Aflac 2012 Annual Report Download - page 29

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Our overall portfolio is dominated by fixed-maturity securities. The majority of our total investments fall into the senior
debt category. The percentage of our senior debt holdings increased from 86.2% at the end of 2011 to 91.9% at the end
of 2012. At year-end 2011, 94.4% of our portfolio was investment grade, and that increased to 95.3% at the end of 2012.
SHAREHOLDERS’ EQUITY
In 2012, net after-tax realized investment losses from securities transactions and impairments, excluding derivatives,
were $326 million, which is a significant improvement from after-tax realized investment losses of $850 million in 2011.
It’s worth noting that while we have been actively and successfully reducing the risk in our portfolio, we have grown our
shareholders’ equity from $8.8 billion at year-end 2007 to $16.0 billion at December 31, 2012.
ENHANCING LIQUIDITY AND INVESTMENT RETURNS
In the second half of 2012, our objective was to invest roughly two-thirds of our investment cash flow in U.S. dollar-
denominated, publicly traded corporate bonds for Aflac Japan’s portfolio. Our enhanced investment strategies provide
the benefit of liquidity, portfolio flexibility, and diversification. This investment program was successful and enabled us
to surpass our budgeted new money yield for 2012. In addition to achieving our objective of having our assets primarily
denominated in yen, we employed a currency hedging strategy, which serves to ensure our dollar investments in this
program are hedged back to yen. At December 31, this program represented 6.2% of our total portfolio.
GEOGRAPHIC INVESTMENT EXPOSURE
We diversify our large, fixed-income portfolio by geography and industry. The vast majority of our investments in Japan
are in Japanese Government Bonds (JGBs). In addition, we seek investment opportunities around the world. The United
States is our second-largest region along with diversification from around the rest of the world. As an insurance company,
we are mindful of the changing investment landscape and will seek investments around the globe to achieve the best
long-term value.
INVESTMENT OUTLOOK
As we look ahead, our goal is to continue to enhance the quality of our portfolio by expanding our portfolio’s diversity
and ultimately improving our returns while reducing risks to certain market cycles. Our ability to continue to implement
new strategies is based on the evolving capabilities of the Aflac Global Investment Division. To support investments in
newer asset classes, we will continue to invest in our human capital and technology, while assessing which investment
opportunities represent the best value based on market conditions in the future. We believe this dynamic approach is
in the best interest of all our stakeholders, especially our policyholders, bondholders and shareholders.
Total Debt and Perpetual Securities - $112.1 Billion
JGBs
Industrials
Banks/Financials
Utilities
Sovereign & Supranationals
Municipalities
Other
2012 Composition of Portfolio - Sector
(At Amortized Cost)
39.3%
18.0%
23.9%
11.4%
4.5% 1.4% 1.5%
AFLAC INCORPORATED 2012 YEAR IN REVIEW 27