Aflac 2013 Annual Report Download - page 32

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AFLAC INCORPORATED INVESTMENTS
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. As such, we seek to
maximize risk-adjusted returns subject to our liability profile and capital requirements. Our overall
portfolio is predominantly senior fixed-maturity securities.
INVESTMENT PORTFOLIO BACKGROUND
In Japan, our insurance products are yen-denominated and have high rates of
persistency, thus yielding long duration liabilities. Therefore, we primarily invest
for the long term, and the strong cash flows from our persistent book of business
reinforce this long-term perspective. The percentage of the Company’s total assets
attributable to Aflac Japan was 85% at December 31, 2013.
Our U.S. policy liabilities have a shorter duration than in Japan, and our investment
approach is tailored accordingly.
2013 INVESTMENT RESULTS
2013 proved challenging as Aflac’s Global Investment Division continued to operate in a
low-interest-rate environment accompanied by volatility in global financial markets, particularly
U.S. interest rates. However, we were able to successfully navigate these market movements
and generate consolidated net investment income of $3.3 billion, which was lessened due to
the weakening yen, but ahead of budget on a currency neutral basis. Net realized investment
gains were $399 million. On an amortized cost basis, our invested assets declined in 2013 to
$103.9 billion, reflecting the significant weakening of the yen.
(1) Includes JGB RDCs
(2) Includes 144A-type securities
(3) RDCs have principal denominated in yen and pay U.S. dollar coupons
AFLAC INCORPORATED CONSOLIDATED PORTFOLIO
(Percentage of Total Portfolio, at Amortized Cost)
12/31/13
Total Portfolio - $103.9 Billion
Japanese Government Bonds (JGBs) (1)
Private USD (2)
Private JPY
Reverse Dual Currency (RDC) bonds (3)
Public USD (Japan portfolio, unhedged)
Public USD (US portfolio)
Public JPY
Hedged USD Bonds (2)
40.3%
4.5%
9.1%
20.6%
7.9%
4.8%
1.1%
11.7%
30 AFLAC INCORPORATED 2013 YEAR IN REVIEW