Aflac 2008 Annual Report Download - page 36

32 Aflac Incorporated Annual Report for 2008
Our cancer insurance marketing efforts in 2008 centered on
Cancer Forte, which we introduced in September 2007. Cancer
Forte offers increased outpatient benefits compared to the
preceding version of this policy. In addition to our traditional
first-occurrence benefit, this product also pays an annuity to
a newly diagnosed patient from the second year through the
fifth year following diagnosis. It also assists policyholders with
counseling and doctor referral services through a third party
upon diagnosis of the disease. For consumers who had the
earlier cancer insurance product, we introduced a special bridge
policy in 2008 that allows existing policyholders to upgrade
their coverage to that of Cancer Forte.
As previously disclosed, Japan Post Network Co., Ltd.,
selected Aflac Japan in November 2007 as its provider of
cancer insurance to be sold through post offices. Japan Post
Network Co., Ltd. has historically been a popular place for
consumers to purchase insurance products. We began selling
cancer insurance through the Japan Post Network Co., Ltd. in
October 2008, with our product being offered through 300
post offices.
Our cancer policies are also marketed through a strategic
alliance with Dai-ichi Mutual Life. In 2008, Dai-ichi Life sold
nearly 190,000 of our market-leading cancer policies, retaining
its distinction as the number two seller of cancer insurance
behind only Aflac Japan. We are convinced that the affordable
cancer products Aflac Japan provides will continue to be an
important part of our product portfolio.
Medical sales increased 2.8% in 2008, compared with prior
year. Since first launching a stand-alone medical product
called EVER in 2002, we have been the number one seller
of medical insurance policies in Japan. We believe that our
number one position benefits us in the marketplace. As a
result, we continue to believe that the medical category will
be an important part of our product portfolio. In the last five
years, we have segmented the market by developing variations
of EVER that appeal to specific types of Japanese consumers.
Gentle EVER, introduced in 2007, provides an affordable
alternative to help consumers who may have a health problem
that would exclude them from purchasing other EVER
products. With continued cost pressure on Japan’s health care
system, we expect the need for medical products will continue
to rise in the future, and we remain encouraged about the
outlook for the medical insurance market.
We continue to believe that sales of cancer and medical
insurance will benefit from the recently opened bank channel.
By the end of 2008, we had agreements with 242 banks to
sell our products in their branches. We have significantly more
selling agreements than any of our competitors. We believe
our longstanding relationships within the Japan banking
sector have given us an advantage in developing this channel.
Furthering our reach into the banking channel was the
endorsement of Aflac’s products by the National Association
of Shinkin Banks. This association of about 280 shinkin banks,
which are similar to credit unions, chose Aflac as one of
only four providers of third sector insurance products to its
member banks. Aflac was the only foreign company chosen. In
addition, Aflac was the only company selected for both cancer
and medical insurance. We believe we are well-positioned to
see continued improvement in bank channel sales.
In November 2008, we introduced a new product to 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 negatively impacted by the financial
crisis. However, we believe it will fit well in our bank agents’
product portfolios, particularly those of the mega banks and
larger regional banks in Japan.
We remain committed to selling through our traditional
channels, which allows us to reach consumers through affiliated
corporate agencies, independent corporate agencies and
individual agencies. In 2008, we recruited approximately 3,950
new sales agencies. At the end of the year, Aflac Japan was
represented by more than 18,800 sales agencies, or more than
107,400 licensed sales associates employed by those agencies.
We believe that there is still a strong need for our products
in Japan. Although we have a cautious outlook for sales in
2009 due to the current global economic uncertainty, our
objective is for sales to be flat to up 5% in Japan, including
continued growth in contributions from our new distribution
channels (see the Japanese Regulatory Environment section of
this MD&A for further discussion regarding these distribution
channels). Our sales objective could change if the Japanese
economy experiences further deterioration.
Aflac Japan Investments
Growth of investment income in yen is affected by available
cash flow from operations, timing of and yields on new
investments, and the effect of yen/dollar exchange rates
on dollar-denominated investment income. Aflac Japan has
invested in privately issued securities to secure higher yields
than those available on Japanese government or other public
corporate bonds, while still adhering to prudent standards for
credit quality. All of our privately issued securities are rated
investment grade at the time of purchase. These securities are
generally issued with documentation consistent with standard
medium-term note programs. In addition, many of these
investments have protective covenants appropriate to the
specific issuer, industry and country. These covenants often