2 0 0 9 F i n a n c i a l A n a l y s t s B r i e f i n g


2 0 0 9 F I N A N C I A L ANALySTS BRIEFING - Aflac

2 0 0 9 F i n a n c i a l

A n a l y s t s B r i e f i n g

About This Book

This book primarily contains presentations on Aflac that were given at the company’s 2009 Financial Analysts Briefing

held on May 19-20, 2009, at the Mandarin Oriental Hotel in New York, New York. All are intended to provide a

comprehensive discussion and analysis of Aflac’s operations. The information contained in the presentations was based

on conditions that existed at the time the material was presented. Circumstances may have changed materially since

those presentations were made. The company undertakes no obligation to update the presentations. The enclosed

information was prepared as a supplement to the company’s annual and quarterly reports, 10-Ks and 10-Qs. This book

does not include footnotes to the financial statements and certain items that appear in reports or registration statements

filed with the Securities and Exchange Commission. We believe the information presented in this book was accurate at the

time of the presentations, but its accuracy cannot be guaranteed.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide

prospective information, so long as those informational statements are identified as forward-looking and are accompanied

by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from

those included in the forward-looking statements. We desire to take advantage of these provisions. This document

contains cautionary statements identifying important factors that could cause actual results to differ materially from those

projected herein, and in any other statements made by company officials in communications with the financial community

and contained in documents filed with the Securities and Exchange Commission (SEC).

Forward-looking statements are not based on historical information and relate to future operations, strategies, financial

results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and

uncertainties. In particular, statements containing words such as "expect," "anticipate," "believe," "goal," "objective,"

"may," "should," "estimate," "intends," "projects," "will," "assumes," "potential," "target" or similar words as well as

specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such

forward-looking statements. We caution readers that the following factors, in addition to other factors mentioned from

time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:

difficult conditions in global capital markets and the economy generally; governmental actions for the purpose of stabilizing

the financial markets; defaults and downgrades in certain securities in our investment portfolio; impairment of financial

institutions; credit and other risks associated with Aflac’s investment in perpetual securities; differing judgments applied to

investment valuations; subjective determinations of amount of impairments taken on our investments; realization of

unrealized losses; limited availability of acceptable yen-denominated investments; concentration of our investments in any

particular sector; concentration of business in Japan; ongoing changes in our industry; exposure to significant financial

and capital markets risk; fluctuations in foreign currency exchange rates; significant changes in investment yield rates;

deviations in actual experience from pricing and reserving assumptions; subsidiaries’ ability to pay dividends to the Parent

Company; changes in regulation by governmental authorities; ability to attract and retain qualified sales associates and

employees; ability to continue to develop and implement improvements in information technology systems; changes in

U.S. and/or Japanese accounting standards; decreases in our financial strength or debt ratings; level and outcome of

litigation; ability to effectively manage key executive succession; catastrophic events; and failure of internal controls or

corporate governance policies and procedures.

Table of Contents

Section I - Aflac Incorporated

Strategic Overview of Aflac...............................................................................Daniel P. Amos................................ 2

Aflac Incorporated Financial Results .................................................................Kriss Cloninger III............................. 5

Investments .....................................................................................................W. Jeremy “Jerry” Jeffery................. 12

Product Pricing and Reserving..........................................................................Susan R. Blanck .............................. 19

Section II - Aflac Japan

Introduction to Aflac Japan...............................................................................Tohru Tonoike ................................. 24

Japan’s Regulatory Environment ......................................................................Charles D. Lake II ............................ 29

Aflac Japan Marketing ......................................................................................Takaaki Matsumoto ......................... 34

Aflac Japan Sales.............................................................................................Koji Ariyoshi..................................... 38

Aflac Japan Bank Channel Sales ......................................................................Hisayuki Shinkai............................... 43

Aflac Japan Administration ...............................................................................Hiroshi Yamauchi............................. 51

Section III - Aflac U.S.

Introduction to Aflac U.S. .................................................................................Paul S. Amos II ................................ 54

Aflac U.S Marketing..........................................................................................M. Jeffrey “Jeff” Charney ................. 59

Aflac U.S. Sales ...............................................................................................Ronald S. Sanders........................... 65

Aflac U.S. Training............................................................................................Eric J. Leger .................................... 70

Aflac U.S. Internal Operations...........................................................................Teresa L. White ............................... 76

Section IV - Other Information

The Management Team ........................................................................................................................................... 82

Index of Tables and Charts ...................................................................................................................................... 99


August 2009

Section I

Aflac Incorporated

Strategic Overview of Aflac

Daniel P. Amos

Chairman and Chief Executive Officer

I’d like to offer an overview of our business, our strategy

for continued growth, as well as our balance sheet and

capital position. I’ll also comment on our earnings outlook

for this year and next. But let me begin with some

comments on our operations and our earnings outlook for

next year and beyond. Perhaps the best starting point is our

business model itself. Although Aflac is by no means

immune to economic downturns, particularly one as

pronounced as the current recession, I believe our

operations are on a solid footing. Our business is growing

and generally meeting our expectations. Not only are we not

laying off workers, we are continuing to grow our business

and hiring necessary administrative staff in both Japan and

the United States to serve our customers. Of course, we are

continually hiring new sales associates, which we are

growing in great numbers in both markets. I continue to

believe the resiliency of our model is directly related to the

underlying need for our products in both markets.

In Japan, the need for our products is directly related to

the aging population and the financial stress on the national

health care system caused by the aging demographic. As

we have discussed for many years, Japanese consumers

face significant financial risks from serious health events.

Over time, consumers have recognized that potential risk,

and insurance preferences have changed from traditional

death benefit coverage to products that offer living benefits.

Aflac is the leader in providing living benefits because of our

dominant positions in the cancer and medical markets.

However, at the same time, we have identified and

developed a market niche in Japan for not-so-traditional life

insurance coverage that is growing.

You’ll hear more details about the unique life insurance

market, or first sector products we recently introduced. We

believe these new products will be appealing to consumers.

Furthermore, they will help build on Aflac’s reputation for

product innovation. And most importantly, we believe they

will increase our policyholder base and will serve as dooropeners

for adding our supplemental health products, which

remain our primary product focus. Our product specialty

continues to concentrate on protecting wealth, not building

wealth. As the market leader, we want to make sure we

continue to meet the varied and changing needs of

consumers by continually enhancing our product line.

Product development remains one of the cornerstones of

our model and a key element of our strategy for sales


The other vital element of our business model is a focus

on building distribution. Although there is a strong need for

the insurance we provide, our products are generally “sold”

and not “bought.” That has become even truer as

competition in Japan’s insurance market has increased over

the last several years. As a result, it has become important

for our distribution system to evolve to better position us in

the marketplace. In the mid 1990s, we began to greatly

expand our capabilities for making face-to-face sales by

increasing our number of individual sales associates. Since

the insurance market was liberalized in 2001, we have

further diversified our distribution system to gain even better

reach in the market. In addition to our long-established

traditional affiliated corporate and independent agencies, we

continue to add new agencies and individual associates. In

2008 and into this year, we have had strong recruiting

numbers, and I believe our new associate training program

is more effective than ever. We also have developed several

other avenues to reach consumers. The strategic marketing

alliance with Dai-ichi Mutual Life since 2001 remains

productive and strong. We continue to enhance our

telemarketing capabilities with non-traditional agencies. In

addition, we now offer our products through nearly 270

different banks in Japan, which far exceeds any other

insurer in Japan. And we have just begun our initial sales

efforts through Japan’s vast postal network.

Although we only have one quarter under our belt, I’m

pleased with Aflac Japan’s start this year. Our first quarter

sales, while roughly flat with a year ago, were still slightly

better than our expectations. Additionally, sales through the

bank channel appear to have turned the corner after a very

weak fourth quarter. Since the end of the first quarter, I

remain encouraged. In the past, I have frequently

commented at this meeting on how sales are looking for the

second quarter. In that regard, I was pleased with April

sales. Although the year is young, I still believe Aflac Japan’s

goal of flat sales to a 5% increase for this year is attainable.

When facing past recessions in Japan, our message to

our agents and consumers has been pretty consistent.

Consumer incomes may be down, investment returns may

be lower, and the possibility of job loss may have increased.

But the financial risks that arise due to a serious health event

haven’t changed in any recession. In fact, one could argue

that the need for our product is actually greater in times of

economic weakness because illnesses and accidents simply

don’t go away. To help consumers mitigate possible

financial calamity, Aflac helps provide financial security when

serious illnesses or accidents arise. We provide that peace

of mind for a premium that is usually no more than $50 per

month. I believe strongly in that message, and I believe it

applies to our U.S. business as well. But so far, that

message seems to have resonated better in Japan.


We remain absolutely convinced the United States is still

a vast and attractive market for our products. Yet there is no

doubt this recession has taken its toll on consumers in the

United States. As I have said before, we believe our

coverage is affordable for the average American family. But

we realize that in these times of hardship, families have to

make difficult choices. When we see some stability in the

environment, we believe we will see stronger demand for

our products because the need has not changed. However,

I want to make one important point very clear: We are not

simply standing around waiting for the economy to recover.

While many companies may be pulling back due to expense

pressures, we continue to invest heavily and efficiently in our

business and our brand.

Although the recession has made it more challenging to

sell our products in the United States, the current labor

market has provided a good opportunity to expand our

commissioned sales force because salaried jobs are harder

to come by. Our new agent recruitment was strong in the

first quarter, and we continue to believe we can attract new,

qualified people to our sales organization. Like Japan, we

believe our training programs are more effective than ever

before. That effectiveness is evidenced by strong increases

in new payroll accounts and sales by our associates who

are in their first year with Aflac.

Some of you may have read our press release or news

articles about Aflac’s new U.S. marketing initiative. Jeff’s

presentation provides more details about what we refer to

as Aflac Wingspan and our new tag line: “We’ve got you

under our wing.” I’m excited about how we will build on our

brand using the iconic Aflac Duck. I think you are going to

find that our approach is fresher, more upbeat and fun.

Importantly, I believe Aflac Wingspan will make our products

much more relevant to employers and consumers alike. As

this new approach takes hold, we expect our sales results

to be positively impacted as well.

We remain convinced that we have a strong business

model in the United States. We are equally confident that

there are tremendous opportunities to grow our business

while at the same time, helping people when they need it

most. As the market leader, we believe we are best

positioned to capitalize on those opportunities. In the short

run, we expect our U.S. sales and persistency will continue

to be influenced by weak economic conditions. However, I

would like to point out that our persistency did stabilize in

April. As we told you last quarter, sales in the second

quarter will be our toughest comparison. The downward

trend we saw in the first quarter has continued, but we do

expect the second half of the year to improve due to our

marketing initiatives. However, we are striving to achieve flat

to 5% sales growth for the year, as it is part of our bonus.

We still believe the long-term potential is enormous in the

United States.

From an earnings perspective, we are again affirming our

objective of a 13% to 15% increase in operating earnings

per diluted share in 2009, excluding the impact of the yen.

As I mentioned on our first quarter conference call, it is

unlikely we will repurchase any shares in 2009. That means

we expect earnings growth will be at the low end of the

range this year.

I realize you have heard me say for the last few years that

it is my personal goal to increase operating earnings per

share by at least 15% excluding foreign currency for my first

20 years as CEO. Well, this happens to be my 20th year. I

have to admit I’m disappointed that I won’t likely reach that

goal. But the intent behind establishing my personal goal

was always to enhance shareholder value. Clearly, in this

current market, earnings are not as important as statutory

capital. Therefore, my primary focus has shifted to

maintaining a strong RBC ratio, and then growing our

earnings per share.

I also commented that beyond this year, we did not

expect our earnings growth to fall off sharply. Instead, we

believed our growth rates would grade down over time. We

also said we thought it was possible to generate doubledigit

earnings-per-share growth for another 10 years. I still

think that’s a reasonable expectation. However, implicit in

my past remarks was an assumption that we would

continue to deploy capital through share repurchases to

enhance our per-share results and produce consistent

double-digit growth over a long period of time.

I still believe that prudent and methodical share

repurchases are effective for enhancing shareholder value.

When we return to normalcy, I expect to deploy capital in a

similar fashion to again enhance our per-share earnings

growth. But understand that before we resume the

repurchase of our shares, we’ll need solid evidence that the

credit market has stabilized and the economy is recovering.

As such, we will remain very cautious on the deployment of

excess capital for shareholder purposes. In fact, right now

it’s impossible for me to associate the word “excess” with

the word “capital.” I know Kriss agrees, and we both believe

it is best to keep our powder very dry.

We have spent a lot of time analyzing and assessing our

opportunities for earnings growth in 2010. Assuming no

change in the economic environment, we have established a

range of 9% to 12% growth on a currency-neutral basis for

2010. Kriss will review the assumptions we used to model

our earnings objectives. Within the 9% to 12% range, we will

be focused on achieving a 10% increase next year.

In the foreseeable future, my primary interest will

continue to be maintaining a strong capital position to

protect this company in a very uncertain environment. As I

discussed a couple of weeks ago, we have focused our

entire officer group on maintaining a strong capital position

as measured by our risk-based capital ratio. Every officer’s

incentive compensation for 2009 has a component linked

to maintaining a target RBC ratio of 375%. But I don’t

want them to lose sight of running our business, so we are

still using other important bonus criteria, such as our

traditional premium, earnings, sales and expense growth.

Additionally, we used the RBC ratio as the only measure

for all performance-based restricted stock awards that

were granted to Section 16 insiders this year. To earn

these equity awards when they vest in three years, we will

have had to maintain targeted RBC levels.

Ultimately, our objective is to maintain a high risk-based

capital ratio that supports our financial strength ratings and

provides an adequate cushion for possible investment

losses. At the end of 2008, our RBC ratio was 476.5%. At

the end of the first quarter, we estimated that the RBC

ratio was 479%. We expect our capital generation to be

strong in 2009 and our RBC ratio to remain high.

Importantly, our entire officer team is motivated to keep it


that way. We also expect our solvency margin in Japan to

remain strong.

Let me continue with the balance sheet and comment a

bit on our investments. As I have said repeatedly, I remain

pleased with the overall quality of our assets. Despite global

credit downgrades over the last several months, the credit

profile of our holdings is still quite high. At the end of March,

95% of our fixed maturities and perpetual securities were

investment grade. Our global investment approach is timetested

and I continue to believe that it is the best course of

action for Aflac. The reason is straightforward: We purchase

securities that best match the characteristics of our policy

liabilities. That is especially true with Aflac Japan’s

operations. For more than 15 years, our greatest challenge

has been investing huge cash flows in appropriate

securities. We need to purchase long-duration, yendenominated,

investment grade securities to fund our longduration,

yen-denominated policy liabilities. It’s that simple.

Because Japan does not have a developed corporate bond

market, we turned to securities issued by many non-

Japanese entities in yen, including the perpetuals we first

purchased more than 16 years ago. Perpetual securities

provided us with the returns and the long durations we need

to support our policy liabilities. That hasn’t changed.

Obviously, subordinated, perpetual securities have been

the primary area of investor focus within our portfolio over

the last several months. When we first began purchasing

perpetual securities in the early 1990s, they were never

viewed as risky. Although we have not purchased any

perpetuals since 2005, they have served their purpose very

well over the years. Except for the Icelandic banks that we

wrote off in the fourth quarter, every one of the perpetual

securities we own was current on interest at the end of the

first quarter. In addition, we have not experienced any

extensions of principal at this point. In the fourth quarter of

2008, we had three separate perpetual securities redeemed.

On April 22 of this year, KBC Bank redeemed the Upper Tier

II securities we owned. On May 19, 2009, HSBC redeemed

our Upper Tier II holdings. Because of our long-term view of

these investments, we have both the ability and intent to

hold those securities until they mature. Our current credit

analysis suggests it is probable that we will receive both

interest and principal on a timely basis. As such, it makes

sense to us that we retain them in our portfolio.

Our ability to hold securities to maturity is due, in great

part, to the fact that we do not face any liquidity issues. As

we have discussed, some of our products in Japan offer a

small cash surrender value, particularly with our old block of

cancer insurance. However, we do not have a similar benefit

feature in our U.S. health products. That means that our

reserves exist for the benefit of our persisting policyholders.

As a rule, our customers do not have a claim on those

assets if they lapse. As a result, we do not face the risk of

liquidating invested assets to pay surrender values.

As you are aware, our only short-term liquidity need in

2009 was the repayment of our senior notes in April. It was

always our preference to refinance our recently matured

senior notes in the debt market, preferably the Samurai

market in Japan. However, when the financial crisis

emerged late in 2008, the Samurai market basically shut

down for financial names, especially those without a

government guarantee. At the same time, we are sensitive

to interest costs, and we’re not willing to issue debt with

excessive coupons. This prompted us to secure a loan from

our principal life insurance subsidiary, American Family Life

Assurance of Columbus, to the parent, Aflac Incorporated.

I’ll remind you that the loan is an admitted asset on our

insurance subsidiary’s books under statutory accounting

principles. As a result, it did not negatively impact our RBC

ratio. Despite its three-year term, we view it as short-term

financing until credit markets improve.

Fortunately, there has been substantial improvement in

the debt markets. Over the last few weeks, spreads have

tightened significantly and there has been a sharp increase

in issuance. On May 18 th , we were able to execute a debt

transaction in the U.S. dollar market. We issued $850 million

of senior notes with a ten-year maturity. The coupon on this

debt is 8.5%. As we announced, we primarily intend to use

the proceeds of this issuance to repay the intra-company

loan we originated in April when we repaid our maturing

senior notes. With this debt in place, we will maintain our

conservative capital structure and we are pleased to have

this financing in place. This also positions us to take care of

our obligations that mature in 2010.

I realize that many of you have given thought to our

shareholder dividend recently. Last October, our board of

directors raised the quarterly cash dividend by 16.7%

effective with the first quarter of 2009, which amounts to

$.28 per quarter. The board’s action marked the 27 th

consecutive year in which we have increased the dividend.

Historically, we have generally increased our dividend in line

with the earnings growth excluding currency. We are proud

of our lengthy track record of dividend increases. We realize

that for the roughly 30% of our shares that are owned by

individual investors, dividends are very important. We also

understand the argument for reducing or eliminating the

dividend, which has been expressed not only to Aflac, but

many other publicly owned companies as well.

Our decision to pay a dividend and if so, at what

amount, will ultimately come down to the strength of our

RBC ratio. As I mentioned, our priority is maintaining a

capital position that supports our financial strength ratings

and provides an adequate cushion for possible investment

losses. While we do not expect any changes to this year’s

quarterly dividend of $.28, if we experience significant

deterioration in the investment portfolio that produces

stress on our capital position, we will consider a modified

dividend as a means of conserving capital. And like share

repurchases, we are not prepared to commit to an increase

in the dividend in 2010 until we have more clarity in both

the economy and credit markets.

I want to point out that stock prices and investment

considerations may have changed, but what hasn’t

changed is our business model. Despite wildly volatile

financial markets, we have maintained our focus on

controlling the things that we have the power to control.

We can and will control our efforts to build our business

and take care of our customers, employees, and sales

associates. By doing this, I believe we will continue to

enhance shareholder value. I am confident that we will get

through the difficult times that we’re facing here and around

the globe, and I believe Aflac will emerge as the strong

company you have followed or owned for many years. So

let me conclude by saying, as I have said before and will

say many more times, I wouldn’t trade places with any

other CEO.


Aflac Incorporated Financial Results

Kriss Cloninger III

President; Chief Financial Officer

This presentation focuses on Aflac’s financials, including

our consolidated capital structure and the assumptions

used in modeling our future operating earnings-per-share


Aflac’s Principal Operating Units

Aflac Incorporated

(Georgia corporation)

However, remember that our debt is yen-denominated,

whereas most of our equity is dollar-denominated.

Therefore, a strengthening in the yen increases our

reported debt balance in dollar terms as it did in 2008. As a

result, our debt-to-total capital ratio increases. Of course,

the opposite occurs when the yen weakens. We view the

upper limit of our debt-to-total capital ratio as 25%.

Parent Company Loan Maturities*

(March 31, 2009)

American Family Life Assurance Company (Aflac)




Aflac New York

(New York life insurance co.)

Aflac U.S.

(Nebraska life

insurance co.)




of Total







2009 28.7% $ 450 ¥ 55.6 1.67%

2010 26.0 407 40.0 .71

2011 9.8 153 15.0 1.52

2011 13.0 204 20.0 1.32

2012 17.3 271 26.6 1.87

2016 5.2 81 8.0 2.26

Total 100.0% $1,566 ¥165.2 1.44%

*Excludes capitalized leases of $7 million at March 31, 2009

I know you are likely aware that our two major operating

units are Aflac U.S., which includes our New York

subsidiary, and Aflac Japan, which operates as a branch

of Aflac U.S. American Family Life Assurance Company of

Columbus, or Aflac, is domiciled in Nebraska. Aflac New

York is subject to the insurance laws of the state of New

York, where it is domiciled.

Aflac Japan is primarily regulated by Japan’s Financial

Services Agency, or FSA. However, as a branch of our

U.S. business, the various insurance laws and regulations

promulgated by the state of Nebraska also apply to Aflac

Japan. The regulatory rules address matters related to

operations and marketing, as well as to investments and

minimum capital levels. It’s important to understand that

Aflac Japan’s branch status influences the manner in

which we manage our business, especially as it relates to

capital matters.

Aflac Incorporated Capitalization

(In Millions)

2007 2008

Total long-term debt $1,465 $1,721 $1,573

Shareholders’ equity* 7,921 7,850 8,185

Total capitalization $9,386 $9,571 $9,758

Debt to total

capitalization 15.6% 18.0%


Let me begin with a comment on our overall capital

structure. We analyze total capitalization including longterm

debt, but excluding the unrealized gains and losses in

shareholders’ equity. On that basis, our debt-to-total

capital ratio has been fairly stable in the last few years.


*Excludes unrealized gains/losses on investment securities and derivatives


At the end of March 2009, the average interest rate

associated with Aflac Incorporated’s borrowings was a

fixed rate of 1.44% after interest rate swaps. The first line

item on this table relates to the senior notes we issued in

1999, which matured in April 2009. As we have discussed,

it would have been our preference to refinance the notes in

the debt market, preferably the Samurai market in Japan.

However, following the financial crisis, debt markets have

been essentially closed to financial names. As a result, we

repaid that maturing obligation through a loan from our

principal life insurance subsidiary. The loan is an admitted

asset on the insurance subsidiary’s books under statutory

accounting principles. As such, it does not negatively

impact our risk-based capital, or RBC, ratio. The loan has

an annual interest rate of 7.13% and a term of three years

with a provision for early repayment. Although the loan has

a three-year term, we view it as short-term financing until

credit markets improve, which for us was mid-May. We

issued $850 million of 10-year notes with a fixed 8.5%

coupon. We will first repay the intra-company loan and use

the balance of the funds for general corporate purposes.

The other outstanding debt obligations on this chart are

all yen-denominated issues. Since October 2000, we have

issued five series of Samurai notes, the first three of which

were paid off from 2005 through 2007. Samurai bonds are

yen-denominated securities issued by non-Japanese

companies in Japan. Our most recent Samurai bond

issuance was ¥30 billion of five-year notes that we issued

in June 2007.

Additionally, we have outstanding Uridashi notes, which

are very similar to Samurai notes, except they are issued in

the Euroyen market rather than in Japan’s Samurai market.

In September 2006, we issued three tranches of Uridashi

notes totaling ¥45 billion. One of the tranches has a fiveyear

variable coupon, which we swapped into a fixed rate.

Capital Adequacy Ratios

(In Millions, Except Ratios)

2006 2007 2008

Total adjusted

capital $4,415 $4,464 $4,623

RBC ratios:

Aflac 601% 574% 476%

Aflac New York 228 277 288

Solvency margin 1,078* 937*


*As of March 31 fiscal year end

During the last six months, investors have focused

much more on the capital adequacy of companies within

our sector. The capital levels of our operating units are

influenced by our desire to maintain satisfactory RBC

ratios. The risk-based capital formula applies to Aflac on a

combined basis for Aflac U.S. and Aflac Japan. Because

of Aflac Japan’s branch status, we don’t report separate

RBC ratios for Aflac Japan and Aflac U.S. However, our

ratio is basically a combined ratio of the two operations.

Aflac New York has to meet its own risk-based capital

requirements on a stand-alone basis because it is a

subsidiary of Aflac U.S. Aflac New York’s RBC ratio has

been improving recently due to its strong statutory


Our goal is to maintain a ratio that supports our ratings

and compares favorably to our peers. In the current credit

environment, we also want to maintain a strong RBC ratio

to accommodate potential risks in our investment portfolio.

To emphasize the importance we are placing on achieving

our RBC objective, we added it to our management

compensation plan, both in the annual incentive bonus

program and the vesting requirement for performancebased

restricted stock.

In recent years, Aflac’s RBC ratio has been very strong.

Our RBC ratio declined from its high in 2006 as we

deployed capital in late 2007 and mid-2008 for the

repurchase of our shares. In addition, our 2008 RBC ratio

was negatively affected by $698 million of realized

investment losses. The ratio was also negatively influenced

by the 25% strengthening of the yen in 2008.

The required capital, which is the denominator of the

RBC ratio, is proportionately more sensitive to changes in

the exchange rate than the adjusted capital and surplus

component because a higher percentage of our statutory

capital and surplus is backed by our dollar-denominated

bond portfolio. Therefore, as the yen strengthens to the

dollar, our RBC ratio declines because our required capital

increases at a greater rate than changes to our total

adjusted capital. Had the yen ended 2008 at 115 yen to

the dollar, which was close to the 2007 year-end rate, we

estimate our RBC ratio would have been approximately

561%, instead of 476%.

The dollar-denominated portfolio acts as a hedge of

Aflac Japan’s GAAP equity. We have looked at the costs

of unwinding this hedge as a means of insulating our RBC

ratio against currency swings. However, at an annual cost

of approximately $125 million in reduced investment

income, we do not believe it makes sense to liquidate the

dollar portfolio and reinvest in yen, or to hedge the hedge.

In addition, the yen has weakened by approximately 5%

since the end of 2008, suggesting it is not likely that our

RBC ratio will be significantly and adversely affected this

year due to currency changes.

In addition to U.S regulatory requirements, Aflac Japan

must also meet capital requirements of the Japanese FSA

on a stand-alone basis. Japan’s solvency margin is similar

to the risk-based capital concept. However, Japan’s

solvency margin contains a component for unrealized

gains and losses that the RBC ratio does not. Our

solvency margin in Japan was a solid 881% based on

year-end 2008 data, and I’ll be showing comparisons.

Sensitivity of FSA Solvency Margin Ratio











RBC Ratio Sensitivity to

Yen/Dollar Exchange Rates

(December 31, 2008)


Yield 0.68%




*Based on information as of 12/31/08














This graph illustrates the sensitivity of the solvency

margin to interest rate changes as measured by the yield

of 10-year JGBs. Starting with our December 31 solvency

margin, this graph shows that every 100 basis point

change in yen yields would change our solvency margin by

about 176 percentage points. However, Aflac Japan’s

investment income would obviously benefit by investing at

higher rates.


125 115 105 95 91.03* 85 75

*Actual 2008 period-end exchange rate


Comparison of Solvency Margins

(FSA Basis, 12/08)

Aflac Incorporated Liquidity Analysis

(In Millions)

Solvency Margin

Fukoku 1,262.4%

Meiji Yasuda 1,091.5

Nippon 929.5

Aflac Japan 880.5

Sumitomo 858.1

Taiyo 820.4

Daido 800.6

Alico 792.7

Dai-ichi 756.3

Mitsui 625.1

Asahi 551.6

Source: Press reports and company disclosure statements







Max. dividend to parent $1,679 $1,790 $1,209

Management fees 80 71 91

Allocated expenses 37 38 37

Other income 38 24 20

Less: Oper. expenses (56)



Less: Int. expense (20)



Less: Loan repayment (242)


Less: Shareholder div. (373)



Uncommitted cash flow $1,143 $1,404 $ 154

In the past, our solvency margin has benefited from

sizeable unrealized gains on our yen-denominated, fixedincome

securities. However, as credit spreads widened,

this ratio has declined. Other insurers with larger

concentrations of equity holdings have also experienced

declining solvency margins. As a result, our solvency

margin still ranks fairly high among our peers. In addition to

interest rate changes, our solvency margin is also

impacted by profit repatriation to Aflac U.S. Over the past

five years, for example, we have repatriated profits of ¥247

billion, which would otherwise have increased our solvency

margin by 586.8%.

2009 Estimated Flow of Funds

(In Millions)

Dividend $528

Management fees 65

Allocated expenses 37

Total $630

Aflac U.S.

Profit repatriation $200

Allocated expenses 42

Total $242

Aflac Incorporated

Management fees $26

This chart, which shows the anticipated cash

requirements of Aflac Incorporated, gives you some idea

about the amount of uncommitted cash flow. Although

Nebraska’s statute references the dividend restriction as

the larger of operating income or 10% of the prior year

statutory surplus, the Nebraska Department of Insurance

has interpreted the income test to be the larger of

operating income less realized losses for the prior year on

a statutory basis. Based on that interpretation and our

statutory results in 2008, the maximum we can dividend in

2009 without regulatory approval is approximately $1.2

billion. As you saw from the previous chart, we do not plan

on dividending the maximum amount this year.

In addition to the dividend, management fees and

allocated expenses, Aflac Incorporated also receives cash

from the exercise of stock options along with some

investment income, which is included in the “other” line.

Aflac Incorporated uses these funds to pay operating

expenses, interest expense, principal payments on debt,

and dividends to shareholders. Our 2009 plan calls for an

uncommitted cash flow of roughly $154 million; however,

that plan assumed that we repaid our maturing senior

notes rather than refinancing them.

Projected Statutory Items*

(In Millions)

Aflac Japan

(Branch of Aflac U.S.)

Net Income


Adjusted Capital

This chart shows the estimated flow of funds from our

operating units to the parent company. Our plan calls for

Aflac Japan to send approximately $242 million to Aflac

U.S. in 2009. Of that, we estimate that profit repatriation

will be about $200 million this year. We have elected to

remit a reduced amount of profits this year in order to

maintain and promote a strong solvency margin. Aflac

Japan will also remit $42 million for allocated expenses to

Aflac U.S. and another $26 million of management fees

directly to Aflac Incorporated. Aflac U.S. will send $630

million to the parent company this year, which includes

dividends, management fees and allocated expenses.

2006 $1,715 $4,415

2007 1,790 4,464

2008 1,209 4,623

2009 est. 1,850 5,800

*2009 estimates assume 2008 year-end exchange rate of 91.03

Our ability to provide liquidity to the parent company is

directly related to our statutory results. We expect another

strong year of capital generation in 2009. Based on our

current outlook for the year we expect to produce 2009

income of approximately $1.9 billion. We also estimate our

total adjusted capital will be approximately $5.8 billion this



Estimated “Excess” Capital Position

(In Millions)



of 400%



of 350%

2008 $ 742 $1,200

2009* 1,800 2,300

*2009 estimates assume: no share repurchase; no impairment charges;

and the 2008 year-end exchange rate of 91.03

Under these assumptions, we estimate that our excess

capital position will improve from its year-end level to a

range of $1.8 to $2.3 billion at the end of this year. I put

excess in quotes, because quite frankly, it’s very difficult

for me to consider any capital as excess in the traditional

sense of the word. In the past, investors have referred to

excess capital as funds available for shareholder activities

such as share repurchase and cash dividends. Today, the

concept of excess capital is much more defensive in

nature and relates to our ability to absorb potential realized

losses in our investment portfolio. In that regard, we

currently have a much stronger bias toward conserving

capital rather than deploying it.

component, premium income, has benefited from a

predictable and stable source of renewal revenues. In fact,

we estimate that 90% of Aflac Japan’s premium income

will be derived from renewal premiums this year, with the

balance coming from new sales.

As you can see, total revenues have steadily increased,

although the rate of growth has declined somewhat. One

of the primary reasons for the slowing of revenue growth

stems from lower new sales. In addition, the yen can

influence the rate of investment income growth as reported

in yen, as it did in 2008 and so far this year. Because

dollar-denominated investment income accounts for about

35% of Aflac Japan’s total investment income, when the

yen strengthens to the dollar, the growth rates of

investment income, revenues and earnings are suppressed

in yen terms. Of course, the opposite occurs when the yen

weakens. However, there is no impact on a consolidated

basis as reported in dollars.




Aflac Japan Operating Ratios

(To Total Revenues)

66.2 65.4





Now let me turn to our income statement and our

segments’ contributions to Aflac’s consolidated financial


Segment Contributions to Operating Earnings

(In Millions)








19.3 18.8 19.4

14.5 15.8 16.8

19.8 19.6 19.5


18.0 19.0

2007 2008 3/08 3/09

Aflac Japan $1,821 $2,250 $554 $681

Aflac Japan remains the primary contributor to our

overall operations. In the first quarter of 2009, Aflac Japan

represented approximately 77% of pretax insurance










% Inc.

Aflac Japan Total Revenues

(Yen in Billions)


¥1,146.1 ¥1,218.8 ¥1,279.0


2004 2005 2006 2007 2008 3/08 3/09

6.0 6.6 6.3

As you know, the main components of total revenues

are premium income and investment income. The largest








2004 2005 2006 2007 2008

Ben. & claims Expenses Pretax earnings

Over time, our operating ratios have remained quite

stable. The benefit ratio to total revenues peaked in 1996

at 73.4%, and has trended downward ever since. One

major factor behind this decrease in our benefit ratio in

recent years has been the steady change in our business

mix. As a result of product broadening, the mix of our inforce

business has changed significantly. For instance, in

1992 cancer life accounted for 94.1% of premiums in

force. At the end of the first quarter, cancer life premiums

in force represented 51.3% of total premiums in force. The

greatest contributors to in-force business in the last five

years have been products with lower benefit ratios, such

as riders to our cancer products and our medical product

category. This change in mix is significant because the

benefit ratios vary quite a bit by product.

Expected Benefit Ratios by Product

Traditional cancer life – full CSV 68% - 73%

Cancer life – reduced CSV 63% - 68%

21st Century Cancer life – full CSV 55% - 60%

21st Century Cancer life – reduced CSV 50% - 55%

Cancer Forte – full CSV 55% - 60%

Cancer Forte – reduced CSV 48% - 53%

Riders to cancer and medical 40% - 55%

Ordinary life products 60% - 75%

EVER 50% - 57%

3/08 3/09


Our traditional cancer life product that we were selling

through the 1990s had a full cash surrender value, or CSV,

and a benefit ratio in the area of 68% to 73%. To offset

some of the effect of the 1999 rate increase on newly

issued cancer life policies caused by a lower assumed

interest rate, we elected to reduce the cash surrender

value. This product modification was well-received by

consumers looking to maximize their premium value.

Reducing the CSV brought down both the premium and

the benefit ratio as well. Currently, our cancer insurance

products have benefit ratios that range from 48% to 60%.

The benefit ratios of our medical products are 50% to

57%, and the riders to our cancer and medical products

range from 40% to 55%.

Overall, the addition to our in-force premiums from

medical products, cancer policies with reduced cash

surrender values and several riders has de-emphasized the

impact of death benefits in the mix of benefits. Although

life insurance sales have increased over the last several

years, we still expect the benefit mix to continue to trend

toward health and medical benefits. In addition, we have

seen favorable claims experience for most of our major

product lines. This has also positively impacted the range

of our expected benefit ratios. As Japan’s national health

care system continues to be under severe pressure to

reduce costs through such means as shorter hospital

stays, we expect that favorable claim trend to continue.

Total annual operating expenses as a percentage of

revenues have remained in a narrow range for the last five

years. Aflac Japan’s low expense ratio reflects efficient

operations, lower net-commission expense, and a strong

and fairly stable persistency rate. The higher expense

ratios in the last two years primarily reflect investments in

establishing the foundation for the new bank channel and

our IT infrastructure. We believe the investments we made

to support the bank channel will be instrumental in

maximizing our potential in this new and vast distribution

opportunity. Additionally, we believe our recent

investments in the IT infrastructure will improve our

ongoing business operations and further accelerate new

product introductions for years to come.

Although low interest rates and profit repatriation

suppress our margins, this has been more than offset by

the improvement in the benefit ratio, which has significantly

enhanced the overall profit margin in recent years.

Aflac Japan Pretax Operating Earnings

(Yen in Billions)









With the expanded profit margin, pretax earnings

increased 9.3% to ¥63.6 billion in the first quarter of 2009.

Excluding the impact of the stronger yen on Aflac Japan’s

dollar-denominated income and expenses, pretax

operating earnings were up 11.2% in the quarter.

Segment Contributions to

Operating Earnings

(In Millions)

Our other reportable segment, Aflac U.S., accounted for

the remaining 23% of pretax insurance earnings in the first







% Inc.



Aflac U.S. Total Revenues

(In Millions)






2004 2005 2006 2007 2008 3/08 3/09

12.6 10.0 9.5 10.4 7.7 8.4 4.7


After returning to double-digit growth in 2007, Aflac

U.S. revenue growth slowed in 2008, and into the first

quarter of 2009. The growth rate in total revenues is largely

driven by the growth rate in premium income, which has

also slowed in recent years. The slowdown in premium

income has resulted from weaker new sales over the last

five quarters, as well as lower renewal rates. As we have

discussed, we believe the rates of sales growth and the

lower persistency rate over the last several quarters are

directly tied to the weaker economy.

In addition, investment income growth has slowed since

2007. The slower growth of net investment income

resulted from the transfer of capital to the parent company.

As we have discussed, we are also paying out return-ofpremium

benefits on a major cancer insurance plan we

sold in the mid 1980s. We have reserved for these payouts

and estimate they will be approximately $365 million over

the next four years.










2008 3/08 3/09

% Inc. 14.7




8.4 4.8 9.3











Aflac U.S. Operating Ratios

(To Total Revenues)

Over a long period of time, the operating ratios of Aflac

U.S. have consistently been very stable. However, in the

first quarter of this year, the benefit and expense ratios

were influenced by the decline in U.S. persistency. As a

result of increased lapsation, the benefit ratio declined

sharply, reflecting the release of the benefit reserves

associated with the lapsed policies. The expense ratio was

also higher due to the increased amortization of deferred

acquisition costs, or DAC, for the lapsed policies.

However, the net impact of the reserve release and DAC

amortization was a modest benefit to the bottom line in the










% Inc.

Aflac U.S. Pretax Operating Earnings

(In Millions)


54.2 53.9 52.9

31.5 31.6 31.5











2004 2005 2006 2007 2008

Ben. & claims Expenses Pretax earnings







2004 2005 2006 2007 2008 3/08 3/09

11.7 5.6 11.4 18.3 7.6 12.6 7.2





3/08 3/09

Based upon our operating trends and margins, we

expect pretax operating earnings and revenues to grow at

a fairly parallel rate. Although Aflac Japan is the dominant

component of our total company results, Aflac U.S. still

remains a significant and important contributor to our


Segment Contributions to Operating Earnings

(In Millions)

The increase in interest expense in 2008 was due to the

effect of the stronger yen on our yen-denominated debt.

Parent company and other unallocated expenses were

higher in 2008 primarily because of a decline in parent

company investment income that was netted against

corporate operating expenses. Our consolidated tax rate

has been very stable over the last several years.






Yen impact

Operating Earnings Per Share

(Diluted Basis)

At the bottom of this chart, you’ll see the per-share

impact from the changes in average yen/dollar exchange

rates for last five years. Over the long run, the impact from

currency fluctuations tends to be smoothed. In 2008 our

results benefited significantly from the strengthening of the

yen on a per-share basis. Our sensitivity to currency

changes on a per-share basis increased last year due to a

greater portion of our consolidated earnings being derived

from yen-denominated sources and the effects of share


Reconciliation of Operating to

Net Earnings Per Diluted Share

2007 2008 3/08 3/09

Operating earnings $3.27 $3.99 $.98 $1.22

Reconciling items*:

Inv. gains (losses) .04 (1.37) (.01) (.01)

SFAS 133 .01 (.01)

Debt extinguishment .02

Net earnings $3.31 $2.62 $.98 $1.22

*Net of tax

EPS ex. Yen

Reported EPS


2004 2005

$.08 (.02)

% inc. ex. ¥ 16.8 14.8


















In addition to net earnings, we believe that an analysis

of operating earnings, a non-GAAP financial measure, is

vitally important to an understanding of Aflac’s underlying

profitability drivers. We define operating earnings as the

profits we derive from our operations before realized

investment gains and losses, the change in the fair value of

the interest rate component of cross-currency swaps as

required by SFAS 133, and nonrecurring items.

We use operating earnings to evaluate our financial

performance because realized gains and losses, the

impact from SFAS 133, and nonrecurring items tend to be

driven by general economic conditions and events, and

therefore can obscure the underlying fundamentals and

trends in Aflac’s insurance operations.


However, in the current environment we are also wellaware

of the focus on net earnings as a means for growing

shareholders’ equity. In 2008, we realized significant

investment losses. Those losses were primarily attributable

to the sale of our Lehman Bros. holdings, in addition to

impairments of Ford Motor Co., our holdings in three

Icelandic banks and several collateralized debt obligations

(CDOs). In the first quarter of this year, we realized aftertax

investment gains of $146 million for federal tax

purposes to offset previously incurred investment losses.

Offsetting those gains were $152 million of realized

investment losses, which were primarily attributable to

impairments on certain CDOs, two corporate securities

and perpetual securities of two issuers. We also

repurchased some of our outstanding yen-denominated

debt in the first quarter of this year. We purchased ¥5.4

billion of bonds at a price of ¥3.86 billion, or about 71% of

par. The extinguishment of this debt resulted in a $10

million gain in the quarter, or $.02 per diluted share.

EPS Growth Objectives

modeling assumes that our persistency declines slightly in

2009 due in part to a significant number of cancer

policyholders reaching the primary retirement ages where

termination rates are highest. Additionally, in 2010, we

assume our persistency will remain fairly stable, compared

with 2009. As we have discussed for many years, we

expect continued improvement in the benefit ratio due to

the ongoing change in business mix and improving claims

trends. We believe the benefit ratio will improve by roughly

150 to 200 basis points in 2009 and another 125 to 175

basis points in 2010. Our general expectation is that the

expense ratio will remain relatively stable.

Aflac U.S. Assumptions

2009 2010

Sales growth 0% to 5% 0% to 5%

New money 5.50% to 6.00% 5.50% to 6.00%

Benefit ratio down 1.0% to 2.0% down .5% to 1.5%

Persistency down stable

• Increase operating earnings per diluted share 13% to

15% in 2009, excluding the impact of foreign currency

• Increase operating earnings per diluted share 9% to

12% in 2010, excluding the impact of foreign currency

Taking all of this into account, we continue to focus on

maintaining strong fundamentals in our core businesses

and building on our record of strong earnings growth. Our

goal for 2009 is to increase operating earnings per share

13% to 15%, excluding the yen. As we have discussed, it

is unlikely we will repurchase shares in 2009 given the

distressed nature of financial markets, even though we find

the current valuation very attractive. With no share

repurchases, we would expect earnings growth to be at

the low end of the 13% to 15% range this year. Our

objective for 2010 is to increase operating earnings per

share 9% to 12%, excluding the impact of the yen. We

believe these targets represent realistic underlying financial

assumptions. I want to remind you, that the data I will

show you represent modeling assumptions and not

necessarily our official operating objectives.

Aflac Japan Assumptions

For Aflac U.S., just like for Aflac Japan, we are

assuming sales will be flat to up 5% this year. Again, that

number happens to be in line with our official sales target

for this year. Like Japan, it is too soon to set a 2010 sales

target; however, we have assumed sales are again flat to

up 5% for modeling purposes. In terms of new money

yields, we have assumed we will invest in the 5.50% to

6.00% range. We anticipate the benefit ratio will be 100 to

200 basis points better in 2009, compared with last year,

which is influenced by our persistency assumption. In

2010, we expect the benefit ratio to be 50 to 150 basis

points better than 2009. We’re assuming that persistency

will decline in 2009 and stabilize in 2010. We did see

stabilized U.S. persistency at the end of April, compared

with the first quarter of 2009. Overall, we expect to see

some margin expansion at Aflac U.S. this year and next.

Corporate Assumptions

2009 2010

Share repurchase none 0 to 12 million

Cash dividend $.28 quarterly up 0% to 10%

Capital structure unchanged unchanged

Tax rate unchanged unchanged

2009 2010

Sales growth 0% to 5% 0% to 5%

New money 2.75% to 3.00% 2.75% to 3.00%

Benefit ratio down 1.5% to 2.0% down 1.25% to 1.75%

Persistency down slightly stable

For Japan, our assumption is that sales will be flat to up

5%, which is in line with our incentive compensation

target. We are assuming the same range for 2010. Our

assumption for new money yields is a range of 2.75% to

3.00%, which we believe is conservative. Our financial

I already mentioned that we are assuming no share

repurchases in 2009. For 2010 we have assumed no share

repurchases to as many as 12 million shares. We will

continue to closely monitor the financial markets and our

capital position before going forward with purchases next

year. As I previously mentioned, our current bias is to

retain capital due to the uncertain environment. If we see

clarity and then improvement in the environment, we will

consider resuming repurchases to enhance our per-share


Historically, it has been our policy to increase cash

dividends generally in line with operating earnings per


diluted share before the effect of foreign currency. Overall,

that view has basically not changed. We expect no change

in our quarterly cash dividend this year, which is 16.7%

higher than last year’s dividend. We have assumed a 0%

to 10% increase in the cash dividend for next year.

However, like share repurchases, we believe it is prudent

to avoid committing to a dividend increase next year until

we have a better feel for the economic outlook and our

capital position based on our RBC ratio.

In addition, we are also assuming no significant change

to our capital structure. As I previously stated, we view a

25% debt-to-capital ratio as a ceiling, and we are

assuming we will not raise additional equity capital. We

also have assumed the 2008 tax rates will remain in effect

through 2010. All of these assumptions reflect our best

estimates of factors that can impact future results. We

believe they are reasonable, if not conservative. But I want

to remind you again that there are risks that can affect our

future financial performance. We regularly assess those

risks and describe them in our SEC filings, and I’d

encourage you to review them as well.

2009 Operating EPS Scenarios

The highlighted line on this chart represents our

earnings target for 2009 of a 13% to 15% increase over

2008. Assuming we produce earnings growth at the low

end of the range this year, we would expect to report

$4.51 in operating earnings per diluted share this year

before the effect of the yen. Although the yen has

weakened since the end of the year, the average so far

this year is still stronger than 2008’s average exchange

rate of 103.46. If we achieve the low end of the objective

and the yen averages 100 for the full year, reported

operating EPS should come in around $4.59. We estimate

that a one yen change in the average exchange rate

should impact EPS by about 2.5 cents per share this year.

I hope that the discussion of Aflac’s operations in Japan

and the United States has provided you with a solid

understanding about how we approach our business. I

also hope you have a strong sense about our commitment

to thorough and transparent disclosure. We believe it’s

important to present information to investors in the same

manner in which we actually manage our operations. And I

want to assure you that as we always have, we will

maintain the highest degree of integrity in the way we

manage Aflac and report its financial results.







% Growth

Over 2008



85 $5.04 – 5.12 26.3 – 28.3% $.53

90 4.87 – 4.96 22.1 – 24.3 .37

95 4.73 – 4.81 18.5 – 20.6 .22

100 4.59 – 4.68 15.0 – 17.3 .09

103.46* 4.51 – 4.59 13.0 – 15.0

105 4.47 – 4.55 12.0 – 14.0 (.04)

110 4.37 – 4.44 9.5 – 11.3 (.15)

*Actual 2008 exchange rate


W. Jeremy “Jerry” Jeffery

Senior Vice President; Chief Investment Officer

Markets are never in perfect equilibrium. We have

moved from the “irrational exuberance” of the Greenspan

era, where risk tolerance was virtually infinite, to the

specter of a global financial crisis this year, where risk

avoidance has carried the day. Aflac has not been immune

to the dramatic revaluations of global credit markets, and

as a result, we have examined our investing discipline

more rigorously than ever. But the principles that guide our

investment decisions have not changed.

Investment Considerations

• Aflac investment policy

• Product needs - Japan

» Long liability durations

» Yen-denominated policy liabilities

• Product needs - U.S.

» Shorter liability durations

• Credit risk

• Aflac Incorporated objectives

As we have discussed for many years, product needs

still drive our investment process. Our high persistency

rate in Japan causes long liability durations. We support

these liabilities by purchasing long-duration, yendenominated

assets. Since the Japanese credit market

has virtually no sponsorship beyond ten years, we have

developed our own strategy of long-dated investing that is

unique among Japanese life insurers. Our U.S. policy

liabilities have far shorter durations, but they have no cash

values if they lapse. So our business model tends to

insulate us from any sudden liquidity needs. We invest for

the long term, and our strong liquidity position gives us the

ability to continue to invest that way.

Intensive credit analysis is the core of our investment

discipline. Every investment we make receives a thorough

credit review prior to approval. Our global investment

policy, established by Aflac’s Board of Directors, governs

every investment decision we make. This policy prohibits

transactions deemed “speculative in nature.” Therefore, we


do not purchase securities rated below investment grade,

even if our regulations permit such purchases. Inasmuch

as net investment income is a primary driver of our

consolidated earnings performance, our specific

investment activities are formulated while considering

Aflac’s corporate objectives.

Aflac’s Investment Portfolios

(March 31, 2009, In Millions)

Book Value

% of Total

Aflac Japan - yen $54,800 84.0%

Aflac U.S. 6,579 10.1

Aflac Japan - dollar 3,507 5.3

Aflac New York 242 .4

Aflac Incorporated 111 .2

Total $65,239 100.0%

significant additions to the dollar-denominated portfolio for

the past several years.

The Aflac New York portfolio is for the book of business

of our New York subsidiary. The investment guidelines are

different for this portfolio than those of the general Aflac

U.S. account, and as a result, the assets of the New York

account are invested differently. As you can see from the

graph, the New York portfolio had $242 million of invested

assets at the end of March. The average rating was ‘A’,

and the yield to worst was 6.65% at the end of the first

quarter of this year. The average maturity was 21.8 years.

We also maintain a small portfolio at the holding

company level. The primary purpose of this portfolio is to

temporarily hold capital until it is deployed for other

corporate purposes.

As this table shows, we have five separate investment

portfolios, each of which has a specific purpose. Although

our overall management style is consistent throughout

portfolios, we manage each portfolio separately based on

cash flows, product and regulatory requirements and

objectives. Our Global Investment Policy governs all

transactions in both the United States and Japan.

Clearly our largest portfolio is the yen-denominated

portfolio that supports Aflac Japan’s policy liabilities. Given

Aflac Japan’s persistent business and our pursuit of

asset/liability matching, the yen portfolio is marked by longdated

instruments. The average maturity of this portfolio is

17.3 years and the average duration is 11.7 years. As I

suggested, Japan does not have a long-dated corporate

bond market. As such, approximately 77% of our yendenominated

investments are from non-Japanese issuers,

predominantly Euroyen issuers. As you know, many of

these non-Japanese issuers have privately issued yendenominated

securities to Aflac Japan. A high percentage

of our privately issued securities employ standard mediumterm

note documentation and are completely fungible into

smaller denominations should the need arise.

The Aflac U.S. portfolio supports the policy liabilities for

our U.S. insurance operation, excluding our New York

subsidiary. We continue to invest primarily in corporate

bonds to achieve our U.S. investment objectives.

Corporate bonds represented 87.3% of the portfolio at the

end of the first quarter. The average rating on this portfolio

was ‘A’ at the end of March. Given the different policy

characteristics of our U.S. business, our duration is shorter

than Aflac Japan’s yen portfolio. At the end of March, the

duration of the U.S. portfolio was eight and the maturity

was 17.4 years.

For more than 20 years, Aflac Japan has maintained a

portfolio of dollar-denominated investments. The rationale

behind this portfolio was to take advantage of more

attractive yields and for many years, lower tax rates. In

addition, by investing a portion of Aflac Japan’s equity in

dollars, we have helped mitigate the currency impact on

Aflac’s consolidated GAAP equity. At the end of March,

Aflac Japan’s dollar-denominated portfolio represented

5.3% of our consolidated investments, yet it accounted for

9.0% of total net investment income. Because we have

also hedged a portion of shareholders’ equity through the

issuance of yen-denominated debt, we have not made


Consolidated Portfolio Composition

(March 31, 2009, In Millions)

Book Value

% of Total

Debt securities:

Fixed maturity securities $54,835 84.1%

Perpetual securities 8,371 12.8

RMBS 1,032 1.6

CMBS 132 .2

Asset backed 100 .2

CDOs 747 1.1

Equity securities 22

Total $65,239 100.0%

Let me comment on the overall structure of our

portfolio. As you can see, our portfolio is dominated by

fixed maturity securities, followed by perpetual securities.

Our exposures to collateralized mortgage obligations and

collateralized debt obligations remain relatively small. We

also have a very small position in equities, which is

primarily for business relationship purposes in Japan.

Ten Largest Investment Positions

(March 31, 2009, In Millions)

Book Value % of Total

Government of Japan $9,410 14.4%

Israel Electric Corp. 841 1.3

Lloyds Banking Group* 817 1.3

Republic of Tunisia 815 1.3

HSBC Holdings PLC 799 1.2

Republic of South Africa 625 1.0

Commerzbank AG** 603 .9

Takefuji Corp. 577 .9

Bank of America*** 555 .9

Kingdom of Belgium**** 543 .8

*Includes HBOS & Bank of Scotland

**Includes Dresdner

***Includes Merrill Lynch

****Includes Fortis

Within the fixed maturity category we have several large

positions. Our largest holding remains Japanese

government bonds, or JGBs, which accounted for 14.4%

of investments at the end of March. As a part of our

routine credit work, we have frequent contact with the

management of our credit exposures, especially our larger

concentrations. We pay particular attention to these larger

concentrations and remain comfortable with the

creditworthiness of all of them.

I’d like to share a few other observations about our

concentrations. It is worth noting that our largest exposure

by far is to the Government of Japan through their

government bond issuance. To put this in perspective, our

exposure to JGBs is four times higher than the average

exposure of U.S. life companies to U.S. Treasuries as a

percentage of admitted assets. Both our Lloyds Banking

Group and Commerzbank AG exposures reached their

current size as the result of large bank mergers. The senior

debt ratings of both are single A; however 34% of our

Commerzbank exposure and all of our Lloyds exposure

are rated below investment grade due to the subordinated

status of our holdings. All of our top ten holdings are

current on all obligations to Aflac. With the exception of

mergers, we have not added to these concentrations

except for JGBs. We remain committed to a strategy of

diversification. As a result we do not add to any exposure

or establish a new position when it would exceed 5% of

total adjusted capital on a statutory basis.

Subordination Distribution

(March 31, 2009, In Millions)

Senior $48,120 73.8%


Book Value

Lower Tier II 7,252 11.1

Upper Tier II* 6,329 9.7

Tier I** 3,040 4.6

Surplus notes 339 .5

Trust preferred (non-bank) 86 .2

Other 51 .1

Equities 22

Total $65,239 100.0%

*Includes $6,054 million of perpetual Upper Tier II securities

**Includes $2,317 million of perpetual Tier I securities

I thought it would be helpful to provide a detailed

description of the capital classes of our investments. As

you can see, senior debt comprises the majority of our

debt exposure, and that remains our bias for portfolio

additions. Since the end of 2007, senior debt has

increased from 70.6% of total investments to 73.8% at the

end of March. The Lower Tier II securities are all fixed

maturity securities that are ranked higher than everything

but senior debt. Within the Upper Tier II and Tier I areas,

the majority of our holdings are perpetual securities.

Perpetual Security Holdings

(March 31, 2009, In Millions)





% of Total




Upper Tier II $6,053 $4,888 $(1,165)

Tier I 2,318 1,321 (997)

Total $8,371 $6,209 $(2,162)

Clearly the perpetual portion of our portfolio is the

sector that has attracted the most scrutiny and comment.

As you know, these securities do not have stated

maturities. Instead, they have an interest rate step-up

provision and a strong market expectation that they will be

redeemed at their step-up dates, thereby creating an

economic maturity. Of our total perpetual holdings, 96%

are yen-denominated and the average economic maturity

is 14 years. The average coupon on the perpetuals is

4.32%. Among our holdings, 72.3% were Upper Tier II

securities, which are senior to equity and preferred shares.

The coupons for all of our Upper Tier II holdings are

deferrable and cumulative. As we discussed on our first

quarter conference call, we did have one issuer of a fixed

maturity Upper Tier II defer its coupon this year. However,

at the end of the first quarter, all of our perpetual holdings

were current on interest with the exception of the Icelandic

banks we wrote off in the fourth quarter.

Our primary investment premise when purchasing

securities of banks and other financials was that

governments would take extraordinary efforts to support

the financial institutions that underpin their respective

economies. To date, I believe the behavior of bank

regulators worldwide has supported our premise. I’ll

address impairments in this area.

Residential Mortgage-Backed Securities

(March 31, 2009, In Millions)



Agency $ 643 $648 AAA

Non-agency 389 249 AA

Total $1,032 $897

Our residential mortgage backed securities in Japan are

almost entirely invested in securities issued by government

sponsored entities, which are rated ‘AAA’. In the dollardenominated

portfolios our RMBS exposures consist of

both agency and non-agency CMOs. Our non-agency

CMOs have an average loan-to-value ratio of 68.4 and an

average FICO score of 742. We are constantly performing

extensive loss analysis on every holding, and we have

impaired any holding where we anticipate any material

principal loss anytime during the expected life of the CMO.

At the end of the first quarter, this amounted to $4 million

of after-tax impairments on a total exposure of $1.0 billion.

Commercial Mortgage-Backed and

Asset-Backed Securities

(March 31, 2009, In Millions)










CMBS $132 $102 AA

Asset backed 100 98 A

Asset-backed securities make up an immaterial part of

our dollar holdings. Aflac Japan’s dollar-denominated

portfolio has a small exposure to this class, and all are

investment grade rated. Our U.S. commercial mortgage

backed securities, or CMBS, exposure totaled $132

million, $105 million of which were rated ‘AAA’ at the end


of March. All benefit from substantial subordination and

pass our most severe stress tests with comfortable

subordination cushions. At the end of the first quarter, we

had no exposure to Japanese CMBS.

Collateralized Debt Obligations

(March 31, 2009, In Millions)






CDOs $747 $530 BBB

Although our exposure is relatively small, CDOs are

another area of increased investor attention. These

instruments were all rated AA or higher at the time of

purchase, although some are now rated below investment

grade. The pricing on this asset class has been severely

distressed since last fall. While we have aggressively

impaired some CDOs, it is worth noting that all were

meeting their obligations in full as of March 31, 2009. All of

our CDOs could withstand a minimum of four defaults

among the reference entities before they would experience

any loss of principal. And for most of our CDOs, the

number of defaults would be much higher before

experiencing a loss. We are not making any additions to

our CDO holdings.

Investment Pricing Methods*

(March 31, 2009, In Millions)

Level 1 Level 2 Level 3 Total

Fixed maturities $8,767 $19,918 $2,654 $31,339

Perpetual securities 5,573 636 6,209

Equities 15 10 25

Total $8,782 $24,491 $3,300 $37,573

*Applies to available-for-sale securities only

We spend a great deal of time refining the precision of

our portfolio pricing, as today’s market conditions make

proper valuations more challenging than ever. Let me

briefly walk you through our process. The Financial

Accounting Standards Board (FASB) has directed that we

classify our pricing in three levels for those assets

classified as available-for-sale. Level 1 pricing

encompasses the most readily observable quoted prices in

active markets for our holdings or identical securities. This

would include our holdings of JGBs and U.S. Treasuries.

This amounts to approximately 23% of our available-forsale


Level 2 pricing employs quoted prices for assets similar

to ours, or inputs derived from observable market data. In

our case this includes pricing feeds from our custodian

bank, specific single name quotes from participant dealers,

and model pricing of our single name holdings. Our pricing

feeds are used primarily to evaluate our public U.S.

corporate bond holdings, while our model pricing is used

to evaluate most of our investment grade yendenominated

privately issued holdings. Our model pricing

derives its inputs from dealers who generate spread

information based on rating, maturity, and specific level of

subordination. Level 2 pricing is used for 68% of our

consolidated AFS holdings.

Level 3 pricing uses what the accounting profession

describes as “unobservable inputs” to value securities.

Unobservable inputs mean that there are few if any

observable transactions for a security or security class. In

such a case we are directed to use the best information

available to derive reasonable assumptions about the value

of our holdings. We use Level 3 pricing for our CDO

holdings, for example, since there is little or no activity in

the sector at other than liquidation levels. In this case we

employ an outside evaluation firm to provide pricing. We

also designate all our below investment grade valuations as

Level 3, along with all our callable RDC securities. Level 3

values are used for 9% of our consolidated available-forsale

(AFS) holdings.

Unrealized Gains and Losses

(In Millions)

Available for sale:

Gains $ 1,482 $ 2,049 $ 1,113

Losses (3,069)



Held to maturity:

9/30/08 12/31/08 3/31/09

Total AFS $(1,587 ) $(2,046 ) $(4,789)

Gains $ 187 $ 571 $ 219

Losses (1,981)



Total HTM $(1,794 ) $(1,352 ) $(2,210)

The unrealized losses in our portfolio have increased

significantly since the financial crisis emerged last fall.

Although we have not been immune to credit downgrades,

the primary reason for the unrealized loss has been the

global widening of credit spreads. The impact of this

widening is magnified for Aflac due to the very long

duration nature of our invested assets. However, because

we have the ability and intent to hold securities to maturity,

we would not expect to realize these losses unless our

credit analysis concludes the issuer will not be able to

meet its obligations for interest and principal payments.

Split-Rated Securities

(March 31, 2009, In Millions)


of Issues





Investment grade 23 $2,614 $1,985

Below investment grade 9 1,588 874

Total 32 $4,202 $2,859

Now I’d like to discuss our view on split-rated securities.

We classify split-rated securities as investment grade or

below investment grade on a case-by-case basis. When

determining the appropriate classification, we first look to

the rating assigned by the majority of the various rating

agencies. For example, if two of three agencies have an

issue rated as below investment grade, we automatically

put it in that category. However, we also give

consideration to the NAIC rating, along with other factors,

such as a watch list for upgrade or downgrade by one of

the major rating agencies. At the end of March 2009, Aflac

had $4.2 billion of split-rated securities, which represented

6.8% of Aflac’s total investments and cash.


Largest Split-Rated Holdings

(March 31, 2009)

Book Value

This chart shows our ten largest split-rated holdings,

which represented 90% of our total split-rated holdings on

a book value basis at the end of the first quarter. The

recent increase in split-rated securities for Aflac has

primarily arisen from our holdings of perpetual securities.

As you can see, seven of our ten largest split-rated

positions at the end of March were perpetual securities.

Credit Ratings*


Lloyds Banking Group* $817 BIG

Fortis* 509 IG

Dexia Bank Belgium* 458 IG

Irish Life and Permanent* 377 IG

Signum (Ahold) 326 IG

Upm-Kymmene 316 BIG

Swedbank* 279 IG

SEB AB* 255 IG

Royal Bank of Scotland* 227 BIG

Dresdner Funding Trust 4 & 1 208 BIG

*Perpetual security

The increase in our below-investment-grade holdings

since year-end 2008 was primarily attributable to the

downgrades of Lloyds, Upm-Kymmene, Royal Bank of

Scotland, Hella and Dresdner Funding Bank. Combined,

those issuers represented 2.8% of total debt and perpetual

securities at amortized cost. Among all below-investmentgrade

holdings at the end of March, 55.9% were corporate

securities, 35.8% were perpetuals, 8.2% were CDOs, and

.1% were CMOs.

Designating a security as below investment grade does

not mean we immediately impair the security and write off

the difference between fair value and carrying value. We

first reference independent pricing sources to assess the

value of the security. If the fair value is below our amortized

cost, our analysis focuses on whether the decline is other

than temporary. Let’s review the Aflac impairment policies

that guide our decisions.

Aflac’s Debt Impairment Policy

• Recoverability of principal and interest

• Percentage decline in value and length of time during

which decline has occurred

• Market conditions

• Ability and intent to hold investment

• Pattern of continuing operating losses of issuer

• Rating agency actions

• Adverse changes in production or revenue sources, or

technological conditions

• Adverse changes in issuer’s economic, regulatory or

political environment

Credit quality remains a primary focus of our investment

approach. At the end of March, 2009, 76.7% of our

holdings were rated ‘A’ or better. Of our ‘BBB’ rated

securities, 18.3% were rated ‘BBB+’ or ‘BBB’ compared

with 17.5% a year earlier. If a security we hold is

downgraded to below investment grade, we immediately

classify that security as available for sale if it is not already

so classified. The unrealized gain or loss on the security

then becomes reflected in shareholders’ equity. As you

can see, our below-investment-grade exposure rose from

1.8% at the end of the year to 5.0% at the end of the first

quarter of this year. Let me cover some of the

reclassifications that caused that increase.

Largest Below-Investment-Grade Holdings

(March 31, 2009, In Millions)

When considering whether or not to impair any debt

security we start with a very straightforward question: will

the issuer pay their principal and interest under the stated

terms? We then apply a far more detailed analysis, as you

can see. This impairment policy applies to our debt

investments on a GAAP and statutory basis. We believe

the recent changes to SFAS 115 support the notion of

taking a longer view on the recovery of the fair value of an

investment, which is consistent with the long-duration

nature of our business. As such, just because a debt

security is in an unrealized loss position, it does not

automatically mean that an impairment charge is

warranted. Although price is a consideration in our

analysis, it is by no means the primary determinant of the

timing of a debt impairment. As you are probably aware,

the evaluation of perpetual securities for possible

impairment is much different based on current accounting


Aflac’s Equity Impairment Policy

Percentage Decline From Cost

Consecutive Months in Decline

10% 12

20 9

35 6

The appropriate impairment approach is under review

by the accounting profession because of the hybrid nature

of perpetual securities. I would point out that we continue


to view the perpetual securities we own as more debt-like

than equity like. They are rated like debt, priced like debt,

and pay coupons like debt. Furthermore, we have no

ownership interest and Upper Tier II and Tier I perpetual

securities are senior to common equity. However, because

they have no contractual maturity, they are classified as

equities for GAAP purposes. For statutory accounting

purposes, these securities are considered debt


On October 14, 2008, the Securities and Exchange

Commission (SEC) issued a letter to the Financial

Accounting Standards Board (FASB) on the topic of

perpetual securities. The SEC’s letter noted that due to

their debt characteristics, perpetuals could be evaluated

using a debt impairment model until the FASB further

addresses whether a debt or equity impairment approach

is most appropriate. Because the FASB has yet to act on

this issue, we continue to follow the guidance in the SEC’s

letter. As a result, we are evaluating our holdings of

perpetual securities using a debt impairment method

unless a security is downgraded to below investment

grade. At that time, SEC guidance requires us to use an

equity impairment method.

As you can see, the equity impairment model is based

on an aging schedule of unrealized losses. Following a

downgrade to below investment grade, we will apply this

model for GAAP purposes regardless of our credit analysis

of the issuer’s ability to meet its contractual obligations.

After-tax Realized Investment Gains/Losses

(March 31, 2009, In Millions)

Gains $ 146 $ 224



Debt model impairments (110 ) (166 )

Equity model impairments (42 )

Total realized gain (loss) $ (152 ) $ 58

Gains transferred to IMR 224

Net realized loss $ (6 ) $ (166)

In the first quarter of 2009, we generated $146 million of

after-tax gains to offset the losses on a tax basis we had

incurred through the sale of our Lehman Brothers holdings

in 2008. It’s important to note that the gains on a statutory

basis do not have an immediate benefit to our results.

Instead, these gains are amortized over the remaining life

of the securities that were sold.

Our debt impairment losses in the first quarter totaled

$110 million on a GAAP basis. Of that total, $74 million

were the result of CDO impairments, $32 million resulted

from the impairment of the corporate bonds of two issuers:

Security Benefit Life and Ford Motor Co. and $4 million

came from CMOs. In addition, on a GAAP-only basis we

recognized $42 million of impairment losses on the

perpetuals of the Lloyds Banking Group and Royal Bank of

Scotland. Again, because we evaluate the perpetuals as

debt instruments for statutory accounting and because our

analysis continues to suggest the issuers will continue to

service their obligations, we did not impair them on a


statutory basis. As we discussed on our first quarter

conference call, assuming March 31 pricing and assuming

no additional perpetuals downgraded to below investment

grade, we would expect to incur $295 million of additional

after-tax impairments under the equity method for the

balance of the year. The majority of these GAAP

impairments would occur in the third quarter.

Now, let me turn to our investment activities, starting

with our investment cash flow.









Investment Cash Flow

(In Millions)


$4,947 $5,050


2004 2005 2006 2007


The vast majority of cash flow to investments is

allocated to Aflac Japan. As we have discussed, cash flow

from Aflac U.S. has been constrained in recent years. In

late 2007 and in 2008, we funded share repurchase

activities with U.S. cash flow. This year the U.S. operation

also loaned $500 million to the parent company to

refinance its maturing senior notes. In addition, we will be

paying anticipated claims for the next few years for a

return-of-premium benefit that was included on the cancer

policy we wrote in the United States during the 1980s. As

a result, our investment activities in the United States are

largely limited to re-investing income and redemptions and

executing bond swaps when market conditions permit.

Our cash flow in 2008 amounted to $5.1 billion. The

primary contributor to cash flow is operations, followed by

investment income and redemptions. Our 2009 cash flow

projection is $4.4 billion, assuming calls and redemptions

take place as scheduled. Because most of our cash flow is

attributable to Aflac Japan, we must invest primarily in

long-dated, yen-denominated debt securities to meet the

characteristics of Aflac Japan’s policy liabilities.

Purchases by Asset Class

Aflac U.S.

Aflac Japan


Fixed maturity securities from single corporate issuers

have dominated our purchases over the past several

quarters. We are not purchasing perpetual securities due

to the uncertain regulatory climate and accounting

uncertainty. In fact, we last purchased perpetuals in 2005.

Our RMBS and CMBS purchases have been infrequent

and typically only the highest credit quality. In these areas,

we continue to look for interesting opportunities.

Additionally, we have not purchased any CDOs during the

last two quarters due to poor liquidity and uncertain credit

conditions. And we do not anticipate adding materially to

our small equity position.

Composition of Purchases by Sector

2007 2008 3/31/09

Banks/financials 32.9% 24.1% .8%

Gov't/gov't guaranteed 21.0 11.9 72.3

Municipalities .4 2.4

Public utilities 7.8 23.6 5.4

CDOs 4.7 6.6

Sovereign/supranational 3.0 12.0

Mortgage/asset-backed 3.8 7.1 .5

Other corporate 26.4 26.7 6.6

Total 100.0% 100.0% 100.0%

Credit Ratings on Purchases


2008 3/31/09

AAA 18.4% 9.9% 7.2%

AA 44.1 36.4 80.1

A 30.2 42.0 10.1

BBB 7.3 11.7 2.6

100.0% 100.0% 100.0%

The credit ratings on our purchases remain high and are

in keeping with our conservative investment philosophy.

There has been a decline in ‘AAA’ purchases primarily

because we have deemphasized CDOs and CMOs, which

comprised most of our ‘AAA’ purchases. Any ‘BBB’

purchases were either through bond swaps in the U.S.

portfolio, or if purchased outright came with robust

covenants. We continue to aggressively seek protective

covenants in any non-bank investments we make.

Net Investment Income

(In Millions)

Aflac Japan

Aflac U.S.

We are committed to diversification when making new

investments. What you see in this chart certainly bears that

out. Our bank purchases have fallen as purchases of

utilities and other corporate names have risen. While we

do feel that the senior debt of many banks offers excellent

value, so too does the debt of many non-financial issuers.

We believe we have a rare opportunity to make long-term

investments in high quality non-financial names that are

seldom offered at such attractive terms. We are also

seeing opportunities in high-quality sovereign and quasisovereign

opportunities. I should note that roughly 30% of

the bank exposure that we purchased in 2008 was

government owned or government sponsored institutions.







$2,171 $2,333

2004 2005 2006 2007


$627 $688


3/08 3/09

Debt Purchases by Subordination

2007 2008 3/31/09

Senior 90.0% 96.0% 100.0%


Lower Tier II 10.0 4.0

Upper Tier II

Tier I

Surplus notes

Trust preferred - non-bank


Total 100.0% 100.0% 100.0%

As you can see, we have not purchased Upper Tier II or

Tier I capital securities of any description since prior to

2007. Lower Tier II securities, while subordinated, do not

have loss absorption features. Therefore, we have

occasionally purchased them when we thought they

offered attractive relative value versus the senior debt of

the same issuer. But our overwhelming preference has

been, and continues to be, senior debt.

Aflac’s consolidated net investment income growth has

averaged 7.6% per year over the last five years.

Translation of the stronger yen to the dollar benefited our

growth rates in 2008 and so far in 2009. Excluding the

currency, the steady growth of our operations has led to

increased invested assets. Growth in the asset base,

combined with improved new money yields, has assisted

Aflac Incorporated in reaching its corporate earnings


Although we have had some sense of marginal

improvements in global credit markets, it’s clear that we

remain in a very uncertain and turbulent period. In this

environment, we believe it is as important as ever to

remain focused on our core investment discipline of

investing in securities that will help us ensure we meet our

policyholder obligations, while mitigating risk. We believe

our investment approach has been a prudent course of

action for many years, and we believe it will continue to

serve us well in the future.


Product Pricing and Reserving

Susan R. Blanck

Senior Vice President; Corporate Actuary; First Senior Vice President, Aflac Japan

This presentation contains information regarding

product pricing and reserving, as well as claim experience

trends. It also includes information that illustrates profit

emergence under GAAP.

Pricing Assumptions

(U.S. and Japan)

• Morbidity

• Mortality

• Persistency

• Expenses

• Investment returns

Product pricing includes assumptions for morbidity,

mortality, persistency, expenses and investment returns. In

Japan, the product pricing assumptions are approved by

the FSA. Premiums are calculated using assumptions that

include provisions for adverse deviation, or PAD. These

may be greater than those used for GAAP. No explicit

margin for profit is added. Instead, profit margins arise

from the pricing PAD.

The interest rate assumption for product pricing is

established by each company and must be justified to the

FSA. The rate may vary depending on the type of product.

For example, we use a lower interest rate for pricing first

sector products than for third sector products. Other

pricing assumptions such as morbidity and persistency are

also reviewed and approved by the FSA. These

assumptions may be developed based on Aflac

experience, industry experience, national statistics or a

blend of data.

The persistency assumptions are generally higher than

our actual persistency. For products with cash values, we

generally assume no voluntary lapses. When the cash

values are not present in the product, we use a low level of

voluntary lapse in each year. In the first part of 2007, we

modified our first sector premium rates to reflect the

revised standard mortality table that was promulgated by

the FSA. In September 2007, we reflected the new

standard mortality table for third sector products in our

product pricing. This table has lower mortality rates than

the previous table, and generally adds to the conservatism

in our overall pricing persistency assumptions for third

sector products.

The expense assumptions reflect our actual operational

costs. Aflac’s cost structure per policy is favorable when

compared to other life insurance companies in Japan.

Reflecting the efficiency of our operations in our product

pricing allows us to maintain a competitive edge in our

premium rates.

In the United States, the pricing assumptions tend to be

based on our own experience, including some provisions

for adverse deviation. In addition, it is our practice to target

an explicit profit margin, expressed as a percentage of

premium. Because most of our products do not consume

significant amounts of statutory capital for a long period of

time, we do not price on a return-on-invested-capital

basis. We do, however, monitor invested capital patterns

on a regulatory basis and may include an invested surplus

charge if necessary.

FSA Reserve Assumptions


• Net Level Method

• Interest Rate – 1.50%

• Lapse Rate – lower than pricing basis

• Mortality – standard mortality table

• Morbidity – pricing basis with stress testing

In Japan, we are required to use specific reserving

methods, as well as certain minimum assumptions for our

FSA reporting. The net level premium reserving approach

required by the FSA is similar to what we use for GAAP

reporting. Benefit reserves begin building from the first

policy year. However, unlike GAAP reporting, where we are

allowed to defer certain costs of acquiring business, FSA

reporting doesn’t make any allowance for the first-year

profit strain of issuing a policy. For this reason, there can

be significant surplus strain associated with new business.

In addition, the interest rates, lapse assumptions, mortality

tables and morbidity rates required for the reserve

calculation generally result in reserves that are larger than

those calculated using the pricing assumptions.

FSA Reserving Strain

(Japan Representative Plan)

Premium Rate

as a Percentage of

FSA Basis Premium

FSA Reporting Basis

Breakeven Year

100% 5

90 8

80 18

This has an influence on our product pricing, because

there can be significant FSA surplus strain when the

product pricing assumptions result in lower premiums than

those based on FSA reserving assumptions. This chart

shows the FSA surplus strain for a representative medical

product. As shown, the surplus strain is fairly minimal

when the product premiums use the same assumptions as

the FSA reserving with a breakeven period of five years.

However, when the premiums are lower than those

calculated using FSA reserving assumptions, the

breakeven period lengthens dramatically. Using premiums

that are 90% of the FSA basis premiums, the breakeven


period lengthens to eight years. And, at an 80% premium

level, the breakeven period lengthens to 18 years. This

discourages the use of pricing assumptions that are more

liberal than FSA reserving assumptions.

U.S. Statutory Reserve Assumptions

pricing when we don’t have enough of our own credible


Aflac U.S. Investment Return Assumptions

GAAP Pricing Statutory

Life/Health 5.50% 4.50% - 7.00% 4.00%

In the United States, premium rates are filed with each

state’s Department of Insurance. We must demonstrate

that premiums are reasonable in relation to the benefits

provided by the policy. Many states also require that we

demonstrate the product experience will meet or exceed a

minimum loss ratio requirement. For most of our U.S.

health products, we use a two-year preliminary term

method for calculating statutory benefit reserves. With this

method, benefit reserves begin building from the third

policy year. This feature helps mitigate the surplus strain

caused by new business. Statutory reporting prescribes

the maximum interest rates that can be used in the reserve

calculation. The lapse assumptions, mortality tables and

morbidity rates are generally based on our pricing

assumptions with an added margin for conservatism.

GAAP Reserve Assumptions

• Morbidity

• Mortality

• Persistency

• Expenses

• Investment returns

In the United States, all of our currently issued products

use a 5.50% investment return for GAAP reserves. That is

generally in line with our pricing assumptions. However,

some products that were priced several years ago used

higher or lower investment assumptions when they were

priced. For statutory accounting purposes, we use a 4.0%

interest assumption for all new business.

GAAP Reporting

• Benefit reserve uses net level premium method

• Certain acquisition costs are capitalized and put into a

deferred policy acquisition cost asset

• The deferred policy acquisition cost asset is amortized

over the premium paying period of a policy

• Requires a provision for adverse deviation (PAD) in the

benefit reserve calculation

GAAP reserves are computed using the net level

premium method. Under this approach, benefit reserves

begin to build in the first policy year. Certain expenses

associated with the cost of acquiring new business are

capitalized and amortized over the premium paying period

of a policy. The combination of the net level premium

reserve methodology and the capitalization of acquisition

costs results in an expected profit emergence pattern that

is fairly level over time. However, there are various

acquisition costs we are not allowed to defer, so the

expected profit in the first policy year is usually much lower

than in other policy years.

Once the premium rates are established, we determine

appropriate assumptions to use in calculating GAAP

reserves. The calculation of GAAP reserves requires

assumptions for morbidity, mortality, persistency,

expenses and investment returns.



Claims vs. Reserves



Aflac Japan Investment Return Assumptions




Deduct from


GAAP Pricing FSA

Life/Health 1.50% - 3.00% 1.50% - 2.35% 1.50%

Annuity 1.65% 1.65% 1.50%

As the chart shows, for our major product lines in

Japan, GAAP reserve assumptions generally use higher

investment return rates than the pricing or FSA reserving

assumptions. GAAP assumptions generally use claim and

persistency assumptions that are derived from our actual

experience, or from assumptions used in the product






Add to




0 5 10 15 20 25 30 35 40

Policy Years


This simplified schematic shows why benefit reserves

are provided and illustrates the relationship between

incurred claims and benefit reserves. The policyholder


pays a level premium each year. In early years, incurred

claims are lower than the premium. The difference

between the premium paid and claims incurred is added to

the benefit reserve. In later years, incurred claims exceed

the premium and the benefit reserves are released to

accommodate the higher claims.

In theory, GAAP benefit reserves are derived in such a

way that gross profits would emerge in a fairly level pattern

over time. However, GAAP benefit reserves are required to

include a provision for adverse deviation, or PAD, which

suppresses the profit somewhat in the early years of a

policy and magnifies the profit in later years.

GAAP Experience Emergence Parameters

• Assumes representative health plan where claim costs

are expected to increase by policy year

• The expected lifetime loss ratio for the representative

plan is 60%

• All ratios shown are to earned premium

• The margins shown are gross margins

• Demonstration excludes required interest

To demonstrate this, we have developed some

illustrations using a representative health product where

claim costs are expected to increase by policy year. This

representative product has an expected lifetime loss ratio

of 60% as measured using the present values of future

claims and future premiums. All ratios shown in these

graphs are to earned premium. And the margins that are

illustrated are gross margins. The gross margin is the

percentage of premium in each year that is available for

expenses and profit. Finally, required interest is excluded

for this demonstration.

GAAP Experience Emergence without PAD

(Ratios to Earned Premium)


Expected incurred claims ratio







GAAP Experience Emergence with PAD

(Ratios to Earned Premium)

This chart shows the same expected incurred claims

ratios. But this time, the GAAP benefit reserves have been

calculated with the required PAD. As you can see, the

expected total benefit ratio is no longer flat and is higher

than the expected lifetime loss ratio of 60% in early policy

years. The margins are captured in the GAAP benefit

reserve in early policy years when the reserve is building

and incurred claims ratios are low. They are released over

time as reserves are used to fund the higher level of

incurred claims anticipated in later policy years. Again, this

chart assumes that the actual experience emerges exactly

as expected.





1 3 5 7 9 11 13 15 17 19 21 23 25


GAAP Experience Emergence

(Ratios to Earned Premium, 90% Actual-to-Expected Claims)

Total benefit ratio

100% A/E

Expected total benefit

ratio with PAD

Expected incurred claims ratio

Incurred claims ratio

100% A/E





Expected total benefit

ratio without PAD



Total benefit ratio

90% A/E

Incurred claims ratio

90% A/E

1 3 5 7 9 11 13 15 17 19 21 23 25


Total benefit ratios include PAD


1 3 5 7 9 11 13 15 17 19 21 23 25


The first chart shows the expected incurred claims

ratios and expected total benefit ratios assuming that the

GAAP benefit reserves are calculated without the required

provision for adverse deviation. This chart demonstrates

that if actual experience exactly matches expected

experience in all years, the total benefit ratio would be the

same 60% in each year, which is the expected lifetime loss

ratio for the product.

Now, we move on to a demonstration where the actual

experience emergence differs from what was expected.

This chart includes the original expected total benefit ratios

with PAD and incurred claims ratios, but also illustrates the

patterns if the actual claim costs emerge at 90% of

expected. While the incurred claims ratios are 90% of the

original expected incurred claims ratios in each policy year,

the total benefit ratios decline slightly in the early policy

years, and by an increasing amount in later years when

provisions for adverse deviations are released and the

incurred claims are a larger portion of the total benefit




GAAP Experience Emergence

(Ratios to Earned Premium, 90% Actual-to-Expected Claims)

Ratio of total benefit ratio 90% A/E

to total benefit ratio 100% A/E



GAAP Gross Margin Scenarios

Gross margin at 100% A/E

Gross margin at 80% A/E








Total benefit ratio

100% A/E

Total benefit ratio

90% A/E

1 3 5 7 9 11 13 15 17 19 21 23 25


Total benefit ratios include PAD

Here, I’ve added a line showing the ratio of the total

benefit ratios under the 90% actual to expected claim

emergence to the original expected total benefit ratios. In

early policy years, the ratio is between 90% and 100%.

However, in later policy years, the ratio is less than 90%.

As discussed previously, this demonstrates the build up of

margins in early policy years followed by the release of

those margins in later policy years.

GAAP Experience Emergence

(Ratios to Earned Premium, 80% Actual-to-Expected Claims)



Finally, let’s look at how gross margins emerge under

each scenario. While the gross margins under each

scenario have relatively small differences in early years, the

difference expands with each policy year as provisions for

adverse deviation are released and the difference between

actual and expected total benefits grows larger.

Now, let me take that theoretical discussion and apply it

to our operations in Japan.


Gross margin at 90% A/E

1 3 5 7 9 11 13 15 17 19 21 23 25


Aflac Japan Actual vs. Tabular Claims

(Tabular = 100%)


Ratio of total benefit ratio 80% A/E

to total benefit ratio 100% A/E








Rider MAX



Total benefit ratio

100% A/E

Total benefit ratio

80% A/E


1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 9/07 9/08


1 3 5 7 9 11 13 15 17 19 21 23 25


Total benefit ratios include PAD

Next, I’ll show the same presentation but with claims at

80% actual to expected. As the chart illustrates, the

difference in profit emergence in early years versus later

years is even more pronounced, with a ratio between 85%

and 95% in early years, falling well below 75% in later


The characteristics of GAAP reserving that I just

described are reflected in the trend of our total benefit ratio

in Japan. In recent years, we have experienced favorable

claim trends for our major product lines in Japan. Rider

MAX claims have been better than our original expectation

since that product’s introduction in 1998. Actual cancer life

claims as a percentage of tabular claims have declined

since 1993 and were about 78% as of September 2008.

EVER claims have also been lower than our original

expectation since that product’s introduction in 2002.

The ordinary product line also shows favorable ratios,

but we expect these ratios will show some variability over

time until our block reaches a critical mass.

As we have shown you previously, our experience in

Japan related to the average length of stay in the hospital

for cancer treatment has declined steadily for some time

now. The Ministry of Health, Labor and Welfare has tried to

control escalating national health care costs by limiting

reimbursements to hospitals for longer hospital stays. At


this time, the amount of reimbursement a hospital receives

varies depending on the aggregate average length of stay

for the hospital. Prior to July 2006, the variation between

the highest reimbursement rate and the lowest

reimbursement rate was just under 25%, with the highest

level paying ¥12,090 per day if stays averaged 21 days or

less and the lowest level paying ¥9,740 per day if stays

average more than 28 days. In July 2006, the

reimbursement scale was modified. Now, the highest

reimbursement rate is ¥15,550 per day if stays average 19

days or less and the lowest reimbursement rate is ¥9,540

per day if stays average more than 24 days. With a more

than 60% increase in the reimbursement rate for the

shortest length of stay category compared to the longest

length of stay category, there is a great deal of financial

incentive for hospitals to shorten the length of hospital


Aflac Japan Trends in Sickness

Average Length of Stay

short, more people are surviving cancer, and those who

continue in treatment are generally living longer.

Despite the significant decline in the average length of

stay per hospitalization, we have also noted that the

number of hospital stays per claimant has been increasing.

Our analysis of claims data shows that the total number of

days hospitalized per claimant is declining, but at a much

slower rate than the average length of stay per

hospitalization. We anticipate that more hospital stays of

shorter durations will continue going forward.

Aflac U.S. Trends in Cancer Hospitalization

(Cancer Only, 24-Month Runoff)





Stays per claimant

Days per claimant





Days per stay



1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006




Rider MAX

2000 2001 2002 2003 2004 2005 2006 2007

We have seen the effect of these actions in our actual

experience. For example, with the sickness hospitalization

benefit, we have seen a generally downward trend in the

average length of hospital stays for Rider MAX and EVER.

The next slide shows the hospitalization trends for cancer.

In the United States, we are seeing a trend toward

greater use of outpatient treatments for cancer. The

average days per hospital stay for cancer treatment has

leveled off in the last few years. The average number of

hospital stays per claimant and the total hospitalization

days per claimant had a slight uptick in 2005, but both

have declined considerably in recent years.


Aflac U.S. Trends in Average Length of Stay

Aflac Japan Trends in Cancer Hospitalization

(Cancer Only, 24-Month Runoff)



Stays per claimant




Hospital Indemnity



Days per claimant


1999 2000 2001 2002 2003 2004 2005 2006 2007




Days per stay

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Cancer treatment patterns in Japan are being influenced

by significant advances in early-detection techniques and

by the increased use of pathological diagnosis rather than

clinical exams. Follow-up radiation and chemotherapy

treatments are occurring more often on an outpatient

basis. Such changes in treatment not only increase the

quality of life and initial outcomes for the patients, but also

decrease the average length of each hospital stay. In

Finally, we look at our hospital indemnity products in the

U.S. For the past several years, we have seen a downward

trend in the average length of stay per hospitalization.

I hope that this information provides a strong foundation

for understanding how our products are priced as well as

how the profit from those products emerges. While we

generally do not project future improvements in claim

trends in our pricing, the impact of lower- than-expected

claim costs over time and the emergence of the profit from

the better-than- expected experience has a strong impact

on our projections and our outlook for Aflac’s future profit



Section II

Aflac Japan

Introduction to Aflac Japan

Tohru Tonoike

President; Chief Operating Officer, Aflac Japan

I will be providing an overview of the Japanese life

insurance market and our operations at Aflac Japan.

Life Insurance Policies in Force

(FSA Basis, In Millions)

Let me start off by updating you on the current status of

the life insurance market in Japan and the positioning of

Aflac Japan within that market. The number of life

insurance policies in force in Japan increased in 2008 in

line with the increase of third sector products, represented

by cancer and medical insurance. The number of policies

in force at the end of December 2008 increased by 2.4

million, compared with the end of March 2008. And third

sector products accounted for 1.7 million of the increase.


















Source: Life Insurance Association of Japan

First sector

Third sector

109.3 109.6 110.0 109.8 110.0 112.4

3/04 3/05 3/06 3/07 3/08 12/08

The Number One Life Insurer in Japan

(Policies in Force, FSA Basis, In Millions)

20 Aflac = No. 1 19.3

3/75 3/80 3/85 3/90 3/95 3/00 3/05 12/08

As you can see in this graph, Aflac Japan’s number of

policies in force has been steadily increasing over the past

34 years. Since the end of fiscal 2003, we have been

Japan’s number one company in terms of the number of

policies in force. The number of policies in force at the end

of December 2008 was 19.3 million, accounting for 17.2%

of the total number of all insurance policies in force in


We will be commemorating our 35 th anniversary in

Japan later this year, and we expect to achieve a major

milestone of 20 million policies in force at that time.







New Business in Policies

(FSA Basis, In Thousands)



Life industry


Third sector





2003 2004 2005 2006 2007 2008

(Apr. – Dec.)

Source: Life Insurance Association of Japan, Insurance Research Institute

The total number of new life insurance policies in Japan

has gradually declined since 2001. However, the number

increased in 2007 because of the addition of the number

of new policies sold by Kampo Life following the start of

the privatization process in October 2007. On the other

hand, because Kampo Life only sells first sector products,

during the period of April to December of 2008, the share

of third sector products in new business declined to

40.6%, slightly lower than in 2007. At first glance, this may

seem to imply a change in consumers’ preference for the

third sector products. However, a closer look tells us that,

excluding Kampo Life, the share of third sector products

would have been a record high of 49.1%. This indicates

that the trend of consumers’ shift from life insurance to

living benefits such as medical, care and injury, has not











Japan’s Aging Population and

Declining Birthrate

(In Thousands)


1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Juvenile (0-14) Productive (15-64) Retirement (65+)

Source: National Institute of Population and Social Security Research,

Future Estimated Population of Japan, 12/06


One major cause for the increased preference of living

benefits is Japan’s rapidly aging society. Japan’s

population reached its peak in October 2005 at 127.8

million. Since that time, the number of deaths has basically

been exceeding the number of births, resulting in a

population decline. Japan’s population is anticipated to

drop below 100 million in 2050.

The primary reason for the shrinking population is a

lower birthrate. The total fertility rate in Japan went down

as low as 1.34 in 2007, which is far below the level of 2.08

that is required to maintain a stable population size. As a

result, the population age 65 and above will further

increase, while the population aged 64 and below will

continue to decline.

National Medical Expenses

(Yen in Trillions)

Because of the rapidly aging population and higher

copayments for medical expenses, the market for third

sector products is expanding at a solid pace and is

expected to further expand in the future. As a natural

consequence, the competition among private insurers in

this market has intensified. However, we believe market

expansion will also become the key source for Aflac

Japan’s growth.







Competitors in the Third Sector

(Number of Life and Non-life Insurance Companies)







12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 3/09

Stand-alone cancer

Stand-alone medical

Reflects results of company mergers and companies that have discontinued sales

Source: Web sites of each company



At the time Aflac Japan began its operation in 1974,

Aflac was the only company selling cancer insurance in

Japan. However, mid-sized insurers and other foreign

insurers followed suit and entered the market. In addition,

the market was opened to all life and non-life insurers in

2001. As a result, at the end of March 2009, there were 47

life and non-life companies that were marketing standalone

medical and 29 companies marketing cancer

insurance products

Number of Medical Products











Medical expenses For elderly National medical expenses to national income



13.2% 14%






















2007 2010 2025

Source: Ministry of Health, Labor and Welfare, 7/08












140 141







93 94







12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 3/09

Stand-alone medical Stand-alone medical and riders

It is clear that national medical expenses will increase

along with the rapidly aging population. Medical expenses

for the elderly, as shown in the shaded portion of the

graph, will increase overall national medical expenses.

Fortunately, Japan does have a universal national health

care system that covers all Japanese citizens. However,

fiscal resources are tight in all areas, including medical,

care and pension, and it is clear that the difficult fiscal

situation is likely to persist going forward. This situation led

to the passage of health care reform in 2006, which

increased the copayment borne by elderly patients in April


Reflects results of company mergers and companies that have discontinued sales

Source: Web sites of each company

At the end of March of 2009, the number of medical

products sold by life and non-life insurers was 139

including riders and 93 excluding riders. Those numbers

declined a little bit compared with the year-end of 2008

because some insurance companies tried to streamline

their product lineups in an effort to prevent claims

nonpayments or underpayments from occurring again. But

as seen in the introduction of new medical riders by

Nippon Life and Kampo in the second half of 2008,

competition in the medical market remains severe.


Aflac’s Share of In-Force Business: Cancer

(FSA Basis, Stand-alone, Life Industry Only)

before the end of fiscal year 2009. There have been

objections from the American Council of Life Insurers

(ACLI) and other organizations concerning this move,

claiming that because Japan Post Group is solely held by

the Japanese government, it is not on the same level

playing field as other private insurers. If Kampo Life begins

selling its own cancer insurance, there is no doubt that

Aflac’s sales both in the retail market and through Japan

Post Network will be impacted. As such, we will closely

monitor the situation and take appropriate measures as


Aflac’s Share of In-Force Business: Medical

(FSA Basis, Stand-alone, Life Industry Only)

Next, I would like to show you some data related to

Aflac Japan’s market share for our primary products.

These charts reflect FSA-based fiscal year data, which

runs from April through March and include products sold

only by life insurers. The data here incorporates the latest

figures based on each insurer’s financial statements for the

first nine months of the fiscal year of 2008. And as you

know, some property and casualty insurers also sell

medical insurance products. Because this detail of sales

data is not disclosed by non-life companies, we were not

able to include them in the statistics shown on this chart.

The graph on the left side shows that the number of

policies in force for cancer stand-alone products in the life

insurance industry is growing each year. Aflac Japan has

77% of the stand-alone cancer insurance market, and our

share has been stable over the past few years.

Aflac’s Share of New Business: Cancer

(FSA Basis, Stand-alone, Life Industry Only)

These graphs illustrate the growth of policies in force for

stand-alone medical insurance and Aflac Japan’s share.

Although we were not the first insurer to enter the medical

insurance market, our share of policies in force rose to

20% at the end of December 2008, as a result of

aggressively and successfully launching EVER in 2002 to

tap into the market.

Aflac’s Share of New Business: Medical

(FSA Basis, Stand-alone, Life Industry Only)

As a result of launching Cancer Forte in 2007 and a

focus on driving cancer sales, Aflac’s share of new

business in terms of the number of policies in the cancer

insurance market rose slightly to 63% during the period

from April to December of 2008.

On the other hand, Japan Post Life Insurance, namely

Kampo, which was inaugurated as a part of the

privatization process of Japan Post, announced its

intention to launch cancer insurance through post offices

Aflac Japan’s share of new business for stand-alone

medical insurance was 20% for the period of April to

December 2008. As we have discussed, a large number of

insurers have entered the medical market over the last few

years and the competition has intensified. Despite this

competition, in fiscal 2008, our market share remains

stable with fiscal 2007, and we are still the number one

company in terms of medical policy sales.








Insurance Product Penetration

(Individual Basis)

2001 2004 2007

Life insurance Medical insurance Cancer insurance

Source: Japan Institute of Life Insurance

This chart shows market penetration rates for various

insurance products in Japan. In 2007, 79.9% of Japanese

citizens were enrolled in some kind of life insurance.

Although the market penetration for cancer insurance

shown in the yellow line has been steadily increasing, it is

still only at 31.2%. Medical insurance penetration is high at

71.3%. But most of the policies purchased are assumed to

be term policies. We believe the potential for switching to a

whole life medical policy is large. Given the aging of

Japan’s population, we also believe the opportunity for

increasing cancer insurance penetration is sizable.




77.7 77.9 79.9





Economic Indicators

(Composite Indices)



caused by the rapid deterioration of the economy, as well

as the impact from the decline of population I discussed

earlier, the total premium revenues of the 44 life insurers in

Japan during the period of April to December 2008 were

down 2.6%, compared with the same period of the

previous year. Many insurance companies are

experiencing a decline not only in the volume of new

businesses, but also in the number of policies in force.

Furthermore, due to the sharp decline in stock prices

and the appreciation of yen against major currencies,

unrealized gains on insurers’ investment portfolios are

drastically shrinking, and solvency margin ratios across the

industry are at lower levels. In addition, with the collapse of

Yamato Life and the difficult financial situation of AIG, the

public is now paying more attention to the financial stability

of life insurance companies.

In order for Aflac Japan to beat the competition and

achieve sustainable growth in this challenging

environment, we need to fortify the competitive strengths

we have built so far. I also think it important to build a new

strategy that enables us to respond to any changes that

are likely to occur in the future.

Aflac Japan’s Competitive Strengths



Internal Controls

Financial Strength







Administrative Efficiency


1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09

Source: Cabinet Office

Leading Indicator

Shaded columns indicate economic recessions

Coincident Indicator

Next, I would like to touch upon the recent market

environment. As a way to measure the state of the

domestic economy, the Cabinet Office of Japan releases

the diffusion index every month. The diffusion index

actually has two components: a coincident indicator for

the current state of the economy and a leading indicator

for the economic outlook. Each indicator is calculated from

eleven to twelve indices such as production and sales. The

coincident indicator of February 2009 announced by the

Cabinet Office declined from January by 2.6 percentage

points to 86.0. This marked the seventh consecutive

month of decline of this indicator and the lowest level since

April 2002. At the same time, the leading indicator is also

on the decline, suggesting that the Japanese domestic

economy will continue to face a difficult situation for some

time. As a result of the decline in individual income growth

The five points shown on this chart are the areas where

we believe Aflac Japan is strongly positioned within the

industry. They are: products, distribution, internal controls,

financial strength and administrative efficiency. These

advantages have not changed and we believe they will

remain intact going forward.

Mr. Matsumoto and Mr. Ariyoshi will offer some

information about products and distribution channels in

their presentations. However, I’d like to mention that in

addition to the new products we recently launched in

March of this year, we are preparing to launch other new

products in the second half of 2009. These new products

will have the features that we believe accurately reflect

customers’ needs as well as changes in medical treatment

technology and costs. We are also providing support to

new channels such as banks and the Japan Post Network

Co., Ltd., while at the same time reinforcing support to our

traditional channels.

Based on the J-SOX act, which is the Japanese version

of the Sarbanes-Oxley in the United States, all Japanese


public companies introduced an internal controls

evaluation system at the end of March 2009 for financial

reporting. At Aflac Japan, we proactively established a

corporate governance system based on the U.S. law

ahead of others, which we believe has given us a

competitive advantage.

Although we have not been immune to the financial

crisis, we still maintain a strong solvency margin. Our

solvency margin ratio was 880.5% at the end of December

2008, close to our September 2008 ratio of 871.9%. The

decline in the solvency margin between March and

September 2008 reflected the global financial market’s

lower fair values of our investments. We will continue to

focus on producing stable earnings and a strong financial


As competition in the third sector market intensifies, it is

a great strength of Aflac Japan to be able to provide

products at competitive premiums. In order to achieve this,

we will move forward with efficient and accurate policy

administration operations through improvements in both

business processes improvements and IT infrastructure.

Key Themes of Aflac Japan’s

2009 Management Plan

• Rapid response to a changing market

• Customized support to each distribution channel

• Improved operational efficiency and effectiveness

• Customer-driven products and services

• Continued investment income growth

• Reinforced business infrastructure

• Engaged and motivated employees

• Enhanced consumer perception of brand

Last year, Aflac Japan established “Midterm

Management Policy 2008-2010,” as a basic management

strategy to maintain the number one position in the

medical and cancer insurance markets. This “Midterm

Management Policy” indicates the direction of our midterm

strategy for each of the following nine categories; market,

products, distribution channel, business operation, IT,

finance, HR/HR development, internal control system, and

CSR and corporate brand. We regard 2009, the second

year of the Midterm Policy, as a critical year in building a

solid foundation for the business that is necessary for

sustainable growth in the future.

As a part of our Midterm Management Policy, we put

together the “2009 Management Plan.” Let me take you

through the key themes of the Management Plan. They

include: Strengthening capabilities to respond to a rapidly

changing market environment; implementing strategic

sales specific to each channel attribute; increasing

operational efficiency and effectiveness; strengthening

products and services from the perspective of customers;

continued investment income growth; reinforced business

infrastructures; engaging and motivating employees and

enhancing consumer perception of the brand.

The entire management of Aflac Japan and employees

share the significance of these themes and are executing

highly effective measures for achieving the themes at

departments that are in charge of each of these themes. I

firmly believe that Aflac Japan’s sales target and earnings

target can be achieved by thoroughly completing the

series of these programs.

Amid the global financial turmoil, intensified competition

and diversification of customers’ needs, the changes in the

environment surrounding our company are becoming more

and more challenging. Aflac Japan is still in an

advantageous position in terms of competitiveness. But for

us to continue to have sustainable growth, we must take

the ever-evolving environmental change as an opportunity,

and not fear it, but act on it.


Japan’s Regulatory Environment

Charles D. Lake II

Chairman, Aflac Japan

The global financial and economic crisis has had a

profound impact on Japan. As Minister of Finance Kaoru

Yosano noted recently, the current situation in Japan

represents the “worst economic crisis since World War II.

The once-in-a-hundred-years crisis has become a reality.”

But the Government of Japan is taking steps to respond to

the crisis. This presentation will provide a brief overview of

that response as well as a discussion of the Japanese

regulatory environment, including an update on key

developments in Japan’s financial and social security

systems and how we believe these changes will impact the

insurance industry in Japan.












Changes in Japan’s GDP

(Quarterly Estimates of GDP)


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2005 2006 2007 2008

Source: Cabinet Office, Quarterly Estimates of GDP

budget totaling ¥13.93 trillion is now before the Diet and is

expected to be enacted into law within the current Diet

session, scheduled to end June 3, 2009.

Additional measures taken by the Government of Japan

include expanding the role of government-affiliated

financial institutions in low-interest corporate lending and

implementing other initiatives to boost corporate liquidity,

¬including a ¥2 trillion program for direct commercial

paper purchases. Prime Minister Aso has also assembled

– in a very public manner – a panel of 84 economic policy

experts to discuss finance, social security, and other

economic measures. The panel’s recommendations are

slotted to be developed into the above-mentioned fiscal

2009 supplemental budget, which is expected to pass the

Diet by June 2009. On the whole, the government’s

response to the global financial and economic crisis has

been robust, and Japan has been an important contributor

toward meeting the International Monetary Fund’s

economic stimulus target of 2% of global GDP.

“Divided Diet” Has Impacted Policymaking

As the impact of the global financial and economic crisis

reverberates around the world, it is clear that Japan's

export-driven economy has been particularly hard hit. In

fact, the Government of Japan reported that the Japanese

economy shrank 12.1% on an annualized basis in the

fourth quarter of 2008 and has continued to contract

since. That represented the greatest decline in

Japan’s GDP in 35 years. The Government of Japan is

projecting a 3.3% decline in economic growth for fiscal

year 2009. Japan's exports, meanwhile, are expected to

fall 27.6% in fiscal year 2009 as other economies around

the world also experienced negative growth.

Against this background, the Government of Japan, led

by Prime Minister Taro Aso, has implemented a number of

measures designed to limit the damage to the economy

and put growth back on track. As of March 31 (the end of

fiscal 2008), economic stimulus measures totaled ¥75

trillion, including ¥12 trillion in new fiscal spending. The

government passed two supplemental budgets for fiscal

2008, representing a combined ¥6.6 trillion in new

spending. The second supplemental budget paved the

way for the government to implement its much debated

“fixed-sum stipend” program to distribute a total of ¥2

trillion directly to Japanese citizens and residents. Further,

in late March 2009, the Diet enacted a record ¥88.5 trillion

ordinary budget for fiscal 2009. In addition, a supplemental

The Government of Japan’s response to the global

financial crisis has been complicated somewhat by

domestic politics. As a result of its overwhelming victory in

the September 2005 lower house election, the ruling

coalition made up of Liberal Democratic Party (LDP) and

Komeito, holds a two-thirds majority in the lower house,

the more powerful of the two Diet chambers. However, the

ruling coalition suffered a major defeat in the July 2007

upper house election, putting the opposition Democratic

Party of Japan (DPJ) in charge of the upper house for the

first time since the LDP first came to power in 1955. This

defeat created a “divided Diet.” Under the Japanese

constitution, both houses of the Diet must pass most

legislation before it can be enacted into law, making a

divided Diet a formula for gridlock. Indeed, the ruling

coalition’s efforts to stimulate the economy, including

through passage of supplemental budgets, have been

slowed and, in some cases, blocked by the DPJ and its

opposition coalition partners.


However, Japan’s constitution also provides that the

lower house can override an upper house vote with a twothirds

majority. This provision makes the LDP’s supermajority

in the lower house exceedingly important. This

super-majority, however, is unprecedented and the result

of former Prime Minister Koizumi’s unique political skills,

popularity, and ability to capture the public’s imagination

with his reform drive. It is highly unlikely to be repeated in

the next election, which is constitutionally required to be

held by September 2009.

Until a recent arrest of a staff member of the DPJ’s

leader for political funding violations, that party was well

ahead in the polls and appeared poised to win control of

the lower house and, with it, the overall government.

Currently, the gap between the DPJ and LDP has

narrowed, and it is unclear which party or parties would be

able to assemble a majority in the lower house if an

election were held today. However, based on an analysis

of LDP and DPJ policy platforms, regardless of the election

outcome, we do not envision any material impact on our

operations at this time.

Progress in Financial Regulatory Reform




“Convoy system”

1998 - June 2007

Rules-based approach

July 2007-

“Better Regulation” policy

(The best mix of principles-based

regulation and rules-based regulation)

The challenges posed by the global financial crisis and

the domestic political environment have resulted in a slow

down, to some extent, of efforts by the Japanese

Government, particularly the Financial Services Agency

(FSA), to take aggressive steps aimed at strengthening

Japan’s competitiveness as an international financial

center. Nevertheless, the FSA’s work is ongoing and is

summarized below.

As I have noted in previous briefings, Japan’s financial

system has changed dramatically in recent years. The old

Ministry of Finance emphasized maximum control, industry

protection, and the use of informal administrative guidance

based on its “convoy system” philosophy. The FSA

replaced this philosophy with a rules-based regulatory

approach, which relies on transparency and the notion of

self-responsibility by financial institutions. In recent years,

the FSA has taken further steps to achieve the best mix of

principles-based regulation and rules-based regulation,

calling this the “Better Regulation” initiative. The FSA

continues to work closely with other regulatory authorities,

and through the G-20 and Financial Stability Board, to

ensure that Japan’s financial regulatory approaches are

consistent with policy measures agreed to globally.

As noted before, the Financial Instruments and

Exchange Law came into effect in September 2007,

replacing the old Securities Exchange Law. The new law

aims to reduce over-regulation and establish a flexible,

across-the-board framework for market conduct rules

pertaining to investment products. Specifically, the new

law was designed to: 1) improve customer protection and

convenience; 2) strengthen market functions through

enhanced transparency and reduction of red tape so as to

facilitate the shift of individual financial assets from savings

to investment; and 3) further internationalize financial and

capital markets.

Consistent with the policy direction of this law, the FSA

took further steps to modernize Japan’s financial servicesrelated

laws last year. The Financial Instruments and

Exchange Law was amended in June 2008, among other

things, to establish streamlined markets exclusively for

"professional" investors and ease firewall regulations that

separate banks, insurance companies, and securities

companies. Taking advantage of this new environment, the

Tokyo Stock Exchange, in a joint venture with the London

Stock Exchange, plans to establish a new market called

“Tokyo AIM” in Spring 2009. The new market, which is

designed for “growing” companies and specifically

targeted at professional investors, offers a flexible

regulatory approach, including through permitting

disclosure in Japanese or English and according to

International Accounting Standards, U.S. GAAP, or

Japanese GAAP.

On October 14, 2008, as the global financial crisis

continued to unfold, Japan’s Minister for Financial

Services, as part of an announcement regarding a farreaching

financial stabilization package, stated that Japan

would extend the government’s current temporary

program of support for the life insurance safety net past

the March 31, 2009, expiration date. Consistent with the

minister’s statement, new legislation was passed

extending the temporary program for three more years

beginning April 1, 2010, and expiring March 31, 2012.

The details, in relevant part, are that the industry is

required to fund any failures requiring the Life Insurance

Policyholder Protection Corporation (LIPPC) to borrow up

to ¥460 billion, with the Government covering any failures

requiring funds exceeding that amount. The new legislation

reestablishes the prior legislation’s requirement to review

the overall LIPPC system within three years of enactment

(i.e., before March 31, 2012).

The LIPPC decided to provide approximately ¥27.7

billion for the bailout of Yamato Life, which filed for

bankruptcy protection last October. Yamato was the first

Japanese life insurer to file for bankruptcy since March

2001. This action will be the first time that the LIPPC has

provided funding to bail out a failed life insurer since the

failure of Taisho Life in 2000 (although Yamato Life is the

fifth life insurance company to require LIPPC funds). As a

result of the LIPPC’s decision, life insurance companies

will be required to contribute additional funds to the

LIPPC. However, given the relatively small amount

involved, the additional assessment will not have a material



Japan’s Regulatory Environment Overview –

Consumer Affairs Agency

• Proposed Consumer Affairs Agency

» Consolidate many of the government’s consumer

protection functions under a single agency

» Current plan exempts the Insurance Business Law

Legislation to create a new consumer agency that was

first submitted to the Diet in September 2008 has passed

the lower house and is likely to be enacted into law within

the current legislative session, which is scheduled to end

June 3, 2009. The new agency will be required to start

operations within one year of the law’s passage, but could

do so earlier. It would consolidate many of the

government’s consumer protection functions under a

single agency. The legislation does not include the

Insurance Business Law or Banking Law in the planned

consolidation. At this time, we do not believe that this

development will have an immediate material impact on

our operations.

Postal Privatization:

Current Status and Before IPO

Holding Company

(100% of shares held by the government)

Postal Privatization: After IPO and by 2017

Holding Company

(at least 1/3 held by the Gov’t)

Japan Post


Postal Service;

Domestic and




Japan Post



Retail Services;

Bank Agency;

Insurance Agency

Japan Post





Japan Post



Life Insurance


These four entities are subsidiaries of a holding

company, Japan Post Holdings Co., Ltd. According to the

Japan Post’s business plan, the current plans call for initial

public offerings of the holding company as well as Japan

Post Insurance and Japan Post Bank in 2010 or 2011.

Japan Post Holdings will retain 100% ownership of the

Japan Post Network and Japan Post Service corporations,

but is required by the Privatization Law to be fully divested

of its shares of Japan Post Insurance and Japan Post

Bank by September 2017.

Eight-Step Approval Process for Japan

Post Insurance’s New Insurance Products

Japan Post


Postal Service;

Domestic and




Japan Post



Retail Services;

Bank Agency;

Insurance Agency

Japan Post





Japan Post



Life Insurance


Japan Post Insurance

1) Request to FSA

Commissioner, Minister of MIC,

and Postal Privatization

Promotion Office to revise

relevant regulations

2) Expression of opinions by

Postal Privatization Commission

5) Revision of regulations

6) Product approval application

to FSA Commissioner

and Minister of MIC

7) Expression of opinions by

Postal Privatization Commission

The Government of Japan’s efforts to reform its postal

system is seen by the domestic and international policy

community as a key test of Japan’s commitment to

strengthening the competitiveness of its financial and

capital markets and promoting a robust economic growth

strategy. As we have discussed in the past, on October 1,

2007, Japan Post was divided into four entities: Japan

Post Insurance Co., Ltd. (the insurance entity), Japan Post

Bank Co., Ltd. (the bank entity), the Japan Post Network

Co., Ltd (the post office entity), and Japan Post Service

Co., Ltd. (the delivery entity).

3) Public comment process

4) Approval by Cabinet Decision

8) Approval by

FSA Commissioner

and Minister of MIC

The Postal Privatization Law includes a commitment to

implement “measures to ensure equivalent conditions of

competition” between the four privatized Japan Post

companies and other companies “engaged in like business

operations.” The law also requires that the postal

insurance entity be subject to the same tax and

policyholder safety-net contribution requirements as its

private competitors, as well as to the Insurance Business

Law and FSA supervision. Further, the Postal Privatization

Law establishes a special process to approve any new

business by Japan Post Insurance or Japan Post Bank,

which involves a special review by the Postal Privatization

Commission and approval from the Prime Minister

(delegated to the FSA Commissioner) and Ministry of

Internal Affairs and Communications (MIC) Minister (in

charge of postal services), in addition to the ordinary FSA

product approval process.


On March 19, 2009, Japan Post Insurance submitted a

formal request to the Government of Japan to amend

regulations that currently limit the amount of coverage to

¥10 million that the postal life insurance company could

provide in any standalone cancer insurance it might offer.

The next step would be for the Postal Privatization

Commission to take up the request for deliberation, which

would likely involve the Commission soliciting opinions

from a wide range of interested parties. Once its

deliberations are completed, the Commission would then

submit its opinion regarding the proposed revisions to the

FSA Commissioner and the MIC Minister, who would then

approve or deny the request, taking into account the

Commission’s opinion.

If the regulatory revisions are approved, before Japan

Post Insurance could offer a standalone cancer product, it

would still have to undergo the normal FSA product

approval process as well as submit once more to the

additional process of having the Postal Privatization

Commission deliberate the product approval request and

render its opinions to the FSA Commissioner and the MIC

Minister, who would then approve or deny the request.

The FSA has been clear in its commitment to this

process. For example, FSA Commissioner Takafumi Sato

stated as recently as March 23, 2009, that if a Japan Post

financial institution were to make a new product approval

request, the FSA would: “consider such factors as the

impact of [the new product] on competitive relationships

with other financial institutions as well as the management

conditions of the two postal financial companies, which I

believe should probably include such factors as the degree

to which [the postal financial companies’] operational

systems are in good repair. The law requires these points

to be taken into consideration as we evaluate a new

product approval request, which we would do in

appropriate accordance with the purpose and framework

set forth under the [Postal Privatization] Law.”

As the Privatization Commission takes up Japan Post

Insurance’s request, this constitutes a clear statement of

commitment to a level playing field.

Rapidly Increasing Social Security Benefits

(Yen in Trillions)

¥ 160





Pension Medical Welfare



FY 2006 FY 2011 FY 2015 FY 2025


Source: Ministry of Health, Labor and Welfare, 5/06



A declining birthrate and aging population are among

the most difficult challenges that Japan faces on the path

to continued growth and prosperity. As these trends

progress, Japan’s publicly funded social insurance

programs will continue to come under ever-increasing

financial pressure. The Ministry of Health, Labor and

Welfare estimates that medical insurance benefits will

reach as high as ¥48 trillion in 2025, a 74% increase from

those budgeted for 2006.

Against this backdrop, former Prime Minister Fukuda

established the National Conference on Social Security in

January 2008, which issued its final report in November

2008. The Conference focused its efforts on discussing

ways to meet the many challenges ahead for Japan’s

social security system, including future costs associated

with pensions, medical care, nursing, the declining birth

rate, and other issues. In its report, the Conference called

for reform aimed at quickly securing stable funding for the

social security system as well as robust engagement with

the public on these issues.

In February 2009, in order to further promote this reform

dialogue, a social security reform promotion group was

established in the Cabinet Office to follow through on the

recommendations of the Conference. The group is working

toward compiling a concrete reform proposal to be

reflected in the Government of Japan’s Basic Economic

Policies (“Honebuto”), which is slotted for Cabinet approval

in June 2009. We expect that continued media coverage

of the issues covered in the report will stimulate consumer

interest in the health care sector, including supplemental

medical and cancer insurance products.

Major Changes in

Copayments for the Employed

(Age 69 or Under)

Japan has a compulsory and universal public health

care insurance system. The system’s costs are covered by

premiums paid by the insured and their employers, as well

as taxes and copayments paid by patients. Given Japan’s

aging population and declining birthrate, however, the

system has been under great financial strain, and

copayments have been rising. A 10% copayment was

introduced for salaried workers under 70 in 1984. In 1997,

it was raised to 20%, and in April 2003 to 30%.

Major Changes in Copayments for the Elderly

(Age 70 or Over)

Feb. 1983

Oct. 1984

Introduction of

10% copayment

Introduction of small


Jan. 1992




Sep. 1997




Sep. 1997

Copayment hike

to 20%

Jan. 2001


of fixed



Oct. 2002



Apr. 2003

Copayment hike

to 30%

Oct. 2006



Apr. 2009








*Husband and wife or individual with annual income exceeding ¥6.37 million or ¥4.5 million, respectively,

including pension

**Husband and wife or individual with annual income exceeding ¥5.2 million or ¥3.8 million, respectively,

including pension

***Advanced Elderly Health System was introduced from April 2008


Those over 70 have been required to pay a fixedamount-per-visit

copayment since 1983 for outpatient and

inpatient services. Since then, the copayment has

increased several times. In October 2006, the copayment

for high-income seniors was raised to 30% and, in April

2010, the copayments for other seniors age 70 to 74 will

rise from 10 percent to 20%.

¥20,000 of daily out-of-pocket hospitalization expenses,

compared with 21.7% just three years earlier.

The Public’s View on the

National Health Care System

In addition, recognizing that the national health care

system will be unsustainable as the costs of providing

medical care for the elderly swell given current trends, in

April 2008, the Government of Japan introduced

Advanced Elderly Health, a system that separates medical

treatment fees for advanced elderly from that of the

younger population. The Advanced Elderly Health system

aims to reduce medical costs by preventing unnecessary

long-term hospitalization and over-treatment and overmedication

of patients. We believe such changes will lead

to enhanced consumer interest in the health care sector,

including supplemental medical and cancer insurance


Daily Out-of-Pocket Hospitalization Expenses

More than ¥20,000

¥15,000 to ¥20,000

¥10,000 to ¥15,000

¥7,000 to ¥10,000

¥5,000 to ¥7,000

Less than ¥5,000

Source: Japan Institute of Life Insurance, 12/07







2004 2007







Much of the need for our products arises because many

expenses are not covered by Japan’s health care system.

Patients must bear these expenses, which can include

extra charges for private or semi-private hospital rooms,

special treatments or medicines not covered by the

national health care system, transportation costs for family

members traveling to the hospital, and daily necessities

while in the hospital. According to the most recent

December 2007 survey by the Japan Institute of Life

Insurance, nearly one-third of patients had more than

Given Japan’s aging population and declining birthrate,

the Government of Japan faces tight financial conditions,

and many people worry that additional increases in out-ofpocket

expenses will be necessary. Some worry not only

that their burden will increase, but that the scope of

government coverage may be reduced as well.

The percentage of people who believe that the cost of

their medical care will be covered entirely by public health

care insurance has been decreasing every year. The most

recent survey in December 2007 shows that since 1993,

those who believe public health care insurance will be

inadequate to cover medical expenses has increased from

41% to over 65% of the population.

Japan’s rapidly aging population and low birthrate is

putting the country’s social security system under

increasing strain, which is forcing Japanese consumers to

bear an ever-growing share of the burden. Despite the

election campaign environment in Japanese politics, the

political consensus is that the current system cannot be

sustained without significant changes. In this rapidly

changing environment, the companies that prevail will be

those that are customer-centric. Accordingly, Aflac is wellpositioned

to take advantage of the opportunities

presented and we believe will continue to be a successful

company in the Japanese market.


Aflac Japan Marketing

Takaaki Matsumoto

First Senior Vice President; Director of Marketing and Sales, Aflac Japan

I will be sharing with you Aflac Japan’s marketing

activities as well as recent changes in our business


Shares of Third Sector New Sales*

(FSA Premium Basis, Life Industry Only)

domestic insurers such as Nippon and Sumitomo have

been on the decline across the board. However, even in

the more competitive environment, Aflac was able to

achieve better sales results than the industry as a whole.

Share of In-force Third Sector Business*

(FSA Premium Basis, Life Industry Only)






21.4 21.0 21.1 21.2 21.2


3/05 3/06 3/07 3/08 12/08

*Excludes Kampo







Let me start with the market shares for major insurers in

terms of new annualized premium sales in the third sector,

which includes cancer and health-related products such

as EVER. Based on the FSA data from April to December

2008, which is the most up-to-date information available,

Aflac’s share of third sector sales was 15.1%. Our share

has improved since 2007. And as you can see, we still

retain the number one position in the industry in terms of

new sales of third sector products.


Third Sector New Sales

(March 2006=100, FSA Premium Basis, Life Industry Only)






Industry Total

This chart shows the share of annualized premium in

force for third sector products for various companies. Aflac

had a 21.2% share of the in-force business as of

December 2008 and this measure has remained very





New Sales of Cancer Insurance

(New Annualized Premium, Yen in Billions)








¥8.8 ¥9.4




2004 2005 2006 2007 2008 3/08 3/09

% Inc. (11.9) 16.3 .5 12.9 3.6 2.8 7.4


3/06 9/06 3/07 9/07 3/08 9/08

This chart shows the trends in third sector new sales for

some of our principal competitors on an FSA basis with

March 2006 as the base year. As you can see, new sales

of third sector products for the industry as a whole have

been almost flat since September of 2006.

In addition, due to the intensifying competition, the

claims nonpayment issue and the challenging market for

first sector insurance products, new sales at large

Now, let me give you an overview of the sales of our

founding product, cancer life.

Sales of cancer insurance in 2008 grew 3.6% over the

prior year. One of the reasons for this growth was robust

sales of our upgrade policy that allows existing cancer

policyholders to increase their benefit levels to equal that

of Cancer Forte, our latest cancer product. This upgrade

policy was introduced in January 2008. In the first quarter

of 2009, cancer insurance sales were up 7.4% over the

first quarter of 2008. The upgrade policy accounted for

26% of cancer sales in the first quarter. Since its January

2008 introduction, we have sold 430,000 upgrade policies.


However, we still have approximately 13.6 million

customers who are eligible to purchase the upgrade


As Tonoike-san mentioned, we believe the cancer

insurance market still has considerable room for growth.

The market penetration for cancer insurance is relatively

low, yet expensive treatment costs and the aging

population mean the need will only continue to climb.

Therefore, we will continue to strongly promote cancer

insurance sales.

Now let me move on to medical insurance.







New Sales of Medical Insurance

(New Annualized Premium, Yen in Billions)




¥37.6 ¥38.6

¥9.9 ¥9.3

2004 2005 2006 2007 2008 3/08 3/09

% Inc. 10.7 27.1 (18.8) (3.8) 2.7 17.6 (5.4)

Following the introduction of EVER in 2002, Aflac

became the top seller of stand-alone medical polices and

has remained in that position ever since. However, due

primarily to the claims nonpayment issue, and the

intensifying competition in the medical insurance market,

our medical insurance sales have remained virtually flat

since 2006.

Medical insurance sales in 2008 rose 2.7% over the

prior year. One of the factors driving that growth was the

introduction of new markets obtained through Gentle

EVER, a nonstandard medical product we launched in

August 2007. This product allowed us to extend our

market reach to new customers. In the first quarter of

2009, however, as sales of Gentle EVER had peaked,

medical insurance sales were down 5.4% year on year.

We will seek to increase medical insurance sales by

developing products that can meet the needs of a broader

range of customers.

Next, I would like to touch upon key factors consumers

consider when purchasing medical insurance. There are

several factors that influence a consumer’s decision about

the most appropriate company to buy medical insurance

from. However, a survey by an independent organization

shows that the most important criteria when selecting an

insurance company for medical products is “proper claims

payments,” followed by responsiveness and coverage.






Consumer Perceptions of Insurers

25% Aflac Nippon Alico

Proper claims

Easy to understand

payments Responsiveness Coverage materials Low premium

Source: Yahoo Value Insight Corporation, 4/09

This chart shows consumers’ perceptions of Aflac, and

two top competitors, Nippon Life and Alico for key

purchase considerations. As you can see, Aflac ranked

higher than the other two companies in four out of the top

five factors, which suggests we are supported by

consumers not only because we provide favorable product

features such as coverage and affordable prices, but also

because we are more responsive and our products are

easier to understand.




The Most Preferred Insurer for

Cancer and Medical Insurance

8/08 12/08 4/09










34 Aflac







8/08 12/08 4/09







Selection Factors for Medical Insurance












Proper claims

Easy to understand

payments Responsiveness Coverage materials Low premium

Source: Yahoo Value Insight Corporation, 4/09


0 10 20 30 40%

Source: Cross Marketing Corporation

0 5 10 15 20%

This chart indicates the results of a survey conducted

by another independent research firm on the most

preferred company for purchasing cancer and medical

insurance. Consumer preference for both Aflac’s medical

and cancer insurance has declined somewhat since

August 2008 due primarily to consumers’ concerns about

the financial strength of foreign insurers in the wake of the

extensive Japanese media coverage on AIG. However, the

result of the latest survey, which was conducted last

month, continues to show that Aflac remains the “most

preferred insurer” for both cancer and medical insurance.

We firmly believe this shows that Aflac is offering

competitive products that best meet consumers’ needs. In

addition, we are widely accepted by consumers, thanks in

great part to our effective branding. Later, I will talk about

some of our initiatives aimed at reinforcing our branding.

Policyholders’ Review of Insurance Portfolio

Do not intend to

review – 37%

Source: Macromill, 12/08

Reviewed over the

past year – 18%

Considering or

have intention to

review – 45%

Because of the uncertain economic outlook, many

consumers are reviewing their existing insurance portfolio

mainly in an effort to try to reduce premium payments. In

fact, a recent survey indicated that 18% of the

respondents said that they reviewed their existing policies

over the past year. On top of that, 45% replied that they

are considering or intend to review their existing policies.

Based on this observation, we enhanced our life

product offerings. In March 2009, we introduced a new

first-sector product called “GIFT.” Typically, a life insurance

policy pays a death benefit in a lump sum. By contrast,

GIFT provides beneficiaries, typically family members, with

a monthly annuity until the insured would have turned 60.

For example, a male who purchases the product at age 30

pays a monthly premium of ¥6,140. If he dies at age 40 or

50, the beneficiary of the plan will receive ¥200,000 every

month for 240 months or 120 months, respectively.

Because of the affordability of Gift, compared with other

life insurance products, we believe it will appeal to

consumers who want to review their insurance portfolio to

reduce premium payments.

GIFT is a door-opener for our agents, and we believe it

will result in cross-selling opportunities of our two pillar

products. Although it has only been about a month since

we introduced GIFT, two thirds of GIFT purchasers so far

have also bought some other insurance products such as

EVER or cancer at the same time.

Aflac’s Child Endowment Product

Purchases Following

Policyholders’ Portfolio Review

Other – 22%


insurance – 26%

Source: Macromill, 12/08

Medical and life


coverage – 52%

Of those who reviewed their insurance portfolio over the

past year, about 80% actually decided to purchase a new

medical insurance policy as a result of the review.

Furthermore, 52% even chose to buy life insurance

coverage on top of the medical insurance. This suggests

that if Aflac can offer an appropriate life insurance policy to

those customers when selling medical insurance, we

would better service them by catering to their needs for

both medical and life coverage.

Aflac also launched a new child endowment product in

March. Despite the declining birthrate and aging

population, about one million babies are born every year in

Japan. The birth of a child is a big event that prompts the

family to consider and review their family members’

insurance. This product contains several features that we

believe consumers will like. It provides a death benefit until

the child reaches age 18. It also pays a lump-sum benefit

at the time of the child’s entry into high school as well as

an educational annuity for each of the four years during his

or her college education. When considering the purchase

of a child endowment product, many consumers look to

the product’s return ratio. With the launch of our new

product, we now offer the highest return ratio in the


Product Structure of “GIFT”

Age at Death:


40-yr: ¥200,000 × 240 months = ¥48 million


¥200,000 × 120 months = ¥24 million

Age 30 40 50 Age 60

30-yr. male, paid up by age 60

“Gift” annuity payment amount of ¥200,000 per month


Other Products Owned by

Child Endowment Policyholders

Promotion: “Duck Insurance Consultation”

• Television commercials and

Internet promotion

• Message to consumers:

» Convenient locations

» Face-to-face consultation

Many consumers who purchased child endowment

insurance also bought, or considered buying, other

policies such as life, medical and cancer insurance at the

same time.

Therefore, we believe that child endowment insurance is

an effective product for creating new opportunities to

contact customers in order to sell them cancer and

medical insurance products.

We believe the Child Endowment Insurance, as well as

GIFT, perfectly match the needs of consumers who are in

their thirties and want to think about taking out a new

policy or reviewing their existing policies due to the birth of

a child. In Japan, these consumers are called “Baby

boomer junior” and constitute a large portion of the

Japanese population pyramid. We believe by selling these

new products, we can effectively approach this bracket of

the population. Combining these new products with our

already popular cancer and medical insurance will help us

strengthen our relationship with customers as well as

improve sales.

Number of Agencies and

Share of New Sales by Type of Agency

In the second half of 2008, Aflac introduced a new

promotional campaign called “Duck Insurance

Consultation.” This campaign is reaching consumers

through television commercials and the Internet.

We use the Aflac Duck to convey the message that

consumers can purchase our products at convenient

locations with face-to-face consultations. We let them

know that our agents listen to each person’s needs and

customize coverage to respond to those needs.

Television Commercial

Following the recent financial crisis, insurers have come

under increasing public scrutiny about their financial

strength. In such an environment, Aflac has focused on

developing a stronger brand image as a “reliable insurer

with which customers can sustain a relationship for a


Aflac Japan New Annualized Premium Sales

(Yen in Billions)





¥117.5 ¥114.6 ¥114.7





¥27.6 ¥27.5


In addition to such traditional channels as affiliated

corporate agencies, independent corporate agencies, and

individual agencies, Aflac has added diverse sales

channels over the years, including Dai-ichi Life, banks and

Japan Post Network Co., Ltd. To support sales through

our various channels, we are also focusing on effective

promotion activities.


2004 2005 2006 2007 2008 3/08 3/09

% Inc. 1.1 5.1 (8.8) (2.4)

5.0 (.4)

This chart shows the trend in the total new annualized

premium sales of Aflac Japan. We were not able to

achieve our sales target in 2008. As you all know, the

Japanese economy has been deteriorating drastically since

the second half of 2008. Japan’s GDP in the fourth quarter

of 2008 shrank at an annualized rate of 12.1%, and


everyone expects further and significant contraction in the

first quarter of this year. In addition, GDP is expected to

decline for the full year of fiscal 2009. In this environment,

we are encouraged to see that Aflac Japan’s new sales in

the fourth quarter of 2008 and the first quarter of 2009

were basically flat from a year ago, down just .1% and

.4%, respectively. For the second quarter, although we

have one fewer production day than a year ago, we are

comfortable with how new sales have been doing so far in

the quarter.

Marketing Objectives for 2009

As you already know, Aflac Japan’s goal is to produce

flat sales to a 5% increase in 2009. In order to achieve this

objective, we will provide more effective support to our

various distribution channels by customizing our efforts to

best meet the unique attributes of each channel. On the

distribution side, we will continue to implement agency

segmentation, strengthen recruiting and training and

further promote bank channel sales. At the same time, we

believe we will benefit from our newly introduced products

such as GIFT and new child endowment, and will carry out

promotional campaigns to reinforce our corporate brand.

By implementing all of these initiatives, we believe we will

be able to achieve the sales target.

Aflac Japan remains in a strong competitive position in

the fastest growing sector of Japan’s insurance market.

Despite the uncertainty of consumer sentiment from the

global economic crisis, consumers continue to need the

third sector insurance. The aging population and low birth

rate continue to put pressure on the public health care

system. Therefore, we believe we can achieve sustainable

growth in this market.

Aflac Japan Sales

Koji Ariyoshi

Senior Vice President; Deputy Director of Marketing and Sales, Aflac Japan

I will be providing you with an overview of Aflac Japan’s

sales channels, the sales teams supporting these

channels, and the sales activities created to enhance the

efforts of our agents.




Number of Agencies by Type




Let me begin with our sales channels.

The graph shows the growth in the number of Aflac’s

sales agencies. Although the number of affiliated corporate

agencies has increased slightly, the number of

independent/individual agencies has grown tremendously.

This growth is largely attributable to two targeted

recruitment activities. First, we established recruitment

objectives for our sales office staff. And second, we

deployed personnel to our retail market sales offices who

are dedicated to agency recruitment.

It is not uncommon for affiliated corporate agencies to

represent many insurance companies. In fact, at the end of

last year, only 21% were exclusive to Aflac. However,

among independent corporate and individual agencies,

67% were exclusive.



1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008


Face-to-face sales

at home

On the Internet

Face-to-face sales

at agencies/shops

Face-to-face sales

at worksite

Communication Preferences

for Insurance Purchases

Source: Cross Marketing Corporation, 4/09





0 10 20 30 40%

We believe the increase in the number of sales agencies

reflects Aflac’s goal of being responsive to consumers and

their changing needs. In the past, domestic life insurance

companies deployed a significant number of sales

employees and counted mainly on one-on-one sales at

both consumers’ homes and worksites, which is still the

case today. By comparison, Aflac previously focused on

affiliated corporate agencies, which used a mass-sales

approach, relying on solicitation materials that were

distributed at worksites. We began to change that focus in

the mid 1990s as the deteriorating Japanese economy

lowered the response rates to our worksite sales


In addition, consumers’ desire to communicate directly

with insurance agents has become more varied and

interactive. As shown on this chart, some people prefer

face-to-face approaches at home, at agencies or at

service shops, while others prefer to take out an insurance

policy by using the Internet.

To accommodate the changing needs of our

customers, we have been recruiting a lot of independent

and individual agencies. These agencies use the face-toface

consultative approaches that many consumers want.

As such, we are being more responsive to potential

consumers. For those who prefer to go online, they can

make an inquiry or get a brochure of our insurance

products through Aflac Japan’s Web site.

As consumers’ needs have changed, the sales

contributions by agency type have also changed. From the

mid-1970s, when we first established our operations in

Japan, through the mid-1990s, affiliated corporate

agencies served as the most vital sales channel for us.

However, in the wake of Japan’s sharp economic

downturn in the 1990s, many office employees were laid

off and workers’ disposal incomes were on the decline. In

addition, more and more consumers wanted to choose

from a variety of insurance products, rather than just those

provided by their employers. As a result, people began to

purchase insurance products at locations other than the

worksite. Additionally, due to heightened security

requirements and the enforcement of Japan’s Personal

Information Law, limitations on worksite insurance sales

have become stricter in many cases.

Against this backdrop, we have implemented supportive

measures to help affiliated agencies, which are responsible

for a large number of policies in force. For example, we

implemented direct mail campaigns to help affiliated

agencies boost their cancer sales through our cancer

upgrade product. A strong complement to our traditional

distribution is our alliance with Dai-ichi Life. This alliance

was formed in 2001 and gives us access to customers we

were not reaching through our traditional channels. Most

recently, the addition of the bank channel and the Japan

Post Network Co., Ltd. has provided more avenues for us

to reach additional consumers.

The impact of the changes to our distribution system

has been significant. In 1992, affiliated corporate agencies

represented 61% of our sales. In 2008, affiliated agencies

made up 35.5% of our sales, with independent and

individual agencies accounting for 55%. Aflac Japan is

firmly committed to exploring various potential sales

channels, while still offering necessary support to our

traditional sales channels.

Number of Banks Selling Aflac Products

(Third Sector Products Only)









Historical Transition of Sales Channels

(New Annualized Premium Sales)





(Yen in Billions)









12/07 3/08 6/08 9/08 12/08 4/09

Mega banks, regional banks

Shinkin banks

80 ¥68.4





1992 2000 2008





1992 2000 2008






As you know, insurance sales at banks were fully

deregulated in December 2007, and banks have become

an important channel for insurance sales. This chart

indicates changes in the number of banks selling Aflac’s

third sector products. By the end of April, the number had

grown to 267 banks representing Aflac. Our products are

sold by many more banks than any of our competitors,

and we expect Aflac to continue to increase sales through

the bank-channel.


New Sales through the Bank Channel

(Yen in Millions)














3/08 6/08 9/08 12/08 3/09

99 Area

sales offices





Dai-ichi, Japan


Sales Organization

2008 2009

10 Territories

13 Financial


sales offices





11 Corporate

sales offices



agencies in

Tokyo, Osaka,



Retail &



61 Retail

sales offices







Japan Post

Bank Channel


10 Financial


sales offices


Sales through banks experienced strong sequential

growth through the first three quarters of 2008. When the

financial crisis emerged, the downturn dealt a heavy blow

to banks’ insurance sales, and sales of Aflac’s products

were no exception. In the fourth quarter, we saw a drop in

new sales, compared with the third quarter. As we have

discussed, banks had to spend most of their time following

up with customers who had purchased investment trusts

or variable annuities from them. Customers have also

become extremely cautious about purchasing investment

products, which reduced the number of branch visitors

and thus lessened opportunities for third sector sales.

Additionally, in the first quarter of 2009, banks began to

concentrate on generating profits by using a governmentsponsored

loan program for small and medium

businesses, thus limiting the time available for insurance

sales. However, bank sales in the first quarter of this year

improved over the fourth quarter of last year. And we

expect bank sales to do even better in the second quarter

when Japan’s banks begin their new fiscal year in April.

We believe banks will pay attention to third sector

products as a potential means to make up the shortfall in

revenues caused by declining commissions from

investment trusts and variable annuities. Additionally, many

banks have set specific targets for insurance sales. Once a

sales target is set, it allows us to work with the bank to

closely monitor sales activities in the field and quickly

respond to market changes by implementing new effective

initiatives. Further, we believe banks are motivated to sell

Sanjuso, the single-premium, critical disease product we

launched last year, as well as the new child endowment

product Matsumoto-san discussed. As we look to the

future of bank sales, we expect the number of banks that

will adopt Aflac products to increase and we expect sales

by banks that already offer our products to further expand.

As another facet to enhance our ability to reach

consumers, we restructured our sales support organization

in January 2009 to more effectively support our various

sales channels. This chart shows both the previous and

current structure of Aflac Japan’s sales organization. Last

year, within 10 territories, 99 sales offices were in charge

of local agencies and 13 sales offices were responsible for

bank channel sales. This year, we have classified agencies

into three divisions: Large Corporate Marketing, Retail and

Mid-Corporate Marketing, and Bank Channel Marketing.

We believe grouping agencies according to their function

rather than strictly by their location allows us to more

directly meet each agency’s needs with the most relevant

and specialized support.

Specifically, the Large Corporate Marketing Division has

11 sales departments that look after affiliated agencies in

the Tokyo, Osaka and Nagoya areas. The Retail & Mid-

Corporate Marketing Division has 61 sales offices around

Japan and provides support to independent/individual

agencies throughout Japan as well as affiliated agencies in

areas excluding Tokyo, Osaka and Nagoya. The Bank

Channel Marketing Division has 10 sales offices and

supports all banks throughout Japan, as it did last year.

These changes allow us to provide more effective support

to different distribution channels that have diverse

characteristics and needs while focusing the

responsibilities of each marketing division internally.



Recruitment of New Agencies












2004 2005 2006 2007 2008 3/08 3/09


Although recruitment of new agencies declined from

2005 through 2007, agency recruitment is a renewed

priority for us. In 2008, we had a significant improvement

in recruiting, which was up 23.4%, compared with 2007.

We believe this was a result of the weak labor market in

Japan due to this economic downturn as well as certain

improvements we have made in our recruitment activities.

For instance, we increased the opportunity for potential

agents to attend group recruit meetings.

Previously, we held one-on-one meetings with those

who wanted to talk about becoming our associates. Now

we hold group meetings once or twice each month at our

sales offices around the country, where those who are

interested in becoming a sales agent get together to get

explanations on Aflac and its business. The group

meetings make the recruiting process far more efficient

than before from an Aflac standpoint. From the point of

view of potential agents, group meetings have less

pressure than a one-on-one meeting.

When making group presentations, we give an overview

of the company, how the agency system works, how

commissions are paid and how our training program

prepares agencies for a successful career at Aflac. This

overview is followed by a face-to-face meeting with each

interested candidate. We began testing this recruiting

approach in limited territories last year. Based on their

positive results, we are now using this approach

throughout Japan as we continue to intensify our efforts to

effectively recruit new agencies. We recruited 1,041 new

agencies in the first quarter, which was up 35% compared

with a year ago.

Aflac’s Support for New Agencies

them to receive a one-year portion of commissions in a

lump sum prior to the actual payment of premiums, which

helps them get their business on track more quickly and

cover some of their own necessary expenses. We also

offer another type of incentive to those making use of our

online application system, e-App, in their sales. Using e-

App reduces application documentation errors and

enhances the overall efficiency of policy issuance.







Growth of Newly Recruited

Producing Agencies



2006 2007 2008


We believe our supportive efforts for newly recruited

agencies are paying off. During the early stage of training,

our goal is to increase the number of agencies that

produce new sales of at least ¥200,000 or more within

three months after registration. Based on that measure, we

had a 13.9% increase in newly recruited producing

agencies in 2008.

Promotion of “Light Consulting” Training

• New Associates Basic Training - ABT

• Rookie Challenge Bonus

• Advanced commissions

• e-App incentive



New Annualized

Premium Sales

(Yen in thousands)

¥10,000 or more

Now, let me share some important ways we provide

support to newly recruited agencies. We believe that early

success at Aflac is an important indicator of future and

long-term success. For this reason, we have implemented

various initiatives to increase the number of producing


For example, new agencies attend New Associates

Basic Training (ABT), a six-month training program that

uses repeated group training sessions and visits with

potential customers to improve their sales skills. Trainees

focus on improving face-to-face consultation skills and

learn how to proactively identify potential customers in the

direct market and in small- to medium-sized companies.

We are also employing other methods to provide

incentives and help new recruits. For example, our “Rookie

Challenge” bonus program is designed to motivate new

agencies to produce sales at a specified level within the

first three months. Additionally, new agencies may choose

to enroll in an advance commission system that allows

2-3-year agencies

“Light Consulting”

Newly registered agencies

“New ABT”

From ¥2,400 to ¥10,000

Less than ¥2,400

To further improve new agencies’ productivity, we

launched an advanced training program called “Light

Consulting” for New ABT graduates who have produced

new sales of ¥2.4 million to ¥10 million. This advanced

training program is designed to enhance agencies’ abilities

to assess customers’ current needs, propose solutions

that respond to those needs, and ultimately provide a

customized and comprehensive portfolio of Aflac health

and life products. In addition, veteran agencies with

experience and skills will be eligible for the support system

based on their growth stage.

We will continue to enhance the program content to

achieve better agency productivity.


Agency Segmentation

Agency Composition by Stage



Number of


Percentage of

Total Agencies

Share of New

Annualized Premium

Sales in 2008

AA 460 3% 40%

A 1,150 6 21

B 2,760 15 17

C 8,100 45 13



Agencies 5,440 31 9

Total 17,910 100 % 100 %

*Excluding Dai-ichi, Special Corporate Sales Dept., subsidiaries, banks, Japan Post

Network Co., Ltd. and agencies that will be de-licensed

This year, we will complete the rollout of our agency

segmentation initiative we began last year. From the

beginning of 2008, we started a system to identify and

track low performing agencies and manage those agencies

at our headquarters in Tokyo. Additionally, we began to

segment higher-performing agencies by size, growth

potential, and whether they do business exclusively with

Aflac or not, as well as various indices including the degree

of contribution to Aflac’s sales growth.

Support Stance According to

Agency Growth Stage

This chart shows the number of agencies and their

share in new sales at each level. Although agencies ranked

“AA” and “A” together only account for about 9% of the

total number of agencies, their combined share of 2008

new annualized premium sales was 61%. We believe it is

important to continue preferential support to “AA” and “A”

level agencies to ensure our top agencies are motivated

and productive.

Support Measures by Stage

• Additional bonuses for high-stage agencies

• Financial support for agent recruitment

• Agency listing on Aflac Japan’s Web site








Growth Stage





We use a variety of measures to support agencies at

each level. One area of support is for sales of our mainstay

products, cancer and medical. To high-stage agencies, we

pay an extra bonus fee in addition to regular commissions.

In addition, high-stage agencies receive financial support

for recruiting new agencies. For example, we pay them a

one-time fee when they recruit an agent, and will continue

to pay them an incentive bonus based on the amount of

new sales produced by that specific new agent during the

first six months after the recruitment. Also, our official Web

site only lists the names of high-stage agencies. We

believe agency segmentation allows us to effectively

allocate our marketing resources and achieve maximum


We have segmented agencies that have two years’

experience as our sales agencies. We ranked them from

“AA” to “C,” according to their stage, and will review their

ranks on an annual basis based on their sales

performance. Agencies categorized as “AA” are extremely

important to Aflac because they tend to be big in size and

have high potential for further growth. As a result, they

receive more preferential support. It’s important to note

that we will actively support those agencies categorized as

“C” that are highly motivated to expand their business so

that they can move up to a higher rank. However, we will

only provide limited support to other agencies that are

ranked as “C.” By providing differential support based on

the growth stage of each agency, we will seek to realize

fair and preferential allocation of marketing resources and

achieve maximum results.

As I mentioned, so far, Aflac’s distribution system has

evolved over many years to meet the needs of our existing

and potential customers. We continue to believe our vast

distribution network is one of our primary competitive

strengths in the Japanese insurance market. Going

forward, we will continue to expand this agency network

and enhance service quality in order to realize sustainable

growth of Aflac Japan.

As you already know, Aflac Japan’s goal for the year

2009 is increasing its new sales from flat to 5%. As

Matsumoto-san mentioned, we are gearing up to develop

products and promotions that will further differentiate us

from our competitors. At the same time, we will effectively

step up our support to banks and other new channels in

addition to our traditional channels. Through these efforts, I

believe we are positioned to achieve our sales goal for 2009.


Aflac Japan Bank Channel Sales

Hisayuki Shinkai

First Senior Vice President, Financial Institutions, Aflac Japan

I would like to explain the sale of insurance products

through the bank channel, which was fully deregulated on

December 22, 2007.

December 1998

April 2001

October 2002

December 2005

December 2007

History of Bank Sales

Investment trusts first offered

Long-term fire insurance related

to housing loans, etc.

Individual annuity, savings-type

accident insurance with annuity, etc.

Single premium whole-life, singlepremium

endowment insurance, etc.

All remaining insurance products

Let me begin with a brief regulatory history of bank

channel sales. Sales of financial products through the bank

channel began in December 1998 when the sale of

investment trust products was allowed. Since then, the

pace of deregulation has accelerated. The sales of

mortgage-related, long-term fire insurance and individual

annuity products were deregulated in April 2001 and

October 2002, respectively. Then, in December 2005, the

ban on the sale of single premium whole life and

endowment insurance was lifted. Finally, on December 22,

2007, the remaining restrictions were fully eliminated,

including third sector products.

Financial Institutions in Japan

of 548 branches, these four banks offer a wide range of

banking services throughout the nation, from investment

banking and wholesale to retail and private banking. In

addition to over-the-counter sales, the mega banks also

provide direct sales over the phone and the Internet. The

mega banks are also increasing the number of financial

planners they employ and opening branches to provide

new types of services.

There are 108 regional banks in Japan, including

second-tier regional banks, which were originally mutual

banks and converted to ordinary banks in 1989. In the

retail banking division, door-to-door sales now represent

the second-largest channel after over-the-counter sales.

Some regional banks based in the Tokyo metropolitan area

offer retail banking businesses similar in scale to mega


Shinkin banks are cooperative financial institutions

specializing in services for small to medium businesses

and individuals. Their sales activities are deeply rooted in

local communities, and door-to-door sales make up a

significant part of their retail business. They have a vast

network of nearly 7,700 branches, which accounts for

more than one-third of all bank branches. The National

Association of Shinkin Banks selects industry-standard

products and provides an administrative framework to its

members. With the association’s selection of Aflac’s

cancer and medical insurance, sales by shinkin banks

have been expanding, and we expect further success at

shinkin banks.

Sales Power of Banks

(Outstanding Market Value, Yen in Trillions)

No. of


No. of Branches


Avg. per


No. of Employees


Avg. per



Investment Trust

Mega banks 4 2,192 548 79,129 19,782

Major banks 7 466 67 25,996 3,713

Regional banks 64 7,442 116 126,634 1,979

Second - tier

regional banks 44 3,252 74 48,194 1,095

Shinkin banks 279 7,684 28 112,445 403

Other banks 7 104 15 1,483 212

Total 405 21,140 52 393,881 973






¥3.3 ¥4.5







¥54.8 ¥52.8



As you can see, Japan has a total of 405 banks,

including mega banks, major banks, regional banks and

shinkin banks. These banks have a total of approximately

21,000 branches and 390,000 employees in Japan, and

they represent our target market. In addition, there also are

some credit associations and agricultural cooperatives,

which tend to be very small in size.

The mega banks typically include Mizuho, Tokyo-

Mitsubishi UFJ and Sumitomo Mitsui. We have also

included Resona as a mega bank due to its large-scale

and extensive nationwide sales network. With an average


12/99 3/00 3/01 3/02 3/03 3/04 3/05 3/06 3/07 3/08 9/08 3/09

Source: Investment Trusts Association of Japan

Banks have had great success in selling investment

trusts and annuity products. At the end of 1999, the total

market value of investment trust products sold by banks

stood at ¥3.3 trillion. This amount jumped to ¥54.8 trillion

in March 2007. Due to market turbulence under the

financial crisis, the market value of investment trust sold by

banks shrank to ¥39.4 trillion as of March 2009. However,

this amount is still huge and accounts for 51.6% of the













Sales Power of Banks

(Outstanding Market Value, Yen in Trillions)


Variable Annuity


The same is true with variable annuities, which are now

the mainstay products in the bank channel. Market value

of these products sold by banks increased from ¥1.1

trillion at the end of March 2003 to ¥16.4 trillion at the end

of September 2008.

Characteristics of Banks in Japan

• Large allocation of household financial assets to


• Consumers reliance on banks

» High credibility

» Consolidated transactions



• Door-to-door sales

» Unique in Japan

» Regional banks, shinkin banks build strong


• Fewer independent financial planners (FP)

» 85% of FPs belong to financial institutions




3/03 3/04 3/05 3/06 3/07 3/08 9/08

Source: Insurance Daily

Japan’s banks have several characteristics that explain

why we believe this channel will be good for insurance

sales. First, consumers are very comfortable doing

business at banks. For instance, 55% of household

financial assets were cash and deposits at year-end of

2008. This is almost four times that of the United States,

which was 15%. Also, when customers purchase a

financial product, they often transfer the funds from their

accounts at the bank’s counter.

Second, customers’ confidence in banks is high in

general. Accordingly, there are many who prefer to

purchase a financial product at the same time they make a

deposit at the bank, so they can take care of both

transactions collectively.

Third, door-to-door sales are unique to Japan and

rooted in the Japanese markets. Through this approach,

shinkin banks and other local financial institutions build

strong relationships with their customers.

Fourth, there are not many independent financial

planners in Japan. An October 2007 survey conducted by

Japan Association for Financial Planners showed that 85%

of qualified financial planners belong to financial

institutions. As a result, many consumers tend to seek

financial advice from banks.

Relationships with Banks

Mega banks 4 1,346 49 79 62%

Major banks 7 283 6 26 23

Regional banks 62 497 76 127 60

Second - tier

regional banks 42 222 27 48 56

Shinkin banks 145 186 44 112 39

Total 260 2,534 202 392 52%

*In thousands

Business with Affiliated

Corporate Agencies

No. of Affiliated



No. of Cancer


in Force*

No. of Cancer



Historically, Aflac has strong business ties with banks.

For more than 30 years, Aflac has been selling third sector

insurance products to bank employees and others through

bank-affiliated corporate agencies. As a result, we have

extensive relationships with all mega banks and most

major, regional and second-tier regional banks. These long

standing business ties have positively influenced product

selection as well as sales promotion after the full


Banks’ Points of View

• Highly recognized company and products by


» Simple and easy-to-explain products

• High commissions

Bank Employees

Related Business

No. of Bank


• Sales support and training

» 10 specialized offices and 250 employees

» Specialized call center for day-to-day



There are several decisive factors banks consider when

selecting an insurer or a product, as well as driving sales.

The first factor is the products. Banks seek products that

are well-recognized by consumers. Aflac Japan has

achieved a strong brand and consumer recognition largely

through its television commercials. Customer surveys

show Aflac is the most preferred insurer for third sector

products. It is also important that a product has easy-tounderstand

features so that the bank staff can easily

explain the coverage. Aflac’s products clearly meet the

needs of banks.

The second factor is commission level. Commissions

paid by Aflac are among the highest in the industry. The

third factor is training and support. In order to respond to

these three considerations, Aflac Japan is now operating

10 bank sales offices nationwide with a total of 250

employees who are dedicated to servicing both banks’

headquarters and branches. And we operate a dedicated

call center for banks to promptly handle daily inquiries from







Number of Banks Selling Aflac Products

(Third Sector Products Only)







Regulatory Concerns

• Detailed regulation imposed


»• Administrative framework frameworkatat banks banks

»• Knowledge Knowledgeand andskills skillsofof salesperson


Cautious behavior at the beginning

Three year monitoring period will end in 2010






12/07 3/08 6/08 9/08 12/08 3/09 4/09


• Financial Instruments and Exchange Law

» Enforced in September 2007

» Applied to investment instruments

» Third sector products not covered

» Affected in case of combined sales

» Require lead time

Shinkin banks

Mega banks, regional banks, etc.

We have always believed that our long-standing

relationships with banks would translate into agreements

to sell our products. Since the end of December 2007, the

number of banks selling Aflac’s products has been steadily

increasing. At the end of April 2009, 267 banks were

selling Aflac’s products, which represent nearly two thirds

of all the banks and we expect that number to increase to

approximately 300 in the near future. We also believe we

have significantly more selling agreements with banks than

our competitors.

The FSA has added some very detailed regulations to

prevent banks from abusing their strong market positions.

One of the major regulations includes a restriction on sales

to executives and employees of corporate borrowers as a

lending condition. Banks are not allowed to sell insurance

products if the number of employees of the corporate

borrower is less than 51. Shinkin banks and other regional

banks dealing with small sized enterprises are permitted to

sell to executives and employees of corporate borrowers

with at least 21 employees. However, in this case, daily

benefit will be limited to ¥10,000 for cancer and ¥5,000 for

medical insurance.

National Association

of Shinkin Banks

• Sales policy

• Recommendation of products

• Administration system

279 Shinkin banks


7,700 branches

The Shinkin Industry


Application for





There is a three year monitoring period for the FSA to

review any abusive conduct by banks with respect to

insurance sales. This period will end in December 2010

and if there proves to be no significant problems during

this period, the aforementioned regulations will be lifted at

that time.

Another issue is the impact of the Financial Instruments

and Exchange Law that became effective in September

2007. This law imposes restrictions on products such as

investment trusts and variable annuities, the value of which

fluctuates in accordance with market conditions. Third

sector products are exempt from the provisions of this law.

However, most regional and second-tier regional banks

are considering the law when selling third sector products

because the same employees are also handling investment

trusts, variable annuities and third sector products.

All 279 shinkin banks are members of the National

Association of Shinkin Banks. The association has been

selecting insurance products and developing

administrative workflows for its members.

Until April 2008, the association had recommended

annuities and non-life insurance products of eight

Japanese insurance companies. At that time, foreign

companies were excluded. Anticipating full bank channel

deregulation, we quickly approached the association to

ask them to recommend our products. Aflac was the only

foreign company among the four that were selected for

third sector products and was the only insurance company

that is allowed to sell both cancer and medical products.

This situation remains unchanged to date.

In order to respond to these regulations, it is necessary

not only to establish a solid management organization

within a bank, but also to make sure that its sales force

has thorough knowledge of relevant laws and regulations.

This is one of the reasons, along with the fact that they

also need to get accustomed to totally new products,

which is generally considered to be several months, for the

bank channel sales to start running in full swing. In

response, Aflac has been providing banks not only with

effective training, but also with sales and administrative

processes in accordance with relevant regulations, thereby

helping banks address all these needs and eventually

contributing to their swift sales expansion.





Bank Channel New Sales

(Yen in Millions)



2008 compared with in 2007, which means banks are

facing new challenges as they see their commissions from

selling these products decline.

Result in the First Quarter 2009






• Impact of financial crisis remained

• Banks’ focus on “Emergency Loan Guarantee

Program” sponsored by government

• New sales stood at ¥1.0 billion




Next, let me comment on new sales results through the

bank channel. As I mentioned, it takes several months for

a bank to start running its sales activities in full scale.

During the first three quarters of 2008, as the number of

banks selling our products increased, we also experienced

strong sequential growth in bank channel sales for the first

three quarters of 2008. New sales were ¥276 million for

the first quarter, followed by ¥680 million and ¥1,311

million for the second and third quarter, respectively.

Although these numbers did not meet our original

expectation, we were still pleased with the growth for the

first nine months of last year. In the fourth quarter,

however, sales through the bank channel fell sharply to

¥959 million following the onset of the financial crisis.

Emergence of Financial Crisis

• Collapse of Lehman and market turbulence

• Depreciation of investment trust, variable annuity

(below par)

• Banks extremely busy in handling customer

inquiries and follow ups

• Customer concerns over investment products

• Traffic significantly reduced

• Less opportunities to sell third sector products

As the financial crisis emerged in September last year

following the collapse of Lehman Brothers, sales at banks

suffered significantly. In many cases, the value of

investment trust and variable annuity products fell below

the paid-in amount and banks were extremely busy

dealing with inquiries from customers who bought these

products from the banks. In addition, the banks voluntarily

explained to all of the relevant customers about the

situation of their financial assets. Customers also became

very cautious about investment type products, resulting in

a significant drop in customer traffic at bank branches.

Accordingly, opportunities and time allowed for insurance

sales at banks declined, and the sales of third sector

products decreased, even though third-sector products

had nothing to do with market fluctuation.

The third sector products are not the only ones whose

new sales had suffered. New sales of both investment

trust and annuity products were also significantly lower in

The impact of the financial crisis continued in the first

quarter 2009. And, on top of that, there appeared to be a

new factor affecting bank sales: the emergency loanguarantee

program sponsored by the Japanese

government. This program was introduced in October

2008 and will be valid through March 2010 as a main

measure for economic recovery. Initially, the total budget

for this program was ¥6 trillion, but it has since been

expanded to ¥30 trillion. Under this program, banks are

able to extend a loan to small and medium enterprises

(SMEs) with virtually no risk because of the government

guarantee. Therefore, regional banks and shinkin banks

have placed top priority on this business. As of March this

year, which is the fiscal year end for most companies in

Japan, approximately ¥10 trillion of loans have been

executed under this program. At banks such as shinkin

banks whose business is mostly done through door-todoor

sales, the same sales person typically handles both

insurance products and loans. Thus, time that can be

allocated to insurance sales was understandably reduced.

Partly due to this new factor, new sales in the first quarter

of 2009 were ¥1.0 billion, which, although not a significant

one, still marked a nice increase of 5.2% sequentially from

the fourth quarter of 2008.

Outlook for 2009

• Sales targets installed inside banks

• Provision of diverse products

• Pursuit of stable fee income sources

• Steady growth expected for 2009 and beyond

As I mentioned before, after the full deregulation, banks

needed some time to ramp up in terms of selling third

sector products because these products were totally new

to them, and also because intensive training was needed

to enhance skills and knowledge of sales person at banks,

including compliance issues. Despite these factors, until

the global financial crisis emerged, by and large, banks

had been able to gradually work through these issues.

Although the aftereffect of the financial crisis possibly

will continue to take hold throughout 2009 and banks will

be busy executing the government guarantee lending

program, we believe sales will turn around and grow in

2009. There are several reasons behind this belief.


First, many Japanese banks have set their sales targets

for the new fiscal year, which starts in April. However, as

far as 2008 is concerned, banks had never handled third

sector products before and therefore they were extremely

cautious about compliance issues. In fact, most of them

were too busy in preparing relevant sales training as well

as arranging administrative frameworks prior to setting up

appropriate sales targets. As a result, the number of banks

setting sales targets was smaller than our estimate. For

fiscal 2009, therefore, we started aggressively negotiating

with banks from the end of 2008, and succeeded in

getting many banks to set a specific sales target for Aflac

products. Now, banks and Aflac are working together in

closely checking sales trends against these specific sales

target and implementing effective measures necessary for

achieving relevant goals.

Second, the products we are offering for sale at banks

are becoming increasingly more diverse. Shortly after the

full deregulation of insurance sales, banks’ top priority was

a clear-cut product and simple administration. In response

to this requirement, Aflac came up with a package product

called the EVER Select Plan (with long-term hospitalization

rider) and Cancer Forte 300 (total diagnosis and surviving

benefit is ¥3 million) as the standard third-sector products.

These products were widely accepted by both banks and

bank customers and as the best plans. In the meantime,

however, the need for less expensive insurance products

has been increasing under worsening economic

conditions. To offer a solution, we started offering Simple

EVER (without riders) with lady’s rider as an option and

Cancer Forte 140 (total diagnosis and surviving benefit of

¥1.4 million) in April of 2009.

Sales of Sanjuso have steadily increased since its

launch in October 2008. However, due to the emergence

of the financial crisis, there have been some delays at

banks in adopting the sale of Sanjuso because this

product is a single-payment product, which is classified in

the same category as investment trust or variable annuity.

Yet, this product is particularly supported by wealthy

customers, who are generally more sensitive to risk

associated with single-payment investment products and

therefore tend to seek for safer products. In addition, we

launched a new educational endowment product in April

2009. This product has proven to match the needs of

banks seeking to promote sales of third sector insurance

products for bank customers’ family members by making

consultation over child’s education as a trigger. This

educational endowment product was adopted by the

National Association of Shinkin Banks, and shinkin banks

started selling this product in May 2009. By leveraging this

product, we expect an increase in revenue from cross

selling of cancer and medical products to bank customers’

family members.

Third, banks are seeking stable fee income sources. As

I mentioned before, sales of investment trusts and annuity

products have decreased since the emergence of the

financial crisis, and banks are now facing the need to

make up the shortfall of conventional fee incomes. Banks

have been busy with generating profits on loans leveraging

the emergency government guarantee program. However,

this is a tentative measure; in order to secure a stable

profit source, banks are increasingly aware of the potential

of third-sector products in an expectation that third-sector

products will become a stable income base in the long

term, although each transactional amount is relatively


In addition to all of these factors, fundamental

conditions for stronger bank sales are being established. In

the 18 months since full deregulation, both the

management and sales force of banks are getting

accustomed to sales of third sector products, and the

skills of sales person are enhanced, which gives them

confidence in facing customers. In fact, the mega banks,

who were the most cautious players, are now expanding

their sales channels and drastically increasing human

resources. For example, Mitsubishi Tokyo UFJ Bank

started with 200 branches and 400 salespersons, but now

it plans to expand the number of branches to 400

branches and increase the number of sales people

accordingly by the end of this year. Mitsui Sumitomo Bank

started with 90 branches and 300 sales people and is also

eager to boost its insurance sales by increasing the

number of insurance-available branches to all 400

branches equipped with an appropriate number of

salespeople by March next year.

The bank-sales market has been steadily growing

despite such a huge negative impact of the current

financial crisis. Banks needed time to get their sales on

track, because they were becoming accustomed to

dealing totally new products, strictly observing compliance

requirements, increasing customers’ awareness that banks

are selling insurance products, and establishing new sales


Now, banks have successfully included third-sector

products into their core retail-banking product portfolio as

part of their strategy aiming to make third-sector products

earn stable sales commissions and prompt additional fee

incomes from banks’ conventional products as part of their

life-planning consultation services that include insurance.

In light of these favorable factors, we continue to believe

the bank channel is a great opportunity for the distribution

of our products and we expect further improvement in this

channel all through 2009 and in years to come.


Cancer Forte (No CSV)


Sample Premium (Monthly Group Rate):

First occurrence ¥ 1,000,000 $ 10,000 30-year-old male ¥ 2,781 $ 27.81

First occurrence annuity* 100,000 1,000 40-year-old male 3,900 39.00

Hospitalization/day 10,000 100 50-year-old male 5,448 54.48

Surgical 200,000 2,000

Outpatient/day 10,000 100

Special outpatient/day 10,000 100

Advanced medical treatment Up to 500,000 Up to 5,000

Lump-sum advanced medical treatment 150,000 1,500

Cancer death 100,000 1,000

*Paid in years two through five following diagnosis.

Aflac Japan’s Product Line

(as of 4/30/09)

EVER (Stand-alone whole life medical)


Sample Premium (Monthly Group Rate):

Hospitalization/day ¥ 10,000* $ 100 30-year-old male ¥ 3,440 $ 34.40

Surgical 100,000 to 400,000 1,000 to 4,000 40-year-old male 4,320 43.20

50-year-old male 5,790 57.90

*Covers overnight hospital stay. Maximum days per hospital stay is 60. Maximum lifetime days is 1,095.

EVER Half (Stand-alone whole life medical)


Sample Premium (Monthly Group Rate):

Hospitalization/day ¥ 10,000* $ 100 Premium cut in half from age 60**

Surgical 100,000 to 400,000 1,000 to 4,000 30-year-old male ¥ 3,820 $ 38.20

40-year-old male 5,120 51.20

50-year-old male 7,900 79.00

*Covers overnight hospital stay. Maximum days per hospital stay is 60. Maximum lifetime days is 1,095.

**Benefits remain the same over the life of the policy.

Premium cut in half from age 65**

30-year-old male ¥ 3,720 $ 37.20

40-year-old male 4,860 48.60

50-year-old male 7,100 71.00

EVER Paid Up (Stand-alone whole life medical)


Premium paid up at age 60 (Monthly Group Rate):

Hospitalization/day ¥ 10,000* $ 100 30-year-old male ¥ 4,850 $ 48.50

Surgical 100,000 to 400,000 1,000 to 4,000 40-year-old male 7,550 75.50

50-year-old male 16,230 162.30

*Covers overnight hospital stay. Maximum days per hospital stay is 60. Maximum lifetime days is 1,095.

Premium paid up at age 65 (Monthly Group Rate):

30-year-old male ¥ 4,360 $ 43.60

40-year-old male 6,270 62.70

50-year-old male 11,030 110.30

Gentle EVER


Sample Premium (Monthly Group Rate):

Sickness or accident hospitalization/day ¥ 10,000** $ 100 40-year-old male ¥ 8,390 $ 83.90

Surgical 100,000 1,000 50-year-old male 11,260 112.60

60-year-old male 14,760 147.60

*Cut in half for occurrences within one year after issue date.

**Covers overnight hospital stay. Maximum days per hospital stay is 60. Maximum lifetime days is 1,095.


Care Master

(One Unit, Individual Coverage)


Sample Premium (Monthly Group Rate):

Care annuity/year ¥ 240,000 $ 2,400 30-year-old male ¥ 1,248 $ 12.48

Lump-sum care benefit* 50,000 500 40-year-old male 1,728 17.28

50-year-old male 2,424 24.24

*First year only

Aflac Japan’s Product Line (con’t)

(as of 4/30/09)

Ordinary Life (Basic plan)


Sample Premium (Monthly Direct Rate):

WAYS 30-year-old male ¥ 8,715 $ 87.15

Payment through age 60 ¥ 5,000,000 $ 50,000 40-year-old male 14,105 141.05

50-year-old male 29,995 299.95

Whole Life

Sample Premium (Monthly Direct Rate):

Payment through age 60 ¥ 5,000,000 $ 50,000 30-year-old male ¥ 9,575 $ 95.75

40-year-old male 15,125 151.25

50-year-old male 31,210 312.10



Sample Premium*(Monthly Direct Rate):

Annuity/month ¥ 200,000 $ 2,000 30-year-old male ¥ 6,140 $ 61.40

35-year-old male 6,560 65.60

40-year-old male 7,000 70.00

*Payment through age 60

Child Endowment


Sample Premium** (Monthly Direct Rate):

Lump-sum education ¥ 500,000 $ 5,000 30-year-old male ¥12,470 $124.70

Education annuities* 2,500,000 25,000 40-year-old male 12,630 126.30

50-year-old male 13,010 130.10

*Paid over four years

**Payment through age 18 of the child

Note: Premiums in dollars reflect exchange rate of ¥100=$1.


▲ ▲


# Taisei Corporation

# Kajima Corporation

# Takenaka Corp.

* Shimizu Corp.

# Obayashi Corp.

# Tokyu Construction Co. Ltd.


# Sapporo Breweries, Ltd.

# Kirin Holdings Co., Ltd.

* Coca-Cola Japan Company, Ltd.

# Ajinomoto Co., Inc.

# Nissin Food Products Co., Ltd.

# Snow Brand Milk Products Co., Ltd.

# Asahi Breweries, Ltd.

# Nichirei Corp.

# Yamazaki Baking Co., Ltd.

# Fujiya Co., Ltd.

* Kikkoman Corp.


# Toyobo Co., Ltd.

# Kracie Holdings, Ltd.

# Renown, Inc.

# The Japan Wool Textile Co., Ltd.

# Wacoal Holdings Corp.

# Teijin Ltd.

# Mitsubishi Rayon Co., Ltd.

# Kuraray Co., Ltd.

Paper & Pulp

# Oji Paper Co., Ltd.

# Nippon Paper Group, Inc.

# Mitsubishi Paper Mills, Ltd.


# Mitsui Chemicals, Inc.

* Showa Denko K.K.

# Sumitomo Chemical Co., Ltd.

# Ube Industries, Ltd.

# Kao Corporation

# Dai-ichi Sankyo Co., Ltd.

# Takeda Pharmaceutical Co., Ltd.

# Sionogi & Co., Ltd.

* Astellas Pharma, Inc.

# Shiseido Co., Ltd.

# Otsuka Pharmaceutical Co., Ltd.

# Mitsubishi Chemical Holdings Corp.

# Daicel Chemical Industries, Ltd.

# Sekisui Chemical Co., Ltd.

# Asahi Kagaku Kogyo Co., Ltd.

Oil & Coal Products

# Cosmo Oil Co., Ltd.

# Nippon Oil Corporation

# Showa Shell Sekiyu K.K.

* Tonen General Sekiyu K.K.

Rubber Goods

# Bridgestone Corp.

Glass & Chemicals

# Asahi Glass Co., Ltd.

# Nippon Sheet Glass Co., Ltd.

Corporations Supporting Aflac Japan

(as of 4/30/09)

Iron & Steel

# Nippon Steel Corporation

# JFE Holdings

# Sumitomo Metal Industries, Ltd.

# Kobe Steel, Ltd.

Non-ferrous Metals

# Mitsubishi Materials Corporation


# Komatsu, Ltd.

# Sumitomo Heavy Industries, Ltd.

# Kubota Corp.

# Tsubakimoto Chain Co.

# Ebara Corp.

* Shibuya Kogyo Co., Ltd.

# Brother Industries, Ltd.

Electric Appliances

# Hitachi, Ltd.

# Toshiba Corporation

# Mitsubishi Electric Corporation

# Fuji Electric Holdings Co., Ltd.

# Fujitsu, Ltd.

# Panasonic Corporation

# Sharp Corporation

# Sony Corporation

# Sanyo Electric Co., Ltd.

# Pioneer Corporation

# Victor Co. of Japan, Ltd.

# NEC Corporation

* Ikegami Tsushinki Co., Ltd.

# IBM Japan, Ltd.

* TDK Corp.

Transport Equipment

# Denso Corporation

# Mitsui Engineering &

Shipbuilding Co., Ltd.

# Hitachi Zosen Corporation

# Mitsubishi Heavy Industries, Ltd.

# Kawasaki Heavy Industries, Ltd.

# IHI Corporation

# Nissan Motor Co., Ltd.

# Toyota Motor Corp.

# Mazda Motor Corp.

# Yamaha Motor Co., Ltd.

# Honda Motor Co., Ltd.

# Isuzu Motors, Ltd.

Precision Machinery

# Canon, Inc.

# Konica Minolta Holdings, Inc.

# Nikon Corp.

# Citizen Holdings Co., Ltd.

* Seiko Holdings Corp.

# Ricoh Co., Ltd.

Miscellaneous Mfg.

# Yamaha Corp.

# Dai Nippon Printing Co., Ltd.

# Toppan Printing Co., Ltd.

* ASICS Corp.

# YKK Corp.


# Mitsui & Co., Ltd.

# Itochu Corporation

▲ ▲ ▲▲ ▲ ▲

▲ ▲ ▲

▲ ▲

# Marubeni Corporation

# Toyota Tsusho Corporation

# Sumitomo Corporation

# Mitsubishi Corporation

# Sojitz Corporation

# Isetan Mitsukoshi Holdings

# J. Front Retailing Co., Ltd.

# The Daiei, Inc.

# AEON Co., Ltd.

# Skylark Co., Ltd.

# Takashimaya Co., Ltd.

# Tokyu Department Store Co., Ltd.

Long-Term Credit Banks, City Banks

# The Shinsei Bank, Ltd.

# Mizuho Financial Group, Inc.

# Mitsubishi UFJ Financial Group, Inc.

# The Sumitomo Mitsui Banking Corporation

# Resona Holdings, Inc.

Securities, Non-life Insurance

# Daiwa Securities Group, Inc.

# Nikko Cordial Corporation

# Nomura Holdings, Inc.

# Mitsui Sumitamo Insurance

Group Holdings, Inc.

# Tokio Marine Holdings, Inc.

* Nippon Koa Insurance Co., Ltd.

# The SMBC Friend Securities Co., Ltd.


# Nippon Yusen K.K.

# Japan Airlines Co., Ltd.

# All Nippon Airways Co., Ltd.

# Tobu Railway Co., Ltd.

# Tokyu Corp.

# East Japan Railways Co.

# Odakyu Electric Railway Co., Ltd.

* Nippon Konpo Unyu Soko Co., Ltd.

# Seibu Railway Co., Ltd.


# Nikkei, Inc.

# The Asahi Shimbun Co.

# Dentsu Incorporated

# Hakuhodo Incorporated

# The Yomiuri Shimbun Holdings

# The Mainichi Newspapers Co., Ltd.

# Nippon Telegraph & Telephone Corp.

Electricity & Gas

# The Tokyo Electric Power Co., Inc.

# The Kansai Electric Power Co., Inc.

# Chubu Electric Power Co., Inc.

Life Insurance

# The Dai-ichi Mutual Life Insurance Co.

# Nippon Life Insurance Co.

* Asahi Mutual Life Insurance Co.

# Corporate agent and payroll group

* Payroll group

Not listed on Tokyo Stock Exchange



Aflac Japan Administration

Hiroshi Yamauchi

First Senior Vice President; Chief Administrative Officer, Aflac Japan

I would like to share information with you regarding

Aflac Japan’s efforts to provide the best customer service,

while at the same time maintaining low-cost operations

from an administrative perspective.

Let me start with Aflac Japan’s low-cost operations by

showing you a couple of statistical comparisons between

Aflac Japan and our competitors.

Maintenance Expenses Per Policy in Force

(FSA Basis, 3/08)

Rank by


General Operating


(In Millions)

*Excluding renewal commissions

Source: Disclosure statement from each company


in Force

(In Thousands)

As you can see, our maintenance expenses per policy in

force are considerably lower than those of any of our

competitors. These costs refer to general administrative

costs, excluding renewal commissions paid to sales


It is worth noting that Aflac Japan continues to rank as

the number one life insurance company in Japan in terms

of the number of individual policies in force. Furthermore,

the number of policies in force used to calculate Aflac

Japan’s operating cost per policy does not include the

number of riders, which makes the figure of ¥5,234 for

Aflac Japan even more remarkable.

Number of Policies

Per Administrative Employee

(FSA Basis, 3/08)


Per Policy

1 Nippon ¥258,609 12,458 ¥20,758

2 Dai-ichi 201,883 11,221 17,991

3 Meiji Yasuda 170,740 8,994 18,983

4 Sumitomo 172,590 8,666 19,915

6 Alico 63,918 5,616 11,381

7 Taiyo 52,900 2,970 17,811

11 Aflac* 98,466 18,812 5,234

15 Sony 35,039 4,392 7,977

19 Tokio Anshin 37,736 2,189 17,238

Rank by





in Force

(In Thousands)

Policies per


1 Nippon 11,700 12,458 1,064

2 Dai-ichi 10,322 11,221 1,087

3 Meiji Yasuda 8,603 8,994 1,045

4 Sumitomo 8,706 8,666 995

6 Alico 3,741 5,616 1,501

7 Taiyo 2,927 2,970 1,014

11 Aflac 3,533 18,812 5,324

15 Sony 1,124 4,392 3,907

19 Tokio Anshin 1,441 2,189 1,519

Source: Disclosure statement from each company

This chart shows the number of policies in force per

administrative employee. As you can see, Aflac Japan also

achieves efficient operations through employee

productivity. This measure shows that our employees

administer about five times the number of policies in force,

compared with various large domestic life insurance

companies. This difference in productivity helps explain

how we maintain a low-cost-operation advantage.

Efficiency Improvement Measures

by Leveraging IT


• eco

• e-App

• Aflac Net Billing

One key to efficient business operations is reducing

costs without negatively affecting quality. In order to

achieve this goal, Aflac Japan and Aflac U.S. have been

sharing best practices for many years and implementing

specific initiatives by leveraging IT solutions. Let me give

you an idea of how some of our actions are benefiting

Aflac Japan’s operations.

AANET is a system Aflac developed and launched in

2000 that provides information and services to Aflac sales

associates via the Internet. AANET generates premium

quotes, verifies the policyholders’ policy status and

downloads policy maintenance related documents, along

with many other services. By enabling us to extract and

sort customer data by various categories such as product,

age, address, or group attributes, AANET is also used as a

sales support tool for activities like suggesting suitable

additional policies or riders.

In March 2008 we enhanced AANET to allow the

statement of premiums remitted from an associate to be

sent electronically to Aflac via AANET instead of on paper.

As a result, associates no longer need to stock forms in

their offices. This function also eliminates human error from

manually calculating the amount of the statement.

In addition, associates can now also use AANET to print

forms and give them to a policyholder who would prefer to

pay directly into Aflac’s bank account. This function is

much more convenient for the policyholders because they

can now pay premiums at places such as Seven-Eleven

stores, whereas before, they could only make payments at


Since 2001, we have been using “eco,” a tool designed

to download application forms from AANET. This is a

flexible and convenient tool that can be used even for nonface-to-face

applications. By the end of March 2009,

9,534 associates were using eco, and it accounted for

31.2% of the applications that are eligible for the eco

system in the first quarter of this year.


It is easier for customers to fill out the application form

using eco because only limited sections, such as the

declaration form, along with a few other sections need to

be completed and signed. For associates, eco alleviates

the burden of maintaining an inventory of forms.

Furthermore, data entered upon application is stored in

Aflac’s servers and can be accessed at a later point, which

leads to efficient processing of subsequent applications

after receiving the first application from the customer.

The next initiative I would like to touch upon is e-App ® , a

system that facilitates the electronic submission of

applications instead of using traditional paper-based

forms. This system, which is modeled after Aflac U.S.’s

SmartApp ® , was launched in 2003 as a pilot program

followed by a full-scale promotion to all sales agencies. At

the end of March 2009, 4,746 agencies were using e-App,

and 34.1% of the applications that are eligible for the e-

App software were submitted through this electronic

system in the first quarter of 2009. Last year, we made it

even more convenient by adding a function that allows our

associates to accommodate applications of multi-products

at one time.

The fourth initiative I will highlight is the Aflac Net Billing

system. This system was developed to replace the

monthly paper bills we send to our payroll accounts. At the

end of the first quarter, more than 15,400 payroll accounts

had adopted the Net Billing system, compared with

14,500 a year ago. In addition, starting January this year, a

new function has been added to this system. Using this

function, an administrator at a payroll account can enter

data into the Net Billing system related to upcoming

retirement of certain employees, thus allowing for

application forms for continuing a policy even after

retirement to be sent out automatically to those


Aflac’s Inbound Call Centers

Aflac Call Center operators can now respond more

quickly and accurately to customers’ inquiries as well as

suggest sending brochures to customers for new policies.

Through AANET, the Aflac Call Center also provides our

associates with information about any inquiries made by

their customers who had directly called into the Aflac Call

Center. That way, they can follow up with those inquiries

properly, which in some cases leads to new sales.

We believe offering high-quality service through the call

center is a very important element in building strong

relationships with all stake holders, including our

customers, sales associates and banks.













3.7 3.8

Surrender and Lapse Rates

(Individual Insurance Only, FSA Policy Basis)

7.9 8.1

Life insurance





Source: Japan Institute of Life Insurance

8.2 8.1

5.0 4.9


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

We are continually working to preserve our in-force

business. This graph shows our surrender and lapse rates

for individual insurance policies. Although Aflac Japan’s

surrender and lapse rates have for many years been much

better when compared with the industry average, they

gradually increased from 1998 through 2002. We started

seeing improvement in 2003, and the rate of 4.1% in both

2007 and 2006 was the lowest since 2000.



4.4 4.4





Aflac Call Center

(Inquiries from existing policyholders)

(Inquiries from prospective customers)

Ratio of Not-Taken Policies

(Percentage of All New Applications)



Associates Support Center

(Inquiries from sales agencies)

8 7.2



7.6 7.6 7.8 7.7


Alliance Support Center

(Inquiries from banks, Japan Post and Dai-ichi Life)



Next, let me discuss Aflac’s Call Centers, which play an

extremely important role in serving our customers and


We have three centers for inbound calls. One is the

Aflac Call Center, which receives inquiries from existing

and prospective policyholders. The second is the

Associates Support Center, which takes calls from our

associates. And the third is the Alliance Support Center,

which takes calls from our large sales channels such as

banks, the Japan Post Network Co., Ltd. and Dai-ichi Life.



2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Internal data

We are making a concerted effort to reduce not-taken

policies, which is a policy that we are unable to issue for

various reasons. In order for our sales agencies to get a

better sense of what financial impact not-taken policies

could have on their business, we have been providing

them with materials on estimated profit losses on not-


taken policies. Sharing this information with agencies has

proven to be very beneficial to their efforts at reducing nottaken

policies because agencies understand the

importance of reducing this number even from their

perspective. The not-taken rate had been increasing until

2002. However, since focusing on this measure, we have

had a fairly stable rate from 2003 through 2007. In 2008,

the rate improved by .8% due to the introduction of the

“bridge” cancer policy that allows existing policyholders to

upgrade their coverage to match that of Cancer Forte.

Because this bridge policy targets our existing

policyholders, fewer customers tend to be declined for

medical conditions. And for the same reason, it is much

easier for Aflac Japan to collect first-time premiums from

those customers. All these led to a lower ratio of not-taken


Key Points to Improving Persistency Rates

• Sales agencies take follow-up action

• Communicate the importance of improving

persistency rates to sales agencies

We believe the key to improving persistency rates is to

enable our sales agencies, who tend to have more direct

contact with customers than our headquarters, to take

appropriate follow-up actions. In order to encourage

agencies to take such actions, we have been emphasizing

the importance of improving persistency. We do this by

providing agencies with information such as not-taken

policy rates, surrender and lapse rates, and successful

initiatives of other agencies. By doing so, we can create an

environment where agencies can easily follow up with their

customers and improve persistency. Ultimately, the

agencies benefit because persistency generates a

continuation of commission payments.






Claims Payments

(Yen in Billions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Internal data


Medical/Rider MAX

This chart shows the actual claims payments in yen

between 1998 and 2008. As you can see, the actual

payment amount has been growing steadily. In 2008, we

paid about ¥305 billion on 260,000 cancer claims. The

total amount of yen paid on medical policies in 2008 was

about ¥79 billion by comparison, but we made

approximately 430,000 payments, which was greater than

the number of cancer insurance payments.

We receive a lot of feedback and appreciation from our

customers who have received benefits from us. Here are

some of those words.

• I always take out a medical policy with some

concerns about if I really would be paid later on.

But I was surprised by how quickly Aflac Japan

made the payments. Thank you.

• I felt relieved by the kind response from your

company, and I was satisfied with everything you

did for me, from the reception of my claim filing

and the handling of claim forms to the prompt

benefit payments.

• You didn’t treat me in a matter-of-fact way, and I

was pleased to receive very thoughtful words from

you. I actually thought I might need to fight for the

payments. But it turned out that you paid so

quickly. Thank you very much.

The most important service an insurance company can

provide is to pay benefits promptly when policyholders

need them the most. And we remain dedicated to

providing quick and accurate claims payments. To ensure

our payments are made even more accurately, we carried

out an important initiative last year to consolidate our

operations of receiving claim filings by phone and claim

data entry work. We now bring these operations to two

locations in Tokyo and Osaka, as opposed to seven

locations across the nation before, in an effort to narrow or

eliminate discrepancies in levels of accuracy between

those locations. As such, we strive to make fundamental

changes to our organization and pursue even more

accurate payments.

Lastly, I would like to explain the companywide

business operations improvement efforts we have been

promoting since 1983. Dozens of intra- and interdepartmental

teams are set up every year, to work on

various business operation improvement initiatives.

Currently, the effort is called “Change and Create” and all

participating teams compete against each other for award.

These types of activities foster innovative thinking and

nurture a culture that continually considers improving

efficiency as an important objective. The improvement

activities are also conducted at an individual level. We have

a companywide database for registering one’s

improvements, or “kaizen,” that all employees can access.

One improvement builds on another by obtaining hints

from ideas in the database.

We continue to believe a low-cost operation is one of

Aflac Japan’s greatest competitive strengths. Our low-cost

operation is a source of pride for our employees at Aflac

Japan, and they are all dedicated to pursuing ways to

improve our business operation and better serve our

customers. Aflac Japan will continually make efforts

towards maintaining its low-cost operations while also

enhancing services to customers.


Section III

Aflac U.S.

Introduction to Aflac U.S.

Paul S. Amos II

President, Aflac; Chief Operating Officer, Aflac U.S.

My presentation will provide you with an overall look at

our business operation in the United States. Amid the

current economic environment, I’ll first take just a few

moments to address how that environment relates to


State of the Economy

Over the last century, the United States, along with the

world, has certainly experienced quite an imposing list of

economic downturns. The second half of 2008 ushered in

an era that will likely claim its place in history toward the

top of that list. In one way or another, virtually every

business sector was touched. First, the housing bubble

burst with a vengeance. At the same time, it has been

shocking and difficult for consumers to watch companies

once thought of as impervious succumb to the reality of

failure. The stock market turmoil that ensued tested the

resolve of even the most seasoned investors, adding yet

another layer of unease, distrust, and financial hardship to

the mix.


Medicare and

Social Security


• Housing bubble burst

• Company failures

• Stock market turmoil

National Top Priorities

Percentage Saying Each Should be a Top Priority

Health Care 39%

Source: Kaiser Family Foundation Health Care Tracking Poll; 2/09




0% 20% 40% 60% 80%

This backdrop has left the American public skeptical,

wary, and financially vulnerable as they make difficult

choices and look for new solutions. Two of the greatest

public concerns these days are the state of the economy

and the broad topic of health care. In fact, in February

2009, the Kaiser Family Foundation’s health care tracking

poll indicated that the economy dominates the public’s

priorities for the president and Congress, followed by

concerns about Medicare and Social Security. Thirty-nine

percent of consumers felt that health care was also a top

priority. That same survey indicated that as economic

conditions decline, public concern escalates about

affordability and availability of health care. These concerns

don’t even address out-of-pocket expenses or fixed

household costs such as mortgage payments, food,

gasoline, and other bills that must be paid in sickness and

in health. Fortunately, Aflac is uniquely positioned to

address these concerns. We are trying to better

synchronize all aspects of our business to reach

consumers who need our affordable products.

Research that supports the need for our products is

everywhere. With health care and general household costs

on the rise, we believe that now more than ever,

consumers can benefit from the financial protection Aflac

products can provide.

Health Care Cost Trends

• Health care costs rising 6% per year

• 34% of employers have increased employee

cost sharing

• 16% of employers have increased employee


• 18% of employers have increased

deductibles in all/most plans

Source: The Effect of the Economic Crisis on Health Care Programs;

Watson Wyatt Worldwide, National Business Group on Health, 2/09

A February 2009 report issued by Watson Wyatt

Worldwide noted the following: “With the recession in full

swing and health care costs continuing to rise at 6% per

year, many companies are looking for ways to contain their

health care benefit costs. As a result, a majority of

companies will revamp their health care strategies, and

many intend to implement consumer directed health plans.

While companies remain positive about their ability to offer

health care benefits in the future, their confidence is

declining.” In fact, 34% of employers have already taken

action to increase employee cost sharing. Additionally,


16% of employers have already taken action to

significantly increase employee copayments or

coinsurance and 18% of employers have already taken

action to significantly increase deductibles in all/most plan





Health Care Spending Projections









Decreased Confidence

Among Small Businesses


Small Business Optimism Index










2005 2006 2007 2008 3/09

Source: Bloomberg



2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Center for Medicare and Medicaid Services, National Health Expenditures Projections, 2/09

According to a report published by the National Health

Statistics Group researchers at the Centers for Medicare

and Medicaid Services, “Public payers are expected to

become the largest source of funding for health care in

2016 and are projected to pay for more than half of all

national health spending in 2018.” Additionally, they found

that the United States can expect to experience a 6.2%

annual climb in health care spending through 2018,

compared with a 4.1% increase in the gross domestic


According to economists, small business optimism has

been trending downward since the third quarter of 2007.

By December 2008, small business optimism had fallen to

85.2, and by March 2009, it had dropped to 81.0, the

lowest level ever reported in its more than two-decade

history. We expect this lack of confidence in the current

economic environment to drive employers, especially at

small businesses, to look for solutions that help offset the

ever-escalating cost of providing employee benefits.

Because Aflac provides benefit solutions companies can

offer to their employees at little or no cost, we believe that

demand for our products will also continue to increase

among U.S. businesses.

Health Care Cost Trends – Cancer

• 10% diagnosed or treated for cancer

• 25% of cancer patients used all or most of

their savings

Source: National Survey of Households Affected By Cancer; the

Kaiser Family Foundation and the American Cancer Society; 11/06

An example of the huge financial impact a serious

medical event can have is exemplified by another survey

by the Kaiser Family Foundation and The American Cancer

Society. It found that, “10% of Americans say they or

another family member in their household has been

diagnosed or treated for cancer in the past years.” And

25% of those with cancer reported using all or most of

their savings as a result of the financial cost of dealing with


Additionally, another Kaiser Family Foundation survey

highlights the issues cancer patients and survivors face as

they try to find and maintain coverage which enables them

to access the care they need. The report said, “Having

private health insurance at the time of their cancer

diagnosis did not protect patients from high out-of-pocket

costs – leaving them with large debts to cover their

treatment costs and forcing some to skip or delay

necessary treatments.”

The pessimism found at employers is also shared by

consumers, as consumer confidence reached a twodecade

low of 29.4 in January 2009. Clearly, this downturn

has forced consumers to make difficult choices about how

to allocate their hard-earned money. In times like these,

there is a natural inclination to categorize “wants” and

“needs” when consumers allocate their money. We

absolutely believe our products fall in the “needs” category

now more than ever, particularly keeping the affordability of

our products in mind. For example, one of our accident

policies costs about $16.00 per month. When

policyholders encounter medical and financial hardship,

the “bang for their buck” our products provide is very real

and tangible. This coverage can be maintained at the

same rate even if the policyholder loses his or her job.

Health events like a car accident, diagnosis of cancer,

or heart attack are just as likely to occur in challenging

economic times as they are to occur in times of prosperity.


The cash benefits from Aflac products offer policyholders

great value, financial protection, peace of mind, and a

sense of control, particularly during this time. Each and

every day, we hear from consumers who tell us how cash

benefits from our products have meant the difference

between paying their mortgage or losing their house;

between maintaining their lifestyle or interrupting their

customary activities; between paying their car note or

finding alternate transportation; and in many cases, most

chilling of all, forgoing necessary medical treatment due to

its expense, as the Kaiser study showed. And now more

than ever, our products are essential to protecting

consumers’ financial well-being.

The Small Business Market


serves to bolster our assertion that there is a strong need

for the type of products we sell and a bright future for

worksite, or payroll, marketing. But I do want to point out

one major difference between Aflac and all the rest of the

competing companies: For Aflac, voluntary insurance sold

at the worksite represents virtually all of our focus,

whereas our competitors tend to offer voluntary products

as a peripheral line of business. Streamlining this focus

toward one insurance category has given us an edge that

has contributed to our market-leading position. According

to the 2007 U.S. Worksite Sales Report from Eastbridge,

Aflac is the market leader with 31% of the market share.

All of our competitors have market share in the single


Aflac’s Competitive Strengths – Products

Size of


Number of



Number of



We continue to reach both consumers and business

decision-makers with targeted messages about the

relevance of our products. Jeff will be giving you more

insight into our advertising directed at businesses and

benefits decision makers. Businesses are the gatekeepers

to consumers, and marketing our products at the worksite

is our focus because that’s where most Americans buy

their insurance. According to the most recent data from

the Small Business Administration, there are approximately

six million businesses in the United States with fewer than

500 workers. Based on U.S. Census data, our 431,985

payroll accounts at the end of the first quarter only

represent about 7.2% of the small-business market,

making the U.S. a very sizeable and attractive market.

Competitive Environment

• Aegon


• Allstate

• American Fidelity

• Aon

• Assurant

• Colonial

• Conseco

• MetLife

• Unum Group

• Certain Regional Carriers

% of Total


0 - 19 Workers 5,378 21.6 18.0%

20 - 99 Workers 536 21.1 17.6

100 - 499 Workers 91 17.5 14.6

Total 6,004 60.2 50.2%

Source: U.S. Census Bureau Tabulations by Enterprise Size, 2006

Over the last five-plus decades, we have competed with

various companies, both large and small. Some of these

companies stood the test of time, and some have

withdrawn from the supplemental/voluntary market. But

the fact that others show strong interest in this market only

• Products

Within the supplemental insurance market, we believe

we have established several competitive advantages over

the last five decades that have fortified our market-leading

status. One such advantage is our product portfolio. Over

the years, our portfolio has also evolved to include a wide

range of supplemental products with benefits designed to

be easy to understand and easy to file a claim upon. We

are committed to meeting the changing needs of

consumers in a changing environment. Jeff will cover our

current product portfolio and provide some texture about

areas we are considering. I believe our portfolio couldn’t

be more relevant to today’s market, and I’m excited about

the chance to make a difference in people’s lives with

products they really need.

Aflac’s Competitive Strengths –

Advertising and Brand Awareness

• Products

• Advertising and brand awareness

It’s hard for any company to reach consumers through

all of the clutter in the marketplace. The current

environment makes it even harder. But we are making

lemonade out of lemons. Most companies have pulled

back their advertising due to the weak economic

environment. By contrast, we’ve taken advantage of the

opportunity to pick up media buys at a fraction of their

original cost. In this regard, we believe we have put our

dollars to the best, most efficient use.












Brand Awareness

(Aided and Unaided)




Over the last eight years, commercials featuring the

Aflac Duck have catapulted our brand awareness to 93%,

making Aflac into a household name and transforming the

Aflac Duck into a pop icon and a celebrity.

With an intangible product like ours, brand awareness is

only part of the picture. Consumers will only be moved to

buy a policy if they truly understand how the policy works

and then envision how it can add value to their lives. Jeff

will give you the rundown on how we’re developing

advertising and sponsorships that are continuing to

prompt consumers and businesses into action.

Aflac’s Competitive Strengths – Distribution


1999 2000 2001 2002 2003







2006 2007



opportunity to stimulate future growth by pursuing

partnerships with insurance brokers. According to the U.S.

Census Bureau, 64.4% of employees work at payroll

accounts with more than 100 employees. As the graph

demonstrates, the vast majority of these accounts use

brokers to help identify the products that best suit their

insurance needs. We have already experienced some

success in the small and local broker market with 12.4% of

our overall sales attributable to broker sales in 2008. Our

efforts to build new and better relationships in the regional

and large-account broker market will undoubtedly allow us

to expand our presence in a market where there’s a lot of

room to grow. I believe brokers will not only bring us new

business, they will give us access to businesses we

haven’t had before.

There are approximately 129,000 brokers in the United

States. The majority of these brokers are new to Aflac, and

we are creating relationships with them which we believe

will bring in substantial business for many years to come.

We are also leveraging and building relationships through

insurance associations and also sponsoring many local

events across the country to connect with brokers.

Aflac for Brokers

• Broker message:

» Quality services

» Value-added services

» Streamlined products

» Three compensation packages

• Leveraging/building connections with associations

• Products

• Advertising and brand awareness

• Distribution

Aflac’s advertising is designed to warm the door for our

greatest asset and major competitive strength – our sales

force. While Ron Sanders will be covering this topic in

greater detail, I will tell you that we believe that the model

we use to build our distribution is working in this

challenging environment. Our recruiting has actually

benefited from rising unemployment, as has the number of

our payroll accounts. We also believe our training is

benefiting our growing field force and resulting in increases

in producing sales associates.

Broker Control

Employee Size


% Using

a Broker

101 - 500 87%

501 - 2000 84

2001 - 5000 70

Source: 2007 Eastbridge Study

In January 2009, we officially launched our broker

initiative, Aflac for Brokers. Our message to brokers is

simple: We want to compete for broker business and

provide value for their clients in four basic areas. First, we

will provide brokers with quality service. One important

change we made was to create our new Broker

Development Coordinator position – a single point of

contact for brokers. Second, we will offer brokers 10

value-added services, the most visible of which is

“Wingspan,” Aflac’s new core benefits enrollment system.

This is a software program that allows Aflac to interface

with existing broker systems and can stand alone as well.

Third, we will offer several streamlined and relevant

products in 2009. And finally, we will offer three consistent

broker compensation packages without increasing

expenses related to the total commissions paid.

Aflac’s Competitive Strengths – Technology

• Products

• Advertising and brand awareness

• Distribution

• Technology

On the topic of distribution, I want to cover our new

broker initiative. We believe we have a significant

Technology is another one of Aflac’s strengths in the

United States. We continually adopt cutting edge

technology solutions to streamline transactions for


policyholders and sales associates. Effectively employing

new technologies allows us to improve our products,

attract new sales associates, and allocate more resources

to advertising.

Our sales associates have used our unique SmartApp

system to sell electronically for more than 15 years.

SmartApp allows our sales associates to electronically

transmit new business from the field directly to

headquarters. Our newest version of SmartApp, called

SmartApp Next Generation, or SNG, further reduces the

time sales agents must spend on administrative issues,

freeing their time up to focus on selling. In 2008, 91% of

our applications for coverage were electronically submitted

using SNG and other Internet-based programs. And we

were able to process more than 68% of policy applications

last year without any human intervention.

Customer Retention

• Crucial touch points

» Aflac Always

• Enrolled 20,000 policies

• Retained 700 policies

» Outbound calls to lapsed accounts

• Conserved more than $8 million

in new annualized premium

Often technology is helpful in streamlining our

interactions with policyholders and payroll accounts, which

improves our policy persistency and customer retention.

The tangibility of our products comes into question only at

specific touch points, such as when a consumer becomes

a policyholder, when a policyholder becomes a claimant,

or when a customer looks to us to help solve an issue.

It is especially important for us to be responsive to our

customers during an economic downturn that prompts

consumers to make difficult choices about where to spend

their money. The economy’s effect was reflected in our

first quarter persistency, which declined to 66.9% from

71.9% in the first quarter of 2008 on an annualized basis.

We cannot afford to let payroll accounts and policyholders

slip away from us, and we are taking decisive actions to be

there in the tangible way customers deserve with proactive

measures, including our customer retention initiative. This

initiative focuses on what we can do after we make the

sale to keep a policyholder’s business on our books. This

initiative was created to identify key customer and account

touch points and intervene through proactive, reactive, and

win-back measures. We are beginning to see positive


Perhaps the most obvious touch point is when a

policyholder leaves his or her job. We found that often,

they don’t realize they can keep their Aflac payrolldeducted

policies through direct billing. In July of 2008, we

introduced Aflac Always, a protection plan in which the

policyholder gives us permission during enrollment to draft

their bank account or charge their credit card should their

company stop forwarding their premiums to us for any

reason. From August 2008 through the end of the first

quarter of 2009, we have enrolled approximately 20,000

policies in our Aflac Always program. For the first quarter

of 2009, Aflac Always has allowed us to retain 700


Additionally, in our service center, we are saving

accounts and policies through inbound and outbound call

efforts. When accounts or policyholders call to cancel, we

make every attempt to retain their business. We also call

all lapsed accounts in an effort to bring them back to Aflac.

Between AflacAlways and these calls, we conserved more

than $11 million in annualized premium during the first

quarter of 2009.

For the ever-expanding number of consumers who

prefer to handle their transactions with us over the Internet,

we enhanced our Policyholder Service Center at

aflac.com. The new, more user-friendly site enables our

customers to update personal information, find answers to

questions about their policy, learn how to expedite the

claims process, and check the status of their claims. In the

first quarter of 2009, more than 376,000 policyholders

accessed their information using this Web site.

Aflac is well-positioned to offer solutions consumers

need, and there are millions of people out there who want

and need our products. Despite the dynamic health care

environment and the possibility of health care reforms, the

need for our products does not change. We know there is

no “silver bullet” solution that any one plan can offer to

cover all medical and non-medical expenses stemming

from a major health event. We believe that now more than

ever, and regardless of any potential changes on the

healthcare landscape, our products are positioned to offer

consumers much-needed financial help. That said, we

continue to monitor the issue of national health care very

closely and continue to ensure Aflac is positioned for

success in this environment.

We are innovative in how we approach our products

and marketing, but we don’t view progress in our business

as a sprint – we view it as a marathon, and we are

methodically preparing to go the distance for our

policyholders, field force, employees, shareholders,

philanthropies, and everyone whose lives we touch.


Aflac U.S. Marketing

M. Jeffrey “Jeff” Charney

Senior Vice President; Chief Marketing Officer, Aflac U.S.

I joined Aflac about six months ago. During that time,

I’ve had a chance to take a good look at Aflac’s products,

distribution, and creative marketing programs. It has been

increasingly clear that today’s economic realities are

forcing many consumers to make very difficult decisions,

and at Aflac we are adapting our products and advertising

to ensure we remain relevant.

Aflac’s Strategy

• Products

» Relevant

» Wanted

» Needed

• Distribution

» Dedicated

» Extensive

and need the financial protection more than ever. Bills

continue to roll in even when someone is sick or injured,

and Aflac products protect policyholders with cash

benefits to pay for those bills. Aflac products also give

peace of mind, which is very hard to come by in today’s


We also believe our premiums are affordable and offer

excellent value to the average consumer, with average

premiums ranging from $400 to $600 per year. At the end

of April, we introduced a new lump sum critical illness plan

and a lump sum cancer plan that can be sold separately or

as a package. We also introduced a new accident plan as

well as a new short-term disability product. Our new lumpsum

products provide the simplified benefits customers

want with upfront benefits that help in these difficult times.

The streamlined product structure is also very appealing to

brokers, and there are special rates and underwriting for

large accounts with more than 500 workers.

All aspects our marketing and advertising support the

two-part strategy we’ve focused on for more than two

decades: First, we offer a portfolio of relevant products

consumers both want and need. Second, we take these

products to market through an extensive and dedicated

distribution system comprised of independent sales

agents. Ron’s presentation covers more about our

distribution, and I’ll discuss our products. I’ll also talk

about how our advertising and branding efforts support

both products and distribution.

Aflac’s U.S. Product Line





Int. Care


Med Sup

L-T Care

Spec. Event



New Sales Product Mix







Supplemental Insurance

Products, Including:

Life Insurance

Products, Including:

1992 1997 2008


Cancer indemnity

Short-term disability

Hospital indemnity

Intensive care

Sickness indemnity

Specified health event

Fixed-benefit dental

Payroll long-term care


Term life

Whole life

Juvenile life

It doesn’t matter how creative, appealing, or

straightforward our marketing is if our products don’t

provide real solutions that fill an essential and tangible

need. Remaining in step with those needs means we

continually review and refine our current product portfolio

to assess whether we’re on target and what adjustments

we might need to make. This is especially true in

challenging times like these when people must make

difficult choices, yet they’re the most financially vulnerable

While we remain focused on supplemental insurance,

we have had great success in segmenting the market and

appealing to consumers we haven’t reached before. This

is exemplified by our decision to broaden our product line

in the early 1990s. As you can see, we have significantly

changed the mix of our new sales. For many years, cancer

insurance dominated new sales. In 2008, it accounted for

less than 19% of new annualized premium sales. Our

accident/disability line has been our best-selling category

for 15 consecutive years and in 2000 became our number

one product in terms of in-force premium. Last year, the

accident/disability line represented 30% of sales and 28%

of in-force premium. The introduction of our newer

products, including our specified health event, fixed-benefit

dental and vision plans have broadened our product mix.

These plans, together with our hospital indemnity

category, which we have focused on recently, accounted

for about one-quarter of new sales in 2008.


that help us remain focused on creating relevant products.

For example, the fact that many small employers can’t

afford to offer company-paid benefits is one reason our

voluntary products are so popular. All of our products are

designed to be “simplified issue,” which means that if the

limited underwriting questions in the application are

answered favorably, the agent can commit to issuing the

policy to the applicant. When an applicant’s answers

reveal a health condition, we require additional

underwriting to proceed with any coverage. Because we

sell individually issued policies at the worksite, we often are

only able to spend 10 or 15 minutes with an applicant, so

we are not in a position to explain complicated products.

We try to make our products simple with a fixed-benefit

design. It’s important to offer products that are easy to

explain, easy to understand at the point of sale, and easy

to file a claim upon.

One of our newest product line enhancements was our

January 2006 expansion of our life insurance portfolio, with

life policies that respond to consumers’ requests for higher

face value amounts and longer terms. To support our

efforts in selling life products, we initiated internal sales

campaigns and training designed to encourage our sales

associates to offer life as a complement to the products

consumers are already purchasing. We also streamlined

the application process for life insurance when consumers

purchase short-term disability by only asking two

additional questions. As a result of these initiatives, we’re

seeing more consumers choosing to add life insurance

when they purchase other Aflac products. In 2008, we

increased life insurance sales by 12.9%, and in the first

quarter of 2009, the growth rate has jumped to 16.1%.

Basics of New Product Development

• Input from the Aflac Field Force, Marketing, Actuarial,

Compliance, New Business, Underwriting, Claims and IT

• General product parameters

» No employer contribution

» Simplified issue

» Simple, indemnity product design

The creation of new products like the life insurance

enhancements start with our agents. These sales

associates are the public face of the company – our eyes

and ears. They deal with payroll accounts and consumers

on a daily basis, and they know firsthand the kinds of

products and benefits that consumers want and need. To

leverage this valuable knowledge, we assemble a Field

Force Advisory Group for each product development

undertaking. These advisory groups are made up of a

broad range of the sales force from various levels and

different geographic areas.

We supplement the Advisory Group’s insight with data

gathered by surveying a wider field audience, as well

decision makers at payroll accounts and consumers. The

Marketing, Actuarial, Compliance, New Business,

Underwriting, Claims and IT Departments are also

instrumental in ensuring we follow the guiding principles

Aflac Wingspan

With economic concerns at the forefront of consumers’

and business decision-makers’ minds, we took a good

look at how Aflac’s image is holding up in today’s

environment and found ways we could help invigorate

sales. To leverage these opportunities, we kicked off a

new marketing initiative in April 2009 called Aflac

Wingspan. Aflac Wingspan is a proactive, multi-faceted

and comprehensive set of marketing initiatives designed to

expand our reach to consumers, extend the Aflac brand,

energize our agents, and ultimately, stimulate sales.

Aflac Wingspan Goals

• Increase brand relevancy

• Define who we are and how our products help

• Expand our brand through sponsorships

• Use our brand to inspire people

• Stimulate sales

This initiative has five goals: The first goal is to increase

the relevancy of our brand in this new economic reality.

Second, we want to define who we are and how our

products can help people. Third, we will continue to

expand our brand with sponsorships that tie in to where

our customers are. Fourth, we want to use our brand to


inspire people, including our customers and our own sales

force and employees. Finally, these first four goals are

designed to ultimately stimulate our sales.

Through Aflac Wingspan, the changes to our product

portfolio are opening new markets and opportunities for

Aflac and for the people who need our protection. We

looked for ways to offer those who need protection and

peace of mind by welcoming more people under our wing.

Aflac Wingspan

• Short-term Disability now available to:

» Businesses with three employees

(down from five)

» Unions

» Employees who work at least 19 hours

per week

Aflac products will be offered to a segment of additional

consumers that were not previously eligible. Our existing

short-term disability product was previously offered to

payroll accounts with a minimum of five employees. Now,

we have lowered the minimum to payroll accounts with

three applications submitted.

Additionally, our new short-term disability product is

also now available to union members. And in response to

the challenging economy that has prompted a reduction in

working hours, we have created a new short-term disability

product that lowers the full-time hourly requirement for

employees to 19 hours per week from 30 hours. Further,

this new short-term disability policy offers a new

“transitional benefit” for a policyholder who loses his or her

job or works less than 19 hours at a full-time job and

becomes disabled.

Successful Branding

Feeling Understanding Sales

• Brand must be liked by consumers

• Consumers must understand what company does

• Sales will follow

We’re creating a feeling and an understanding of our

brand. When those two elements are combined, I believe

our sales can be positively impacted. Obviously, if

someone doesn’t like a brand, they’re not going to take

the time to learn more about that brand and they’re

certainly not going to buy products associated with that

brand. What does it mean to have a feeling for a brand?

Think about your favorite products and why you want to

own them. We are using our marketing to create a brand

that consumers connect with on an emotional level as well

as one that fosters an understanding of exactly how our

products can help. This will open more doors for our sales

associates. After creating a feeling with our brand, our next

goal is to create understanding. Understanding takes

brand awareness, or the simple recognition of the Aflac

name, and extends it to the definition of what the company

does. I believe that successfully inspiring feeling and

creating understanding will ultimately lead to more sales.

People who are aware of Aflac – and, as Paul

mentioned, that’s a mind-boggling 93% of individuals – will

say: “Aflac is the company with the duck.” But those who

really understand Aflac will say: “That’s the company with

the duck, and that’s the company that pays you cash if

you’re too sick or hurt to work.” It is critical for people to

understand what we do.

It’s a Duck’s World, We Just Live in It


• Refreshing, not reinventing

• Leveraging newly emerging cost-effective mediums

With a foundation of relevant products and a dedicated

sales force to bring them to those who need them the

most, our brand message is critical. My job at Aflac is to

refresh an already-successful marketing program – to take

what I’ve learned and use it to supplement the strong

foundation that’s already in place. To refresh, not reinvent.

To be evolutionary, not revolutionary.

In these challenging economic times, many companies

have cut back on marketing. At Aflac, however, we are

taking these challenging times and turning them into an

opportunity. We’re leveraging the newly emerging nontraditional

cost-effective mediums to increase awareness

of our brand.

Aflac is an iconic brand – one that speaks to people of

all ages and all demographics. That brand – that feeling –

can be summed up in three words: the Aflac Duck. I’m

sure many of you wonder if the Aflac Duck has lost his

luster. We’ve done a lot of research on the duck, and

when all is said and done, we couldn’t have a better icon.

The duck will celebrate his 10th birthday at the end of

2009. I’m here to tell you his appeal is as strong as ever.

Since the Aflac Duck was introduced in 2000, virtually all of

our commercials have been tested with consumers to

determine their likeability. When consumers are asked

about what they like most about our commercials, the

Aflac Duck has consistently ranked as the number one

thing! I believe it will become even stronger as we position

our marketing pieces to be more relevant in today’s

economic climate.


Let me break down how we approached the challenge

of maintaining freshness and creating relevancy in a

changing economic marketplace that is also causing

people to struggle.

Aflac’s New Tagline

Prior Tagline

New Tagline

We looked at the tagline we’ve been using for more

than seven years: “Ask About it At Work.” We found it had

run its course – it wasn’t hitting the emotional chord we

needed to hit and was no longer relevant or timely.

We tested a lot of potential new taglines on payroll

account decision-makers and consumers, and the clear

winner that emerged from both groups was six simple

words: “We’ve Got You Under Our Wing.” It is ownable,

current, emotive and has the potential to be timeless.

Now More than Ever Video

We wanted to build on this new tagline and looked for

ways to inject a feeling that resonates with consumers into

an already-strong portfolio of powerful, memorable

commercials. We had recently released a series of highperforming

national spots. A couple of these are targeted

to businesses and business decision-makers, and two

others speak to the NASCAR nation. We complemented

those spots with two new commercials. Only this time, in

addition to the Aflac Duck’s traditional humor, we added a

timely message about the financial security our products

help provide. Most importantly, all are designed to build


The first, called “Soccer,” is real, conversational and

relatable. It’s not showy or flashy; it’s a realistic

conversation between two moms that will play well in a

no-nonsense advertising market.

Our “We’ve Got You Under Our Wing” tag also ties in to

our “Aflac Wingspan” campaign. As part of this campaign,

we created a video for our employees and field force that

shows how “Now More than Ever” we are spreading their

wings to protect our policyholders when they need it most.

The next is “Farm.” The concept is simple, but the

cutting edge, computer-generated animation takes it to a

new level. And, while “Soccer” is true-to-life, “Farm” is fun,

disruptive, conversational and highly memorable.


Get the Aflacts

Aflac is also using new media to spread our message

and create greater awareness of what we do: The Aflac

Duck has recently launched a Facebook page to directly

communicate with a large and growing fan base. Through

Facebook, we’re harnessing the growing power of social

networking to spread our message. Plus, we’re taking that

power to the next level: The Aflac Duck’s Facebook page

is the first to allow back-and-forth conversation between

consumers and a company icon. Duck fans leave

comments and the duck responds, creating a pop culture

experience that is interactive, fun and contemporary. We

established the Aflac Duck’s Facebook page on April 21,

2009. As of May 7, the Aflac Duck has amassed more

than 85,000 Facebook fans. In fact, the Aflac Duck

Facebook page has been the number one fastest-growing

page with less than one million fans for two weeks in a



In addition to the “We’ve Got You Under Our Wing”

tagline, we’re adding a clever, fresh and memorable

campaign that will be used in our advertising efforts both in

print and on the Internet. The campaign is called “Get the

Aflacts.” “Aflacts” are print and online factoids or simple

truths about the company presented in an entertaining and

sometimes interactive format. Each communication piece

captures the consumer’s attention and educates them

about our products in a fun way.


Last year, Aflac introduced a new component to its

marketing strategy: business-to-business advertising. It

was – and is – our goal to speak directly to benefits

decision makers through television, print, radio and online

ads; and to support our agents with collateral material, tool

kits and an information center.

Aflac for Business focuses on five key reasons business

owners should offer Aflac insurance to their employees:


• No direct cost to employers

• Ease of administration

• Helps attract and retain employees

• Complements other benefits

• Possible employer tax savings

First, there is no direct cost to employers if they elect to

offer Aflac products. The premiums are paid by the

policyholder, not the employer. Second, we strive to keep

things simple for employers by handling the details of

enrollment and also by offering streamlined invoice

technology. Third and fourth, we illustrate to employers


and benefits decision-makers how offering Aflac products

actually helps them attract and keep employees, as well as

the fact that Aflac products naturally complement other

benefits they may already have. And finally, offering Aflac

products often means tax savings for the employer. Our

Aflac for Business campaign has been a factor in

generating some very encouraging results.

Indicators of success come from many sources. A

Forbes magazine study recently ranked an Aflac for

Business ad No. 2 in the publication for reader recall. And

Business to Business magazine named Aflac its “No. 1

Success Story” of 2008 in an article about integrated

marketing achievements. We also believe it has helped

with our new payroll account growth. New accounts,

which we believe are key indicators to future new sales,

grew 6.3% in 2008 and, for first-quarter 2009, they

increased 9.9%.

Aflac Sports-related Sponsorships

Aflac Sponsorship – NASCAR

Aflac’s NASCAR sponsorship helps us reach customers

where their passion lies. We know that policyholders who

see the Aflac Duck on a favorite driver’s car are likely to

deepen their loyalty to our brand. Earlier this year,

NASCAR fans voted our Monster Truck ad as the number

one NASCAR ad! Research has shown that NASCAR fans

are three times more likely to purchase the products and

services of NASCAR sponsors versus companies not

involved in the sport. That’s why we recently decided to

extend our NASCAR relationship by becoming a full

sponsor of driver Carl Edwards, his racing team and the

No. 99 Ford Fusion Carl will drive in 38 Sprint Cup Series

Races in 2009.

In 2008, the NASCAR sponsorship has returned 2,707

media placements, which add up to 664 million

impressions, or the equivalent of $64.6 million in


Aflac also generates brand feeling among consumers

and businesses through sports-related sponsorships.

Sponsorships are a cost-effective way to be part of our

customers’ lives. They take us to places our customers go

and allow us to interact with them in new ways.

Additionally, sporting events are a way for Aflac to take its

brand from television sets and magazine pages into a live

venue where customers can experience the brand.

Beginning in 2008, Aflac entered into a multi-year

partnership with Iron Girl to present the Aflac Iron Girl

National Event Series, which encourages women of all

ages to lead a healthy, active lifestyle – a goal Aflac shares.

Since 2003, we have also sponsored the Aflac All

American High School Baseball Game. Proceeds from this

event are donated to children’s hospitals and other

pediatric cancer research organizations.

And finally, our most popular sponsorship probably is

NASCAR racing.

We’re very fortunate here at Aflac. Our sales team is

motivated, excited and energized by the great tools and

products at their disposal. Our products and agents are

backed up by fresh and innovative sponsorships, television

and print ads, and online marketing that expose Aflac to

new audiences and generate buzz. Our products’ cash

benefits offer help to people who are worried about

protecting their families. These benefits provide stability to

business owners who want to ease the anxiety of their

employees, and peace of mind to people at a time when

it’s hard to come by. We’re confident our efforts will see

Aflac and our policyholders through tough times.

And finally, we have the Aflac Duck – an icon that is,

without a doubt, one of the hardest-working and best

sales representative in marketing today. As the duck

reaches the 10-year mark, its presence is a strong,

persuasive reminder to businesses, individuals and families

that, at Aflac, “We’ve Got You Under Our Wing.”


Aflac U.S. Sales

Ronald S. Sanders

Senior Vice President, Director of Sales

Aflac’s continued success is directly attributable to one

of our most unique assets – our distribution system. Our

policies are sold by members of our field force. These

individuals do not work for Aflac; they work with Aflac. But

most importantly, to our clients and policyholders, they are


Aflac U.S. Sales Territories

(December 2008)

operations are not necessarily always identified by standalone

geographic U.S. states. For example, Colorado is an

Aflac state operation, as is Alabama/West Florida. At the

close of 2008, Aflac had 93 state sales operations.

Marketing Coordinator

State Training Coordinator

Field Force Organization

VP / Territory Director

State Sales Coordinator

Business Development Manager

Broker Development Coordinator


Sales Coordinator


Sales Coordinator


Sales Coordinator


Sales Coordinator



Sales Coordinator



Sales Coordinator


Assoc. Assoc. Assoc. Assoc.

Our commission-based, independent sales associates

are entrepreneurs using their personal initiative and drive to

make their business successful. The field force has several

levels, starting with our sales associates and culminating

with our state sales coordinators, who report directly to a

territory director.

Each is an entrepreneur working independently to

develop his or her own business, essentially serving as

president and CEO of his or her own company. This

results in a distinctive drive and impetus for achievement.

We believe our sales system – in which our field force

members serve as the primary point of contact between

Aflac and its customers – and our close relationship in

supporting their success – sets us apart from our

competitors and positions us for continued success.

Number of State Operations Per Territory

(December 31, 2008)

Sales Territory

Number of State


South 14

Central 8

Northeast 14

North 13

East 11

Southwest 10

West 11

Pacific 12

Total 93

Aflac has divided its U.S. market into eight distinct sales

territories. The territories range in population from 20

million to 51 million, and each is managed by an Aflac U.S.

officer known as a territory director.

Each territory is further divided into state operations,

with some encompassing more than one state. Our state

Sales associates are the “face” of Aflac. They sell our

products primarily to employees of payroll accounts and

then service those accounts. The next level in the Aflac

hierarchy is the coordinator in training, or CIT. At this level,

the duties of the sales associate are combined with those

of a district sales coordinator. CITs have the opportunity to

learn management skills without the added pressure of

meeting sales quotas.

Our district sales coordinators, or DSCs, train and

manage sales associates and act as mentors to our

coordinators in training. They have both personal and

district sales goals, while managing the sales associates

on their teams. DSCs are managed by the men and

women who’ve reached the next level of Aflac sales

management: regional sales coordinators, or RSCs. These

individuals assist with training, but their primary role is

recruiting new sales associates. RSCs are managed by

state sales coordinators, or SSCs, who lead state

operations. Additionally, each state has up to two state

training coordinators, or STCs, who support and

coordinate headquarters and field training efforts on a

statewide basis. STCs are compensated by state sales


As the focus of our business changes, so must our

organization. As Paul mentioned, to support our expansion

into the broker market, we recently added a new position

to our field force organization: broker development

coordinators. Broker development coordinators work with

state sales coordinators. They build and develop

relationships with brokers to provide voluntary benefits,

benefit education, and enrollment methods for accounts

that typically consist of more than 100 employees.


Business development managers act as liaisons between

territory offices, field force training and our various state

operations. Their primary goal is to help drive initiatives

throughout our territories.

Compensation Structure

• First-year and renewal commissions

• Bonus programs

• Other special incentives

Once the sale is made, Aflac’s compensation structure

combines sales commissions with other desirable

compensation opportunities designed to attract, retain and

reward our sales force and drive growth. In addition to

first-year and renewal commissions, we offer lucrative

bonus programs and special incentives. These incentives

include Aflac Honor Clubs and corporate and field-based

contests that motivate and reward superior performance

and provide high achievers with more ways to be

successful. As employees of the company, territory

directors are the only level of the field force that has an

element of their total compensation that is salary-based.

Commission Structure Example*

(Accident Policy)



Associate 34.5% 6.1%

DSC 6.9 3.3

RSC 4.8 1.5

BDC .8 .2

STC .8 .2

SSC 4.0 1.0

Total 51.8% 12.3%

*Standard commission structure



To simultaneously encourage individual efforts and

promote teamwork, Aflac’s field force representatives are

commission-based with no limit as to how much they can

earn. Each level of the field force is intertwined with

respect to commission earnings, encouraging a built-in

support system that drives success at all levels.

Although the commissions paid on each product varies

slightly, this chart illustrates an example of our accident

policy. As you can see, the total field force payout is nearly

52% of first-year year premium, and just over 12% in

subsequent years. The bulk of the commission is paid to

the associate directly responsible for selling the policy, with

higher-level coordinators receiving varying levels of

commissions. Broker development coordinators are now

included in the commission structure.

Often, our sales coordinators have financial obligations

to meet as they support their families while building their

businesses. For that reason, once the policy is issued,

Aflac offers them the opportunity to receive a portion of

their anticipated first-year commissions in advance of

collection of the premium – an offer that most associates

accept. We believe advance commissions promote the

recruitment and retention of new sales associates because

commissions put money in their pockets when they need it

most. For most lines of business, 63% of first-year

commissions may be paid in advance, with the remaining

37% paid as premium payments are applied.

We also began offering a new option for new associates

last year called the Advanced Payment Option, or APO.

Under this new commission plan, new associates can opt

to receive higher first-year commission amounts, with

reduced renewal commission and a reduced stock bonus.

If an agent opts for the APO commission plan, they

automatically revert back to standard plan after two years.

This plan, which is for new associates only and is not

available to brokers or coordinators, was designed to get

more cash in associates’ pockets upfront to reduce new

agent turnover.

Bonus Compensation

• MPI Bonus

• Stock Bonus

• Recruiter Bonus

In addition to motivating commissions, Aflac offers

various bonuses. Aflac’s bonus programs include the

Market Potential Index, or MPI Bonus, the Stock Bonus

and the Recruiter Bonus. These are designed to motivate

the field force and promote retention of our valued and

independent sales team members and augment the

commissions paid.

The MPI Bonus measures the sales potential of Aflac

state and regional operations. MPI targets are set for each

region and state, taking into account the number of inforce

policies, the estimated potential employee base in

each state, and gross production in prior years. Lesspenetrated

states typically have higher MPI target goals.

When regional or state sales coordinators reach or

exceed their target MPIs, they receive cash bonuses

based upon the additional production. It’s important to

note that bonuses for DSCs are not MPI-based. Instead,

they are based on the number of associates on their teams

who qualify for particular Honor Club award programs. The

associates qualify for these programs based on meeting

certain production quotas.

The Stock Bonus provides Aflac stock to sales

associates and coordinators. This bonus is triggered when

a policy’s premium is paid in the 13 th month. At that point,

we award sales associates 3.5% of the first year’s

premium as a stock bonus. District, regional and states

sales coordinators receive .7% of the first-year premium in

stock bonuses. For policies written by associates paid

under the APO program, associates receive a stock bonus

paid at a rate of 2%, and the coordinator commission

remains the same at .7%.

The final incentive is the Recruiter Bonus, which is paid

only to sales associates, not coordinators. It is an


important incentive, because many of our best new

recruits join Aflac as a result of referrals by existing agents.

As compensation for recruiting a new agent, sales

associates receive a 5% override from business written by

that agent for one year. The bonus is calculated and paid

quarterly as a one-time payment of 5% for each applicable

policy’s annual premium. The Recruiter Bonus slightly

reduces the commission percentages paid to state,

regional and district sales coordinators for that particular


Honor Clubs

early July, challenges all levels of the Aflac field force to

boost their sales numbers.


• Primary methods

» Recommendations from field force

» Internet

• Focus on increasing size and effectiveness

of field force

• Track average weekly producers (AWPs)

• Fireball and Star Award Series

• Key Clubs

• Growth Enterprise Management (GEM)


• Founders Week

• Convention

• President's Club

• Life Guild

• Top Ten

Honor Clubs offer associates and coordinators access

to yet another pool of prestigious and lucrative incentives

that increase morale and generate recognition that drives

sales. These clubs also serve to increase average monthly

producer growth and payroll account growth, all of which

are essential to growing Aflac’s business.

Awards include cash bonuses and world-class

vacations to domestic and international locations.

Incentive Contests

These contests are for sales associates and

coordinators who have reached various levels of success.

But before they can excel at Aflac, we have to identify and

recruit talented and driven associates. Recruiting has

always been, and will continue to be, an essential

component of Aflac’s distribution growth. We recruit

potential members of our field force in two primary ways:

through recommendations from current sales agents and

via two of the leading national Internet resources –

Monster.com and CareerBuilder.com. Other recruits join

the Aflac team after learning about opportunities through

other sources, such as job fairs and print ads.

In 2009, Aflac’s continued focus is on the training and

retention of new associates. After all, increasing the size of

our field force allows us to effectively reach out to new

customers and expanding markets. At the same time, we

are committed to increasing the effectiveness of the field

force by developing, tracking and building upon the

number of average weekly producers.

Average Weekly Producers

• Companywide, state, regional and district


• Aflac Goes to Hollywood contest

• Spread Your Wings Adventure contest

• AWP metric more accurately measures success

• AWPs increased 2.4% in first quarter 2009

» 69% were veteran agents

» 31% were first-year agents

Contests have also proven to be motivators. They have

a track record of encouraging associates and coordinators

to focus on specific skills and activities that support all

aspects of Aflac’s business. Thousands of Aflac contests

are run at each year, ranging from state, regional and

district challenges to companywide challenges organized

at the corporate level. I believe contests have contributed

to premium growth, payroll account growth, average

weekly producer growth and new recruits in recent years.

Companywide contests planned for 2009 include the

Aflac Goes to Hollywood and Spread Your Wings

Adventure contests. Aflac Goes to Hollywood is a national

account referral challenge that gives sales associates,

district sales coordinators and their current account

contacts the chance to rub elbows with the stars in sunny

California. The contest began January 1 and ends May 31.

The Spread Your Wings Adventure Contest allows winners

to choose their own destination, whether it’s the famed

Las Vegas Strip or a stretch of sand on a secluded beach.

The contest, which began April 25 and will continue to

We believe that the average weekly producer metric is a

better measure of our success than simply recruitment.

We are continually working to improve the capabilities of

our field force in order to drive the growth of average

weekly producers.

In the first quarter of 2009, the number of average

weekly producers rose by 2.4%. Sixty-nine percent of

those producers were veteran members of the Aflac sales

force, while 31% were new weekly producers, or those

who are in their first year at Aflac.

Coordinator Expansion

1999 2002 2008 3/09

SSC 54 63 93 93

RSC 321 430 554 526

DSC 1,543 2,095 2,321 2,254

Total 1,918 2,588 2,968 2,873


In terms of building our sales force, the success of the

Aflac Duck advertising campaign in early 2000 led to

tremendous growth of recruits, which ultimately challenged

our sales management infrastructure. We have commonly

referred to this time period as the “duck bubble.” The

growth of our sales force simply outpaced the growth of

our coordinator base.

Today, the picture is different. Since 2002, we have

effectively expanded our coordinator base, which has

allowed us to enhance both our recruiting and training

capacity. Part of that success is attributable to the addition

of coordinators in training, who help associates transition

between sales and the DSC who is responsible for on-thejob

field training.

Payroll Account Growth

Another area that reflects the success of our training

efforts is the increase in new annualized premium written

by new associates. We continue to focus on training and

developing our new recruits, and that focus has paid off in

solid results. Although new sales declined .6% in the first

quarter of 2009, production from new associates rose







Aflac U.S. New Premium Sales

(In Millions)




$1,558 $1,551

• Number of new payroll accounts rose 6.3% in

2008 and 9.9% in first quarter 2009

• Payroll account growth gives us "shelf space"

• Fewer employees are purchasing products

• Producers must "step up their game" and meet

with more employees






% Inc. 5.1












Despite the challenges of the economy, Aflac is showing

improvement in some key areas. Our overall growth of new

payroll accounts has been solid. The number of new Aflac

payroll accounts rose 6.3% in 2008 and 9.9% in the first

quarter of 2009. Importantly, payroll accounts opened by

new associates have been strong, which we attribute to

the New Associate Training Cycle that was implemented

several years ago. We believe growth in payroll accounts

gives us important “shelf space” that will help future sales.

Despite the economic downturn, in the first quarter of

2009, we continued to grow the number of payroll

accounts and also our block of business at existing

accounts. With respect to our new business in the first

quarter of 2009, we saw a slightly lower percentage of

people purchase Aflac products, and those who are

buying are buying about the same amount in terms of

premium. Therefore, our new producers are being

challenged to “step up their game” and meet with more

potential policyholders to achieve the same number of

sales they achieved before the economy began to



New Associate Premium Growth

Following the explosive sales growth of 2000 through

2002, growth slowed from 2003 to 2005 as we focused on

enhancing our sales force infrastructure. Sales improved in

2006 and 2007. However, the steadily deteriorating

economy last year had an impact on our sales results.

Although sales were down .4% for the year, annualized

premiums in force were up 6.2%. Sales in the first quarter

of this year were down slightly. However, we picked up six

additional production days in the first quarter due to

movement in the production calendar. Without those

added days, sales would have been down approximately


2008 Sales Results by Territory

Sales Territory





South 21.9% (1.6)%

North 14.0 (2.8)

East 13.5 2.6

Southwest 12.0 4.0

Northeast 11.5 (2.0)

West 9.8 (2.6)

Central 8.5 3.2

Pacific 8.6 (2.5)

Total 100.0% (.4)%





18.9 18.9






This chart breaks out sales results by territory. The

South Territory is the largest contributor to Aflac sales,

accounting for to 21.9% of new annualized premium in









2007 2008 2009









Sales Growth by State Operation

(Twelve Months Ended 2008)

10% or greater increase

Zero to 10% increase

Negative percentage change

In the meantime, there is no doubt that 2009 will be a

difficult year for American businesses across every

industry. Insurers are no different – and, in some ways, our

challenges are greater due to the perception that coverage

is a “nice to have” but not a “need to have” when

consumers are not optimistic about the future. Our 2009

sales objective is to generate flat to 5% sales growth.

However, as we have previously mentioned, we may need

to revisit and modify that target if we see continued

deterioration of the economy.



Penetration by Sales Territory

(In thousands)

Total businesses*

Aflac payroll accounts (12/31/08)

Last year, 43 Aflac state organizations showed positive

sales growth. Among those, 10 states had increases of

10% or more. That’s down from 2007 when 86 states had

sales increases, with 45 states producing double-digit

sales growth. In the first quarter of this year, 40 states

produced growth in sales. Among those, 19 were up 10%

or higher.

Key Indicators

• Key indicators are up

» Average Weekly Producers (AWP)

» Average Weekly New Producers (AWNP)

» Payroll accounts

» Payroll accounts opened by new associates

» Recruiting

Although sales have been negatively impacted by the

weak economy, we remain encouraged by the underlying

key indicators of future sales. Average weekly producers

and average weekly new producers are up. New payroll

accounts are increasing, and payroll accounts opened by

new associates continue to grow at a faster rate. In

addition, we are experiencing strong recruitment of new

associates. We believe this suggests that the underlying

condition of our business model is healthy and that we will

be well-positioned when the economic environment


2009 Sales Objective

• To generate flat to 5% sales growth







Pacific Northeast West North Southwest South Central East

Penetration 4.2% 4.6% 5.7% 7.8% 9.1% 8.3% 9.7% 8.8%

*Source: U.S. Census Bureau Tabulations by Enterprise Size, 2006

As the U.S. economy declines, we believe the consumer

need for the protection provided by Aflac’s products is

growing. However, it is up to our field force to turn that

need into demand.

We believe our sales territory distribution model is on

track to meet growing consumer needs. There is a vast,

untapped market available to us in the United States. As

that market realizes the need for Aflac’s products and

services, we will be here to meet those needs.

Even our most penetrated territory, the Central territory,

has a penetration rate of just 9.7%. Our most

underpenetrated territory, Pacific, is at just 4.2%. This

suggests that there are tremendous opportunities for Aflac

in all territories.

We believe our highly motivated and trained sales force

and new marketing campaign “We’ve Got You Under Our

Wing” will show employers and employees why now, more

than ever, Americans need the peace of mind Aflac

products provide. The campaign will reinforce the

message that we will be here for our policyholders and

payroll accounts during their greatest times of need – and

that need is enormous today. Money is tight, every

financial decision is a source of worry, jobs are being lost

and too many Americans are afraid of losing the

paychecks they so urgently depend upon. Consumers are

looking for peace of mind, and Aflac is here to provide that

peace of mind.


Aflac U.S. Training

Eric J. Leger

Vice President, Field Force Development

For more than two decades, our growth strategy has

been to create and deliver relevant products that offer

value to consumers. We’ve provided information about the

product side of this equation. I’ll focus on the second

aspect of our strategy – the development of our

distribution system that delivers these products to


In 2005, we restructured the Field Force Development

Department to place greater emphasis and resources on

training our distribution system. Since the restructure, we

have continued to develop innovative training programs for

all levels of the field force. We believe our 2008 results

prove this has been a success. Our programs are

delivered by a dedicated team of trainers who began their

Aflac careers as associates and sales coordinators in the

field. Let’s take a look at how we’ve structured our training

area to maximize our ability to deliver the appropriate

training programs where they are needed.




Field Force Sales Training




Eric Leger

Vice President

Field Force Development

Senior Manager

Territory Training














Within Field Force Development, a senior manager of

Territory Training supervises five territory training managers

and one technology training manager, each of whom is

responsible for training within dedicated geographic

territories. Under each territory training manager are

trainers. Each training manager works closely with his or

her designated territory directors, state sales coordinators,

and state training coordinators to assess each state

operation’s specific training and developmental needs and

then coordinate programs to meet those needs.

These assessments use current and historical data to

analyze recruiting, retention and sales performance. They

also take into consideration the state’s current training

programs, training calendar, and the experience of the

state training coordinator. Based on the assessment, the

territory training manager may select appropriate classes

and seminars from a corporate catalog. If necessary, a

training team from headquarters can be used to

supplement the training provided by the state. By

capitalizing on the longstanding working relationships

between the training personnel in the field and at

headquarters, we feel we enable our state operations to

maximize new recruits’ potential throughout the United

States. The coordination between field trainers and our

headquarters training teams helps us deliver an inventory

of programs in a timely, effective and customized manner.

We have various methods of measuring our success in

developing our field force. One such method is the Market

Potential Index, or MPI. MPI is a metric that measures the

sales potential of Aflac state, regional and district

operations. This metric takes into account in-force policy

numbers, the estimated potential employee base in each

state, and prior years’ gross production. Over the years,

we have identified a handful of “pre-MPI” metrics that

show a high correlation to whether or not a state will

achieve their MPI. To proactively identify areas in which a

certain state operation may be struggling, and therefore

are likely to miss achieving MPI, we began using a new

assessment tool called the State Operation Sales Analysis

in the second quarter of 2008. This tool helps identify

certain critical metrics and then predicts positive or

negative trends. Once this is accomplished, we can then

proactively and methodically deliver training and support

where needed to help turn things around in that state.

To apply this tool, we first group together state

operations that have similar population and geographicsize

characteristics. The State Operation Sales Analysis

tool then makes an apples-to-apples comparison of

numerous metrics, including the number of new recruits,

how much business those recruits are producing in new

and existing accounts, what products are being sold in

accounts, how many products of business are being

offered, and numerous other key indicators. If, after

comparison and analysis, we determine that a state is

falling short of achieving these important metrics, we then

strategically determine when and where to deliver

customized training to help that state get back on track.

Field Force Philosophy

• Recruit

• Train

• Retain

In Field Force Development, we are also focused on

getting our recruits on the right track. We center our efforts

on our philosophy of recruit, train and retain. While this

may sound like a simple philosophy, it reflects the logical

steps we must take to ensure we are securing,

empowering, and enabling our sales force to have a

successful and long-term career with Aflac.

Recruiting Methods

• Nominations

• Internet


With this philosophy, recruiting comes first, and it

should always be prioritized that way. The two primary

sources of new recruits in 2008 were nominations from our

field force and candidates from the Internet. These two

recruiting methods have traditionally been, and continue to

be the most effective way for us to connect with recruits.

Good Aflac agents know what it takes to be successful,

and are able to make a personal connection with those

they recruit. In 2008, nominations and referrals together

accounted for roughly 47% of our new recruits.

Internet Recruiting

recruits came from various other sources, including career

fairs and print advertising.











13.6 15.0

Recruiting Results

(3.8) (5.8)


4.2 4.9









2007 2008 2009

Field force recruiting yielded solid gains in 2008, as the

number of recruits joining the Aflac field force grew by

6.2%. Over 25,000 new associates joined Aflac in 2008.

The Internet continued as solid source of new recruits in

2008, and accounted for approximately 26% of our new

recruits, up from 22% the previous year. In 2009, we

streamlined the number of our Internet recruiting partners

from five to the two leading online recruiting companies:

CareerBuilder.com and Monster.com. Both of these

partners continue to provide us with the most current

trends and best practices in Internet recruiting and

together capture more than 95% of both the aggressive

and passive job seekers. We have developed a much more

interactive and robust presence for Aflac on both sites.

We are also leveraging these two main sites to interface

with other Internet recruiting avenues, including Work-In-

Retail.com – a site that targets people in the retail sector

and is owned and hosted by CareerBuilder.com. We are

also in the early stages of collaborating with

CareerBuilder.com for select ads for sales associates on


When a candidate has learned of an opportunity at Aflac

through CareerBuilder.com or Monster.com and decides

to click on an “Apply Now” button, they are automatically

funneled to “Producer Pathway,” our internal candidate

contact information collection system. We streamlined the

number of questions a potential candidate must answer on

this system from more than 30 to eight after we

determined that too many initial screening questions turn

people away. This simplified process resulted in a 50%

increase in the number of candidates submitting

information about a career as an Aflac agent. Once a

potential candidate’s information is collected, it is sorted

by ZIP code and distributed to the RSC who is responsible

for recruiting in the corresponding region. We believe that

we will continue to feel the positive effects of this change

through 2009 and beyond.

While the previously mentioned methods accounted for

most of our recruiting, the remaining 27% of our new

We have continued the solid recruiting momentum from

2008 into 2009. During the first quarter of 2009, recruiting

was up over 25.0% and average weekly new producers

rose 11.8%. We believe that a contributing factor to our

growth in recruiting is directly related to the increased

unemployment rates across the country, as traditionally,

Aflac field force recruiting has an inverse relationship with

the unemployment rate. That’s because when salaried jobs

are harder to obtain, people are more open to working in a

commission-related position.


To further bolster our recruiting infrastructure, we

introduced the Online Prelicensing and New Associate

Development system in the first quarter of 2008. This

comprehensive, easy-to-use system was designed to help

new recruits complete the various components of their

prelicensing training. It allows us to connect with and

support new associates even earlier in the process. It also

allows coordinators to track, manage and mentor new

associates throughout the challenging testing phase, as

well as track how many people we lose during that phase.

This program has been very successful. Approximately


22,000 recruits completed the pre-licensing in the first


Recruiting Strategies

Specific, Targeted Recruiting:

• Industry

• Company

• Geographic

We began testing a new strategy in 2008: industry-,

company-, and geographic-specific recruiting that uses e-

mail, direct mail, industry events and chambers of

commerce to specifically target certain industry sectors.

This has allowed us to reach out to potential recruits and

communicate the opportunities an Aflac agent career can


Our initial “testing” of this new strategy targeted

established salespeople who shared commonalities with

our existing sales force. This initial campaign resulted in

more than 600 new Aflac associates during the second

half of 2008.

As 2008 came to a close, we targeted employees in

other segments of the workforce. This industry-,

geographic-, and company-specific strategy accounted for

almost 7.0% of our new associate recruitment in the fourth

quarter 2008 new associates. During 2009, we will

continue to be both proactive and reactive in strategically

targeting geographies, industries, and companies.

After recruiting, training is next in our philosophy of

recruit, train and retain. And training will become even

more important as we continue to build on our product

portfolio. Learning starts in the classroom, but the real

learning and development happens once associates apply

it to actual sales situations. Although “rookie” agents and

veteran associates are at different places in their careers,

both can benefit from training.


approach to LEASE effectively bridges the disconnect we

encountered between classroom training and field training

in the earlier version of LEASE.

New Associate Training Cycle Level One

• Basic Products

• New Associate Sales School featuring LEASE

• New Associate Sales School Follow-up

• SmartApp Next Generation (SNG)

• Enrollment & Account Management

• Basic Flex

The New Associate Training Cycle, which incorporates

LEASE training, is divided into two levels of classes. The

first level starts the associate off learning six fundamental


New Associate Training Cycle Level Two

• Owning Your Own Business

• Goal Setting and Business Planning

• Target & Referral Marketing

• Consultative Selling

• Conducting a Group Meeting

• Advanced Product Knowledge

• Understanding Commissions and Statements

• Value-added Services/Advanced Flex

• Networking in Your Community

• Understanding the Claims Process

Once associates have mastered Level One, Level Two

delves deeper to equip new associates with advanced

knowledge and skills they’ll need to succeed. This is

consistent with our belief that training should be sequential

and help new associates address topics as they arise.

Winner’s Edge

Larger Earnings Acquire Small Employers

In January 2004, Aflac introduced a new training

program called LEASE, which stands for Larger Earnings

Acquire Small Employers. LEASE is a selling system

developed especially for our new associates. It teaches

associates to open and focus on businesses with five to

20 employees. Our goal is to help the new agent achieve

success early on by making the program simple,

straightforward, and easily transferable. Also, the smaller

accounts that LEASE targets tend to be more accessible

to sales agents, faster to execute on decisions and more

open to the one-on-one enrollment system that allows our

associates to fully explain Aflac products. In early 2006,

our team in Field Force Development redesigned LEASE,

to make it even easier for DSCs to consume, and therefore

deliver, when training new associates in the field. This new

• Part of the New Associate Blueprint for Success

• Intense 13-week accelerated training

• Weekly meetings with coordinator

• Supports associate for future success

In April of 2009, we incorporated a new element into our

New Associate Blueprint for Success – it’s called Winner’s

Edge. Winner’s Edge will afford associates the ability to

live, learn, and test their knowledge of Aflac’s proven sales

training in an all-inclusive, 13-week, hands-on training

track that uses a curriculum adapted specifically for

accelerated learning. We know that the first 13 weeks in

the life of a new associate are critical. They need to

experience success and experience it quickly. In this 13-

week program, we break down the new associate’s

calendar into an accountability system lasting 13 weeks.

Each week, the associate meets with his/her coordinator


to review the previous week’s objectives and discuss the

upcoming week’s objectives. Each weekly meeting helps

the associate stay on track.

New Payroll Account Growth



Average Weekly New and

Veteran Producer Growth




















We are showing significant improvement in several key

categories. The New Associate Training Cycle was

introduced in the fourth quarter of 2005. A little more than

a year after its introduction, payroll accounts opened by

new associates increased at double-digit rates and have

stayed there ever since. For the first quarter of 2009,

payroll account growth from new associates was

significantly up, posting growth of 18.1%.
















New Associate Premium Growth

18.9 18.9













2007 2008 2009

In addition to payroll account growth, we believe the

success of our training efforts is also reflected in the

increase in new annualized premium written by new

associates. As we continue to focus on not just the

quantity of recruits we bring into the business, but the

quality and education of those recruits, we have generally

experienced solid growth in new associates’ new

annualized premium sales. Although new sales were down

.6% in the first quarter of this year, production from new

associates made reasonable gains, with sales from new

associates rising 6.9% in the first quarter.









New Producers













3.0 3.7 3.4




Veteran Producers (.8)

(1.6) (1.4)



2007 2008 2009

As we have discussed, we have successfully shifted the

focus of our field force management from one of simply

recruiting to recruiting with the intent of growing average

weekly producers. To effect this change, we adjusted the

criteria of a contest from simply recruiting to focus on

recruiting and developing those recruits to become

producers. We then provided bonuses to the DSC based

on the new criteria. An increase in average weekly

producers is the combined result of effective recruiting,

solid training for new associates, and veteran associates

who are “on their game.” The number of average weekly

producers increased by 2.4% for first quarter 2009.

However, the number of new average weekly producers,

or those who are in their first year, rose 11.8% in the first

quarter of this year.









Coordinator in Training Growth







1,285 1,291 1,292


2007 2008 2009

For the last few years we have discussed our

coordinator in training program as a means for better

developing field management. The mission of the CIT

program is to provide every prospective district sales

coordinator with the tools and training needed to be

successful. As our CITs progress in the training, they will

be educated on leadership, nominating, education and

field training, team building, planning, time management

and much more. There are specific guidelines,

requirements and qualifications to which our CITs must


By focusing on coordinator expansion, we can create

an atmosphere of success by offering associates the


opportunity to move up through the ranks, following a set

of predetermined standards prior to promotion. This

program gives the CIT an opportunity to experience sales

management without having to make a full commitment to

the district sales coordinator position.

Coordinator in Training Performance

(1/01/07 - 12/31/08)

On a weekly basis, CITs who completed four or more CIT

training modules:

• Opened an average of 86.9% more new payroll

accounts than CITs with less than four CIT training


• Produced 87.2% more new annualized premium

than CITs with less than four CIT training modules

On a weekly basis, CITs with four or more modules

opened 87% more new payroll accounts than those with

less than four modules. These same CITs have also

produced 87% more new annualized premium than those

with less than four modules. These results are significant

and suggest our CIT program is effective.

now more than ever. And it is our job at headquarters to

empower our sales force with the tools they need to get

this message through.

In keeping with our philosophy of providing relevant and

timely training, we conducted the second Aflac National

Training Day on Friday, April 24, 2009. This training was

made available to all levels of our field force and is

especially important because of the economic uncertainty

that has filled consumers with fear, anxiety and confusion

about their financial situations. This nationwide training day

was created as a specialized training forum where our

state training coordinators train the sales force with

effective techniques and relevant approaches that will

spread the message about how now more than ever, our

products are valuable. Leading up to the Aflac National

Training Day, state sales coordinators and state training

coordinators attended a webcast event on April 21 called

“All Access.” This live “All Access” webcast event was

broadcast to the Aflac field force in cities throughout the

country to help build awareness and momentum for the

ensuing National Training Day as well as engage

participation from the field force. The feedback we

received was phenomenal.

Coordinator Accreditation Program Series

District Sales Coordinator Performance

(1/01/07 - 12/31/08)

On a weekly basis, DSCs who participated in the CIT


• Opened an average of 29.2% more new payroll

accounts than DSCs with no CIT training

• Produced 18.8% more new annualized premium

sales than DSCs with no CIT training

District sales coordinators who participated in the CIT

program are also outperforming DSCs who did not have

CIT training. It is our plan to have coordinators at every

level better prepared in every necessary skill set to execute

their own design for success. A culture of learning must be

created and reinforced for our entire field force – for all

coordinators and all associates.

Aflac National Training Day

All leadership levels –

• Territory

• State

• Region

• District

In terms of a focus on training at all levels, as I

discussed last year, Field Force Development has been

developing coordinator accreditation programs for all levels

of coordinators. We believe our District Coordinator

Accreditation Program (DCAP) and Regional Coordinator

Accreditation Program (RCAP) continued to be

tremendously successful. All of our DSCs and RSCs

attended the classes in 2008.

SCAP Curriculum

• Establishing credibility

• Climate, leadership and performance

• Decision making

• Skillful conversation

• Conflict management

For the first time in Aflac’s 50-year history, the

economic downturn is impacting our sales. Clearly, this

downturn has forced consumers to rethink how they

allocate their finances. It is the job of our sales force to

convey to consumers how Aflac products can help them

For the first time ever, we conducted a State

Coordinator Accreditation Program (SCAP) in June of

2008. This curriculum focused on key areas of leadership:


establishing credibility, climate, leadership and

performance, decision making, skillful conversation and

conflict management. Our SCAP was enthusiastically

received by our SSCs, and we will continue this program in


TCAP Curriculum





First-Year Associate Retention







• Creating a positive work climate

• Managing business leadership dilemmas

• Improving performance through business coaching

• Leading at territory meetings

New for 2009 is our Territory Director Coordinator

Accreditation Program, or TCAP. The focus of TCAP will

be on business leadership, entrepreneurship and climate

within the organization. The leadership message to all

other levels of coordinators challenges them to embrace

their leadership role fully. As a result of their participation in

program activities and discussions, TDs come to

appreciate that they are part of a leadership team whose

members are not only responsible for their immediate

areas of responsibility but also for building and

strengthening the Aflac organization as a whole. Woven

into the TD learning experience will be creating a positive

work climate, leading sales performance, sales coaching,

managing sales dilemmas and leading and arriving

business at Aflac.

Finally, to the “retain” portion of our recruit, train and

retain philosophy. Retention is the ultimate culmination of

effective recruiting and training.




2003 2004 2005 2006 2007 2008

As you likely know, commission-only positions tend to

have high turnover, and that has always been the case

with Aflac. However, in looking at this chart, it is important

to understand that there is a lag between the time an

associate is recruited and when we measure retention. We

count associates as retained when they produce business

anytime during the 10 th to 12 th month of their tenure with

Aflac. For example, because we are measuring the

associate in the 12 th month of tenure, our retention of 2007

recruits is actually reflected in the 2008 retention number.

The improvement of 19.5% in 2008 reflects benefits of the

revised training program that started in 2006 and

continues today. We also expect further improvement as

our training efforts continue to pay off.

Each year we strive to improve upon the last year in

every measurable category. We remain steadfast in our

commitment to focus not only on expanding our field

force, but doing it the right way. We want quality

associates who are motivated to participate in our training

systems and sell products people want and need. As

associates succeed in the early stages of their career, the

opportunity for advancement is theirs for the taking. Aflac’s

entire Field Force Development team is committed to

advancing our field force efforts through improved

recruiting support, enhancing skills sets through more

effective training, and motivating our sales force with

creative incentive programs.


Aflac U.S. Internal Operations

Teresa L. White

Executive Vice President; Chief Administrative Officer

Internal Operations includes many distinct administrative

departments that provide service support to Aflac’s payroll

accounts, policyholders, and sales associates. More than

2,600 employees work in these areas. To provide

perspective on the scale of operations: In 2008 we

handled over 10.9 million calls to our service center,

completed over 5.2 million requests for policy service,

established more than 100,000 new payroll accounts and

issued over 3.2 million new policies.

Our focus within Internal Operations has remained

consistent: to effectively balance operating efficiency with

outstanding service delivery. 2008 was a year of strong

service performance, with further advances in service

reliability, introduction and adoption of technology

solutions that make it easy to do business with Aflac, as

well as delivery of specialized service to key customer

segments. These investments are reaping rewards with

respect to perception of the Aflac brand among all

employers and satisfaction levels among Aflac’s existing

payroll accounts.

Service Factors Driving

Brand Perception Among Employers

• Effective/efficient claims handling

• Easy to understand information

• Knowledgeable call center employees

• Caring about clients and their needs

• Overall dependability

Source: Aflac Millward Brown Report, 11/08

Research conducted in 2008 by Millward Brown

indicates that employers within the marketplace are

significantly more likely to describe Aflac as “service

oriented” and “having a good reputation” versus other

health, life, and supplemental insurance companies. Key

service areas where Aflac has a distinct advantage in

brand perception within the general marketplace are

1) effective and efficient claims handling, 2) easy-tounderstand

information, 3) knowledgeable call center

employees, 4) caring about clients and their needs, and

5) overall dependability.

Aflac Account Satisfaction with Service

Favorable perception of Aflac’s service capabilities also

translates to high levels of satisfaction among companies

currently offering Aflac products to their employees.

Research performed by an independent third party

indicates that 78% of Aflac’s payroll accounts are either

“extremely satisfied” or “very satisfied” with our service. To

provide you with perspective on just how favorable these

results are, this same research indicates that account

satisfaction among our three top competitors is much

lower, ranging from 59% to 66%. In addition, over 46% of

Aflac’s payroll accounts are very willing to refer Aflac to a

friend or colleague, compared with a range of 19% to 30%

for our top competitors. Aflac’s service capabilities remain

a competitive advantage that is leveraged to open doors,

close sales, and retain customers.

Core Administration Expense per Policy in Force












2004 2005 2006 2007 2008

Administration expense per policy is one of the most

fundamental metrics we use to evaluate our efficiency

within Internal Operations. The trend line shown on this

chart represents our core administration expense per

policy in force, excluding renewal commissions paid to our

field force associates. While these expenses show a

gradual increase over time, the rate of change continues to

be modest. This performance has been accomplished

despite expense pressures that include rising consumer

expectations regarding service delivery, increasing product

complexity, the need for differentiated service levels for

specific customer segments, and the continued growth of

our business.



Percent Change in Core Administration

Expense and Earned Premium


Earned premium















7.7 Core administration expense



2004 2005 2006 2007 2008

One of our high-level objectives each year is to ensure

that our expense growth for core administration remains

below the growth in earned premium. In 2008, our percent

change in expenses compared very favorably to the past

two years and tracked closely with earned premium

growth. Our service investments in 2008 were focused on

further enhancing reliability, leveraging technology

solutions to make it even easier to do business with us,

and increasing our capability to deliver differentiated

service to key customer segments such as brokers, large

accounts, and Hispanic consumers.

Key Service Interactions

Research among Aflac customers indicates that reliable

service, which means being fast and effective in handling

customer requests, is a key driver of market perception

and customer satisfaction. We continue to experience

outstanding performance across the board on the key

service interactions of enrollment, claims, and customer

service center inquiries.












87.6 88.9


• Enrollment

• Claims

• Service Center

Enrollment Reliability:

New Business Automation

Transactions via SmartApp/SNG




Jet-issue rate

86.1 87.2 89.9


67.7 67.0

2004 2005 2006 2007 2008 3/09

From an enrollment perspective, our average time to

process new policy applications in the first quarter of 2009

is 1.3 days, which is well within our service turnaround

time commitment of two days. This performance is

enabled in part by the fact that over 89% of our policy

applications now come via SmartApp or SNG. When we

also include submissions via our web-based enrollment

solutions, over 90% of submissions are received in an

electronic format. In addition, approximately 67% of

applications received are processed without manual

intervention. This efficient processing means faster

decisions for our customers, faster commission payments

for our field force associates, and lower processing

expenses for Aflac.

We have also made delivery of our policies simpler and

more cost effective, with the implementation of E-Policy in

2008. With this service, our policyholders can elect to

receive an electronic copy of their policy rather than a

printed version via mail. Through March 2009, over 18% of

our policies are offered in the new format, making the

process faster and easier for many customers and saving

processing and handling expenses for Aflac. As an added

benefit, E-Policy clearly aligns with our support of a

“greener” approach to business.

Aflac Wingspan

For the Employer

Integrated benefits enrollment

Enrollment process management

For the Employee

Clear benefit communication

Comprehensive summary of benefit


For the Broker

Leading edge, market-driven solutions for

their clients

No direct cost to broker or employer for

open enrollment

We are continuing to build on our enrollment success

with the recent introduction of Wingspan, our core and

voluntary enrollment solution. Wingspan allows employers

to offer one of several professional, integrated platforms to

enroll core, Aflac and ancillary benefits. This solution

equips employers with tools to effectively manage the

enrollment process, while providing employees with clear

benefit communication and a comprehensive summary of

their enrollment selections. Wingspan yields a simplified,

smooth and easy enrollment process for both employers

and employees. It also allows brokers to offer leading

edge, marketplace-driven solutions to their clients at no

direct cost for open enrollment. In developing our

solutions, we have partnered with leading enrollment

solution providers so that Wingspan will remain on the

cutting edge of enrollment technology.









Claims Reliability

(Turnaround Time in Days)


2004 2005 2006 2007 2008 3/09

With respect to claims, our most critical interaction, our

average handling time through March 2009 is just 3.5

days. This performance significantly exceeds the service

commitment of five days we have consistently held for

claims processing. We recognize that in tough economic

times, fast payment of claims becomes even more

valuable to our policyholders and a more distinct

competitive advantage for Aflac.

We have increased our percentage of claims that are

automated, or handled without manual processing, to over

45%. This helps us continue to control costs while

providing great claims service. In addition, we recently





introduced the capability for our policyholders to submit

claims electronically for select claim types, making the

claims filing process faster, easier and more efficient.

With the continued introduction of new and revised

products, effectively managing claims complexity will be

important to maintaining claims efficiency and reliable

service delivery. To ensure our success, we have staff

dedicated to structuring and simplifying business rules for

handling claims.

Aflac’s 2008 claimant satisfaction study indicated that

93% of paid respondents said that Aflac met or exceeded

their expectations, up from 92% in 2007. Aflac’s payroll

account administrators also have a very favorable

perception of our performance on claims handling.

Independent research conducted in 2008 indicated 80% of

our accounts are extremely or very satisfied with handling

of claims for their employees, versus an average of 63.6%

for our top three competitors. Outstanding claims service

continues to be a selling point and competitive advantage

for our field force and brokers.






Service Center Reliability

(Percentage of Inquiries Handled via IVR)






2004 2005 2006 2007 2008 3/09

Aflac’s most frequent customer contact is through our

service center, and we have continued to build our

capabilities to effectively manage this interaction. We

recently introduced an enhanced desktop system for our

service center representatives, providing improved access

to important information and faster and better resolution of

customer service requests. We also continued to refine

and promote use of our Interactive Voice Response

System, or IVR, which currently handles over 37% of all

service inquiries. While IVR usage remains high, we have

experienced slight declines due to adoption of the web

channel for simple service inquiries. These technology

solutions helped us reduce our Average Speed of Answer

year-to-date to 1 minute, 32 seconds, an 8% improvement

over the same time period in 2008.

Technology solutions are critical to the performance of

our service center. However, we also recognize the

importance of having highly skilled and knowledgeable

people resources. As daily life becomes more challenging

and stressful for our customers, our service center

representatives work even harder to reinforce the feeling

that our customers can count on Aflac now more than

ever. Our on-going training on Aflac products and services

is complemented by soft skill training and reinforcement

that ensures we consistently provide the caring service

that differentiates Aflac from our competition.











Online Services

(Online Billing Adoption Rate)


New accounts


To complement Aflac’s phone services, we have

expanded service capabilities via the web for associates,

policyholders and payroll accounts. These web services

give our customers more choice and flexibility and free our

service center representative to handle more complex

customer inquiries.

On-line Billing and Service has become the standard

means of interacting with Aflac for the majority of our new

payroll accounts. In 2008, we began a significant focus on

adoption of online billing for new accounts with a rate of

over 78% through March 2009. This represents an

increase of 52% over prior year, bringing our total account

adoption rate to 35%. This web-based solution is targeted

toward our small to mid-size accounts and allows them to

reconcile their invoices, view account information and

make select changes on-line.

For our large accounts, we offer Express Services to

simplify the billing and invoice reconciliation process. This

suite of tools enables the electronic exchange of billing and

policy change files between Aflac and the account. This

frees the account from having to manually reconcile

invoices and automates the reconciliation and payment

application process for Aflac. This solution is also very

attractive to brokers as a time-saving tool they can offer to

accounts at no cost.

For policyholders, we introduced our online policyholder

services in 2008. This web portal provides policyholders

with a variety of self-service options, including access to

policy information, claims status, and the ability to update

personal contact information. We will continue to offer

choice of service channels to our customers, while

encouraging the use of self-service capabilities.

Segmented Service


2005 2006 2007 2008 3/09

• Large account executives

• Broker service managers

• Hispanic customer support


Employers and consumers continue to emphasize the

importance of insurance companies being “easy to do

business with.” While our investments in streamlined

service processes and technical capabilities have given us

a competitive edge in the broad marketplace, we

recognize the need to provide specialized solutions for

select business segments.


One area of focus for segmented service has been for

Aflac’s largest payroll accounts. In late 2008, we developed

a large account relations team, with account relations

executives assigned to our highest revenue accounts. Their

role is to manage relationships, monitor key indicators to

ensure the health and stability of the account, and to

provide service support in partnership with the field

associate. Through March of 2009, our account executives

manage 1,381 large accounts, with large accounts being

defined as those with 500 or more employees. In addition,

this team actively researches industry trends and provides

valuable insights to the field force that assist them in

preserving and building key accounts.

A second area of focus for segmented service has been

in support of Aflac’s broker initiative. Broker Service

Managers have been assigned to serve as a single point of

contact with Aflac’s service operations for broker

coordinators. This translates to a simple and easy process

for brokers from initial account set-up and enrollment

through on-going customer support.

Our third area of segmented service has been for

Hispanic consumers. To support this segment of the

market, we offer IVR and dedicated phone lines for

Spanish-speaking customers, key customer

correspondence in Spanish, and back-office support for

handling of Spanish correspondence. We provide Spanish

communication for 1.5% of our policies in force, and that

percentage is steadily growing. Our Spanish language

capabilities integrate seamlessly with our mainstream

processing, which translates to minimal additional expense

and the ability to easily expand or contract our support

based on market demands.

As these segments of the market grow in size and

influence, Aflac’s Internal Operations has the foundational

capabilities in place to expand with the market and provide

high-quality, specialized service.

Field Service Capabilities

The change in billing occurs automatically with no lapse in

coverage or change in premium for the customer. Through

March of 2009, we have over 20,000 policies with Aflac

Always coverage protection. We are increasing promotion

of this service in 2009, as it gives our customers peace of

mind in a more volatile job market and simplifies the

process of converting policies from payroll to direct billing

for our associates.

AflacAnywhere allows our associates to receive

electronic notification of important customer events while

they are in the field. Field adoption of this tool has

increased to 39,000 unique subscribers through March

2009. AflacAnywhere is complemented by another

solution, MobileAflac, which provides our associates with a

wireless connection to access items such as policy or

claims information. This tool allows the associate to quickly

handle customer inquiries and needs, without requiring a

call to the service center. Adoption of MobileAflac has

increased to over 4,300 users through March of 2009, a

67% increase over the prior year. Together, these tools

provide our associates with both subscription-based and

on-demand access to information. This increases the

efficiency of our sales force, while enabling them to provide

outstanding service to our customers.

Field Reporting and Management

• Aflac Reporting and Performance

Management Tool (RPM)

• Leads management

In 2008, we introduced a new Aflac Reporting and

Performance Management tool (RPM) to our field force.

RPM is a standardized corporate reporting tool that assists

the field in formulating sales strategies, determining

training opportunities, and monitoring daily, weekly,

quarterly, and yearly sales performance. This tool provides

enhanced tracking of key metrics such as recruiting

results, new associate premium, and new account activity.

Information is displayed in an easy to use scorecard format

for our state and territory operations. The most significant

benefit of RPM is that it makes planning and management

of field activities and performance simpler and more

efficient for our field force.

Delivery of service to Aflac’s customers is a partnership

between Aflac’s headquarters staff and our field sales

associates. We have provided tools to our associates that

allow them to be highly effective in servicing existing

customers while continuing to network, prospect and grow

their book of business. Introduction and adoption for these

technologies continued to expand in 2008.

AflacAlways was introduced in response to research

indicating many of our policyholders forget that their Aflac

policies are portable and can be taken with them at no

additional cost when they leave their place of employment.

When customers enroll in AflacAlways, they agree to have

their policy automatically switched to direct payment by

credit card or bank debit when they leave the employer.


We also continue to add functionality to our Leads

Management solution to provide our field with the ability to

effectively manage account and policyholder leads, and to

track and drive closure rates. For 2008, the rate of leads

closed with sales was 10.9% for payroll account leads and

3.8% for direct policyholder leads.

Now more than ever, customers want to do business

with insurance companies that are reliable, trustworthy,

and “easy to do business with.” In a turbulent market,

consistent service delivery that is complemented by a

caring, personal touch becomes even more of a positive

differentiator for Aflac. Leading-edge technology solutions

underpin our model and allow us to offer outstanding

service at a low cost of operation. We have built a

foundation that ensures we continue to deliver on our

promise of great service while aggressively managing

efficiency and expenses.

Aflac U.S. Payroll Product Line

(as of 4/30/09)

Benefit Amounts

Monthly Premium Rates (Payroll)


Accident Indemnity

Accident emergency treatment $75 - $120/accident $13.65 - $58.24

Initial accident hospitalization $750 - $2,000

Accidental-death $1,500 - $150,000

Accident specific-sum injuries $20 - $12,500

Accident hospital confinement

$150 - $250/day

Accident rehabilitation confinement

$75 - $150/day

Intensive care

$300 - $400/day


$40 - $60/year

Major diagnostic exams

$100 - $200/year

Accident follow-up treatment

$25 - $35/day

(maximum of 6 treatments per accident)

Physical therapy

$25 - $35/treatment/day

(up to 10 treatments per accident)

Appliances benefit

$50 - $125/accident


$250 - $750/accident


$100 - $200/accident


$120 - $200 ground / $800 - $1,500 air


$200 - $600 round trip

(up to 3 times per year per covered person)

Family lodging

$75 - $125/night/50+miles/up to 30 days

Accident dismemberment

$400 - $40,000 depending upon loss

X-Ray Benefit

$20 - $25/accident

Epidural pain management benefit


Sickness Indemnity

Physician’s visit (payable for accident, sickness, or wellness) $15 - $25/visit $19.90 - $105.90

3 - 4 visits/year (indiv.) or

6 - 8 visits/year (family)

The following benefits are payable for sickness only:

Hospital confinement

$50 - $200/day

Initial hospitalization $250

Diagnostic exams


Surgical schedule

$100 - $2,000/year


$100 ground/$1,000 air

Lump Sum Critical Illness $5.72 - $122.46

Covers: heart attack, stroke,

end-stage renal failure, coma,

paralysis, major human organ transplant

Major Critical Illness Event

Major Critical Illness Event

(if hospitalization and event free for five years)

Subsequent Critical Illness Event $5,000

Coronary Artery Bypass Graft Surgery $3,000

Payroll Long-Term Care

$10,000 - $100,000 (same for children)

$10,000 - $100,000 (same for children)

First occurrence $1,800 - $6,000 $8.40 - $562

Nursing home daily benefit

$60 - $200/day

Assisted living daily benefit

$48 - $160/day

Home health care daily benefit

$30 - $100/day

(Benefit periods vary)

Cancer Indemnity

Wellness benefit $50 - $125/year $16.12 - $213.20

Cancer vaccine benefit $40

Bone marrow donor $40

Annual care benefit

$500/year for 5 years

Initial diagnosis benefit

$2,500 - $10,000 ($5,000 - $20,000 for dependent children)

Initial diagnosis building benefit


Initial treatment benefit

$3,000/covered person

Hospital confinement

$300 - $600/day ($375-$750 for dependent children)



Injected chemotherapy


Oral chemotherapy


National cancer institute (evaluation/consultation) $1,000



Medical imaging $200

Experimental treatment

$500/calendar week if charged

$125/calendar week if no charge



Stem cell transplantation benefit

$10,000/covered person

Nursing services


Surgery and anesthesia $140 - $6,250

Outpatient hospital surgical $300

Skin cancer surgery $50 - $600

Surgical prosthesis $3,000


Cancer Indemnity (con’t)

Prosthesis nonsurgical $250

Benefit Amounts

Reconstructive surgery $350 - $3,000

Blood and plasma


Additional surgical opinion



$250 ground, $2,000 air





Bone marrow transplant $10,000, donor $1,000

Extended-care facility



$1,000 day one, $50/day thereafter

Home health care


Monthly Premium Rates (Payroll)


Lump Sum Cancer $7.54 - $164.58

Internal Cancer

$10,000 - $100,000 (same for children)

Carcinoma In Situ $2,000

Cancer Related Death $5,000

Short-Term Disability (individual coverage)

Disability benefits for sickness and off-the-job injury $500 - $5,000 $14.95 - $266.50

Elimination periods 0-180 days. Benefit periods 3-24 months

Hospital Indemnity*

Aflac U.S. Payroll Product Line (con’t)

(as of 4/30/09)

Hospital confinement $100/day $27.95 - $138.32

Annual confinement benefit (first 5 days)

$400 - $500/day/policy/year

Surgical $100 - $1,000


$50/once per year/policy

Outpatient surgical room charge

$300 general/$100 w/o for surgery or invasive diagnostic exam

Invasive diagnostic exams



$100/day 15 days/confinement 30 days/year

Medical diagnostic imaging

$150/exam/person per year


$100 ground/$1,000 air

Initial hospitalization (rider) $250, $500, $750, $1,000

*Three levels available with benefits added at each level. Level 1 compatible with Health Savings Accounts (HSAs).

Payroll Life

Whole-life face amounts $10,000 - $200,000 $1.04 - $70.72

10-, 20-, and 30-year term face amounts $10,000 - $200,000

Optional return of premium on 20- and 30-year term policies

Accelerated death benefit

Waiver of premium

Optional accidental-death benefit rider

Dependent coverage available

Simplified-issue, rates guaranteed

Hospital Intensive Care

Hospital intensive care unit $700 - 800/day (days 1-7) $10.40 - $24.57

$1,200 - $1,300/day (days 8-15)

Sub-acute intensive care unit benefit $350/day (days 1-15)

Organ transplant $25,000 - $50,000


$250 ground, $2,000 air

Specified Health Event $9.10 - $15.08

Covers: heart attack, stroke, coronary artery bypass surgery,

coma, paralysis, major third-degree burns, end-stage renal

failure, major human organ transplant, persistent vegetative state

First occurrence

$5,000 ($7,500 children)

Reoccurrence $2,500

Secondary specified events




Continuing care $125


$250 ground, $2,000 air




$.50/mile up to $1,500 per occurrence


Dental wellness (Preventive) $25 - $75/year $23.40 - Individual (Basic)

Scheduled benefits $15 - $1,100 $159.50 - Two-parent family (Premier Plus)


Vision correction materials $50 - $210 $13.90 - $49.90

Refractive error correction $100 - $420

Eye exam $35

Permanent visual impairment Up to $20,000

Specific eye diseases/disorders $1,000

Eye surgery $50 - $1,500


Section IV

The Management Team

Daniel P. Amos

Chairman and Chief Executive Officer,

Aflac, Aflac Incorporated

Dan Amos, 57, graduated from the

University of Georgia with a bachelor’s

degree in insurance and risk

management. He first joined Aflac as a sales associate

while in his teens. He served as state manager of Aflac’s

Alabama/West Florida Territory for 10 years. Under his

leadership, his sales territory was the number one

producing area in 1981 and 1982. He was elected

president of Aflac in 1983 and chief operating officer of

Aflac in 1987. He became chief executive officer in 1990

and was named chairman in 2001. Dan serves on the

board of directors of Synovus Financial Corporation and

is a member of the boards of trustees of Children’s

Healthcare of Atlanta and House of Mercy of Columbus.

He is a past recipient of the Dr. Martin Luther King Jr.

Unity Award and the Anti-Defamation League’s Torch of

Liberty Award, and has been named by CNN as CEO of

the Week. In 2009, Dan was named America's Best

CEO for Life Insurance by Institutional Investor magazine.

He is the former chairman of the boards of The Japan-

America Society of Georgia and the University of Georgia


Kriss Cloninger III

President and Chief Financial Officer,

Aflac Incorporated

Kriss Cloninger, 61, joined Aflac

Incorporated in March 1992 as senior

vice president and chief financial officer.

He was promoted to executive vice president in 1993

and president in May 2001. Since joining Aflac, he has

had primary responsibility for overseeing the financial

management of all company operations. In March 2006,

he was named Best CFO in the insurance/life category in

America by Institutional Investor magazine for the third

year in a row. He is a member of the boards of directors

of Aflac Incorporated, Tupperware Brands Corporation,

and Total Systems Services, Inc. He holds bachelor’s

and master’s degrees in business administration from

the University of Texas at Austin and is a Fellow of the

Society of Actuaries.

Paul S. Amos II

President, Aflac;

Chief Operating Officer, Aflac U.S.

Paul Amos, 33, holds a bachelor’s

degree in economics from Duke

University and a master’s degree in

business administration from Emory University. He also

holds a juris doctor degree from Tulane University. He

joined Aflac in 2002 as the state sales coordinator for the

Georgia-North sales territory. Under his leadership, the

Georgia-North sales territory grew to become the

company’s No. 1 state operation. He was promoted to

executive vice president, Aflac U.S. in January 2005 and

assumed the additional responsibilities of chief operating

officer in February 2006. He was promoted to his current

position as president of Aflac in 2007, and he is

responsible for the development and implementation of a

comprehensive strategic plan designed to increase U.S.

sales, enhance recruiting and training, and maximize

operational efficiencies. He is responsible for centralizing

the recruiting and training functions for Aflac’s 70,000+

sales associates, creating a new broker channel, and

broadening the company’s marketing plan to include

diversification of both media and messages. Prior to

joining Aflac, he worked in the corporate legal division of

the merger and acquisition firm, Skadden, Arps, Slate,

Meagher and Flom, in Washington, D.C. He is a member

of the boards of directors of Aflac Incorporated, the

Winship Cancer Center at Emory University, the Turner

School of Business at Columbus State University and

the Make-a-Wish Foundation of Southwest Georgia.

Martin A. Durant III

Executive Vice President;

Deputy Chief Financial Officer,

Aflac Incorporated

Martin Durant, 60, graduated from the

University of West Florida with a

bachelor’s degree in accounting. Immediately after

college, he gained experience with a venture capital firm

and as an accountant with KPMG/Peat Marwick. He

originally joined Aflac in 1990 as vice president and

comptroller of Aflac Incorporated and remained with

Aflac for 10 years, during which time he was promoted

to senior vice president, Corporate Services. In 1999, he

accepted a position as senior vice president and CFO of

Carmike Cinemas, Inc., from which he retired in April

2006. He became senior vice president; Corporate

Finance in July 2006 and was promoted to executive

vice president; deputy chief financial officer in June

2008. In his new position as deputy CFO, he will

continue to work closely on capital management, risk

management and other financial matters.


Joey M. Loudermilk

Executive Vice President;

General Counsel;

Corporate Secretary

Joey Loudermilk, 56, earned a

bachelor’s degree with honors from

Georgia State University and a juris doctorate degree

from the University of Georgia School of Law. He worked

in private law practice before joining Aflac in 1983 as

head of the company’s then newly formed Legal

Department. In 1988, he assumed responsibility for

governmental relations. In February 1989, he became

treasurer for Aflac Incorporated’s political action

committee (Aflac-PAC) and was appointed senior vice

president, corporate counsel, for Aflac Incorporated in

1989. In 1991 he was promoted to general counsel of

Aflac Incorporated and Aflac, and in 2000 he was

promoted to his current position as executive vice

president. He is a member of the State Bar of Georgia,

the American Corporate Counsel Association and the

American Society of Corporate Secretaries. He also

serves on the boards of the Georgia Humanities Council,

the Georgia Military Affairs Coordinating Committee, and

the Columbus Regional Medical Foundation. He is

former president of the Rotary Club of Columbus.

Audrey Boone Tillman

Executive Vice President;

Corporate Services

Audrey Boone Tillman, 44, received a

bachelor of arts degree from the

University of North Carolina at Chapel

Hill and a juris doctorate from the University of Georgia

School of Law. Before joining Aflac in 1996, she

completed a federal judicial clerkship, worked in private

practice, and was a law school professor. She holds law

licenses in Georgia, North Carolina, and the District of

Columbia. Her main areas of responsibility are: Human

Resources, Facilities, Corporate Training and Health

Services. She was promoted to second vice president in

1997 and to vice president in 2000, where she

concentrated on employment law. She was promoted to

senior vice president of Human Resources in 2001, and

to her current position in 2008. She currently serves as a

director-at-large for the Society for Human Resource

Management (SHRM).


Teresa L. White

Executive Vice President,

Chief Administrative Officer

Teresa White, 42, earned a bachelor’s

degree in business administration from

the University of Texas at Arlington and a

master’s degree in management from Troy State

University. She joined Aflac in 1998 as second vice

president, Client Services; was promoted to vice president

of Client Services in 2000; to senior vice president,

director of Sales Support and Administration, in October

2004; to deputy chief administrative officer in March 2007,

and to her current position in March 2008. In her current

role, Teresa oversees administrative functions in Client

Services, Claims, Aflac New York Administration,

Administrative Services, New Account Set-Up, New

Business, Field Contracting and Compensation, Support

Services, Shared Services, Payment Services, Account

Relations, Field Liaison Office and Corporate Travel and

Events. She also oversees Sales Support and

Administration and Sales Financial Management

departments. Teresa is an alumnus of Leadership

Columbus, and is a Fellow of the Life Management

Institute. She currently serves on the board of directors for

Columbus NeighborWorks, SIFE and Communicorp.

She’s also a member of Delta Sigma Theta Sorority, Inc.

Peter T. Adams, CPA

Senior Vice President, Financial

Reporting; Assistant Treasurer

Peter Adams, 53, earned a bachelor’s

degree in business from the University of

South Alabama. He joined Aflac in August

1999 and has responsibilities for Treasury, Financial

Reporting and Compliance, and Investments Accounting.

Before joining Aflac, he was a senior manager with KPMG

LLP, where he specialized in audit and accounting

consulting services for publicly held insurance companies.

He is a certified public accountant and a member of the

American Institute of Certified Public Accountants and the

Alabama Society of Certified Public Accountants.

Janet P. Baker, ACS

Senior Vice President, Corporate Learning

Janet Baker, 48, completed a master’s

degree in human resources management

at Troy State University in 1995 and

graduated magna cum laude in 1994 with

a bachelor’s of science degree in management from Troy

State. She joined Aflac in 1982 and has held various

positions, including second vice president, Human

Resources, and second vice president, Client Services.

She was appointed vice president, Marketing Services, in

1999, was named vice president, Account Implementation

and Management, in July 2002, to senior vice president,

Client Services in October 2004, and was appointed to her

current position in December 2007. She has held board

positions with the YMCA; serving as past president for

Columbus’ Golden K Kiwanis Club and Altrusa

International – a community organization directed at

building leadership skills for women and addressing literary

issues within the city. Other boards include the American

Red Cross, Easter Seals and the Historic Liberty Theatre.

Susan R. Blanck

Senior Vice President; Corporate Actuary;

First Senior Vice President, Aflac Japan

Sue Blanck, 42, graduated from the

University of Missouri-Columbia with a

bachelor’s degree in education. She

joined Aflac’s Actuarial Department in the U.S. pricing

area in 1993. She was promoted to second vice

president and assistant actuary in 1998. In 2000 she

was promoted to vice president, and in 2002 she

assumed responsibility for developing Aflac’s business

and financial plans. She was promoted to senior vice

president and deputy corporate actuary in March 2004,

to corporate actuary in January 2006, and additionally to

first senior vice president, Aflac Japan, in June 2008. In

this capacity, she will continue to work on product

development and strategic marketing initiatives in Japan.

She is a fellow of the Society of Actuaries and a member

of the American Academy of Actuaries.

M. Jeffrey “Jeff” Charney

Senior Vice President;

Chief Marketing Officer

Jeff Charney, 50, earned a bachelor of

arts degree from the University of South

Carolina and a master’s degree from The

Ohio State University. He joined Aflac in December 2008

in his current position, and comes to Aflac from QVC,

Inc., where he served as senior vice president and CMO.

Prior to his career at QVC, he was a founder of Fringe

Ventures, LLC, a creative marketing consulting company

in Santa Monica, California, and served as senior vice

president at Washington Mutual, Homestore and KB

Home. Additionally, he has held senior level positions at

Rockwell International and Raytheon Company. His

professional honors and distinctions include being

named one of Advertising Age magazine’s “Marketing

100” Top Marketers of the Year.

Laree R. Daniel

Senior Vice President, Customer

Assurance Organization

Laree Daniel, 47, holds bachelor of

science degrees in business and

psychology from Nebraska Wesleyan

University and a master of science degree in organizational

psychology from the University of Nebraska at Omaha.

She joined Aflac in September 2007 as a Customer

Experience Consultant for Internal Operations, was

promoted to vice president of Client Services in December

2007, and in March 2009 was promoted to her current

position as senior vice president of the Customer

Assurance Organization for Aflac, which includes Client

Services, Claims, Aflac Benefit Services, & New York

Administration. Laree is an insurance industry veteran with

more than 17 years of leadership, having joined Aflac from

two of the nation’s largest insurers – Assurant Health and

Mutual of Omaha. She most recently served as chief

administrative officer for Assurant Health in Milwaukee, and

prior to that held various leadership positions at Mutual of

Omaha. Her professional designations include the Health

Insurance Association of America (HIAA) and the

Accredited Customer Service (ACS).


Phillip J. “Jack” Friou

Senior Vice President;

Director of Governmental Relations

Jack Friou, 59, graduated from the

University of Georgia in 1971 with a

bachelor’s degree in political science and

served in the Army for two years. He joined Aflac in 1973

and has served in various capacities in administration

and marketing, including Agency Administration, the

Policyholder Service Department and the Compliance

Department. He also served as president of Aflac New

York and senior vice president, Marketing and Agency

Development. His current area of responsibility includes

state legislative and regulatory relations.

Kenneth S. Janke Jr.

Senior Vice President,

Investor Relations

Ken Janke, 51, attended Michigan State

University and received a bachelor’s

degree in political science from the

University of Michigan in 1981 and a master’s degree

from Oakland University’s School of Economics and

Management in 1985. Before joining Aflac Incorporated

as manager of Investor Relations in 1985, he was

director of Corporate Services for the National

Association of Investors Corporation (NAIC) in Madison

Heights, Michigan. He also chairs Aflac’s Disclosure


W. Jeremy “Jerry” Jeffery

Senior Vice President;

Chief Investment Officer

Jerry Jeffery, 58, graduated from Yale

University with a bachelor of arts in

political science. He joined Aflac in 2005

as senior vice president and deputy chief investment

officer. Prior to joining Aflac, Jerry had a 23-year career

with Morgan Stanley, where he focused on diverse fixed

income strategies affecting a wide range of industries.

Over the last 10 years there, he served as executive

director of Fixed Income Institutional Sales.

Robert M. Ottman

Senior Vice President

Sales Operations Management

Bob Ottman, 53, is senior vice president

over Sales Operations Management. Bob

began his management career at Aflac in

1999 and has served in several leadership positions,

including second vice president, Aflac Administrative

Services and vice president, AIM and Aflac Benefit

Services. He was promoted to senior vice president;

Claims, Shared Services, Hispanic Services, Benefit

Services and New York Administration in 2005 and to his

current position as senior vice president over Sales

Operations Management in 2009. Bob holds a bachelor’s

degree from Eastern Connecticut State University. Before

joining Aflac, he held the position of vice president at

Frank Gates USA (formerly Acordia of Dallas). He is a

member of the ECFC and holds a CFCI designation.

David L. Pringle

Senior Vice President,

Federal Relations

David Pringle, 53, graduated from

Mississippi State University, where he

received a bachelor of arts degree in

insurance and risk management. He has worked for

Aflac for more than 29 years. For nine of those years,

David worked with the Aflac sales force in Mississippi,

North Carolina and West Virginia, where he worked his

way from the position of associate to state sales

coordinator. During his career with Aflac, David has also

worked at Aflac Worldwide Headquarters as the

assistant agency director for the West Territory, and

director of Training, where he was responsible for

helping develop the concept for Aflac’s state training

programs. He assumed his current position in 2006. His

primary responsibility is to coordinate Aflac’s

government relations and lobbying efforts in Washington,

D.C. He also serves as secretary and principal fundraiser

for Aflac’s Political Action Committee (Aflac PAC), which

is the largest political action committee among all

insurance companies.

Ralph A. Rogers Jr.

Senior Vice President,

Financial Services;

Chief Accounting Officer

Ralph Rogers, 60, graduated from

Tennessee Technological University in

1970 with a bachelor’s of business administration

degree in accounting. He joined Aflac in 2000 as senior

vice president, Financial Services. He assumed the role

of chief accounting officer in 2002. Before coming to

Aflac, he was a senior vice president at another large

insurance company. He is a member of the American

Institute of Certified Public Accountants, the Tennessee

Society of Certified Public Accountants, Financial

Executives International, and the Institute of

Management Accountants.

Ronald S. Sanders

Senior Vice President; Director of Sales

Gerald W. Shields

Senior Vice President,

Chief Information Officer

Gerald W. Shields, 51, graduated from

Baylor University with bachelors’ of

business administration in accounting

and computer sciences. He began his management

career at Aflac in 2002 as vice president, Information

Technology-Enterprise Services and was promoted to

chief information officer for Aflac Incorporated in July

2005. In his current position, he oversees all aspects of

Aflac’s U.S. Information Technology division and is also

responsible for the division’s project management and

customer relationship management efforts. During his

tenure, Computerworld and Information Week magazine

have consistently named Aflac as one of the Best Places

to Work in IT. He was also selected by Computerworld

as one of the 100 Premier CIOs for 2006. In March

2007, he was honored as one of Computerworld’s

Premier 100 IT Leaders. Before joining Aflac, he held

senior IT positions at Electronic Data Systems (EDS) and

served as the chief technology officer, director of

Information Services for LifeWay Christian Resources in

Nashville, Tennessee. He is a member of the inaugural

governing body for the Atlanta CIO Executive Summit, as

well as a Fellow of the Life Management Institute.

James C. Woodall

President and CEO,

Communicorp, Inc.

James Woodall, 62, received his BBA

from Columbus State University, Abbott

Turner School of Business. Prior to

joining Communicorp in 1991, he was president and

CEO of The Print House, Inc., a Communicorp affiliate. In

his current position, he is responsible for all

Communicorp administration and operations, including

both the Columbus and Atlanta facilities. He currently

serves on the boards of directors of Communicorp, Inc.,

the Youth Orchestra of Greater Columbus, the

Columbus State University Friends of Art, the Printing

and Imaging Association of Georgia, and as chairman of

the Aflac Credit Union board.

Ron Sanders, 54, received a bachelor’s

degree in environmental science from

Lamar University. He joined Aflac in 1983

as an associate in Beaumont, Texas. He

was promoted to district sales coordinator in 1984 and

to regional sales coordinator in 1986. In 1988 Ron took

a marketing position with Aflac headquarters and in

1990 became director of Field Force Development for

recruiting and training. In 1990, he was named state

sales coordinator of Arizona/New Mexico. Ron was

promoted to vice president, Southwest Territory Director

in April 2005, to senior vice president, deputy director of

Aflac U.S. sales in November 2008, and to his current

position as senior vice president; director of sales in

March 2009.


Brian L. Abeyta

Vice President,

IT Project Management Office

Brian Abeyta, 42, holds a bachelor’s

degree from the Air Force Academy

and a master’s degree from the Florida

Institute of Technology. He holds another master’s

degree earned while studying at both the University of

Nevada – Las Vegas and the University of Phoenix.

Brian is a military veteran having served eight years of

Air Force active duty. Brian joined Aflac in 2001 as a

senior corporate project manager and has served in

several positions in IT, most recently serving as second

vice president, Project Management Office. He was

promoted to his current position as vice president, IT

Project Management Office, in July 2007. As vice

president, Brian guides the overall direction of the

Project Management Office by managing all aspects of

the design, development, and implementation of

projects within the IT division and for IT’s internal

customers. He also actively participates in long-range

strategy planning and manages policy development to

address complex business issues.

Ronald G. Agypt

Vice President, U.S. Broker Sales

Ron Agypt, 52, joined Aflac in 2008 to

lead the team for Broker Sales. Ron

spent over 34 years with Combined

Insurance, an Aon Company, where he

started as a sales representative and became the

youngest regional manager and vice president in the

history of the company. During his previous career, he

led 12 different organizations ranging from 22

employees to 4,000. His latest project was building and

developing a worksite company for Combined

Insurance. Ron is responsible for setting corporate

strategy, operational performance, professional and

management development, value-added services,

technical resources, and national marketing relationships

all within the U.S. broker arena for Aflac. Ron has served

on the Better Business Bureau of Northern Illinois, the

board of directors for Sterling Life Insurance, and the

board of directors for Legal Club of America.

J. Brian Angel

Vice President,


Brian Angel, 43, received his bachelor

of business administration degree from

the University of Texas at Austin. He

joined Aflac’s Legal Department in 1992 after earning

his juris doctor degree from the University of Texas

School of Law. In 1996 he was promoted to second

vice president, regulatory counsel, and transferred to

Albany, New York, where he assumed day-to-day

responsibility for Aflac New York’s legal, regulatory,

and government relations matters. In 2001 he

relocated back to Columbus to serve as Aflac’s privacy

officer. In 2003 he joined the Government Relations

department as counsel and was promoted to his

current position in 2006. He is a member of the state

bars of Texas and Georgia.


Carol E. Austensen

Vice President,

U.S. Business Innovation and Solutions

Carol Austensen, 46, graduated from

Mercer University with a bachelor’s

degree in marketing and received her

MBA from Emory University’s Goizueta School of

Business. She has also completed the Georgia

Institute of Technology’s Six Sigma black Belt

certification program. Carol has more than 20 years of

insurance and management experience and joined

Aflac in 2002 as a business consultant in the Project

Management Office. Most recently, she served as vice

president, U.S. Strategic Planning Office. Her previous

roles at Aflac include second vice president of Client

Services, vice president of U.S. Strategy and Planning,

and vice president of Business Innovation and

Solutions. In her current role, Carol and her team

develop and execute comprehensive service strategies

and provide quality and risk management services for

U.S. Internal Operations. Before joining Aflac, Carol

served as a director at Allstate Insurance Company

and as a business strategy consultant with several

small, boutique firms. She has more than 17 years of

leadership experience.

Lynn G. Barnson

Vice President;

Territory Director, Southwest Territory

Lynn Barnson, 53, joined Aflac in

February, 1981, as an associate in

southern Utah. Eight months after

joining Aflac, he was promoted to a district sales

coordinator, and spent three years building a

successful district organization. In January 1985, he

was promoted to regional sales coordinator in Ft.

Worth, Texas, and in 1987, he was promoted to

director of metro development at Aflac Worldwide

Headquarters. In 1988, Lynn was promoted to vice

president, agency director of the newly formed

Mountain Territory. In 1990, he was promoted to

territory director of a newly expanded West Territory,

where he met and/or exceeded his sales quota twelve

out of sixteen years and successfully helped build the

West Territory to ultimately spin off two territories – the

Pacific and Southwest Territories. Lynn assumed the

role as the state sales coordinator of Nevada in 2004,

and in 2009 was promoted to Territory Director,

Southwest Territory in 2009.

Michael E. Bartow

Vice President,

Financial Control

Mike Bartow, 54, received a bachelor’s

of business administration degree in

accounting from the University of

Wisconsin at Oshkosh. He became a Fellow of the Life

Management Institute in 1981 and earned a CPA

designation in 1983. Before joining Aflac in 1986, he

was a manager at Sentry Insurance. He was promoted

to second vice president in 1995 and to vice president

in 2001. He is a member of the American Institute of

Certified Public Accountants.

Debra H. Beckley

Vice President,

Sales Financial Management

Debra Beckley, 51, attended Mercer

University and graduated from West

Georgia College with a bachelor’s of

business administration degree in accounting. She joined

Aflac’s Accounting Department in 1979, and since that

time she has held various positions in the Financial

Division. She became a supervisor in Financial Reporting

in 1984 and was later promoted to manager of the

Payroll Department in 1986. In 1988 she was appointed

assistant vice president, General Accounting, and in

1990, she was named second vice president, General

Accounting. In 1994, she was promoted to vice

president, Agents’ Accounting/Remittance Processing

Services. She was named vice president, Sales Financial

Management in 2005.

Alfred O. Blackmar, FLMI

Vice President,

Facilities Support

Alfred Blackmar, 47, graduated from

Presbyterian College with a bachelor’s

degree in business administration. He

joined Aflac in 1984 and has been in his current position

since 1999. He previously served as vice president,

deputy director, Compliance. He is past executive

chairman of the Life and Health Compliance Association.

Mary M. Chapman, CFA

Vice President,


Mary Chapman, 47, graduated from

Harvard University with a bachelor’s

degree in European history, and she

received her master’s of business administration degree

from Cornell University. Before joining Aflac in 1993, she

worked in investment banking and bond analysis. In

1997 she was promoted to her current position with

responsibility for credit analysis of Aflac’s dollar- and

yen-denominated portfolios. She is a chartered financial

analyst and a member of the CFA Institute.

Michael S. Chille

Vice President;

Territory Director, Northeast Territory

Michael Chille, 38, earned a bachelor’s

degree in finance from the State

University of New York at New Paltz. He

joined Aflac in March 1995 as a personal producer, and

in November of that year, he was promoted to district

sales coordinator. He was named regional sales

coordinator in April 1996 and state sales coordinator of

Metro New York/New Jersey in June 1998. He was

promoted to his present position in November 2003.

Nikka N. Copeland

Vice President, U.S. Strategy,

Planning & Analysis

Nikka Copeland, 41, earned a bachelor’s

degree in economics from the University

of Macedonia and an MBA in Finance

and International Business from the University of

Oklahoma. Nikka joined Aflac in 2007 in her current

position, and is responsible for coordinating the

continued development of a comprehensive strategy and

business plan for Aflac’s U.S. operations. Prior to joining

Aflac, she worked for the Burger King Corporation (BKC)

in Miami, where she held the role of senior director,

Global Strategy, Planning and Business Finance. At

BKC, she led a team responsible for developing the

company’s global strategy, and oversaw the company’s

planning, forecasting and performance analysis process.

Before her tenure at BKC, Nikka served as senior

manager, Asset Strategy and M&A for PepsiCo,

Inc./YUM! Brands. Earlier in her career, she held roles of

varying responsibility in strategy and business planning

at Omega Environmental, Inc., Amoco Corporation and

Macosped Export/Import, Inc.

Timothy J. Craig

Vice President:

Territory Director, West Territory

Tim, 49, began his career with Aflac in

1981 as an associate in Utah.

Throughout his career with Aflac he has

held the positions of district, regional and state sales

coordinator. As district sales coordinator, he was the

recipient of the #2 companywide DSC award and held

the Aflac record for the most production for month,

quarter and year in 1987. He was an RSC in Texas and

assumed a marketing coordinator position for the West

Territory in 1991. He was promoted to SSC of Utah in

1995. As an SSC, one of his most important

contributions to Aflac was achieving and exceeding

market potential index for 12 out of 13 years. He has

qualified for 34 FAMEs, 23 Conventions and numerous

other Aflac awards and recognitions. Tim was promoted

to his current position as Vice President, Territory

Director, West Territory in December of 2008.

Lynn B. Fry

Vice President,

Sales Support and Administration

Lynn Fry, 50, joined Aflac in March 1982

in the Information Technology Division. In

1993 she was promoted to second vice

president, Information Systems, and in 1997 she was

promoted to vice president. In 2000 she moved to the

Marketing Division to serve as vice president of

Marketing Technology Support, focusing on technology

for the company’s field force. In 2002 she assumed

additional responsibilities in Sales Support, and currently

is responsible for Sales Administration and Support, and

currently is responsible for Sales Support and

Administration, Field Contracting and Compensation,

and the Field Liaison Office.


Brett J. Gant, FSA, MAAA

Vice President;

Actuarial Pricing

Brett Gant, 51, received a bachelor’s

degree in mathematics from Marietta

College and a master’s degree in

statistics from Miami University of Ohio. He joined Aflac

in the Actuarial Department in 1981. In 1993 he was

promoted to vice president overseeing pricing

development for Aflac U.S. products. In 2003 he

received additional responsibilities supporting Aflac

Japan business. In 2008 he assumed his current

position of overseeing U.S. actuarial involvement

supporting profitability analysis and components of

valuation and financial reporting for Aflac Japan

business, as well as responsibilities for re-rating and

monitoring analysis for Aflac U.S. products. He is a

member of the Society of Actuaries and the American

Academy of Actuaries.

Gregory J. Gantt, CFA

Vice President,

Fixed Income Investments

Greg Gantt, 50, received his bachelor’s

degree in accounting from Georgia State

University. He joined Aflac in 1982 as a

member of the Financial Planning Department. He

moved to the Investment Department in 1987, where he

was in charge of investment accounting. In 1991 he was

promoted to his current position with responsibility for

managing Aflac Japan’s U.S. dollar fixed-income

portfolio. He is also a part of the Aflac Global

Investments team that oversees management of Aflac

assets worldwide. He is a member of the Association for

Investment Management and Research.

Kenneth L. “Casey” Graves

Vice President,

Human Resources Support

Casey Graves, 52, received a bachelor

of science degree in marketing/

management and an associate of arts

degree in computer science from Southeast Missouri

State University. He joined Aflac in 2002 as manager of

Human Resources Information Systems (HRIS) and

Payroll. He was promoted to second vice president in

October 2004 and then to vice president in August

2006. Casey is responsible for Compensation, Benefits,

Human Resources Information Systems, HR Finance and

the Payroll Departments within Human Resources, and

has more than 25 years of experience in human

resources and information systems. He also played a

key role in the implementation of the SAP HCM module

in 2007. Before joining Aflac, he worked for Darden

Restaurants as director of IT in support of human

resources, and as director of HRIS. He also spent 15

years with the McDonnell Douglas Corporation, where he

served in various human resources-related roles.

June Howard, CPA, CFA

Vice President,

Financial Services, IFRS

June Howard, 43, graduated from the

University of Alabama in Huntsville with a

bachelor’s degree in business

administration. She joined Aflac in June 2009 and is

responsible for SEC reporting and IFRS implementation.

Before joining Aflac, she held financial reporting positions

of increasing responsibility at ING and The Hartford.

Additionally, she worked as an auditor with Ernst & Young

for nearly ten years. June is a member of the American

Institute of Certified Public Accountants, the Alabama

Society of Certified Public Accountants, the CFA Institute

and the Atlanta Society of Financial Analysts.

John A. “Al” Johnson

Vice President, Marketing Services;

Director of Branding and Advertising

Al Johnson, 41, holds a bachelor's

degree in English literature from the

University of North Carolina at Chapel Hill.

He joined Aflac in September 2000 as manager of

Corporate Advertising, and in January 2003 was

promoted to second vice president, director of Branding

and Advertising. In January 2007, he became second vice

president of Marketing Services with the reorganization of

Aflac’s Marketing division, and was promoted to his

current position in December 2007. In his current role, Al

oversees Aflac’s national advertising program, which

includes the Aflac Duck campaign, as well as online media

efforts, incentives and merchandising, philanthropy, the

development of Aflac’s corporate and business-tobusiness

sponsorship initiatives, and Aflac’s NASCAR

advertising and sponsorship. Prior to joining Aflac, he was

the advertising and marketing manager for Continental

Tire North America. Al has more than 18 years of

experience in advertising, branding and marketing.

Bradley S. Jones

Vice President;

Territory Director, North Territory

Brad Jones, 50, joined Aflac as a sales

associate in 1984. He became a district

sales coordinator in 1986, a regional

sales coordinator in 1989, and a recruiting coordinator

for Aflac in 1992. In 1993, he was appointed to state

sales coordinator for Maryland/Delaware/Philadelphia.

During Brad’s 6 ½ years in this capacity, sales increased

more than 1,100%. In 2000 Brad was promoted to

Territory Director for the Northeast Territory. Under his

leadership, the Northeast Territory’s sales increased by

almost 100%, from $47.3 million in 2000 to $94.4 million

in 2003. Brad also increased recruiting by 49% and the

number of writing agents 48% in the Northeast Territory.

He was appointed senior vice president, director of

Sales in 2003, was named vice president, territory

director, East Territory in January 2005, and was

appointed to his current position in April 2007.

Throughout his career, he has earned numerous awards,

including the coveted FAME award 31 times.


John R. Keddy

Vice President, IT Application Services

John Keddy, 44, holds a master’s

degree in business administration from

Columbia University and a bachelor’s

degree in economics from Rutgers

College. He joined Aflac in 2008 as vice president, IT

Application Services, where he oversees the day-to-day

operations of Application Services and Professional

Services organizations, to include enrollment, imaging,

management information systems, and financial

services. He has nearly 20 years of experience in the

insurance industry. Before joining Aflac he also served as

a vice president at Conseco and at ING.

Laura Kane Mullahy

Vice President, External


Laura Kane, 47, holds a bachelor’s

degree from Michigan State University in

communications. She joined Aflac in

2003 and was promoted to vice president of external

communications in 2008. Laura serves as Aflac’s

primary spokesperson and oversees communications

initiatives that enhance and protect the corporate

reputation. In 2008, Kane was inducted into the PR

News PR Hall of Fame at the National Press Club. Prior

to joining Aflac, she developed and executed

communications programs for the Metro Atlanta

Chamber of Commerce, Disney ABC, Euro RSCG and


Mary Ellen Keim

Vice President,

Fixed Income Investments

Mary Ellen Keim, 53, holds a bachelor of

science degree from the University of

Alabama. Before joining Aflac, she

worked in the Trust Department of First National Bank of

Tuscaloosa as a portfolio manager and trust

administrator. She successfully completed the National

Association of Security Dealers Series 7 and Series 63

exams in 1986. She is a member of the Association of

Investment Management and Research.

Robert C. Landi

Vice President,

Corporate Tax

Robert Landi, 47, received a bachelor’s

degree in business administration from

the University of Tennessee at Knoxville.

He joined Aflac in 1988 as a tax and financial analyst and

was promoted to second vice president, Corporate Tax,

in 1993. He was promoted to his current position in

1999 and is responsible for corporate taxes, including

federal and state income taxes, premium taxes, payroll

taxes, and other state and local taxes. He is a member

of the American Institute of CPAs and the Tennessee

Society of CPAs.

John G. Laughbaum

Vice President,

Channel Marketing and Sales


John Laughbaum, 40, graduated from

George Mason University with a

bachelor’s degree in political science and received a

master’s of business administration in marketing,

strategy, and finance from the Kellogg School of

Management at Northwestern University. Prior to

graduate school, he worked in various capacities at

Federal Legislative Associates, a Washington, D.C.,

government relations firm. Since joining Aflac in 1997,

John has served as an analyst, director, second vice

president, and vice president, and he was appointed to

his current position in 2007. His responsibilities as vice

president, Channel Marketing and Sales Development,

include business-to-business marketing, industry

marketing, social and digital marketing, and key account

development. He is a Fellow of the Life Management


Eric J. Leger

Vice President, Field Force Development

Eric Leger, 46, joined Aflac in 2002 in

Lubbock, Texas, as an associate and

qualified for all the Fireball Series

awards, plus Rookie Associate Key Club

and the State and National Conventions in his first year.

He was subsequently promoted to district sales

coordinator, state training coordinator in Texas South

Central, state sales coordinator of New Mexico, and then

to his current role as vice president, Field Force

Development in 2008. In his current role, he oversees

the development and implementation of all field force

training, recruiting and coordinator development.

Jeffery A. Link

Vice President, Compliance

Jeff Link, 46, graduated from Columbus

State University in 1987 with a

bachelor’s degree in business

administration. Before joining Aflac, he

held various marketing positions with Pascoe Building

Systems and Premier Industrial. He joined Aflac’s

Compliance Department in 1988 as an analyst. In 1996

he became a second vice president, responsible for

forms filings. He was promoted to his current position in

2001. He is a member of the Executive Committee of the

Life and Health Compliance Association.


G. Bryant McKee

Vice President, Special Investigations

Bryant McKee, 56, graduated from

Vanderbilt University with a bachelor’s

degree in economics and business

administration. He served as regional

accounting coordinator for a national food service

company and held management positions in claims and

internal audit with Life of Georgia. Bryant became a

Fellow of the Life Management Institute in 1978 and

obtained his Certified Internal Auditor (CIA) designation in

1987. He joined Aflac in 1988 and was promoted to

second vice president in 1991 and vice president in

2000. He is a member of the Institute of Internal Auditors,

The Information Systems Audit and Control Association,

and the Association of Certified Fraud Examiners.

Thomas P. McKenna

Vice President; Deputy General Counsel

Tom McKenna, 43, received his

bachelor’s degree in political science

from Columbus State University. He

joined the Legal Department in 1993

after receiving his juris doctor degree from the Walter F.

George School of Law at Mercer University. He became

a second vice president in 2001 and was promoted to

his current position in 2006. His primary responsibilities

are to manage and direct the operations of the Aflac

U.S. Legal Department, and to provide advice and

counsel on legal matters that impact U.S. business

operations. He is a member of the State Bar of Georgia

and the Defense Research Institute.

Virgil R. Miller

Vice President,

Client Services

Virgil Miller, 40, holds a master's degree

in business management from Wesleyan

College, a bachelor's degree in

accounting from Georgia College and a Six Sigma

greenbelt for Villanova University. He joined Aflac's

management team in 2004 in the Policy Service’s

Department after having a successful leadership career

in the property and casualty industry. In 2006, he was

promoted to second vice president of Policy Services

where he drove key metrics and process innovation. He

later became second vice president of the customer

service center where he championed technology

innovation and conservation strategies. In 2009, he was

promoted to Vice President of Client Services where he

was responsible for the customer service centers, policy

service and process innovation and control, and then

was promoted to vice president of Client Services,

where he is responsible for the Policy Services and

Customer Service Center operations. He served as a

U.S. Marine and veteran of Operation Desert Storm. He

was a member of the United Way Board of Trustees,

Leadership Macon and the Community Impact

Leadership Team of Central Georgia.

John A. Moorefield

Senior Vice President, Strategic

Management, Aflac International; Senior

Vice President, Portfolio Coordination,

Aflac Japan

John A. Moorefield, 47, graduated from

North Carolina State University in 1986. He joined Aflac

in 2005 and has worked in various positions, including

as chief information officer of Aflac Japan, where he

managed Aflac Japan’s technology service delivery and

directed the completion of several key initiatives,

including the branch’s mainframe transformation, LAN

redesign and rebuilding, and the upgrading of all

software packages. In that role, he was also responsible

for the development of short-term and long-term Aflac

Japan Information Technology strategic plans. In his

current role as senior vice president, strategic

management for Aflac International, John oversees

various strategic initiatives and planning activities, along

with coordination between Aflac’s U.S. and Japan

operations. Prior to joining Aflac, he served as a Principal

in ApproxiCom, LLC and as a managing director at

BearingPoint. He also held executive leadership

positions at Cap Gemini Ernst & Young LLP, Fidelity

Investments, and NationsBank, where he was

responsible for technology strategy and delivery of

information architecture and systems.

Thomas O. Morey, FSA, MAAA

Vice President, U.S. Products and

Business Planning

Tom Morey, 47, earned bachelor’s and

master’s degrees in mathematics from

the University of West Florida. He

became a member of the American Academy of

Actuaries in 1998 and a Fellow of the Society of

Actuaries in 2000. He joined Aflac in 1995, was

promoted to senior manager, Pricing, in 2000; to second

vice president, Pricing and Rerating, in 2003; to vice

president, U.S. Products and Business Planning, in

2005; and to vice president, U.S. Product Development

and Financial Planning for Aflac Incorporated. Prior to

joining Aflac, he spent 11 years as a weapon system

cost estimator for the United States Air Force.

Perry J. Mullins

Vice President,

Expense Management

Perry Mullins, 51, graduated from the

University of Wisconsin at Eau Claire in

1980 with a bachelor's degree in

accounting. He passed the Certified Public Accounting

examination in 1981 and became a Fellow of the Life

Management Institute in 1984. Perry worked at Sentry

Insurance in Stevens Point, Wisconsin, before joining

Aflac's Financial Reporting department in 1987. He

moved to the Budget Department manager position in

1992 and was promoted to a second vice president in

1998. He was promoted to his current position in 2007,

and his primary responsibility is the budget and analysis

of Aflac expenses in the United States. He is a member

of the American Institute of Certified Public Accountants.


David A. Nelson

Vice President,

Travel, Meetings and Incentives

David Nelson, 55, joined Aflac in 1988 as

a travel analyst after working in the airline

industry for 16 years. In 1995 he was

promoted to director of Travel, Meetings and Incentives.

He was promoted to his current position in 1997 and is

responsible for all aspects of Aflac’s corporate travel

program, the planning of all business meetings, and the

planning of all sales force incentive travel programs. He

is a member of the National Business Travel Association,

the Georgia Business Travel Association, and the

Financial and Insurance Conference Planners


Bahija Fouad Noell

Vice President,

IT Business Partnership Management

Bahija Noell, 44, is vice president of the

Business Partnership Management

Office in the Information Technology

Division. She joined Aflac in 1987 and held several

leadership positions in Client Services and Administration

and in the Information Technology Division. She holds a

bachelor’s degree in computer science and accounting

from Eureka College in Eureka, Illinois, a master’s degree

in management from Troy State University and the

Information Technology Management Program from

Georgia Institute of Technology. She provides the overall

direction of the Business Partnership Management

Office, the Software Testing Services organization, and

the IT Service Center. She directs the strategic alignment

of the overall IT strategy and the Aflac business

organizations’ strategies. She participates in strategic

planning and decision-making at the executive and

division level and facilitates the development of wellintegrated

IT initiatives and a business implementation

roadmap to support the business strategy. She works

with the Aflac leadership to form alliances at the

strategic and operational levels and leads key

management activities and committees to maintain

appropriate communications at all levels.

J. Lance Osborne

Vice President;

Territory Director, Pacific Territory

Lance Osborne, 47, joined Aflac in July

1988 as an associate, and in August

1991, after being promoted to district

sales coordinator, he established a scratch district in the

Atlanta/Northwest Georgia region, where he served in

that capacity for five years. In 1997 he was promoted to

regional sales coordinator, and in 2002, he was asked to

accept a leadership role supporting Georgia-North as

state training coordinator. In January 2005, Lance was

promoted to vice president, Field Force Development,

and in December 2008, he assumed his current position

as vice president, territory director of the Pacific


Daniel M. Quigley

Vice President, IT Enterprise Services

Dan Quigley, 50, holds a bachelor of arts

degree in political science from Boston

University. He joined Aflac in 2007 as vice

president, Enterprise Services, and is

responsible for all technology infrastructure, operations,

and data security in the Information Technology division.

Prior to joining Aflac in 2007, Dan spent more than 20

years in IT working for major Fortune 500 companies

across different industries implementing global

technology solutions. Most recently, he was at Novartis

A.G., where he held multiple positions such as head of

Network Services and head of IT Infrastructure for the

Novartis Consumer Health Division. Dan is a member of

the Society for Information Management. He is a certified

Master Certified Novell Engineer (CNE) and is a member

of the Society for Information Management and the

Institute of Electrical and Electronics Engineers, Inc. He

has completed executive education and leadership

programs at the Wharton School and Harvard Business

School’s MIT- Novartis “IT Excellence Program.”

Thomas A. OKray

Vice President,

Financial Planning & Controls

Tom OKray, 54, received his bachelor’s

degree in accounting, risk management

and insurance from the University of

Wisconsin. Before joining Aflac in 1988, he was a staff

accountant with Wausau Insurance Company. He

became a second vice president in 1995 and was

promoted to his current position in 2001. He is a

member of the board of directors, investment committee

and audit committee of the Georgia Life and Health

Insurance Guaranty Association.


Vilma I. Salaverria, HIA, MHP

Vice President,

Multicultural Marketing

Vilma Salaverria, 51, serves as vice

president of Multicultural Marketing. She

holds a bachelor’s degree in business

administration with a major in accounting and a minor in

management from the University of Puerto Rico. Vilma is

fully bilingual (English/Spanish). She has earned her

Health Insurance Associate (HIA) and Managed

Healthcare Professional (MHP) designations. Vilma joined

Aflac in 1992 and has held various positions, including

administrator for the Caribbean Territory, Hispanic

marketing coordinator, operations manager for

recruitment and multicultural markets, manager of

marketing services overhead, director of marketing

associate administration, second vice president of New

Business/Underwriting and vice president of Client

Services. She served on the board of directors of the

Atlanta chapter of Women in Insurance and Financial

Services (WLUC) in 2000. Vilma is a 2007 graduate of

the Leadership of Columbus program.

Eric B. Seldon

Vice President, AIM & Support Services

Eric B. Seldon, 40, received a bachelor’s

degree in business administration from

Madison University. Before joining Aflac

in 1999 as an operations manager in

Client Services, he was vice president of Card Services

at Total System Services Inc. After joining Aflac, he took

the helm of Payroll Account Service Billing, where he

managed the reconciling and billing activities for the

company’s payroll accounts, and was promoted to

director of New Business. He has held several leadership

positions within Aflac, most recently serving as second

vice president, Support Services, and was promoted to

his current position in 2006. In his current role, he is

responsible for the strategic direction of Support

Services, Payment Services, Account Relations,

Strategic Partnerships, New Account Set-Up, and New

Business/Underwriting. He has more than 17 years of

leadership experience, including more than nine years

with Aflac. He is a member of the Georgia Minority

Supplier Development Council and is certified by the

U.S. Postal Service as a Mail Center Professional and by

Mailcom for Mail Center Security Training.

Daniel F. Skelley, FSA, MAAA

Vice President;

Actuarial Valuation

Dan Skelley, 60, received bachelor’s and

master’s degrees in applied

mathematics from Georgia Tech. Before

joining Aflac in 1983, he taught mathematics on the high

school and college levels. He became an assistant vice

president in 1986, a second vice president in 1990, and

was promoted to his current position in 1993. His

primary responsibilities are the actuarial items in financial

reporting for all Aflac U.S. products. He is a member of

the Society of Actuaries and the American Academy of


Alexander W. Stephanouk

Vice President, Internal Audit,

Aflac Incorporated

Alex Stephanouk, 39, holds a bachelor’s

degree in marketing from Auburn

University and a master of business

administration degree in internal audit and human

resources from Louisiana State University. He joined

Aflac in 2009 as vice president, Internal Audit, for Aflac

Incorporated. Before joining Aflac, he was managing

director of Advisory Services at KPMG in Atlanta and he

also worked as manager of Business Process Risk

Consulting at Arthur Andersen, LLP. He holds the

Certified Internal Auditor (CIA) and the Certified

Information Systems Auditor (CISA) designations. Alex is

responsible for all corporate Internal Audit activities and

works directly with management on business process

improvement recommendations, as well as the

coordination of Internal Audit’s role within companywide

enterprise risk management activities.

Arthur L. Smith III

Vice President;

Senior Associate Counsel,

Legal Division

Art Smith, 53, holds a bachelor’s degree

in political science from Columbus State

University and a juris doctorate from the Samford

University School of Law. He also graduated with a

master of laws (taxation) degree from the University of

Alabama School of Law. He was engaged in private law

practice in Columbus, Georgia, from 1979 until he joined

Aflac as associate counsel in January 1989. He was

appointed second vice president and senior associate

counsel in the Legal Division in 1993 and was promoted

to vice president in 1996. He is a member of the State

Bar of Georgia and the American Bar Association.

Michael J. Tomlinson

Vice President;

Territory Director, Central Territory

Mike Tomlinson, 51, joined Aflac in 1980

as a sales associate in Detroit Lakes,

Minnesota. Mike progressed through the

Aflac coordinator ranks of district sales coordinator and

regional sales coordinator in Minnesota. He assumed the

role of SSC of North and South Dakota in 1989. North

and South Dakota is currently the leading state

organization in Aflac for sales per capita and in force

premium per capita. Mike accepted the position of vice

president, territory director for the Central Territory in

May 2008.


David R. Turner

Vice President,

IT Advanced Technology Group

David Turner, 56, graduated with a

bachelor’s degree in mathematics

education from Columbus State

University. His entire 22-year career in the information

technology field has been at Aflac. As a member of the

Information Technology Division, he has written software,

managed software development projects, and managed

both the software development and software testing

departments within IT. He had primary planning and

management responsibility for the three-year Y2K (year

2000) project. His primary areas of responsibility currently

include advanced technology research, software

architecture, and technology strategy development.

Blakely H. Voltz, ACS

Vice President,


Blake Voltz, 39, received a bachelor’s

degree in finance from the University of

Georgia. He joined Aflac in 1992 and has

held several management positions in Client Services.

Prior to his current position, he was second vice

president in the Strategic Planning Office, where he

worked with the administrative business units to develop

innovative process changes to improve efficiency and

quality. Blake also has served as second vice president

in the Customer Service Center and Policy Service. He

has almost 15 years of leadership experience at Aflac.

He was promoted to his current position in November

2006. Blake holds the Life Office Management

Association (LOMA) Associate Customer Service


William D. Wenberg

Vice President;

Territory Director, South Territory

Bill Wenberg, 60, graduated from

Moorhead State University with a degree

in accounting. He started his career with

Aflac in October 1983 in Minneapolis, Minnesota, and

spent 12 years as a regional sales coordinator. In 1998

he was promoted to state sales coordinator of Arkansas,

a position he held until October 2003 when he was

promoted to vice president; territory director, North

Territory. He was appointed to vice president; territory

director, Central Territory in February 2005. In April

2008, Bill accepted the position of vice president;

territory director, South Territory.

Larry “Al” Weston

Vice President;

Territory Director, East Territory

Al Weston, 56, graduated with a

bachelor’s degree from the University of

North Carolina at Chapel Hill. He started

his career with Aflac shortly thereafter in 1976. He has

enjoyed success at every field position; associate,

district sales coordinator, regional sales coordinator, and

state sales coordinator all in his hometown of Greenville,

North Carolina. In his current position, he is responsible

for developing, managing, and guiding sales and

recruiting activities for the East Territory.

Robin Y. Wilkey, CPA

Vice President,

Investor Relations

Robin Wilkey, 51, graduated from the

University of Georgia with a bachelor’s

degree in finance and went on to receive

her designation as a certified public accountant. She

joined Aflac in 1990 as an accountant in Financial, was

promoted to senior auditor in Internal Auditing and to

manager of Information Systems and Payroll in the

Human Resources Division. She joined the Investor

Relations Department in 1998 as senior director, was

promoted to second vice president in 2002 and to her

current position as vice president, Investor Relations in

2003. Prior to working at Aflac, she worked in auditing

and accounting in the banking and medical industries.

Jefferson W. Willis

Vice President,

Senior Associate Counsel,

Legal Division

Jeff Willis, 60, holds a bachelor’s degree

in economics and history from

Hampden-Sydney College in Virginia. He received a juris

doctorate from the Walter F. George School of Law at

Mercer University in 1975 and is a licensed member of

the state bars of Georgia and Virginia. Before joining

Aflac in 1988, he was a partner in a Gainesville, Georgia,

law firm specializing in insurance litigation.


Tohru Tonoike

President and Chief Operating Officer,

Aflac Japan

Tohru Tonoike, 59, graduated from

Hitotsubashi University and worked for

Dai-ichi Kangyo Bank, which later

merged with two other banks to form the Mizuho

Financial Group, prior to joining Aflac Japan as vice

president in February 2007. In 2005 he became

president and representative director of Dai-ichi Kangyo

Asset Management Company, another division of the

Mizuho Financial Group. Tonoike served on the Aflac

board of directors from November 2004 through January

2007. He was promoted to president of Aflac Japan in

July 2007.

Charles D. Lake II


Aflac Japan

Charles Lake, 47, received a bachelor’s

degree in Asian studies and political

science from the University of Hawaii at

Manoa in 1985 and a juris doctorate from the George

Washington University School of Law in 1990. He joined

Aflac International in February 1999 and Aflac Japan in

June 1999. He became deputy vice president in 2001,

president in 2003, vice chairman in 2005 and chairman in

2008. Before joining Aflac, he practiced law with Dewey

Ballantine LLP in Washington, D.C. He also served as

director of Japan affairs and special counsel at the office

of the U.S. Trade representative in the executive office of

the President. He currently serves as vice chairman of the

Maureen and Mike Mansfield Foundation and as a

director on the board of the Tokyo Stock Exchange

Group, Inc. He is also President Emeritus of the American

Chamber of Commerce in Japan (ACCJ).

Eizo Kobayashi

Vice Chairman

Eizo Kobayashi, 60, graduated from

Tokyo University in 1972 and joined the

Bank of Japan that same year. Prior to

joining Aflac as senior advisor in May

2006, he served as executive director for Bank of Japan.

He became vice chairman in July 2007.

Aflac Japan Management

Hisayuki Shinkai

First Senior Vice President;

Financial Institutions, Financial Institution

Support, Bank Sales Offices,

Public Relations, Investor Relations

Hisayuki Shinkai, 58, joined Aflac in 1999

as general manager of the Public Relations Department

and was promoted to vice president in 2000 and to

senior vice president in 2002. In February 2006, he was

named to his current position. He graduated from

Tohoku University in 1974 and previously worked for the

Long Term Credit Bank of Japan, Ltd.

Hiroshi Yamauchi

First Senior Vice President;

Chief Administrative Officer

Hiroshi Yamauchi, 57, graduated from

Saitama University in 1976 and joined

Aflac that same year. He served in the

Actuarial Department as section manager and assistant

general manager. He was promoted to general manager

in the Policy Maintenance Department in 1998 and to

vice president in 1999. He was promoted to first senior

vice president in 2002 and to his current position as

chief administrative officer in January 2005.

Yuji Arai, CFA

Senior Vice President,

Investments, Investment Analysis,

Asset Management;

Principal Financial Officer

Yuji Arai, 46, graduated from Keio

University in 1986 and joined Aflac that same year. He

became assistant general manager of the Investment

Department in 2001, and he began supervising the

Investment Department and the Investment Analysis

Office in 2002. He was promoted to his current position

in January 2005. He is a chartered financial analyst

certified by the CFA Institute and a charter member of

the CFA Society of Japan.

Koji Ariyoshi

Senior Vice President;

Deputy Director of Marketing and Sales

Takaaki Matsumoto

First Senior Vice President;

Director of Marketing and Sales

Takaaki Matsumoto, 60, graduated from

Meiji Gakuin University in 1974 and

joined Aflac in 1975. He served as

general manager of the Tohoku Sales Department and