2006 Tokyo Analyst Meeting Presentation Slides. September 11, 2006

Transcription

1 26 Tokyo Analyst Meeting Presentation Slides September 11, 26 For more information contact: Ken Janke, Jr. or Robin Mullins , Option 3 Fax: (76) aflac.com Aflac Worldwide Headquarters 1932 Wynnton Road Columbus, GA 31999

2 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 forwardlooking 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: legislative and regulatory developments; assessments for insurance company insolvencies; competitive conditions in the United States and Japan; new product development and customer response to new products and new marketing initiatives; ability to attract and retain qualified sales associates; ability to repatriate profits from Japan; changes in U.S. and/or Japanese tax laws or accounting requirements; credit and other risks associated with Aflac's investment activities; significant changes in investment yields; fluctuations in foreign currency exchange rates; deviations in actual experience from pricing and reserving assumptions including, but not limited to, morbidity, mortality, persistency, expenses, and investment yields; level and outcome of litigation; downgrades in the company's credit rating; changes in rating agency policies or practices; subsidiary's ability to pay dividends to Parent Company; ineffectiveness of hedging strategies used to minimize the exposure of our shareholders' equity to foreign currency translation fluctuations; catastrophic events; and general economic conditions in the United States and Japan.

3 Introduction to Aflac Japan Aki Kan President & Chief Operating Officer, Aflac Japan Life Insurance Policies in Force (FSA Basis, in Millions) /1 3/2 3/3 3/4 3/5 3/6 Life Industry Aflac Source: Life Insurance Association of Japan, Insurance Research Institute 1

4 The Number One Life Insurer in Japan (Policies in Force, FSA Basis, in Millions) Aflac = No. 1 3/75 3/8 3/85 3/9 3/95 3/ 3/ Third Sector s Increasing Share (New Policy Sales) 5% 47.7% /96 3/97 3/98 3/99 3/ 3/1 3/2 3/3 3/4 3/5 3/6 Source: Life Insurance Association of Japan, Insurance Research Institute Japan s Aging Population and Declining Birthrate (In Thousands) 14, 12, 1, 8, 6, 4, 2, Actual Estimate Juvenile (-14) Productive (15-64) Retirement (65-) Source: National Institute of Population and Social Security Research, Future Estimated Population of Japan 1/2 2

5 National Medical Expenses (Yen in Trillions) Medical Expenses For elderly National Medical Expenses to National Income % 9.9% 8.9% % Source: Ministry of Health, Labor and Welfare Aflac s Share of In-Force Business (FSA Basis) Stand-alone Cancer (Policies in Thousands) Market Growth Market Share 17,8 1% 17,7 17,6 8 17,5 17,4 6 17,3 17,2 4 17,1 17, 2 16,9 16,8 3/2 3/3 3/4 3/5 3/6 3/2 3/3 3/4 3/5 3/6 Source: Insurance Research Institute Aflac Alico Asahi SJ Himawari Others Aflac s Share of New Business (FSA Basis) Stand-alone Cancer (Policies in Thousands) Market Growth 1,8 1,6 1% Market Share 1,4 1,2 1, /2 3/3 3/4 3/5 3/6 Source: Insurance Research Institute /2 3/3 3/4 3/5 3/6 Aflac Nippon Alico Asahi SJ Himawari Others 3

6 Aflac s Share of In-Force Business (FSA Basis) Stand-alone Medical (Policies in Thousands) Market Growth Market Share 18, 1% 16, 14, 12, 1, 8, 6, 4, 2, 3/2 3/3 3/4 3/5 3/6 Source: Insurance Research Institute /2 3/3 3/4 3/5 3/6 Aflac Alico AXA Fukoku Others Aflac s Share of New Business (FSA Basis) Stand-alone Medical (Policies in Thousands) 3,5 3, 2,5 Market Growth 1% 8 Market Share 2, 6 1,5 1, /2 3/3 3/4 3/5 3/6 3/2 3/3 3/4 3/5 3/6 Source: Insurance Research Institute Aflac Alico Sony Fukoku AXA Others Competitors in the Third Sector (Number of Life and Non-life Insurance Companies) / 12/1 12/2 12/3 12/4 12/5 7/6 Stand-alone cancer* Stand-alone medical *Reflects results of company mergers and companies that have discontinued sales Source: Websites of each company 4

7 Number of Medical Products / 12/1 12/2 12/3 12/4 12/5 7/6 Stand-alone medical Stand-alone medical and rider *Reflects results of company mergers and companies that have discontinued sales Source: Websites of each company Japan's Most Popular Life Insurers (Rating Points) Nippon 3,569 Dai-ichi 2,156 Sumitomo Aflac 1,372 1,21 Meiji Yasuda Alico , 1,5 2, 2,5 3, 3,5 4, Source: The Nikkei Financial Daily, 1/5/6 Aflac Japan s Strategy for Growth 1. Product broadening 2. Distribution expansion 3. Operational efficiency 5

8 Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control Aflac Japan s Product Line Third Sector Products 21 st Century Cancer Super Care EVER EVER Half EVER Bonus New Rider MAX First Sector Products WAYS Ordinary Life Fixed Annuity 6

9 Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control Aflac Japan s Distribution Channels 1. Affiliated Corporate 2. Independent Corporate 3. Individual 4. Dai-ichi Mutual Life Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control 7

10 Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control Aflac Japan s Competitive Strengths Products Efficient Operations Distribution Financial Strength Internal Control 8

11 Japan s Regulatory Environment Charles Lake Vice Chairman, Aflac Japan Progress in Financial Regulatory Reform MOF Era Maximum control Industry protection Administrative guidance Convoy system FSA Era Areas of deregulation measures Areas of expanded regulator involvement Self-responsibility principle Financial Big Bang Free, Transparent and Fair Market Global Market Expected Changes in the Market Environment Program for Further Financial Reform Privatization of the national postal delivery, savings, and life insurance businesses 9

12 The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising Price flexibility The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising Price flexibility Third-sector reserving rules 1

13 The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising Price flexibility Third-sector reserving rules New regulations for previously unregulated small-amount, short-term insurance providers The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising Price flexibility Third-sector reserving rules New regulations for previously unregulated small-amount, short-term insurance providers Policyholder protection fund The Program for Further Financial Reform Market conduct» Confirmation of customer needs» Allow comparative advertising Price flexibility Third-sector reserving rules New regulations for previously unregulated small-amount, short-term insurance providers Policyholder protection fund Expand distribution channels 11

14 Postal Privatization Oct. 27- Government Holding Company (1% of shares held by the government) Postal Delivery Company Postal Office Company Postal Savings Company Postal Insurance Company Oct Government Holding Company (at least 1/3 held by the govt.) Postal Delivery Company Postal Office Company Postal Savings Company Postal Insurance Company Rapidly Increasing Social Security Benefits (Yen in Trillions) Pension Medical Welfare FY 26 FY211 FY215 FY225 (Budget) Source: Ministry of Health, Labor and Welfare 5/6 Major Changes in Copayments for the Employed (Age 69 or Under) Apr. 23 Oct Introduction of 1% copayment Sep Copayment hike to 2% Copayment hike to 3% 12

15 Major Changes in Copayments for Seniors (Age 7 or Over) Feb Introduction of small fixed-amount Sep Jan Fixed Fixed amount amount hike hike Jan. 21 Introduction of fixed rate 1% Oct. 26 Oct. 22 1% 2%* 1% 3%** Apr. 28 Age 7-74: 2% Age 75-: 1% 3%** *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 Examples of the Health Care Reform To create a separate health insurance program for those aged 75 and older To raise the cap on medical expenses Cancer Law Promote prevention and early detection» improved health screening» enhanced awareness Focus on improving services in outlying areas 13

16 Aflac Japan Administration Hiroshi Yamauchi First Senior Vice President; Chief Administrative Officer, Aflac Japan Maintenance Expenses Per Policy in Force (FSA Basis, 3/6) Rank by Assets General Operating Expenses (In Millions)* Policies in Force (In Thousands) Cost Per Policy 1 Nippon 24,737 13,411 17,95 2 Dai-ichi 181,387 11,498 15,775 3 Meiji Yasuda 18,254 9,666 18,648 4 Sumitomo 165,24 9,128 18,12 6 Taiyo 5,258 3,368 14,922 1 Alico 58,127 5,273 11,23 11 Aflac 77,288 17,81 4, Sony 26,36 3,815 6, Tokio Anshin 29,77 1,82 16,357 * Excludes renewal commissions Source: Disclosure statements from each company 14

17 Number of Policies Per Administrative Employee (FSA Basis, 3/6) Rank by Assets Administrative Employees Policies in Force (In Thousands) Policies per Employee 1 Nippon 1,754 13,411 1,247 2 Dai-ichi 9,253 11,498 1,242 3 Meiji Yasuda 8,755 9,666 1,14 4 Sumitomo 8,149 9,128 1,12 6 Taiyo 2,74 3,368 1,245 1 Alico 2,687 5,273 1, Aflac 2,967 17,81 5, Sony 957 3,815 3, Tokio Anshin 1,156 1,82 1,574 Source: Disclosure statement from each company Efficiency Improvement Measures by Leveraging IT e-app Aflac Net Billing Remote interview using FOMA Centralization of Sales Administrative Jobs Centralization of forms Policyholders Sales agencies Sales offices Forms Receiving Center at HQ Centralization of inquiry calls Inquiry calls from customers Sales offices Call Center at HQ 15

18 Benefits of Centralization Generation of time for core jobs at sales offices Use of time generated Sales agency training e-app promotion, etc. Aflac Contact Center Aflac Contact Center Aflac Call Center (Inquiries from existing policyholders) Aflac Direct Desk (Inquiries from prospective consumers) Associates Help Desk (Inquiries from sales agencies) Benefits of Establishing Aflac Contact Center Sharing of IT infrastructure Flexible human resource allocation Sharing of various areas of expertise One-stop handling by smooth collaboration in the company 16

19 Surrender and Lapse Rates (Individual Insurance Only, FSA Policy Basis) 1% Life insurance industry Aflac Source: Japan Institute of Life Insurance Ratio of Not-Taken Policies 1% Source: Internal data Jan. May Key Points to Improving Persistency Rates Have sales agencies take follow-up actions Appeal the importance of improving persistency rates to sales agencies Provide sales agencies with necessary information Create an environment where sales agencies can follow customers easily 17

20 Claims Payments (Yen in Billions) Cancer Medical/Rider MAX No. of days required to pay claims Less than 2 days on average (No. of days) Source: Internal data Aflac Japan Investments Shigeharu Naoki General Manager, Investment Department, Aflac Japan 18

21 Aflac Investment Organization Aflac Japan Investment Considerations Product needs» Long liability durations» Yen-denominated policy liabilities Credit risk Aflac Incorporated objectives 26 Longer-Dated Yen Purchases (Six Months, June 3) Acquisition Cost (In Billions) % of 26 New Money Remaining Years Yield Euroyen % 2.84% 3. RDCs JGBs Gov't. agency Industrial % 3.4%

22 Average Maturity and Duration (Yen-Denominated, in Years) Maturity Duration / /6 Aflac s Investment Policy All securities must be rated investment grade at the time of purchase. Credit Ratings on Aflac Japan Purchases /6 AAA 2.5% 6.9% 1.7% 11.% AA A BBB % 1.% 1.% 1.% 2

23 Aflac Japan Credit Ratings* /6 AAA 2.9% 2.9% 3.4% AA A BBB BB or below Total 1.% 1.% 1.% *At amortized cost Below-Investment-Grade Holdings (June 3, 26, Yen in Millions) Amortized Cost Fair Value Unrealized Gain (Loss) Ahold 32, 22,271 (9,729) KLM Royal Dutch Airlines 3, 25,256 (4,744) Ford Motor Credit 3, 24,513 (5,487) Ford Motor Company 4,721 3,29 (1,431) Total 96,721 75,33 (21,391) Aflac s Impairment Policy Percentage decline in value and the length of time during which the decline has occurred Recoverability of principal and interest Market conditions Ability and intent to hold the 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 21

24 Largest Investment Concentrations (June 3, 26, at Amortized Cost, Yen in Millions) Rating Category Japanese Government Bonds 922,329 AA State of Israel* 99,498 A/BBB Credit Suisse Group 89,183 A HSBC 86,162 AA/A Banque Centrale De Tunisie 8,54 BBB HBOS 72,848 AA/A Takefuji 72,53 BBB Republic of South Africa 62,41 BBB Mitsubishi UFJ Financial Group 6,839 A Fortis Bank 52,489 A *Includes Israel Electric Corp. Composition of Investments and Cash* Yen-denom. bonds: /6 Government 19.7% 18.4% 16.5% Industrial Public utility Euroyen/Samurai Yen-denom. stocks Dollar-denom. securities Loans Cash & short-term invest Total 1.% 1.% 1.% *At amortized cost Invested Asset Comparison (FSA Basis, March 31, 26) Industry Aflac Cash 1.6%.9% Securities: JGB Municipal 2.7 Corporate Stocks Foreign Other 5.6 Loans Real Estate Other % 1.% 22

25 Comparison of Yields in Japan (FSA Basis, March 31) 8% Aflac Japan All life insurers 3 in Japan (average) /96 3/97 3/98 3/99 3/ 3/1 3/2 3/3 3/4 3/5 3/6 Interest Rate Margin (FSA Basis, March 31, 26, Yen in Billions) Basic Yield Assumed Interest Rate Spread Interest Rate Margin Aflac 4.58% 4.44%.14% 5.9 Nippon (.44) (15.) Dai-ichi (.52) (122.) Meiji-Yasuda (.53) (16.9) Sumitomo (1.3) (171.1) Mitsui (.54) (32.7) Asahi (1.6) (85.8) Taiyo (.68) (38.5) Daido (.59) (29.4) Fukoku (.73) (33.) Net Investment Income (Yen in Billions) % Inc /5 6/

26 Aflac Japan Financial Results Yuji Arai Senior Vice President; Principal Financial Officer, Aflac Japan Comparison of Premium Income Growth (FSA Basis, 3/1 = 1) 15% /1 3/2 3/3 3/4 3/5 3/6 Aflac Industry Source: Japan Institute of Life Insurance 24

27 Premium Income (FSA Basis, 3/6) Rank Company Amount (In Billions) % Increase 1 Nippon 4,841.3 % 2 Dai-ichi 3,399 (3.7) 3 Sumitomo 3, Meiji Yasuda 2,671 (12.2) 5 Alico 1,372 (18.4) 6 Hartford 1, Aflac 1, Mitsui Daido 87 (1.5) 1 ING Source: Disclosure statement from each company Premium Income of Individual Insurance (FSA Basis, 3/6) Amount Rank Company (In Billions) % Increase 1 Nippon 2,793 (.6)% 2 Dai-ichi 1,931 (1.1) 3 Sumitomo 1,495 (1.9) 4 Meiji Yasuda 1,323 (6.1) 5 Aflac Alico Daido Sony Taiyo 519 (4.8) 1 Mitsui 516 (.8) Source: Disclosure statement from each company Total Assets (FSA Basis, 3/6) Rank Company Amount (In Billions) % Increase 1 Nippon 5, % 2 Dai-ichi 32, Meiji Yasuda 26, Sumitomo 22, Mitsui 8, Taiyo 6, Daido 6, Asahi 6,337 9 Fukoku 5, Alico 5, Aflac 4, Source: Disclosure statement from each company 25

28 Individual Policies in Force (FSA Basis, 3/6, Policies in Thousands) Rank Company No. of Policies % Increase 1 Aflac 17,81 3.9% 2 Nippon 13,411 (3.2) 3 Dai-ichi 11,498 (.8) 4 Meiji Yasuda 9,666 (4.5) 5 Sumitomo 9,128 (2.2) 6 Asahi 7, Alico 5, Sony 3, Gibraltar 3,662 (3.7) 1 AXA* 3,553 (.5) *Reflects company merger at 1/5 Source: Disclosure statement from each company Net Investment Income (FSA Basis, 3/6) Rank Company Amount (In Billions) % Inc. Company Yield 1 Nippon 998.6% Alico 7.64% 2 Dai-ichi Yamato Meiji Yasuda AIG Edison Sumitomo Aflac Alico AIG Star Aflac Manulife Asahi Tokio Anshin Mitsui AXA AIG Edison Winterthur Taiyo Gibraltar 2.63 Source: Disclosure statement from each company Investment Margin (FSA Basis, Yen in Billions) 3/4 3/5 3/6 Yield 4.81% 4.51% 4.58% Assumed Interest Rate 4.78% 4.62% 4.44% Spread.3% (.11)%.14% Investment Margin 1.1 (3.9)

29 Assumed Interest Rates for Product Pricing Jul Sept Oct Jul Apr. 21 Cancer life 4.5% 4.5% 3.1% 2.35% 2.35% Care LBL Medical Ordinary life 2.35* 1.85 Annuity** *Changed in April 1999 **Periodic payment only Required Interest for New Business and New-Money Investment Yields Yen New* Required Interest Money Yield Spread % 3.65%.67% / *Net of Investment expenses; Represents yen-denominated investments for Aflac Japan that support policy obligations and therefore excludes Aflac Japan s annuities, and dollar-denominated investments and related investment income Premiums in Force by Product 1% Other Medical Ordinary Care Riders Cancer /6 27

30 Benefit Ratios by Product Traditional cancer life - full CSV 68% - 73% Cancer life - reduced CSV 63% - 68% 21st Century Cancer life - full CSV 6% - 65% 21st Century Cancer life - reduced CSV 55% - 6% Riders to cancer and medical 5% - 6% Ordinary life products 65% - 75% EVER 52% - 57% Persistency Rates* 1% /5 6/6 *All product lines, excluding annuities Comparison of Persistency Rates (FSA Policy Basis) Aflac Industry 1% /1 3/2 3/3 3/4 3/5 3/6 Source: Japan Institute of Life Insurance, Life Insurance Association of Japan 28

31 Solvency Margin, Real Net Asset, Basic Earnings (FSA Basis, 3/6) Solvency Margin 1,1.7% Real Net Asset 638 Billion Real Net Asset Ratio* 12.9% Basic Earnings 18 Billion Basic Earnings Ratio** 2.2% * Real Net Asset/Total Assets ** Basic Earnings/Total Assets Financial Strength Ratings Rank by Policies in Force Company S&P Rating* Moody s Rating* 1 Aflac AA Aa2 2 Nippon A+ Aa3 3 Dai-ichi A A1 4 Meiji Yasuda A- A3 5 Sumitomo BBB Baa1 6 Asahi BB- Ba3 7 Alico AA+ Aa2 8 Sony A+ Aa3 9 Gibraltar AA- A1 1 AXA AA- - * As of 8/15/6 FSA Topics 1. Mortality Table Revision Affects standard mortality for ordinary life, third sector and individual annuity products Proposed table to be finalized by the Institute of Actuaries of Japan by September 26 Effective April 1, 27 Lowers ordinary life premiums Increases third sector premiums 2. Third Sector Product Reserving Requires stress test of reserves Effective April 1, 27 29

32 Pretax Operating Earnings Growth (Yen in Billions) Total Revenues Profit Margin Pretax Operating Earnings % = = , = , = , = Reflects SFAS 123R beginning in 22 Aflac Japan Marketing Takaaki Matsumoto Senior Vice President; Director of Marketing, Aflac Japan 3

33 Comparative Cancer Policy Sales (Stand-alone Basis) 25, Aflac Co. A Co. B Co. C Co. D Co. E 2, 15, 1, 5, 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT Source: Internal data Premium Comparison of Cancer Life Policies (Whole-life, Stand-alone Basis) Male - Direct Rate 3-year-old 4-year-old Aflac (CSV=1%) 2,36 3,166 Co. A (CSV=1%) 3,196 4,148 Co. B (CSV=1%) 4,19 5,582 Aflac (CSV=%) 1,957 2,759 Co. C (CSV=%) 3,152 4,544 Co. D (CSV=3%) 2,358 3,25 Comparative Medical Policy Sales (Stand-alone Basis) 25, Aflac Co.A Co.B Co.C Co.D Co.E Co.F Co.G Co.H Co.I Co.J Co.K Co.L 2, 15, 1, 5, 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 22 Source: Internal data

34 Confusion of Consumers with Various Types of Medical Products What do you think of so many insurance companies selling whole-life medical insurance? Can choose the best product - 17% Difficult to choose the best product - 39% Can choose the best product for me in the future if the number of products continue to increase - 44% Source: Interscope Inc., 8/6 Effect of the Administrative Sanctions The FSA put administrative sanctions on some insurers. How does this affect you in buying medical insurance? Still want to buy insurance from a company who received the sanctions if the product fits me - 23% Will buy insurance only from companies who have not received sanctions - 4% Source: Interscope Inc., 8/6 Do not care about the sanctions - 5% Don t want to buy insurance now due to the uneasy feeling I have about all insurance companies - 32% Consumer Preference for Insurance 4% /5 4/6 8/ Cancer Medical Death Annuity Source: My Voice Communications Inc., 1/5; Interscope Inc., 4/6 and 8/6 32

35 The Most Preferred Insurer for Cancer Life and Medical Insurance Cancer Life Medical Aflac 38 Aflac 2 Alico 12 Alico 12 Nippon 9 Nippon 1 Kampo 7 Kampo % 1 2 3% Source: Interscope Inc. 8/6 Premium Comparison of Medical Products (Whole-life, Stand-alone Basis) Requires Overnight Stay Max. Days Per Hospital Stay Max. Lifetime Days Issue Ages Monthly Premium (5 yr. Male) Aflac No 6 1, -8 6,15 Co. A No ,5 Co. B Yes 62 1, ,2 Co. C No 6 1, ,9 Premiums for 1,/day hospitalization benefits Co. A: Maximum days per hospital stay is 18 for certain diseases. Maximum lifetime days is 1,95. Co. B: Maximum lifetime unlimited for cancer. Co. C: Premium may be reduced if interest rates rise. Need for Rider MAX with Care If you buy medical and nursing care insurance, What kind of combination will you choose? % 2% 4% 6% 8% 1% 2s 3s s 5s 6 and over Medical and Nursing care Medical only Nursing care only Others 33

36 Average Premiums for Rider MAX Products 6, 55, 5, Rider MAX Rider MAX with Care 52,663 45, 4, 35, 41,19 3, /6 Excludes conversions Alliance Between Different Types of Agencies Affiliated corporate agencies Make a contract Individual/independent agencies Service shops Distribution of application forms Face-to-face meeting Telephone Customers visit Employees and families of payroll accounts Number of payroll accounts where alliances have already been employed or are being employed = 17 Number of payroll accounts for which an alliance is under study = 5 Strengthening our Approach to Existing Policyholders Hot Call Existing policyholders (In Thousands) 5 No. of customers Receiving Hot Call 4 Outbound Product introduction Follow-up for policy maintenance Aflac Contact Center 2QT 3QT 4QT 26 (Projection) 34

37 Strengthening our Approach to Existing Policyholders Mailing Hot Mail Direct mail to existing policyholders Policy maintenance Call (Contact Center) Introduce products that meet customer needs Follow-up telephone calls(hot Call) Existing policyholders Outbound Inbound Website Only for existing policyholders Handle policyholders inquiries about their coverage Respond to requests for product brochures Promotion of Referrals to New Customers Do you want to introduce EVER to your friends or acquaintances? No answer - 8% Yes/Already did so - 4% What made you decide to buy EVER? Recommendation from families and acquaintances - 2% No - 52% Others 66% Brochures - 14% Source: Survey of EVER policyholders, 12/5 Customer Introduction Campaign Trumpet Flute Piano Violin Saxophone 35

38 Ten Million Aflac Ducks (In Millions) 1 Cumulative Number of Toy Ducks Rider MAX with Care TV Commercial 36

39 Aflac Japan Sales Hisayuki Shinkai First Senior Vice President; Director of Sales, Aflac Japan New Annualized Premium Sales (Yen in Billions) % Inc /5 6/6 (7.9) (2.8) New Associates Basic Training - ABT Change of sales style - Developing markets Strengthen ability to respond to worksite market Explore potential customers Develop new markets Six Strengthen ability to respond to customers months Improve ability for face-to-face consulting Enhance communication ability Next step Conduct group training Confirm the results Action learning Practice Advice and assist by Aflac employees 37

40 Number of Service Shops QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT 3QT 4QT 1QT 2QT New Annualized Premium Sales in the Hojinkai Market (Yen in Billions) /5 6/6 Aflac Contact Center Function Aflac Contact Center Inbound Response to requests for product brochures Policy maintenance Inquiries Outbound Product introduction Follow-up for policy maintenance Customers 38

41 Bank Channel Distribution Total Number of Banks Affiliated Corporate Agencies Banks Selling Aflac Products Mega, long-term credit and trust banks 11 9 Regional banks Second-tier regional banks Credit banks Total Percentage Change in New Sales by Dai-ichi Life 4% (1) (4.7) (3.2) 1QT 2QT 3QT 4QT 1QT 2QT

42 Aflac Japan Sales - From a Territory Director s Perspective Shigehiko Akimoto Senior Vice President; Director of Tokyo Territory, Aflac Japan Aflac s Penetration Among Companies Listed on the Tokyo Stock Exchange Aflac Customers 91% 1

43 Strategy for the Existing Tokyo Worksite Market Annualized Premium Sales from MS (First Six Months 26) Tokyo Territory 13% Sales offices responsible for agencies affiliated with financial institutions 26% Strategy for the Existing Tokyo Worksite Market New annualized premium sales of Hitachi Insurance Services, Ltd. (Yen in Millions) /5 6/6 Share of Isogo Service Shop 6% Strategy for the Existing Tokyo Worksite Market An Aflac agency Alliance AIS (Aflac Insurance Service) Introduce products Closing Market Customers 2

44 Aflac s Penetration Among Companies Listed on the Emerging Equity Markets* Aflac Customers: 373 companies 54% 46% Non Aflac Customers: 44 companies *JASDAQ, Mothers and Hercules Banks Selling Insurance in the Tokyo Area Number of Banks Banks Selling Aflac Products Number of Branches Regional Banks Credit Banks 23 1,6 Total 27 1,267 No: 21 banks 77.8% 22.2% Yes: 6 banks New Sales at Top Five Banks (Yen in Millions) Sugamo Hyakugo Settsu Suito Chiba Ogaki

45 Aflac Japan Sales - From a Territory Director s Perspective Hidekatsu Yajima First Vice President; Director of Shutoken Territory, Aflac Japan The Shutoken Territory Shutoken: Tokyo and 6 prefectures 4

46 The Market in Shutoken Territory (In Thousands) Area Number of Households Population Country 5, ,869 Ibaraki 1,51 2,989 Tochigi 711 2,88 Saitama 2,695 6,997 Chiba 2,379 6,15 Tokyo 5,862 12,168 Kanagawa 3,654 8,644 Yamanashi Shutoken total 16,674 39,72 Shutoken s share 33.1% 31.3% Source: Basic Resident Register, 3/31/25 Cancer Policy Sales (Yen in Billions) Shutoken Whole Company (Excl. Shutoken) /5 6/6 6/5 6/6 % Change Medical Policy Sales (Yen in Billions) Shutoken Whole Company (Excl. Shutoken) /5 6/6 % Change (9.9) /5 6/6 (17.8) 5

47 New Sales of WAYS (Six Months 26) Shutoken: 1.4 billion 24.3% Whole Company (Excl. Shutoken) New Annualized Premium Sales by Product (Yen in Billions) Shutoken /5 6/6 5.8% Whole Company (Excl. Shutoken) 6/5 6/6 (4.9)% Cancer Medical WAYS Other New Agency Recruitment 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Shutoken 3,469 Other 4,78 4,164 4,388 1,743 Shutoken s /6 Share 24.4% 26.5% 28.9% 28.3% 29.8% 6

48 Tactics for Training New Agencies Encourage them to participate in training Accompany them when they visit a customer Review training methods and materials to respond to the diversification of products Contribution from New Agencies (Yen in Billions) Shutoken* Whole Company** /5 6/6 6/5 6/6 % Change *Individual agencies only **All types of agencies excl. Shutoken, Corporate Sales, Mail-order and Banks Reasons for Selling Aflac s Products Want to stabilize business base Aggressively approached by Aflac 7

49 Number of Non-exclusive Agencies /6 New Sales from Non-exclusive Agencies (Yen in Billions) /5 6/6 Contribution from Service Shops By Small and Medium Agencies* By Large Agencies** (Yen in Millions) (Yen in Billions) Shops 13 Shops Shops 98 Shops % Change 6/5 6/6 6/5 6/ * Less than 1 million of new annualized premium sales ** 1 million or more of new annualized premium sales 8

50 Advantages and Challenges Advantages Convenient access Concentration of population Challenge Increased competition The Operations of an Affiliated Corporate Agency Ichiro Yamada Senior Vice President, Wanbishi Archives Co., Ltd. 9

51 Overview of Wanbishi Archives Year of foundation: 1966 (4th anniversary) Sales in 25: 16.5 billion Number of employees: 556 (as of 4/1/26) Core businesses: Records management business Insurance business Problems with Paper Solicitation Method Only periodic sales activity (once a year or so) is possible Cannot respond to consumer needs Cannot catch up with changing markets Customer satisfaction is low Cannot respond to decentralized locations Cannot make sales anywhere other than at worksites Advantages of Face-to-Face Sales Method Can offer consumers coverage which is best for them Can boost customer satisfaction Can make sales in various locations as well as at worksites 1

52 Number of Face-to-Face Sales Representatives Monthly Average Comparison of New Sales (Yen in Millions) Regular employees Face-to-face sales reps Number of Sales Offices

53 New Annualized Premium Sales (Yen in Millions) 1,4 1,2 1, Jan. Jun. Premium Income (Yen in millions) 18, 16, 14, 12, 1, 8, 6, 4, 2, Jan. Jun. Share of New Sales from Direct Market 7% % Jan. Jun. 12

54 Outlook Promoting channel mix Paper solicitation Face-to-face sales Sales outlets where customers visit Direct mail Call centers Internet Pursuing synergy effect with the records management business The Operations of an Aflac Insurance Service Shop Yukari Yamada President, My Communication 13

55 Number of Insurance Shops 1, Non Aflac shops Aflac Service Shops /6 * Non Aflac shops include Hoken Ichiba, Life Plaza Holdings and other shops that are operated by GMS company affiliated agencies My Communication Service Shops Roadside In store New Annualized Premium Sales (Yen in Millions) /5 6/6 14

56 Sales Composition by Product Cancer Medical Ordinary Other 1% 8% 6% 4% 2% % /6 Annualized Premium in Force (Yen in Millions) 4, 3,5 3, 2,5 2, 1,5 1, /6 Common Purchasing Process of Customers Purchasing Goods Attention Interest Desire Conviction Action Purchasing Insurance Attention Interest Explanation Decision Purchase 15

57 Purchasing Process at a Service Shop Attention Interest Information 1. Confirmation of the customer s anxiety and risks 2. Importance of having coverage which fits his/her sentiment 3. Review of his/her existing policy 4. Necessary coverage for the future 5. How we can help him/her Access Consideration Recognition Decision Purchase Proposal New Form for Alliance 1 Appear in other agencies direct mail for existing policyholders as Partner service shops. 2 Existing policyholders of other agencies contact us Non-existing policyholder Existing policyholder 4 Existing policyholder Application for a new policy My Communication deals with everything for the new policy Existing policyholder 3 Review their existing policies and policy maintenance, Advise on better coverage Future Outlook First Stage - up to 27 Competition among channels:increase of customers who take out insurance at shops Expand the shop channel as the fourth channel of insurance sales following sales people, agencies and life planners. Second Stage - from 28 Competition within the channel:change of the positions of the shops Widening gap between successful and unsuccessful shops in expanding product lines for one-stop shopping and enhancing services by consulting and counseling 16

58 Marketing Cancer Insurance through Dai-ichi Mutual Life Takashi Nawa General Manager, Hachioji Branch, Dai-ichi Mutual Life Insurance Co. The Hachioji Branch Number of Divisions: 12 Number of Sales Reps.:

59 Advantages of Aflac s Cancer Insurance Simple coverage Obvious need in the market Strong brand Simple paperwork and quick claims payment Positioning of Cancer Insurance Important means to support sales representatives income Income of Sales Representatives (Annual Average, Yen in Millions) Before I was transferred to this branch

60 Positioning of Cancer Insurance Important means to support sales representatives income Important means to increase base of potential customers Positioning of Cancer Insurance Important means to support sales representatives income Important means to increase base of potential customers Important means to retain existing customers Strategies for Promoting Cancer Policy Sales Enhance sales reps daily awareness about the benefits from cancer policy sales Create a framework to stimulate motivation among sales reps Add cancer policy sales as a criteria for sales contests 19

61 Cancer Policy Sales (Number of policies) 2, 1,5 1, /6 Retention Rate of Sales Representatives 7% Selling Life Insurance to Cancer Policyholders Cancer policyholders through Dai-ichi Life 66% 34% New customers: Do not have life insurance (About 26, people) Existing customers: Already have life insurance New sales of life insurance from this portion of market last year: Hachioji Branch: 373 policies Whole Company: 42, policies 2

62 Potential for Selling Cancer Insurance to Dai-ichi s Policyholders Already have cancer insurance : 6% Do not have cancer insurance : 94% 21