Aflac 2008 Annual Report Download

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It’s no mystery
how Aflac makes a difference.
It’s no mystery
how Aflac makes a difference.
Annual Report for 2008

Table of contents

  • Page 1
    It's no mystery how Aï¬,ac makes a difference. Annual Report for 2008

  • Page 2
    ... commercials, the Aflac Duck has been cast in the role of the overlooked, albeit quite vociferous benefactor, as the befuddled friends struggle to solve a mystery: Who pays you cash to cover expenses that other insurance doesn't cover? Additional clues about how Aflac policies make a difference...

  • Page 3
    ... the best possible value for our customers. And we are continually making enhancements to our product line to ensure they are always relevant in an ever-changing health care environment. We have tens of thousands of sales associates and employees dedicated to helping policyholders resume life where...

  • Page 4
    ...: Accident/disability Cancer indemnity Short-term disability Intensive care Hospital indemnity Sickness indemnity Long-term care Specified health event Fixed-benefit dental Vision Life insurance products, including: Term life Whole life Juvenile life Who Buys It At the worksite: Employees at more...

  • Page 5
    ... earnings (basic) Net earnings (diluted) Shareholders' equity Cash dividends paid Supplemental Data: Number of common shares outstanding Number of registered common shareholders Number of full-time employees 2007 Aï¬,ac Incorporated and Subsidiaries 2006 % Change 2008 - 2007 $ 16,554 1,914 1,254...

  • Page 6
    ...5.5 million policies in the United States and Japan in 2008, generating more than $2.6 billion of new annualized premium. A year like 2008 reminds us of why it's so important to stay focused on what Aï¬,ac does best. Aï¬,ac develops and markets affordable products consumers need to help protect them...

  • Page 7
    ...do not anticipate liquidating securities at a loss to make claims payments. Instead, we have both the intent and ability to hold our investments until the market prices recover, or when they mature. Aï¬,ac Japan We were pleased to see Aï¬,ac Japan's new annualized premium sales increase slightly for...

  • Page 8
    ... in Aï¬,ac Japan's core competitive strengths that have positioned us as the number one seller of both cancer and stand-alone medical insurance, and as the largest insurer in Japan in terms of individual policies in force. We also believe the need for our products, combined with our well-known and...

  • Page 9
    ... retain employees as well as complement existing insurance plans at no direct cost to a company. I believe our solid new payroll account growth suggests that employers are better understanding the benefits Aï¬,ac brings to the table. They are seeing how Aï¬,ac products help to provide health care...

  • Page 10
    ... policyholders. Along with the strong marketing organization, I still think controlling expenses while offering the best products with the best value and competitive commissions, as well as our position as the low-cost producer, continues to be the driving force behind the success of the company...

  • Page 11
    ... our continued involvement, our board of directors formed a Green Committee in 2008 to help steer Aï¬,ac as a good steward of the resources and materials we use. A: Q: In 2008, you opted to forgo the benefits of a "golden parachute" worth approximately $13 million. What led you to make this...

  • Page 12
    ... the financial crisis late in the year, bank channel sales fell off sharply as many banks made thousands of customer service calls to those who had purchased annuities from other companies. These service calls greatly reduced the time available for banks to offer our products to their customers. As...

  • Page 13
    .... In 2008, the yen averaged Â¥140 130 120 110 100 90 99 00 01 02 03 04 05 06 07 08 Yen/Dollar Exchange Rate (Closing rates) The average yen/dollar exchange rate strengthened 14.0% in 2008, which magnified Aï¬,ac Japan's growth rates in dollar terms. It's no mystery how Aï¬,ac makes a difference...

  • Page 14
    ... remains the best-branded company in Japan for cancer insurance and we have a commanding market share for new sales of this product. Our cancer insurance marketing efforts in 2008 centered on Cancer Forte, which we introduced in September 2007. Cancer Forte extended our preceding policy's outpatient...

  • Page 15
    ... has been fortunate enough to have helped many people when they needed it most, making a difference in so many lives. Through his place of employment at the fire station, he purchased an Aï¬,ac cancer policy, which provides him with peace of mind for his entire family and financial protection and...

  • Page 16
    ... the products she offers throughout the day are EVER, the Aï¬,ac's medical product, and Cancer Forte, Aï¬,ac's cancer policy. Bank customer Sachiko Kita is a Cancer Forte policyholder. She considers this product to be a very valuable product to protect her family financially and to provide peace...

  • Page 17
    ...the market called Sanjuso. This innovative new offering is a single-premium product that provides lump-sum payments upon the diagnosis of cancer, heart attack or stroke, as well as a death benefit. It was primarily designed for the bank channel. Initial sales of Sanjuso were undoubtedly impacted by...

  • Page 18
    ... to credit unions, chose Aï¬,ac as one of only four providers of third sector insurance products to its member banks. Aï¬,ac was the only foreign company chosen. In addition, Aï¬,ac was the only company selected for both cancer and medical insurance. We are also excited about Japan Post Network Co...

  • Page 19
    ...on sales-related business activities by centralizing inquiries from our field force to the associate support center, and we have also established exclusive units in the contact center for the bank channel and Japan Post Network Co., Ltd. so we can provide quality services for these channels as well...

  • Page 20
    ... in 2008 that provided sales associates with the support and enrollment technology to offer defined combinations of products, or "portfolios" that provide breadth and/or depth of coverage for diverse medical health Policies In Force* Annualized Premiums In Force** Total New Annualized Premiums...

  • Page 21
    ... our personal sickness indemnity product. We are also pairing life products with other supplemental policies we offer. As a result of this approach, life premiums and policies showed double-digit increases for the year. Aï¬,ac's Field Force: A Strong and Growing Team As the primary point of contact...

  • Page 22
    ... also supporting this initiative with streamlined products, specific advertising, and customized enrollment technology. Aï¬,ac's New Brand Initiatives Take Off The now-legendary Aï¬,ac Duck continued to help us propel our brand message in 2008. For the first time, Aï¬,ac Duck commercials directly...

  • Page 23
    ... car since 2003. With a history of cancer in his family, Hoss and his wife, Vikki, decided to apply for Aï¬,ac's cancer insurance policy on top of the accident policy they already had. And then the news came - in February 2008, he was diagnosed with thyroid cancer. Surgeons at Presbyterian Hospital...

  • Page 24
    ...our payroll accounts. For consumers who prefer to handle their service online, we also enhanced our Policyholder Service Center at aï¬,ac.com. This improved site enables customers to update personal information, review their policy, check the status of a claim and even initiate a new claim online to...

  • Page 25
    ...reach consumers through print and online advertising. • Improve efficiency, mobility and ultimately productivity through cutting-edge technology - We will continue to adapt and upgrade new technology to improve the services we offer our customers and the ï¬,exibility we give sales associates while...

  • Page 26
    ... for share and per-share amounts) Revenues: Premiums, principally supplemental health insurance Net investment income Realized investment gains (losses) Other income Total revenues Benefits and expenses: Benefits and claims Expenses Total benefits and expenses Pretax earnings Income taxes Net...

  • Page 27
    ... $ 39,147 5,911 $ 45,058 $ 32,726 1,312 2,362 2,262 6,396 $ 45,058 $ 33.45 23.10 30.12 Â¥ 119.90 125.15 $ 32,792 5,068 $ 37,860 $ 27,592 1,207 2,090 1,545 5,426 $ 37,860 $ 36.10 23.00 24.56 Â¥ 131...770 $ 31,222 $ 22.66 11.35 21.94 Â¥ 115.70 130.89 It's no mystery how Aï¬,ac makes a difference. 23

  • Page 28
    ...the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aï¬,ac), which operates...

  • Page 29
    ... estimates involve the use of various assumptions developed from management's analyses and judgments. The application of these critical accounting estimates determines the values at which 96% of our assets and 86% of our liabilities are reported as of December 31, 2008, and thus has a direct effect...

  • Page 30
    ... costs discounted basis using statistical analyses as a percentage of annualized of historical claims payments, adjusted for premiums in force 44.2% 43.3% 42.4% 54.1% 52.9% 52.9% current trends and changed conditions. We update the assumptions underlying the estimate of unpaid policy claims...

  • Page 31
    ... structure, which our assets support. We do not purchase securities with the intent of generating capital gains or losses. However, investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers, tax planning strategies...

  • Page 32
    ... and administration of our insurance products, which are the principal drivers of our profitability. In 2008, we realized total pretax investment losses of $1,007 million (after-tax, $655 million, or $1.37 per diluted share), primarily a result of the sale of securities and the recognition of...

  • Page 33
    ... interest rates and has no cash impact on our It's no mystery how Aï¬,ac makes a difference. Foreign Currency Translation Aï¬,ac Japan's premiums and most of its investment income are received in yen. Claims and expenses are paid in yen, and we primarily purchase yen-denominated assets to support...

  • Page 34
    ...to conversions, represent the premiums that we would collect over a 12-month period, assuming the policies remain in force. For Aï¬,ac Japan, total new annualized premium sales are determined by applications written during the reporting period. For Aï¬,ac U.S., total new annualized premium sales are...

  • Page 35
    ... to total new annualized premium sales by major product for the years ended December 31. 2008 Medical policies Cancer Ordinary life Rider MAX Other Total 34% 34 23 5 4 100% 2007 33% 33 22 7 5 100% 2006 33% 28 The following table presents a summary of operating ratios for Aï¬,ac Japan. Ratios to...

  • Page 36
    ... these distribution channels). Our sales objective could change if the Japanese economy experiences further deterioration. Aï¬,ac Japan Investments Growth of investment income in yen is affected by available cash ï¬,ow from operations, timing of and yields on new investments, and the effect of...

  • Page 37
    ... markets. Japan's system of compulsory public health care insurance provides medical coverage to every Japanese citizen. These public medical expenditures are covered by a combination of premiums paid by insureds and their employers, taxes and copayments from the people who receive medical service...

  • Page 38
    ... line. In 2008, we primarily directed our efforts to helping consumers broaden their coverage by pairing existing policies that complement one another's coverage. We launched a product portfolio initiative in 2008 that provided sales associates with the support and enrollment technology to offer...

  • Page 39
    ... products, specific advertising, and customized enrollment technology. Additionally, a new level of management has been introduced in 2009 to deliver this initiative. Broker Development Coordinators have been hired in most of our state operations to initiate contact with new brokers as well...

  • Page 40
    ... income debt and perpetual securities markets. The following table details investment securities by segment as of December 31. Currency Risk The functional currency of Aï¬,ac Japan's insurance operation is the Japanese yen. All of Aï¬,ac Japan's premiums, claims and commissions are received or paid...

  • Page 41
    ...% if market interest rates increase by 100 basis points, assuming all other factors remain constant. We believe a principal cause of the increase in gross unrealized losses on securities available for sale is the effect of widening credit spreads on Aï¬,ac Japan's long-duration invested assets. The...

  • Page 42
    ...3.82 6.20 6.79 4.63 3.83 6.28 6.86 4.71 3.88 *Represents yen-denominated investments for Aï¬,ac Japan that support policy obligations and therefore excludes Aï¬,ac Japan's annuities, and dollar-denominated investments and related investment income 38 Aï¬,ac Incorporated Annual Report for 2008

  • Page 43
    ... Distribution of Debt and Perpetual Securities 2008 (In millions) Amortized Cost Percent of Total Amortized Cost 2007 Percent of Total Senior notes Subordinated securities: Fixed maturities (stated maturity date): Lower Tier II Upper Tier II Tier I* Surplus Notes Trust Preferred - Non-banks...

  • Page 44
    ... of these investments at December 31 are shown in the following tables. Cost or Amortized Cost 2008 Gross Gross Unrealized Unrealized Gains Losses 2007 Fair Value Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In millions) Securities available for sale, carried at...

  • Page 45
    ...credit risk by geographic region or country of issuer at December 31, 2008, based on amortized cost, was: Europe (48%); United States (20%); United Kingdom (9%); and Japan (9%). Our total investments in the banks and financial institutions sector, including those classified as perpetual securities...

  • Page 46
    ...2007 to the end of 2008. We have investments in both publicly and privately issued securities. The outstanding amount of a particular issuance, as well as the level of activity in a particular issuance and market conditions, including credit events and the interest rate environment, affect liquidity...

  • Page 47
    .... BBB rated securities increased primarily due to purchases and downgrades of higher rated securities. The fair value of our debt and perpetual security investments ï¬,uctuates based on changes in credit spreads in the global financial markets. Credit spreads are most impacted by market rates of...

  • Page 48
    ...'s credit position as well as current market pricing and other factors, such as the issuer's or security's inclusion on a (In millions) Total Amortized Cost Total Percent Gross Gross Fair of Total Unrealized Unrealized Value Fair Value Gains Losses Available-for-sale securities: Investment-grade...

  • Page 49
    ... largest unrealized loss positions in our portfolio as of December 31, 2008. (In millions) Credit Rating Amortized Cost Fair Value Unrealized Loss SLM Corp. Ford Motor Credit Takefuji Unicredito Italiano Morgan Stanley Aces 2008-6* Sultanate of Oman UPM-Kymmene Banco Espirito Santo CSAV Nordea Bank...

  • Page 50
    ... the fair value of our securities available for sale using several sources or techniques based on the type and nature of the investment securities. For securities categorized as Level 1, we obtain quoted market prices for identical securities traded in active markets that are readily and regularly...

  • Page 51
    ... primary exposure to be hedged is our investment in Aï¬,ac Japan, which is affected by changes in the yen/dollar exchange rate. To mitigate this 47 The increase in deferred policy acquisition costs was primarily driven by total new annualized premium sales and the strengthening of the yen against...

  • Page 52
    ...are premiums and investment income. The primary uses of cash by our insurance operations are policy claims, commissions, operating expenses, income taxes and payments to the Parent Company for management fees and dividends. Both the sources and uses of cash are reasonably predictable. When making an...

  • Page 53
    ... tax credit carryforwards. Cash provided by operating activities was also reduced by the payout of lumpsum return-of-premium benefits to policyholders on a closed block of U.S. cancer insurance business. The majority of these benefit payouts began in 2008 and will conclude in 2012. We paid...

  • Page 54
    ...the board of directors for purchase in January 2008. We do not plan to purchase any shares of our common stock during the first half of 2009; however, we will evaluate the market and our capital position to determine if we will purchase any shares in the second half of the year. Cash dividends paid...

  • Page 55
    ... insurance department must approve service arrangements and other transactions within the affiliated group of companies. These regulatory limitations are not expected to affect the level of management fees or dividends paid by Aï¬,ac to the Parent Company. A life insurance company's statutory...

  • Page 56
    ... Premiums, principally supplemental health insurance Net investment income Realized investment gains (losses) Other income Total revenues Benefits and expenses: Benefits and claims Acquisition and operating expenses: Amortization of deferred policy acquisition costs Insurance commissions Insurance...

  • Page 57
    ...fits Unpaid policy claims Unearned premiums Other policyholders' funds Total policy liabilities Notes payable Income taxes Payables for return of cash collateral on loaned securities Other Commitments and contingent liabilities (Note 13) Total liabilities Shareholders' equity: Common stock of $.10...

  • Page 58
    ...taxes Change in unrealized gains (losses) on investment securities during year, net of income taxes Pension liability adjustment during year, net of income taxes Adoption of SFAS 158, net of income taxes Balance, end of year Treasury stock: Balance, beginning of year Purchases of treasury stock Cost...

  • Page 59
    ... premiums Increase in deferred policy acquisition costs Increase in policy liabilities Change in income tax liabilities Realized investment (gains) losses Other, net Net cash provided by operating activities Cash ï¬,ows from investing activities: Proceeds from investments sold or matured: Securities...

  • Page 60
    ... (the Parent Company) and its subsidiaries (the Company) primarily sell supplemental health and life insurance in the United States and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aï¬,ac), which operates in the...

  • Page 61
    ... guidelines and with the approval of state insurance regulatory authorities. Insurance premiums for health and life policies are recognized ratably as earned income over the premium payment periods of the policies. When revenues are reported, the related amounts of benefits and expenses are...

  • Page 62
    ... and marketing expenses. All of these costs vary with and are primarily related to the production of new business. Policy Liabilities: Future policy benefits represent claims that are expected to occur in the future and are computed by a net level premium method using estimated future investment...

  • Page 63
    ...We review the estimated liability for policyholder protection corporation contributions on an annual basis and report any adjustments in Aï¬,ac Japan's expenses. In the United States, each state has a guaranty association that supports insolvent insurers operating in those states. To date, our state...

  • Page 64
    ... disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial...

  • Page 65
    ... those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15...

  • Page 66
    ... accounting guidance not discussed above is not applicable to our business. 2. BUSINESS SEGMENT AND FOREIGN INFORMATION The Company consists of two reportable insurance business segments: Aï¬,ac Japan and Aï¬,ac U.S., both of which sell individual supplemental health and life insurance. Operating...

  • Page 67
    ...health Life insurance Net investment income Other income Total Aflac Japan Aflac U.S.: Earned premiums: Accident/disability Cancer expense Other health Life insurance Net investment income Other income Total Aflac U.S. Other business segments Total business segments Realized investment gains (losses...

  • Page 68
    ...monthly insurance premiums due from individual policyholders or their employers for payroll deduction of premiums. At December 31, 2008, $527 million, or 57.3% of total receivables, were related to Aï¬,ac Japan's operations, compared with $395 million, or 53.9%, at December 31, 2007. 3. INVESTMENTS...

  • Page 69
    ... of these investments at December 31 are shown in the following tables. Cost or Amortized Cost 2008 Gross Gross Unrealized Unrealized Gains Losses 2007 Fair Value Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In millions) Securities available for sale, carried at...

  • Page 70
    ... Distribution of Debt and Perpetual Securities 2008 (In millions) Amortized Cost Percent of Total Amortized Cost 2007 Percent of Total Senior notes Subordinated securities: Fixed maturities (stated maturity date): Lower Tier II Upper Tier II Tier I* Surplus Notes Trust Preferred - Non-banks...

  • Page 71
    ...credit risk by geographic region or country of issuer at December 31, 2008, based on amortized cost, was: Europe (48%); United States (20%); United Kingdom (9%); and Japan (9%). Our total investments in the banks and financial institutions sector, including those classified as perpetual securities...

  • Page 72
    ... million after-tax, or $.35 per diluted share) of the total realized investment losses in 2008. The fair value of our debt and perpetual security investments ï¬,uctuates based on changes in credit spreads in the global financial markets. Credit spreads are most impacted by market rates of interest...

  • Page 73
    ... changes in ratings on our perpetual securities, we will incur additional other-thantemporary impairment losses beginning in 2009, which could materially affect our results of operations for a particular fiscal quarter or year. It's no mystery how Aï¬,ac makes a difference. As a part of our credit...

  • Page 74
    ... pressures related to the company's constrained ability to raise debt in both the secured and unsecured markets. The U.S. Department of Education has provided some funding relief to student lenders by agreeing to purchase existing and newly originated FFELP (Federal Family Education Loan Program...

  • Page 75
    ... bank in Portugal. BES provides commercial and investment banking services, and has leading market positions in Portugal in trade finance and pension plan asset management and has expanded its operations abroad to Brazil, Angola and Spain. The increase in the unrealized loss for BES related...

  • Page 76
    ... of our investment in HVB is negatively impacted by the downturn in the economic environment in the European economies, particularly Germany, HVB's key market. Also negatively impacting HVB's fair value is its parent company's marginal capital levels in 2008. In contrast however, HVB reported much...

  • Page 77
    ... the issuers to service our investments has not been compromised by these factors. Unrealized gains or losses related to prevailing interest rate environments are impacted by the remaining time to maturity of an investment. Assuming no credit related factors develop, as investments near maturity the...

  • Page 78
    ... and Standard & Poor's rating services also expect this commitment to continue. Financial subsidy payments from Ford and lease program residual value support payments inextricably link FMCC's financing business to the parent. The increase in the unrealized loss for FMCC related to foreign currency...

  • Page 79
    ... 31, 2008. Another amount included in the unrealized losses in other corporate sector was an unrealized loss of $117 million on Aï¬,ac Japan's investment of $339 million (Â¥30.8 billion) in UPMKymmene Corporation (UPM), one of the world's largest forest product companies. The unrealized loss on UPM...

  • Page 80
    ...599 399 6,532 $ 3,408 2,448 411 6,267 $ (126) (151) 12 (265) Credit Rating Amortized Cost Fair Value Unrealized Gain (Loss) At the end of 2008, 96% of the company's total perpetual securities in an unrealized loss position were investment grade, compared with 93% at the end of the prior year. With...

  • Page 81
    ...to service our investment has not been compromised by these factors. Unrealized gains or losses related to prevailing interest rate environments are impacted by the remaining time to maturity of an investment. Assuming It's no mystery how Aï¬,ac makes a difference. no credit related factors develop...

  • Page 82
    ...nancial position or results of operations. We began investing Aï¬,ac Incorporated Annual Report for 2008 $ 204 We believe a principal cause of the increase in gross unrealized losses on securities available for sale was the widening of credit spreads on Aï¬,ac Japan's long-duration invested assets...

  • Page 83
    ...these entities. Except as relates to our review and evaluation of the structure of these VIEs in the normal course of our investment decision making process, we have not been involved in establishing these entities. We have not been nor are we required to purchase the securities issued in the future...

  • Page 84
    ...these VIEs, the impact on debt covenants, capital ratios, credit ratings or dividends would be no different than the impact from losses on any of the other debt securities we own. Our risk of loss related to our interests in any of our interests in these VIEs is limited to our investment in the debt...

  • Page 85
    ... inactive markets. The estimated fair values developed by the DCF pricing models are most sensitive to prevailing credit spreads, the level of interest rates (yields) and interest rate volatility. Credit spreads are derived based on pricing data obtained from investment brokers and take into account...

  • Page 86
    ... by obtaining broker quotes from a limited number of brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market ï¬,ows. The equity securities classified in Level 3 are related to investments in Japanese businesses, each of which...

  • Page 87
    ... rate is then used to convert all future dollar cash ï¬,ows of the bond, where applicable, into yen cash ï¬,ows. Additionally, credit spreads It's no mystery how Aï¬,ac makes a difference. 5. DEFERRED POLICY ACQUISITION COSTS AND INSURANCE EXPENSES Deferred Policy Acquisition Costs and Insurance...

  • Page 88
    ...incurred Less claims paid during the year on claims incurred during: Current year Prior years Total paid Effect of foreign exchange rate changes on unpaid claims Unpaid supplemental health claims, end of year Unpaid life claims, end of year Total liability for unpaid policy claims 2008 $ 2,332 6,127...

  • Page 89
    ... billion liability, and we reduced our interest rate from 6.5% in dollars to 1.67% in yen. We plan to either refinance, subject to market conditions, or use existing cash to pay off the aforementioned senior notes when they mature in April 2009. The aggregate contractual maturities of notes payable...

  • Page 90
    ... income tax liabilities Deferred income tax assets: Depreciation Policyholder protection corporation obligation Difference in tax basis of investment in Aflac Japan Unfunded retirement benefits Other accrued expenses Unrealized losses on investment securities Policy and contract claims Unrealized...

  • Page 91
    ... the board of directors for purchase in January 2008. Voting Rights: In accordance with the Parent Company's articles of incorporation, shares of common stock are generally entitled to one vote per share until they have been held by the same beneficial owner for a continuous period of 48 months, at...

  • Page 92
    ..., except for per-share amounts) Earnings from continuing operations Earnings before income taxes Net earnings Net earnings per share: Basic Diluted 2008 $ 42 42 29 $ .06 .06 2007 $ 42 42 29 $ .06 .06 2006 $ 35 35 25 The following table summarizes stock option activity. Stock Option Shares 19,981...

  • Page 93
    ... Aï¬,ac Japan's dollardenominated investments and related investment income into 89 11. STATUTORY ACCOUNTING AND DIVIDEND RESTRICTIONS Our insurance subsidiary is required to report its results of operations and financial position to state insurance regulatory authorities on the basis of statutory...

  • Page 94
    ..., end of year Plan assets: Fair value of plan assets, beginning of year Actual return on plan assets Employer contribution Benefits paid Effect of foreign exchange rate changes Fair value of plan assets, end of year Funded status Accumulated benefit obligation Japan $ 125 11 3 (1) (2) 33 169...

  • Page 95
    ..., well-diversified and balanced portfolio of high-quality equity, fixed-income and money market securities. As a part of our strategy, we have established strict policies covering quality, type and concentration of investment securities. For our U.S. plan, these policies prohibit investments in...

  • Page 96
    ... sales associates. Plan participants receive shares of Aï¬,ac 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...

  • Page 97
    ... Commission (COSO), and our report dated February 19, 2009, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Atlanta, Georgia February 19, 2009 Management's Annual Report on Internal Control Over Financial Reporting Management...

  • Page 98
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Aï¬,ac Incorporated and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of earnings, shareholders' equity, cash ï¬,ows, and comprehensive income for each...

  • Page 99
    ...Stock Prices In management's opinion, this quarterly financial information fairly presents the results of operations for such periods and is prepared on a basis consistent with our annual audited financial statements. (In millions, except for per-share amounts) Premium income Net investment income...

  • Page 100
    ...1990. E. Stephen Purdom, M.D., 61, former executive vice president of insurance operations for Aï¬,ac U.S., is on the board of advisors for Emory University Medical School. He previously served as chief of staff at Doctors' Hospital in Columbus, Georgia, and was first elected to Aï¬,ac Incorporated...

  • Page 101
    ... Technology Jun Isonaka, Senior Vice President, Policy Data Administration, Contact Center, Customer Services Tomomichi Itoh, Senior Vice President, Planning, Government Affairs and Research, Legal, Compliance Promotion and Risk Management Yosuke Miwa, Senior Vice President, Human Resources, Human...

  • Page 102
    ... stock purchase plans, dividends, lost stock certificates, etc., should be directed to the Shareholder Services Department at 800.235.2667 - option 2. Registrar Synovus Trust Company P.O. Box 23024 Columbus, Georgia 31902-3024 In Japan contact: Ken Kyo Investor Relations Support Department...