Frederick J. Crawford
President; Chief Operating Officer at Aflac
Thank you, Dan. I'm going to focus my comments today on efforts to drive growth. I'll also provide some perspective on market and economic conditions in Japan and in the U.S. Beginning with Japan, COVID-related critical illness, daily death and hospitalization remains at very low levels. While weekly new cases were elevated for much of the quarter, they have come down in the last month and the government's intensive infection prevention measures were lifted as of March 21st. However, for much of the quarter, we felt the ongoing COVID impact, and as evidence, a further 17% decline in traffic through our retail insurance shops as compared to 2021. We have seen COVID incurred claims increase despite the lower rate of hospitalization. This is driven by the rising cases along with COVID's designation as an infectious disease or deemed hospitalization, which allows for payment of claims for care outside of the hospital.
To give you a perspective, we estimate over 80% of our COVID-related claims in the quarter were considered deemed hospitalization. In the meantime, and despite the increase in COVID claims, third sector benefit ratios remain very low. Sales in the quarter were weaker than we had hoped for. Provided COVID dynamics continue to trend positive. We remain confident we will hit our internal expectations for the year. While COVID conditions partially explain the weakness, we are taking additional action to strengthen the associate channel to include renewed investment in our exclusive agency platform and efforts designed to build market share with nonexclusive agencies where we have low market share. With this in mind, we are accelerating our cancer insurance refreshment timing and plan to launch in the second half of 2022. With respect to Japan Post, we have experienced sequential growth in sales with increased proposal activity as we continue to roll out a successful pilot program launched late last year.
As Dan mentioned, the April transfer of 10,000 sales employees to Japan Post Insurance was completed without disruption. Our alliance now is best characterized as distribution through 20,000 post offices, 10,000 sales employees selling from 223 locations within the Japan Post Insurance Network and 88 Japan Post Insurance branches focused on corporate sales. Importantly, cancer sales targets have been communicated to the regional offices of both the postal system and within Japan Post Insurance for the first time in three years. With respect to our elderly care products, sales were softer in the first quarter after an initial promotional period. This market is still relatively small, roughly 1/10 the size of the medical product industry. The market is further divided into two distinct and equally sized classes of product, protection and savings. We are focused on the protection segment of the market where we have quickly captured market share in the high teens. We are well-positioned with competitive product should the government of Japan contemplate shifting more of the burden to individuals.
Turning to the U.S. The markets for voluntary and other worksite benefits have effectively recovered to pre-pandemic conditions. However, we are navigating inflation in a challenging labor market. When we reflect on the U.S. economic environment, we are especially focused on two areas of impact to our U.S. model, recruiting and persistency. Tight labor markets create difficulty in recruiting to a full-time commission-based profession. We are, therefore, focused on improving conversion rates of new recruits to producing agents and reengaging veteran agents who are less productive during the pandemic. Our strategy has been successful, driving a 7% increase in average weekly producers year-over-year. In addition, veteran agents are better equipped to leverage our recent product expansion and strategy to grow within the small business brokers. In terms of persistency, it's important to note our account persistency was stable in the quarter. However, policyholder persistency was weak and broad-based, which leads us to believe it's partially attributable to the extreme movement in the labor markets. We track the labor department's quit rate, which had been declining during the pandemic then jumped in the first quarter to levels not seen in recent history.
While higher turnover in the small business sector is common, the so-called great resignation, along with COVID and return to office dynamics is driving higher turnover. Unfortunately, when employees leave their place of work, they often leave their policies behind. With this backdrop, what is most impressive about the sales results Dan covered is the balance. Split by product type, group voluntary was up 23%, individual benefits up 17%. Split by channel, agent sales were up 15% and broker up 25%. Our buy-to-build platforms were all up year-over-year, with the combination of network dental and vision, Premier Life and Disability and consumer markets up 65%, albeit off a small but building base. We track the halo impact of dental and vision sales and for every dollar of dental and vision sales, we were able to cross-sell $0.57 of other voluntary product. Finally, we launched Aflac Pet Insurance powered by Trupanion targeting the larger case market and are busy responding to requests for proposals.
It's the balance in our results that give us added confidence that performance should continue throughout the year. Turning to our investment operations, we do not have any direct exposure in Russia or Ukraine. Of course, our large global credit portfolio does include multinational companies with business interests in the impacted region but nothing significant enough to cause us concern among what are generally large, high-quality credits. We are closely watching secondary risk, namely the impact to the European energy sector, the conflict's impact to existing supply chain and inflation risk and a risk of recession in Europe. While increasing yields erode some of our unrealized gain in the bond portfolio, we also have benefits from rising interest rate environment. Rising rates obviously provide a tailwind for new money investments. Further, our sizable floating rate portfolio will benefit directly from aggressive Fed rate hikes as their interest rate resets are based off short-term rates.
Given the significant move in the forward rate curve, we expect -- we elected to lock in a portion of the expected rate increases by increasing the notional of our interest rate swap strategy such that now approximately 70% of our income is protected from changes in short-term interest rates over the next five years. In addition, the holding company holds short-term investments that will benefit with rising short-term yields. Our alternative portfolio continues to deliver strong results. We understand these portfolios could very well give back some of the gains as the year goes on, but we're off to a strong start in generating the favorable returns expected from these portfolios. Finally, Max provided helpful perspective on our exposure to the weakening yen in his recorded comments. In short, while there are GAAP reported impacts, we are well protected from an economic perspective and do not see the weakness in the yen as altering our investment strategy, hedging strategy or overall capital deployment activities. There are certainly no implications to our business model, which reinforces our strategic focus on currency-neutral outcomes. I'll now hand the call back to David to take us to Q&A. David?
