10-KPeriod: FY2005

AFLAC INC Annual Report, Year Ended Dec 31, 2005

Filed February 28, 2006For Securities:AFL

Summary

Aflac Inc.'s 2005 10-K report highlights a strong financial performance, with total revenues reaching $14.36 billion and net earnings of $1.48 billion. The company's core business remains supplemental health and life insurance, with a significant portion of its operations and assets concentrated in Japan (74% of revenues and 82% of assets). Aflac Japan continues to be the primary growth driver, showing robust premium income and pretax operating earnings, aided by favorable demographic trends and increasing consumer demand for health-related insurance products. In the U.S., Aflac also demonstrated solid growth in premium income and operating earnings, driven by its accident/disability and cancer expense products. The company emphasizes its distinct market position through its worksite marketing strategy and portable, individually underwritten policies. Management is focused on enhancing its distribution system and sales associate training to ensure continued growth and operational efficiency across both key markets.

Key Highlights

  • 1Total revenues increased to $14.36 billion in 2005, up from $13.28 billion in 2004.
  • 2Net earnings grew to $1.48 billion in 2005, compared to $1.27 billion in 2004.
  • 3Aflac Japan accounted for a substantial majority of the company's financial performance, with 74% of total revenues and 82% of total assets.
  • 4Annualized premiums in force for Aflac Japan grew by 6.8% in yen terms, reflecting strong policy persistency and new sales.
  • 5Aflac U.S. saw a 10.0% increase in annualized premiums in force, driven by its accident/disability and cancer expense products.
  • 6The company's financial strength ratings remained strong, with ratings of AA from Standard & Poor's and Fitch Ratings, and Aa2 from Moody's.
  • 7Aflac continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

Aflac's primary business is supplemental health and life insurance. The company has a significant international presence, with its operations heavily concentrated in Japan, which accounted for 74% of total revenues and 82% of total assets in 2005. The United States is its secondary market.

The Japanese yen weakened against the U.S. dollar in 2005. Since Aflac Japan's functional currency is the yen and it is a significant portion of the company's operations, this weakening suppressed the dollar-reported results. Management views currency translation as a financial reporting issue rather than an economic one and evaluates performance excluding its impact.

In Japan, growth is driven by increasing consumer demand for health-related insurance products due to an aging population and rising healthcare costs, along with strong policy persistency and new product development, particularly in the medical category. In the U.S., growth is supported by accident/disability and cancer expense products, and the company's worksite marketing strategy.

Aflac's investment strategy is to maximize investment income while emphasizing liquidity, safety, and quality, primarily through fixed-income investments. The company adheres to prudent standards for credit quality, requiring all securities to be investment grade at the time of purchase and conducting internal credit reviews. The portfolio is diversified across various sectors, with a focus on matching asset durations with liability durations.