Aflac 2012 Annual Report Download - page 4

THE AFLAC WAY: OUR PROMISE
As an insurance company, our product is intangible: We sell a promise to be there for our
policyholders and insureds when they need us most by paying claims fairly and promptly. Keeping
that promise includes delivering a positive consumer experience and ensuring we live up to the
Aflac brand each and every day. It’s what we call The Aflac Way, and it’s the foundation of every
endeavor we undertake.
Our goal is to fulfill this promise while also offering our customers the best value in voluntary
insurance products in Japan and the United States.
HOW WE KEEP OUR PROMISE
Income from Premiums
Policy premiums are the primary source of cash flow for our insurance operations. Premiums
are generated from two sources: policy renewals, which represent the majority of premiums
received; and new policies issued. With these premium funds, we are able to offer services that
deliver on our promise to policyholders, including paying claims fairly and promptly, reserving for
future claims, and enhancing customer service and product development.
Income from Investments
Our investment portfolio backs up the most important promise we make as an insurance company:
to protect our policyholders when they need it most by paying cash benefits in response to
their claims. We primarily invest for the long term, and our portfolio is diversified by industry
and geography. The strong cash flows from our persistent book of business give us the ability
to continue to invest from this perspective. Earnings from our investments provide additional
income that allows us to offer a strong value to policyholders through lower premiums and better
benefits. Historically, our product needs and liability profile have been key drivers to our asset
strategy. Matching policy liabilities by both duration and currency is a primary consideration in
managing our investment portfolio. At the same time, we are continuously focused on enhancing
the strength and stability of our balance sheet.
An insurance company is in the business of managing risk, not avoiding risk. We strive to be
good stewards for our policyholders and those we insure, and we take great care to thoroughly
evaluate the risks of the investments we own to ensure that the entire portfolio offers an
appropriate balance of risk and return. Our investment objectives are primarily driven by careful
consideration of our liabilities and capital requirements. With these in mind, our investment
strategies are designed to achieve the highest attractive risk-adjusted returns with an eye toward
quality, diversification and liquidity. We continually evaluate investment opportunities around
the world. While fixed income investments represent the majority of our strategy, we seek out
opportunities in multiple asset types for their diversification and long-term return potential. With
respect to our fixed income investments, we want to own assets where there is a high probability
the issuer of the bond can and will meet its obligations to us, both interest and return of principal
at maturity. Next, we look for investments that align with the timing of claims we expect to pay
and also the currency we expect to pay them in, whether yen or dollars.
KEEPING OUR PROMISE, THE AFLAC WAY
Since the founding of our company in 1955, we’ve put the customer first by reminding ourselves
daily about the promises we’ve made to those we insure. By doing so, we’ve gained the trust of
more than 50 million people worldwide who count on us to pay claims fairly and promptly when
they need us most – The Aflac Way.
2 AFLAC INCORPORATED 2012 YEAR IN REVIEW