Aflac 2011 Annual Report Download - page 7

AFLAC INCORPORATED 2011 YEAR IN REVIEW 5
Capital adequacy in Japan is principally
measured by our solvency margin ratio,
which was 547% at December 31, 2011, based
on the new calculation method that will
be eective March 31, 2012. Japan’s new
solvency margin calculation makes this
capital strength measure more comparable
with global measures of capital adequacy.
We are comfortable with this level of
solvency margin ratio, but continue to test
this capital adequacy ratio by applying
rigorous stress tests under extreme
scenarios. We are proud the rating agencies
have recognized the strength of our platform
and balance sheet. Our financial strength,
which exemplifies our ability to pay claims,
is rated A+ (Superior) by A.M. Best, Aa3 by
Moody’s, and AA- by S&P.
It is our longstanding belief that
when it comes to deploying capital for the
benefit of our shareholders, growing the
cash dividend and repurchasing our shares
are the most attractive means, and that is
something we will continue to pursue. We
repurchased 6.0 million shares of Aflac stock
in 2011. Additionally, we are very proud that
2011 marked the 29th consecutive year in
which Aflac has increased the cash dividend.
Our objective is to grow the dividend at a
rate that’s generally in line with operating
earnings-per-share growth before the impact
of the yen.
Despite our intense focus on the
balance sheet, we never lost sight of growing
our business. Combined, we generated more
than $3.5 billion in total new annualized
premium sales in the United States and
Japan in 2011. Total revenues rose 6.9%
to $22.2 billion, reflecting solid growth
in premium income and net investment
income, as well as the benefit of the stronger
yen/dollar exchange rate for the year.
Investments
Our vision is to have a world-class
investment organization that pays particular
attention to the needs of the insurance
operation through eective asset/liability
management and capital adequacy
management, while also taking into account
investment income needs. Without a
doubt, it is our investment portfolio that
fortifies what I believe is the most important
promise an insurance company makes to
policyholders—to protect them when they
need us most by paying claims promptly.
We continue to review our investments
to ensure that they best represent the
interests of our policyholders and all of our
stakeholders.
As we evaluate investment opportuni-
ties, it is a challenge to invest large cash
flows in a low-interest-rate environment. For
example, in Japan alone in 2011, we invested
$57 million each business day. We primarily
invest for the long term, and the strong cash
flows from our persistent book of business
give us the ability to continue to invest from
this perspective. Clearly, the world, and
particularly Europe, remains a very dynamic
and volatile macro-environment. As such,
we examined our traditional approach to
investing to determine how best to adapt to
the changing environment. One way we’ve
adapted over the last several years has been
through reducing our exposure to financial
holdings and investments in the peripheral
Eurozone. To eectively respond to this
environment, we brought on a global chief
investment ocer in November 2011. We are
also enhancing human capital, technology
and investment processes as we embark on
our goal to be best-in-class.
At Aflac, we do not just sell voluntary
insurance products. We sell a promise to
be there for our policyholders in their time
of need. Our employees are empowered to
honor and fulfill that promise every day.
The global financial challenges we’ve
all seen, especially with the changes in the
investment environment, have only served
to re-energize my enthusiasm as CEO
of this company. I wouldn’t trade places
with any other CEO in the world. I want to
personally thank you, our shareholders, for
supporting Aflac and helping establish
and maintain a strong foundation for
our company.
Daniel P. Amos
Chairman and
Chief Executive Ocer