build in the portfolio.

John, current side is about $22.8 billion. By year end, based on current projections, we’ll probably get to about 24.5 or so in the majority of new assets that will go in will be floating rate assets between transitional real estate and middle market loans.

Just as a real quick follow up on that one, Eric, that's the total size of the US dollar denominated program but that's not the hedged piece is it?

Well that's correct, I apologize. So currently about 52% is hedged and 49% is unhedged.

And that ratio should increase I assume?

It should because what we are building in the floating rate portfolio is by definition intended to be 100% hedged. The only thing that would change that is if we were to make any tactical decisions around the hedge ratio. But if you just roll the ball forward or play the ball forward, the portfolio grows to 24.5 billion because it's growing on the back of a couple billion growth rate in the floating rate portfolio and that is 100% hedged. You'll see that notional climb from its roughly 11 billion range up towards 12.5ish plus.

Those changes are already contemplated and forecast in our full-year hedge forecast which Fred mentioned earlier.

And then back to Japan and the margins, Fred, just a quick one thinking about that sort of the natural shift. So certainly seeing the impact on the benefit ratio that’s come down and I think you mentioned maybe 100 or 120 basis points. So the lion share of that improvement in the benefit ratio really driven by shift as opposed to favorable claims activity. What I guess we're really not seeing and I'm wondering if you expect that we should see more of it is the expense ratio is up a little bit on a year over year basis if I think first half versus first half. Should we expect that the expense ratio is going to increase a little bit more, again driven by that shift.

The way I would think about expense ratio, now remember, expense ratio is up against total revenue. So you also have debt investment income playing into that, which also includes hedge cost now. So, with the switch rate for example and sort of a slowing down of debt investment income to then build back up you'll see some natural short-term pressure to that expense ratio. But as we see premium levels pressured because of the paid up status throughout this year and continues on a bit into next year and net investment income while recovering still being down from historical standards, we would expect the expense ratio to still be pressured and remain in that range that we've forecasted of 19% to 20% range. So it may climb before it comes down. What we're busy working on is IT and operational investments that we would expect over time to start to pay off in the way of yielding expense benefits. And we're going to need to be attentive to the overall expense structure we have that surrounded in particular first sector savings product as that starts to ratchet back. Now we continue to launch new product, the income product that Dan mentioned, we continue to refresh our core medical and cancer product and we're always exploring where there may be new avenues of growth rate on the third sector side. And so we may have some reallocation of expenses over time. But we have to be attentive to the revenue realities and that will mean managing expenses. So right now I would stick to this notion of 19% to 20%, we're traveling a bit on the low side of that. But I would expect it to probably pick up a bit as we go throughout the year.

Thank you. Our next question is from Mr. Humphrey Lee with Dowling & Partners. Your line is now open.

Just to follow on the benefit ratios dynamic in Japan. So I appreciate the comment about the ways, the five pay ways kind of getting to paid of status and how they're going to shift the dynamics a little bit. But at the same time I would expect that would be your expectation kind of factoring into the 2017 guidance. So looking at your sector sales being more robust in kind of the first half of the year, how much of that accelerated that mix shift that we've seen year-to-date.

So I mean the way I would think about it is when we went into our outlook call and therefore our guidance we guided to a range of 71% to 73% for our benefit ratio in Japan. And in the first quarter we posted 71.7% and in the second quarter we dipped down to 70.5. And so there's obviously a lot of attention being paid to the second quarter and whether there was something of a more permanent nature there. But I'll just remind you of the fact that we did in fact see a good level paid up policies in the first quarter. And our benefit ratio was 71.7%. So our view is that we will travel on the low end of that range of 71 to 73, but we would expect the benefit ratio to kind of come back to those 71, 72 levels as we go throughout the year. So we did in fact see good favorable claims results in the second quarter that then led also to IBNR breaking to the positive if you will i.e. lowering IBNR. IBNR trends are slowing the pace of increase in IBNR. So did have some of those what I would call normal positive or favorable results, but it was just pumped up by really the mix now really taking traction and bringing it down by another 100 points. So hopefully that helps, but you are seeing some favorability. As I mentioned I do expect to travel in the low end of our range, but I would expect a bit of a tick up from what we're seeing in the second quarter.

So in other words, the strong sales that we've seen in the fourth quarter or the first two quarters of this year that had relatively limited impacts to that mix shift is just more about the pay off status of those five pay ways, is that correct?

That’s right, you can sort of see at this quarter, the strength of our third sector sales contributed a bit over 5 billion yen to the earned premium while the paid up status of our product dropped the first sector savings premium by 14.5 billion yen. So there's a bit of a disproportionate amount of shift because we're in that peak year of paid up policies here in 2017, so that will start to calm down.

And then just to stay on the sector sales a little bit. So sales continue to be pretty strong even though my understanding is that the Japanese market is getting more competitive in this third sector products as many other players are shifting their focus to this area. Can you just talk about in addition to kind of the successful relationship with Japan Post, anything that is notable that you’re seeing the held you to deliver such a strong sector sales in the first half of the year.

Well, would say that my meeting with Japan Post CEO was a very strong meeting and one that is encouraging to continue to see growth in the cancer insurance market with them. And the potential seems to be even stronger than what we first thought and have a longer tail on it in terms of continued penetration. Maybe Koide would like to make some comment some Japan. Koide, are you on?

[Foreign Language] This is Koide from Aflac Japan. [Foreign Language] So as Dan mentioned, the reason why we have been very successful in the first half of this year is, one, is of course JP. [Foreign Language] Another contributor was the medical product that we've launched in February. [Foreign Language] This is because of the new product effect. [Foreign Language] That’s it from me.

Thank you. Our next question is from Mr. Ryan Krueger with KBW. Please go ahead sir.

I had a follow up on the medical product, the revised EVER. I guess the sales, you talked in the past about shorter sales cycles for medical products, I guess it's been a few months now, just help give -- hoping for some perspective on kind of how much longer you think the new product can resonate before kind of it reaches the end of the natural selling cycle for medical in Japan.

Well, the nice thing about adding a third pillar with allows us to cycle different products at different times. So it's not just medical, but then we entered this in cancer and then we back off and go to a new medical again, but Todd, you want to make any comment about the life expectancy of the products.

Thanks Dan. I think if you go back and look at what we have in our fab sub materials you can see how many quarters you get from a repricing. Back in 2015, you can see third quarter medical sales around 9.1 billion yen, and that stayed at a relatively high amount until we came out with a substandard medical in second quarter 2016. So you're going to see the natural pacing of the product probably for a few quarters. But one thing I’d point out with this is the channel differences. So we're focused on the Japan Post selling the cancer product and the good results we saw there. But what we have different now that we haven't had in the past is the associate channel is focused on selling the medical product, while contributing to cancer cells. So you have both cancer and medical products up for the year, which is something we haven't been able to enjoy in the past.

And then quick one Eric, can you just give us a sense of what new hedges are casting at this point that you're putting on for the US dollar portfolio and how much of the 2018 costs are locked in?

First the second question about 51%, 52% of ’18 is locked in. As Fred mentioned, we continually look at that throughout the year. So we'll expect to even make deposits on that and get that locked in percentage higher as we get into fab and to the earnings outlook call. With respect to current costs, we've been fortunate because the kind of pick at the end of last year. And if you think about the macros, US had an outlook at the year-end of very high growth, the Fed lifting rates perhaps three times. Japan being stabilized, the cross currency basis came in a bit. So hedge costs are actually running lower now than they were at the beginning of the year in our forecast. When you look at longer term hedges, which is a place where we’re focused for the longer dated assets, you're looking at a little over 2% like 2.05. When you're looking at shorter dated hedges like three month hedges which is what will be focused on later in the year for our floating rate assets. You're currently looking at about 170 basis point.

Our next question is from Sean Dargan with Wells Fargo Securities. Please go ahead, sir. Mr. Dargan your line is now open.

Why don’t we go onto the next question.

Next question is from Mr. Suneet Kamath from Citi. Your line is now open, please.

Question for Teresa on the US business, good to hear that things are moving in the right direction. But if I think of your 3% to 5% sales growth long term target. It's quite a bit lower than where I would argue Unum has been running. And I would say that there's lots of similarities in terms of the business mixes. One thing that Unum does differently is I think they've really separated the brokerage business from the traditional agent channel, just wondering if that's a strategy that maybe you guys should be thinking about in terms of more of that delineation between the two channels given prior comments around channel conflict.

Well certainly, so what I look at is the market and I get your question, the market forecasts to grow about 6%, broker growth is about 8% to 9%. And Aflac broker growth is already within that range. So we are internally looking at the broker side of the business as well as the career side of the business. But we have the fortune of having one of the largest distribution forces and career agents selling over 70% of our business. So that's a large base to grow over and so that's why when we looked at our guidance, we believe that the guidance of the 3% to 5% is reasonable. And it's really the difference in our distribution mix at this point in time. So, I think that’s kind of what I'll share as it relates to distribution.

I'd like to make one other comment, the thing that’s so great about our company is our brand, but it also is a liability in one respect. Certain companies can break their brands apart with different ones but the companies don't necessarily have great brand recognition themselves, so it doesn't make any difference. In our case everyone wants Aflac and wants the Aflac does because they know our name. So in our case, with brokers and individual agents no one won't for example See CAIC which is our Aflac group, they don't want the name CAIC, they want to name the Aflac Group because of that brand. So our channel conflict is somewhat to do with the brand itself and that if we had separate brands and we thought about that. But as you can imagine everyone likes to be able to go into an account and be able to say the name of the company and they immediately know who it is and like the brand. So that give us some pause but at the same time it's worth because we feel like on the other hand that's why we're number one in the market by far in terms of what we're doing.

And then just a follow up on that. From time to time we do hear about acquisition possibilities in the group side, particularly in the brokerage business. I know you did CAIC a while ago, but would it make sense to think about something a little bit bigger and kind of jump start your brokerage sales. Acknowledging that Teresa said that you're already running a little bit higher than in the market overall.

This is Fred, I'll take that question and Teresa welcome any comments you have. But the most common discussion around our name from time to time is the notion of True Group if you will as opposed to differentiated from the group business we have in South Carolina. This would be True Group Life, short of long term disability and we have for a while had to contemplate strategically the importance of that product and how it plays into our business model particularly as you go up market and into the brokerage space. And we effectively had what amounted to a build buy or partner decision framework, the build was not very practical because it would take a lot of time nor do we possess necessarily the expertise and infrastructure to support that type of business. The buy is not appealing because the premiums associated with purchasing large group players is very significant comes with integration, issues and risk, and we don't think argues for the company's capital. And so what we have done is we are on a path of partnering on True Group products such that we can offer that product to the brokerage space under the Aflac. By partner meaning we partner on the administrative side, but also on the risk taking side. When you're Aflac looking at that business the thin margins and occasionally volatile results that come with True Group aren’t particularly appealing, they may be appealing to a company that is in other types of business and looking to diversify. But to us, they don't necessarily argue for capital let alone overpaying or paying a tremendous premium for the property. So we've gone down the partner route and you'll hear more about that over time. I think thus far the only announcement we've made is with Trustmark on a life-LTC related - I came out of Lincoln so those of you familiar with MoneyGuard know it's that type of a product offering which has become popular in the work site. And that's the type of parting will do as we go forward to measure up against the market. But it just doesn't argue for our capital to be a buyer at this time and take on that risk nor can we afford the time it takes to build. So we've chosen the partner route.

I think the only thing I'll add to that is in September, I think we can bring a little bit more color to the question of broker versus career and the strategy overall, so we’ll do that.

Our next question is from Mr. Erik Bass with Autonomous Research. Please go ahead, sir.

Dan, I was hoping that you could expand on your comments about looking for ways to strengthen the partnership with Japan Post. And so wondering are there potential new product opportunities or potential opportunities to expand that. If you could comment a little bit.

Well, we didn't really go there at this particular time when we were having our meetings because we think there's still enormous amount of potential with [indiscernible]. But certainly we would like to have discussions in that area, but as you know they sell their all medical products right now. So I think that would be a much harder thing to consider for anyone including us. So right now we just want to get to those 20,000 offices and make sure we're penetrating it and they are committed to continue that going forward. You are exactly right, as big as that distribution channel is, we’re always keeping our ears open to see if they ever had any consideration for doing that, we would do everything we could to open that channel and open that door with them.

I know you can't comment on specific sales levels for the post, but can you give any sense of how penetrated you are in the channel today, now that you've had access to the full 20,000 post locations for a bit. How close are you to being fully penetrated in the channel?

I really, I can't speak on that, but I don't know either because it's something new that's never - there's never been a partnership like this. They've never done a deal where they let everybody have all 20,000 post offices. So what the penetration is, I don't know, but the thing I will reiterate is, here we are been in this program this long and we had a record this quarter. So I don't think it's over is the main thing. Everybody is wondering when it's going to hit down and it doesn't seem to be headed down, it seems to be going up. Of course that can’t go on forever, but I'm certainly encouraged about that. The one thing that we always talk about on these calls is how negative interest rates or low interest rates are killing us or everybody, not just us Aflac, but the industry as a whole, it's terrible. But the products that we sell in the third sector are less interest rate sensitive and so it's helped us with our last partners, all of them. Here's a product that they can sell that will help them financially, help us financially and it's a win-win. So I think that will continue going forward and I'm excited about that.

Thank you. Our next question is from Mr. Sean Dargan with Wells Fargo Securities. Your line is now open, sir.

I had a question about the income support product. Ultimately what will this do to be the benefit ratio, will this change that mix shift at all. I mean how big can this product get and I guess this is my question.

I would not hold your breath on the income product adjusting our benefit ratio anytime soon just given the sheer size of the earned premium build over it but…

And I’d like Koide to talk about the potential of the product, but why don’t you go ahead and answer.

The benefit ratio for the income support is expected to be in line with our other third sector products, somewhere between medical and cancer. And again because of the sheer size of it today, there would have to be a material amount of sales of income support which I think we'd all enjoy in order to effect the benefit ratio in anyway a regular third sector sale would.

Koide, would you like to comment on the potential of that market?

[Foreign Language] Right now this income support product market itself is still in development stage. And we intend on developing it into a third pillar over the medium to long term perspective. [Foreign Language] That’s all from us.

It's just too early to tell at this particular point and we're encouraged with it initially. Any time a new product comes out they generally have a spike in it and our agents go to the path of lease resistance. So as you've seen in the past when we introduced medical, cancer drops off, we introduce a new cancer, medical drops off. We introduce this, it hurts the others. So they move and we've never cared as a company where they go. But the potential of taking this on to this large customer base of ours has enormous potential, but it's still too early to tell how successful it's going to be, but I'm certainly excited about it and think it has the potential long term.

At this point speakers, there are no questions in the phone.

Thank you very much. Before we end the call today, I'd like to remind everyone of our upcoming financial analyst briefing in New York on September 28. For further details or any questions please contact our investor and rating agency relations department and we hope to see you all there. Thank you very much.

And that concludes today's conference. Thank you for your participation, you may now disconnect.