Aflac 2012 Annual Report Download - page 28

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AFLAC INCORPORATED INVESTMENT SUMMARY
During 2012, Aflac’s Global Investment Division made significant progress in building out our investment capability,
while also improving the overall quality, liquidity and diversification of our global investment portfolio. The buildout
of the Investment Division included the opening of a new office in New York City, hiring key investment personnel both
in Japan and New York, completing a strategic business review, and implementing a strategic asset allocation study to
invest our sizeable cash flows at more attractive returns through a more diversified and high-quality portfolio.
INVESTMENT PORTFOLIO BACKGROUND
Our investment portfolio fortifies the most important promise Aflac makes to policyholders – to protect them when they
need us most by paying claims fairly and promptly.
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. We have defined our investment objectives as maximizing risk-adjusted
performance subject to our liability profile and capital requirements.
• InJapan,ourproductsareyen-denominated,long-dated,andhavehighpersistency,thusyieldinglong
duration liabilities.
• OurU.S.policyliabilitieshaveashorterdurationthaninJapan,andourinvestmentapproachistailored
accordingly.
CHANGING GLOBAL INVESTMENT ENVIRONMENT
Because the vast majority of our policies are in Japan, we’re predominantly invested in yen-denominated assets around
the world, including Europe. Virtually all of our investments in Europe are yen-denominated. Following the 2008 financial
crisis, our primary focus has been on investment risk management, while investing our significant cash flows in assets of
relatively higher quality and liquidity.
ENHANCING PORTFOLIO QUALITY
One way we’ve adapted over the last several years has been through reducing our exposure to financials in Europe and
sovereign investments in the peripheral Eurozone countries of Portugal, Italy, Ireland, Greece, and Spain. During 2012
we continued to identify investment opportunities to further reduce European and financial holdings that improved the
quality of our investment portfolio. Our total exposure to European assets declined from 29.1% of total investment and
cash at the end of 2011 to 20.0% at year-end 2012.
Total Debt and Perpetual Securities - $112.1 Billion
Japan
Europe
U.S.
Asia, excl. Japan
Americas, excl. U.S.
Middle East & Africa
Australasia
All Others
2012 Composition of Portfolio - Geographic Region
2.8% .5%
3.2%
4.8%
4.8%
20.1%
20.4%
43.4%
(At Amortized Cost)
26 AFLAC INCORPORATED 2012 YEAR IN REVIEW