2010 Financial Analysts Briefing

Transcription

1 21 Financial Analysts Briefing

2 About This Book This book primarily contains information about Aflac that, most of which was given at the company s 21 Financial Analysts Briefing held on May 18-19, 21, at the Mandarin Oriental Hotel in New York, New York. All information is intended to provide a comprehensive discussion and analysis of Aflac s operations. The information contained in this book was based on conditions that existed at the end of the first quarter 21. Circumstances may have changed materially since those presentations were made. The company undertakes no obligation to update the presentations. This information was prepared as a supplement to the company s annual and quarterly releases, 1-Ks and 1-Qs. This book does not include footnotes to the financial statements or certain items that appear in reports or registration statements filed with the Securities and Exchange Commission. We believe the information presented in this book was accurate at the time of the presentations, but its accuracy cannot be guaranteed. Forward-Looking Information The Private Securities Litigation Reform Act of 1995 provides a safe harbor to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. We desire to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by Company officials in communications with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as expect, anticipate, believe, goal, objective, may, should, estimate, intends, projects, will, assumes, potential, target or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements. We caution readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements: difficult conditions in global capital markets and the economy; governmental actions for the purpose of stabilizing the financial markets; defaults and downgrades in certain securities in our investment portfolio; impairment of financial institutions; credit and other risks associated with Aflac s investment in perpetual securities; differing judgments applied to investment valuations; subjective determinations of amount of impairments taken on our investments; realization of unrealized losses; limited availability of acceptable yen-denominated investments; concentration of our investments in any particular sector; concentration of business in Japan; ongoing changes in our industry; exposure to significant financial and capital markets risk; fluctuations in foreign currency exchange rates significant changes in investment yield rates; deviations in actual experience from pricing and reserving assumptions; subsidiaries ability to pay dividends to the Parent Company; changes in law or regulation by governmental authorities; ability to attract and retain qualified sales associates and employees; decreases in our financial strength or debt ratings; ability to continue to develop and implement improvements in information technology systems; changes in U.S. and/or Japanese accounting standards; failure to comply with restrictions on patient privacy and information security; level and outcome of litigation; ability to effectively manage key executive succession; catastrophic events; and failure of internal controls or corporate governance policies and procedures. Table of Contents Section I - Aflac Incorporated Strategic Overview of Aflac...Daniel P. Amos... 2 Aflac Incorporated Financial Results...Kriss Cloninger III... 5 Investments...W. Jeremy Jerry Jeffery Product Pricing and Reserving...Susan R. Blanck... 2 Section II - Aflac Japan Introduction to Aflac Japan...Tohru Tonoike Japan s Regulatory Environment...Charles D. Lake II Aflac Japan Marketing and Sales...Koji Ariyoshi Aflac Japan Bank Channel Sales...Hisayuki Shinkai Aflac Japan Administration...Jun Isonaka Section III - Aflac U.S. Introduction to Aflac U.S...Paul S. Amos II Aflac U.S. Marketing...M. Jeffrey Jeff Charney Aflac U.S. Sales...Ronald S. Sanders Aflac U.S. Training...Eric J. Leger Aflac U.S. Internal Operations...Teresa L. White Section IV - Other Information The Management Team... 8 Index of Tables and Charts January 211

3 Section I Aflac Incorporated Strategic Overview of Aflac Daniel P. Amos Chairman and Chief Executive Officer As has been the case for many years, I d like to kick off this year s analyst briefing with an overview of our operations and our outlook for continued growth. Overall, we are pleased with how Aflac has emerged from the turmoil of the financial crisis. The underlying strength of our operations has allowed us to build capital, and our balance sheet remains strong. Our operations in Japan are performing very well. Although Aflac U.S. has been particularly challenged by the weakened U.S. economy, we are encouraged with the direction of our business. The Japanese and U.S. markets are perfectly suited to the products we offer. We are committed to retaining our disciplined and focused approach on these markets and on our specialty products. In the process, we believe we will maintain our market-leading position and produce earnings growth that our owners will find attractive. Let me begin with our operations in Japan. For more than three decades, Aflac has been positioned as the number one seller of third sector, or supplemental insurance products in Japan. The growing need for supplemental insurance is a direct result of a rapidly aging population and the related financial stress on Japan s national health care system. Because of the significant financial risk that can arise from serious illnesses and accidents, Japanese consumers have increasingly understood the need for additional insurance protection. In fact, according the most recent research available, nearly two-thirds of the population views the national health care system as inadequate. Aflac s leading market position has resulted, in part, from an intense focus on protection-oriented products. By monitoring changing consumer needs and improving our products, our product line has remained a key competitive strength for many years. Aflac has earned a reputation as a product innovator, and we are very well-branded for the products we sell. That is certainly the case with our founding product, cancer insurance. Over time, we extended that brand strength to include medical insurance. More recently, we have also found success through the development of unique life insurance products. Our product development efforts were very successful in 29. As you know, we began offering a child endowment product last March. This product proved to be very attractive to distributors and consumers alike. Aflac s child endowment policy has the highest return ratio in the industry, and several newspaper articles have referenced our product. In March of this year, our product was voted the number one child endowment product by financial experts in the Weekly Diamond magazine. As we have discussed, the child endowment product has a lower margin than our health products. Yet the premium is almost three times higher than our cancer and medical products, so it s very beneficial to both the top and bottom lines. In addition, for every 1 child endowment plans sold, our agents sold two additional policies to the same customers. As you know, the child endowment product has been a strong contributor to our sales growth since its introduction. We expect it to continue to be a core part of our life insurance sales as it is well-suited to our individual sales agents and the bank channel. Our biggest highlight was the revision of EVER, our popular medical product. Supported by the instantly famous Maneki Neko Duck, the new version of EVER led to an incredible sales increase late last year. A central aspect of our strategy remains the continued expansion and refinement of our product line. To that end, we will soon be introducing a new cancer insurance rider developed specifically for women. We have also revised our nonstandard medical product, Gentle EVER. Both of these products will be launched this June. The other important aspect to our strategy is the growth and enhancement of our distribution system. In the mid 197s, virtually all of our sales came from affiliated corporate agencies. Since that time, our distribution system has steadily evolved to include a diversity of sales outlets. During the 199s, we significantly expanded our ability to provide face-to-face sales by building a large network of independent corporate and individual agencies. In late 2 we entered into a strategic marketing agreement with Dai-ichi Life, which I believe has been one of the most effective alliances in the insurance industry. We also added alternative distribution outlets, including Internet sales and telemarketing capabilities. More recently, we are selling through more banks than any company offering third sector products. Like our product line, our extensive and diversified distribution system is a key competitive strength in the Japanese market. With our ability to provide our sales force with valued products, attractive commissions, effective support, and financial strength, I don t expect that competitive strength to diminish. I remain very pleased with Aflac Japan s overall position in the market and its consistently strong operating performance. I m also happy with our start to the year and especially with Aflac Japan s sales results. We had record breaking first quarter sales that surpassed our expectations. We also had strong sales in the month of April, which keeps us solidly on track toward achieving our sales target for the year. More important, the improvement 2

4 in our sales growth and the incredible persistency of our business is benefiting the bottom line. As we have discussed for many years, the current products we are selling were generally designed to have better margins than our older business. In addition, we have experienced very favorable claims experience in relation to our assumptions. As a result, Aflac Japan s benefit ratio has steadily declined, resulting in consistently improving margins. As you will hear in the following presentations, we expect that trend to continue. Like the Japanese market, our overall strategy in the United States remains the same. We are dedicated to expanding our product line and growing our distribution. In fact, we began focusing on this approach in the early 199s as a means for growing our business and later, we exported that same concept to Japan. However, within our two-part strategy, we took a significant step to enhance our business last year with a small acquisition in the insurance sector. Since the early 199s, we have transformed Aflac U.S. from basically a one-product company to the leading seller of supplemental insurance products. We remain confident in our ability to develop and market individually issued insurance products. However, we recognized that the market had, and is continuing, to evolve. Many of our competitors have offered group products in recent years, and that has created some challenges for us in the marketplace. Our sales force asked us for a solution that would help them be more competitive, particularly with larger payroll accounts that generally want group products. We are convinced we provided them with a very good solution when we purchased Continental American last October. From my own personal experience with our sales force, I can tell you that I travelled extensively during the first three months of the year. Everywhere I went, our sales force was energized that group products are now in their portfolio. It s clear they recognize the added option of group products as a great way to help them grow their business. But we re being careful and methodical in how we roll out these new group products, as we want to make sure we do it right. As you will hear in the presentations that follow, we believe group product offerings also better position us for distribution through insurance brokers. Historically, our products have been distributed almost exclusively through a growing sales force of individual, independent sales associates. But we believe we can do even better by complementing our existing sales force with new and stronger relationships in the regional and large-account broker market. Our entry into this distribution outlet is fairly recent. But we are pleased with our results so far and believe the contribution from brokers will increase in the future. However, I want to emphasize one very important point. We are not moving away from individually issued products, nor are we de-emphasizing our traditional distribution. Instead, we will grow our U.S. business in the future by pursuing both individual and group products sold through individual sales associates and brokers. Ultimately, this approach gives employers and employees the choice for the product that best meets their needs. Today, Aflac is the undisputed leader of individually issued supplemental products in the United States. We believe we can retain that distinction and become the major player in the voluntary group market as well. When we think of the long-term outlook for the U.S. business, we are convinced the United States is a vast and largely untapped market for our products. Actually, it s arguable that the recent passage of health care reform can benefit the supplemental insurance category. We will likely see more standardization of major medical insurance, which should mean the need for additional protection will become better defined, just like it has in Japan. It s impossible to predict how employers, both large and small, will react as the provisions of the legislation take effect over the next several years. However, it does not seem likely that employers will upgrade the major medical coverage they are currently offering their workers. In the short run, we recognize the sales challenges facing us in our traditional target market. Unemployment remains stubbornly high, and consumer confidence has not significantly improved. Many of the industries in which we achieved great sales success in the past are economically sensitive, including the retail, construction and manufacturing sectors. Additionally, we have primarily focused our sales activities on the small group market. It s clear that small businesses have been especially vulnerable in this recession. Yet when the economy recovers, we believe small business will again be one of the drivers of economic growth, and in turn, our sales. In the meantime, we are somewhat encouraged by what we have seen in our business recently. You may recall that our veteran agents sales activities have been weak for several quarters, in particular because they have faced challenging re-enrollment conditions. However, we have seen some improvement in the sales contribution recently from our veteran agents. And while it s just one month, our sales results in April were a bit better than expected. In addition, our persistency in April was higher than a year ago. Yes, challenges still exist. But we believe a turn in sales during the second half of this year is still possible for our U.S. operations. Let me share my thoughts on the balance sheet. Overall, we remain pleased with the quality of the assets we hold. The credit profile remains high with 94.1% of our debt and perpetual securities rated as investment grade. Our global investment approach has been time-tested. Given the events of the last 18 months, it has certainly been stress tested. I continue to believe that the most prudent course of action for Aflac is to purchase securities that best match the characteristics of our policy liabilities. That is especially true with Aflac Japan s operations, where our investment activities have been most challenged historically. As you may know, Japan does not have a long-dated corporate bond market. And we are primarily focused on purchasing long-dated, yen-denominated, investment grade securities. In addition, we require interest rates on the invested assets we purchase that exceed our pricing assumptions. Because of our sales contributions and extraordinary persistency rates, we have tremendous investment cash flows in Japan. It s Aflac Japan s unique investment requirements and sizeable cash flows that have led to our portfolio composition. As such, one of the legacies in our portfolio is single-issue investment concentrations that are generally 3

5 larger than our peers. We also have investment positions in names that are more likely to be found in global portfolios rather than those of North American insurers. That s certainly the case with our ownership of subordinated perpetual securities that were primarily issued by European financial institutions. Clearly, perpetual securities have generated the greatest investor concern over the last several quarters. Throughout last year, our extensive credit work led us to conclude that the perpetuals did not have the outsized risks that many investors and other observers had suggested. Although we in no way liked the impact these securities had on the valuation of Aflac s common shares, I believe we made the right call. I d like to point out that the vast majority of issuers of the perpetual securities have met their contractual obligations for paying coupons and market expectations for redeeming the securities at their first call date, just as our credit team expected. As a result, the market values of the perpetual securities have significantly recovered from their March 29 lows. I would also remind you that if we had followed the advice of many members of the investment community, we would have raised equity last year in the teens, and likely cut or eliminated the dividend. Then we would have incurred investment losses of about $2 billion by divesting our portfolio of the perpetual securities. We did not believe that was a wise course of action last year, and today, we stand by that decision. Our experience with perpetual securities points to one valuable lesson we learned last year and that is: Don t panic. I believe that lesson can also be applied to the current concern with the so-called European PIIGS. I am by no means being dismissive as to the seriousness of the current situation in Europe. However, it s in part because the situation is serious that we believe the issues will be addressed, and the crisis will pass. I m also not willing to say that we won t incur losses on some of the securities we own in those countries. But in our view, if losses occur, they will be manageable. Again, if we chose to divest ourselves of our sovereign and financial institution exposure to the PIIGS, we would incur the sizeable losses that the market seems so concerned about. The point I want to leave you with is this: We are well aware of what some investors perceive as risk in the portfolio. I promise you that when the risk of a specific asset exceeds our tolerance, we take action. That s true when it comes to concentration risk. It s also true with our exposure to European sovereign debt and banks, and it s true for other securities as well. If our credit view changes, as it did with many issuers over the last two years, we will move quickly to dispose of that risk. In that regard, we believe that a more selective, or opportunistic approach to de-risking the portfolio is the best course of action. We have, for instance, taken advantage of several exchange and tender offers that have allowed us to improve the quality of our portfolio, and we remain open to those opportunities as they arise. I would also point out that we do not have any liquidity concerns. We do have a Samurai debt obligation that matures this July in the amount of 39.4 billion, or $423 million. However, the capital resources needed to repay that debt already reside at the parent company. The parent company s only real funding requirement this year is the cash dividend, which is provided by the life insurance subsidiary. Furthermore, our debt obligations that mature in 211 and 212 are only $376 million and $286 million, respectively. Additionally, our statutory capital generation remains strong and impressive. Our consistent statutory earnings growth has allowed us to more than absorb investment losses. This year we expect to earn approximately $2 billion in statutory operating earnings. Absent material investment losses or credit ratings downgrades, that should allow us to see significant improvement in our RBC ratio. You ll recall that we concluded 29 with a ratio of 479%. We recently completed our first quarter statutory financial statements and finalized our RBC ratio. At the end of March, our ratio was better than our original estimate, and was 539%. As I have mentioned, my primary interest continues to be maintaining a strong capital position. Last year we focused our entire officer group on the risk-based capital ratio. For 21 as well, every officer s incentive compensation has a component linked to maintaining a target RBC ratio. Additionally, for the second year in a row, we used the RBC ratio as the only measure for all performance-based restricted stock awards that were granted to Section 16 insiders. To earn these equity awards when they vest, we will have had to maintain targeted RBC levels. But I want to stress that we will work hard toward finishing 21 with a higher RBC ratio than the end of 29. In that regard, I can assure you that the impact on our RBC ratio has recently influenced many of the investment and capital decisions we have made. At the same time, we want to continue providing appropriate incentives to our management team to grow our business. In addition to specific performance measures that relate to each officer s business segment and responsibilities, our officers are all united in achieving our goals for earnings growth. As you know, our earnings objective for this year is to increase operating earnings per share 9% to 12% before the impact of foreign currency. In my comments at this meeting a year ago, I stated that within the 9% to 12% range, we would be focused on achieving a 1% increase. With one quarter of the year behind us, I still think it s reasonable to see operating earnings per share up 1% this year before the impact of the yen. We have spent a lot of time analyzing and stresstesting our financial model to assess our opportunities for earnings growth in 211. Based on that analysis, we have established a range of 8% to 12% growth on a currencyneutral basis for next year. In the following presentation, Kriss will review the assumptions we used to model our earnings objectives. But I want to say that overall, not much has changed in our outlook. The primary reason we lowered the bottom of the range from 9% to 8% was the prospect for continued low interest rates and the resulting slower investment income growth. However, like this year, we will be focused on producing an increase of 1% before the effect of the yen in 211. I recognize there is a lot of discussion among investors about deployment versus retention of capital. From 1994 through 28, we consistently deployed excess capital to benefit per-share earnings growth. I still view 4

6 share repurchases as an effective means for enhancing shareholder value. At this point, however, my position has not changed. I certainly don t want to go through another period like early 29. As such, I still believe it is most appropriate at this time to build and retain capital as a cushion. When we are convinced that financial markets have stabilized and are less prone to panic, and that the economy is on a firmer footing, you can expect us to resume our share repurchase program. I expect that will occur in 211. This is similar to our thinking on the dividend policy. As I have stated in the past, we want to extend our record of 27 consecutive annual increases in the cash dividend to 28 years and beyond. We are proud of our lengthy track record of dividend increases. But we won t increase the dividend at the expense of financial strength. Historically, we have generally increased our dividend in line with the earnings growth excluding currency. We understand that for the roughly 3% of our shares that are owned by individual investors, dividends are very important. As a result, we would like to return to our former dividend policy as soon as we believe it is appropriate. Throughout this period of tremendous financial strain on businesses and consumers, and significant volatility in capital markets, one thing has not changed that is the confidence we have in our business model. We firmly believe in the value and peace of mind that our products bring to consumers. We are confident in the ability of our sales force to effectively distribute our products to the market. Beyond our product line and distribution system, we believe we have the core competitive strengths needed to remain the market leader for supplemental insurance in the United States and Japan. Ultimately, our mission is to do whatever we can to see that the needs and expectations of our customers, sales associates and employees are met. By taking care of those constituencies, I believe we will also continue to provide value to our shareholders. Aflac Incorporated Financial Results Kriss Cloninger III President; Chief Financial Officer I will provide information about Aflac s financials, including our consolidated capital structure and the assumptions used in modeling our future operating earnings-per-share growth. Aflac s Principal Operating Units Aflac Japan (branch) Aflac New York (New York life insurance co.) Aflac Incorporated (Georgia corporation) American Family Life Assurance Company (Aflac) Aflac (Nebraska life insurance co.) Continental American Insurance Company (South Carolina life insurance co.) As this chart shows, our principal subsidiary is American Family Life Assurance Company of Columbus, or Aflac, which is domiciled in Nebraska. Our financial disclosures reflect two operating segments Aflac U.S. and Aflac Japan. The Aflac U.S. segment includes its subsidiary, Aflac New York, which is subject to the insurance laws of the state of New York, where it is domiciled. The Aflac U.S. reporting segment also includes the recently acquired Continental American Insurance Company (CAIC), a South Carolina company. CAIC was acquired as a subsidiary of the parent company, Aflac Incorporated. Aflac Japan, which operates as a branch of Aflac, is primarily regulated by Japan s Financial Services Agency, or FSA. However, as a branch of our U.S. business, the various insurance laws and regulations promulgated by the state of Nebraska also apply to Aflac Japan. The regulatory rules address matters related to operations and marketing, as well as to investments and minimum capital levels. It s important to understand that Aflac Japan s branch status influences the manner in which we manage our business, especially as it relates to capital matters. Aflac Incorporated Capitalization (In Millions) /1 Total long-term debt $1,721 $ 2,599 $ 2,584 Shareholders equity* 7,85 9,57 9,192 Total capitalization $9,571 $11,656 $11,776 Debt to total capitalization 18.% 22.3% 21.9% *Excludes unrealized gains/losses on investment securities and derivatives Let me begin with some comments on our overall capital structure. We analyze total capitalization including longterm debt, but excluding the unrealized gains and losses in shareholders equity. On that basis, our debt-to-total 5

7 capital ratio has been fairly stable in the last several years, although it increased last year due to our debt issuance. It s important to note that more than half of our outstanding debt is yen-denominated, whereas most of our equity is dollar-denominated. Therefore, a strengthening in the yen increases our reported debt balance in dollar terms. As a result, our debt-to-total capital ratio increases. Of course, the opposite occurs when the yen weakens. We view the upper limit of our debt-to-total capital ratio as 25%. Parent Company Loan Maturities (March 31, 21) Contractual Maturities Percent of Total Amount (Millions) Interest Rate % $ % Total 1.% $2, % *Excludes capitalized leases of $6 million at March 31, 21 This chart shows Aflac s debt maturity schedule as of March 31, 21. Over time, we have found Japan to be an attractive market for issuing debt. As such, we have several outstanding yen-denominated issues. In fact, all of the outstanding debt that matures from 21 through 216 is yen-denominated and has an average interest rate of 1.48% after interest rate swaps. You may recall that we had $45 million of senior notes that matured in April 29. As we were in the height of the financial crisis at that time, it was not possible to refinance those notes. As a result, we executed an intra-company loan agreement to repay our maturing debt obligation last April. Our preference is to issue in yen because we have a natural source of cash flows to service yen-denominated obligations. However, Japan was essentially a closed market to foreign issuers last year, especially for financial names without government guarantees. Therefore, all of our public debt issuance in 29 was in the U.S. market. When market conditions eased in May, we issued $85 million of 1-year senior notes. The primary use of those proceeds was to pay off the intra-company loan. Later in the year, we did borrow in yen from two separate Japanese financial institutions. These loans totaled 15 billion, or $161 million, and are due in 215. In December we issued $396 million of 3-year notes with an interest rate of 6.9%. The capital levels of our operating units are influenced by our desire to maintain satisfactory RBC ratios. The riskbased capital formula applies to Aflac on a combined basis for Aflac U.S. and Aflac Japan. Because of Aflac Japan s branch status, we don t report separate RBC ratios for Aflac Japan and Aflac U.S. However, our ratio is basically a combined ratio of the two operations. Aflac New York has to meet its own risk-based capital requirements on a stand-alone basis because it is a subsidiary of Aflac U.S. Aflac New York s RBC ratio improved significantly last year due to its strong statutory earnings. CAIC also maintains a stand-alone RBC ratio, which has been very strong. For our principal operating subsidiary, our goal is to maintain an RBC ratio that supports our ratings and compares favorably to our peers. We also want to maintain a strong RBC ratio to accommodate potential risks in our investment portfolio. To emphasize the importance of maintaining a strong RBC ratio, we modified our management compensation plan last year to include a targeted RBC ratio as a component. In addition, it is the vesting requirement for performance-based restricted stock. Aflac s RBC ratio has been strong for many years. However, our RBC ratio declined from its high in 26 as we deployed capital in late 27 and mid-28 for the repurchase of our shares. In addition, our 28 RBC ratio was negatively affected by realized investment losses and the 25% strengthening of the yen. We continued to experience pressure on our RBC ratio in 29, primarily as a result of downward ratings migration, which resulted in an increase in required capital. We also realized $727 million of investment losses on a statutory basis last year. In late 29, we moved $5 million of capital from the holding company to our life insurance subsidiary, which benefited our RBC ratio by approximately 4 points. Excluding the benefit from the capital contribution, our 29 RBC ratio still exceeded our target for the year. Capital Adequacy Ratios (December 31) RBC ratios: Aflac 574% 476% 479% Aflac New York Aflac Group Insurance* Aflac Japan solvency margin 937** *Purchased in 4QT 29 **As of fiscal year end (3/31/8) As we have discussed for several years, Aflac s RBC ratio is somewhat sensitive to changes in the yen/dollar exchange rate. The required capital, which is the denominator of the RBC ratio, is proportionately more sensitive to changes in the exchange rate than the adjusted capital and surplus component because a significant percentage of our statutory capital and surplus is backed by our dollar-denominated bond portfolio. The dollar-denominated portfolio provides higher investment yields than comparable yen assets and also acts as a hedge of our GAAP equity. As the yen strengthens to the dollar, our RBC ratio declines because our required capital increases at a greater rate than changes to our total adjusted capital. Had the yen ended 29 at 115 yen to the dollar instead of 92.1, we estimate our RBC ratio would have been approximately 521% rather than 479%. Our bias last year was to retain more of Aflac Japan s capital in yen to enhance our solvency margin. As a result, the sensitivity of movements in the RBC ratio to the yen declined in 29. For example, using the data in this slide, 6

8 every 1 yen move in the exchange rate last year would have resulted in an average change of about 19 points in the RBC ratio. Applying the same analysis to this sensitivity chart from a year ago, the RBC ratio would have changed by approximately 36 points for each 1 yen change. 6 % 5 4 RBC Ratio Sensitivity to Yen/Dollar Exchange Rates (12/31/9) Comparison of Solvency Margins (FSA Basis, 12/31/9) Solvency Margin Meiji Yasuda 1,212.6% Fukoku 1,167.4 Nippon 1,77.7 Daido 1,72.5 Taiyo 1,16.6 Dai-ichi 986. Sumitomo Aflac Japan Mitsui Asahi 57.7 Source: Press reports and company disclosure statements * *Actual 29 period-end exchange rate In addition to U.S. regulatory requirements, Aflac Japan must also meet capital requirements of the Japanese FSA on a stand-alone basis. Japan s solvency margin is similar to the risk-based capital concept. However, Japan s solvency margin ratio contains a component for unrealized gains and losses that the RBC ratio does not. Our solvency margin in Japan improved from 881% at the end of 28 to 886% at the end of last year. Sensitivity of FSA Solvency Margin Ratio 1,4 % 1,2 1, % 885.5% 512.5% In the past, our solvency margin has benefited from sizeable unrealized gains on our yen-denominated, fixedincome securities. When credit spreads widened, this ratio declined. Furthermore, the impact of the stronger yen on Aflac Japan s dollar-denominated portfolio somewhat suppressed the ratio. In addition, our solvency margin is impacted by profit repatriation to Aflac U.S. Over the past five years, for example, we have repatriated profits of 243 billion, which would otherwise have increased our solvency margin by 538%. I should point out that in the past we were required to get approval for profit repatriation. Currently, under the concept of self regulation, we can repatriate any amount as long as we maintain a reasonable solvency margin. As we have discussed in the past, the FSA will be implementing changes in the solvency margin calculation that will be disclosed in 211 and take effect the following year. These changes are expected to lower solvency margins for all life insurers by about half. We expect our relative ranking within the industry to remain about the same. 21 Estimated Flow of Funds (In Millions) Aflac Incorporated 4 2 Yield.8% -.5% 1.3% +.%* 1.8% +.5% 2.3% +1.% 2.8% +1.5% 3.3% +2.% Dividend $399 Management fees 159 Allocated expenses 35 Total $593 Aflac U.S. Management fees $28 *Based on market data of 1-year JGB as of 12/31/9 This graph illustrates the sensitivity of the solvency margin to interest rate changes as measured by the yield of 1-year JGBs. Starting with our December 31 solvency margin, this graph shows that for every 1 basis point change in yen yields, our solvency would change by about 187 percentage points. However, Aflac Japan s investment income would obviously benefit by investing at higher rates. Profit repatriation $43 Allocated expenses 35 Total $438 Aflac Japan This chart shows the estimated flow of funds from our operating units to the parent company. Our plan calls for Aflac Japan to send $438 million to Aflac U.S. in 21. We estimate that profit repatriation will be about $43 million this year. Aflac Japan is expected to remit $35 million for allocated expenses to Aflac U.S. and another $28 million of management fees directly to Aflac Incorporated. Aflac 7

9 U.S. will send $593 million to the parent company this year, which includes dividends, management fees and allocated expenses. Management fees from Continental American to Aflac Incorporated are not material. Aflac Incorporated Liquidity Analysis (In Millions) 29 Actual 21 Plan Max. dividend to parent $1,29 $1,414 Management fees Allocated expenses Other income Less: Oper. expenses (55) (62) Less: Int. expense (57) (123) Less: Shareholder dividend (524) (53) Uncommitted cash flow $ 743 $ 938 *Excludes repayment of debt maturing in 7/1 This chart, which shows the anticipated cash requirements of Aflac Incorporated, gives you some idea about the amount of uncommitted cash flow. Although Nebraska s statute references the dividend restriction as the larger of operating income or 1% of the prior year statutory surplus, the Nebraska Department of Insurance has interpreted the income test to be the larger of operating income less realized losses for the prior year on a statutory basis. Based on that interpretation and our statutory results in 29, the maximum we can dividend in 21 without regulatory approval is approximately $1.4 billion. As you saw from the previous slide, we do not plan on dividending the maximum amount this year. In addition to the dividend, management fees and allocated expenses, Aflac Incorporated also receives cash from the exercise of stock options along with some investment income, which is included in the other line. Aflac Incorporated uses these funds to pay operating expenses, interest expense, principal payments on debt, and dividends to shareholders. You ll note that this chart excludes the debt repayment in July 21 as the capital resources to satisfy that obligation already reside at the parent company. As a result, our plan for this year calls for an uncommitted cash flow of roughly $938 million. Projected Statutory Items (In Millions) Projected Capital Position (In Millions) RBC Ratio of 4% RBC Ratio of 35% 29 $ 953 $1,6 21* 2,26 2,88 *21 estimates assume: no share repurchase; no realized investment losses; and the 29 average exchange rate of Based on the previous statutory financial projections, we estimate that our capital position above RBC ratios of 4% to 35% will improve to a range of $2.3 to $2.9 billion at the end of 21, respectively. I am very hesitant to refer to these numbers as excess capital, especially in the context of capital deployment. As Dan covered, we are very pleased with our capital position and like most, we believe the worst of the financial crisis is behind us. However, we continue to believe it is prudent to retain capital as a defensive measure for absorbing potential realized losses in our investment portfolio or additional credit ratings downgrades. In that regard, our bias remains more toward conserving capital than deploying it. Now let me turn to our income statement and our reporting segment contributions to Aflac s consolidated financial results. Segment Contributions to Operating Earnings (In Millions) /9 3/1 Aflac Japan $2,25 $2,8 $681 $821 Aflac Japan remains the primary contributor to our overall operations. In the first quarter of 21, Aflac Japan represented approximately 77% of pretax insurance earnings. 1, Aflac Japan Total Revenues (Yen in Billions) 1,4 1, , , , ,279. 1,2 Total Net Income Adjusted Capital 26 $1,715 $4, ,79 4, ,29 4, ,414 5, est.* 2,6 7,24 *21 estimates assume 29 average exchange rate of % Inc /9 3/ Our ability to provide liquidity to the parent company is directly related to our statutory results. We expect another strong year of capital generation in 21. Based on our current outlook for the year we expect to produce 21 income of approximately $2.1 billion. We also estimate our total adjusted capital will be approximately $7.2 billion at the end of this year. 8 As you know, the main components of total revenues are premium income and investment income. The largest component, premium income, has benefited from a predictable and stable source of renewal revenues. In fact, we estimate that 9% of Aflac Japan s premium income will be derived from renewal premiums this year, with the balance coming from new sales.

10 Aflac Japan continues to produce increasing revenues in yen terms. The growth rates have declined somewhat in recent years due primarily to lower new sales. In addition, the exchange rate can influence the rate of investment income growth as reported in yen, as it did in 29 and so far this year. Because dollar-denominated investment income accounts for about 32% of Aflac Japan s total investment income, when the yen strengthens to the dollar, the growth rates of investment income, revenues and earnings are suppressed in yen terms. Of course, the opposite occurs when the yen weakens. However, there is no impact on a consolidated basis as reported in dollars. We did experience improvement in total revenue growth last year and in the first quarter of this year due to the stronger increases in new sales. 7 % Aflac Japan Operating Ratios (To Total Revenues) Ben. & claims Expenses Pretax earnings The benefit ratio peaked at 73.4% of revenues in 1996, and has trended downward ever since. One major factor behind this decrease in our benefit ratio has been the steady change in our business mix. As a result of product broadening, the mix of our in-force business has changed significantly. For instance, in 1992 cancer life accounted for 94.1% of premiums in force. At the end of the first quarter, cancer life premiums in force represented slightly less than 5% of total premiums in force. The greatest contributors to in-force business in the last five years have been products with lower benefit ratios, such as riders to our cancer products and our medical product category. This change in mix is significant because the benefit ratios vary quite a bit by product. Expected Benefit Ratios by Product Traditional cancer life full CSV 68% - 73% Cancer life reduced CSV 63% - 68% 21st Century Cancer life full CSV 55% - 6% 21st Century Cancer life reduced CSV 5% - 55% Cancer Forte full CSV 55% - 6% Cancer Forte reduced CSV 48% - 53% Riders to cancer and medical 4% - 53% Ordinary life products 6% - 75% EVER 5% - 55% /9 3/1 Our traditional cancer life product that we were selling through the 199s had a full cash surrender value, or CSV, and a benefit ratio in the area of 68% to 73%. To offset some of the effect of the 1999 rate increase on newly issued cancer life policies caused by a lower assumed interest rate, we elected to reduce the cash surrender value. This product modification was well-received by consumers looking to maximize their premium value. 9 Reducing the CSV brought down the benefit ratio as well. Our current cancer insurance products have benefit ratios that range from 48% to 6%. The benefit ratios of our medical products are 5% to 55%, and the riders to our cancer and medical products range from 4% to 53%. Overall, the addition to our in-force premiums from medical products, cancer policies with reduced cash surrender values and several riders has de-emphasized the impact of the death benefit in the mix of benefits. Although life insurance sales have increased over the last several years, we still expect the benefit mix to continue to trend toward health and medical benefits. In addition, we have seen favorable claims experience for most of our major product lines. This has also positively impacted the range of our expected benefit ratios. As Japan s national health care system continues to be under severe pressure to reduce costs through such actions as shortening hospital stays, we expect that favorable trend to continue. Total annual operating expenses as a percentage of revenues have remained in a fairly narrow range for the last five years. Aflac Japan s low expense ratio reflects efficient operations, lower net-commission expense, and a strong and stable persistency rate. The higher expense ratios in the last two years primarily reflect investments in establishing the foundation for the new bank channel and our IT infrastructure. We believe the investments we made to support the bank channel will be instrumental in maximizing our potential in this new and vast distribution opportunity. Additionally, we believe our recent investments in the IT infrastructure will improve our ongoing business operations and facilitate new product introductions for years to come. Although low interest rates and profit repatriation suppress our margins, this has been more than offset by the improvement in the benefit ratio, which has significantly enhanced the overall profit margin in recent years. Aflac Japan Pretax Operating Earnings (Yen in Billions) % Inc /9 3/ With the expanded profit margin, pretax earnings increased 16.8% to 74.3 billion in the first quarter of 21. Segment Contributions to Operating Earnings (In Millions) /9 3/1 Aflac Japan $2,25 $2,8 $681 $821 Aflac U.S

11 Our other reportable segment, Aflac U.S., accounted for the remaining 23% of pretax insurance earnings in the first quarter. $ 5, 4, 3, 2, 1, % Inc. $3,676 Aflac U.S. Total Revenues (In Millions) $4,27 $4,446 $4,787 $4,953 $1, /13 3/ After returning to double-digit growth in 27, Aflac U.S. revenue growth slowed in 29, and into the first quarter of 21. The growth rate in total revenues is largely driven by the growth rate in premium income, which has also slowed in recent years. The slowdown in premium income has resulted from weaker new sales over the last two years, as well as lower persistency rates. As we have discussed, we believe the declines in sales growth and persistency rates have been primarily tied to the weaker economic conditions we have experienced since 28. I should note that the revenue growth in 29 and in the first quarter of 21 benefited somewhat from the acquisition of CAIC, as their revenues were not included in year-ago periods. In addition, revenue growth in the first quarter of 21 benefited from improved investment income growth. The faster rate of investment income growth in the first quarter was primarily attributable to earnings from the $5 million of capital that we transferred from the parent company at the end of last year. However, for the prior three years, the trend has been one of slowing U.S. investment income growth. The slower growth of net investment income resulted in part from the payment of return-of-premium benefits on a major cancer insurance plan we sold in the mid 198s. We reserved for these payouts and estimate they will be $213 million from 21 through % Aflac U.S. Operating Ratios (To Total Revenues) Ben. & claims Expenses Pretax earnings $1, /9 3/1 Over a long period of time, the operating ratios of Aflac U.S. have been very stable. However, in the first quarter of this year, the benefit and expense ratios were influenced by the lapses of a significant percentage of Wal- Mart policyholders following the loss of that large payroll account. As a result of increased lapsation, the benefit ratio declined sharply, reflecting the release of the benefit reserves associated with the lapsed policies. The higher expense ratio also reflected increased amortization of deferred acquisition costs, or DAC, for the lapsed policies. However, the net impact of the reserve release and DAC amortization was a sizeable benefit to the bottom line in the first quarter. Excluding the impact of Wal-Mart, we estimate the pretax profit margin would have been about 16% in the first quarter. In addition, the expense ratio reflected increased advertising expenses in the first quarter, compared with a year ago. $ % Inc. Aflac U.S. Pretax Operating Earnings (In Millions) $525 $585 $692 $745 $ /9 3/ Based upon our operating trends and margins, we expect pretax operating earnings and revenues to grow at a fairly parallel rate. Although Aflac Japan is the dominant component of our total company results, Aflac U.S. still remains a significant and important contributor to our growth. Segment Contributions to Operating Earnings (In Millions) $24 Aflac Japan $2,25 $2,8 $681 $ 821 Aflac U.S $ /9 3/1 Interest expense (26) (73) (7) (31) Corp. & other exp. (43) (68) (9) (14) Pretax oper. earnings $2,926 $3,435 $869 $1,2 Income taxes 1,14 1, Operating earnings $1,912 $2,277 $568 $ 666 The increase in interest expense in 29 and in the first quarter of 21 was due to the higher interest rates associated with our 29 debt issuance. In addition, the stronger yen also increased interest expense somewhat on our yen-denominated debt as expressed in dollars. Parent company and other unallocated expenses were higher in 29 primarily because of a decline in parent company investment income that was netted against corporate operating expenses. Our consolidated tax rate has been very stable over the last several years. 1

12 Operating Earnings Per Share (Diluted Basis) $ 5. EPS ex. Yen Yen impact 25 (.2) % inc. ex Reported EPS (.8) (.2) At the bottom of this slide, you ll see the per-share impact from the changes in average yen/dollar exchange rates for the last five years. Over the long run, the impact from currency fluctuations tends to be smoothed. In 29 our results benefited significantly from the strengthening of the yen on a per share basis. Our sensitivity to currency changes on a per-share basis increased last year due to a greater portion of our consolidated earnings being derived from yen-denominated sources. Reconciliation of Operating to Net Earnings Per Diluted Share 3/1.5 In addition to net earnings, we believe that an analysis of operating earnings, a non-gaap financial measure, is vitally important to an understanding of Aflac s underlying profitability drivers. We define operating earnings as the profits we derive from our operations before realized investment gains and losses, the change in the fair value of the interest rate component of cross-currency swaps as required by ASC 815, and nonrecurring items. We use operating earnings to evaluate our financial performance because realized gains and losses, the impact from ASC 815, and nonrecurring items tend to be driven by general economic conditions and events, and therefore can obscure the underlying fundamentals and trends in Aflac s insurance operations. In 29, we again realized significant investment losses. Of the $962 million of realized losses in 29 on an after-tax basis, $77 million was attributable to the sale of securities; $411 million was from impairments and $474 million arose from equity method impairment of perpetual securities. We also realized $174 million of after-tax gains in 29. In the first quarter of 21, we realized after-tax investment losses of $77 million. Of that amount, $ Operating earnings $3.99 $4.85 $1.22 $1.41 Reconciling items*: Inv. gains (losses) (1.37) (1.67) (.1) (.6) ASC 815 (.1) (.1) Debt extinguishment.2.2 Net earnings $2.62 $3.19 $1.22 $1.35 *Net of tax /9 3/ million was attributable to the sale of our remaining holdings of Takefuji Corporation and $27 million resulted from equity method impairments of two perpetual securities. The losses were somewhat offset by realized gains of $47 million. Of the realized gains in the first quarter, $36 million resulted from the sale of securities, while the remaining $11 million was due to the valuation of foreign currency, interest rate and credit default swaps on certain investments we were required to consolidate under ASC 81. A year ago, we repurchased some of our outstanding yen-denominated debt in the first quarter. We purchased 5.4 billion of bonds at a price of 3.86 billion, or about 71% of par. The extinguishment of this debt resulted in a $1 million gain, or $.2 per diluted share in the first quarter of 29. EPS Growth Objectives Increase operating earnings per diluted share 9% to 12% in 21, excluding the impact of foreign currency Increase operating earnings per diluted share 8% to 12% in 211, excluding the impact of foreign currency Taking all of this into account, our focus is on maintaining strong fundamentals in our core businesses and producing strong earnings growth. Our goal for 21 is to increase operating earnings per share 9% to 12%, excluding the yen. As we have discussed, it does not appear likely that we will purchase shares in 21 to benefit this year s earnings growth. In addition, with the recovery of our share price, we have experienced an increase in the number of dilutive shares from unexercised stock options. As such, we expect earnings growth will likely be toward the middle of the 9% to 12% range this year. As Dan covered, our objective for 211 is to increase operating earnings per share 8% to 12%, excluding the impact of the yen. We believe these targets reflect realistic underlying financial assumptions. I want to remind you, that the data I will show you represent modeling assumptions and are not necessarily our official operating objectives for either this year or next. Aflac Japan Assumptions Sales growth % to 5% % to 5% New money 2.5% to 3.% 2.5% to 3.% Benefit ratio down 1.% to 1.5% down 1.% to 1.5% Persistency stable stable For Japan, our assumption is that sales will be flat to up 5%, which is in line with our incentive compensation target. We are assuming the same range for 211. Our assumption for new money yields is a range of 2.5% to 3.%. The bottom of the range is lower than the assumptions we used last year and reflects the overall compression of credit spreads. Our financial modeling assumes that persistency will remain fairly stable for both 21 and 211, compared with 29. As we have discussed for many years, we expect continued improvement in the benefit ratio due to 11

13 the ongoing change in business mix and improving claims trends. We have assumed the benefit ratio will improve by roughly 1 to 15 basis points in both 21 and 211. The range for 21 is a bit lower than we had previously assumed because last year s benefit ratio improved more than we had expected. In 29, Aflac Japan s benefit ratio dropped 24 basis points excluding the effect of foreign currency, compared with our assumption of a decline of 15 to 2 basis points. However, we expect the benefit ratio to continue to decline from its level of 59.5% in the first quarter. We believe the expense ratio will remain relatively stable. Aflac U.S. Assumptions Sales growth down 2% to up 3% % to 5% New money 5.5% to 6.% 5.5% to 6.% Benefit ratio down 1.5% to 2.% up 1.5% to 2.% Persistency stable stable Historically, it has been our policy to increase cash dividends generally in line with operating earnings per diluted share before the effect of foreign currency. That view has not changed. However, like share repurchases, we believe it is prudent to avoid committing to a dividend increase until later in the year. As such, we have assumed an increase in cash dividends as high as 3% this year and between a zero to 1% increase in 211. In addition, we are also assuming no significant change to our capital structure, compared with year-end 29. As I previously stated, we view a 25% debt-to-capital ratio as a ceiling. We also have assumed the 29 tax rate will remain in effect through 211. All of these assumptions reflect our best estimates of factors that can impact future results. We believe they are reasonable, if not conservative. But I want to remind you again that there are risks that can affect our future financial performance. We regularly assess those risks and describe them in our SEC filings, and I d encourage you to review them as well. 21 Operating EPS Scenarios For Aflac U.S., we are assuming sales will be down 2% to up 3% this year. For 211, we have assumed sales will be flat to up 5%. Again, I would emphasize that these are simply modeling assumptions and not our official targets. In terms of new money yields, we have assumed we will invest in the 5.5% to 6.% range. We anticipate the benefit ratio will decline 15 to 2 basis points in 21, which primarily reflects the lapsation from Wal-Mart. In 211, we expect the benefit ratio to return to 29 levels, and rise 15 to 2 basis points from 21 levels. We re assuming that persistency will be fairly stable in both 21 and 211, compared with 29. Corporate Assumptions Share repurchase to 6 million to 12 million Cash dividend up % to 3% up % to 1% Capital structure unchanged unchanged Tax rate unchanged unchanged We are assuming repurchases of zero to six million shares in 21. For 211 we have assumed repurchases of zero to as many as 12 million shares. We would like to resume share repurchases when we believe it is prudent to do so. However, our current bias continues to be retention of capital as a cushion for potential adverse developments in the investment portfolio. Assuming our capital position remains strong, we will consider buying back our shares when we believe financial markets have stabilized. Average Exchange Rate 85 $ % $ * (.5) (.21) *Actual 29 exchange rate Annual Operating EPS % Growth Over 29 Yen Impact The highlighted line on this chart represents our earnings target for 21 of a 9% to 12% increase before the impact of currency. Assuming we produce earnings growth of 1% this year before the effect of the yen, we would report $5.34 in operating earnings per diluted share. If the yen averages 9 to 95 for the full year, reported operating earnings should come in around $5.29 to $5.46 per diluted share. I hope that our discussion of Aflac s operations in Japan and the United States has provided you with a solid understanding about how we approach our business. I also hope you have a strong sense of our commitment to thorough and transparent disclosure. We believe it s important to present information to investors in the same manner in which we actually manage our operations. And I want to assure you that as we always have, we will maintain the highest degree of integrity in the way we manage Aflac and report its financial results. 12

14 Investments W. Jeremy Jerry Jeffery Senior Vice President; Chief Investment Officer When we met here a year ago, we were cautiously emerging from the most profound credit crisis any of us had ever seen or are likely to see. Since that time I have often been asked, and I have often asked myself, what are the most important lessons learned over the last year. Well, I have often talked about how essential discipline is to successful investing. Last year hammered home that point like never before. Countless times Aflac was urged to derisk its portfolio and hide in cash. But our discipline as long-term investors convinced us this was the wrong time for such a move. We continued to emphasize our long-term, high quality investing bias, and the result was a remarkable recovery in the values of our holdings. There is never a final chapter in investing, but if we have learned one thing over the past year it is to maintain our long-term focus no matter the short-term hazards. Investment Considerations Aflac investment policy Product needs - Japan» Long liability durations» Yen-denominated policy liabilities Product needs - U.S.» Shorter liability durations Credit risk Aflac Incorporated objectives As we have discussed for many years, product needs still drive our investment process. Our high persistency rate in Japan causes long liability durations. We support these liabilities by purchasing long-duration, yen-denominated assets. Since the Japanese credit market has virtually no sponsorship beyond ten years, we have developed our own strategy of long-dated investing that is unique among Japanese life insurers. Our U.S. policy liabilities have far shorter durations, but they have no cash values if they lapse. So our business model tends to insulate us from any sudden liquidity needs. We invest for the long term, and our strong liquidity position gives us the ability to continue to invest that way. Intensive credit analysis is the core of our investment discipline. Every investment we make receives a thorough credit review prior to approval. Our global investment policy, established by Aflac s Board of Directors, governs every investment decision we make. This policy prohibits transactions deemed speculative in nature. Therefore, it has been our policy to not purchase securities rated below investment grade, even if our regulations permit such purchases. Inasmuch as net investment income is a primary driver of our consolidated earnings performance, our specific investment activities are formulated while considering Aflac s corporate objectives. Aflac s Investment Portfolios (March 31, 21, In Millions) Book Value % of Total Aflac Japan - yen $61,19 84.% Aflac Japan - dollar 3, Aflac U.S. 7, Aflac New York Aflac Group Insurance 8 Aflac Incorporated Total $72,752 1.% As this slide shows, we have six separate investment portfolios, each of which has a specific purpose. Although our overall management style is consistent throughout portfolios, we manage each portfolio separately based on cash flows, product and regulatory requirements and objectives. Our Global Investment Policy governs all transactions in both the United States and Japan. Clearly our largest portfolio is the yen-denominated portfolio that supports Aflac Japan s policy liabilities. Given Aflac Japan s persistent business and our pursuit of asset/liability matching, the yen portfolio is marked by long-dated instruments. The average maturity of this portfolio is 17 years and the average duration is As I suggested, Japan does not have a long-dated corporate bond market. As such, approximately 72% of our yendenominated investments are from non-japanese issuers, predominantly Euroyen issuers. As you know, many of these non-japanese issuers have privately issued yendenominated securities to Aflac Japan. A high percentage of our privately issued securities employ standard mediumterm note documentation and are completely fungible into smaller denominations should the need arise. For more than 2 years, Aflac Japan has maintained a portfolio of dollar-denominated investments. The rationale behind this portfolio was to take advantage of more attractive yields and for many years, lower tax rates. In addition, by investing a portion of Aflac Japan s equity in dollars, we have helped mitigate the currency impact on Aflac s consolidated GAAP equity. At the end of March, Aflac Japan s dollar-denominated portfolio represented 5.1% of our consolidated investments, yet it accounted for 9% of total net investment income. Because we have also hedged a portion of shareholders equity through the issuance of yen-denominated debt, we have not made significant additions to the dollar-denominated portfolio for the past several years. The Aflac U.S. portfolio, which comprised 1.3% of our holdings at the end of March, supports the policy liabilities for our U.S. insurance operation, excluding our New York subsidiary. We continue to invest primarily in corporate bonds to achieve our U.S. investment objectives. The average rating on this portfolio was A- at the end of March. Given the different policy characteristics of our 13

15 U.S. business, our duration is shorter than Aflac Japan s yen portfolio. At the end of March, the duration of the U.S. portfolio was 9.5 years and the average maturity was 18.4 years. The Aflac New York portfolio is for the book of business of our New York subsidiary. The investment guidelines are different for this portfolio than those of the general Aflac U.S. account, and as a result, the assets of the New York account are invested differently. As you can see from the slide, the New York portfolio had $278 million of invested assets at the end of March. The average rating was A+, and the yield to worst was 6.69% at the end of the first quarter of this year. The average maturity was 21.2 years. Like Aflac New York, Aflac Group is a separate corporation, and its assets must remain segregated to support its liabilities. We also maintain a small portfolio at the holding company level. The primary purpose of this portfolio is to temporarily hold capital until it is deployed for other corporate purposes. Consolidated Portfolio Composition (March 31, 21, In Millions) have frequent contact with the management of our credit exposures, especially our larger concentrations. We pay particular attention to these larger concentrations and remain comfortable with the creditworthiness of all of them. I d like to share a few other observations about our concentrations. It is worth noting that our largest exposure by far is to the Government of Japan through their government bond issuance. To put this in perspective our exposure to JGBs is more than twice the average exposure of U.S. life companies to U.S. Treasuries as a percentage of admitted assets. Both our Lloyds Banking Group and Commerzbank AG exposures reached their current size as the result of large bank mergers. In the case of Lloyds we exchanged two of our Upper Tier 2 holdings for a Lower Tier 2 contingent capital obligation in December of 29, which resulted in a ratings upgrade and coupon increase. Over 9% of our Commerzbank holdings are Lower Tier 2 holdings and thus rated single A. With the exception of mergers, we have not added to any top ten concentrations except for JGBs. We do not add to any exposure or establish a new position when it would exceed 5% of total adjusted capital on a statutory basis. Consolidated Exposure to PIIGS (March 31, 21, In Millions) Book Value % of Total Debt securities: Fixed maturity securities $63, % Perpetual securities 7, RMBS CMBS Asset backed CDOs 2 Equity securities 21 Total $72,752 1.% Book Value % of Total Portugal: Financial institutions $ % Ireland: Financial institutions Italy: Sovereign Financial institutions Greece: Sovereign Financial institutions 1, Let me comment on the overall structure of our portfolio. As you can see, our portfolio is dominated by fixed maturity securities, followed by perpetual securities. Our exposures to collateralized mortgage obligations and collateralized debt obligations remain relatively small. We also have a very small position in equities, which is primarily for business relationship purposes in Japan. Ten Largest Investment Positions (March 31, 21, In Millions) Book Value % of Total Government of Japan $11, % Israel Electric Corp Republic of Tunisia HSBC Holdings Republic of South Africa Lloyds Banking Group* Commerzbank** Bank of America*** Mizuho Financial Group Unicredit *Includes HBOS & Bank of Scotland **Includes Dresdner ***Includes Merrill Lynch Within the fixed maturity category we have several large positions. As a part of our routine credit work, we 14 Spain: Sovereign* Financial institutions Total $4,182 1.% *Regions of Andalucia and Catalunya I d like to share our observations about our exposures to issuers domiciled in Portugal, Ireland, Italy, Greece, and Spain. Our direct sovereign exposure to this group totaled $91 million at the end of March. Our below investment grade financial exposures consist of the Greek banks and our Irish Life and Permanent Upper Tier II securities. All these holdings are current on all obligations to Aflac and we expect them to remain so. Our view on our Lower Tier II Greek bank debt is underpinned by the continued commitment of the European Central Bank to accept Greek sovereign debt as posted collateral. The condition of the economies of the peripheral European countries is very fluid and will remain so for some time. However, what is known is that Eurozone support for the funding needs of these countries appears more than adequate to meet their needs for the near and intermediate term. We believe the risk of contagion from Greece to other countries is limited by several factors, most notably the relative strength of those other economies compared to Greece. Not only do Spain, Portugal, and Italy have lower ratios of debt to GDP, but the fundamental productivity of those economies is higher. The elevated level of debt to GDP in Ireland is almost exclusively the effect of the

16 housing bubble in Ireland and the UK and the support the Irish government has offered to the Irish banks. Ireland has already implemented significant austerity measures and appears on its way to recovery. Subordination Distribution (Book Value Basis) Tender and Exchange Offers Considerations Clearly identifiable benefits to Aflac including but not limited to: Seniority Maturity Coupon % of Total 12/31/8 12/31/9 3/31/1 Senior 73.5% 76.5% 77.2% Subordinated: Lower Tier II Upper Tier II Tier I Surplus notes Trust preferred (non-bank) Other Equities Total 1.% 1.% 1.% I thought it would be helpful to provide a detailed description of the capital classes of our investments. As you can see, senior debt comprises the majority of our debt exposure, and that remains our bias for portfolio additions. Since the end of 28, senior debt has increased from 73.5% of total investments to 77.2% at the end of March. The Lower Tier II securities are all fixed maturity securities that are ranked higher than everything but senior debt. The majority of our Upper Tier II and Tier I holdings are perpetual securities. Capital rules for banks around the world are rapidly changing, but one trend has become clear. Traditional Tier I and Upper Tier II securities are no longer efficient forms of capital for most banks. As a result, we have seen a number of banks either tendering for these capital securities or offering to exchange them over the last year, typically for more senior instruments. Many observers have urged us to aggressively accept any and all such offers as a way to reduce our exposures to financial institutions in general. But our response to this phenomenon is consistent with our overall discipline. We look at each offer in detail, and we apply the potential impact to our portfolio in a number of ways. What may be a very attractive proposal to some may not fit our asset/liability profile. But the opposite is true as well. The bottom line is that any exchange or tender must provide a clear net benefit to Aflac to be accepted. In the past six months we have participated in several exchanges and tenders resulting in the disposition of $653 million par value of Aflac holdings, and we have no self imposed limit on future participations. Residential Mortgage-Backed Securities (March 31, 21, In Millions) Perpetual Security Holdings (March 31, 21, In Millions) Book Value Market Value Avg. Rating Agency $681 $697 AAA Book Value Market Value Unrealized Gain (Loss) Upper Tier II $5,252 $5,457 $ 25 Tier I 2,263 1,966 (297) Total $7,515 $7,423 $ (92) Clearly the perpetual portion of our portfolio is the sector that has attracted the most scrutiny and comment in the last year. As the name suggests, these securities do not have stated maturities. Instead, they have interest rate step-up provisions and a strong market expectation that they will be redeemed at their step-up dates, thereby creating economic maturities. Of our total perpetual holdings, 96% are yen-denominated and the average economic maturity is 14.5 years. The average coupon on the yen perpetuals is 4.32%. Among our holdings, 69.9% are Upper Tier II securities, which are senior to equity and preferred shares. The coupons for all of our Upper Tier II holdings are deferrable and cumulative. Our primary investment premise when purchasing securities of banks and other financials was that governments would take extraordinary efforts to support the financial institutions that underpin their respective economies. To date, I believe the behavior of bank regulators worldwide has generally supported our premise. Non-agency BB Total $954 $918 Our residential mortgage backed securities in Japan are almost entirely invested in securities issued by government sponsored entities, which are rated AAA. In the dollardenominated portfolios, our RMBS exposures consist of both agency and non-agency CMOs. Our non-agency CMOs have an average loan-to-value ratio of 69.4 and an average FICO score of 74. We are constantly performing extensive loss analysis on every holding, and we have impaired any holding where we anticipate any material principal loss anytime during the expected life of the CMO. Commercial Mortgage-Backed Asset- Backed Securities and CDOs (March 31, 21, In Millions) Book Value Market Value Avg. Rating CMBS $129 $137 AA Asset backed AA CDOs 2 4 CCC 15

17 Our U.S. commercial mortgage backed securities, or CMBS, exposure totaled $129 million, $83 million of which were rated AAA at the end of March. All of our CMBS holdings pass our most severe stress tests with comfortable subordination cushions. At the end of the first quarter we had no exposure to Japanese CMBS. Historically, our asset-backed securities have made up an immaterial part of our dollar holdings. Aflac Japan s dollar-denominated portfolio has a small exposure to this class, and all are investment grade rated. It may appear that our asset-backed holdings have increased since year end. However, this is due to a classification change, not new money purchases. As you may know, we adopted ASC 81 on January 1, 21. This accounting pronouncement required us to consolidate certain holdings, including almost all of our CDOs, on our balance sheet. For these securities, we must now determine the fair value of the underlying collateral and the swaps separately. 84% of the collateral in the CDOs is rated AAA and the remainder is rated AA. As such, they are no longer classified as CDOs and instead appear in the asset-backed category. In fact, the only CDO security we do not have to consolidate is a small holding in which we have less than a 5% position. Investment Pricing Methods (March 31, 21) Unrealized Gains and Losses (In Millions) 3/31/9 12/31/9 3/31/1 Available for sale: Gains $ 1,113 $ 1,921 $ 2,116 Losses (5,92) (3,64) (2,587) Total AFS $ (4,789) $ (1,143) $ (471) Held to maturity: Gains $ 219 $ 632 $ 572 Losses (2,429) (1,491) (1,483) Total HTM $ (2,21) $ (859) $ (911) The unrealized losses in our portfolio peaked in the first quarter of 29 but have shrunk significantly since then. Downgrades, particularly in the perpetual security portion of our portfolio, continued throughout 29, but credit markets benefited from almost unprecedented spread tightening. Although we are still in a net unrealized loss position, our unrealized losses have declined significantly from year ago levels. However, because we have the ability and intent to hold securities to maturity, we would not expect to realize these losses unless our credit analysis concludes an issuer will not be able to meet its obligations for interest and principal payments. Split-Rated Securities (March 31, 21, In Millions) Active market feeds 26% Model pricing, broker quotes, custodian feeds 63 Best efforts (e.g., outside evaluators) 11 *Applies to available-for-sale securities only Number of Issues Book Value Market Value Investment grade 14 $1,357 $1,67 Below investment grade Total 19 $1,59 $1,199 We spend a great deal of time refining the precision of our portfolio pricing, as today s market conditions make proper valuations more challenging than ever. Let me briefly walk you through our process. We employ active market feeds for the most readily observable of our public securities, including JGB s and U.S. Treasuries. This covers about 26% of our portfolio. For the bulk of our holdings, we use either pricing feeds from our custodian bank, specific single name quotes from participant dealers, or model pricing of our single name holdings. Our pricing feeds are used primarily to evaluate our public U.S. corporate bond holdings, while our model pricing is used to evaluate most of our investment grade yen-denominated privately issued holdings. Our model pricing derives its inputs from dealers who generate spread information based on rating, maturity, and specific level of subordination. This method is used for about 63% of our portfolio. For some holdings there are few if any observable transactions to determine value. This pertains for instance to our CDO holdings since there is little or no activity in the sector. In such cases, we use the best information available to derive reasonable assumptions about the value of our holdings. For these types of assets, we employ an outside evaluation firm to provide pricing. About 11% of our holdings are valued using this best efforts approach. We classify split-rated securities as investment grade or below investment grade on a case-by-case basis. When determining the appropriate classification, we first look to the rating assigned by the majority of the various rating agencies. For example, if two of three agencies have an issue rated as below investment grade, we automatically put it in that category. However, we also give consideration to the NAIC rating, along with other factors, such as a watch list for upgrade or downgrade by one of the major rating agencies. At the end of March 21, Aflac had $1.5 billion of split-rated securities, which represented 2.1% of Aflac s total investments and cash. Ten Largest Split-Rated Holdings (March 31, 21) Book Value IG/BIG Erste Group Bank* $354 IG SLM Corp. 353 IG Rohm & Haas Company 284 IG Dexia Overseas Limited* 161 IG Sparebanken Vest* 6 IG May Department Stores Co. 58 BIG Dresdner Funding Bank AG 55 BIG Mead Corp. 36 IG Tennessee Gas Pipeline 31 IG Weyerhauser Co. 21 BIG *Perpetual security 16

18 This slide shows our ten largest split-rated holdings, which represented 94% of our total split-rated holdings on a book value basis at the end of the first quarter. The recent increase in split-rated securities for Aflac has primarily arisen from our holdings of perpetual securities. As you can see, three of our 1 largest split-rated positions at the end of March were perpetual securities. Credit Ratings /31/1 AAA 5.7% 3.3% 3.9% AA A BBB BB or below Total 1.% 1.% 1.% *At amortized cost value of the security. If the fair value is below our amortized cost, our analysis focuses on whether the decline is other than temporary. Let s review the Aflac impairment policies that guide our decisions. Aflac s Debt Impairment Policy Recoverability of principal and interest Percentage decline in value and length of time during which decline has occurred Market conditions Ability and intent to hold investment Pattern of continuing operating losses of issuer Rating agency actions Adverse changes in production or revenue sources, or technological conditions Adverse changes in issuer s economic, regulatory or political environment Credit quality remains a primary focus of our investment approach. At the end of March, 21, 75.9% of our holdings were rated A or better. If a security we hold is downgraded to below investment grade, we immediately classify that security as available for sale if it is not already so classified. The unrealized gain or loss on the security then becomes reflected in shareholders equity. As you can see, our below-investment-grade exposure declined from 6.9% at the end of the year to 5.9% at the end of the first quarter of this year. Largest Below-Investment-Grade Holdings (March 31, 21, In Millions) Lloyds Banking Group* $643 $699 $ 56 Investcorp (228) Upm-Kymmene (126) Ford Motor Credit (15) Swedbank* CSAV (Tollo Shipping) (112) Hella KG Hueck (88) Dexia* Irish Life and Permanent* Royal Bank of Scotland* *Perpetual security Book Value Market Value Unrealized Gain (Loss) Part of the decrease in our below-investment-grade holdings in the first quarter is attributable to recent accounting changes. As I mentioned earlier, CDOs are now bifurcated into their rated collateral and their unrated swap components under current accounting requirements. This benefited our BIG levels on a GAAP only basis because all of the collateral in our CDOs is rated either AA or AAA. In addition, the disposal of our Takefuji holdings and the upgrade of our Dresdner Funding Trust IV securities were also contributing factors. Among all below-investmentgrade holdings at the end of March, 63.9% were corporate securities, 31.2% were perpetuals, and 4.9% were CMOs. Designating a security as below investment grade does not mean we immediately impair the security and write off the difference between fair value and carrying value. We first reference independent pricing sources to assess the When considering whether or not to impair any debt security we start with a very straightforward question: Will the issuer pay their principal and interest under the stated terms? We then apply a far more detailed analysis, as you can see. This impairment policy applies to our debt investments on a GAAP and statutory basis. We believe last year s changes to SFAS 115 support the notion of taking a longer view on the recovery of the fair value of an investment, which is consistent with the long-duration nature of our business. As such, just because a debt security is in an unrealized loss position, it does not automatically mean that an impairment charge is warranted. Although price is a consideration in our analysis, it is by no means the primary determinant of the timing of a debt impairment. Likewise, the omission of a coupon payment under the contractual terms of an obligation does not automatically mean that an impairment charge is warranted. Instead, coupon deferral or cancellation is grounds for a more detailed analysis that focuses on the duration of skipped payments, whether those skipped payments are cumulative, and the ability to recover principal as anticipated under the terms of the instrument. As you are probably aware, Aflac also applies an additional impairment evaluation for perpetual securities based on current accounting guidance. Aflac s Equity Impairment Policy Percentage Decline From Cost Consecutive Months in Decline 1% We continue to view the perpetual securities we own as more debt-like than equity like. They are rated like debt, priced like debt, and pay coupons like debt. Furthermore, we have no ownership interest and Upper Tier II and Tier I perpetual securities are senior to common equity. However, because they have no contractual maturity, they are classified as equities for GAAP purposes. For statutory accounting purposes, these securities are considered debt instruments. 17

19 As we have discussed, the Securities and Exchange Commission (SEC) issued a letter to the Financial Accounting Standards Board (FASB) in October 28 on the topic of perpetual securities. The SEC s letter noted that due to their debt characteristics, perpetuals could be evaluated using a debt impairment model until the FASB further addresses whether a debt or equity impairment approach is most appropriate. Because the FASB has not acted on this issue, we continue to follow the guidance in the SEC s letter. As a result, we are evaluating our holdings of perpetual securities using a debt impairment method unless a security is downgraded to below investment grade. At that time, SEC guidance requires us to use an equity impairment method. As you can see, the equity impairment model is based on an aging schedule of unrealized losses. Following a downgrade to below investment grade, we will apply this model for GAAP purposes regardless of our credit analysis of the issuer s ability to meet its contractual obligations. hesitate to sell that holding. The Takefuji sale above is a clear demonstration of that, but it is by no means the only one. Since the third quarter of 28, outright sales based on changes in credit views have exceeded $97 million. Now, let me turn to our investment activities, starting with our investment cash flow. $ 8, 7, 6, 5, 4, 3, 2, $4,947 Investment Cash Flow (In Millions) $5,195 $4,616 $6,283 $7,225 Aflac U.S. Aflac Japan After-tax Realized Investment Gains/Losses (March 31, 21, In Millions) 1, Realized gains: Sales $ 36 ASC Realized losses: Sales (5) Impairments Equity model impairments (27) Net realized loss $(3) In the first quarter of this year, we had a gain of $36 million from various securities transactions. You ll note that we also realized a gain of $11 million from valuing foreign currency, interest rate and credit default swaps on certain variable interest entities that were required to be consolidated following adoption of Accounting Standards Codification (ASC) 81, effective January 1, 21. We also had a loss of $5 million in the first quarter from the sale of securities, with $49 million of that amount attributable to the disposal of our remaining exposure to Takefuji Corporation. There were no debt impairment losses in the quarter. However, on a GAAP only basis we recognized $27 million of impairment losses on the perpetuals of Bawag Capital Finance and Swedbank. Again, because we evaluate the perpetuals as debt instruments for statutory accounting and because our analysis continues to suggest the issuers will continue to service their obligations, we did not impair them on a statutory basis. All of our perpetual securities rated below investment grade have now been impaired for GAAP purposes using the equity impairment method. Therefore absent any further ratings changes we are not currently forecasting additional future impairments to this class of securities for the balance of the year. As I have said many times, if our credit analysis shows a change in credit fundamentals and indicates to us that we will not receive our contracted payments, we will not The vast majority of cash flow to investments is allocated to Aflac Japan. As we have discussed in the past, cash flow from Aflac U.S. has been constrained in recent years. In late 27 and in 28, we funded share repurchase activities with U.S. cash flow. In addition, we will be paying anticipated claims for the next few years for a return-ofpremium benefit that was included on the cancer policy we wrote in the United States during the 198s. However, in late 29 U.S. investment cash flow increased significantly following the $5 million of capital we pushed down from the holding company. This occurred very late in 29, so almost all this cash flow is being deployed in 21. Our cash flow in 29 amounted to $7.2 billion. The primary contributor to cash flow is operations, followed by investment income and redemptions. Our 21 cash flow projection is $6.1 billion, assuming calls and redemptions take place as scheduled. Because most of our cash flow is attributable to Aflac Japan, we must invest primarily in long-dated, yen-denominated debt securities to meet the characteristics of Aflac Japan s policy liabilities. Purchases by Asset Class /31/1 Debt securities: Fixed maturity securities 86.3% 98.% 9.5% Perpetual securities RMBS CMBS 1.3 Asset backed CDOs 6.6 Equity securities Total 1.% 1.% 1.% Fixed maturity securities from single corporate issuers have dominated our purchases over the past several quarters. We are not purchasing perpetual securities due to the uncertain regulatory climate and accounting uncertainty. In fact, we last purchased perpetuals in

20 Our RMBS and CMBS purchases have been infrequent and typically of only the highest credit quality. Additionally, we have not purchased any CDOs during the last several quarters due to poor liquidity and uncertain credit conditions. And we do not anticipate adding materially to our small equity position. Composition of Purchases by Sector /31/1 Banks/financials 24.1% 5.3%.7% Gov't/gov't guaranteed Municipalities Public utilities CDOs 6.6 Sovereign/supranational Mortgage/asset-backed Other corporate Total 1.% 1.% 1.% Credit Ratings on Purchases /31/1 AAA 9.9% 7.6% 1.3% AA A BBB % 1.% 1.% The credit ratings on our purchases remain high and are in keeping with our conservative investment philosophy. There has been a decline in AAA purchases primarily because we have deemphasized CDOs and CMOs, which comprised most of our AAA purchases. Any BBB purchases were either through bond swaps in the U.S. portfolio, or if purchased outright came with robust covenants. We continue to aggressively seek protective covenants in any non-bank investments we make. We are committed to diversification when making new investments. What you see in this chart certainly bears that out. Our bank purchases have fallen as purchases of utilities and other corporate names have risen. Credit spreads have tightened materially over the past few quarters, a trend which shows little sign of reversing itself. The temptation for many would be to relax credit standards to maintain yield levels, but we consider that an imprudent risk. Rather we are increasing our JGB purchases in Japan and accepting temporarily lower yields rather than higher risk. Debt Purchases by Subordination $ 3, 2, 1, $2,71 Net Investment Income (In Millions) Aflac Japan $2,171 $2,333 Aflac U.S. $2,578 $2,765 $688 $ /31/1 Senior 96.% 1.% 1.% Subordinated: Lower Tier II 4. Upper Tier II Tier I Surplus notes Trust preferred - non-bank Other Total 1.% 1.% 1.% We have not purchased Upper Tier II or Tier I capital securities of any description since prior to 27. Lower Tier II securities, while subordinated, do not have loss absorption features. Therefore, we have occasionally purchased them when we thought they offered attractive relative value versus the senior debt of the same issuer. But our overwhelming preference has been, and continues to be, senior debt /9 3/1 Aflac s consolidated net investment income growth has averaged 7.2% per year over the last five years. Translation of the stronger yen to the dollar benefited our growth rates in 28 and in 29. Excluding the currency, the steady growth of our operations has led to increased invested assets. Growth in the asset base, combined with improved new money yields, has assisted Aflac Incorporated in reaching its corporate earnings targets. A year ago who would have dreamed that our biggest challenge would be finding enough quality investments to absorb our investment cash flow. But no matter how the landscape changes we try to maintain our consistent discipline in sourcing new opportunities. We believe our investment approach has been a prudent course of action for many years, and we believe it will continue to serve us well in the future. 19

21 Product Pricing and Reserving Susan R. Blanck Senior Vice President; Corporate Actuary, First Senior Vice President, Aflac Japan This presentation contains information regarding product pricing and reserving, as well as claim experience trends. It also includes information that illustrates profit emergence under GAAP. Pricing Assumptions for Aflac Japan and Aflac U.S. Morbidity Mortality Persistency Expenses Investment returns Product pricing includes assumptions for morbidity, mortality, persistency, expenses and investment returns. In Japan, the product pricing assumptions are approved by the FSA. Premiums are calculated using assumptions that include provisions for adverse deviation, or PAD. These may be greater than those used for GAAP. No explicit margin for profit is added. Instead, profit margins arise from the pricing PAD. The interest rate assumption for product pricing is established by each company and must be justified to the FSA. The rate may vary depending on the type of product. For example, we use a lower interest rate for pricing first sector products than for third sector products. Other pricing assumptions, such as morbidity and persistency, are also reviewed and approved by the FSA. These assumptions may be developed based on Aflac experience, industry experience, national statistics or a blend of this data. adverse deviation. In addition, it is our practice to target an explicit profit margin, expressed as a percentage of premium. Because most of our products do not consume significant amounts of statutory capital for a long period of time, we do not price on a return-on-invested-capital basis. We do, however, monitor invested capital patterns on a regulatory basis and may include an invested surplus charge if necessary. FSA Reserve Assumptions (Aflac Japan) Net Level Method Interest Rate 1.5% Lapse Rate lower than pricing basis Mortality standard mortality table Morbidity pricing basis with stress testing In Japan, we are required to use specific reserving methods, as well as certain minimum assumptions for our FSA reporting. The net level premium reserving approach required by the FSA is similar to what we use for GAAP reporting. Benefit reserves begin building from the first policy year. However, unlike GAAP reporting, where we are allowed to defer certain costs of acquiring business, FSA reporting doesn t make any allowance for the firstyear profit strain of issuing a policy. In addition, the interest rates, lapse assumptions, mortality tables and morbidity rates required for the reserve calculation generally result in reserves that are larger than those calculated using the pricing assumptions. FSA Reserving Strain (Aflac Japan Representative Plan) The persistency assumptions are generally higher than our actual persistency. For products with cash values, we generally assume no voluntary lapses. When the cash values are not present in the product, we use a low level of voluntary lapse in each year. In the first part of 27, we modified our first sector premium rates to reflect the revised standard mortality table that was promulgated by the FSA. In September 27, we reflected the new standard mortality table for third sector products in our product pricing. This table has lower mortality rates than the previous table, and generally adds to the conservatism in our overall pricing persistency assumptions for third sector products. The expense assumptions reflect our actual operational costs. Aflac Japan s cost structure per policy is favorable when compared to other life insurance companies in Japan. Reflecting the efficiency of our operations in our product pricing allows us to maintain a competitive edge in our premium rates. For Aflac U.S., we tend to base pricing assumptions on our own experience, including some provisions for 2 Premium Rate as a Percentage of FSA Basis Premium FSA Reporting Basis Breakeven Year 1% This has an influence on our product pricing, because there can be significant FSA surplus strain when the product pricing assumptions result in lower premiums than those based on FSA reserving assumptions. This slide shows the FSA surplus strain for a representative medical product. As shown, the surplus strain is fairly minimal when the product premiums use the same assumptions as the FSA reserving with a breakeven period of five years. However, when the premiums are lower than those calculated using FSA reserving assumptions, the breakeven period lengthens dramatically. Using premiums that are 9% of the FSA basis premiums, the breakeven period lengthens to eight years. And, at an 8% premium level, the breakeven period lengthens to 18 years. This discourages the use of pricing assumptions that are more liberal than FSA reserving assumptions.

22 Aflac U.S. Statutory Reserve Assumptions 1- or 2-year preliminary term for health Interest rate generally lower than pricing Lapse rate prescribed, generally lower than pricing basis Mortality pricing basis or lower for health Morbidity pricing basis with load and some prescribed tables In the United States, all of our currently issued products use a 5.5% investment return for GAAP reserves. That is generally in line with our pricing assumptions. However, some products that were priced several years ago used higher or lower investment assumptions when they were priced. For statutory accounting purposes, we use a 4.% interest assumption for all new business. GAAP Reporting In the United States, premium rates are filed with each state s Department of Insurance. We must demonstrate that premiums are reasonable in relation to the benefits provided by the policy. Many states also require that we demonstrate the product experience will meet or exceed a minimum loss ratio requirement. For most of our U.S. health products, we use a two-year preliminary term method for calculating statutory benefit reserves. With this method, benefit reserves begin building from the third policy year. This feature helps mitigate the surplus strain caused by new business. Statutory reporting prescribes the maximum interest rates that can be used in the reserve calculation. The lapse assumptions, mortality tables and morbidity rates are generally based on our pricing assumptions with an added margin for conservatism. GAAP Reserve Assumptions Morbidity Mortality Persistency Expenses Investment returns Once the premium rates are established, we determine appropriate assumptions to use in calculating GAAP reserves. The calculation of GAAP reserves requires assumptions for morbidity, mortality, persistency, expenses and investment returns. GAAP reserves are computed using the net level premium method. Under this approach, benefit reserves begin to build in the first policy year. Certain expenses associated with the cost of acquiring new business are capitalized and amortized over the premium paying period of a policy. The combination of the net level premium reserve methodology and the capitalization of acquisition costs results in an expected profit emergence pattern that is fairly level over time. However, there are various acquisition costs we are not allowed to defer, so the expected profit in the first policy year is usually much lower than in other policy years. 16% 14% 12% 1% 8% Benefit reserve uses net level premium method Certain acquisition costs are capitalized and put into a deferred policy acquisition cost asset The deferred policy acquisition cost asset is amortized over the premium paying period of a policy Requires a provision for adverse deviation (PAD) in the benefit reserve calculation Claims vs. Reserves Premium Incurred claims Deduct from reserves Aflac Japan Investment Return Assumptions 6% 4% 2% Add to reserves Incurred claims Premium GAAP Pricing FSA Life/Health 1.5% % 1.5% % 1.5% Annuity 1.65% 1.65% 1.5% As the chart shows, for our major product lines in Japan, GAAP reserve assumptions generally use higher investment return rates than the pricing or FSA reserving assumptions. GAAP assumptions generally use claim and persistency assumptions that are derived from our actual experience, or from assumptions used in the product pricing when we don t have enough of our own credible experience. Aflac U.S. Investment Return Assumptions GAAP Pricing Statutory Life/Health 5.5% 4.5% - 7.% 4.% % Policy Years This simplified schematic shows why benefit reserves are provided and illustrates the relationship between incurred claims and benefit reserves. The policyholder pays a level premium each year. In early years, incurred claims are lower than the premium. The difference between the premium paid and claims incurred is added to the benefit reserve. In later years, incurred claims exceed the premium and the benefit reserves are released to accommodate the higher claims. In theory, GAAP benefit reserves are derived in such a way that gross profits would emerge in a fairly level pattern over time. However, GAAP benefit reserves are required to include a provision for adverse deviation, or PAD, which suppresses the profit somewhat in the early years of a policy and magnifies the profit in later years. 21

23 GAAP Experience Emergence Parameters Assumes representative health plan where claim costs are expected to increase by policy year The expected lifetime loss ratio for the representative plan is 6% All ratios shown are to earned premium The margins shown are gross margins Demonstration excludes required interest To demonstrate this, we have developed some illustrations using a representative health product where claim costs are expected to increase by policy year. This representative product has an expected lifetime loss ratio of 6% as measured using the present values of future claims and future premiums. All ratios shown in these slides are tied to earned premium. And the margins that are illustrated are gross margins. The gross margin is the percentage of premium in each year that is available for expenses and profit. Required interest is excluded for this demonstration. This next chart shows the same expected incurred claims ratios. But this time, the GAAP benefit reserves have been calculated with the required PAD. As you can see, the expected total benefit ratio is no longer flat and is higher than the expected lifetime loss ratio of 6% in early policy years. The margins are captured in the GAAP benefit reserve in early policy years when the reserve is building and incurred claims ratios are low. They are released over time as reserves are used to fund the higher level of incurred claims anticipated in later policy years. Again, this chart assumes that the actual experience emerges exactly as expected. GAAP Experience Emergence (Ratios to Earned Premium, 9% Actual-to-Expected Claims) GAAP Experience Emergence without PAD (Ratios to Earned Premium) 1% Expected incurred claims ratio 8% 6% 4% 2% Expected total benefit ratio without PAD % Years The first chart shows the expected incurred claims ratios and expected total benefit ratios assuming that the GAAP benefit reserves are calculated without the required provision for adverse deviation. This chart demonstrates that if actual experience exactly matches expected experience in all years, the total benefit ratio would be the same 6% in each year, which is the expected lifetime loss ratio for the product. Now, we move on to a demonstration where the actual experience emergence differs from what was expected. This chart includes the original expected total benefit ratios with PAD and incurred claims ratios, but also illustrates the patterns if the actual claim costs emerge at 9% of expected. While the incurred claims ratios are 9% of the original expected incurred claims ratios in each policy year, the total benefit ratios decline slightly in the early policy years, and by an increasing amount in later years when provisions for adverse deviations are released and the incurred claims are a larger portion of the total benefit ratio. GAAP Experience Emergence (Ratios to Earned Premium, 9% Actual-to-Expected Claims) GAAP Experience Emergence with PAD (Ratios to Earned Premium) 1% Expected incurred claims ratio 8% 6% 4% 2% Expected total benefit ratio with PAD % Years 22

24 Here, I ve added a line showing the ratio of the total benefit ratios under the 9% actual to expected claim emergence to the original expected total benefit ratios. In early policy years, the ratio is between 9% and 1%. However, in later policy years, the ratio is less than 9%. As discussed previously, this demonstrates the build up of margins in early policy years followed by the release of those margins in later policy years. Aflac Japan Actual vs. Tabular Claims (Tabular = 1%) GAAP Experience Emergence (Ratios to Earned Premium, 8% Actual-to-Expected Claims) The characteristics of GAAP reserving that I just described are reflected in the trend of our total benefit ratio in Japan. In recent years, we have experienced favorable claim trends for our major product lines in Japan. Rider MAX claims have been better than our original expectation since that product s introduction in Actual cancer life claims as a percentage of tabular claims have declined since 1993 and were about 76% as of September 28. EVER claims have also been lower than our original expectation since that product s introduction in 22. Next, I ll show the same presentation but with claims at 8% actual to expected. As the chart illustrates, the difference in profit emergence in early years versus later years is even more pronounced, with a ratio between 85% and 95% in early years, falling well below 75% in later years. GAAP Gross Margin Scenarios Finally, let s look at how gross margins emerge under each scenario. While the gross margins under each scenario have relatively small differences in early years, the difference expands with each policy year as provisions for adverse deviation are released and the difference between actual and expected total benefits grows larger. Now, let me take that theoretical discussion and apply it to our operations in Japan. The ordinary product line also shows favorable ratios. However, favorable claim ratios for ordinary products have a smaller impact on profits than favorable claim ratios in third sector products. This is because cash values make up a large part of the benefit ratio. As we have shown you previously, our experience in Japan related to the average length of stay in the hospital for cancer treatment has declined steadily for some time now. The Ministry of Health, Labor and Welfare has tried to control escalating national health care costs by limiting reimbursements to hospitals for longer hospital stays. At this time, the amount of reimbursement a hospital receives varies depending on the aggregate average length of stay for the hospital. Prior to July 26, the variation between the highest reimbursement rate and the lowest reimbursement rate was just under 25%, with the highest level paying 12,9 per day if stays averaged 21 days or less and the lowest level paying 9,74 per day if stays average more than 28 days. In July 26, the reimbursement scale was modified. Now, the highest reimbursement rate is 15,55 per day if stays average 19 days or less and the lowest reimbursement rate is 9,54 per day if stays average more than 24 days. With a more than 6% increase in the reimbursement rate for the shortest length of stay category compared to the longest length of stay category, there is a great deal of financial incentive for hospitals to shorten the length of hospital stays. In addition, Japan has adopted a strategy to realize a moderation of medical expenses. These measures include numerical targets for average hospital days, targets for implementation of specified health guidance for patients and numerical targets for a decrease in patients with metabolic syndrome which is akin to pre-obesity and obesity. All of these measures have target achievement dates of

25 Aflac Japan Trends in Sickness Hospitalization (Average Length of Stay) Aflac U.S. Trends in Cancer Hospitalization (Cancer Only, 24-Month Runoff) We have seen the effect of these actions in our actual experience. For example, with the sickness hospitalization benefit, we have seen a generally downward trend in the average length of hospital stays for Rider MAX and EVER. The next slide shows the hospitalization trends for cancer. Aflac Japan Trends in Cancer Hospitalization (Cancer Only, 24-Month Runoff) In the United States, we are seeing a trend toward greater use of outpatient treatments for cancer. The average days per hospital stay for cancer treatment has leveled off in the last few years. The average number of hospital stays per claimant and the total hospitalization days per claimant had a slight uptick in 25, but both have declined considerably in recent years. This is expected to continue as more and more treatments are performed on an outpatient basis. Aflac U.S. Trends in Hospitalization (Average Length of Stay) Cancer treatment patterns in Japan are being influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams. Follow-up radiation and chemotherapy treatments are occurring more often on an outpatient basis. Such changes in treatment not only increase the quality of life and initial outcomes for the patients, but also decrease the average length of each hospital stay. In short, more people are surviving cancer, and those who continue in treatment are generally living longer. Despite the significant decline in the average length of stay per hospitalization, we have also noted that the number of hospital stays per claimant has been increasing. Our analysis of claims data shows that the total number of days hospitalized per claimant is declining, but at a much slower rate than the average length of stay per hospitalization. We anticipate that more hospital stays of shorter durations will continue going forward. Finally, we look at our hospital indemnity products in the U.S. For the past several years, we have seen a downward trend in the average length of stay per hospitalization. I hope that this information provides a strong foundation for understanding how our products are priced as well as how the profit from those products emerges. While we generally do not project future improvements in claim trends in our pricing, the impact of lower- than-expected claim costs over time and the emergence of the profit from the better-than- expected experience has a strong impact on our projections and our outlook for Aflac s future profit growth. 24

26 Section II Aflac Japan Introduction to Aflac Japan Tohru Tonoike President and Chief Operating Officer, Aflac Japan I will provide an overview of the insurance market in Japan and the operations of Aflac Japan. Life Insurance Policies in Force (FSA Basis, In Millions) Let me start off by updating you on the current status of the life insurance market in Japan and the positioning of Aflac Japan within the market. The number of life insurance policies in force in Japan has been increasing, with particular growth in third sector products including cancer and medical insurance. The number of policies in force at the end of December 29 was up about three million, compared with 113. million at the end of March 29. Of the increase in total policies, about 1.7 million came from third sector products First sector Third sector /4 3/5 3/6 3/7 3/8 3/9 12/9 Source: Life Insurance Association of Japan The Number One Life Insurer in Japan (Policies in Force, FSA Basis, In Millions) Aflac = No /75 3/8 3/85 3/9 3/95 3/ 3/5 1/1 As you can see, Aflac Japan s number of policies in force has been steadily increasing over the past 35 years, thanks to robust growth of new business and high persistency. We have established a solid position as Japan s number one company in terms of the number of individual policies in force since fiscal year 23. The number of Aflac Japan s policies in force for individual insurance and individual annuity insurance combined reached 2 million by the end of October 29. Aflac Japan s number of policies in force at the end of December 29 accounted for 17.2% of the total number of policies in force of all insurers in Japan. 12, 1, 8, 6, 4, 2, New Business in Policies (FSA Basis, In Thousands) 44.2% 47.7% Life industry 47.4% 44.9% Third sector 4.3% 42.2% (Apr. Dec.) Source: Life Insurance Association of Japan, Insurance Research Institute The total number of new stand-alone life insurance policies, including first sector and third sector products in Japan, had been declining until 26. However, the number has increased since October 27 because of the inclusion of new policies sold by Japan Post s insurance operation, Kampo, following the start of the privatization process. Meanwhile, from April to December 29, the contribution of third sector products grew to 42.2% of total new business, compared with 4.3% in fiscal year 28, despite the increased contribution from Kampo for first sector products such as ordinary life insurance. This suggests a continued preference among consumers for living benefit products such as medical, care and injury rather than death benefit coverage. Also, as you know, Aflac s cancer products are sold through 1, post offices around Japan. The current debate on postal reform has not included any discussion about restricting sales of private insurance companies 25

27 products through the post office network. We have established a good relationship with the post office company and believe that this will not change regardless of the outcome of this debate in the Diet. To this end, Aflac Japan is continuing to develop this channel. 14, 12, 1, 8, 6, 4, 2, Japan s Aging Population and Declining Birthrate (In Thousands) Actual Estimate Juvenile (-14) Productive (15-64) Retirement (65+) Source: National Institute of Population and Social Security Research, Future Estimated Population of Japan; 12/6 One major cause of the increased preference for living benefits is Japan s rapidly aging society. Japan s population reached its peak in October 25 at million. Since that time, the number of deaths has been exceeding the number of births, resulting in a population decline. Japan s population was million as of September 29 and is anticipated to drop below 1 million by 25. The primary reason for the shrinking population is a lower birthrate. Although the total birth rate in Japan rose for the third straight year to 1.37 in 28, this figure is still far below the level of 2.8 that is required to maintain a stable population size. As a result, the population in Japan is expected to continue to decline going forward because young people represent a declining percentage of the total population, as the downward trend in birth rate continues. National Medical Expenses (Yen in Trillions) Medical expenses For elderly National medical expenses to national income national health care system that covers all Japanese citizens. However, fiscal resources are tight in all areas, including medical, care and pension, and it is clear that the difficult fiscal situation is likely to persist going forward. This led to the passage of health care reform in 26, which increased the copayment for elderly patients starting April 28. Because of the rapidly aging population and higher copayments for medical expenses, the market for third sector products is expanding at a solid pace and is expected to further expand in the future. As a natural consequence, the competition among private insurers in this market has intensified. However, we believe market expansion will also become a key source for Aflac Japan s growth Competitors in the Third Sector (Number of Life and Non-life Insurance Companies) /1 12/2 12/3 12/4 12/5 12/6 12/7 12/8 4/9 4/1 Stand-alone cancer Stand-alone medical Reflects results of company mergers and companies that have discontinued sales Source: websites of each company When Aflac began operating in Japan in 1974, it was the only company selling cancer insurance in Japan. However, mid-sized insurers and other foreign insurers followed suit and entered the market in the early 198s. In addition, the market was opened to all life and nonlife insurers in 21. As a result, as of April 21, Japan had a total of 47 competitors selling stand-alone medical products and 27 selling stand-alone cancer products, including both life and non-life companies. We believe the market for third sector products will remain very competitive. However, we also believe we will maintain our market-leading position for our primary products % % 9.9% Source: Ministry of Health, Labor and Welfare, 7/8 14 % Aflac s Share of In-Force Business: Cancer (FSA Basis, Stand-alone, Life Industry Only) (Policies in Thousands) 19, 18,5 18, 17,5 Market Growth 1 % Market Share It is clear that national medical expenses will increase along with the rapid aging of the population. Medical expenses for the elderly, as shown in red, will increase overall national medical expenses. Japan has a universal 17, 3/5 3/6 3/7 3/8 3/9 12/9 Source: Insurance Research Institute, Life Insurance Association of Japan 3/5 3/6 3/7 3/8 3/9 12/9 Aflac Others 26

28 Next, I would like to show you some data related to Aflac Japan s core lines of business: cancer and medical products. These slides reflect FSA-based fiscal year data, which runs from April through March and includes products sold only by life insurers. The data here are the latest figures based on each insurer s financial statements for the third quarter of fiscal 29. As you may know, some property and casualty insurers also sell medical insurance products. Because third sector sales data is not disclosed by non-life companies, we were not able to include them in the statistics shown on this slide. Aflac s Share of In-Force Business: Medical (FSA Basis, Stand-alone, Life Industry Only) (Policies in Thousands) 24, 22, 2, 18, 16, Market Growth 1 % Market Share The graph on the left side shows that the number of policies in force for stand-alone cancer products in the life insurance industry is growing each year. Based on December 29 data, Aflac Japan has a 76% share of the stand-alone cancer insurance market, which has been stable over the past few years. 14, 12, 1, 3/5 3/6 3/7 3/8 3/9 12/9 Source: Insurance Research Institute, Life Insurance Association of Japan 2 3/5 3/7 3/8 3/9 12/9 Aflac Others (Policies in Thousands) 1,6 1,4 1,2 1, Aflac s Share of New Business: Cancer (FSA Basis, Stand-alone, Life Industry Only) Market Growth 3/6 3/7 3/8 3/9 12/8 12/9 Source: Insurance Research Institute, Life Insurance Association of Japan 1 % Market Share 3/6 3/7 3/8 3/9 12/8 12/9 Aflac Others This slide illustrates the growth of policies in force for stand-alone medical insurance and Aflac Japan s share. Although we were not the first insurer to enter into the medical insurance market, we aggressively pursued the market by launching EVER in 22. We have launched numerous versions of EVER that appeal to various segments of the market to reach consumers we previously could not. Most recently, in August 29, we introduced a revised version of EVER, which most notably has an enhanced surgical benefit. This was our first major revision to our primary medical product in seven years. Our share of policies in force has improved and was 18.7% as of the end of December 29. Aflac s Share of New Business: Medical (FSA Basis, Stand-alone, Life Industry Only) (Policies in Thousands) 3,5 Market Growth 1 % Market Share As shown in the graph on the right side, Aflac s share of new business for cancer insurance was 58% for the nine month period from April to December 29. The number of new cancer policies sold by Aflac in 29 decreased because we directed marketing resources on promoting our revised medical product, EVER, in August 29. Despite the situation, Aflac Japan s share of new business remains very high. 3, 2,5 2, 1,5 1, There have also been numerous new product launches by competitors in this market. Meanwhile, cancer morbidity is rising and medical fees associated with cancer are soaring due to the increased availability of advanced treatments and the revision of drug prices. In addition, local governments are promoting cancer control initiatives and awareness-raising campaigns in accordance with the Cancer Control Act. Given these conditions, the cancer insurance market is likely to continue to grow. 3/6 3/7 3/8 3/9 12/8 12/9 Source: Insurance Research Institute, Life Insurance Association of Japan Aflac Japan s share of new business for stand-alone medical insurance was 19% for the period April to December 29. A large number of insurers have entered the medical market over the last few years, and the competition continues to be fierce. Despite this competitive environment, our share from April to December 29 remains the same as fiscal 28, and we have retained our distinction as the number one company in terms of medical policies sold. 3/6 3/7 3/8 3/9 12/8 12/9 Aflac Others 27

29 1 % Insurance Product Penetration (Individual Basis) This slide shows market penetration rates for various insurance products in Japan. In 27, 79.9% of Japanese citizens were enrolled in some kind of life insurance. Although the market penetration for cancer insurance has been steadily increasing, it is still only 31%. Given the aging of Japan s population, we believe the opportunity for the potential penetration rate for cancer insurance is sizeable. Medical insurance penetration is high at 71.3%. But most of these policies are believed to be term policies. Based on our research and experience to converting our Rider MAX term product to Rider MAX whole life several years ago, we believe there is significant potential for consumers to switch to a whole life medical policy Life insurance Medical insurance Cancer insurance Source: Japan Institute of Life Insurance Economic Indicators Composite Indices (25=1) / 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 Leading indicator Shaded area indicates economic expansion period Source: Cabinet Office Coincident indicator Next, I would like to touch upon the recent market environment. As a way to measure the state of domestic economy, the Cabinet Office of Japan releases the diffusion index every month. The diffusion index actually has two components: a coincident indicator for the current state of economy and a leading indicator for the economic outlook. Each indicator is calculated from eleven to twelve indices such as production and sales. Setting the year of 25 as 1, the coincident indicator for January 21 announced by the Cabinet Office was 99.9, marking ten consecutive months of increases after hitting a bottom in March 29. The leading indicators have shown a similar trend indicating that although the Japanese economy is steadily recovering, it still finds itself in a difficult situation as exemplified by its weak selfsustaining recovery or its unemployment rate remaining at a high level. However, as a result of a difficult environment in the job market, weakening growth in of individuals incomes, and the population decline, the total premium income of 46 life insurers from April through December 29 decreased 2.2% year over year. Although we are in a challenging environment, in order for Aflac Japan to achieve sustainable growth, it is more necessary than ever that we further build on our competitive strengths. I also think it is important to develop a new strategy that enables us to respond and adapt to any market changes quickly and effectively. Aflac Japan s Competitive Strengths Products Distribution Internal Controls Financial Strength Administrative Efficiency The points shown on this slide are five key competitive strengths Aflac Japan can be very proud of, as they stand out within the industry. These competitive strengths include: products, distribution, internal control, financial strength and administrative efficiency. These strengths have remained stable, and we foresee them continuing into the future. Mr. Ariyoshi will offer some information about products and distribution channel later in his presentation. But to give you an idea of where we stand, let me just say that we are taking various initiatives to maintain robust sales of the new medical product. In addition, we are providing services to new channels, including the bank channel, while reinforcing the support to the traditional channels. Aflac Japan has implemented an internal control assessment based on the J-SOX Act, the Japanese version of the U.S. Sarbanes-Oxley Act. In addition, we have established a robust corporate governance system by further strengthening compliance and internal audit systems as well as by adopting comprehensive integrated risk management processes. We believe these efforts will enable us to enhance our competitive strengths. Let me touch upon Aflac Japan s financial status. We have established a highly profitable business structure and will continue efforts toward maintaining stable earnings and solid financial footing. As the competition in the third sector market intensifies, it is a great accomplishment for Aflac Japan to have 28

30 been able to have achieved 2 million policies in force as a result of continued support from our customers. In order to better serve our customers, we will move forward with efficient and accurate policy administration through business process improvements and aggressive IT infrastructure improvements. Aflac Japan s 21 Corporate Slogan Aflac Japan s 21 Management Strategy Basic Management Policy for 21 Further evolution of sales and marketing models Strengthen business infrastructure to reinforce trust with customers Investments that prioritize profits and quality Improve business efficiency and productivity Improve and reinforce internal control mechanisms and CSR activities Go Beyond Expectations!! As I have stated earlier, the competitive business environment surrounding Aflac Japan has been intensifying. As the number one life insurance company in Japan in terms of the number of policies in force, the expectation of Aflac s social responsibility is enormous. Given this, our employees and sales associates who serve as the bridge between our customers and Aflac Japan, are required not only to meet expectations of our stakeholders but to provide them with values beyond expectations. To share this commitment among all executives and employees across Aflac Japan, we decided Aflac Japan s Management Slogan for 21 is Go Beyond Expectations. Under this pledge, each individual is charged with working hard to exceed expectations. As I mentioned last year, Aflac Japan has established the Midterm Management Policy 28-21, the basic management policy for maintaining the number one position in medical and cancer insurance. This management policy provides mid-term strategies for nine categories, including: market, products, channels, business operations, IT, finance, human resources and human resources development, internal control system, corporate social responsibility, and corporate brand. With regard to 21, the last year of the Midterm Policy, this is an important year for us to further solidify the business foundation necessary for sustainable growth in the future. To this end, we need to formulate strategies that look ahead of anticipated changes in the marketplace and competitive environment, while strongly taking into account our social responsibility as the number one life insurer in terms of policies in force. The 21 Management Plan defines five basic management goals: the evolution of sales and marketing models; the strengthening of the business infrastructure and operation mechanisms to reinforce customer trust; investments that are both profitable and high-quality; continued improvement in business efficiency and productivity; and better internal control mechanisms and corporate social responsibility activities. The departments in charge of these priorities are implementing highly effective measures and initiatives on a timely basis for achieving them. I firmly believe that Aflac Japan will achieve its sales objectives and earnings target by accomplishing these goals. Japan s Public Policy and Regulatory Environment Charles D. Lake II Chairman, Aflac Japan The Government of Japan has taken numerous steps to strengthen Japan s economy as the financial crisis spread to economies around the world and seriously impacted Japan. Several large-scale economic stimulus packages were implemented in 28 and 29, which have resulted in signs of improvement in the Japanese economy over the past few months, including a gradual recovery in both consumer spending and corporate performance. This has led to the government indicating in its monthly economic report that with improvement in foreign economies, 29 the effects of emergency stimulus packages, etc., the Japanese economy is expected to continue its recovery trend. While coping with the global economic crisis, Japan also witnessed a historic change of government in September 29, which has had a significant impact on Japanese politics. This presentation will provide a broad overview of the meaning of Japan s change of government and reforms to its policymaking process, the new administration s

31 economic growth strategy, trends in the financial regulatory environment, recent developments regarding Japan Post reform, and the direction of reforms to Japan s social safety net system. Historic Change of Government The Democratic Party of Japan (DPJ) wins historic election in September 29. The coalition government established by DPJ is first real non- Liberal Democratic Party (LDP) administration in post-war period. The DPJ is attempting to consolidate policymaking and governmental control within the Cabinet. For example:» Abolition of Administrative Vice Ministers Conference and freeze of Financial System Council» Establishment of National Strategy Bureau in the Office of the Prime Minister rapidly learn how to make policy and govern Japan. The DPJ s Cabinet- or politician-centric policymaking approach is forcing the DPJ to execute policies without fully utilizing Japan s experienced and knowledgeable bureaucracy. It is expected that this will continue to cause confusion and disarray in Japan s policymaking process in the short term. Furthermore, although the DPJ won a sweeping victory in the Lower House election, because it does not have a majority in the Upper House, it created a coalition government with the People s New Party and the Social Democratic Party, bringing their leaders into the Cabinet. The three ruling parties, however, do not always see eye to eye with regard to ruling philosophy or policy priorities. Indeed, the media often carries reports of dissension among the ruling parties and Cabinet members at the final stages of developing and implementing policies, including on important issues such as national security-related policies and postal reform. In the Lower House election held last summer, the Democratic Party of Japan (DPJ) won an overwhelming majority of seats, resulting in a historic change of government. Let me first discuss this development because an understanding of the historic significance of this change can help provide important context for analyzing trends in Japanese government policy and for distinguishing between transitional issues and insignificant political posturing to actual, material changes in public policy. Although Japan actually experienced a change of ruling party in the early 199s, that change occurred due mainly to the departure of a group of dissatisfied members of the then-ruling Liberal Democratic Party (LDP), who went on to create a number of new parties. This development forced an election and a defeat of the LDP in 1993, but the LDP maintained its position as the largest party in the Lower House, which enabled it to quickly come back into power after 1 months. The LDP s quick return to power is not expected in 21. The transfer of power that took place last year was achieved after an election campaign that focused on the theme of a change of government from the LDP to the DPJ, which means that voters in Japan made a conscious decision to vote out the LDP, which had not happened in nearly 55 years. Thus, the election of 29 was truly historic. The DPJ also assumed power with a policy to fundamentally change Japan s policymaking process and the role of career government officials. Whereas the policymaking process under the LDP was said to be heavily dependant on career government officials and strongly affected by the bureaucracy, the DPJ is aiming to change to a Cabinet-centric system of policymaking and government control more reminiscent of the British parliamentary model. Various changes have already been carried out to this end, with prominent examples being the abolition of the Administrative Vice Ministers Conference (consisting of the most senior career officials in the ministries) and the freeze of the Financial System Council and other policy deliberation bodies. As these changes are implemented, the DPJ ministers and senior vice ministers who lack actual governing experience - because most of them have never been in power - are being forced to 3 Despite such difficulties during this historic transition, no election need be held for three years after this summer s Upper House election, which should increase stability in the government. And as the DPJ ministers gain governing experience, soundness and effectiveness in the development and execution of government measures are expected to improve. Finally, reform of the policymaking process, especially the creation of the National Strategy Bureau within the Cabinet Office, is expected to have positive effects over the medium and long terms by strengthening the Government of Japan s overall policymaking process and making it more likely that the government will be able to develop the strategic economic policies necessary for responding to dramatic changes in the global economy. Goals of New Government Growth Strategy Increase nominal growth rate to higher than 3% and real growth rate to higher than 2% by fiscal year 22 Grow nominal GDP to 65 trillion by fiscal year 22 Reduce the unemployment rate to between 3.% and 4.% Create 5 trillion in environment- and energy-related markets and 1.4 million new green jobs Foster health industry growth to meet demand for medical, nursing care and other health-related services Realize a Free Trade Area of Asia-Pacific by 22 Increase tourism to 25 million by start of 22 Source: Office of the Prime Minister In December 29, the Government of Japan released a New Growth Strategy (Basic Policies) aimed at ensuring sustainable growth by the Japanese economy. The growth strategy named environment, health, Asia, tourism, science and technology, and employment and human resources as strategic areas and identified concrete numerical goals as follows: First, achieve average annual growth of over 3% in nominal terms and over 2% in real terms in the years through fiscal 22; second, grow nominal GDP to 65 trillion by fiscal 22; third, reduce the unemployment rate to the 3.% to 4.% range; four, create over 5 trillion in environment- and energyrelated markets and 1.4 million new green jobs; five, foster health industry growth to meet the demand for medical, nursing care, and other health-related services and create

32 2.8 million jobs; six, realize a Free Trade Area of the Asia-Pacific (FTAAP) by 22; and seven, increase the annual number of foreign visitors to Japan to 25 million by the beginning of 22 and create 56, new jobs. A Growth Strategy Implementation Plan with specific measures for achieving the numerical goals outlined above is scheduled to be compiled by June. The DPJ-led government is also focused on carrying out its campaign promises. Under its philosophy from concrete [i.e., public works spending] to people, the government is promoting policies to stimulate consumer spending. Specifically, since April 21, the government has taken such action as implementing a monthly child allowance of 13, per child (junior high school or younger), making high school tuition effectively free, and increasing the government s maternity subsidy by more than 3% to 55,. We believe that promotion of such measures to support household budgets will benefit Aflac, as indicated by the positive sales of the child endowment insurance product the company introduced last year. Progress in Financial Regulatory Reform MOF FSA Pre-1998 Convoy system June 27 Rules-based approach July 27- Better Regulation policy (The best mix of principles-based regulation and rules-based regulation) The challenges posed by the global financial crisis and changes in the domestic political and policy environment have resulted in a slowdown, to some extent, of efforts by the Japanese Government, particularly the Financial Services Agency (FSA), to take aggressive steps aimed at strengthening Japan s competitiveness as an international financial center. Nevertheless, the FSA s work is ongoing and is summarized below. As I have noted in previous briefings, Japan s financial system has changed dramatically in the past decade. The old Ministry of Finance emphasized maximum control, industry protection, and the use of informal administrative guidance based on its convoy system philosophy. The FSA replaced this philosophy with a rules-based regulatory approach, which relies on transparency and the notion of self-responsibility by financial institutions. In recent years, the FSA has taken further steps to achieve the best mix of principles-based regulation and rules-based regulation, calling this the Better Regulation initiative. As FSA Commissioner Katsunori Mikuniya stated in a press conference after the historic election last year, the FSA, while continuously considering its role in helping to maintain financial system stability, improve consumer protection and convenience, and establish fair, transparent, and vibrant markets, continues to work closely with other regulatory authorities, including through the G-2 and the Financial Stability Board, to ensure that Japan s financial regulatory approaches are consistent with policy measures agreed to globally. 31 Development of Institutional Frameworks Pertaining to Financial and Capital Markets FSA's responses to the international discussions and the actual state of affairs of Japan s financial systems and financial industry» Improving the stability and transparency of the settlement of OTC derivative transactions» Strengthening the securities clearing and settlement systems, including for government bond transactions and stock lending transactions» Consolidated regulation and supervision of securities companies etc (insurance companies included)» Hedge fund regulation» Ensuring investor protection and fair trade Beginning in July 29, the FSA s Roundtable Committee on Fundamental Issues of the Financial System Council held eight sessions of deliberations on how Japan s financial system should change in light of the global financial crisis. On December 9, 29, the Roundtable Committee compiled the results of these discussions in a report titled, Designing the Japanese Financial System in Light of the Global Financial Crisis. The report points out that it is vital for Japanese financial authorities to establish a financial system using a 3S approach (i.e., ensuring Suitability, Sustainability and Stability ). In addition, the report confirms the necessity of moving in line with international developments (including those in the G-2 and the Financial Stability Board) to improve macro-prudential supervision, review regulations with an eye toward preventing imbalances that could trigger another financial crisis, and curb the spread of any crisis that did occur. At the same time, given widespread discussions on the ideal form of financial regulation, the FSA has held a series of hearings with market participants since November 29 to ensure that it is taking into account views of key stakeholders as well as all relevant issues. The results of these deliberations were published in a report entitled the Development of Institutional Frameworks Pertaining to Financial and Capital Markets. The report includes reforming and enhancing regulations in the following areas: Regulation of over-the-counter derivative transactions; regulation of hedge funds; strengthening of securities clearing and settlement systems; consolidated regulation of securities companies, insurance companies, etc.; and ensuring investor protection and fair trade. The FSA views these issues as important internationally, and many experts in Japan believe that such measures would enhance investor protection and financial market stability and transparency. The FSA intends to move forward in its efforts to improve Japan s financial and capital markets, including by presenting a draft bill that contains measures addressing the issues discussed above during the current Diet session. The impact of this legislation and related regulatory changes, however, are not expected to have a material impact on Aflac s operations in Japan. In direct relation to the insurance sector, the FSA is planning to review market conduct rules applied to bank sales of insurance that were implemented in December 27. Although it is too early to predict the outcome of this review, it is possible that regulations related to medical and

33 cancer insurance sales through small and medium-sized financial institutions such as regional banks and Shinkin Banks could be relaxed. Because the global regulatory trend is to strengthen regulations generally, some experts in Japan are opposed to this. However, foreign insurance companies, including Aflac, will continue to advocate that the FSA ease relevant regulations in this area. In addition, beginning in March 211, the FSA is requesting that insurance companies disclose what their solvency margin ratio would be under the newly revised calculation standard. The FSA projects that the new standard will result in solvency margin ratios decreasing by approximately half for major life insurance companies and approximately 3 percent for major non-life insurance companies. After implementation of the new standard in March 212, Aflac s solvency margin ratio is expected to decline, but only by a similar level to that of other major life insurance companies. 12/4/9 3/24/1 4/3/1 Postal Reform Developments Mid-May 21 6/16/1 IPO freeze legislation Postal reform outline Cabinet decision on postal reform legislation Official presentation of bill to Diet End of scheduled Diet session The previous government s efforts to reform Japan s postal system had been seen by the domestic and international policy communities as a key test of Japan s commitment to strengthening the competitiveness of its financial and capital markets and promoting a robust economic growth strategy. As we have discussed in the past, on October 1, 27, Japan Post was divided into four entities: Japan Post Insurance Co., Ltd. (the insurance entity), Japan Post Bank Co., Ltd. (the bank entity), Japan Post Network Co., Ltd (the post office entity), and Japan Post Service Co., Ltd. (the delivery entity). These four entities are subsidiaries of a holding company, Japan Post Holding Co., Ltd. Under the previous administration s plan, the bank entity and the insurance entity were to be publicly listed by 21 or 211, with the holding company to sell all of its shares in these two companies by September 217. The current DPJ-led government, however, joined by the two coalition partners, is undertaking a comprehensive review of the postal reform program implemented by the LDP. In December 29, it passed legislation freezing the IPOs of the Japan Post entities. On April 3, 21, a Cabinet Decision regarding a bill on Japan Post reform was announced, and a bill was introduced to the Japanese Diet for debate after the Golden Week holidays in Japan. The Cabinet Decision was based on an outline announced by the two ministers in charge of postal reform about which there is much disagreement from opposition parties and within the ruling party including the Cabinet not to mention from the domestic and international communities. The current Diet session is scheduled to end on June 16. In 25, the Diet debated the postal privatization legislation for over a month before it was brought to a vote. Given the other items on the legislative agenda and the fact that it is difficult to envision a long extension of the Diet session with an Upper House election scheduled for this summer, it is unclear whether there will be adequate time to debate the legislation for passage during the current session. Adding to this uncertainty is the fact that the current debate on postal reform is taking place in the Diet in the context of complex political dynamics in Japan wherein the DPJ government is facing rapid and steep declines in its approval ratings going into the July Upper House election. For all of these reasons, as of this writing many policy experts in Tokyo believe that it is not entirely clear whether the bill will actually pass the Diet by the scheduled June 16 close of the current legislative session. We share this assessment. Because the tiny People s New Party, with its three lower house members and leadership by postal reform minister Shizuka Kamei, views the passage of the postal reform bill as its number one priority, we expect the minister to do his best to push for passage. On the other hand, the DPJ, with its 37 lower house members, is divided. Thus, as mentioned above, the outcome remains unclear. However, even if the legislation were to pass the Diet during the current session, it is likely to be lacking in detail, and will require significant regulatory work, with an implementation date as late as October 211. Accordingly, based on these issues and when considered in combination with the implications of the historic changes to the Japanese policymaking process addressed at the outset of this presentation, we believe that it would be premature to discuss the details of the Cabinet Decision or the bill as of this writing. In our view, this debate will not have an immediate material impact on our operations in Japan. As you likely know, Aflac s cancer products are sold through 1, post offices around Japan. The current debate on postal reform has not included any discussion about restricting sales of private insurance companies products through the post office network. We have established a good relationship with the post office company and believe that this will not change regardless of the outcome of this debate in the Diet. To this end, Aflac Japan is continuing to develop this channel. Rapidly Increasing Social Security Benefits (Yen in Trillions) Welfare Medical Pension FY 26 FY 211 FY 215 FY 225 (Budget) Source: Ministry of Health, Labor and Welfare, 5/6 32

34 As I have noted in previous briefings, a declining birthrate and aging population are among the most difficult challenges that Japan faces on the path to continued growth and prosperity. As these trends progress, Japan s publicly-funded social insurance programs will continue to come under ever-increasing financial pressure. The Ministry of Health, Labor and Welfare estimates that medical insurance benefits will reach as high as 48 trillion in 225, a 74% increase from those budgeted for 26. Against this backdrop, the DPJ-led government established a study team that has begun a full-scale discussion on introducing a system to more accurately link tax, pension, and medical information for each Japanese citizen. Addressing this issue (possibly with the introduction of a unique and widely used identification number such as the social security number used in the United States) is an essential foundation of the DPJ s plan to enhance the efficiency and effectiveness of Japan s tax and social welfare systems, and the government is aiming to submit the necessary bills in the ordinary Diet session that begins in January 211. Major Changes in Copayments for the Employed (Age 69 or Under) increased several times. In October 26, the copayment for high-income seniors was raised to 3%. In addition, recognizing that the national health care system will be unsustainable as the costs of providing medical care for the elderly swell given current trends, in April 28, the Government of Japan introduced Advanced Elderly Health, a system that separates medical treatment fees for advanced elderly from that of the younger population. The Advanced Elderly Health system aims to reduce medical costs by preventing unnecessary long-term hospitalization and over-treatment and over-medication of patients. The DPJ promised in its election manifesto to abolish the Advanced Elderly Health system as it stood. The government began designing another system in November 29, and aims to introduce a new bill with a goal of implementing a new system beginning in fiscal 213. Although details of the design of the new system are unknown at this point, we believe the reforms will lead to enhanced consumer interest in the health care sector, including supplemental medical and cancer insurance products. Daily Out-of-Pocket Hospitalization Expenses Oct Introduction of 1% copayment Sep Copayment hike to 2% Apr. 23 Copayment hike to 3% More than 2, 15, to 2, 1, to 15, 21.7% 13.% 25.9% 32.% 14.3% Japan has a compulsory and universal public health care insurance system. The system s costs are covered by premiums paid by the insured and their employers, as well as taxes and copayments paid by patients. Given Japan s aging population and declining birthrate, however, the system has been under great financial strain, and copayments have been rising. A 1% copayment was introduced for salaried workers under 7 in In 1997, it was raised to 2%, and in April 23 to 3%. Feb Introduction of small fixed-amount Major Changes in Copayments for the Elderly (Age 7 or Over) Sep Jan Fixed Fixed amount amount hike hike Oct. 26 Oct. 22 Jan. 21 1% Intro- 1% duction of fixed rate 3%** 1% 2%* *Husband and wife or individual with annual income exceeding 6.37 million or 4.5 million, respectively, including pension **Husband and wife or individual with annual income exceeding 5.2 million or 3.8 million, respectively, including pension ***Advanced Elderly Health System was introduced from April 28 Apr. 28 Age 7-74: 2% Age 75+: 1%*** 3%** Those over 7 have been required to pay a fixedamount-per-visit copayment since 1983 for outpatient and inpatient services. Since then, the copayment has 7, to 1, 5, to 7, Less than 5, Source: Japan Institute of Life Insurance, 12/7 15.9% 11.8% 11.6% % 1.8% 7.3% 7.5% In addition to the review of the Advanced Elderly Health system outlined above, the DPJ-led government is expected to conduct a review of the social security system, including pensions, health care, and nursery care. However, because Japan s falling birthrate, aging population, and related need for fiscal discipline will not change, it is unlikely that the government will choose an option, for example, to expand national health care insurance coverage. Related to this, much of the need for our products will continue to arise because of the many expenses that are not covered by Japan s health care system. Patients will have to continue to bear these expenses, which can include significant extra charges for private or semi-private hospital rooms, special treatments or medicines not covered by the national health care system, transportation costs for family members traveling to the hospital, and daily necessities while in the hospital. According to the most recent December 27 survey by the Japan Institute of Life Insurance, roughly one-third of patients had more than 2, of daily out-of-pocket hospitalization expenses, compared with 21.7% just three years earlier. 33

35 The Public s View on the National Health Care System Adequate Don't know Inadequate Source: Japan Institute of Life Insurance, 12/ % 2% 4% 6% 8% 1% Given Japan s aging population and declining birthrate, the Government of Japan faces tight financial conditions, and many people worry that additional increases in outof-pocket expenses will be necessary. Some worry not only that their burden will increase, but that the scope of government coverage may be reduced as well. Japan s rapidly aging population and low birthrate are putting the country s social security system under increasing strain, which is forcing Japanese consumers to bear an ever-growing share of the burden. Despite the prevailing election campaign mood in Japanese politics in May 21, the political consensus is that the current system cannot be sustained without significant changes. In this environment, the companies that prevail will be those that are customer-centric. Aflac will react to any environmental changes swiftly and continue to closely interact with our stakeholders as we always have. Aflac is well-positioned to take advantage of the opportunities presented, and we believe will continue to be a successful company in the Japanese market. Aflac Japan Marketing and Sales Koji Ariyoshi First Senior Vice President; Director of Marketing and Sales, Aflac Japan I will present you with Aflac Japan s marketing activities and some recent changes in Aflac Japan s external environment. Aflac Japan s Product Mix This chart shows how we have broadened our product offerings, which are driven by consumer needs. Shares of Third Sector New Sales* (FSA Premium Basis, Stand-alone and Riders, Life Industry Only) 1 % Others 1 % 8 Child endowment 8 Others 6 4 Life insurance Medical Rider MAX 6 4 Dai-ichi Nippon Alico Cancer /5 3/6 3/7 3/8 3/9 12/9 *Excludes Kampo Sumitomo Aflac Let me begin with Aflac Japan s product mix. Shortly after Aflac established our business operations in Japan in 1974, we focused primarily on selling cancer insurance. Our concentration on this line of business continued for almost two decades. In the 199s, we began developing death benefit products as well as Rider MAX, a medical rider to our cancer policy. And in 29, the cancer, medical and ordinary life product categories each accounted for around one third of new annualized premium sales. This slide shows the major life insurance companies share of third sector new annualized premium sales. According to the latest data for the period from April to December 29, on an FSA basis, our share is 14.9%. As you can see, Aflac Japan has consistently maintained a stable share at a time when competition has increased. In addition, Aflac Japan still holds the number one position in new sales within the third sector. 34

36 4 3 New Sales of Cancer Insurance (New Annualized Premium, Yen in Billions) medical sales increased 21.4%, compared with the first quarter of 29, due primarily to sales of the revised medical product. Aflac Japan will continue to promote New EVER to maintain our already successful medical sales. Aflac s Child Endowment Product 2 Lump-sum education benefit Education annuity (Four years) 1 million /9 3/1 Inc (11.3) 7.4 (29.4) Now I would like to discuss our sales by product line. First, I ll cover cancer insurance, one of our mainstay products. In 29, cancer sales dropped 11.3% from the previous year. Let me explain the reasons behind this decline. In 28, we launched an upgraded cancer product targeting our existing policyholders, and it sold extremely well. As we entered into 29, however, it appeared that the initial boost in sales had run its course. Additionally, we primarily concentrated our marketing efforts on New EVER beginning in August 29. I will discuss our new medical product later in more detail. Our cancer sales for the first quarter of 21 were down 29.4% from the same period of 29. As Tohru mentioned, because the penetration rate for cancer insurance in Japan is much lower than that of ordinary or medical insurance, we believe cancer sales still have more room for growth. Also, considering high medical copayments, especially with the more expensive advanced treatment for cancer, along with Japan s increasingly aging population, we anticipate the need for cancer insurance will continue to grow New Sales of Medical Insurance (New Annualized Premium, Yen in Billions) Issuance Age 5, Entrance into high school Age 15 Entrance into college: Freshman Age 17 or 18 5, 5, 5, Sophomore Age 19 Junior Age 2 Now let me explain the child endowment product we launched in March 29. Despite the fact that the Japanese population is aging at an increasing rate and the birth rate remains low, one million new babies are born every year. Traditionally, from a cultural standpoint in Japan, the birth of a child is a landmark event where families begin planning for the baby s future, as well as review the family s financial needs, including life insurance coverage. Aflac s Child Endowment policy pays a lump-sum benefit when the covered child enters high school, as well as an educational annuity over the four years following enrollment in college. It also provides a death benefit that covers children from birth until they turn 18. Child endowment products are fairly popular among Japanese consumers as a means to financially prepare for their child s future education. Generally, when people purchase a child endowment educational product like this, they tend to give much more consideration to the return on total premium payments. Our child endowment policy offers the highest return ratio among other similar products in the industry, which we believe makes this a highly competitive product. New Sales of Life Insurance (New Annualized Premium, Yen in Billions) Senior Age /9 3/1 % Inc. (18.8) (3.8) (5.4) Child endowment Others 35. Let s move on to medical insurance sales. Reflecting in part the intense market competition, our medical sales were little changed from 26 through 28. However, in 29, our sales jumped 15.7% over the previous year. This significant increase is because of the launch of New EVER in August 29 together with our consolidated marketing promotion for this product. New EVER has continued its sales momentum into 21. In fact, our 21 first quarter /9 3/1 % Inc. 17. (6.9)

37 This slide shows our ordinary life sales category, including the child endowment product. As you can see, the robust sales of the new child endowment product contributed to the significant increase of 33.9% in 29. The child endowment product we introduced last year has also proven to be a door opener that gives us access to new customer bases, which also provides the opportunity to sell them cancer and medical products at the same time. In fact, at the time of purchase, almost 2% of child endowment policyholders in 29 also purchased other products. I want to share some information about a new subsidy that the Japanese government has decided to offer families with children. Starting in April 21, families raising children up to age 15 will earn a monthly allowance regardless of their household income. Although the amount is initially 13, per month for each child, it is expected to double to 26, in April 211. This allowance can be spent at the discretion of the parents, and we expect many parents may use it to purchase a child endowment product, thus potentially providing a positive influence on sales. In fact, research conducted by a major advertising company in December of last year indicated that 16% of respondents would use the subsidy to purchase a child endowment product Communication Preferences for Insurance Purchases 4 % 4/9 8/9 12/ On the Internet Sales at home Sales at agencies/shops Source: Cross Marketing Inc, 4/9; Macromill, Inc., 8/9, 12/9 Next, I would like to outline our sales distribution channels. As you can see from this chart, online enrollment has been increasingly popular with consumers. To accommodate those who prefer this electronic option, Aflac Japan offers an online brochure request system. Yet, the majority of consumers prefer face-to-face consultation at home, agency offices or service shops. To satisfy these needs, Aflac Japan continues to recruit and train individual and independent agencies who primarily offer face-to-face consulting services Sales at worksite 9.6 (In Billions) Transition of Sales Channels (New Annualized Premium Sales) % To remain in step with diverse consumer needs, our agencies sales contributions are also changing. Shortly after we started our business operations in Japan, our sales focused on mass consumer sales mainly at the worksite sales through affiliated corporate agencies. In the 199s, however, as the Japanese economy deteriorated, many office workers were laid off and their disposable incomes also dropped. Simultaneously, the popularization of the Internet increased the number of those who prefer to select insurance on their own using tools provided on the Internet. Further, the enforcement of the Personal Information Protection Law has consistently tightened restrictions on worksite sales. Despite such business circumstances, we are continuing our support for affiliated corporate agencies. At the same time, we are also increasing our recruitment of individual and independent agencies, as well as employing telemarketing agencies and supporting Aflac service shops. Our distribution capabilities expanded as we began a sales partnership with Dai-ichi Life in 21. This alliance gave Aflac Japan access to customers we had not been able to reach via traditional channels. Recently, however, as Dai-ichi concentrated on its core business in preparing for demutualization, their cancer sales have been declining. Still, for its part, Dai-ichi has met their cancer sales commitments without fail every year since 25. The sales of Aflac s cancer policies not only provide Dai-ichi with commission income, but it also enables them to develop a new base of customers to whom they can subsequently sell Dai-ichi products. We both maintain a good partnership. And more recently, we embarked on the bank channel insurance sales, which also helps us approach a broader range of customer bases Bank Dai-ichi Individual/ independent Affiliated corporate 36

38 5, 4, 3, 2, 1, Recruitment of New Agencies 4,651 3,944 3,463 3,195 1,41 1,197 to establish early success. Based on our experience, our support for new agencies is designed to help them improve their skills to achieve satisfactory results during early the stages of their career. For example, we are offering new agencies an intensive, eight-month training program called New Associates Basic Training, or New ABT. Participants of this training learn how to develop a market and how to acquire the basic sales skills necessary to face prospective individual customers. After completing this training, the agents then advance to a higher-level training, Light Consulting ABT, which is a two year program where they enhance their consulting skills and continue to develop as Aflac agency /9 3/1 This slide shows our recent agency recruitment results. The number of new agencies we recruited in 29 was 4,651, up 17.9% from 28. The deteriorating employment environment resulting from the global economic downturn and specifically Japan s challenging economic backdrop has likely contributed to an increase in the number of agency applicants. Of course, our efficient recruitment methods played a vital part in increasing the number of applicants as well. Among all of our recruitment methods, a group recruiting meeting is truly most effective and efficient. Many agency applicants meet at a single session, which allows us an excellent group setting to efficiently share information about Aflac, our products, and the support they would receive as an Aflac agency. To attract more people to this meeting, we also upgraded our online presence and content that targets potential agency applicants. In addition to detailed information on Aflac agency business, our Web site also features some testimonials from existing Aflac agencies, which provides them with a firsthand account about starting an agency business, their daily activities, merits, and why they like their job. We believe this information will help applicants better understand what an agency business is all about. We accept applications online, allowing people to register at their convenience. In fact, the number of applicants is on the increase. Through these efforts, the number of new agencies recruited in the first quarter of 21 was up 15.% to 1,197 agencies. We remain pleased with the number of newly recruited agencies. Going forward, we will focus more on the training of new agencies rather than increasing just the number of new agencies. Aflac s Support for New Agencies New Associates Basic Training - ABT Rookie Challenge Bonus Advanced commissions e-app incentives Because early success at Aflac is an important indicator of future and long-term success, we are aware of the importance to empower newly recruited agencies To offer new agencies an incentive to achieve a certain volume of sales within the first three months, we have put in place a Rookie Challenge Bonus Program where we pay a cash bonus award in the range of 5, to 2, according to their sales results during the first three months after initially signing on as our agent. Moreover, new Aflac agencies can also choose to receive advance commissions. This advance commission system allows agencies to receive one-year commissions in a lump sum even before Aflac starts receiving premiums from policyholders. By leveraging this system, new agencies have an earlier opportunity to offset some of their initial expenses. It also provides money to live on while they are first building their business, which gives them a better chance of early success. Our online application system, e-app, is a streamlined option that guides both new and veteran agencies through the application process and reduces paperwork errors during sales, thereby improving their overall efficiency. As such, we are providing incentives when e-app is utilized in sales. 2,5 2, 1,5 1, 5 Growth of Newly Recruited Producing Agencies* 1,58 1, *Three months after registered as an agency 2,8 2,449 We believe our support for new agencies is steadily producing results. At Aflac Japan, when an agency achieves annualized premium sales of 2, or more within three months of registration, he or she is recognized as a newly recruited producing agency. Our purpose during the introductory phase is to increase productivity of new agents as soon as possible. As shown by this slide, the number of newly recruited producing agencies for 29 was up 22.% from the previous year. 37

39 Engagement with Banks (March 31, 21) No. of Banks Coverage Aflac No. of No. of No. of Total Agencies Banks Branches Employees Mega banks % 1 % 1 % Regional banks Shinkin banks Other banks* Total % 91 % 9 % Includes Citibank Japan, Seven Bank, e-bank, Jibun Bank, Aeon Bank, seven major banks and eight credit unions Now, let me discuss our new and vital distribution channel, bank sales. As you know, the Japanese government fully deregulated insurance sales through the bank channel in December 27. Since then, banks have been playing an integral role in third sector insurance sales. This slide gives an overview of banks selling Aflac products by type of banking business. As you can see, 352 out of the total of 43 banks, or 87% of total banks, were serving as Aflac agencies at the end of March 21. In terms of the number of bank branches, our agency banks account for 91% of the total. This reflects the fact that Aflac Japan already has an agency contract with most major banks in Japan. Although we will continue to sign up additional banks, we will spend more time training agency banks on improving sales skills at existing banks as well as encouraging them to adopt more products from Aflac. 3,5 3, 2,5 2, 1,5 1, New Sales Through the Bank Channel (Yen in Millions) Other Regional banks ,311 Shinkin banks Mega banks 959 1,9 1,43 2,178 3,94 2,94 12/7 3/8 6/8 9/8 12/8 3/9 6/9 9/9 12/9 3/1 Since insurance sales were deregulated, our bank channel sales steadily grew until the financial crisis emerged in the third quarter of 28. Since then, Japanese bank clerks have spent most of their time clarifying the impact, especially to their bank customers with annuities. In October of 28, the Japanese government started providing guarantees on emergency loans for small and mid-sized businesses. This placed even more work on the alreadyburdened shoulders of bank clerks. As a result, the time they need to spend on selling investment trusts, variable annuities and insurance products has generally been reduced. Starting in the second quarter of 29, as the financial markets started seeing some stability, retail banking operations gradually began to return to normal. In the meantime, bank clerks have improved their sales skills, and a number of banks began setting up a specific numeric target for their insurance sales. We added our child endowment product to the bank sales product list in March 29, and it has been selling well, in large part because of its benefits that are closely matched with traditional banking services. As a result, we now see the sales volume of Aflac products growing significantly again. Particularly since the launch of New EVER, Aflac Japan has been able to consistently secure a large share of medical policies sold through banks. We have been especially pleased that the addition of the child endowment product has prompted an increasing number of banks to step up sales of third sector insurance product. In addition, sales through this channel are well-balanced by different types of banks. Aflac Japan s bank channel sales are steadily gaining ground as shown by banks increasing commitment and product adoptions. We expect bank channel sales to continue to further expand. 6 % Consumers Brand Association with Cancer Insurance (Unaided Recognition Ratio) Aflac Alico Nippon 12/5 7/6 12/6 8/7 12/7 8/8 1/9 6/9 12/9 Source: Dentsu and Nippon Research Center Aflac Japan has successfully secured a large share in bank channel sales, and Aflac s highly recognized corporate brand has helped in this regard. The next two slides show the results of a third-party survey about people s unaided recognition of cancer and medical insurers in Japan. This chart shows the results for cancer insurance. The bars represent Aflac, while the blue line is Alico and the red line is Nippon Life. As you can see, the unaided recognition ratio of Aflac as a cancer insurance company is significantly higher than the other two competitors. 6 % Consumers Brand Association with Medical Insurance (Unaided Recognition Ratio) Aflac Alico Nippon 12/5 7/6 12/6 8/7 12/7 8/8 1/9 6/9 12/9 Source: Dentsu and Nippon Research Center 38

40 On the other hand, until recently, Alico had a higher brand recognition number than Aflac in the medical category. Research conducted in December 29 shows that Aflac overtook the other two companies, albeit by a small margin. Even though Aflac s medical sales have been the largest within the industry since entering the market in 22, our brand recognition as a medical insurance company is not as established as it is for cancer insurance. Therefore, our objective is to further increase our brand recognition as a medical insurance company. Top Four Criteria for Medical Insurer Selection Comparison of Medical Premiums* (Whole-life, Stand-alone Basis) Aflac New Monthly premium (Male Age 3) EVER % VARIANCE Co. A Co. B Co. C % VARIANCE % VARIANCE 1,64 1, % 1,6-2.4% 1, % *Premiums for 5,/day hospitalization benefits for base policy only 95 % This slide compares the premiums of New EVER with the premiums of our major competitors medical products. As you can see, our premium amount is very close to our competitors, which makes it increasingly difficult to differentiate ourselves from others by simply pricing competitively. But as I explained before, low premiums are just one of several factors affecting consumers medical product selection. This fact led us to conclude that we need to further increase our brand recognition by implementing effective promotional measures. 8 Proper claim payment Responsiveness Source: Macromill Inc., 12/9 Easy to understand materials Low premium Challenge 35 Campaign This slide outlines the top four criteria consumers generally take into account when considering the purchase of medical insurance. As you can see, the most decisive factor is proper claim payment, followed by responsiveness and easy to understand materials. Although low premium is an important selection criterion, it is not the most important factor in the mind of the consumer. Integrated marketing strategy Product Challenge 35!! Consumer Perceptions of Insurers Promotion Channel 3 % Aflac Nippon Alico Proper claim Responsiveness payment Source: Macromill Inc.,12/9 Easy to understand materials Low premium This slide outlines how the insurance companies fit into each of the top four selection factors I just covered. As you can see, Aflac ranked higher than the other two companies in three out of the top four factors, which suggests we are supported by consumers not only because we provide favorable product features such as affordable prices,but also because we are more responsive and our products are easier to understand. This was our answer Challenge 35. It was a companywide sales promotion involving all departments. In a bid to further solidify our presence as a medical insurance company, we started rolling out this extensive sales campaign upon the launch of New EVER last August. We named this companywide marketing effort, Challenge 35, as 29 marked the 35th anniversary of Aflac Japan. Behind the launch of New EVER was our firm determination to gain a commanding sales share in Japan s medical market. Therefore, we set our sales goal on achieving a total of 35, new medical policies from the launch date, August 24, 29, to the end of the year. In fact, the volume of 35, new medical policies was an extremely ambitious goal, as it was almost double the volume of the previous year. Total medical sales during the same period of 28 were 18, policies. In the face of this ambitious goal, if we had simply stuck to our conventional sales approaches, it would have been virtually impossible to achieve it. Aflac Japan, therefore, mobilized all its available resources to launch this marketing campaign. 39

41 Positioning of Maneki Neko Duck Aflac Duck Maneki Neko to exceed the companywide annual sales target by a significant margin. The momentum of New EVER and our child endowment products continued into 21. Our sales have remained solid by producing a 1.% increase in the first quarter of 21. Marketing Objectives for 21 Increase new annualized premium sales by % to 5% in yen Distribution Channel Product Promotion To expand awareness of the New EVER among consumers, Aflac Japan created a new sales icon, the Maneki Neko Duck. Recruitment and training Bank Integrated marketing communication The Maneki Neko Duck is a unique combination of the Aflac Duck and Maneki Neko, a Japanese traditional creature. More specifically, Maneki Neko is a cat ornament and widely believed to bring in customers and good luck. In Japan, merchant families typically display a Maneki Neko in a hope for business prosperity. Some cats raise their right hands while others the left. When the cat raises its right hand, it is believed to bring in good fortune. If it is the left, it is said to bring luck and well being. Our Maneki Neko Duck, therefore, raises its left hand to reflect our wish to bring peace of mind to many customers. The Maneki Neko Duck is a great draw for both agencies and consumers. We have so far distributed more than 1.6 million Maneki Neko Ducks. But the Maneki Neko Duck is a sales icon for New EVER only. The Aflac Duck will remain our overall corporate icon and continue to help us increase our brand power. Now, let s take a look at last year s results from Challenge 35, along with our on-going promotional activities. Aflac Japan New Annualized Premium Sales (Yen in Billions) % Inc /9 3/1 (8.8) (2.4) 6.7 (.4) 1. As a result of our all-out effort across the company, Challenge 35, we were able to sell 361, medical policies, surpassing our goal of 35,. This is one of the main drivers of the 6.7% increase in new sales for 29 compared to the previous year, and it enabled us 4 As you know, Aflac Japan is committed to increasing its new sales by to 5% for 21. To achieve this objective, Aflac Japan will not only enhance its agency recruitment and training, but also expand its scale of bank sales. We are also going to target sales of New EVER product, as well as additional sales of third sector products to Aflac child endowment policyholders. As for cancer insurance, we will launch a female-specific cancer rider in June. As the Japanese government s nationwide effort to combat cancer is gradually gaining momentum in Japan, people are increasingly aware of and concerned about how to deal with the high costs of cancer-related care. In Japan, particularly among the younger generations, women are more likely to suffer from cancer than men. In light of this fact, we believe this new cancer rider will help us tap a new market for women. In the meantime, we will keep rolling out the integrated marketing communications as I mentioned earlier. Some of you may consider our commitment of sales increase by to 5% relatively conservative considering our first quarter results. But let me remind you of some details you have probably heard before. Our largest telemarketing agency has lowered its sales goal for 21 by 2 billion or approximately 68.8% less than they produced last year. Sales through Dai-ichi Life are also expected to decrease. Further, in terms of year-over-year comparisons, the second half of 21 will be challenging, particularly in the fourth quarter due to last year s tremendous success with New EVER. As a result, we believe the goal of increasing sales by to 5% is appropriate. Aflac Japan remains a strong and competitive player in the most vibrant area of Japan s insurance market. Due to the recession, consumers are feeling a lot of uncertainties, and Japan s public health care system continues to be strained by an aging population and low birth rates. Under these circumstances, we expect consumers needs towards the third sector products will continue to rise. In addition, like the Child Endowment product, we will continue to tap into new markets, as well as making efforts to meet consumers needs to review their insurance portfolio. By doing so, we believe Aflac Japan can achieve sustainable growth in this market.

42 Aflac Japan Bank Channel Sales Hisayuki Shinkai First Senior Vice President, Aflac Japan I would like to provide information about the sale of insurance products through the bank channel. History of Bank Channel Deregulation December 1998 Investment trusts first offered April 21 Long-term fire insurance related to housing loans, etc. October 22 Individual annuity, accident insurance with annuity, etc. December 25 Single premium whole-life, singlepremium endowment insurance, etc. December 27 All remaining insurance products Let me begin with a brief regulatory history of bank channel sales. Sales of financial products through the bank channel began in December 1998 when the sale of investment trust products was first permitted. Since then, the pace of deregulation has accelerated. The sales of long-term fire insurance and individual annuity products were deregulated in April 21 and October 22, respectively. Then in December 25, the ban on the sale of single-premium whole life and endowment insurance was lifted. Finally, on December 22, 27, the remaining restrictions were fully removed, including those on third sector products. Financial Institutions in Japan (March 31, 21) throughout the nation, from investment banking and wholesale to retail and private banking. In addition to overthe-counter sales, the mega banks provide direct sales of financial products both over the phone and the Internet. There are 16 regional banks in Japan, including second-tier regional banks, which were originally mutual banks and converted to ordinary banks in In the retail banking division, door-to-door sales now represent the second-largest channel after over-the-counter sales. Some regional banks based in the Tokyo metropolitan area offer retail banking businesses similar in scale to mega banks. Shinkin banks are cooperative financial institutions specializing in services for small- to medium-sized businesses and individuals. Their sales activities are deeply rooted in local communities, and door-to-door sales make up a significant part of their retail business. Shinkin banks have a vast network of nearly 7,7 branches, which accounts for more than one-third of all bank branches. The National Association of Shinkin Banks is responsible for selecting industry-standard products and providing an administrative framework to its members. Since the association selected Aflac s cancer and medical insurance as its standard products, Aflac sales through shinkin banks have been expanding, and we expect further success at shinkin banks. Banks Sales of Investment Trusts (Outstanding Market Value, Yen in Trillions) No. of Institutions No. of Branches Avg. per Total Institution Mega banks 4 2, ,264 2,816 Major banks ,473 3,782 Regional banks 16 1, ,552 1,684 Shinkin banks 272 7, , Other banks* ,67 45 Total 43 21, ,414 1,11 *Includes Citibank Japan, Seven Bank, e-bank, Jibun Bank, Aeon Bank and nine credit associations. No. of Employees Avg. per Total Institution Japan has a total of 43 banks, including mega banks, major banks, regional banks and shinkin banks. These banks represent our target market and have a total of approximately 21, branches that employ 4, people in Japan. In addition, there are also credit associations and agricultural cooperatives, which tend to be very small in size. The mega banks include Mizuho, Tokyo-Mitsubishi UFJ and Sumitomo Mitsui. We have also included Resona as a mega bank due to its large and extensive nationwide sales network. With an average of 549 branches, these four mega banks offer a wide range of banking services /99 3/ 3/1 3/2 3/3 3/4 3/5 3/6 3/7 3/8 3/9 3/1 Source: Investment Trust Association of Japan Historically, banks have achieved great success in selling investment trusts and annuity products. At the end of 1999, the total market value of investment trust products sold by banks stood at 3.3 trillion. This amount had grown to 54.8 trillion by March 27. Market turbulence stemming from the financial crisis shrank the market value of investment trusts sold by banks to 39.4 trillion as of March 29, but this number rebounded to 48.2 trillion as of March 21. This accounts for 51.2% of the total investment trust sold through all channels. 41

43 Banks Sales of Variable Annuities (Outstanding Market Value, Yen in Trillions) The same is true with variable annuities, which are now the mainstay products in the bank channel. The market value of these products sold by banks increased from 1.1 trillion at the end of March 23 to 17.1 trillion at the end of September 29. Reasons for Banks Compatibility With Insurance Sales Consumers have strong comfort level with banks Consumers have strong level of familiarity and confidence with banks Many regional and Shinkin banks sell door-to-door 85% of financial planners work for banks /3 3/4 3/5 3/6 3/7 3/8 3/9 9/9 Source: Insurance Daily Japan s banks have several characteristics that lend themselves to insurance sales. First, consumers are already very comfortable doing business at banks. In fact, at the end of 29, 55% of Japanese household financial assets were in cash and deposits at banks. This is almost four times that of the United States, which was 14%. Also, when customers purchase a financial product, they often visit banks to transfer funds from their account. We believe that also means banks make for a convenient and streamlined exchange of money if they were to purchase insurance through a bank. Second, Japanese banks have already earned the confidence of their customers. Accordingly, there are many who would prefer to purchase a financial product from the very same bank with which they already conduct business. Hence, they can make a deposit and purchase insurance in one convenient stop. Third, door-to-door sales of banking services are common in the Japanese markets. Through this approach, shinkin banks and other local financial institutions have been able to build strong relationships with their customers. Fourth, there are not many independent financial planners in Japan. An October 27 survey conducted by Japan Association for Financial Planners, which is the most recent data available, showed that 85% of active qualified financial planners work for banks. As a result, many consumers tend to seek financial advice from banks that employ these financial planners. Aflac s Cancer Policy Penetration Within the Banking Sector (March 31, 21) Business with Affiliated Corporate Agencies No. of Affiliated Corporate Agencies No. of Cancer Policies in Force* No. of Cancer Policy- Holders* No. of Bank Employees* % with Cancer Coverage Mega banks 4 1, % Major banks Regional banks Shinkin banks Total 258 2, % *In thousands Historically, Aflac has strong business ties with banks. For more than 35 years, Aflac has been selling third sector insurance products to bank employees and others through bank-affiliated corporate agencies. As a result, we have extensive relationships with all mega banks and most major as well as regional banks. These longstanding business ties have positively influenced banks product selections as well as sales promotion after the full deregulation. Considerations for Insurer Selection Company with products that will drive sales Brand recognition of insurer Easy-to-explain products Commission level Sales support and training On the product side, when banks consider an insurer with whom to do business, they primarily look for a company with products that will drive sales. But there are several other important factors banks also consider, including brand recognition. Banks seek products that are well-recognized by consumers. Aflac Japan has achieved strong brand and consumer recognition largely through its television commercials. In fact, various consumer surveys show Aflac is the most preferred insurer for third sector products. Banks also look for companies with products that have simple and easy-to-understand benefits and features that make it easy for their staff to explain the coverage in a short amount of time. Aflac s products clearly meet the needs of banks. Another factor banks look at is the commission level. Commissions have become even more important as a source of income for banks, especially in Japan s lowinterest environment. Commissions paid by Aflac are among the highest in the industry, again clearly meeting the needs of banks. 42

44 Banks also consider the training and support their employees will receive to help them sell insurance products. In order to respond to these considerations, Aflac Japan is now operating 11 bank sales offices nationwide with a total of 25 employees who are dedicated to servicing both banks headquarters and branches. And at the Aflac Contact Center, we have operators that are dedicated to servicing banks to promptly handle daily inquiries from banks. Aflac s Extensive Reach Within the Bank Channel (March 31, 21) Until April 28, the association had recommended annuities and non-life insurance products of eight Japanese insurance companies. At that time, foreign companies were excluded. Anticipating full bank channel deregulation, we quickly approached the association to ask them to recommend our products. Aflac was the only foreign company among the four that were selected for third sector products. And in fact, we were the only insurance company designated to sell both cancer and medical products, a distinction that remains true today. Regulatory Restrictions Related to Bank Sales No. of Banks Aflac Total Agencies Coverage No. of Branches Mega banks 4 4 1% 1% 1% Major banks Regional banks Shinkin banks Other banks* Total % 91% 9% *Includes Citibank Japan, Seven Bank, e-bank, Jibun Bank, Aeon Bank and nine credit associations Since the end of December 27, the number of banks selling Aflac products has steadily increased, and at the end of March 21, there were 352 banks that had agreed to sell Aflac products. This number represents 87% of the 43 banks in Japan, and the coverage is over 9% in terms of number of branches or employees. We believe this number is much larger than any of our competitors in the third sector. We also believe that these numbers indicate that we have obtained a strong level of bank branch participation, and we now need to shift focus on increasing sales penetration at each existing bank. National Association of Shinkin Banks Sales policy Recommendation of products Administration system 272 Shinkin banks nationwide 7,7 branches No. of Banks The Shinkin Industry Selection Application for selection Contracts No. of Employees Insurance companies Let me explain two topics unique to bank sales in Japan, starting with the shinkin industry. Currently, there are 272 shinkin banks, and all of them are members of the National Association of Shinkin Banks. The association has been designating industry standard insurance products and developing administrative workflows for its members. Bank cannot make insurance sales a lending condition Restrictions may be loosened after three-year FSA monitoring period Restrictions on investment trusts and variable annuities have inadvertently impacted third sector sales» Aflac is countering by training bank management and sales representatives to distinguish regulations intended for other products Second, let me provide some information about Japan s current regulatory environment. The FSA has added some very detailed regulations to prevent banks from abusing their strong market positions. One of the major regulations includes a restriction on sales to executives and employees of corporate borrowers as a lending condition. Banks are not allowed to sell insurance products if the number of employees of the corporate borrower is less than 51. Shinkin banks and other regional banks dealing with small sized enterprises are permitted to sell to executives and employees of corporate borrowers with at least 21 employees. However, in this case, the daily benefit is limited to 1, for cancer and 5, for medical insurance. Japan s FSA established a three-year monitoring period to review any abusive conduct by banks with respect to insurance sales. This period will end in December of this year, and if there proves to be no significant problems during this period, some of these regulations are expected to be loosened or eliminated at that time. Another topic is the impact of the Financial Instruments and Exchange Law that became effective in September 27. This law imposed tight restrictions on products such as investment trusts and variable annuities. Third sector products are exempt from the provisions of this law. However, the same sales representatives that handle investment trust and variable annuity sales at the banks often handle third sector products. As a result, many of these sales representatives tended to apply the same stringent rules to selling third sector products. Now, many banks have gained a better understanding of which products are affected by recent regulations. However, some banks continue to remain overly cautious about the law when they sell third sector insurance products. In order to counter the unnecessary application of rules intended for investment trust and variable annuity sales, it is important to make sure that banks management and sales representatives have gained a thorough knowledge 43

45 of relevant laws and regulations. In response, Aflac has been providing banks not only with effective training, but also with sales and administrative processes in accordance with relevant regulations, thereby helping banks address all these needs. This ultimately allows them to shift their focus to growing sales. In Millions 3,5 Quarterly Sales by Type of Bank (Annualized Premium Basis) As you can see in this slide, sales by banks have been steadily increasing since the full deregulation in December 27 through the third quarter of 28. However, in the wake of the financial crisis, mutual fund and annuity sales declined, as did insurance sales. In the aftermath of the turbulent financial market environment, sales representatives at banks had to focus much of their time explaining or responding to customer concerns about investment products sold to them by the banks. Loan officers were also busy making loans to small and mediumsized enterprises under special emergency guarantees made by the government of Japan, with the aim of helping the economy recover. By the second quarter of 29, retail business at banks had returned to normal as the financial crisis began to show signs of subsiding. Since then, our sales through the bank channel have generated record results for every quarter. 1% 3, 2,5 2, 1,5 1, 9% 8% 7% 6% 5% 4% 3% 2% 1% % 5 Other Shinkin banks Regional banks Mega banks , ,9 1,43 2,178 Quarterly Sales Contribution by Type of Bank (Annualized Premium Basis) 2,94 Mega banks Regional banks Shinkin banks Other 3,94 8/1Q 8/2Q 8/3Q 8/4Q 9/1Q 9/2Q 9/3Q 9/4Q 1/1Q 8/1Q 8/2Q 8/3Q 8/4Q 9/1Q 9/2Q 9/3Q 9/4Q 1/1Q In looking at sales contribution you can see that the contribution from mega banks has risen to approximately 3%, which is the highest level to date, with regional banks contributing about 42% and shinkin banks 26%. We expect this more balanced contribution level from each type of bank to continue in the future. Three factors that have contributed to the growth in bank channel sales include: the number of branches and sales representatives actively selling insurance products has been expanding; more banks are adopting multiple products from Aflac as they pursue consultative sales; and through intensive training, sales representatives at banks have not only become more accustomed to insurance sales, but they have become more skilled and confident in selling our products. While we believe all three factors are sustainable, we believe that the following two will drive sales growth: the expansion of branches and sales representatives actively selling our products, as well as the adoption of more products. I will touch upon this subject in more detail. No. of Policies Sold 4, 35, 3, 25, 2, 15, 1, 5, 5,75 Policy Sales by Product Cancer EVER Sanjuso WAYS Child Annuity 12,635 24,355 17,49 16,25 21,649 27,229 36,77 34,533 8/1Q 8/2Q 8/3Q 8/4Q 9/1Q 9/2Q 9/3Q 9/4Q 1/1Q This chart shows the number of policies sold by product on a quarterly basis. It s clear that our recent growth in this channel has been mostly driven by our newest EVER product and child endowment product. Our child endowment product, which was introduced to banks in March 29, is similar to traditional banking products in that it is a savings type of product. It also has a favorable pricing structure compared to other child endowment products on the market. Both of these factors have contributed to the widespread acceptance of this product by consumers and banks alike. We introduced revised EVER to banks and the general market in August 29. Since then, this product has also been embraced by bank customers. Although there are no official statistics for market share in the bank channel, we estimate our cancer and medical products dominate with around two-thirds of the total bank market in terms of number of third sector policies sold. 44

46 Sales Activity at Branch Level Percentage of Percentage of Branches Selling Branches Selling Six or More Twelve or More Policies Policies Mega banks 3.6% 14.3% Regional banks Shinkin banks Total 23.% 12.9% As I mentioned, the number of branches and sales representatives actively selling insurance products has been expanding. However, as shown on this chart, only 23.% of all the branches sold six to 11 policies during 29 and just 12.9% of total branches have sold 12 or more policies, which translates into approximately one policy per month per branch. The top producing bank for Aflac Japan in 29 had generated sales of nearly 1 billion. And at that bank, 96% of their branches actually sold 12 or more policies. This number suggests that we have tremendous upside potential for increasing branch sales productivity. Number of Banks Offering Aflac Products No. of Banks Products 12/31/8 3/31/9 3/31/1 Cancer EVER Gentle EVER WAYS Sanjuso Child endowment 133 Annuity Total Average per bank On both an industrywide and per-bank basis, the number of products offered by banks has increased. The fact that more than half of the banks now offer our cancer and EVER products creates a tremendous potential for us to expand our product offerings to include Gentle EVER, WAYS, Sanjuso, and Child Endowment at more banks. The idea of offering an array of products aligns well with the mindset of banks, as most are already implementing, or are eager to start implementing consulting sales. These oneon-one consultations give customers long-term planning options and enable banks to suggest various types of insurance products to meet consumer needs. 21 Strategy for Bank Sales Focus on increasing sales at existing banks Promote adoption of multiple products Leverage government initiatives» Child subsidies» Cancer screening and education The information I ve presented suggests that bank sales are gaining momentum for continued growth. In order to ensure such momentum, we will focus on following strategic actions. First, we will focus on increasing sales at existing banks rather than signing on new banks, as we have already secured agreements with approximately 9% of all of Japan s banks. Next, we will expand into bank branches and tap into sales personnel within these banks to increase the ability to reach more consumers. We have targeted certain banks, which we will assist with adopting best practices from other banks that have been successful, and we are allocating as many resources as possible for its implementation. Second, we will promote the adoption of multiple products by banks. Many banks are now strengthening consulting sales functions to respond to customer needs such as life planning. Our product line will help banks respond to customer needs in many ways. We are providing banks with proposals that contain not only product features, but also other related information that is necessary for life planning consultations and comprehensive training programs to achieve this goal. Third, we will leverage governmental initiatives to facilitate sales of our child endowment and cancer products. The Japanese Government will provide all children up to ninth grade with monthly subsidies of 13, starting in June 21. Banks are very eager to get additional business by suggesting that customers have these payments automatically deposited into their banking accounts. We believe our child endowment is the best use of this subsidy because of its features, pricing and premium. For example, if the monthly subsidy of 13, is used as premium, a child will receive 3 million at the age of 18. Once a bank has sold a child endowment policy, sales representatives at the bank will take the opportunity to suggest other Aflac products, such as cancer and EVER during the consulting service. We believe another government initiative will benefit sales of our cancer products. The Japanese government has been implementing a nationwide effort to combat cancer by increasing the percentage of the population that is screened for cancer from 2% to 5% by March 212. These activities are being carried out by local governments. In addition to this screening initiative, local governments are trying to increase citizens awareness of the importance of early diagnosis. Aflac has been cooperating with local governments, and has already executed cooperative action agreements with almost all of the 47 prefectures. Local governments expect participation of banks in the cancer screening and awareness efforts because banks meet with an enormous number of customers every day, either at branches or homes. These opportunities can easily be utilized to deliver leaflets on cancer and other measures to increase awareness. To this end, we have been incorporating screening and wellness messages into our marketing materials. We are pleased with the government s cancer awareness and screening programs and believe the banks are good vehicles for delivering the message to consumers. In light of these facts and circumstances, we continue to believe the bank channel is a great opportunity for the distribution of our products and we expect further improvement in this channel all through 21 and in years to come. 45

47 Cancer Forte (No CSV) Benefits: Sample Premium (Monthly Group Rate): First occurrence 1,, $ 1,526 3-year-old male 2,781 $ First occurrence annuity* 1, 1,53 4-year-old male 3, Hospitalization/day 1, 15 5-year-old male 5, Surgical 2, 2,15 Outpatient/day 1, 15 Special outpatient/day 1, 15 Advanced medical treatment Up to 5, Up to 5,263 Lump-sum advanced medical treatment 15, 1,579 Cancer death 1, 1,53 *Paid in years two through five following diagnosis. Aflac Japan s Product Line (as of 4/3/1) New EVER (Stand-alone whole life medical) Benefits: Sample Premium (Monthly Group Rate): Sickness or accident hospitalization/day 1,* $ 15 3-year-old male 3,22 $ Surgical 5, to 4, 526 to 42,15 4-year-old male 4, Radiation therapy 1, 1,53 5-year-old male 6,8 64. Lump-sum advanced medical treatment 1, 1,53 *Covers overnight hospital stay. Maximum days per hospital stay is 6. Maximum lifetime days is 1,95. Gentle EVER Benefits*: Sample Premium (Monthly Group Rate): Sickness or accident hospitalization/day 1,** $ 15 4-year-old male 8,39 $ Surgical 1, 1,53 5-year-old male 11, year-old male 14, *Cut in half for occurrences within one year after issue date. **Covers overnight hospital stay. Maximum days per hospital stay is 6. Maximum lifetime days is 1,95. Care Master (One Unit, Individual Coverage) Benefits: Sample Premium (Monthly Group Rate): Care annuity/year 24, $ 2,526 3-year-old male 1,248 $ Lump-sum care benefit* 5, year-old male 1, year-old male 2, *First year only Ordinary Life (Basic plan) Benefits: Sample Premium (Monthly Direct Rate): WAYS 3-year-old male 8,715 $ Payment through age 6 5,, $ 52,632 4-year-old male 14, year-old male 29, Whole Life Sample Premium (Monthly Direct Rate): Payment through age 6 5,, $ 52,632 3-year-old male 9,575 $ year-old male 15, year-old male 31, Child Endowment Benefits: Sample Premium** (Monthly Direct Rate): Lump-sum education 5, $ 5,263 3-year-old male 12,47 $ Education annuities* 2,5, 26,316 4-year-old male 12, year-old male 13, *Paid over four years **Payment through age 18 of the child Note: Premiums in dollars reflect exchange rate of 95=$1. 46

48 s s s s Construction # Taisei Corporation # Kajima Corporation # Takenaka Corp. * Shimizu Corp. # Obayashi Corp. # Tokyu Construction Co. Ltd. Foods # Sapporo Breweries, Ltd. # Kirin Holdings Co., Ltd. * Coca-Cola Japan Company, Ltd. # Ajinomoto Co., Inc. # Nissin Food Products Co., Ltd. # Snow Brand Milk Products Co., Ltd. # Asahi Breweries, Ltd. # Nichirei Corp. # Yamazaki Baking Co., Ltd. # Fujiya Co., Ltd. * Kikkoman Corp. Textiles # Toyobo Co., Ltd. # Kracie Holdings, Ltd. # Renown, Inc. # The Japan Wool Textile Co., Ltd. # Wacoal Holdings Corp. # Teijin Ltd. # Mitsubishi Rayon Co., Ltd. # Kuraray Co., Ltd. Paper & Pulp # Oji Paper Co., Ltd. # Nippon Paper Group, Inc. # Mitsubishi Paper Mills, Ltd. Chemicals # Mitsui Chemicals, Inc. * Showa Denko K.K. # Sumitomo Chemical Co., Ltd. # Ube Industries, Ltd. # Kao Corporation # Dai-ichi Sankyo Co., Ltd. # Takeda Pharmaceutical Co., Ltd. # Sionogi & Co., Ltd. * Astellas Pharma, Inc. # Shiseido Co., Ltd. # Otsuka Pharmaceutical Co., Ltd. # Mitsubishi Chemical Holdings Corp. # Daicel Chemical Industries, Ltd. # Sekisui Chemical Co., Ltd. # Asahi Kagaku Kogyo Co., Ltd. Oil & Coal Products # Cosmo Oil Co., Ltd. # Nippon Oil Corporation # Showa Shell Sekiyu K.K. * Tonen General Sekiyu K.K. Rubber Goods # Bridgestone Corp. Glass & Chemicals # Asahi Glass Co., Ltd. # Nippon Sheet Glass Co., Ltd. Corporations Supporting Aflac Japan s s s (as of 4/3/1) Iron & Steel # Nippon Steel Corporation # JFE Holdings # Sumitomo Metal Industries, Ltd. # Kobe Steel, Ltd. Non-ferrous Metals # Mitsubishi Materials Corporation Machinery # Komatsu, Ltd. # Sumitomo Heavy Industries, Ltd. # Kubota Corp. # Tsubakimoto Chain Co. # Ebara Corp. * Shibuya Kogyo Co., Ltd. # Brother Industries, Ltd. Electric Appliances # Hitachi, Ltd. # Toshiba Corporation # Mitsubishi Electric Corporation # Fuji Electric Holdings Co., Ltd. # Fujitsu, Ltd. # Panasonic Corporation # Sharp Corporation # Sony Corporation # Sanyo Electric Co., Ltd. # Pioneer Corporation # Victor Co. of Japan, Ltd. # NEC Corporation * Ikegami Tsushinki Co., Ltd. # IBM Japan, Ltd. * TDK Corp. Transport Equipment # Denso Corporation # Mitsui Engineering & Shipbuilding Co., Ltd. # Hitachi Zosen Corporation # Mitsubishi Heavy Industries, Ltd. # Kawasaki Heavy Industries, Ltd. # IHI Corporation # Nissan Motor Co., Ltd. # Toyota Motor Corp. # Mazda Motor Corp. # Yamaha Motor Co., Ltd. # Honda Motor Co., Ltd. # Isuzu Motors, Ltd. Precision Machinery # Canon, Inc. # Konica Minolta Holdings, Inc. # Nikon Corp. # Citizen Holdings Co., Ltd. * Seiko Holdings Corp. # Ricoh Co., Ltd. Miscellaneous Mfg. # Yamaha Corp. # Dai Nippon Printing Co., Ltd. # Toppan Printing Co., Ltd. * ASICS Corp. # YKK Corp. Commerce # Mitsui & Co., Ltd. # Itochu Corporation s s s s s ss s s s s s # Marubeni Corporation # Toyota Tsusho Corporation # Sumitomo Corporation # Mitsubishi Corporation # Sojitz Corporation # Isetan Mitsukoshi Holdings # J. Front Retailing Co., Ltd. # The Daiei, Inc. # AEON Co., Ltd. # Skylark Co., Ltd. # Takashimaya Co., Ltd. # Tokyu Department Store Co., Ltd. Long-Term Credit Banks, City Banks # The Shinsei Bank, Ltd. # Mizuho Financial Group, Inc. # Mitsubishi UFJ Financial Group, Inc. # The Sumitomo Mitsui Banking Corporation # Resona Holdings, Inc. Securities, Non-life Insurance # Daiwa Securities Group, Inc. # Nikko Cordial Corporation # Nomura Holdings, Inc. # Mitsui Sumitamo Insurance Group Holdings, Inc. # Tokio Marine Holdings, Inc. * Nippon Koa Insurance Co., Ltd. # The SMBC Friend Securities Co., Ltd. Transportation # Nippon Yusen K.K. # Japan Airlines Co., Ltd. # All Nippon Airways Co., Ltd. # Tobu Railway Co., Ltd. # Tokyu Corp. # East Japan Railways Co. # Odakyu Electric Railway Co., Ltd. * Nippon Konpo Unyu Soko Co., Ltd. # Seibu Railway Co., Ltd. Communications # Nikkei, Inc. # The Asahi Shimbun Co. # Dentsu Incorporated # Hakuhodo Incorporated # The Yomiuri Shimbun Holdings # The Mainichi Newspapers Co., Ltd. # Nippon Telegraph & Telephone Corp. Electricity & Gas # The Tokyo Electric Power Co., Inc. # The Kansai Electric Power Co., Inc. # Chubu Electric Power Co., Inc. Life Insurance # The Dai-ichi Mutual Life Insurance Co. # Nippon Life Insurance Co. * Asahi Mutual Life Insurance Co. # Corporate agent and payroll group * Payroll group Not listed on Tokyo Stock Exchange s Legend 47

49 Aflac Japan Administration Jun Isonaka Senior Vice President; Chief Administrative Officer, Aflac Japan I would like to share information with you regarding Aflac Japan s efforts to provide the best customer service, while at the same time maintaining low-cost operations from an administrative perspective. Let me start with Aflac Japan s low-cost operations by showing you a few statistical comparisons between Aflac Japan and our competitors. Maintenance Expenses Per Policy in Force (FSA Basis, 3/9) Rank by Assets General Operating Policies Expenses in Force (In Millions) (In Thousands) Excluding renewal commissions Source: Disclosure statement from each company Cost Per Policy 1 Nippon 257,77 12,47 21,339 2 Dai-ichi 2,854 11,51 18,175 3 Meiji Yasuda 167,216 8,714 19,189 4 Sumitomo 169,32 8,496 19,895 6 Alico 72,919 5,637 12,935 7 Aflac* 97,577 19,457 5,15 8 Taiyo 53,1 3,41 15, Sony 35,38 4,657 7, Tokio Anshin 39,347 2,446 16,86 As you can see, our maintenance expenses per policy in force are considerably lower than those of any of our competitors. These costs refer to general administrative costs but exclude renewal commissions paid to sales associates. It is worth noting that Aflac Japan continues to rank as the number one life insurance company in Japan in terms of the number of individual policies in force. Furthermore, the number of policies in force used to calculate Aflac Japan s operating cost per policy does not include the number of riders, which makes the figure of 5,15 for Aflac Japan even more remarkable. Rank by Assets Number of Policies Per Administrative Employee (FSA Basis, 3/9) Administrative Employees Policies in Force (In Thousands) Policies per Employee 1 Nippon 12,763 12, Dai-ichi 1,364 11,51 1,66 3 Meiji Yasuda 8,733 8, Sumitomo 9,22 8, Alico 4,38 5,637 1,38 7 Aflac 3,694 19,457 5,267 8 Taiyo 3,32 3,41 1, Sony 1,273 4,657 3, Tokio Anshin 1,453 2,446 1,683 Source: Disclosure statement from each company This slide shows the number of policies in force per administrative employee. As you can see, Aflac Japan also achieves efficient operations through employee productivity. This measure shows that our employees administer about five times the number of policies in force, compared with various large domestic life insurance companies. This difference in productivity helps explain how we maintain a low-cost-operation advantage. Efficiency Improvement Measures by Leveraging IT AANET e-app eco Aflac Net Billing One key to achieving efficient business operations is by reducing costs. At the same time, however, we want to maintain quality customer service. In order to achieve this goal, Aflac Japan and Aflac U.S. have benefited for years by sharing best practices between operations and also by leveraging IT solutions for specific initiatives. Let me give you an idea of how some of our actions are benefiting Aflac Japan s operations. AANET is a system Aflac Japan developed and launched in 2 that provides information and services to Aflac sales associates via the Internet. AANET enables us to extract and sort customer data by various categories such as product, age, address, or group attributes, and is also used as a sales support tool for activities such as suggesting suitable additional policies or riders. AANET also generates premium quotes, verifies the policyholders policy status and downloads policy maintenance-related documents, along with many other services. Paper-based policy maintenance forms were discontinued in February 29, and now all of these forms are downloaded via AANET. In March 28, we enhanced AANET to allow the statement of premiums remitted from an associate to be sent electronically to Aflac via AANET. As a result, associates no longer need to stock paper forms in their offices. This function also virtually eliminated human error from manually calculating the amount of the statement. In addition, associates can now use AANET to print forms for customers who would prefer to pay directly into Aflac s bank account. Many consumers tell us that this function is much more convenient because they can now pay premiums at places they already frequent, such as Seven-Eleven stores, whereas before, they could only make payments at banks. The next initiative I would like to touch upon is e-app, a system that facilitates the electronic submission of applications instead of using traditional paper-based forms. This system, which was launched in 23, is modeled after the SmartApp laptop enrollment used by Aflac U.S., with an electronic policy application system to ensure a speedy and accurate application process. About 36% of the applications that are eligible for the e-app software were submitted through this electronic system in the first quarter of

50 Since 21, we have been using eco, a tool designed for our agents to download from AANET application forms. This tool contains pre-printed customer information, including the customer s name as well as premiums. While e-app is used in face-to-face applications, eco is a flexible and convenient tool that can be used even for non-faceto-face applications. In the first quarter of this year, eco applications accounted for 32% of the paper applications that are eligible for this eco system. The fourth initiative I will highlight is the Aflac Net Billing system. This system was developed to replace the monthly paper bills we send to our payroll accounts. This tool enables the access to the monthly billing data and the processing of various billing procedures through the Internet. The Life Insurance Association of Japan started promoting such a Web-based billing system in 29. We re very proud that Aflac implemented the Net Billing system in 21, well ahead of the industry. A webbased billing system helps achieve a paperless operation, reduce the workload of payroll accounts and improve administrative accuracy through automatic calculation, while at the same time allowing insurance companies to simplify and streamline their administration processes. At the end of March 21, about 67% of Aflac s payroll accounts had adopted the web-based billing system, a two percentage point increase over last year. Also, there is a function in this billing system that allows administrative employees at those payroll accounts to enter retirement dates of upcoming retirees. That way, we can be informed of that information, which in turn enables us to send out policy continuation forms to those would-be retirees in a timely manner. Aflac s Inbound Call Centers Aflac Call Center (Inquiries from existing policyholders) (Inquiries from prospective customers) Associates Support Center (Inquiries from sales agencies) Alliance Support Center (Inquiries from banks, Japan Post and Dai-ichi Life) associates with information about any inquiries made by their customers who had directly called into the Aflac Call Center. For example, when customers call to share that they have gotten married, given birth, or had another lifechanging event, sales associates are informed on a timely basis. That way, they can follow up, which in some cases leads to new sales. We believe offering high-quality service through the call center contributes to improving customer service and is a very important element in building strong relationships with all stakeholders, including our customers, sales associates and banks. 1 % Surrender and Lapse Rates (Individual Insurance Only, FSA Policy Basis) Source: Japan Institute of Life Insurance Just as we strive to earn new business, we are continually working to preserve our in-force business. This graph shows our surrender and lapse rates for individual insurance policies. At nearly two percentage points lower than the industry average, Aflac Japan s surrender and lapse rates have, for many years, been fairly low. The most recent uptick in fiscal year of 28 reflected the general economic conditions and the retirement bubble in our in force business. 1 % Life insurance industry Aflac Ratio of Not-Taken Policies (Percentage of All New Applications) Next, let me discuss Aflac s Inbound Call Centers, which play an extremely important role in serving our customers and associates We have three centers for inbound calls, and each is separated according to the type of caller. One is the Aflac Call Center, which receives inquiries from existing and prospective policyholders. The second is the Associates Support Center, which takes calls from our associates. And the third is the Alliance Support Center, which is equipped to take calls from our large sales channels such as banks, the Japan Post Network Co., Ltd. and Dai-ichi Life. Aflac Call Center operators not only respond quickly and accurately to customers inquiries, they also suggest sending brochures to customers for new policies. Through AANET, the Aflac Call Center also provides our Source: Internal Aflac data We are making a concerted effort to reduce nottaken policies, which are policies that we are unable to issue for a variety of reasons. In order for our sales associates to see how not-taken policies could impact 49

51 their business, we have been providing them with materials on estimated profit losses on not-taken policies. By sharing this information with associates, we have personalized the potential impact, which has helped motivate our agencies to reduce the number of not-taken policies. The not-taken rate had been increasing until 22. However, since focusing on this measure, we have had a fairly stable rate from 23 through 27. In 28, the rate improved by.8 percentage point due to the introduction of the bridge cancer policy that allows existing policyholders to upgrade their coverage to match that of Cancer Forte. Because this bridge policy targets our existing policyholders, fewer customers tend to be declined for medical conditions as they had already passed the underwriting for the base plan. For the same reason, it is much easier for Aflac Japan to collect first-time premiums from those customers. All these led to a lower ratio of nottaken policies. Key Points to Improving Persistency Rates We believe the key to improving persistency rates is to encourage our sales associates, who tend to have more direct contact with customers than our headquarters, to take the lead on appropriate follow-up actions. In order to support our associates in taking such actions, we have been emphasizing the importance of improving persistency. We do this by educating our associates by providing them with information such as not-taken policy rates, surrender and lapse rates, and successful initiatives of other associates. By doing so, we can create an environment where associates understand the need to follow up with their customers and improve persistency. Ultimately, the associates benefit because persistency generates a continuation of commission payments Sales agencies take follow-up action Communicate the importance and financial impact of improving persistency rates to sales agencies Claims Payments (Yen in Billions) Source: Internal Aflac data Medical/Rider MAX Cancer This chart shows the actual claims payments in yen between 2 and 29. As you can see, the actual payment amount has been growing steadily. In 29, we paid about 37 billion on about 27, cancer claims. The total amount of yen paid on medical policies in 29 was about 85 billion, but we made approximately 46, payments, which was greater than the number of cancer insurance payments. We receive a lot of feedback from our customers who have received benefits from us, and virtually all express their appreciation. Here are some of their words: Whenever I take out a medical policy, I have some concerns about whether I really will be paid later on. But I was surprised by how quickly Aflac Japan made the payments. Thank you. I felt relieved by the kind response from your company, and I was satisfied with everything you did for me, from the receipt and handling of my claim to the prompt benefit payments. You didn t treat me in a cold, all business way; I was pleased to receive very thoughtful words from you. I actually thought I might need to fight for the payments. But it turned out that you paid so quickly. Thank you very much. The most important service an insurance company can provide is to live up to its promise of paying benefits promptly when policyholders need them the most. And we remain dedicated to providing quick and accurate claims payments. There are basically three steps in the claims payment process: first is the filing of the claim; second is the claim data entry, and third is the claim evaluation. To further improve the accuracy of claims payments, we consolidated the first two steps in Tokyo and Osaka in 28. In 29, we completed our consolidation efforts by bringing the third step of the claims process to Tokyo and Osaka. As a result, we now have all of our claims operations in two locations. This was done in an effort to narrow or eliminate discrepancies in levels of accuracy among locations. We strive to make fundamental changes to our organization and pursue even more accurate payments through education, training, and other avenues to improve staff skills and achieve the same level of service quality. In closing, I would like to explain the companywide business operations improvement efforts we have been promoting since Dozens of intra- and interdepartmental teams are set up each year to work on various relevant business operation improvement initiatives. Currently, the effort is called Change and Create and all participating teams compete against one other. These types of activities foster innovative thinking and nurture a culture that continually prioritizes operational efficiency as an important objective. The improvement activities are not just conducted on a group level they are also conducted on an individual level, which we call kaizen. We have a companywide database all employees can access to register their improvements. One improvement builds on another by obtaining hints from ideas in the database. We continue to believe a low-cost operation is one of Aflac Japan s greatest competitive strengths. Our lowcost operation is a source of pride for our employees at Aflac Japan, and they are all dedicated to pursuing ways to improve our business operation and better serve our customers. Aflac Japan will continually make efforts towards maintaining its low-cost operations while also enhancing services to customers. 5

52 Section III Aflac U.S. Introduction to Aflac U.S. Paul S. Amos II President, Aflac; Chief Operating Officer, Aflac U.S. My presentation and the two that follow will provide you with an overall look at our business operation in the United States, starting with the strategy we use to grow our business. Aflac s Strategy for Growth Aflac s strategy for growth has remained straightforward and consistent for more than two decades. Our focused, two-part strategy of expanding our distribution system while developing new products to match consumers needs has been very effective for us and has given us greater access to potential customers. On the distribution side of the strategy, Aflac is represented by independent sales contractors, or sales associates, who sell our products. We ve often been asked whether we would consider an acquisition to expand our distribution; and, while we ve said that we would consider an acquisition if it would create the right kind of synergy for Aflac, over the course of Aflac s 55 years of operations, we have decided against doing so until last year. Last year, we identified an opportunity with potential synergy that swayed us to consider an acquisition, and we transformed that opportunity into reality. As you probably know, I am referring to our decision to acquire CAIC, now branded as Aflac Group Insurance. This acquisition was a strategic expansion of our product line and distribution and it extends our reach into the medium to larger case market where we ve previously had only a small presence. Size of Firm New Products Sold through Expanded Distribution Channels Yields New Accounts and Policyholders The Small Business Market (26) Number of Firms () Number of Employees (Millions) % of Total Employees - 19 Workers 5, % 2-99 Workers Workers Total 6, % Even with our expansion into the medium to larger case market, which I will cover in more detail shortly, the small business market or businesses with fewer than 1 workers continues to dominate our business. According to the most recent data from the U.S. Small Business Administration, the United States had approximately six million businesses in 26 with fewer than 5 workers. Based on U.S. Census data, our 444,5 payroll accounts at the end of the first quarter only represent about 7.4% of the small-business market, still making the United States a very sizeable and attractive market. Because the small business market remains underserved, we still believe there is a significant opportunity, and we are determined to maintain our position as the leading provider of supplemental insurance in the small business market. Simply because of their size, small businesses are particularly vulnerable to economic downturns. But with economic recovery, it is likely that small businesses will grow. This means our opportunity to sell to smaller businesses will likely grow as well because the number of small businesses, and the people employed at them, are likely to increase. Size of Firm The Business Market (26) Number of Firms () Number of Employees (Millions) - 19 Workers 5, % 2-99 Workers Workers Subtotal 6, % 5 + Workers Total 6, % Source: U.S. Census Bureau Tabulations by Enterprise Size, 26 % of Total Employees Small businesses with fewer than 5 employees represent just over half the market in terms of number of employees. Since Aflac s founding, this has been our core market. Yet if we were to focus solely on this market, we would clearly be leaving money on the table. By purchasing Continental American last year, we believe we have significantly increased the addressable market and are now much better positioned to reach the nearly 6 million employees who work at large businesses. Source: U.S. Census Bureau Tabulations by Enterprise Size, 26 51

53 Aflac s Distribution Channels Number Average weekly producers 11,9 Licensed sales associates 74,5 I mentioned that expanding our distribution capabilities represents one pillar of our two-part growth strategy. As you ll hear from Ron and Jeff, we re continually working on ways to enhance the capabilities of our sales force and brokers to give them the best chance for success. Sales associates are the most visible asset in our distribution channel. Each individual sales agent delivers our products primarily to employees of payroll accounts. In addition, the agent services those accounts not only through the initial sales process, but also by selling to new hires and annually renewing or modifying the policies of existing policyholders. Aflac has created a strong and capable sales force with more than 74,5 licensed sales associates, including nearly 11,9 who, on average, produced business every week in the first quarter of 21. The sales hierarchy in the field has been carefully established to promote the sales activities that grow our business. We have a hierarchy of sales managers, known as coordinators, who share a focus on recruiting, training and other important sales activities to grow our sales force while equipping them for success. You ll hear more from Ron about this later. Aflac s Distribution Channels - Expanded Number Average weekly producers 11,9 Licensed sales associates 74,5 Brokers 8 Marketing organizations 16 Now that Aflac Group Insurance previously CAIC is a part of our distribution system, we have expanded our reach. Not only do we still have our team of sales associates and coordinators who ve traditionally sold Aflac products, but now we also have access, via Aflac Group Insurance, to the 16 marketing organizations and 8 brokers with whom CAIC had already forged strong relationships. Aflac U.S. Product Line The other pillar of our two-part growth strategy is the continual refinement of our product line in order to respond to consumers needs with relevant, voluntary products. Our focus on individual products has been very successful for more than five decades. Aflac products were created specifically to pay for expenses that major medical or a national health care program does not cover. When a policyholder gets sick or misses work, the cash benefits our products provide can be used toward daily living expenses like groceries, child care, rent and mortgage payments, or out-of-pocket expenses such as the cost of transportation to and from medical facilities. While we believe the need for the cash benefits Aflac provides policyholders has only intensified over the last few years, we have also begun to see a shift in preference among employers for voluntary products offered on a group platform. 22 % New Sales in the Voluntary Group vs. Individual Platform (2=1) Group Individual Source: 29 Eastbridge Study; Renewal/re-enrollments in group platform not included in new sales According to data from Eastbridge, individually issued products made up approximately 52% of the total supplemental insurance market in 28, with group contracts accounting for the balance. Although the market is pretty evenly split for these two product platforms, the growth rates have been significantly different. New sales of individual products were roughly flat from 26 through 28. In fact, excluding Aflac s sales contribution, the sale of individually issued products has trended down over the last three years. However, the market for group products has been increasing at a good pace during that same three years, rising at an average of rate of 1.1%. Aflac U.S. Product Line - Expanded Individual Accident/disability Cancer indemnity Short-term disability Hospital indemnity Intensive care Sickness indemnity Specified health event Fixed-benefit dental Vision Term life Whole life Juvenile life Individual Voluntary Group Accident/disability Accident Cancer indemnity Short-term disability Short-term disability Critical illness Hospital indemnity Hospital indemnity Intensive care Whole life Sickness indemnity Term life Specified health event Fixed-benefit dental Vision Term life Whole life Juvenile life 52

54 Although Aflac products have traditionally been offered on an individual platform and CAIC products on a group platform, the product lines of the two companies are very similar. We have always been committed to meeting the evolving needs of consumers in a changing environment. Offering group products is yet another way we can leverage our competitive strengths and reach more people with more product options. With the capacity to offer voluntary coverage on either a group or an individual platform, I believe our portfolio couldn t be more relevant to today s market, and we are well positioned to make a difference in people s lives by offering the products they need to protect their financial well-being. Competitive Environment AIG Allstate American Fidelity Assurant Colonial Combined Conseco MetLife Transamerica Unum Group Certain regional carriers Over the last five-plus decades, we have competed with various companies, both large and small. Some of these companies have stood the test of time, and some have withdrawn from the supplemental/voluntary market. But the fact that others are showing increased interest in this market only serves to bolster our assertion that there is a strong need for the type of products we sell. But I do want to point out one major difference between Aflac and all the rest of the competing companies: For Aflac, voluntary insurance sold at the worksite represents virtually all of our focus, whereas our competitors tend to offer voluntary products as a peripheral line of business. We believe that maintaining a disciplined focus on one insurance category has given us an edge that has contributed to our marketleading position. Competitive Environment - Expanded AIG Reliastar Allstate Trustmark American Fidelity Assurant Colonial Combined Conseco MetLife Transamerica Unum Group Certain regional carriers Although we have a couple new competitors now that have entered the group product arena, many of our competitors have remained the same. However, I should point out that many of our traditional competitors were already offering group products. As a result, our acquisition of CAIC has effectively allowed us to plug competitive gaps and establish Aflac as a strong competitor with brokers and in the large account market. Aflac s Payroll Accounts by Employee Size (March 31, 21) Employee Size Aflac - Traditional # of Accounts % of Total , , , , , ,12.7 1, - 4,999 2, , - 9, , Total 444,161 1.% Historically, our U.S. business has centered on small businesses. In fact, 92% of our payroll accounts have fewer than 1 employees, while about 7% of our policies were written in medium-sized accounts with between 1 and 499 employees. Only a limited number of our accounts have more than 5 employees. Appeal of Individual Platform to Small Businesses No direct cost to employers Ease of administration Helps attract and retain employees Complements other benefits Possible employer and employee tax savings We have focused on selling individually issued products through small businesses not only because of the sheer number of businesses in this category, but also because individually issued policies have strong appeal to the employers who give us access to their workers. For instance, our individually issued products are voluntary, meaning the employee pays the premium and there is no direct cost to the employer. The products are easily administered. In effect, all the employer has to do is to provide us access through payroll deduction. The products help attract and retain employees, especially in tight labor markets, and they work very well with other companyprovided benefits. Additionally, some of our products may offer employers and employees tax savings. 53

55 Employee Size Aflac s Payroll Accounts by Employee Size - Expanded (March 31, 21) Aflac - Traditional # of Accounts % of Total Aflac Group Insurance # of Accounts % of Total , , , , , , , - 4,999 2, , - 9, , Total 444,161 1.% % different from the standard or base policy. And finally, large accounts and brokers want one simple and universal application for all core products offered by that company not different applications for various products. Broker Influence in Payroll Market Businesses by Number of Employees % Using a Broker % 51-2, 79 2,1-5, 78 Source: Eastbridge, The Employer Viewpoint Update, 2/1 In contrast to Aflac s focus on employers with fewer than 5 employees, CAIC has been concentrating on the larger end of the spectrum businesses with more than 1, employees. It is important to note that although less than 1% of CAIC s accounts have 1, or more employees, historically about 7% of CAIC s premium comes from the large-case market. Compare that with the fact that 7% of the business from Aflac s traditional distribution comes from businesses with fewer than 5 employees, and it is clear that together, Aflac and CAIC complement one another by creating a significant presence in both the smaller- and larger-case markets. Characteristics of Businesses that Prefer Group Platform Medium-sized accounts from 1 to 5 employees Large-sized accounts with more than 5 employees Brokers control majority sales in the group and larger market Unlike small businesses, medium and large accounts typically prefer offering insurance products on a group platform. Also, the majority of mid- to large-sized accounts use insurance brokers to handle their insurance coverage. Appeal of Group Platform Products Guaranteed/simplified-issue products Customization of products Universal application for all products Research confirms that medium- to large-sized businesses and brokers prefer doing business with insurers that offer a group platform for insurance. There are three main product characteristics that large accounts and brokers find appealing. First, larger accounts and brokers tend to prefer the simplification of guaranteedissue policies sold on a group platform because it makes enrollment easier. Second, large accounts and insurance brokers are accustomed to dealing on a larger scale that allows for products to be custom-designed with the specific benefits they want, which are quite often We believe there is a significant opportunity to stimulate future growth by pursuing partnerships with insurance brokers. According to the U.S. Census Bureau, 64.4% of employees work at payroll accounts with more than 1 employees. As the slide demonstrates, the vast majority of these accounts use brokers to help identify the products that best suit their insurance needs. Aflac for Brokers Initiative Quality services» Increased support staff Value-added services Compensation packages Streamlined products Our efforts to build new and better relationships in the regional and large-account broker markets began in 27. In January 29, we officially launched our broker initiative, Aflac for Brokers. Our message to brokers is simple: We want to compete for broker business and provide value for their clients in four basic areas. First, we provide brokers with quality service. We added Broker Development Coordinators, or BDCs, each of whom is assigned to a geographic area and acts as is a single point of contact for brokers whose clients have 1 or more employees. Their job is to drive new broker business on either the group or individual business platform. Additionally, these BDCs report to a newly created market vice president, or MVP, position. We hired 15 new MVPs, each of whom is already seasoned with experience in the insurance broker business. Each MVP oversees a particular geographic area and implements defensive strategies while increasing penetration of all existing large accounts, as well as coaching and training BDCs within their geography. Additionally, when BDCs or state sales coordinators (SSCs) need help closing a large account, the MVP can be called on to assist. Second, we offer brokers 1 value-added services, the most visible of which is Wingspan, Aflac s new core benefits enrollment system. This is a software program that allows Aflac to interface with existing broker systems and can stand alone as well. Third, we offer competitive compensation packages without increasing expenses related to the total commissions paid. And finally, we offer several streamlined and relevant products directed at the broker market. 54

56 However, even with all of these initiatives, it became clear that the ability to offer products on a group platform was an imperative in order for us to be a successful contender in the growing broker market. This was a large factor in our ultimate decision to acquire CAIC last year. Because this acquisition was unusual for Aflac from a historical context, I d like to take a couple of minutes to share our thinking with you. Options for Entering the Group Market Build internally Joint venture Acquisition First, we considered creating and building an infrastructure internally. However, the time required to build the capability ourselves would have significantly slowed down our entry into the group market. This option would have also involved significant upfront costs to hire a third party administrator for approximately two to three years while we finalized our group administration capabilities. Most important, we knew that our inexperience in this area could also have led to unforeseen costs or service issues, which could have been detrimental to our large account relationships and brand. We also considered a joint venture. Yes, it would have allowed us to avoid a large upfront investment, but it would also have limited our potential return, not to mention our control. It would still require us to bear the IT and administrative expenses that accompany integration. Our control over the development, pricing and administration of those products could be limited. That was a risk that caused us great concern. We obviously concluded that the best course of action would be an acquisition. This option provided us with complete control of management and operations, while retaining key leadership personnel. Aflac also gained immediate access to a portfolio of ready-to-sell products and the expertise of management with a proven track record in underwriting and administrative capabilities. Also, the acquisition allowed us to give our field force something they d been asking for: A place at the table when employers and brokers are looking for group insurance products and also a turnkey platform for introducing new group products. Why CAIC? We narrowed our search to 15 potential companies with criteria ranging from the products we wanted, the size of the company, and the company s reputation, which was critical. Continental American Insurance Company stood out from the beginning. All the data pointed to the unique pure-play option CAIC offered so Aflac could immediately enter the group voluntary market, while also keeping our risk exposure minimal. Continental American Insurance Company, which was founded in 198, is now licensed in 49 states and the District of Columbia, and has more than 16 employees. We were attracted by CAIC s consistent track record of sales growth and profitability. They were rated A- by A.M. Best. That rating has since been raised to A+. They also had a strong statutory capital position with a 28 RBC ratio of 569%. Like Aflac, they are very focused on what they do. In fact, group voluntary insurance products are all they do. At a purchase price of $1 million, the financial risk of the acquisition was fairly low. CAIC also had the solid actuarial, underwriting, administrative, and IT capabilities with the scalable potential we were seeking. Additionally, they had gained a solid reputation in the industry, and there seemed to be a strong cultural fit. Although CAIC had rejected offers from other companies in the past, they also felt our two companies fit together perfectly. Integration of Aflac and Aflac Group Insurance Leadership remains in Columbia, SC Group operations remain in Columbia, SC Aflac Worldwide Headquarters provides support from various areas Cross-functional team in place to support remaining integration issues Aflac Group Insurance leadership and operations will remain in Columbia, South Carolina. The day-to-day management control for the operational areas of the business will also remain with the management of Aflac Group Insurance. Aflac Worldwide Headquarters will offer support from various departments including Financial, Legal, Regulatory, Compliance, Investor Relations, Marketing, and other areas as needed. A cross-functional team at Aflac is in place and is dedicated to integrating the two businesses effectively and efficiently. Consistent track record of sales growth and profitability Rated A- by A.M. Best for financial strength* Strong capital position Entirely focused on group platform Strong, competitive product line similar to Aflac Low financial risk Solid and scalable capabilities Solid reputation in the industry Strong cultural fit *Currently rated A+ by A.M. Best 55

57 We re convinced that Aflac Group Insurance is the right complement to our core strategy of enhancing our product line and expanding our distribution. We believe the addition of a group product platform was an important piece for providing brokers with the types of products they prefer. At the same time, we expect that group products will enhance the sales opportunities for our traditional sales force of individual associates. In fact, our sales force is very enthusiastic about the new group products. We also believe this will better position us to tap into the large payroll account market as larger businesses typically prefer group products. Admittedly, we have some catching up to do in that marketplace, as some of our competitors have been offering group products through brokers for many years. In addition, because of Aflac Group s small size, it will take a while for group sales to meaningfully impact our overall U.S. sales results. However, we expect to see strong sales growth on the group side of our business in the future. Aflac s Competitive Strengths Products Distribution Brand The same competitive strengths that we have applied to our individual sales platform also apply equally well to our new opportunity to sell products on a group platform. I ve shared information about two of those competitive strengths our products and our distribution. But our brand is another important competitive strength that helps sell our products and makes it easier for our associates to gain access to our business. Our advertising featuring the Aflac Duck has produced brand recognition of 94%, while positioning Aflac as an approachable company and setting us worlds apart from other insurance companies. As the Aflac Duck celebrates his 1th anniversary, we celebrate the many ways he has touched our business. Jeff will provide you with some detailed information about our branding efforts. I hope you have taken notice of our current campaigns, which were designed to get the attention of consumers, businesses and brokers, and then educate them on exactly how Aflac products can add financial protection and peace of mind. Just as we have been successfully leveraging the Aflac brand to promote our traditional products over the last decade, we will now leverage our brand to promote our group products and expanded distribution platform. The Challenging Environment Aflac is working to maximize long-term potential Economy has taken financial control away from many people» Aflac is conveying how products give some control back Passage of health care reform answered some questions, created some new questions» Gives Aflac the opportunity to clarify how Aflac products help We view these difficult times as an opportunity to step back, affirm what we are doing right, re-evaluate areas we can improve upon, and ultimately forge the path that best maximizes our long-term potential. Clearly, the challenging economy has made many people feel helpless in many areas of life. Now more than ever, it s important that we convey how Aflac products help people wrestle back some control through our unique solutions that protect policyholders. The recent passage of health care reform has provided closure to some questions, yet its implementation has raised a new set of questions for others about what it means to their health care situation. We believe there will be greater opportunities in the future to loosen the paralysis by analysis grip that has stymied many consumers and businesses by educating them about how our products can help. Whether it s peace of mind or financial protection, we want to reassure consumers, businesses and brokers alike that we ll be there to protect them when they need us most by telling them We ve got you under our wing. For 55 years, Aflac insurance policies have given policyholders the opportunity to focus on recovery, not financial stress. In today s competitive marketplace, we must take advantage of every opportunity to enhance and expand our business. We believe the addition of the group platform will enhance our presence in the broker market as well as assist our existing sales force to better penetrate the medium- and large-sized payroll account markets. At the same time, we want to continue as the leader in the small business market with individually issued products. I want to emphasize that we are not moving from individual to group we re now offering both. We believe our strategy for growth will be significantly enhanced, and we are better prepared for the future because of our broader range of products offered through a more diverse distribution system. Our impetus is not to improve numbers for just this quarter or next; we re in the business of offering voluntary products at the worksite for the long term. We don t view progress in our business as a sprint we view it as a marathon, and we are preparing to go the distance for our policyholders, field force, employees, shareholders, philanthropies, and everyone whose lives we touch. 56

58 Aflac U.S. Marketing M. Jeffrey Jeff Charney Senior Vice President; Chief Marketing Officer, Aflac U.S. When I presented to you 364 days ago, we d just introduced the most integrated marketing campaign in Aflac s history. It featured our new tagline, We ve got you under our wing, and centered on an effort called Get the Aflacts. With brand recognition at an all-time high, our objective was now to define our brand to show consumers what types of products and services we provide. In other words, we wanted to go from brand recognition to brand definition. We believe that if more people know what we do, more will buy our products. The Aflacts campaign sparked a 4% jump in traffic to aflac.com, literally overnight, which told us consumers were eager to learn more about Aflac. Fast forward to today and our new You Don t Know Quack campaign, which builds on the success of Aflacts with an even more powerful and memorable message supported by more than 4 integrated marketing elements. I don t have time to talk about all of them (something you re no doubt relieved to know), but I do want to share some key initiatives. Park Bench YDKQ We knew that it was time to take awareness to the next level, and in early January of this year, we launched You Don t Know Quack, an all-encompassing marketing campaign that tells Americans if all they know about us is the Duck, well They don t know Quack. Household Name Household Need HOUSEHOLD NAME HOUSEHOLD NEED PARK BENCH In the minds of consumers, Aflac was born on a park bench 1 years ago. That was the setting for a simple television commercial starring two men and a slightly testy duck, and it catapulted our company into public consciousness. Today, more than 9% of Americans know Aflac or, at least, they know our name. But just four in 1 can take awareness a step further by identifying what we actually do. Most will say we re a financial services company or a bank, or that we sell some kind of insurance. At Aflac, Marketing s primary role is to generate consideration. What do we mean by that? It means it s our job to create understanding, to create need, to create value and to create demand for our products. At Aflac, we call it consideration and it ensures that when people are ready to purchase the products we offer, the Aflac name is at the top of their go-to lists. Key to that positioning is taking Aflac from household name to household need. What better time to do that than 21, which coincides with the Aflac Duck s 1 th birthday? Marketing Delivery Funnel Promotions Social Media YDKQ Sponsorships B2B Marketing Brand Definition 57

59 This is an incredibly aggressive and strategic campaign. Imagine a funnel as the visual representation of our recognition-to-definition initiative. We begin at the funnel s widest point the top with our broad marketing campaign: television, print and Internet ads. Then, the funnel narrows with initiatives for increasingly targeted audiences: promotions, public relations, social media all the way to its narrowest point, one-on-one meetings with customers. The key to the funnel concept is integration making sure that all of our marketing initiatives work together seamlessly, both in tone and in content. YDKQ Campaign Components commercials at least 8 times. Now, I d like to show you the commercials. YDKQ Stats Since campaign launch January 21:» Aflac.com traffic increased 34% to 5.8 million» Calls to Aflac up 6%, an increase of 11,» Twitter following up 44%» 18, Facebook interactions» Combined Twitter and Facebook audience of 24 million individuals» Sales force ordered more than 2.8 million Quack Packs Sunset Newspapers Times Square YDKQ Campaign Components Non-traditional B2B Magazine Since the campaign launch in early January, we ve had more than 5.8 million visits to the newly redesigned aflac. com, a 34% increase over the same period last year. Calls to Aflac are up by nearly 11, over the same period last year, an increase of 6%. Our Twitter following is up by 44%, and there have been more than 3,3 tweets specific to the campaign itself. Plus, we ve had more than 18, Facebook interactions. The combined audience for Twitter and Facebook interactions is more than 24 million individuals. Pays Cash Zero Cost 1 Seconds Our You Don t Know Quack campaign, or just Quack as we call it, launched January 4. It encompasses television commercials, print advertising, social media, experiential marketing, product tie-ins, co-branding, billboards, sidewalk ads, a revamped Internet site and more. You name it, we have it covered. The key to Quack is simplicity. We re challenging Americans, in a playful, clever and humorous way, to tell us who we are. Instead of pushing information to the public, we re pulling it from them. It s called reverse dialogue and it s among the best ways to ensure a message is remembered. The media has embraced the Quack campaign, with more than 38 media outlets running stories about the effort. That s the equivalent of 22 million impressions. An important measure of whether a campaign will work is the reaction of our sales force and our sales team loves Quack. They ve ordered more than 2.8 million Quack Pack items (tools that go hand-in-hand with the campaign message). That s a 38% increase over the number of orders we received for Aflacts sales materials. As I mentioned earlier, Aflacts was the campaign we discussed at last year s briefing. Facebook: Engaging People We began our campaign with web sites featuring targeted messages for consumers and business decision-makers, ads in major publications, disruptive messaging on high-viewership billboards and Internet sites, and the launch of three new commercials. Two of those commercials were digital, as opposed to live action, which is a departure from the norm, but we wanted to accomplish something different to shake things up a bit. One of these digital spots is geared more to the consumers perspective, and one focuses on how Aflac products help businesses. The third commercial, which premiered during the opening ceremonies of the Winter Olympics, is more in line with the style of our previous commercials, but concisely clarifies what we do with a snowboarding Aflac Duck and NASCAR s Carl Edwards bantering back and forth on the slopes. By the end of March, 9% of our target audience American adults between the ages of 25 and 54 had seen our 58 Aflac Duck has 172, fans Aflac's Facebook Cause made history» $1.16 million raised for the Aflac Cancer Center» Most successful Facebook cause ever, with 9, fans Since the Aflac Duck dipped his webbed foot into the social media arena in April 29, we ve used the Web to connect with current and potential customers. Through the Duck, we ve entered into a first-of-its-kind, two-way conversation with more than 172, fans and followers on Facebook and Twitter. We ve used the conversations to inform them about Aflac, our products and our company s charitable efforts and fans have responded with thousands of comments about their great experiences with Aflac.

60 In 29, Aflac used Facebook to transform lives through its Facebook Cause page. Through a budgeted matching grant campaign with the Aflac Foundation, we raised more than $1.16 million for the Aflac Cancer Center and attracted nearly 9, fans in less than 3 days, making it the most financially successful and popular Facebook Cause to date. Contributors made instant credit card payments at the time of donation. 1 Second Challenge Aflac last year affirmed our decision to sponsor driver Carl Edwards. Our research indicated that 48% of NASCAR fans would consider purchasing insurance from Aflac, compared to 23% of non-fans. Avid fans reported a nearly 5% increase in Aflac product usage over the previous survey. In the past year, our NASCAR sponsorship helped us generate additional annual premium and largecase account growth as a result of hosting current and prospective customers and their employees at races and car-show events. The sponsorship also generated 235 million impressions worth more than $35 million in advertising not to mention the many relationships we will continue to leverage for the future. Business-to-Business Marketing 18 video entries 24, video views 21 million online impressions Recently, Facebook was the hub of our 1 Second Challenge, which asked Americans to submit a video defining Aflac in a quick 1 seconds or less. The challenge winner, 22-year-old newlywed Matthew Hoelter, received $25, for his entry, which featured simple and eyecatching illustrations and visuals. Matthew may have won the contest, but Aflac won, too the contest took definition to the next level, generating 18 entries, more than 24, video views and more than 21 million online impressions. Now, I d like to show some of the best moments from the video entries. Take a look. NASCAR 2% of Fortune 5 Companies involved in NASCAR 48% of fans would consider buying insurance from Aflac $23 million in annual premiums generated from 79 new accounts $35 million in value from 235 million impressions generated Two years ago, Aflac introduced a new component to its marketing strategy: business-to-business advertising. It was and remains our goal to speak directly to business decision-makers through our marketing efforts. We also support our agents in this effort with collateral materials, toolkits and a B2B information center. This year, we updated and enhanced those materials, unifying them with a clean, clear and concise message that extends from our ads and Aflac for Business web site to our employer sales folders and inserts. Why? It s simple: In 29, nearly 94% of Aflac sales were made through businesses, and almost 56% of new sales came from existing accounts. Wingspan Aflac also generates brand affinity and understanding through sports-related sponsorships. They re an interactive way to be part of our customers lives, leverage our brand, and allow us to interact with individuals and accounts in one-on-one setting. I ll highlight our best-known partnership: NASCAR. Our involvement with this sport is just one of the many ways we have diversified our media mix and continue to deepen our integration strategy. NASCAR fans are intensely passionate about their sport, and companies throughout the nation have noticed. About 2% of Fortune 5 companies are involved with NASCAR. We re using those affiliations to develop programs that allow us to meet with key decision-makers on and off the track. Additionally, research conducted by 59

61 In 29, Aflac combined its employer tools under Wingspan SM Services and Solutions, a suite of valueadded offerings designed to meet increasingly complex needs. We conducted research to find out what employers wanted, and those who saw the Wingspan package told us they would switch to Aflac just to have access to its services. Wingspan s offerings are grouped into four categories: tax savings for employers and employees; easy, online benefits administration; simple enrollment solutions and benefits-package enhancements. Aflac.com We started strong with an aggressive broker-targeted marketing campaign and it s working: Aflac for Brokers SM has become the preferred provider of voluntary insurance among its target audience. A recent survey of 358 brokers conducted by Personified, a business-intelligence researcher, ranked Aflac No. 1, up 16% from its fourthplace ranking last year. Aflac for Brokers also received favorable reviews for satisfaction and familiarity. Aflac U.S. Product Line Individual Voluntary Group Old New Accident/disability Accident Cancer indemnity Short-term disability Short-term disability Critical illness Hospital indemnity Hospital indemnity Intensive care Whole life Sickness indemnity Term life Specified health event Fixed-benefit dental Vision Term life Whole life Juvenile life In 29, Aflac revamped its web site, aflac.com, to create an engaging, multi-dimensional and entertaining experience for existing customers and potential customers and accounts. The site features more than 35 animations that give visitors the opportunity to learn about our brand and products by interacting with the Aflac Duck. Aflac doesn t sell tangible products we essentially sell a promise written on a sheet of paper but we are able to make the intangible come to life on aflac.com. Thanks to the new design, web traffic is up significantly. In fact, as I mentioned earlier, traffic on aflac.com is up 34% over the first four months of 29, with more than 5.8 million visits to date. Additionally, I m proud to say that aflac. com was recently honored with two Webby awards. These awards honor excellence in online communications, graphics, animation and presentation. This is the first time Aflac has been nominated for a Webby and winning two a people s choice award and an award voted upon by more than 75 judges shows we are powerful innovators in the digital space. Aflac Broker Marketing It s crucial for Aflac to enhance its relationships within the broker community because, according to a study by ZS Associates, brokers control 74% of our market. As Paul told you, we made an important move last year by acquiring Continental American Insurance Company and its voluntary group insurance offerings, now branded Aflac Group Insurance. With the addition of Aflac Group Insurance, we expanded our existing individual product line to include group accident, short-term disability, critical illness, hospital indemnity and life insurance. Employers may now select which product type group or individual best meets their needs and those of their employees. Product Enhancements 199 expansion Essential plans Guaranteed-issue options Life insurance» Higher policy amounts» Extended issue ages and terms for spouse coverage» Return of premium Aflac continually improves its existing products and adds new ones to ensure we re meeting the needs of today s consumers and employers. To broaden our market, we reached out to 199 employees by opening up payroll sales to all 199 industries in other words, industries in which employees receive 199 tax forms, rather than more-common W-2s. Our initial pilot into a few select industries was successful, so now we allow all 199 workers access to Aflac policies at payroll rates if their employer is willing to collect premiums and pay a list bill. The number of accounts in key 199 industries barbershops, beauty salons, day spas, trucking and real estate doubled in the first quarter of 21, compared to the same time period last year. Additionally, we introduced accident and cancer essential products, which provide valuable coverage to those seeking less-expensive, basic insurance alternatives. We also began offering guaranteed-issue products through Aflac, as well as through Aflac Group. For example, our group short-term disability is now available to accounts with as few as 3 employees. Beginning in February 21, we began offering guaranteed-issue options on 6

62 our personal sickness indemnity plan, and our lump-sum critical illness and lump-sum cancer plans for accounts with 5 or more employees. And, finally, we enhanced our life insurance policies with higher policy amounts, extended issue ages and terms for spouse coverage and a revised term life with return of premium. Competitive Counterpunch New Sales Product Mix Acc./Disab. Cancer HIP STD Int. Care Life Med Sup L-T Care Spec. Event Dental Vision 1% Aflac s product mix has remained fairly consistent over the last few years. The most significant change recently has been an increase in the share of hospital indemnity plans. As a percent of the overall mix, our hospital plans went from 13.6% to 17.2% in just the last two years. Increased exposure from major medical plans has generated consumer and employer interest in broad-based supplemental coverage for hospital stays. Accident, shortterm disability and cancer plans still comprise 66% of our product sales. Our sales associates often encounter situations in which a competitor has provided inaccurate information about our products or theirs. That s why, in November, we kicked off our first counterpunch campaign. Through ads, fliers and leave-behind materials as well as online articles for our field force we re spreading the word about how our products stack up against our competitors products. We re using the results of an independent survey to provide factual comparisons of product satisfaction, ease of doing business, enrollment experiences, claims satisfaction, speed of claims payment and administrative costs. Our associates report they now have everything they need to provide their accounts with accurate information. Aflac Quack Pack and Store Front Dental Product Marketing For years, our marketing efforts have focused on Aflac as a whole. We did a powerful job: Thanks in large part to the popularity of the Aflac Duck, more than 9% of Americans know the Aflac name. We re working to generate understanding of the products and services we offer, so the time is right for us to initiate another type of awareness: awareness of our individual products. We ve just kicked off our first-ever product marketing campaign, and it focuses on our dental policies. Today, Aflac is among the top providers of voluntary dental insurance in the United States, and that s without the benefit of a major sales and marketing push. We believe that by encouraging our associates to put a concerted effort behind dental-product sales, and by backing them up with a marketing campaign that encompasses integrated print and digital strategies, Aflac will maintain a strong position in the voluntary dental insurance market. 61 On-site enrollment meetings, for Aflac, are the equivalent of our storefront: They re critical to making a first impression. Just as brick-and-mortar stores entice retail shoppers with appealing displays, Aflac s Enrollment Storefront Kits are beckoning customers into our stores. They feature tablemats, wall clings, posters, duck prints that lead the way to the enrollment room and more. More than 11,3 enrollment-kit items have been ordered since their November debut, as our sales associates have found how effectively they attract potential customers to our portable stores. Our associates also need great-looking collateral material and giveaways. That s where Quack companion materials come into play. Options include product-specific brochures and fliers, videos, duck-shaped adhesive bandages called Quack-Aides, a special Quack Energy

63 Drink, competitor information and much more. We call them Quack Packs; they re our version of a toolkit or doctor s bag and, as I mentioned, associates have purchased 2.8 million of these sales aids. The Aflac team is pushing hard, becoming more aggressive and experimenting with the way we deliver our messages. Again, it s because we believe if more people know what we do, more people will buy our products. In short, we want to become more than a company that s well known; we want to be a company that s known well. But no matter how much our marketing strategies evolve, one thing remains constant: Our commitment to the families our products protect. For us, We ve got you under our wing isn t just a tagline. It reflects our promise to help individuals and families through the tough times the times when they re counting on us most. In the coming year, we ll continue to roll out new and exciting elements of our Quack campaign elements that are relevant, fresh and that keep our message in the forefront of the public s imagination. In closing, I want to remind you that at Aflac, marketing s goal is to generate consideration. We ve done that with Quack. The campaign, like everything we do, has little bit of attitude, an edge a bit of a disruptive element so we re generating the kind of attention that attracts accounts and opens doors that were previously closed to our associates. We re opening doors. At the end of the day, that s what it s all about. Thank you for being here and for listening. I look forward to meeting with you again next year to discuss the great things You Don t Know Quack has done not only for Aflac, but also for thousands of Americans who hear our message and seek shelter under our wing. As I close, I d like to show you one last video. It features Shawn Mullins, the Grammy Award-nominated recording artist who is the voice of our campaign. His words in this familiar song sum up the protection Aflac helps provide to Americans throughout our nation, and clearly convey what we mean by We ve got you under our wing. Aflac U.S. Sales Ronald S. Sanders Senior Vice President, Director of Sales For 55 years, Aflac has been cultivating a network of people our distribution system to deliver products that offer valuable benefits Americans need. In that time, our network has expanded from dozens of people to tens of thousands of people equipped to sell Aflac insurance policies. Aflac U.S. Sales Territories (March 21) Without a strong distribution system, even the best products would seldom reach their intended audience. And without strong, relevant products, even the best sales force in the world would be challenged to succeed. That is why for decades now, our two-part strategy has maintained a sharp focus on both product and distribution. I will focus my discussion on our sales force. Production by Distribution Channel Traditional production:» Career agents - 85%» Brokers - 15% Broker production expected to grow Our products are sold through two main channels: career agents and brokers. Traditionally, about 85% of our production comes from our career agents and about 15% from insurance brokers. As we continue to build relationships with brokers, we anticipate that production from brokers will grow and represent an expanding part of our distribution system. Because Paul covered the broker channel in some detail, my focus will be primarily career agents. The sales agents that comprise our field force are independent, commission-based entrepreneurs representing Aflac. We believe the close relationship shared by Aflac s corporate operations and sales force sets Aflac apart from its competitors. Aflac has divided its U.S. market into eight distinct sales territories. The territories range in population from 2 million to 53 million, and each is managed by an Aflac U.S. officer known as a territory director. The territory directors and director of sales / co-director of sales positions are the only levels within the sales hierarchy that are employees of Aflac. 62

64 Number of State Operations Per Territory (December 31, 29) Each territory is further segmented into state operations, with some encompassing more than one state. Our state operations are not necessarily identified by stand-alone geographic U.S. states. For example, Utah is an Aflac state operation in the same way that Alabama/West Florida is also an Aflac state operation. At the close of 29, Aflac had 88 state sales operations, each managed by a state sales coordinator who reports to the territory director. State Training Coordinator Vice President, Territory Director State Sales Coordinator Regional Sales Coordinator District Sales Coordinator CIT Associate Sales Territory South 14 Central 8 Northeast 13 North 12 East 1 Southwest 13 West 8 Pacific 1 Total 88 Sales Organization Senior Vice President, Co-Director of Sales Number of State Operations Senior Vice President, Director of Sales Vice President, Broker Sales Market Vice President Broker Development Coordinator Brokers This chart shows our current field force organization, including brokers, and the reporting structure up to the director and co-director of sales. Our traditional sales channel is shown on the left, and our newly expanded broker channel is shown on the right. Aflac s traditional sales associates typically employ a two-part sales process to make a sale. First, they must sell the payroll account on the value of offering Aflac policies to their employees. If they are successful in that regard, the second step is to meet with each individual employee at the business to sell our policies. Associates are responsible for servicing their accounts to sell Aflac insurance products to new hires, cross-sell to existing policyholders, and help provide service with claims and other issues that might arise in the account. The next level in the Aflac hierarchy is the coordinator in training, or CIT position. Following explosive recruiting and sales growth the early 2s, it became clear that we needed to build our bench of management trainees. We rolled out the CIT position nationwide in 26 after successful implementation by a number of our state operations. The CIT position is, in effect, a trial run for sales associates who show potential for future management positions. CITs retain a focus on personal production, but are also charged with training associates they recruit. In effect, they are being groomed for the next level of management the district sales coordinator, or DSC position. One important distinction: they are not held to the DSCs district sales quotas. If it becomes clear that the DSC position is not a good fit, the CIT can easily revert back to their prior role as a sales associate, which means Aflac can retain valued producers even if they opt out of a management path. DSCs are charged with a significant amount of field training and some recruiting, while simultaneously generating their own individual production and leading their team to achieve district production quotas. They are managed by the next level of Aflac sales management: regional sales coordinators, or RSCs. These individuals assist with training, but spend a considerable amount of time driving the recruiting of new sales associates. Each state also has up to two state training coordinators, or STCs, who support and coordinate headquarters and field training efforts on a statewide basis. Both RSCs and STCs are managed by state sales coordinators, or SSCs, who lead state operations. SSCs report to the territory directors, or TDs, who are at the corporate vice president level. TDs, in turn, report in to the newly created senior vice president and co-director of sales position. You may have seen our press release earlier this month about the addition of this position to assist in managing the many sales initiatives at Aflac. As the voluntary benefits industry continues to evolve and become more complex, this new position will help strengthen Aflac s position as the market leader of supplemental insurance. Of all the levels of the sales organization, only TDs and the senior vice president, director of sales and senior vice president, co-director of sales have a salary-based element as part of their compensation. On the right side of this chart are brokers. When a broker brings an account to the table, the degree to which a sales associate participates may vary. Sometimes associates become more like consultative enrollers and less of a driving point of contact for the account. Insurance brokers have established networks of clients and manage the insurance needs of more than 7% of companies in the United States. Over the last two years, we have started to build both a corporate and sales infrastructure to support our expansion into the broker market. As Paul discussed, two recently created positions, broker development coordinators and vice presidents of Market Development are important components of that infrastructure. Compensation Structure First-year and renewal commissions for entire sales organization Bonus programs and incentives for traditional sales force Aflac s compensation structure combines sales commissions with other desirable compensation opportunities designed to attract, retain and reward our 63

65 sales force and drive future growth by incentivizing the activities that generate sales. In addition to first-year and renewal commissions offered to our entire sales organization, we also offer lucrative bonus programs and special incentives to our traditional sales force. Commission Structure Example Traditional (Accident Policy) Using a basic accident policy as an example, the broker receives the largest percentage of the total commission package where the broker is actively involved in securing the business. Other commission packages reflect varying levels of involvement for the broker, the Aflac associate, and the sales hierarchy. In general, the more actively involved the broker is, the higher the commission they receive. Coordinator Bonuses First-Year Rate Associate 34.5% 6.1% DSC RSC BDC.8.2 STC.8.2 SSC Total 51.8% 12.3% *Standard commission structure Renewal Rate As members of Aflac s sales force, the commissionbased compensation is directly tied to the time, effort, and sales ability of the individual, and there is no limit. In addition to individual performance criteria, each coordinator level is given team performance criteria designed to instill a built-in support system that drives success at all levels. Although the commission paid on each product varies slightly, this slide illustrates an example of commission paid through the traditional sales structure on our accident policy. Once the policy is issued, Aflac offers the opportunity to receive a portion of their anticipated firstyear commissions in advance of collection of the premium an offer that most associates accept. As you can see, the total field force payout is approximately 52% of first-year premium. In each subsequent year the policy remains in force, just over 12% is paid to the agent. The bulk of the commission is paid to the associate directly responsible for selling the policy, with coordinators receiving varying levels of commission. Broker development coordinators, or BDCs, are included in this commission structure because they also assist sales associates as a vital resource, providing information and support on broker and largercase accounts, such as multi-state accounts. Commission Structure Example With Broker (Accident Policy Broker Package 2) First-Year Rate Renewal Rate Associate 1.% 2.5% CCM Broker DSC RSC BDC.8.2 STC.8.2 SSC Total 49.8% 12.3% Level Old % As of March 21 % SSC New AP 8% New AP* Broker new AP 2 Broker new AP AWPs AWNPs Account growth RSC New AP* 1 New AP* AWPs AWNPs Account growth DSC New AP*/Acct. 1 No change growth *Excludes brokers As you can see, our old bonus structure for state and regional coordinators was entirely sales based. At the end of this March, we modified the bonus structure for these coordinators to focus more on the people development aspects of our business. As such, bonuses for SSCs and RSCs now include growth measures for average weekly producers, average weekly new producers and payroll accounts. We believe that modifying the incentives for our sales coordinators will result in better execution of the activities that ultimately lead to sales. Honor Clubs and Incentive Contests Differentiates Aflac from competitors Designed to increase morale and sales activity Re-evaluated in light of challenging economy Contests conducted on district, regional, state, and corporate levels 5% The prestige of Aflac Honor Clubs differentiates Aflac from other competitors and continues to be very important to our field force. These clubs are designed to increase both morale and sales activities, while also generating recognition for those who have excelled in targeted areas. Awards may include cash bonuses and world-class vacations to domestic and international locations. Each Aflac Honor Club has its own set of achievement criteria. To ensure that these honor clubs retain their elite status, we have typically raised the bar on some qualification criteria every few years. In light of the challenging economy, we did not raise the bar in 21. We will evaluate the situation moving forward to determine the best way to modify Honor Club criteria. In addition to Aflac Honor Clubs, there are literally thousands of district, regional, states, and corporate contests run each year

66 Recruiting Number of DSCs 3, Primary methods» Nominations/centers of influence» Internet Two major sources of new recruits in 1Q 29» Internet recruiting campaign» Layoffs at large employers Nominations yield most reliable and successful new producers 2,5 2, Recruiting has always been, and will continue to be, an essential component to growing Aflac s distribution. Although our recruiting in the first quarter of 21 was a decrease, the comparison to last year s first quarter was very difficult. You may recall that in the first quarter of 29, recruiting was up an incredible 25% to a record 8,1 new agents. This record recruiting coincided with a major Internet recruiting campaign and some massive layoffs at large employers, which gave us a unique opportunity to recruit. However, sheer volume doesn t tell the whole story. For many coordinators, the Internet had become the main method for recruiting instead of just an additional method. However, we found that the success rate for new associates recruited through the Internet tended to be much lower than nominations from other sales associates and coordinators or other recruiting methods. We call referrals from the sales associates and coordinators nominations and centers of influence, respectively. We have found that these referrals tend to be more committed to their Aflac career for a couple of reasons: Those who already sell Aflac products would be able to more effectively evaluate a potential candidate s potential for success. Also, there is a psychological connection and more of a desire to help someone you know achieve success. Recruiting: TAKE FLIGHT Focuses on» Sourcing candidates» Interviewing» Contract acceptance 1, Many of you will remember what we affectionately refer to as the Duck Bubble of 2 to 22. During that time, Aflac U.S. experienced mind-boggling growth in the number of agents, payroll accounts and new sales. However, the growth of our coordinator base did not keep up with our agent or payroll account growth. We determined that we didn t have the coordinator base to effectively manage all of the new agents we were adding. We were challenged to enhance our sales management infrastructure and increase our recruiting and training capacity in the field. As such, we expanded very suddenly. In some areas, we depleted our bench of seasoned managers, and actually wound up tapping into our base of solid producers who didn t necessarily have management inclination or ability. In the second half of 27, we started seeing a downturn in the number of coordinators. In some cases, these producers-turned-managers either weren t making enough money in the coordinator position or weren t successful managers. Most returned to being an associate. It s necessary to have an adequate number of coordinators to effectively oversee the associates on their teams. At the same time, if the number of coordinators grows too much, they re not going to be able to make enough money. So the question becomes, What is the right ratio of coordinators to associates? There is no simple answer because there are many factors to consider. One major factor is whether the area is more urban or rural. To better address future coordinator growth, we recently implemented an initiative called the Sales Model Office to determine best practices and the optimal placement of coordinators in various situations. Payroll Account Growth 46, Regardless of the recruiting method, our ultimate goal is to recruit high-caliber individuals and help them succeed to become average weekly producers. In December 29, we rebranded our recruiting efforts to Take Flight. Our new recruiting workshop, Take Flight School, follows this theme and focuses on sourcing recruiting candidates, interviewing, and contract acceptance. The purpose of Take Flight School is to improve coordinator productivity within these three components of the recruiting process. 44, 42, 4, 38, 36, 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT

67 During the past few years, the number of payroll accounts has continued to grow. Our payroll account growth rose 1.6% in 29. Although payroll account growth declined.3% in the first quarter of 21, that number was influenced by the fact that we had five fewer days of processing, compared with the first quarter of 29. By normalizing the number of production days, payroll accounts would have increased about 5% in the first quarter. We believe this suggests that employers are open to the possibility of offering Aflac, and we continue to build valuable shelf space that we hope to leverage when the economy improves. Small Business Optimism Index Small business optimism has trended downward for some time, according to economists. By December 29, small business optimism had fallen to 88., and by the end of March of this year, it had fallen even farther to Repeated readings below 9 from the index of Small Business Optimism are unprecedented in survey history. We believe this lack of confidence in the current economic environment should drive employers, especially at small businesses, to look for solutions that help offset the ever-escalating cost of providing employee benefits. Yet, we also understand that a low level of optimism likely negatively affects employment at our target market of small businesses, which in turn has hurt re-enrollment activities at existing payroll accounts. However, because Aflac provides benefit solutions companies can offer to their employees at little or no cost, we believe that our products continue to provide value to businesses around the country /14 Source: National Federation of Independent Businesses 88. Consumer Confidence Index (Monthly Basis) Source: The Conference Board, 3/1 The pessimistic view of the economy held by businesses is also shared by consumers. Consumer confidence began a noticeable decline, dipping below 1 in September 27. While over the last 12 months it has leveled off and trended around 5, clearly, this downturn has forced consumers to make difficult choices about how to allocate their hard-earned money. Lynn Franco, Director of The Conference Board Consumer Research Center, indicated that, Consumer confidence, which had declined sharply in February 21, managed to recoup most of the loss in March. However, despite March s increase, consumers continue to express concern about current business and labor market conditions. And, their outlook for the next six months is still rather pessimistic. Like the weak optimism among small businesses, we believe the low levels of consumer confidence have also contributed to our recent sales challenges in the U.S. market. In the first quarter of 21, there was a 12% decline in the number of people who purchased Aflac products compared with the first quarter of 29. The people who did purchase Aflac products spent about the same per product, although there was a slight decline of 1%. The average premium per policy was again $48, which remained stable from the first quarter of 29. The average number of policies purchased was 1.82 policies, only 1% less than first quarter 29. $ 1,6 1,4 1,2 1, % Inc. Aflac U.S. New Premium Sales (In Millions) $1, $1, $1,558 $1, (.4) $1, (6.4) $316 3/1 (1.) Following the explosive sales growth of 2 through 22, our growth slowed from 23 to 25 as we focused on enhancing our sales force infrastructure and training. Sales improved in 26 and 27. There is no doubt that our sales have been negatively impacted by the weak economy, and for the second year in a row, we were not able to generate new annualized premium sales growth in 29. Reflecting the challenging economy, Aflac U.S. total new annualized premium sales declined 6.4% in 29, although annualized premiums in force increased 3.5% for the year. Total new annualized premium sales in the first quarter declined 1.% compared to a year ago. Although we re not pleased with the sales decline, we were not surprised. We expected to see a sizeable decline in first quarter sales due in part to five fewer production days in the first quarter of 21, compared with last year. The impact on sales 66

68 from fewer days was approximately $16 million, but that was largely offset by $13 million of sales from the new Aflac Group Insurance business. While weak sales indicate the demand for our products has been negatively impacted by the economic downturn, we continue to believe the disruption is temporary. However, we are not just sitting around and waiting for the economy to turn around. Field Force Development Action Items National Training Day Essential products Success Trax We are equipping our sales force with better training, products, and technology to empower them during these challenging times. First, we just conducted our third annual National Training Day on May 1. Although this training day was made available to all levels of the field force, it was created with veteran sales associates in mind. The focus of this year s National Training Day was on consultative selling techniques that tie the needs of the employer and the employee to the benefits of our policies, exemplifying the need for our products. Additionally, National Training Day covered the services Aflac offers to our accounts and policyholders that set us apart from the competition and make us stand out in the marketplace. We also covered accident and cancer essential products, which provide valuable coverage to those seeking less-expensive insurance alternatives. In addition, we have completed the rollout of Success Trax, a coaching and management tool that helps track sales activity and identify potential areas that need improvement. On a daily basis, associates are asked to enter in their sales activities, such as the number of prospecting calls or sales presentations made. Because there is an approximate ratio that emerges when a certain number of completed sales activities typically leads to a sale, coordinators can look at an associates activities and determine where a weakness, such as a closing ratio, might be. They can then step in and offer coaching in that area. Success Trax also has a self-assessment component that allows sales associates to identify what their income needs are. From there, Success Trax calculates the amount of sales activities needed, on average, to allow them to reach their compensation needs. Health Care Reform Opportunities for Aflac Better defines the market for our products Small businesses qualify for subsidies when providing major medical coverage to their employees Businesses need help navigating health care options Brokers may focus more on voluntary products due to:» Cost shifting and reduction of benefits at larger businesses» Downward pressure on major medical commissions Prior to health care reform passage in March 21, it s likely that some consumers and businesses felt paralyzed to make purchasing decisions about health care products. We believe the passage of the legislation will better define the market for our products. However, consumers continue to be confused about the new health care system and how they will be affected. An April 21 Kaiser study found that, Eight in 1 Americans know that President Obama signed the legislation into law. But 55% say they are confused about the law and more than half (56%) say they don t yet have enough information to understand how it will affect them personally. We believe there will be greater opportunities in the future by educating employers and consumers about how our products can help. Employers, and small businesses in particular, have been concerned about two primary topics related to health care reform: First, will they be required to offer medical insurance, and second, if they do offer major medical insurance, will the cost be affordable to their business? We believe these small businesses will be relieved to learn that first; if their business has fewer than 5 employees, they won t be fined if they don t provide coverage and second; some may be eligible for subsidies by offering health care coverage to their employees, including significant tax credits. Ultimately, small businesses may be more receptive to offering Aflac products. In fact, we anticipate that many businesses, especially larger businesses, will continue to turn to brokers to help navigate through the many health care options. From there, two primary factors have the potential to elevate brokers focus on voluntary products. First, larger businesses may become more likely to shift costs and reduce benefits to minimize impact to their bottom line. Second, health care reforms to major medical plans are expected to put downward pressure on broker commissions for the major medical policies, although broker commissions remain unaffected for the types of products Aflac sells. Offering Aflac products can provide brokers with an ideal opportunity to grow their businesses by offering our diverse line of supplemental products to their clients without reduced commissions. Furthermore, following the enactment of heath care reform, we believe employers and consumers will increasingly understand what the health care reform provides, as well as what holes in coverage remain. As such, we anticipate a better understanding of the need for our products may emerge, just as it has in Japan. 21 Sales Objective First half: Flat to down 5% Second half: Flat to up 5% As the world struggles to recover from a global recession, it is likely that 21 will be another challenging year for American businesses across every industry. As an insurer, in many ways our challenges are greater due to the perception that supplemental health coverage is a nice to have but not a need to have when consumers are not optimistic about the future. 67

69 In the short term, we remain cautious in our outlook for new sales in the United States with continued high levels of unemployment. Hence, our sales objective for 21 has been divided to flat to down 5% in the first half of the year. But a bonus for the first half of the year will be paid only if sales are then flat to up 5% in the second half of the year. In the long run, we continue to view the U.S. market as underpenetrated, and believe that our products will be needed more than ever. Clearly, the challenging economy has made many people feel helpless in many areas of life. During these times, it s important for us to convey how Aflac products take some control back with unique solutions that protect policyholders from the devastating effects of a health event. Amid this lack of confidence, we want to reassure consumers, businesses and brokers alike that we ll be there to protect them when they need us most by telling them that We ve got you under our wing. Aflac U.S. Training Eric Leger Vice President, Field Force Development For more than two decades, our growth strategy has been to expand our product offerings to meet the changing needs of consumers, and to enhance our distribution system to better reach potential markets. This presentation focuses on the distribution side of our strategy. As we have discussed, we have made significant efforts to increase our presence in the broker market recently. However, the core of our distribution remains our traditional sales force of individual sales associates. In this presentation, I ll focus on our efforts at increasing the size and effectiveness of our individual sales associates and coordinators. In 25, we restructured the Field Force Development Department to place greater emphasis and resources on training our distribution system. Since then, we have continued to develop innovative training programs for all levels of the field force. Our programs are delivered by a dedicated team of trainers who began their Aflac careers as associates and sales coordinators in the field. Let s take a look at how we ve structured our training area to maximize our ability to deliver the appropriate training programs where they are needed. Training Mgr Central and Southwest Field Force Sales Training Training Mgr North and West Vice President Field Force Development Senior Manager Territory Training Training Mgr NE and SE Training Mgr Pacific Training Mgr Southwest Training Mgr Technology Within Field Force Development, a senior manager of Territory Training supervises five territory training managers and one technology training manager, each of whom is responsible for training within dedicated geographic territories. Under each territory training manager are trainers. Each training manager works closely with his or her designated territory directors, state sales coordinators, and state training coordinators to assess each state operation s specific training and developmental needs and then coordinate programs to meet those needs. These assessments use current and historical data to analyze recruiting, retention and sales performance. They also take into consideration the state s current training programs, training calendar, and the experience of the state training coordinator. Based on the assessment, the territory training manager may select appropriate classes and seminars from a corporate catalog. If necessary, a training team from headquarters can be used to supplement the training provided by the state. By capitalizing on the longstanding working relationships between the training personnel in the field and at headquarters, we feel we enable our state operations to maximize new recruits potential throughout the United States. The coordination between field trainers and our headquarters training teams helps us deliver an inventory of programs in a timely, effective and customized manner. We have various methods of measuring our success in developing our field force. One such method is the Market Potential Index, or MPI. MPI is a metric that measures the sales potential of Aflac state, regional and district operations. This metric takes into account in-force policy numbers, the estimated potential employee base in each state, and prior years gross production. Over the years, we have identified a handful of sub-mpi metrics that show a high correlation to whether or not a state will achieve its MPI. To proactively identify areas in which a certain state operation may be struggling, and therefore are likely to miss achieving MPI, we began using an assessment tool called the State Operation Sales Analysis in the second quarter of 28. This tool helps identify certain critical metrics and then predicts positive or negative trends. Once this is accomplished, we can then proactively and methodically deliver training and support where needed to help turn things around in that state. To apply this tool, we first group together state operations that have similar population and geographicsize characteristics. The State Operation Sales Analysis tool then makes an apples-to-apples comparison of numerous metrics, including the number of new recruits, how much business those recruits are producing in new and existing accounts, what products are being sold in accounts, how many lines of business are being offered, and numerous other key indicators. If, after comparison 68

70 and analysis, we determine that a state is falling short of achieving these important metrics, we then strategically determine when and where to deliver customized training to help that state get back on track. With the application of the State Operation Sales Analysis tool, we have been able to identify strengths and weaknesses within our state operations earlier, and proactively implement appropriate training where needed. Field Force Philosophy Recruit, Train and Retain Recruit Train Retain In Field Force Development, we are also focused on getting our recruits on the right track. We center our efforts on our philosophy of recruit, train and retain. While this may sound like a simple philosophy, it reflects the logical steps we must take to ensure we are securing, empowering, and enabling our sales force to have a successful and long-term career with Aflac. Recruiting Methods Nominations/centers of influence Internet With this philosophy, recruiting comes first. Our model necessitates a consistent recruiting effort. While we are constantly looking for new recruiting avenues, the three primary sources of new recruits in 29 were nominations from our field force, center of influence, and candidates from the Internet. These three recruiting methods have traditionally been, and continue to be the most effective way for us to connect with recruits. Good Aflac agents know what it takes to be successful, and are able to make a personal connection with those they recruit; therefore, we look to the these relationship-based new recruits to supply us with career-focused agents. In 29 and first quarter 21, nominations and centers of influence, which are referrals from associates and coordinators, respectively, accounted for more than half of our new recruits. Internet Recruiting Internet recruiting partners from five to the two leading online recruiting companies: CareerBuilder.com and Monster.com. Both of these partners continue to provide us with the most current trends and best practices in Internet recruiting and together capture more than 95% of both the aggressive and passive job seekers. While the previously mentioned methods accounted for most of our recruiting, the remainder of our new recruits came from various other sources, including career fairs and print advertising. In December 29, we rebranded our recruiting efforts as Take Flight. The Take Flight theme works in conjunction with the corporate tagline, We ve got you under our wing. Our new recruiting workshop, Take Flight School, follows this theme and focuses on sourcing recruiting candidates, interviewing, and contract acceptance. The purpose of Take Flight School is to improve coordinator productivity within these three components of the recruiting process. 3 % (3.8) (1.1) (5.8) Recruiting Results (8.) (27.6) -3 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT In 29, recruiting increased as unemployment rose. Traditionally, this has been the case for Aflac as unemployment levels have risen in previous years. As Americans entered the job market, we saw an obvious spike in recruiting as jobseekers took the leap into commission-based sales. Field Force Recruiting yielded solid gains through the first three quarters of 29, as the number of recruits joining the Aflac Field Force grew by 16.4%. As unemployment began to fall in the fourth quarter, our recruiting numbers also began to decrease, falling 8.6% and continued this trend into the first quarter of 21 with a decrease of 27.6%. I should point out that with a 25% increase and 8,1 new agents, first quarter 29 was the largest number of recruits we have ever had in a single quarter. It is important to note that first quarter 21 recruiting reflects an increase of 6.9% over fourth quarter of (8.6) The Internet continued as solid source of new recruits in 29, and accounted for approximately 26.2% of our new recruits. In 29, we streamlined the number of our 69 The challenging economy has also led to a contraction in the number of our sales coordinators, which has reduced our recruiting capacity. Some of the coordinator reduction was strategic consolidation and some was through attrition. We are currently evaluating our coordinator levels to determine where we might need to rebuild. We have also changed the bonus structure for our state and regional coordinators from one that was based entirely on sales to a structure that is now more heavily weighted on the development of their people.

71 Field Force Philosophy Train Recruit Train After recruiting, training is next in our philosophy of recruit, train and retain. And training has become even more important as we continue to build on our product portfolio. Learning starts in the classroom, but the real learning and development happens once associates apply it to actual sales situations. Although new associates and veteran associates are at different places in their careers, both can benefit from training. LEASE Larger Earnings Acquire Small Employers LEASE, which stands for Larger Earnings Acquire Small Employers, is a selling system developed especially for our new associates. We have been using this training program since 24 to teach associates to focus on and open businesses with five to 2 employees. The program helps the new agent achieve success early on with simple, straightforward information that is easily transferable to real-life selling situations. Also, the smaller accounts that LEASE targets tend to be more accessible to sales agents, faster to execute on decisions, and more open to the one-on-one enrollment system that allows our associates to fully explain Aflac products. Our LEASE program is designed to be easily consumed by DSCs, and therefore, easily delivered when training new associates in the field. New Associate Training Cycle Level One Basic Products New Associate Sales School featuring LEASE New Associate Sales School Follow-up SmartApp Next Generation (SNG) Enrollment & Account Management Basic Flex Once associates have mastered Level One, Level Two delves deeper to equip new associates with advanced knowledge and skills they ll need to succeed. This is consistent with our belief that training should be sequential and help new associates address topics as they arise. Winner s Edge Part of the New Associate Blueprint for Success Intense 13-week accelerated training Weekly meetings with coordinator Supports associate for future success In April of 29, we incorporated a new element into our New Associate Blueprint for Success it s called Winner s Edge. Winner s Edge will afford associates the ability to live, learn, and test their knowledge of Aflac s proven sales training in an all-inclusive, 13-week, hands-on training track that uses a curriculum adapted specifically for accelerated learning. We know that the first 13 weeks in the life of a new associate are critical. Associates need to experience success and experience it quickly. In this 13-week program, we break down the new associate s calendar into an accountability system lasting 13 weeks. Each week, the associate meets with his or her coordinator to review the previous week s objectives and discuss the upcoming week s objectives. Each weekly meeting helps the associate stay on track, and after this 13-week period, the new associates have developed the skills that will carry them into the next stage of learning. Success Trax Interactive activity and coaching tool Coordinators coach for performance Resource and time management Builds local market historical data The New Associate Training Cycle, which incorporates LEASE training, is divided into two levels of classes. The first level starts with the associate learning six fundamental topics beginning with basic product knowledge and finishing with basic Section 125 (Basic Flex) education. The New Associate Training Cycle Level One is designed to provide basic skills necessary for a new sales associate to begin penetrating his or her local market. New Associate Training Cycle Level Two Owning Your Own Business Goal Setting and Business Planning Target & Referral Marketing Consultative Selling Conducting a Group Meeting Advanced Product Knowledge Understanding Commissions and Statements Value-added Services/Advanced Flex Networking in Your Community Understanding the Claims Process After a three month pilot, we introduced an interactive sales activity tracking and coaching tool for our field force, in July 29, called Success Trax. Through Success Trax, associates enter their daily and weekly activities and results into an online system which feeds the information to their coordinators. Success Trax has a self-assessment tool that allows sales associates to identify what their income needs are and calculate the sales activities needed to allow them to reach their compensation needs. It also gives our coordinators: clear ideas of where associates need to be coached for better performance within the sales process; the ability to gauge overall activity in their districts or regions, which helps with business planning and assists with resource and time management; the ability to build historical data on their local markets, which aids in setting expectations for new associates. 7

72 25 % 2 New Payroll Account Growth New, well-trained associates will bring in new payroll accounts, and new payroll account growth by new associates continued to grow at an encouraging pace, until the first quarter of 21. While this 1.3% decline in new payroll account growth from new associates is attributable to the decline in recruiting over the last two quarters, it was also influenced by the fact that we had five fewer production days in the first quarter of 21, compared with the first quarter of % New Associate Premium Growth New associates 2.1 (4.5) (5.2) (2.) Veteran 5 associates (1.3) -5 (2.5) (3.) (4.3) (8.2) -1 (11.7) -15 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT (5.7) -2 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT (14.9) As you can see, the new associate premium growth has declined for the past several quarters. While Aflac continues to grow our client base, the economy has played a major role in the number and cost of the policies that new associates are able to sell in each account. However, with the implementation of SuccessTrax in July 29, we should soon have more of an opportunity to pinpoint and correct the activities that are causing the low closure rate 15 % Growth of Average Weekly New and Veteran Producers Veteran producers New producers QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT As we have discussed, we have shifted the focus of our field force management from one of simply recruiting to recruiting with the intent of growing average weekly producers. The number of average weekly producers fluctuated 29, and the number of average weekly new producers trended similarly. While the last two quarters show a decline in the number of new producers, it mirrors the decline in recruits. However, with a stronger focus on a more productive recruiting process combined with solid training, we expect in the long run that the decrease in the number of producers will be offset by the amount of annualize premium produced by each agent. While we focus a great deal of our efforts on training new associates, the state of the economy has caused us to look at the effectiveness of our veteran associates with more intensity. We are developing a more robust cycle of training modules that will encourage lifelong learning for our career associates who choose not to advance to the coordinator level. The final product will establish continuing education and career advancement at all stages and career paths with Aflac. 1,6 1,4 1,2 1, Number of Coordinators in Training ,154 1, (2.6) 7.2 (.1) 1,285 1,291 1,292 1,333 1,412 (2.6) (.4) 1,333 1,253 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT (7.) (1.5) For the last few years we have discussed our coordinator in training program as a means for better developing field management. The mission of the CIT program is to provide every prospective district sales coordinator with the tools and training needed to be successful. As our CITs progress in the training, they 71

73 will be educated on leadership, nominating, technology, team building, planning, time management and much more. There are specific guidelines, requirements and qualifications to which our CITs must adhere. Through the CIT program, we can create an atmosphere of success by offering associates the opportunity to move up through the ranks, following a set of predetermined standards prior to promotion. This program gives the CIT an opportunity to experience sales management without having to make a full commitment to the district sales coordinator position. As you can see from the graph, for first quarter 21 we had 1,253 CITs, down slightly from the third quarter peak. This decline is due to the overall coordinator reduction and consolidation. Coordinator in Training Performance (1/1/8-12/31/9) On a weekly basis, CITs with four or more modules opened 64.2% more new payroll accounts than those with less than four modules. These same CITs have also produced 62% more new annualized premium than those with less than four modules. These results are significant. 8.% 75.% 7.% 65.% 6.% 55.% 5.% 45.% 4.% On a weekly basis, CITs who completed four or more CIT training modules: Opened an average of 64.2% more new payroll accounts than CITs with less than four CIT training modules Produced 62.% more new annualized premium than CITs with less than four CIT training modules Coordinator in Training Performance Retention % of First-Year DSCs CIT to DSC Associate to DSC 1.% 9.% 8.% 7.% 6.% 5.% 4.% 3.% % of DSCs Who Earned FAME Awards in Four Quarters CIT to DSC Associate to DSC Let s take a look at CIT performance over time. One year after promotion, DSCs who were promoted through the CIT program have an average of 22.6% higher first year retention rate than their counterparts who were promoted directly from the associate level. In addition, one measure of coordinator success is our FAME series. FAME stands for Founders Award for Management Excellence, and is a measure of a coordinator s ability to achieve success. In the four quarters following their promotions, DSCs promoted through the CIT program achieve an average of 67% higher rate of FAME qualifications than their counterparts promoted directly from the associate level based on data from the last three years. Aflac National Training Day Consultative Selling Wingspan Services and Solutions Five-point service strategy In the current economy, our associates are seeing fewer employees at the worksite, so it is important to adapt our training to develop a need for our products with each employer and employee. In keeping with our philosophy of providing relevant and timely training, we conducted the third Aflac National Training Day on Monday, May 1, 21. This training was made available to all levels of our field force and, this year, is especially geared toward our veteran associates. This nationwide training day was created as a specialized training forum where our state training coordinators train the sales force with effective techniques and relevant approaches that will spread the message about how now more than ever, our products are valuable. The focus of this year s National Training Day was Consultative Selling, which incorporates competitive intelligence, Wingspan Services and Solutions, and our five-point service strategy. Through activities and group discussion, our associates learned consultative selling techniques that tie the needs of the employer and the employee to the benefits of our policies, thereby creating need for our products. The competitive landscape that currently exists requires our associates to understand the products and services of our competitors. With this knowledge the associates can more effectively champion any selling barriers that might come from the competition. Additionally, through Wingspan Services and Solutions, associates learned in-depth information about the services that Aflac offers to our accounts and policyholders that set us apart from the competition. We believe that incorporating a consultative sales approach with these services and tools not only makes us more competitive in the marketplace, but it also allows us to help provide exactly what our customers want and need. Coordinator Accreditation Program Series All leadership levels State Region District 72

74 In terms of a focus on training at all levels, as I discussed last year, Field Force Development has been developing coordinator accreditation programs for all levels of coordinators. We believe our District Coordinator Accreditation Program (DCAP) and Regional Coordinator Accreditation Program (RCAP) continued to be tremendously successful. All of our DSCs and RSCs attended the classes in SCAP Curriculum state sales coordinator and facilitated by the state training coordinator. Right Stuff workshops are conducted on a quarterly basis and are based on the teachings of John Maxwell s book, The 17 Indisputable Laws of Teamwork. We believe moving this training to a state operation level will allow the state sales coordinators to have more influence over leadership development in their states, while allowing richer team building opportunities with the coordinator teams. Field Force Philosophy Retain Creating a positive climate Managing leadership dilemmas Business coaching Leadership Recruit Train Retain We launched our first-ever State Coordinator Accreditation Program (SCAP) in 28 and continued its use in 29. This curriculum focused on key areas of leadership: creating a positive climate, managing leadership dilemmas, business coaching, and leadership. Finally, to the retain portion of our recruit, train and retain philosophy. Retention is the ultimate culmination of effective recruiting and training. First-Year Associate Retention 21 SSC Training 3 % New for 21 is our SSC Leadership Academy. We have partnered with The American College, the premier institution in professional education for the financial services industry, to provide leadership training for our SSCs. All SSCs have been invited to participate in the program in the second quarter of 21. This is one piece of our new alliance with The American College to provide leadership training along with industry best practices. 21 Right Stuff Quarterly coordinator leadership workshops Led by the local coordinator team Based on the teachings from John Maxwell s book, The 17 Indisputable Laws of Teamwork For 21, we have revised the series of coordinator accreditation to become The Right Stuff. The Right Stuff is coordinator training taught on a local level, led by the As you likely know, commission-only positions tend to have high turnover, and that has always been the case with Aflac. However, in looking at this slide, it is important to understand that there is a lag between the time an associate is recruited and when we measure retention. We count associates as retained when they produce business anytime during the 1 th to 12 th month of their tenure with Aflac. For example, because we are measuring the associate in the 12 th month of tenure, our retention of 28 recruits is actually reflected in the 29 retention number. The relatively stable rate of 18.7% in 29 reflects benefits of the revised training program that started in 26 and continues today. Agent retention is an issue we remain committed to improving as we develop training. Each year we strive to improve upon the last year in every measurable category. We remain steadfast in our commitment to focus not only on expanding our field force, but doing it the right way. We want quality associates who are motivated to participate in our training systems and sell products people want and need. As associates succeed in the early stages of their career, the opportunity for advancement is theirs for the taking. Aflac s entire Field Force Development team is committed to advancing our field force efforts through improved recruiting support, and enhancing skills sets through more effective training. 73

75 Aflac U.S. Internal Operations Teresa White Executive Vice President; Chief Administrative Officer Internal Operations includes the core processing functions of Aflac U.S., as well as support functions for our accounts, policyholders, and sales associates. More than 2,5 employees work within these areas. In 29, we handled over 11 million calls to our call center, established nearly 11, new payroll accounts, issued approximately 2.9 million new policies, and processed over 7.7 million claims. 29 was a strong year for Internal Operations, as we were able to maintain our outstanding service delivery while also aggressively managing efficiency and expenses. Additionally, we continued to strengthen our differentiated service to brokers and large payroll accounts to augment progress toward sales objectives. Operational agility is becoming increasingly important in responding to changing customer needs and adapting to evolving market conditions. 29 gave us the opportunity to demonstrate our ability to adjust expenses and operating efficiency quickly while maintaining strong service delivery, and we are taking steps to ensure this same agility in 21. Service Factors Driving Brand Perception Ease of enrollment process Ease of doing business with provider Responsiveness of provider Knowledgeable customer service staff Ease of billing process Ease of understanding guidelines and coverage Source: MARC Research Employer Profiling, 6/9 A study conducted by MARC Research in June 29 showed that employers within our market perceive Aflac more favorably than our core competitors for service factors that are most important to brand perception. These factors include: ease of enrollment process, ease of doing business with provider, responsiveness of provider, knowledgeable customer service staff, ease of billing process, and ease of understanding guidelines and coverage. We have begun to more aggressively market our strong service delivery capabilities to help influence employer consideration of Aflac as the provider of choice and will continue these efforts in 21. Aflac Customer Satisfaction with Service In addition to favorable general market perceptions of Aflac, a 21 study conducted by Prince Market Research reflects that Aflac accounts perceive us more favorably than accounts of other voluntary carriers perceive their provider s delivery across a broad set of performance dimensions. Service satisfaction among Aflac accounts is higher than our competitors, with an average gap of nine percentage points. Aflac also compares very favorably on likelihood to continue to do business with, at 12 percentage points higher than the average of our competitors. Our net promoter score, which is defined as the number of promoters (those rating willingness to refer the highest) minus detractors (those rating willingness to refer the lowest), shows 29 points higher than the average of our competitors. The major factors driving our advantage in account results are claims handling and satisfaction, company reputation, ease of doing business, and products offered. Among policyholders, overall satisfaction with Aflac service is 73%, compared with an average of 59% for policyholders of our core competitors. With respect to likelihood to continue to do business with and net promoter score, we have an average favorable gap to competitors of 11 and 4 points, respectively. Areas where Aflac particularly excels in policyholder perceptions are claims handling and satisfaction, product variety, company reputation, and overall value of products and services offered. We are also seeing very favorable results among brokers based on independent third party research conducted in 29. Among brokers who prefer Aflac, satisfaction increased to 78%, which is eight percentage points higher than 28, with a favorable gap to all other voluntary providers evaluated. Brokers cited customer service and fast and easy claims processing as the top drivers of their satisfaction with Aflac. Additionally, we moved to the top spot for likelihood to recommend among brokers, up from fourth place in 28. Aflac s net promoter score demonstrated a 13 point advantage to the next highest provider, with a 35% improvement over prior year. These outstanding results help to reinforce our approach to segmented service delivery for brokers and large accounts. Aflac Accounts Aflac Policyholders 3% 1% 2% 37% 12% 47% 24% 52% 21% Extremely satisfied Very satisfied Somewhat satisfied Not very satisfied Not at all satisfied Source: Prince Competitor Loyalty Study, 4/1 74

76 $ Core Administration Expense per Policy in Force* $12.87 $13.41 $13.83 $14.38 $14.31 Internal Operations continues to benchmark the change in core administration expense against the rate of change in earned premium to gauge the effectiveness of our expense control. In 29, our variance in expenses over prior year was well below the rate of change in earned premium for the same time period, reflecting our conservative and effective approach to expense management. Key Service Interactions Claims Enrollment processes Service center *Expenses exclude AGI. Expenses for Change Management and Print Fulfillment have been added for 29. Aflac s expenses for Internal Operations are primarily driven by resources that support processing for our core business functions. In managing these expenses, our intent is to stay ahead of projections for new sales, in-force policies, and related incoming work volumes. This requires continuous modeling and assessment of staffing, expenses, and service levels. In 29, we leveraged a number of resources to manage staffing related expenses while providing exceptional service delivery. To enhance resource agility, we more actively leveraged contractors and temporary workers in lieu of hired staff where feasible. We also continued to support a work-at-home alternative work arrangement, yielding lower total employee-related expenses while delivering increased productivity. Existing staff were cross trained to enable increased sharing of resources across functions. And, we selectively outsourced non-core processing, yielding an annualized expense savings of approximately $1.1 million. We will maintain these strategies, along with the continued promotion of self-service capabilities and streamlining of our core business processes, as expense management tools for our organization through 21. Due to effective resource management, we were able to reduce our expense per policy in force for 29 while enhancing the differentiated service we provide for brokers and large accounts. Percent Change in Core Administration Expense and Earned Premium* 14 % Core administration expense 2 Earned premium *Expenses and earned premium exclude AGI. Expenses for Change Management and Print Fulfillment have been added for Maintaining excellent service delivery for our core service interactions remains a high priority, even as we more aggressively manage expenses. Research conducted by independent providers continues to reinforce the importance of reliable claims handling, enrollment process, and service center interactions in shaping the satisfaction of our customers and in influencing market perceptions of our brand. Our service delivery for each of these areas has remained strong in 29 and through the first quarter of this year Claims Reliability (Turnaround Time in Days) /1 Claims turnaround time continues to be a strong competitive advantage for Aflac and a vital gauge of service delivery. In 29, our average claims turnaround time was 3.7 days, and we have maintained service levels within our goal of four days through the first quarter of 21. Along with timely claims handling, we also continue to show very positive results for claimant satisfaction. Policyholders who filed claims reported a satisfaction level of 86% in 29, consistent with 28 performance. Based on third party competitive research, we have a favorable gap to competitors of 18 percentage points for policyholder satisfaction with claims. Among accounts, Aflac s claims satisfaction is 64%, compared with an average of 49% for our core competitors. With increasing product complexity, we are able to maintain claims processing efficiency and service delivery through refinements to our business processes and enhancements in automation. Our SmartClaim technology, which enables policyholders to initiate the claims process online for select claim types, is an example of such automation. We began implementing SmartClaim in 28 and expanded this technology to all states in 29. We will continue to drive the use of SmartClaim in 21 by extending this capability to include additional claim types

77 45 % Service Center Reliability (Percentage of Inquiries Handled via IVR) /1 In 29, IVR usage for our service center remained strong at 39.3%. We have experienced a slight decline over previous years in calls handled via IVR, primarily due to increasing adoption of online self-service tools for accounts, policyholders, and associates. Our customer service center has continued to focus on managing and shaping customer experiences. Soft skill training was leveraged for all service center representatives to reinforce skills that enable our staff to identify, address, and respond appropriately to customer emotions. Additionally, we implemented 1% call recording and optional post-call feedback gathering surveys to help our leadership identify specific improvement areas for call handling in support of continuous resource coaching and development. While our core focus is quality of service center interactions, we also actively manage efficiency of call handling. In 29, additional functionality was added to our primary desktop service center application that enables faster information gathering and resolution of calls. Through March 21, our service level, or percentage of calls answered within 6 seconds, was 76%. In early 21, our service center partnered with a third party to provide licensed phone representatives that close new policy leads generated through our website and sponsorship events. The initial results of this solution are positive, with 7.9% of direct leads closed with sales through March. Additionally, in 21 we will begin to source payroll account leads from the direct leads handled by explaining the benefits of payroll rates and requesting employer information. Although we prefer agent-based, in-person enrollments, the addition of licensed service center enrollment support allows us to provide additional flexibility to our customers. Customer enrollment has been a strong differentiator for Aflac historically, and we continue to see positive trends for key metrics associated with new business processing. Through March, our average turnaround time for new policy issuance is 1.4 days. We have experienced positive trends in automated channel usage for new business. Through March of 21, more than 92% of our applications were submitted through SNG, our electronic enrollment system, and almost 69% percent of those policies were jet issued, requiring no manual intervention. This significant level of automation provides faster service for our customers, timely commission payments for our associates, and continues to keep processing costs low for Aflac. Another new business solution we offer that is both cost-effective and environmentally friendly is E-Policy, which allows policyholders to receive an electronic copy of their policies instead of a printed version. Through March, E-Policy adoption has increased to 24%, up from 18% during the same time period last year. While maintaining strong new business service levels, we have also worked to expand employer options for offering of Aflac products. Our Employee Direct Bill solution allows employers to provide Aflac products at a payroll rate, with the policyholder being billed directly. This option provides Aflac with one-on-one employee access for product sales without requiring the employer to manage the billing of Aflac products. We have also added the capability for business owners with 199 workers to provide Aflac products to their staff at payroll rates, with a list bill. We will continue to evaluate the effectiveness of these new employer solutions, while seeking additional new and innovative means to address changing employer needs. 9 % Online Services (Online Billing Adoption Rate) New accounts Enrollment Reliability: New Business Automation Transactions via SmartApp/SNG 1 % Jet-issue rate / /1 In 29, we continued to drive adoption of our robust suite of self-service solutions. Online Services (OLS) allows our payroll accounts to reconcile invoices, view account information, and make select account changes online. The current OLS adoption rate for new accounts is approximately 82%, which is four percentage points higher than the same period last year. To date, 41% of all Aflac accounts are registered in OLS. Our Policyholder Service solution (PHS) allows our policyholders to access policy information, make address changes, check claims status, and update personal contact information online. Through March of 21, the

78 volume of transactions handled through this system has increased 292%, compared with the same period last year. AflacAlways allows policyholders to automatically convert from payroll to direct billing if they leave their existing employer. Through March, more than 48, policies were enrolled in AflacAlways, which represents a 139% increase over the prior year. The self-service technologies for our field force have also experienced favorable rates of adoption. AflacAnywhere allows our sales associates to subscribe to mobile alerts that are triggered by key customer events. Use of AflacAnywhere has increased 46%, to over 57, unique subscribers through March of 21. MobileAflac, which enables associates to access policy and claims information from a wireless device, continues to show solid utilization with more than 4, associates leveraging the service to-date. We will continue to promote these self-service capabilities as a means of providing convenience for our customers and associates, while increasing efficiency and effectiveness of service delivery for Aflac. Usage of automated channels for resolution of simple inquiries and transactions allows our internal operations staff to focus on more complex service interactions. Segmented Service Delivery Broker service managers Account relations executives While we maintain a focus on providing reliable, high quality service to all of our customers and associates, we also recognize the unique needs of brokers and our largest accounts. This segment-based approach to service delivery has yielded very favorable satisfaction results for these key customer and channel segments. Through the first quarter of 21, we provide individualized support to over 1,8 of our largest payroll accounts through our Account Relations Executives (AREs). These AREs are assigned to accounts with 5 or more employees, and their key responsibilities include building and maintaining customer relationships, assisting with billing administration, and facilitating enrollment. The success of our AREs in managing large account service delivery is reflected in large employer perceptions of Aflac as a voluntary provider, based on insight from the 29 Employer Profiling Study conducted by MARC Research. Among accounts with 1, or more employees, Aflac is perceived more favorably than our key competitors on each of the 1 most important voluntary provider attributes, to include: no runaround with claims, accurate and easy billing process, paying claims quickly, and ease of enrollment process. Wingspan/Services and Solutions Cost savings» Cafeteria plans» Commuter spending accounts» HSA and HRA programs Easy to administer» Account relations» Online services» Employee direct billing» Consolidated billing» COBRA administration» 24/7 customer assistance» Hispanic customer assistance Simple enrollment» Integrated enrollment Enhanced benefits» Health and wellness programs» Retirement plan services Employers increasingly seek value added services as a complement to core product offerings from supplemental insurance providers. Primary research sponsored by Aflac, reflects that 75% of employers desire a one stop shop for insurance products and value-added services. Additionally, 25% of employers indicate they would switch to a new voluntary insurance provider to obtain the value-added services they desire. I n D e c e m b e r 2 9, A f l a c r e - l a u n c h e d o u r comprehensive suite of employer services under the umbrella brand of Wingspan Services and Solutions. Our service portfolio is supported by integrated messaging and sales material that illustrates the value of these services to employers and reinforces a consultative approach to employer sales. To illustrate the success of our service offering, over 286, of our more than 444,5 payroll accounts currently leverage our Wingspan Cafeteria Plan Administration service. We currently administer flexible spending accounts for over 8, of our accounts, with more than 156, FSA participants. Our Wingspan Enrollment Solutions are best of breed and include webbased, agent-assisted, and call center supported options for employers. Independent broker research conducted in 29 reflects that brokers who use Wingspan are the most satisfied with their enrollment systems, with a 12 percentage point advantage over the next highest rated enrollment solution. We will continue to focus on marketing of Wingspan Services in 21 to facilitate new account sales, increased account penetration, and retention of existing accounts. Internal Operations will continue to focus on operating agility in 21. Our vigilant balancing of expense management and service delivery will continue, as will our targeted investments in delivery of specialized service to key segments of our business. We recognize the need to dynamically respond to changing business and market conditions, and have approached resource management and staffing in ways that yield heightened flexibility. Consumer feedback will continue to shape our approach to service delivery and to serve as an input to developing new service capabilities that meet evolving market and consumer demands. 77

79 Aflac U.S. Payroll Product Line (as of 4/3/1) Benefit Amounts 78 Monthly Premium Rates (Payroll) Individual/Family Accident Indemnity Accident emergency treatment $75 - $12/accident $ $58.24 Initial accident hospitalization $5 - $2, Accidental-death $1,5 - $15, Accident specific-sum injuries $2 - $12,5 Accident hospital confinement $15 - $25/day Accident rehabilitation confinement $75 - $15/day Intensive care $3 - $4/day Wellness $4 - $6/year Major diagnostic exams $1 - $2/year Accident follow-up treatment $25 - $35/day (maximum of 6 treatments per accident) Physical therapy $25 - $35/treatment/day (up to 1 treatments per accident) Appliances benefit $5 - $125/accident Prosthesis $25 - $75/accident Blood/plasma/platelets $1 - $2/accident Ambulance $12 - $2 ground / $8 - $1,5 air Transportation $2 - $6 round trip (up to 3 times per year per covered person) Family lodging $75 - $125/night/5+miles/up to 3 days Accident dismemberment $4 - $4, depending upon loss X-Ray Benefit $2 - $25/accident Epidural pain management benefit $1/accident Sickness Indemnity Physician s visit (payable for accident, sickness, or wellness) $15 - $25/visit $ $ visits/year (indiv.) or 6-8 visits/year (family) The following benefits are payable for sickness only: Hospital confinement $5 - $2/day Initial hospitalization $25 Diagnostic exams $15/year Surgical schedule $1 - $2,/year Ambulance $1 ground/$1, air Lump Sum Critical Illness $ $ Covers: heart attack, stroke, end-stage renal failure, coma, paralysis, major human organ transplant Major Critical Illness Event Major Critical Illness Event (if hospitalization and event free for five years) Subsequent Critical Illness Event $5, Coronary Artery Bypass Graft Surgery $3, $1, - $1, (same for children) $1, - $1, (same for children) Cancer Indemnity Wellness benefit $5 - $125/year $ $25.38 Cancer vaccine benefit $4 Bone marrow donor $4 Annual care benefit $5/year for 5 years Initial diagnosis benefit $2,5 - $1, ($5, - $2, for dependent children) Initial diagnosis building benefit $5/annually Initial treatment benefit $3,/covered person Hospital confinement $3 - $6/day ($375-$75 for dependent children) Radiation $5/week Injected chemotherapy $9/week Oral chemotherapy $4/month National cancer institute (evaluation/consultation) $1, Immunotherapy $5/month Medical imaging $2 Experimental treatment $5/calendar week if charged $125/calendar week if no charge Anti-nausea $15/month Stem cell transplantation benefit $1,/covered person Nursing services $15/day Surgery and anesthesia $14 - $6,25 Outpatient hospital surgical $3 Skin cancer surgery $5 - $6 Surgical prosthesis $3, Prosthesis nonsurgical $25 Reconstructive surgery $35 - $3, Blood and plasma $15/day

80 Cancer Indemnity (con t) Benefit Amounts Additional surgical opinion $3/opinion/day Ambulance $25 ground, $2, air Transportation $.5/mile Lodging $8/day Bone marrow transplant $1,, donor $1, Extended-care facility $15/day Hospice $1, day one, $5/day thereafter Home health care $15/day 79 Monthly Premium Rates (Payroll) Individual/Family Lump Sum Cancer $ $ Internal Cancer $1, - $1, (same for children) Carcinoma In Situ $2, Cancer Related Death $5, Short-Term Disability (individual coverage) Disability benefits for sickness and off-the-job injury $5 - $5, $ $266.5 Elimination periods -18 days. Benefit periods 3-24 months Hospital Indemnity* Aflac U.S. Payroll Product Line (con t) (as of 4/3/1) Hospital confinement $1/day $ $ Annual confinement benefit (first 5 days) $4 - $5/day/policy/year Surgical $1 - $1, Wellness $5/once per year/policy Outpatient surgical room charge $3 general/$1 w/o for surgery or invasive diagnostic exam Invasive diagnostic exams $1/person/day Rehabilitation $1/day 15 days/confinement 3 days/year Medical diagnostic imaging $15/exam/person per year Ambulance $1 ground/$1, air Initial hospitalization (rider) $25, $5, $75, $1, *Three levels available with benefits added at each level. Level 1 compatible with Health Savings Accounts (HSAs). Payroll Life $6.5 - $12.96 Whole-life face amounts $1, - $25, 1-, 2-, and 3-year term face amounts $1, - $25, Optional return of premium on 2- and 3-year term policies $25,; $5,; $1, & $2, Accelerated death benefit Waiver of premium Optional accidental-death benefit rider Dependent coverage available Simplified-issue, rates guaranteed Hospital Intensive Care $1.4 - $34.6 Hospital intensive care unit $7-8/day (days 1-7) $1,2 - $1,3/day (days 8-15) Sub-acute intensive care unit benefit $35/day (days 1-15) Organ transplant $25, - $5, Ambulance $25 ground, $2, air Specified Health Event $9.1 - $83.59 Covers: heart attack, stroke, coronary artery bypass surgery, coma, paralysis, major third-degree burns, end-stage renal failure, major human organ transplant, persistent vegetative state First occurrence $5, ($7,5 children) Reoccurrence $2,5 Secondary specified events $25/procedure Hospitalization $3/day Continuing care $125 Ambulance $25 ground, $2, air Lodging $75/day Transportation $.5/mile up to $1,5 per occurrence Dental Dental wellness (Preventive) $25 - $75/year $ Individual (Basic) Scheduled benefits $15 - $1,1 $ Two-parent family (Premier Plus) Vision $ $49.9 Vision correction materials $5 - $21 Refractive error correction $1 - $42 Eye exam $35 Permanent visual impairment Up to $2, Specific eye diseases/disorders $1, Eye surgery $5 - $1,5

81 Section IV The Management Team Daniel P. Amos Chairman and Chief Executive Officer, Aflac, Aflac Incorporated Dan Amos, 58, graduated from the University of Georgia with a bachelor s degree in insurance and risk management. He first joined Aflac as a sales associate while in his teens. He served as state manager of Aflac s Alabama/West Florida Territory for 1 years. Under his leadership, his sales territory was the number one producing area in 1981 and He was elected president of Aflac in 1983 and chief operating officer of Aflac in He became chief executive officer in 199 and was named chairman in 21. Dan serves on the board of directors of Synovus Financial Corporation and is a member of the boards of trustees of Children s Healthcare of Atlanta and House of Mercy of Columbus. He is a past recipient of the Dr. Martin Luther King Jr. Unity Award and the Anti-Defamation League s Torch of Liberty Award, and has been named by CNN as CEO of the Week. He also was named one of America s Best CEOs for the insurance category in 21 by Institutional Investor magazine, the fifth time he has appeared on the prestigious list. Under Dan s leadership, Aflac has been named to the Ethisphere Institute s annual list of World s Most Ethical Companies for four consecutive years. Dan is the former chairman of the boards of The Japan- America Society of Georgia and the University of Georgia Foundation. Kriss Cloninger III President and Chief Financial Officer, Aflac Incorporated Kriss Cloninger, 62, joined Aflac Incorporated in March 1992 as senior vice president and chief financial officer. He was promoted to executive vice president in 1993 and president in May 21. Since joining Aflac, he has had primary responsibility for overseeing the financial management of all company operations. He has been named Best CFO in the insurance/life category in America by Institutional Investor magazine three times and is a member of the boards of directors of Aflac Incorporated, Tupperware Brands Corporation, and Total Systems Services, Inc. He holds bachelor s and master s degrees in business administration from the University of Texas at Austin and is a Fellow of the Society of Actuaries. Paul S. Amos II President, Aflac; Chief Operating Officer, Aflac U.S. Paul Amos, 34, holds a bachelor s degree in economics from Duke University and a master s degree in business administration from Emory University. He also holds a juris doctor degree from Tulane University. He joined Aflac in 22 as the state sales coordinator for the Georgia-North sales territory. Under his guidance, Georgia-North grew to become the company s No. 1 state operation. Paul was promoted to executive vice president, Aflac U.S., in January 25 and assumed the additional responsibilities of chief operating officer in February 26. He was promoted to his current position as president of Aflac in 27. In his role, he oversees all aspects of the U.S. operation including more than 4,3 employees and 7, independent sales agents. His primary responsibility is to develop strategies that boost U.S. sales, revenue and profits. Prior to joining Aflac, he worked in the corporate legal division of the merger and acquisition firm Skadden, Arps, Slate, Meagher and Flom in Washington, D.C. He serves on the boards of directors of Aflac Incorporated, the Winship Cancer Center at Emory University, the Turner School of Business at Columbus State University and the Make-a- Wish Foundation of Southwest Georgia. In addition, he is a member of the Georgia Research Alliance Board of Trustees and the Duke University Divinity School s Board of Visitors, as well Georgia Gov. Sonny Perdue s Water Contingency Task Force. Susan R. Blanck Executive Vice President; Corporate Actuary; First Senior Vice President, Aflac Japan Sue Blanck, 43, graduated from the University of Missouri-Columbia with a bachelor s degree in education. She joined Aflac s Actuarial Department in the U.S. pricing area in She was promoted to second vice president and assistant actuary in In 2 she was promoted to vice president, and in 22 she assumed responsibility for developing Aflac s business and financial plans. She was promoted to senior vice president and deputy corporate actuary in March 24, to corporate actuary in January 26, assumed the additional responsibilities of first senior vice president, Aflac Japan, in June 28, and was promoted to executive vice president in 211. In this capacity, she will continue to work on product development and strategic marketing initiatives in Japan. She is a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries. 8

82 Martin A. Durant III Executive Vice President; Deputy Chief Financial Officer, Aflac Incorporated Martin Durant, 61, graduated from the University of West Florida with a bachelor s degree in accounting. Immediately after college, he gained experience with a venture capital firm and as an accountant with KPMG/Peat Marwick. He originally joined Aflac in 199 as vice president and controller of Aflac Incorporated and remained with Aflac for 1 years, during which time he was promoted to senior vice president, Corporate Services. In 1999, he accepted a position as senior vice president and CFO of Carmike Cinemas, Inc., from which he retired in April 26. He became senior vice president, Corporate Finance in July 26 and was promoted to executive vice president; deputy chief financial officer in June 28. As deputy CFO, he works on capital management, risk management and other financial matters. D. Christian Goodall Chief Executive Officer, Aflac Group Insurance (CAIC) Chris Goodall, 52, is chief executive officer of Aflac Group Insurance. He joined CAIC in 1995 as general counsel, also serving as vice president and president prior to his promotion to chief executive officer of Aflac Group Insurance. Before joining CAIC, he served as partner with the law firm of Adams, Quackenbush, Herring & Stuart in Columbia, South Carolina. Chris graduated from Wofford College with a bachelor of arts degree and went on to receive his juris doctorate degree from the Samford University School of Law. He is currently a member of the Boards of Directors of Aflac Group Insurance (CAIC) and the Association of South Carolina Life Insurance Companies. He serves as vice chairman of the Board of Trustees for Providence Hospital; and is a Commissioner of the SC ETV Commission, having been appointed by Governor Sanford from the 2 nd Congressional District. He also serves on the Board of Directors for the Souper Bowl of Caring; Project Pet in Columbia, SC; and Wofford College. He is a member of the World Presidents Organization and the Midlands Business Leaders Group. Kenneth S. Janke Jr. Executive Vice President; Deputy Chief Financial Officer Ken Janke, 52, attended Michigan State University and received a bachelor s degree in political science from the University of Michigan in 1981 and a master s degree in business administration from Oakland University s School of Economics and Management in Before joining Aflac Incorporated as manager of Investor Relations in 1985, he was director of Corporate Services for the National Association of Investors Corporation (NAIC) in Madison Heights, Michigan. In 1993, Ken was promoted to senior vice president of Aflac s Investor Relations Department prior to being promoted to his current role as executive vice president and deputy chief financial Officer. He also chairs Aflac s Disclosure Committee. Joey M. Loudermilk Executive Vice President; General Counsel; Corporate Secretary Joey Loudermilk, 57, earned a bachelor s degree with honors from Georgia State University and a juris doctorate degree from the University of Georgia School of Law. He worked in private law practice before joining Aflac in 1983 as head of the company s then newly formed Legal Department. In 1988, he assumed responsibility for Governmental Relations. In February 1989, he became treasurer for Aflac Incorporated s political action committee (Aflac- PAC) and was appointed senior vice president, corporate counsel, for Aflac Incorporated in In 1991 he was promoted to general counsel of Aflac Incorporated and Aflac, and in 2 he was promoted to his current position as executive vice president. He is a member of the State Bar of Georgia, the American Corporate Counsel Association and the American Society of Corporate Secretaries. He also serves on the boards of the Georgia Humanities Council, the Georgia Military Affairs Coordinating Committee and the Columbus Regional Medical Foundation. He is a former president of the Rotary Club of Columbus. 81

83 Audrey Boone Tillman Executive Vice President, Corporate Services Audrey Boone Tillman, 46, received a bachelor of arts degree from the University of North Carolina at Chapel Hill and a juris doctorate from the University of Georgia School of Law. Before joining Aflac in 1996, she completed a federal judicial clerkship, worked in private practice, and was a law school professor. She holds law licenses in Georgia, North Carolina, and the District of Columbia. Her main areas of responsibility include: Human Resources, Facilities, Corporate Learning and Health Services. She was promoted to second vice president in 1997 and to vice president in 2, where she concentrated on employment law. She was promoted to senior vice president of Human Resources in 21, and to her current position in 28. She recently served as a director-at-large for the Society for Human Resource Management (SHRM). Teresa L. White Executive Vice President; Chief Administrative Officer Teresa White, 43, earned a bachelor s degree in business administration from the University of Texas at Arlington and a master s degree in management from Troy State University. She joined Aflac in 1998 as second vice president, Client Services; was promoted to vice president of Client Services in 2; to senior vice president, director of Sales Support and Administration in October 24; to deputy chief administrative officer in March 27; and to her current position in March 28. In her current role, Teresa oversees administrative functions in Client Services, Claims, Aflac New York Administration, Administrative Services, New Account Set-Up, New Business, Field Contracting and Compensation, Support Services, Shared Services, Payment Services, Account Relations, Field Liaison Office and Corporate Travel and Events. She also oversees the Sales Support and Administration and the Sales Financial Management departments. Teresa is an alumnus of Leadership Columbus, and is a Fellow of the Life Management Institute. She currently serves on the board of directors for Columbus NeighborWorks, SIFE and Communicorp. She s also a member of Delta Sigma Theta Sorority, Inc. Ronald G. Agypt Senior Vice President, Aflac Broker Sales Ron Agypt, 54, joined Aflac in 28 to lead the team in Broker Sales. Ron spent over 34 years with Combined Insurance, an Aon Company, where he started as a sales representative and became the youngest regional manager and vice president in the history of the company. During his previous career, he led 12 different organizations ranging from 22 employees to 4,. His latest project was building and developing a worksite company for Combined Insurance. Ron is responsible for setting corporate strategy, operational performance, professional and management development, value-added services, technical resources, and national marketing relationships all within the U.S. broker arena for Aflac. Ron has served on the Better Business Bureau of Northern Illinois, the board of directors for Sterling Life Insurance, and the board of directors for Legal Club of America. Janet P. Baker, ACS Senior Vice President; Director of Human Resources Janet Baker, 49, holds a master s degree in human resources management from Troy University and a bachelor of science degree in management from TU, where she graduated magna cum laude. She joined Aflac in 1982 and has held various positions, including second vice president of Human Resources and second vice president of Client Services. She was appointed vice president of Marketing Services in 1999 and vice president of Account Implementation and Management in 22. She was promoted to senior vice president, Client Services in 25 and assumed the position of senior vice president of Corporate Learning in December 27. She was recently named senior vice president, Director of Human Resources, where her responsibilities include leadership and day-to-day management of Human Resources Operations. She is the past president of the Golden K Kiwanis Club in Columbus and is the past president of Altrusa International a community organization directed at building leadership skills for women and addressing literary issues within the city. She holds board positions with the American Red Cross, the Historic Liberty Theatre, Easter Seals and the Columbus Chamber of Commerce. In September 28, Leadership Excellence magazine named her as one of the Top Practitioners in the field of Leadership Development, along with just 134 other leaders from throughout the U.S. 82

84 Laree R. Daniel Senior Vice President, Customer Assurance Organization Laree Daniel, 48, holds bachelor of science degrees in business a n d p s y c h o l o g y f r o m N e b r a s k a Wesleyan University and a master of science degree in organizational psychology from the University of Nebraska at Omaha. She joined Aflac in September 27 as a customer experience consultant for Internal Operations, was promoted to vice president of Client Services in December 27, and in March 29 was promoted to her current position as senior vice president of the Customer Assurance Organization for Aflac, which includes Client Services, Claims, Aflac Benefit Services, and New York Administration. Laree is an insurance industry veteran with more than 18 years of leadership, having joined Aflac from two of the nation s largest insurers Assurant Health and Mutual of Omaha. She most recently served as chief administrative officer for Assurant Health in Milwaukee, and prior to that held various leadership positions at Mutual of Omaha. Her professional designations include the Health Insurance Association of America (HIAA) and the Accredited Customer Service (ACS). Phillip J. Jack Friou Senior Vice President; Director of Governmental Relations Jack Friou, 6, graduated from the University of Georgia in 1971 with a bachelor s degree in political science and served in the Army for two years. He joined Aflac in 1973 and has served in various capacities in administration and marketing, including Agency Administration, the Policyholder Service Department and the Compliance Department. He also served as president of Aflac New York and senior vice president, Marketing and Agency Development. His current area of responsibility includes state legislative and regulatory relations. Thomas R. Giddens Senior Vice President; Director of Sales Tom Giddens, 55, joined Aflac in 1983 as assistant vice president before serving in the field for more than 2 years. He was a regional sales coordinator in Atlanta where he consistently exceeded goals, resulting in his promotion to state sales coordinator of Georgia-North. As state sales coordinator, Tom was recognized as the company s top salesperson for three consecutive years, earning the company s alltime sales record. In 27, Tom s numerous achievements and contributions were recognized when he became the youngest member of the Aflac Sales Hall of Fame. Tom was subsequently named Southeast territory director in December 29 where his team leads in sales, and to senior vice president and co-director of Sales in May 21. Tom currently serves on the Boards of the Georgia Chamber of Commerce, Children s Hospital of Atlanta, and the Aflac Credit Union. He received a bachelor s degree in physical education from Georgia Southwestern University. June Howard, CPA, CFA Senior Vice President, Financial Services, IFRS; Chief Accounting Officer June Howard, 43, graduated from the University of Alabama in Huntsville with a bachelor s degree in business administration. She joined Aflac in June 29 and is responsible for financial reporting, investment accounting and International Financial Reporting Standards (IFRS) implementation. She assumed the additional role of chief accounting officer in November 21. Before joining Aflac, she held financial reporting positions of increasing responsibility at ING and The Hartford. Additionally, she worked as an auditor with Ernst & Young for nearly 1 years. June is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, the CFA Institute and the Atlanta Society of Financial Analysts. W. Jeremy Jerry Jeffery Senior Vice President; Chief Investment Officer Jerry Jeffery, 59, graduated from Yale University with a bachelor of arts in political science. He joined Aflac in 25 as senior vice president and deputy chief investment officer. Prior to joining Aflac, Jerry had a 23-year career with Morgan Stanley, where he focused on diverse fixed income strategies affecting a wide range of industries. Over the last 1 years there, he served as executive director of Fixed Income Institutional Sales. John A. Moorefield Senior Vice President, Strategic Management, Aflac International John A. Moorefield, 48, graduated from North Carolina State University. He joined Aflac in 25 and has worked in various positions, including chief information officer of Aflac Japan, where he managed Aflac Japan s technology service delivery and directed the completion of several key initiatives. In that role, he was also responsible for the development of short-term and longterm Aflac Japan Information Technology strategic plans. In his current role as senior vice president, strategic management for Aflac International, John oversees Aflac Group operations, various strategic initiatives and planning activities, along with coordination between Aflac s U.S. and Japan operations. Prior to joining Aflac, he served as a Principal in ApproxiCom, LLC and held executive leadership positions at Cap Gemini Ernst & Young LLP, Fidelity Investments, and NationsBank, where he was responsible for technology strategy and delivery of information architecture and systems. 83

85 Robert P. Moran Executive Vice President; Chief Financial Officer; Chief Actuary, Aflac Group Insurance Rob Moran, 47, graduated with a bachelor of science degree and a masters degree in business administration from Duke University. As executive vice president, chief financial officer and chief actuary for Aflac Group Insurance, Rob is responsible for the development and management of all group products. Prior to joining Aflac Group Insurance/CAIC in 21, Rob was vice president and actuary at Colonial Life & Accident, where he held similar responsibilities. Rob was also President of Investors Consolidated Insurance Company. Robert M. Ottman Senior Vice President, Strategic Transformation Bob Ottman, 54, began his management career at Aflac in 1999 and has served in several leadership positions, including second vice president, Aflac Administrative Services and vice president, AIM and Aflac Benefit Services. He was promoted to senior vice president with responsibility for Claims, Shared Services, Hispanic Services, Benefit Services and New York Administration in 25, to his position as senior vice president over Sales Operations Management in 29, and to his current position in Strategic Transformation in 21. In his current role, Bob manages the various activities that help drive transformation to ensure that Aflac s strategic vision and business value is realized through prioritization and execution of enterprisewide efforts to support Aflac U.S. Bob holds a bachelor s degree from Eastern Connecticut State University. Before joining Aflac, he held the position of vice president at Frank Gates USA (formerly Acordia of Dallas). He is a member of the ECFC and holds a CFCI designation. David L. Pringle Senior Vice President, Federal Relations David Pringle, 54, graduated from Mississippi State University, where he received a bachelor of arts degree in insurance and risk management. He has worked for Aflac for more than 31 years. For nine of those years, David worked with the Aflac sales force in Mississippi, North Carolina and West Virginia, where he worked his way from the position of associate to state sales coordinator. During his career with Aflac, David has also worked at Aflac Worldwide Headquarters as the assistant agency director for the West Territory, and director of Training, where he was responsible for helping develop the concept for Aflac s state training programs. He assumed his current position in 26. His primary responsibility is to coordinate Aflac s government relations and lobbying efforts in Washington, D.C. He also serves as secretary and principal fundraiser for Aflac s Political Action Committee (Aflac PAC), which is the largest political action committee among all insurance companies. Ralph A. Rogers Jr. Senior Vice President; Senior Adviser, Financial Ralph Rogers, 61, graduated from Tennessee Technological University in 197 with a bachelor s of business administration degree in accounting. He joined Aflac in 2 as senior vice president, Financial Services and served as chief accounting officer from 22 to 21. Before coming to Aflac, he was a senior vice president at another large insurance company. He is a member of the American Institute of Certified Public Accountants, the Tennessee Society of Certified Public Accountants, Financial Executives International, and the Institute of Management Accountants. Ronald S. Sanders Senior Vice President; Director of Aflac Group and Broker Sales Ron Sanders, 55, received a bachelor s degree in environmental science from Lamar University. He joined Aflac in 1983 as an associate in Beaumont, Texas. He was promoted to district sales coordinator in 1984 and to regional sales coordinator in In 1988 Ron took a marketing position with Aflac headquarters and in 199 became director of Field Force Development for recruiting and training. In 199, he was named state sales coordinator of Arizona/New Mexico. Ron was promoted to vice president, Southwest Territory Director in April 25, to senior vice president, deputy director of Aflac U.S. sales in November 28, and to his current position as senior vice president; director of sales in March 29. Eric B. Seldon Senior Vice President, Business Services; President and Vice Chairman, Communicorp Eric B. Seldon, 41, received a bachelor s degree in business administration from Madison University. Before joining Aflac in 1999 as an operations manager in Client Services, he was vice president of Card Services at Total System Services Inc. After joining Aflac, he took the helm of Payroll Account Service Billing, where he managed the reconciling and billing activities for the company s payroll accounts, and was promoted to director of New Business. He has held several leadership positions within Aflac, most recently serving as second vice president, Support Services, and then vice president, Business Services & Support. He was promoted to his current position in 21 and is responsible for the strategic direction of Support Services, Payment Services, Account Relations, Strategic Partnerships, New Account Set-Up, and New Business/Underwriting, as well as all Communicorp administration and operations. He has more than 19 years of leadership experience, including more than 1 years with Aflac. He is a member of the Georgia Minority Supplier Development Council and is certified by the U.S. Postal Service as a Mail Center Professional and by Mailcom for Mail Center Security Training. 84

86 Charles C. Shields Executive Vice President; Chief Operating Officer, Aflac Group Insurance Chuck Shields, 57, graduated from the University of South Carolina with a bachelor of science degree in management. He joined Aflac in March 21. Chuck has over 3 years of global corporate and sales management experience, 2 years of which was spent with Policy Management Systems, Inc. Prior to joining Aflac, Chuck had several successful venture firm engagements rehabilitating portfolio companies. Most recently, he was with The Hartford as a member of their executive staff responsible for Trumbull Services Policy Administration Software Services Division. Gerald W. Shields Senior Vice President, Chief Information Officer Gerald W. Shields, 52, graduated from Baylor University with bachelors of business administration degrees in accounting and computer sciences. He began his management career at Aflac in 22 as vice president, Information Technology-Enterprise Services and was promoted to chief information officer for Aflac Incorporated in July 25. In his current position, he oversees all aspects of Aflac s U.S. Information Technology division and is also responsible for the division s project management and customer relationship management efforts. During his tenure, Computerworld and Information Week magazines have consistently named Aflac as one of the Best Places to Work in IT. He was also selected by Computerworld as one of the 1 Premier CIOs for 26. In March 27, he was honored as one of Computerworld s Premier 1 IT Leaders. Before joining Aflac, he held senior IT positions at Electronic Data Systems (EDS) and served as the chief technology officer, director of Information Services for LifeWay Christian Resources in Nashville, Tennessee. He is a member of the inaugural governing body for the Atlanta CIO Executive Summit, as well as a Fellow of the Life Management Institute. Eugene C. Gene Sorrel Sr. President, Aflac Group Insurance Robin Y. Wilkey, CPA Senior Vice President, Investor Relations Robin Wilkey, 52, graduated from the University of Georgia with a bachelor s degree in finance and went on to receive her designation as a certified public accountant. She joined Aflac in 199 as an accountant in Financial, was promoted to senior auditor in Internal Auditing and to manager of Information Systems and Payroll in the Human Resources Division. She joined the Investor Relations Department in 1998 as senior director, was promoted to second vice president in 22, to vice president, Investor Relations in 23, and to her current position as senior vice president, Investor Relations in 21. Prior to working at Aflac, she worked in auditing and accounting in the banking and medical industries. William R. Wright, Jr. Senior Vice President, Investment Strategy and Risk Management, Aflac Incorporated Bill Wright, 58, received a bachelor of arts degree in political science and East Asian studies from Wittenberg University, a diploma in Chinese Mandarin from the Defense Language Institute, and a master s of business administration degree in finance from the New York University Stern School of Business. His work experience began with the National EDP Directorate of Coopers & Lybrand, and then various positions at Bankers Trust Company. He went on to serve as global fixed income portfolio manager at Continental Asset Management, a subsidiary of Continental Corporation; vice president/portfolio manager of International Fixed Income for GE Investments Corporation; managing director of GE Asset Management s first non-u.s. subsidiary in London; managing director and chief investment officer of GE Edison Life Insurance Company in Tokyo, Japan; executive vice president and chief investment officer of Fixed Income Insurance at GE Asset Management; and senior vice president, chief investment officer of Genworth Financial, Inc. Since 26, most recently Bill conducted a private investment management and consulting practice based in Wilton, Connecticut, which included a year-long engagement with Scottish Re in Charlotte, North Carolina. He is a member of CFA Institute. Gene Sorrel, 69, graduated with bachelor of arts degree from the University of Southwestern Louisiana in After working with Colonial Life & Accident Company in Columbia, South Carolina, for 25 years, he joined CAIC in Gene has 47 years experience in the worksite industry. He was inducted into the Benefits Marketing Association s Worksite Hall of Fame in

87 Michael W. Zuna Senior Vice President; Chief Marketing Officer Michael Zuna, 41, graduated cum laude from the United States Naval Academy with a bachelor s degree in economics. He is a military veteran having served 1 years in the Navy. He joined Aflac in 29 as vice president of Marketing, a role in which he managed Aflac s brand strategy, national advertising, business-tobusiness marketing, business-to-consumer marketing, and customer acquisition and retention efforts. He was promoted to senior vice president; chief marketing officer in 21 and is responsible for all marketing activities across the enterprise including brand stewardship, marketing and brand strategy, advertising, corporate identity, customer relationship management and field marketing. Prior to joining Aflac, he served as managing director at Saatchi & Saatchi New York and has also held client leadership roles at Arnold Worldwide, Ogilvy & Mather, and Lord, Dentsu & Partners. Lynn G. Barnson Vice President; Territory Director, Southwest Territory Lynn Barnson, 54, joined Aflac in 1981 as an associate in southern Utah, where he attended Southern Utah State College. Eight months after joining Aflac, he was promoted to a district sales coordinator and spent three years building a successful organization. In 1985, he was offered the opportunity to be a regional sales coordinator in Ft. Worth, Texas. In 1987, Lynn was promoted to director of Metro Development at Aflac Worldwide Headquarters in Georgia and in 1988 to vice president, agency director of the newly formed Mountain Territory. In 199, Lynn accepted promotion as Territory Director of a new enlarged West Territory. Lynn has served as a Territory Director for over 17 years, meeting many of the objectives assigned to him. Lynn took on the position as the Nevada state sales coordinator in 24 and in January 29 rejoined the Southwest Territory. He is in his 29 th year with Aflac. Brian L. Abeyta Vice President, IT Project Management Office Brian Abeyta, 43, holds a bachelor s degree from the Air Force Academy and a master s degree from the Florida Institute of Technology. He holds another master s degree earned while studying at both the University of Nevada Las Vegas and the University of Phoenix. Brian is a military veteran having served eight years of Air Force active duty. Brian joined Aflac in 21 as a senior corporate project manager and has served in several positions in IT, most recently serving as second vice president, Project Management Office. He was promoted to his current position as vice president, IT Project Management Office, in July 27. As vice president, Brian guides the overall direction of the Project Management Office by managing all aspects of the design, development, and implementation of projects within the IT division and for IT s internal customers. He also actively participates in long-range strategy planning and manages policy development to address complex business issues. J. Brian Angel Vice President, Counsel Brian Angel, 44, received his bachelor of business administration degree from the University of Texas at Austin. He joined Aflac s Legal Department in 1992 after earning his juris doctor degree from the University of Texas School of Law. In 1996 he was promoted to second vice president, regulatory counsel, and transferred to Albany, New York, where he assumed day-to-day responsibility for Aflac New York s legal, regulatory, and government relations matters. In 21 he relocated back to Columbus to serve as Aflac s privacy officer. In 23 he joined the Government Relations department as counsel and was promoted to his current position in 26. He is a member of the state bars of Texas and Georgia. 86 Michael E. Bartow Vice President, Financial Control Mike Bartow, 55, received a bachelor s of business administration degree in accounting from the University of Wisconsin at Oshkosh. He became a Fellow of the Life Management Institute in 1981 and earned a CPA designation in Before joining Aflac in 1986, he was a manager at Sentry Insurance. He was promoted to second vice president in 1995 and to vice president in 21. He is a member of the American Institute of Certified Public Accountants. Tyler G. Bennett Vice President; New Business Operations / Account Relations Tyler Bennett, 39, earned a bachelor s degree in management from Purdue University and a master s degree in business administration from Auburn University. Tyler joined Aflac in 1999 and most recently served as second vice president, New Business. In his current role as vice president, Tyler continues to lead New Business and also oversees New Account Setup, Underwriting and Account Relations. Prior to joining Aflac, Tyler worked with Weyerhaeuser Company and Westvaco Corporation as a sales representative, ISO 9/quality manager and customer service manager.

88 Christopher S. Bernardine Sr., WBC Vice President, Enrollment and Sales Implementation Chris Bernardine, 41, has more than 19 years of dedicated experience in benefit communication and employee benefits. He joined Aflac in 29 as second vice president of Broker Services and was promoted to vice president in 21. Prior to joining Aflac, Chris was managing director of Employee Benefit Communications, Inc. (EBC) and led one of the first and only national distribution, communication and enrollment services organization in the worksite industry. Chris has also held several sales and management positions at Combined Insurance Company and Aon, also serving as a partner and president of Beacon Benefit Communicators. Chris has earned the Certified Enrollment Specialist (CES) designation from the Benefits Marketing Association and is a current Board member of Workplace Benefits Association as well as a past board member of the Mass Marketing Insurance Institute (MI2). He worked with the American Association of Homes and Services for the Aging (AAHSA), and developed the AAHSA Benefit and Communication Program. He attended Delaware County College. Alfred O. Blackmar, FLMI Vice President, Facilities Support Alfred Blackmar, 48, graduated from Presbyterian College with a bachelor s degree in business administration. He joined Aflac in 1984 and has been in his current position since He previously served as vice president, deputy director, Compliance. He is past executive chairman of the Life and Health Compliance Association. Michael S. Chille Vice President; Territory Director, Northeast Territory Michael Chille, 39 earned his bachelors degree from the State University of New York at New Paltz. He started his career with Aflac in 1995 as a personal producer. Later on in that same year, Michael was promoted to a district sales coordinator. In April 1996, he had the privilege of being appointed to regional sales coordinator of the newly formed region in the Hudson Valley area of New York. The performance of Michael s regional team elevated him to state sales coordinator of Metro New York/New Jersey in the summer of That original state operation produced seven individuals who later became state sales coordinators. Michael considers this one of the greatest accomplishments of his Aflac career. He assumed his present position as vice president and Northeast Territory Director in November of 23. Timothy J. Craig Vice President: Territory Director, West Territory Tim, 5, began his career with Aflac in 1981 as an associate in Utah. Throughout his career with Aflac he has held the positions of district, regional and state sales coordinator. As district sales coordinator, he was the recipient of the No. 2 companywide DSC award and held the Aflac record for the most production for month, quarter and year in He was an RSC in Texas and assumed a marketing coordinator position for the West Territory in He was promoted to SSC of Utah in As an SSC, one of his most important contributions to Aflac was achieving and exceeding market potential index for 12 out of 13 years. He has qualified for numerous Aflac awards and recognitions. Tim was promoted to his current position as vice president, territory director, West Territory in December of 28. William H. Dudley Vice President, State Governmental Relations Bill Dudley, 44, graduated from Furman University with a bachelor s degree in political science and received his juris doctorate from the University of South Carolina. He practiced law with a small regional firm for five years before joining Aflac in the State Governmental Relations Division. His areas of responsibility include managing executive, legislative and regulatory affairs in fifteen states in the southeast and midwest, with particular emphasis in Nebraska, Georgia and South Carolina. Additionally, he acts as the liaison to the governors, attorneys general and their respective organizations. He is a member of the State Bar of Georgia. Tye M. Elliott Vice President; Territory Director, North Territory Tye Elliott, 45, started as an agent with Aflac in Since then, he has held positions as regional and state sales coordinator. As an Aflac agent, he qualified for FAME 26 times, President s Club four times, and numerous other state and national conventions. He holds a bachelor s degree from Illinois Wesleyan University. In his current position as vice president and territory director, Tye develops, manages, and guides sales and recruiting activities in the North Territory. He also implements policies and programs to achieve maximum sales and recruiting volume within the territory, as well as develops and implements competitive sales strategies and plans to expand the number of active accounts and increase the penetration within existing accounts. 87

89 Glen R. Ellsworth Market Vice President, Broker Sales Glen Ellsworth, 51, brings more than 24 years of experience in the insurance industry to Aflac and most recently worked in the employee benefits market. In that position, he was involved in almost every aspect of worksite marketing, such as product design, underwriting, sales, training and market development. Glen was also responsible for establishing a new agency in Puerto Rico to offer voluntary benefits and severed as a national practice leader for one of the largest carriers in the insurance industry. For the last 6 years, Glen focused on regional and national sales in the large brokerage market, marketing a group product underwritten and offered by CAIC, now known internally as Aflac Group Insurance. As a market vice president, Glen helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, Wingspan SM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. Bernard J. Falco Jr. Market Vice President, Broker Sales Bernie Falco, 37, graduated from the University of Georgia, Athens, with a bachelor s degree in speech communication. He first joined Aflac as a broker development coordinator (BDC) for Florida East in March 29 and served in that role until November 29. He was then promoted to market vice president for the state of Florida, where he currently serves five state operations. Prior to joining Aflac, Bernie worked for Reliastar Financial Services and GE Capital in a variety of marketing and sales capacities. Additionally, Bernie founded Constellation Health, which provides marketing, underwriting and administrative services to middle market and large employer groups. In his current role as market vice president, he helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individualproducts, Wingspan SM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. William G. Billy Farmer Vice President, Eastern Broker Division Billy Farmer, 48, joined Aflac in 1996 as a DSC in Georgia South. He was promoted to RSC of Aflac s newly created Macon region in 1999, and served in that capacity until 24. Billy joined Allstate s Workplace Division in 25 as regional sales director over the Georgia market and was promoted in 26 to regional director of Georgia and Alabama. In October 21, he returned to Aflac as vice president, Eastern Broker Division, where he is responsible for developing and strengthening relationships with national and regional brokers and accounts in the eastern part of the United States. He also oversees and coordinates the activities of Aflac s market vice presidents, who are charged with increasing broker sales and market penetration in accounts with 5 or more employees. Ronald D. Fields, LUTCF, CLF Vice President, Western Broker Division Ron Fields, 55, joined Aflac in November 29 as market vice president for Broker Sales and was promoted to vice president, Western Broker Division in 21. Ron spent 3 years with American General/AIG. He started his career as an agent and progressed through the career ranks to senior regional vice president of Sales where he managed Career, Broker, Worksite, and Ordinary initiatives. Just prior to joining Aflac, Ron was the territory manager with Colonial Life in the Northeast. He has been active in industry issues and has his LUTCF and CLF designations. In his current role as vice president of the Western Broker Division, he is responsible for developing and strengthening relationships with national and regional brokers and accounts in the western part of the United States. He also oversees and coordinates the activities of Aflac s market vice presidents, who are charged with increasing broker sales and market penetration in accounts with 5 or more employees. Daniel Fleishman Vice President, Sponsorships and Emerging Markets Dan Fleishman, 44, holds a bachelor of arts degree from Dartmouth College. He joined Aflac in 29 as vice president, Sponsorships and Emerging Markets. Prior to joining Aflac, Dan worked at Wachovia as senior vice president, director of cross-enterprise marketing and before that, he held the position of director of marketing partnerships with the National Basketball Association. While at Wachovia, Dan played the lead role in the creation, development, marketing, and activation of the Wachovia Championship, considered by players, broadcasters, media and fans as one of the premier events on the PGA Tour. In his current role, Dan oversees strategy and implementation of Aflac s sponsorship portfolio and multicultural marketing initiatives. 88

90 Lynn B. Fry Vice President, Sales Support and Administration Lynn Fry, 51, joined Aflac in March 1982 in the Information Technology Division. In 1993 she was promoted to second vice president, Information Systems, and in 1997 she was promoted to vice president. In 2 she moved to the Marketing Division to serve as vice president of Marketing Technology Support, focusing on technology for the company s field force. In 22 she assumed additional responsibilities in Sales Support, and currently is responsible for Sales Administration and Support, Field Contracting and Compensation, and the Field Liaison Office. Brett J. Gant, FSA, MAAA Vice President; Actuarial Pricing Brett Gant, 52, received a bachelor s degree in mathematics from Marietta College and a master s degree in statistics from Miami University of Ohio. He joined Aflac in the Actuarial Department in In 1993 he was promoted to vice president overseeing pricing development for Aflac U.S. products. In 23 he received additional responsibilities supporting Aflac Japan business. In 28 he assumed his current position of overseeing U.S. actuarial involvement supporting profitability analysis and components of valuation and financial reporting for Aflac Japan business, as well as responsibilities for re-rating and monitoring analysis for Aflac U.S. products. He is a member of the Society of Actuaries and the American Academy of Actuaries. Gregory J. Gantt, CFA Vice President, Fixed Income Investments Greg Gantt, 51, received his bachelor s degree in accounting from Georgia State University. He joined Aflac in 1982 as a member of the Financial Planning Department. He moved to the Investment Department in 1987, where he was in charge of investment accounting. In 1991 he was promoted to his current position with responsibility for managing Aflac Japan s U.S. dollar fixed-income portfolio. He is also a part of the Aflac Global Investments team that oversees management of Aflac assets worldwide. He is a member of the Association for Investment Management and Research. Jon D. Geiger Market Vice President, Broker Sales Jon Geiger, 41, brings more than 19 years of experience in the voluntary and supplemental insurance industry to Aflac. Most recently, Jon was territory manager/worksite specialist with American General. He also worked with Allstate Workplace Division for five years as a regional sales director. As a market vice president, Jon helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, Wingspan SM Services and Solutions, and enrollments. Jon makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. Jon received his bachelor s degree in finance with a minor in economics from Eastern Illinois University and previously served as a president of the Chicago and Northeastern Illinois Association of Health Underwriters. Kenneth L. Casey Graves Vice President, Human Resources Support Casey Graves, 53, received a bachelor of science degree in marketing/ management and an associate of arts degree in computer science from Southeast Missouri State University. He joined Aflac in 22 as manager of Human Resources Information Systems (HRIS) and Payroll. He was promoted to second vice president in October 24 and then to vice president in August 26. Casey is responsible for Compensation, Benefits, Human Resources Information Systems, HR Finance and the Payroll Departments within Human Resources, and has more than 25 years of experience in human resources and information systems. He also played a key role in the implementation of the SAP HCM module in 27. Before joining Aflac, he worked for Darden Restaurants as director of IT in support of human resources, and as director of HRIS. He also spent 15 years with the McDonnell Douglas Corporation, where he served in various human resources-related roles. 89

91 Dexter A. Harris Vice President; Territory Director, Southeast Territory Dexter Harris, 34, joined Aflac in 1999 and progressively advanced through ranks of associate, district sales coordinator, regional sales coordinator, training manager, and sales strategy consultant before being promoted to the state sales coordinator of Florida-South in 26. Responsibilities have ranged from sales strategy design and execution to training, management, and leadership development of Aflac employees and field force members. Recognized for numerous conventions, accomplishments, and leadership awards, becoming an Aflac zealot to add value has always been his personal goal. In his last role as state sales coordinator, his state team ranked in the top five nationally in every sales category in 29, before begin promoted in August to vice president and territory director of the Southeast Territory. He received his bachelors of business administration degree from Georgia College and State University located in Milledgeville, Georgia. Mark A. Hellickson, CLU, ChFC Market Vice President, Broker Sales Mark Hellickson, 49, started his career in the insurance industry in 1985 and brings more than 25 years of experience to Aflac. Most recently, Mark was manager of benefits development in the Minneapolis office of Mercer Health and Benefits. Before that, Mark was the client service director for the Principal Financial Group sales office in Minneapolis. As a market vice president, Mark helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, WingspanSM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. James R. Hill Vice President, Credit Union Services Jimmy Hill, Sr., 69, joined Aflac in central Virginia in He spent six years as a district and regional coordinator and was promoted to state sales coordinator in For the next nineteen years, he served in this position for Idaho/Wyoming, West Texas, Southern California/Southern Nevada and Virginia/DC. He retired in 23 and was inducted into the Aflac Hall of Fame. That year he founded Credit Union Specialty, an agency focusing on serving the credit union community. In March 21, he accepted the position of vice president, Credit Union Services with Aflac. Jeffrey L. Hyman Vice President, National Accounts and Specialty Markets Jeff Hyman, 5, is vice president, National Accounts and Specialty M a r k e t s. H e i s r e s p o n s i b l e f o r developing and implementing sales strategies to support Aflac associates, key account managers and brokers in acquiring new national accounts. With a priority on building relationships with associations and unions, achieving targeted sales volume, maximizing market potential, and helping design and execute marketing and sales strategies for Aflac products, he helps Aflac maintain its strong leadership within the industry. Jeff joined Aflac in December 28 as second vice president of Broker Sales for the Northeast and East Territories and assumed the additional responsibilities of the South Territory in June 29. In November 29, he was promoted to his current position. Before joining Aflac, Jeff was director of business development at ARAG, a global leader of legal insurance based in Dusseldorf, Germany. Earlier, he served eight years as president of JLH Consulting Inc. of Florence, S.C., a privately held consulting firm. He also served eight years at GE as divisional manager for their life and annuity division, managing director for association and third-party affinity groups and vice president for credit insurance. Nicholas C. Jensen Market Vice President, Broker Sales Nick Jensen, 3, graduated from Oregon State University s School of Business and began his career with Aflac in March of 23 as an associate in Corvallis, Oregon. As an associate, Nick qualified for the Fireball, Super Fireball, Triple Crown and All-Star Awards. He was given a scratch district opportunity in August of 23 and by the end of that year his team led the state in MPI, new accounts opened, Fast Starts and Fireballs. He qualified for FAME every quarter he was a DSC before being promoted to RSC in January of 25 in Portland, Oregon. As an RSC he grew his team from 1.7 million to 4.2 million in four years, won multiple Key Club, National Conventions, and FAME Awards but is most proud of his record on training where his team led his state in new associate first-year awards for four out of five years. Laura Kane Vice President, External Communications Laura Kane, 48, holds a bachelor s degree from Michigan State University in communications. She joined Aflac in 23 and was promoted to vice president of external communications in 28. Laura serves as Aflac s primary spokesperson and oversees communications initiatives that enhance and protect the corporate reputation. In 28, Kane was inducted into the PR News PR Hall of Fame at the National Press Club. Prior to joining Aflac, she developed and executed communications programs for the Metro Atlanta Chamber of Commerce, Disney ABC, Euro RSCG and WNYC. 9

92 John R. Keddy Vice President, IT Application Services John Keddy, 45, holds a master s degree in business administration from Columbia University and a bachelor s degree in economics from Rutgers College. He joined Aflac in 28 as vice president, IT Application Services, where he oversees the day-today operations of Application Services and Professional Services organizations, to include enrollment, imaging, management information systems, and financial services. He has nearly 2 years of experience in the insurance industry. Before joining Aflac he also served as a vice president at Conseco and at ING. Mary Ellen Keim Vice President, Fixed Income Investments Mary Ellen Keim, 54, holds a bachelor of science degree from the University of Alabama. Before joining Aflac, she worked in the Trust Department of First National Bank of Tuscaloosa as a portfolio manager and trust administrator. She successfully completed the National Association of Security Dealers Series 7 and Series 63 exams in She is a member of the Association of Investment Management and Research. Charles B. Lacy, Jr. Market Vice President, Broker Sales Chuck Lacy, 5, joined Aflac in 1986 and currently serves as market vice president in the Broker and Market Development Department. Before coming to WWHQ in 26, he served 17 years as an RSC, one year as a DSC and two-and-a-half years as an associate. Chuck s Aflac awards include the following: Fireball, Super Fireball, five Bronze Key Clubs, 12 Silver Key Clubs, 17 Fame Awards, 1 National Conventions, Presidents Club and three Triple Crowns. In his current role as market vice president, he helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, WingspanSM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. Robert C. Landi Vice President, Corporate Tax Robert Landi, 49, received a bachelor s degree in business administration from the University of Tennessee at Knoxville. He joined Aflac in 1988 as a tax and financial analyst and was promoted to second vice president, Corporate Tax, in He was promoted to his current position in 1999 and is responsible for corporate taxes, including federal and state income taxes, premium taxes, payroll taxes, and other state and local taxes. He is a member of the American Institute of CPAs and the Tennessee Society of CPAs. 91 John G. Laughbaum Vice President, Channel Marketing and Sales Development John Laughbaum, 41, holds a master s of business administration from the Kellogg School of Management at Northwestern University and a bachelor s degree from George Mason University. Since joining Aflac in 1997, John has served as an analyst, director, second vice president and vice president across a range of functions including businessto-business marketing, social and digital marketing, product development, market research, sales force development and planning, multicultural marketing and broker marketing. His current responsibilities as vice president, Channel Marketing and Sales Development, include business-to-business and broker marketing and advertising, product advertising, services marketing and account marketing. He is a Fellow of the Life Management Institute. Eric J. Leger Vice President, Field Force Development Eric Leger, 47, is a 1986 graduate of Lubbock Christian University where he obtained a bachelor s degree in education. He began his career in the field force with Aflac in Lubbock, Texas in June 22. His successes in the field force allowed him to be promoted to district sales coordinator in January 23 followed by promotion to state training coordinator in 24 where he served in Texas South Central for over four years. Eric was then promoted to state sales coordinator for the state of New Mexico in 28, a role in which he served for one year before becoming vice president of Field Force Development in January 29. In his current role he oversees the development and implementation of all field force training, recruiting and coordinator development. Prior to his career with Aflac, Eric was a successful Texas high school baseball and football coach for sixteen years. Jeffery A. Link Vice President, Compliance Jeff Link, 46, graduated from Columbus State University in 1987 with a bachelor s degree in business administration. Before joining Aflac, he held various marketing positions with Pascoe Building Systems and Premier Industrial. He joined Aflac s Compliance Department in 1988 as an analyst. In 1996 he became a second vice president, responsible for forms filings. He was promoted to his current position in 21. He is a member of the Executive Committee of the Life and Health Compliance Association.

93 James M. Mattison Market Vice President, Broker Sales Jim Mattison, 55, is market vice p r e s i d e n t, B r o k e r a n d M a r k e t Development, where he is responsible for developing sales strategies to support Aflac s field force in acquiring new accounts through relationships developed with national and regional brokers, achieving targeted sales volume, maximizing market potential, and helping design and implement market sales strategies for Aflac products. Prior to joining Aflac Jim was vice president with Marsh Global Consumer, where he developed solutions for large employers (5,+ lives) with voluntary benefits. Jim began working in the insurance industry in 198 in the employee benefits arena. Throughout his years of experience, he has worked both on the retail and carrier side. He worked for both The Guardian and The Hartford as a regional manager. He graduated with a bachelor of arts from San Diego State University and is a Certified Continuing Education Instructor in California. He has earned his GBDS (Group Benefits Disability Specialist) Designation and is licensed in Health and Life, and Property & Casual. Harold E. McKeever Market Vice President, Broker Sales Harold McKeever, 54, has 3 years in the voluntary worksite insurance business. He joined Aflac with Aflac s purchase of Continental American Insurance Company (CAIC) in 29, where he was vice president of Sales. Harold started out in sales before eventually being promoted to an officer position. He served as vice president for two other insurance companies, and prior to working in the insurance field, worked for 1 years in the labor relations field. As a market vice president, Harold helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, WingspanSM Services and Solutions, and enrollments. Harold makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. He also serves on the Advisory Board of Workplace Benefits. Thomas P. McKenna Vice President; Deputy General Counsel Tom McKenna, 44, received his bachelor s degree in political science from Columbus State University. He joined the Legal Department in 1993 after receiving his juris doctor degree from the Walter F. George School of Law at Mercer University. He became a second vice president in 21 and was promoted to his current position in 26. His primary responsibilities are to manage and direct the operations of the Aflac U.S. Legal Department, and to provide advice and counsel on legal matters that impact U.S. business operations. He is a member of the State Bar of Georgia and the Defense Research Institute. Virgil R. Miller Vice President, Client Services Virgil Miller, 4, holds a master s degree in business management from Wesleyan College, a bachelor s degree in accounting from Georgia College and a Six Sigma greenbelt from Villanova University. He joined Aflac s management team in 24 in the Policy Service Department after working in leadership in the property and casualty industry. In 26, he was promoted to second vice president of Policy Services where he drove key metrics and process innovation. He later became second vice president of the customer service center where he championed technology innovation and conservation strategies. In 29, he was promoted to Vice President of Client Services. He served as a U.S. Marine and is a veteran of Operation Desert Storm. He was a member of the United Way Board of Trustees, Leadership Macon and the Community Impact Leadership Board of Central Georgia. Patrick A. Monahan Market Vice President, Broker Sales Patrick Monahan, 46, started his career in the insurance industry in He brings over 26 years of corporate account and national account sales experience to the Aflac team. Patrick most recently had been an insurance broker in the NYC/ Long Island marketplace, building a personal book of business to over $12 million. Prior to that, he worked for a few benefit carriers as a broker account specialist developing relationships and closing sales. As a market vice president, Patrick helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, WingspanSM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. He remains active in inner-city volunteer programs such as NY Cares and is a mentor and member of the board of directors for In the Spirit of the Children, which is a non profit organization catering to the needs of young adults coming out of the foster care system. Thomas O. Morey, FSA, MAAA Vice President, Product Division Tom Morey, 48, earned bachelor s and master s degrees in mathematics from the University of West Florida. He became a member of the American Academy of Actuaries in 1998 and a Fellow of the Society of Actuaries in 2. He joined Aflac in 1995, was promoted to senior manager, Pricing, in 2; to second vice president, Pricing and Rerating, in 23; to vice president, U.S. Products and Business Planning, in 25; and to vice president, U.S. Product Development and Financial Planning for Aflac Incorporated. Prior to joining Aflac, he spent 11 years as a weapon system cost estimator for the United States Air Force. 92

94 Perry J. Mullins Vice President, Expense Management Perry Mullins, 52, received a bachelor of business administration degree in accounting from the University of Wisconsin at Eau Claire. He passed the CPA exam in 1981 and became a Fellow of the Life Management Institute in Perry was a manager at Sentry Insurance before joining Aflac s Financial Reporting department in He was promoted to second vice president in 1998 and to vice president in 27. He is a member of the American Institute of Certified Public Accountants. Kevin Murphy, CPCU Market Vice President, Broker Sales Kevin Murphy, 54, joined Aflac in 29 as a market vice president in Broker Sales. Kevin began his career in insurance in 1981 as a commercial property/casualty underwriter in Aetna s Chicago office. He spent nine years there in both underwriting and management positions. Kevin then spent seven years selling all lines of insurance as an independent insurance agent. For the 12 years prior to joining Aflac, he served as director for the New York Association of Homes and Services for the Aging (NYAHSA), the business unit of the not-for-profit nursing home association in New York. NYAHSA is predominantly an insurance agency that works with the members of the association to provide commercial insurance and group insurance. During his tenure, he transformed the agency from annual revenues of $26, to annual revenues of more than $3 million. Michael T. Naumann Market Vice President, Broker Sales Michael Naumann, 44, graduated summa cum laude from Marquette University with a Bachelor of Science degree. He joined Aflac in 28 and in his current roles as market vice president, Broker and Market Development, Michael is responsible for developing and implementing sales strategies to support Aflac s field force in acquiring new accounts through relationships developed with national brokers, achieving targeted sales volume, maximizing market potential, and helping design and implement marketing and sales strategies for Aflac products. Prior to joining Aflac, Michael was national sales director, group division, for Guarantee Trust Life Insurance Company and also served as vice president of sales for National Benefit Consultants. He is a veteran of the U.S. Coast Guard Reserve and member of the National Association of Health Underwriters and Greenleaf Center for Servant Leadership. David A. Nelson Vice President, Travel, Meetings and Incentives David Nelson, 56, joined Aflac in 1988 as a travel analyst after working in the airline industry for 16 years. In 1995 he was promoted to director of Travel, Meetings and Incentives. He was promoted to his current position in 1997 and is responsible for all aspects of Aflac s corporate travel program, the planning of all business meetings, and the planning of all sales force incentive travel programs. He is a member of the National Business Travel Association, the Georgia Business Travel Association, and the Financial and Insurance Conference Planners Association. Bahija Fouad Noell Vice President, IT Business Partnership Management Bahija Noell, 45, is vice president of the Business Partnership Management Office in the Information Technology Division. She joined Aflac in 1987 and held several leadership positions in Client Services and Administration and in the Information Technology Division. She holds a bachelor s degree in computer science and accounting from Eureka College in Eureka, Illinois, a master s degree in management from Troy State University and the Information Technology Management Program from Georgia Institute of Technology. She provides the overall direction of the Business Partnership Management Office, the Software Testing Services organization, and the IT Service Center. She directs the strategic alignment of the overall IT strategy and the Aflac business organizations strategies. She participates in strategic planning and decision-making at the executive and division level and facilitates the development of well-integrated IT initiatives and a business implementation roadmap to support the business strategy. She works with the Aflac leadership to form alliances at the strategic and operational levels and leads key management activities and committees to maintain appropriate communications at all levels. Thomas A. OKray Vice President, Financial Planning & Controls Tom OKray, 55, received his bachelor s degree in accounting, risk management and insurance from the University of Wisconsin. Before joining Aflac in 1988, he was a staff accountant with Wausau Insurance Company. He became a second vice president in 1995 and was promoted to his current position in 21. He is a member of the board of directors, investment committee and audit committee of the Georgia Life and Health Insurance Guaranty Association. 93

95 J. Lance Osborne Vice President; Territory Director, Pacific Territory Lance Osborne, 48, joined Aflac in July 1988 as an associate, and in August 1991, after being promoted to district sales coordinator, he established a scratch district in the Atlanta/Northwest Georgia region, where he served in that capacity for five years. In 1997 he was promoted to regional sales coordinator, and in 22, he was asked to accept a leadership role supporting Georgia-North as state training coordinator. In January 25, Lance was promoted to vice president, Field Force Development, and in December 28, he assumed his current position as vice president, territory director of the Pacific Territory. Daron H. Phillips Market Vice President, Broker Sales Daron Phillips, 4, started his career in the insurance industry in 1991 and began selling Aflac insurance in 1995 as a broker. He worked as an Aflac associate, DSC, RSC and BDC (broker development coordinator) for Aflac before accepting the job as market vice president. In his current role as market vice president, Daron helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, WingspanSM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. Daniel M. Quigley Vice President, IT Enterprise Services Dan Quigley, 51, holds a bachelor of arts degree in political science from Boston University. He joined Aflac in 27 as vice president, Enterprise Services, and is responsible for all technology infrastructure, operations, and data security in the Information Technology division. Prior to joining Aflac in 27, Dan spent more than 2 years in IT working for major Fortune 5 companies across different industries implementing global technology solutions. Most recently, he was at Novartis A.G., where he held multiple positions such as head of Network Services and head of IT Infrastructure for the Novartis Consumer Health Division. Dan is a member of the Society for Information Management. He is a certified Master Certified Novell Engineer (CNE) and is a member of the Society for Information Management and the Institute of Electrical and Electronics Engineers, Inc. He has completed executive education and leadership programs at the Wharton School and Harvard Business School s MIT Novartis IT Excellence Program. Vilma I. Salaverria, HIA, MHP Vice President, Corporate Learning Vilma Salaverria, 52, earned a bachelor s degree in business administration, with a major in accounting and a minor in management from the University of Puerto Rico. She joined Aflac in 1992 and has held various positions, including her more recent roles as manager of marketing services overhead, director of marketing, associate administration, second vice president of New Business/ Underwriting, vice president of Client Services, and vice president of Emerging Markets. She currently serves as vice president of Corporate Learning, where she is responsible for providing corporate oversight for the creation and implementation of the strategy, design and delivery of training and development of Aflac employees. Vilma is a 27 graduate of the Leadership of Columbus program and serves on the Board of Trustees for Columbus Technical College. She was recognized in Hispanic magazine in 1999 for her work in multicultural markets, earning her a listing on the Hispanic Business magazine s Corporate Elite Directory. Prior to joining Aflac, Vilma was the comptroller/office manager for a trade association in the automotive aftermarket industry, overseeing benefits for a statewide membership of 5 companies. Additionally, she worked in small business accounting and taught high school in Delaware and Puerto Rico. Daniel F. Skelley, FSA, MAAA Vice President; Actuarial Valuation Dan Skelley, 61, received bachelor s and master s degrees in applied mathematics from Georgia Tech. Before joining Aflac in 1983, he taught mathematics on the high school and college levels. He became an assistant vice president in 1986, a second vice president in 199, and was promoted to his current position in His primary responsibilities are the actuarial items in financial reporting for all Aflac U.S. products. He is a member of the Society of Actuaries and the American Academy of Actuaries. 94

96 Arthur L. Smith III Vice President; Senior Associate Counsel, Legal Division Art Smith, 54, holds a bachelor s degree in political science from Columbus State University and a juris doctorate from the Samford University School of Law. He also graduated with a master of laws in taxation from the University of Alabama School of Law. He was engaged in private law practice in Columbus, Georgia, from 1979 until he joined Aflac as associate counsel in January He was appointed second vice president and senior associate counsel in the Legal Division in 1993 and was promoted to vice president in He is a member of the State Bar of Georgia and the American Bar Association and is a graduate of Leadership Columbus. He is past chairman of the Muscogee County Hospital Authority and currently serves as vice chairman of the Columbus Downtown Development Authority. He served as Chairman of the Muscogee County Republican Party from 1999 to 23 and was recently elected to another term as County Chairman. Art is a member of the Board of Directors of Feed the Valley, Inc. which is a bi-state, multi-county food bank and distribution non-profit organization and he also serves on the Board of Directors of MidTown, Inc., a non-profit organization which seeks to promote the development of Midtown Columbus. Eugene C. Chip Sorrel, Jr. Market Vice President, Broker Sales Chip Sorrel, 45, brings 27 years of worksite industry experience to Aflac. He started his insurance career in 1982 in Louisiana with Techeland Insurance Center in the Property and Casualty Dept. During his 14 year tenure with Colonial Life and Accident in Louisiana, he served 1 years as the marketing director for the Southwest Territory. Prior to joining Aflac, he was employed with Continental American Insurance Company, where he served as senior vice president of Sales and Marketing. In his current role as market vice president, he helps increase broker production and market penetration in accounts with 5 or more employees and serves as a go-to expert for group and individual products, Wingspan SM Services and Solutions, and enrollments. He also makes large account sales calls with broker development coordinators, RSCs, DSCs and the original servicing agent. Alexander W. Stephanouk Vice President, Internal Audit, Aflac Incorporated Alex Stephanouk, 4, holds a bachelor s degree in marketing from Auburn University and a master of business administration degree in internal audit and human resources from Louisiana State University. He joined Aflac in 29 as vice president, Internal Audit, for Aflac Incorporated. Before joining Aflac, he was managing director of Advisory Services at KPMG in Atlanta and he also worked as manager of Business Process Risk Consulting at Arthur Andersen, LLP. He holds the Certified Internal Auditor (CIA) and the Certified Information Systems Auditor (CISA) designations. Alex is responsible for all corporate Internal Audit activities and works directly with management on business process improvement recommendations, as well as the coordination of Internal Audit s role within companywide enterprise risk management activities. Michael J. Tomlinson Vice President; Territory Director, Central Territory Mike Tomlinson, 52, joined Aflac in 198 as a sales associate in Detroit Lakes, Minnesota. Mike progressed through the Aflac coordinator ranks of district sales coordinator and regional sales coordinator in Minnesota. He assumed the role of SSC of North and South Dakota in North and South Dakota is currently the leading state organization in Aflac for sales per capita and in force premium per capita. Mike accepted the position of vice president, territory director for the Central Territory in May 28. Blakely H. Voltz, ACS Vice President, Claims Blake Voltz, 4, received a bachelor s degree in finance from the University of Georgia. He joined Aflac in 1992 and has held several management positions in Client Services. Prior to his current position, he was second vice president in the Strategic Planning Office, where he worked with the administrative business units to develop innovative process changes to improve efficiency and quality. Blake also has served as second vice president in the Customer Service Center and Policy Service. He has almost 15 years of leadership experience at Aflac. He was promoted to his current position in November 26. Blake holds the Life Office Management Association (LOMA) Associate Customer Service designation. 95

97 William D. Wenberg Vice President; Territory Director, South Central Territory Bill Wenberg, 61, graduated from Moorhead State University with a degree in accounting. Bill began his career with Aflac as a sales associate in 1983 in Minneapolis, Minnesota. He spent 12 years as a regional sales coordinator, and in 1997, he was ranked as the number two RSC in the company. He was promoted in 1998 to Arkansas State Sales Coordinator, a position he held until October 23, when he became the North Territory Director. Bill has qualified for 2 national conventions, eight President s Clubs, and FAME 36 times. In 24, Bill became East Territory Director, and in 25, he was given the privilege of becoming the Central Territory Director. Beginning in March 28 and continuing throughout 29, Bill served as the Territory Director of the South Territory and at the start of 21, he assumed his role as Territory Director of the newly formed South Central Territory. Thomas L. McDaniel Jr. Second Vice President, Investor Relations Tom McDaniel, 38, joined Aflac in 24 as an assistant staff attorney in the Legal division. Prior to his current role in Investor Relations, he served as second vice president in Legal, providing legal advice and recommendations to executive and senior management on labor and employment issues, and other complex matters that could have an impact on Aflac s business operations. Prior to joining Aflac, Tom was in private practice at a prominent labor and employment law firm headquartered in Atlanta, Georgia. Tom holds a bachelor s degree as well as a master of business administration degree from the University of Oklahoma. He earned his juris doctor degree from the University of Georgia in 21. Delia H. Moore Manager, Investor Relations Delia Moore, 39, graduated from Columbus State University with a bachelor s of business administration in accounting and earned a master s degree in accounting from Auburn University. Before joining Aflac in 23 as a supervisor in Policy Service, Delia performed in various leadership capacities at major Fortune 5 companies such as AT&T and Citibank. As manager of Investor Relations, she is responsible for overseeing retail investor relations activities at Aflac, including educating the individual, broker and financial advisor investment community on Aflac s financial performance. 96

98 Tohru Tonoike President and Chief Operating Officer, Aflac Japan Tohru Tonoike, 6, graduated from Hitotsubashi University and worked for Dai-ichi Kangyo Bank, which later merged with two other banks to form the Mizuho Financial Group, prior to joining Aflac Japan as deputy president in February 27. In 25 he became president and representative director of Dai-ichi Kangyo Asset Management Company, another division of the Mizuho Financial Group. Tonoike served on the Aflac board of directors from November 24 through January 27. He was promoted to president of Aflac Japan in July 27. Charles D. Lake II Chairman, Aflac Japan Aflac Japan Management Hiroshi Yamauchi First Senior Vice President; Planning, Government Affairs and Research, Legal, Compliance Promotion, Risk Management Hiroshi Yamauchi, 58, graduated from Saitama University in 1976 and joined Aflac that same year. He served in the Actuarial Department as section manager and assistant general manager. He was promoted to general manager in the Policy Maintenance Department in 1998 and to vice president in He was promoted to first senior vice president in 22. Yuji Arai, CFA Senior Vice President, All Financial, Actuarial and Investment Operations; Principal Financial Officer Charles Lake, 48, received a bachelor s degree in Asian studies and political science from the University of Hawaii at Manoa in 1985 and a juris doctorate from the George Washington University School of Law in 199. He joined Aflac International in February 1999 and Aflac Japan in June He became deputy president in 21, president in 23, vice chairman in 25 and chairman in 28. Before joining Aflac, he practiced law with Dewey Ballantine LLP in Washington, D.C. He also served as director of Japan affairs and special counsel at the office of the U.S. Trade Representative in the executive office of the President. He currently serves as vice chairman of the Maureen and Mike Mansfield Foundation, as a director on the board of the Tokyo Stock Exchange Group, Inc., and as a board member of the U.S.-Japan Business Council. He is also president emeritus of the American Chamber of Commerce in Japan (ACCJ). Hisayuki Shinkai First Senior Vice President; Financial Institutions, Financial Institution Support, Bank Sales Offices, Public Relations, Investor Relations Hisayuki Shinkai, 59, joined Aflac in 1999 as general manager of the Public Relations Department and was promoted to vice president in 2 and to senior vice president in 22. In February 26, he was named to his current position. He graduated from Tohoku University in 1974 and previously worked for the Long Term Credit Bank of Japan, Ltd. Yuji Arai, 47, graduated from Keio University in 1986 and joined Aflac that same year. He became assistant general manager of the Investment Department in 21, and he began supervising the Investment Department and the Investment Analysis Office in 22. He was promoted to his current position in January 25. He is a chartered financial analyst certified by the CFA Institute and a charter member of the CFA Society of Japan. Koji Ariyoshi First Senior Vice President; Director of Marketing and Sales Koji Ariyoshi, 56, graduated from Ritsumeikan University in He joined Aflac as senior vice president responsible for sales planning in October 28. From January through March 29, he was directly in charge of the Retail Marketing, Alliance Management and Hojinkai Promotion Departments, and from April through December 29, he oversaw all the marketing and sales departments as deputy director of Marketing and Sales. He was promoted to his current position in January 21. Before joining Aflac, he worked for Alico Japan as Vice President and AXA Life Insurance as Senior Vice President. Andrew J. Conrad Senior Vice President and Counsel; Director of Governmental and Legal Affairs, Aflac International Incorporated Andy Conrad, 46, holds a law degree from Harvard Law School and a master s degree from the Fletcher School of Law & Diplomacy at Tufts University. Before joining Aflac, he practiced law at Dewey Ballantine LLP in Washington, D.C. He joined Aflac International in 21, serving as second vice president, associate counsel and director of Governmental and Legal Affairs. He was promoted to his current position in March

99 Yukio Fukushima Senior Vice President, All Information Technology; Chief Information Officer for Aflac Japan Yukio Fukushima, 58, joined Aflac as vice president and general manager of the System Development Support Office and System Development Office 3 in 26. He graduated from Tokyo Denki University in 1975 and previously worked for IBM Japan, Ltd. He was promoted to his current position in September 28. Jun Isonaka Senior Vice President, Chief Administrative Officer Jun Isonaka, 52, graduated from Kwansei Gakuin University in 198 and joined Aflac that same year. He served as general manager of the Group Marketing and Marketing and Sales Promotion Departments from 1999 through 21. He was promoted to vice president in 22 and to his current position in January 27. He became Chief Administrative Officer in January 21. Yosuke Miwa Senior Vice President, Human Resources, Human Resources Support, General Affairs Yosuke Miwa, 58, graduated from Keio University in 1976 and joined Aflac in From 1998 to 25, he served as general manager in various departments. In November 25, he was promoted to vice president and to his current position in January 28. Kazumi Atsuta Vice President; Chief Actuary Actuarial Product Development, Corporate Actuarial Kazumi Atsuta, 48, graduated from Chiba University in 1984 and joined Aflac that same year. Before being promoted to his current position in January 27, he served as general manager of the Product Development, Actuarial Product Development and Corporate Actuarial Departments. In 1992, he gained full membership in the Institute of Actuaries of Japan. Masahiro Hoshino Vice President, Tokyo General Sales Office Masahiro Hoshino, 51, graduated from Chuo University in 1984 and joined Aflac in the following year. He served as general manager for the Hokkaido Sales Department from 22 through 24 and for the Shutoken Sales Department 3 in 25 and 26. In January 27, he was promoted to his current position. Osamu Ishii Vice President; Operational Efficiency Promotion Osamu Ishii, 53, graduated from Hitotsubashi University in Prior to joining Aflac in April 28, he worked for Dai-ichi Kangyo Bank and also served as vice president and president at DKB Financial Products Inc. and general manager at Mizuho Corporate Bank. He earned a master s degree in business administration from Massachusetts Institute of Technology in Takashi Kadono Vice President, Contact Center Management, Customer Services Takashi Kadono, 55, graduated from Rikkyo University in 1978 and joined Aflac in 198. He served as general manager of Osaka Sales Department 1 and was promoted to vice president in January, 25. Masatoshi Koide Vice President, General Counsel, Compliance Officer; Legal, Compliance, Risk Management Masatoshi Koide, 49, graduated from Tokyo University in 1984 and from Cornell Law School in He originally joined Aflac in November 1998 and stayed with Aflac until March 26. He worked for Nikko Asset Management before he joined Aflac again in December 28 as vice president. He is a member of the New York State Bar. Anthony Kotas Vice President, IT Project Promotion; Representative Director; Aflac Technology Services Tony Kotas, 41, received a bachelor of arts and sciences degree from Virginia Tech. He joined Aflac International as a vice president in 22. He has served as director of large IT initiatives as well as general manager of various IT departments before being named to his current position in April 29. Makoto Kurumazuka Vice President; System Development, IT Administration, Infrastructure Services Makoto Kurumazuka, 45, graduated from Tokyo Metropolitan University in 1987 and joined Aflac that same year. After serving as general manager of the Systems Operations, User Service and Infrastructure Services Departments, he was promoted to his current position in January

100 Takashi Miyajima Vice President; Marketing Strategy Planning, Business Promotion, Alliance Management Takashi Miyajima, 46, graduated from Rikkyo University in 1986 and joined Aflac that same year. Before being promoted to his current position in January 27, he served as general manager in the Shutoken Sales 1 and Sales Promotion Departments. Ken Miyauchi Vice President, Solicitation Management, Sales Inspection Ken Miyauchi, 56, graduated from Kansai University in 1978 and joined Aflac in He served as general manager in Kinki Sales Department 1 and Tokyo Sales Department 1. In 22 he was promoted to vice president. Yoshifumi Murayama Vice President; Corporate Marketing Promotion; Market Development; Aflac National Association of Agencies Office; Special Corporate Sales; All Sales Departments Yoshifumi Murayama, 51, graduated from Meiji University in 1982 and joined Aflac that same year. After serving as general manager of the Osaka Sales Department 1 in 25 and 26, he was named to his current position in January 27. Iwao Nemoto Vice President; Bank Sales Offices Iwao Nemoto, 47, graduated from Chuo University in 1985 and joined Aflac that same year. Before being promoted to his current position in January 27, he served as general manager in the Associates Development Department and the Shutoken Sales Department 2. Hiromi Niida Vice President, General Sales and Sales Offices Hiromi Niida, 54, graduated from Keio University in 198 and joined Aflac that same year. After serving as general manager of the Sales Promotion and Tohoku Sales Departments, he was promoted to vice president in 26. Hitoshi Oda Vice President, Investments Hitoshi Oda, 43, graduated from Keio University in He joined Aflac in 21 after working for Toyo Trust and Banking (now Mitsubishi UFJ Trust and Banking). After serving as general manager of both the Investment Analysis Department and Asset Management Department, he was promoted to his current position in January 21. He is a chartered financial analyst certified by the CFA Institute and a charter member of the CFA Society of Japan. Yasuki Okawa Vice President; Financial Institutions, Financial Institutions Support, Bank Sales Offices Yasuki Okawa, 5, graduated from Musashi University in 1983 and joined Aflac that same year. After serving as general manager of the Tokyo Sales Dept.1 and the Human Resources Dept. for about three years respectively, he was promoted to his current position in January 29. Koichi Ono Vice President; Product Development, Marketing Tool Support, Advertising, Customer Relations Support, Shop Support, Sales Training Koichi Ono, 48, graduated from Waseda University in 1984 and joined Aflac that same year. Before being promoted to his current position in January 27, he served as general manager in two sales departments and in the Marketing Promotion Department. Takashi Osako Vice President, New Business, Underwriting, Policy Data Administration Takashi Osako, 48, graduated from Kwansei Gakuin University in 1985 and joined Aflac that same year. Before being promoted to vice president in 24, he served as general manager of the Human Resource System Planning Department in 21 and as head of the Office of the President in 22. Chikako Sakurai Vice President, Premium Accounting 1 and 2, Policy Maintenance Chikako Sakurai, 56, graduated from Tokyo Women s Christian University in 1976 and joined Aflac that same year. She served as general manager of the Underwriting Department from 1998 through 21. She was named to her current position in January

101 Kayoko Sugimoto Vice President, Claims, Kinki Administration Kayoko Sugimoto, 58, graduated from Sophia University in 1975 and joined Aflac that same year. After serving as general manager of the West Japan Claims Department, she was promoted to vice president in charge of the Personnel and Human Resources Departments in 21. She is currently responsible for the East and West Japan Claims Departments and the Kinki Administration Department. Isao Sumikawa Vice President, Retail Marketing Promotion, Hojinkai Promotion, All General Sales Offices, All Sales Offices Isao Sumikawa, 55, graduated from Akita University in 1977 and joined Aflac in 198. He served as general manager of the Hokuriku Sales Department and Tokyo Sales Department 4. He was promoted to vice president in 22. Hiroshi Takeuchi Vice President; President; Aflac Insurance Service Hiroshi Takeuchi, 42, graduated from Osaka University in 1991 and earned a master s degree in management engineering from Rensselaer Polytechnic Institute in He joined Aflac in 23. In July 24, he became president of aflacdirect.com and in August 25, he became second vice president of Aflac Japan. He was promoted to vice president in January 27. Currently, he also serves as president of Aflac Insurance Service. Kenji Usui, CIA Vice President, Internal Audit Officer; Internal Audit Kenji Usui, 51, graduated from Meiji University in 1984 and joined Aflac that same year. He served as general manager of the Internal Audit Department and was promoted to vice president in 22. He is a licensed CIA and a member of the Institute of Internal Auditors. Tomoya Utsude Vice President; Executive Medical Director, Administration Planning Tomoya Utsude MD, 48, graduated from the Medical School of Tokyo University in 1986 and joined Aflac in Before he became vice president in 23, he worked as medical director and managed the Medical Underwriting Department from 1996 to 2. Before joining Aflac, he was trained and had practical experience as a surgeon at the Tokyo University Hospital and as a surgical pathologist at the Cancer Institute, Japanese Foundation for Cancer Research. Koichi Wakasugi Vice President; General Sales and Sales Offices Koichi Wakasugi, 54, graduated from Ryukoku University in 1979 and joined Aflac that same year. After serving as general manager of the Finance Institution, Chugoku Sales and Kinki Sales Departments, he was promoted to his current position in 25. Chiharu Watanabe Vice President; Government Affairs and Research Chiharu Watanabe, 49, graduated from Tohoku University in 1983 and joined Aflac that same year. She served as general manager for the Government Affairs and Research Dept. from 22 through 28 and was promoted to her current position in January 29. Kazuhiro Yamazaki Vice President, Financial Accounting, Financial Management Kazuhiro Yamazaki, 55, earned bachelor s and master s degrees from Waseda University and joined Aflac in After serving as general manager of the Financial Management and Internal Audit Departments, he was promoted to his current position in 26. He is a member of the American Institute of Certified Public Accountants, the Institute of Management Accountants and the Institute of Internal Auditors. 1

102 Yoshiki Paul Otake Founder, Executive Advisor Paul Otake, 71, is the founder and retired chairman of Aflac Japan. A graduate of Hiroshima Prefectural University, he joined American International Underwriters (AIU) in He established the International Insurance Agency Group (IAG) in He was a representative to Aflac s Tokyo office before the establishment of the Japan branch in 1974 and served as vice president, marketing, from 1974 until he was promoted to president of Aflac Japan in He was named chairman of Aflac Japan in 1995, and he became executive advisor in January 23 after retiring as chairman. Ichiro Murakami General Manager, Investor Relations Support Department, Aflac Japan Ichiro Murakami, 53, graduated from Tokyo University in 198 and joined Aflac in 25. Prior to joining Aflac, he worked for the Long-Term Credit Bank of Japan, where he worked in several capacities, including investor relations for the bank. He assumed his current position in January 211 after serving Aflac Japan as a general manager for bank sales for more than five years. Hachiro Mesaki Senior Advisor Hachiro Mesaki, 67, joined Aflac in 22 as a senior advisor. He graduated from Tokyo University and joined the Ministry of Finance (MOF) in He previously served as deputy director-general of the MOF s International Finance Bureau, executive director for Japan of the International Monetary Fund (IMF), and special advisor to the Ministry of Foreign Affairs. He also previously served as vice president for the Japan International Cooperation Agency (JICA). 11