Aflac 2007 Annual Report Download - page 75

71
Annual Report for 2007
Stock Bonus Plan: Aflac U.S. maintains a stock bonus plan for
eligible U.S. sales associates. Plan participants receive shares of
Aflac Incorporated common stock based on their new
annualized premium sales and their first-year persistency of
substantially all new insurance policies. The cost of this plan,
which is included in deferred policy acquisition costs,
amounted to $45 million in 2007, $40 million in 2006 and $37
million in 2005.
13. COMMITMENTS AND CONTINGENT
LIABILITIES
We have three outsourcing agreements with IBM. The first
agreement provides mainframe computer operations and
support for Aflac Japan. It has a remaining term of eight years
and an aggregate remaining cost of ¥24.4 billion ($213 million
using the December 31, 2007, exchange rate). The second
agreement provides distributed computer operations and
support for Aflac Japan. It has a remaining term of eight years
and an aggregate remaining cost of ¥30.4 billion ($266 million
using the December 31, 2007, exchange rate). The third
agreement provides application maintenance and
development services for Aflac Japan. It has a remaining term
of five years and an aggregate remaining cost of ¥8.8 billion
($77 million using the December 31, 2007, exchange rate).
We have entered into two additional outsourcing agreements
to provide application maintenance and development services
for our Japanese operation. The first agreement with
Accenture has a remaining term of six years with an aggregate
remaining cost of ¥4.7 billion ($41 million using the
December 31, 2007, exchange rate). The second agreement
with NTT DATA has a remaining term of three years with an
aggregate remaining cost of ¥1.0 billion ($9 million using the
December 31, 2007, exchange rate).
We lease office space and equipment under agreements that
expire in various years through 2022. Future minimum lease
payments due under non-cancelable operating leases at
December 31, 2007, were as follows:
(In millions)
2008 $ 46
2009 22
2010 13
2011 11
2012 10
Thereafter 43
Total future minimum lease payments $ 145
In 2005, we announced a multiyear building project for
additional office space in Columbus, Georgia. The initial phase
was completed in 2007 at a cost of $27 million. The second
phase of the expansion is to be completed in 2009 and is
expected to cost approximately $48 million.
We are a defendant in various lawsuits considered to be in the
normal course of business. Members of our senior legal and
financial management teams review litigation on a quarterly
and annual basis. The final results of any litigation cannot be
predicted with certainty. Although some of this litigation is
pending in states where large punitive damages, bearing little
relation to the actual damages sustained by plaintiffs, have
been awarded in recent years, we believe the outcome of
pending litigation will not have a material adverse effect on
our financial position, results of operations, or cash flows.
14. SUPPLEMENTARY INFORMATION
(In millions) 2007 2006 2005
Supplemental disclosures of
cash flow information:
Income taxes paid $ 416 $ 569 $ 360
Interest paid 26 15 21
Impairment losses included in realized investment
gains (losses) 22 1–
Noncash financing activities:
Capitalized lease obligations 194
Dividends declared (91) 91 –
Treasury stock issued for:
Associate stock bonus 38 35 33
Shareholder dividend reinvestment 19 15 11
Share-based compensation grants 221
15. SUBSEQUENT EVENTS
On February 4, 2008, we entered into an agreement for an
accelerated share repurchase (ASR) program with an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill
Lynch). Under the agreement, we purchased 12.5 million
shares of our outstanding common stock at $60.58 per share
for a total purchase price of $757 million. The repurchase was
funded with internal capital. The shares were acquired as a
part of previously announced share repurchase authorizations
by our board of directors and will be held in treasury. Under
the agreement, Merrill Lynch plans to purchase shares of our
common stock in the open market from time to time until it
has acquired a number of shares equivalent to the number of
shares we purchased from Merrill Lynch. At the end of this
period, we may receive, or may be required to remit, a
purchase price adjustment based upon the volume weighted
average price of our common stock during the ASR program
period. Under the terms of the ASR, we may elect to receive
or pay any settlement amount in cash or shares of our
common stock at our option. The completion and settlement
of the ASR program is expected to occur during the second
quarter of 2008, although the settlement may occur before
the second quarter at Merrill Lynch’s option.