Aflac 2006 Annual Report Download - page 58

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2. BUSINESS SEGMENT AND FOREIGN
INFORMATION
The Company consists of two reportable insurance business
segments: Aflac Japan and Aflac U.S., both of which sell
individual supplemental health and life insurance.
Operating business segments that are not individually
reportable are included in the “Other business segments”
category. We do not allocate corporate overhead expenses to
business segments. We evaluate and manage our business
segments using a financial performance measure called pretax
operating earnings. Our definition of operating earnings
excludes the following items from net earnings on an after-tax
basis: realized investment gains/losses, the impact from SFAS
133, and nonrecurring items. We then exclude income taxes
related to operations to arrive at pretax operating earnings.
Information regarding operations by segment for the years
ended December 31 follows:
(In millions) 2006 2005 2004
Revenues:
Aflac Japan:
Earned premiums:
Cancer life $ 4,923 $ 5,147 $ 5,223
Other accident and health 2,755 2,577 2,220
Life insurance 1,084 1,021 925
Net investment income 1,688 1,635 1,557
Other income 25 31 18
Total Aflac Japan 10,475 10,411 9,943
Aflac U.S.:
Earned premiums:
Accident/disability 1,580 1,424 1,261
Cancer expense 1,041 982 918
Other health 801 721 649
Life insurance 130 118 107
Net investment income 465 421 396
Other income 10 10 9
Total Aflac U.S. 4,027 3,676 3,340
Other business segments 42 39 33
Total business segments 14,544 14,126 13,316
Realized investment gains (losses) 79 262 (12)
Japanese pension obligation transfer ––6
Corporate 87 74 24
Intercompany eliminations (94) (99) (53)
Total revenues $ 14,616 $ 14,363 $ 13,281
(In millions) 2006 2005 2004
Pretax Earnings:
Aflac Japan $ 1,652 $ 1,515* $ 1,379*
Aflac U.S. 585 525 497
Other business segments 5––
Total business segments 2,242 2,040 1,876
Interest expense, noninsurance operations (17) (20) (20)
Corporate and eliminations (40) (41) (62)
Pretax operating earnings 2,185 1,979 1,794
Realized investment gains (losses) 79 262 (12)
Impact from SFAS 133 –(15) (15)
Japanese pension obligation transfer ––6
Total earnings before income taxes $ 2,264 $ 2,226 $ 1,773
Income taxes applicable to pretax operating earnings $ 753 $ 687 $ 641
Effect of foreign currency translation on
operating earnings (39) (8) 39
*Includes charges of $46 in 2005 and $26 in 2004 related to the write-down of previously capitalized systems development
costs for Aflac Japan’s administration system.
Assets as of December 31 were as follows:
(In millions) 2006 2005
Assets:
Aflac Japan $ 48,850 $ 46,200
Aflac U.S. 10,249 9,547
Other business segments 110 90
Total business segments 59,209 55,837
Corporate 10,023 9,559
Intercompany eliminations (9,427) (9,035)
Total assets $ 59,805 $ 56,361
Yen-Translation Effects: The following table shows the
yen/dollar exchange rates used for or during the periods
ended December 31. Exchange effects were calculated using
the same yen/dollar exchange rate for the current year as for
each respective prior year.
2006 2005 2004
Statements of Earnings:
Weighted-average yen/dollar exchange rate 116.31 109.88 108.26
Yen percent strengthening (weakening) (5.5)% (1.5)% 7.1%
Exchange effect on net earnings (millions) $ (41) $ (16) $ 39
2006 2005
Balance Sheets:
Yen/dollar exchange rate at December 31 119.11 118.07
Yen percent strengthening (weakening) (.9)% (11.7)%
Exchange effect on total assets (millions) $ (400) $ (5,703)
Exchange effect on total liabilities (millions) (392) (5,599)
Aflac Japan maintains a portfolio of dollar-denominated
securities, which serves as an economic currency hedge of a
portion of our investment in Aflac Japan. We have designated
the Parent Company’s yen-denominated notes payable and
cross-currency swaps as a hedge of our investment in Aflac