Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission file no. 1-7434
AFLAC INCORPORATED
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1167100
------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1932 Wynnton Road, Columbus, Georgia 31999
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 706-323-3431
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------------------ -------------------------
Common Stock, $.10 Par Value New York Stock Exchange
Pacific Exchange
Tokyo Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
--------
The number of shares of the registrant's Common Stock outstanding at March
16, 2001, with $.10 par value, was 528,367,118. The aggregate market value
of the voting stock held by non-affiliates of the registrant as of March 16,
2001 was $13,975,988,096.
DOCUMENTS INCORPORATED BY REFERENCE
PART I Item 1 Exhibit 13 - pages 13-5 to 13-27 (Management's
Discussion and Analysis of Financial
Condition and Results of Operations (MD&A)),
pages 13-40 to 13-53 (Notes 2 and 3 of the
Notes to the Consolidated Financial
Statements), and pages 13-65 to 13-66
(Note 9 of the Notes to the Consolidated
Financial Statements). The applicable
portions of the Company's Annual Report to
Shareholders for the year ended December 31,
2000, are included as Exhibit 13
Item 2 Exhibit 13 - page 13-71 (Note 12 of the Notes
to the Consolidated Financial Statements)
PART II Item 5 Exhibit 13 - pages 13-1, 13-2 and 13-65
(Note 9 of the Notes to the Consolidated
Financial Statements)
Item 6 Exhibit 13 - pages 13-3 and 13-4
Item 7 Exhibit 13 - pages 13-5 to 13-27
Item 7A Exhibit 13 - pages 13-7 to 13-8 and
13-16 to 13-19
Item 8 Exhibit 13 - pages 13-28 to 13-74
PART III Item 10 Incorporated by reference from the
definitive Proxy Statement for the Annual
Meeting of Shareholders to be held May 7,
2001 (the Proxy Statement)
Item 11 Incorporated by reference from the Proxy
Statement
Item 12 Incorporated by reference from the Proxy
Statement
Item 13 Incorporated by reference from the Proxy
Statement
i
AFLAC Incorporated
Annual Report on Form 10-K
For the Year Ended December 31, 2000
Table of Contents
Page
------
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . I-1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . I-18
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . I-18
Item 4. Submission of Matters to a Vote of Security Holders. . . I-19
Item 4A. Executive Officers of the Company. . . . . . . . . . . . I-19
PART II
Item 5. Market for Company's Common Equity and Related
Shareholder Matters. . . . . . . . . . . . . . . . . . II-1
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . II-1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . II-1
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . . . . . . II-1
Item 8. Financial Statements and Supplementary Data. . . . . . . II-1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . II-1
PART III
Item 10. Directors and Executive Officers of the Company. . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . III-1
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . III-1
Item 13. Certain Relationships and Related Transactions . . . . . III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . IV-1
ii
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION
AFLAC Incorporated was incorporated in 1973 under the laws of the state
of Georgia. AFLAC Incorporated is a general business holding company and
acts as a management company, overseeing the operations of its subsidiaries
by providing management services and making capital available. Its principal
business is supplemental health and life insurance, which is marketed and
administered primarily through its subsidiary, American Family Life
Assurance Company of Columbus (AFLAC). Most of AFLAC's policies are
individually underwritten and marketed at worksites through independent
agents with premiums paid by the employee. Our operations in Japan (AFLAC
Japan) and the United States (AFLAC U.S.) service the two markets for our
insurance business.
We are authorized to conduct insurance business in all 50 states, the
District of Columbia and several U.S. territories and foreign countries. Our
only significant foreign operation is AFLAC Japan, which accounted for 81%
of the company's total revenues for both 2000 and 1999, and 80% in 1998, and
86% and 87% of total assets at December 31, 2000 and 1999, respectively.
We believe AFLAC is the world's leading writer of cancer expense
insurance. We continue to diversify our product offerings to include other
types of supplemental health products in both the United States and Japan.
AFLAC Japan, in addition to cancer plans, also sells care plans,
supplemental general medical expense plans, medical/sickness riders to our
cancer plan, and a living benefit life plan. AFLAC U.S. also sells other
types of supplemental health insurance, including hospital intensive care,
accident and disability, hospital indemnity, long-term care, short-term
disability and dental plans. We also offer several life insurance plans in
the United States and Japan.
For financial information relating to our foreign and U.S. operations,
see Exhibit 13, pages 13-5 to 13-27 (Management's Discussion and Analysis of
Financial Condition and Results of Operations (MD&A)) and page 13-40 (Note 2
of the Notes to the Consolidated Financial Statements), which are
incorporated herein by reference.
On February 13, 2001, the board of directors declared a two-for-one
stock split to shareholders of record at the close of business on February
27, 2001. Share and per-share amounts have been adjusted to reflect the
split distributed on March 16, 2001.
Several significant nonoperating items affected our net earnings during
the three-year period ended December 31, 2000.
In the second quarter of 2000, the release of an accrued unfunded
liability for projected retirement payments increased pretax earnings by
$101 million ($99 million after taxes, or $.19 per basic share and $.18 per
diluted share). (See Exhibit 13, page 13-67, Note 10 of the Notes to the
Consolidated Financial Statements.)
During the second quarter of 2000, we sold one security reported as
available for sale at a pretax loss of $34 million. We also recorded a
I-1
pretax impairment loss of $57 million on another security, which was carried
in the held-to-maturity category. These losses are included in realized
investment gains and losses. The combined effect of these losses decreased
net earnings by $58 million ($.11 per basic and diluted share) for the year
ended December 31, 2000.
In both 1998 and 1999, Japan enacted corporate income tax rate
reductions. The statutory tax rate for AFLAC Japan declined from 45.3% to
41.7% in 1998 and from 41.7% to 36.2% in 1999. These tax rate declines
caused reductions in our deferred income tax liability. The deferred tax
effect for the 1998 tax reduction was recognized in the first quarter of
1998, increasing net earnings by $121 million ($.23 per basic share and $.22
per diluted share). The deferred tax effect for the 1999 tax reduction was
recognized in the first quarter of 1999, increasing net earnings by $67
million ($.13 per basic share and $.12 per diluted share). For additional
information on the income tax reductions, see Exhibit 13, page 13-59, Note 7
of the Notes to the Consolidated Financial Statements.
Another factor affecting net earnings was the policyholder protection
system established by the Japanese government during the first quarter of
1998. The pretax charge for our obligation to the protection fund in 1998
was $111 million ($65 million after taxes, or $.12 per basic and diluted
share). In 1999, the Japanese government and the life insurance industry
agreed to legislation that increased the life insurance industry's legal
obligation to the fund. Our share of the industry's obligation was
recognized in the fourth quarter of 1999 and decreased pretax earnings by
$64 million ($41 million after taxes, or $.08 per basic share and $.07 per
diluted share). For further information regarding the policyholder
protection fund, see Exhibit 13, page 13-40, Note 2 of the Notes to the
Consolidated Financial Statements.
Operating earnings exclude realized investment gains/losses, the gain
from the release of the retirement accrual in 2000, the deferred income tax
benefits from the Japanese income tax rate reductions, and the charges for
the policyholder protection fund. Operating earnings per share amounts
referenced are based on the diluted number of average outstanding shares.
Due to the relative size of AFLAC Japan, fluctuations in the yen/dollar
exchange rate can have a significant effect on our reported results. In
years when the yen weakens, translating yen into dollars causes fewer
dollars to be reported. When the yen strengthens, translating yen into
dollars causes more dollars to be reported.
The yen strengthened in relation to the dollar during 1999 and 2000
after several years of weakening. The average yen/dollar exchange rates
were 107.83 in 2000, 113.96 in 1999 and 130.89 in 1998. The stronger yen in
2000 and 1999 increased operating earnings per share by $.02 in 2000
compared with 1999 and by $.06 per share in 1999 compared with 1998. The
weaker yen in 1998 lowered operating earnings per share by $.02 in 1998
compared with 1997. Reported operating earnings per share increased 20.0%
to $1.20 in 2000, 28.2% to $1.00 in 1999 and 18.2% to $.78 in 1998.
Our primary financial objective is the growth of operating earnings per
share excluding the effect of foreign currency fluctuations. Our goal for
2000 was 17% growth, which we exceeded. Excluding the effect of currency
fluctuations, operating earnings per share increased 18.0% in 2000 compared
with 1999, 20.5% in 1999 compared with 1998, and 21.2% in 1998 compared with
1997.
I-2
For further information regarding the impact of currency fluctuations
on our business, see Exhibit 13, pages 13-7 to 13-8 (Foreign Currency
Translation section of Management's Discussion and Analysis).
Insurance premiums and investment income from insurance operations are
the major sources of revenues. Our consolidated premium income was $8.2
billion in 2000, $7.3 billion in 1999 and $5.9 billion in 1998. For further
information on our consolidated premiums earned by business segment, see
Note 2 of the Notes to the Consolidated Financial Statements in Exhibit 13,
page 13-40, incorporated herein by reference.
The following table sets forth the changes in annualized premiums in
force for AFLAC's insurance business for the years ended December 31:
(In millions) 2000 1999 1998
-------- -------- --------
Annualized premiums in force,
at beginning of year $ 8,395 $ 6,931 $ 5,811
Policies sold including
policy conversions 1,633 1,320 1,061
Change in unprocessed
policies (179) 21 (24)
Lapses and surrenders (831) (684) (552)
Other 49 34 23
Foreign currency translation
adjustment (753) 773 612
------- ------- -------
Annualized premiums in force,
at end of year $ 8,314 $ 8,395 $ 6,931
======= ======= =======
INVESTMENTS AND INVESTMENT RESULTS
The following table shows an analysis of investment securities (at cost
or amortized cost) at December 31:
AFLAC Japan AFLAC U.S.
(In millions) 2000 1999 2000 1999
----------------- -----------------
Securities available for sale:
Fixed maturities $16,757 $15,491 $ 3,648* $ 3,405*
Perpetual debentures 2,173 2,411 174 153
Equity securities 64 45 97 92
------ ------ ------ ------
Total available for sale 18,994 17,947 3,919 3,650
------ ------ ------ ------
Securities held to maturity:
Fixed maturities 3,645 4,389 - -
Perpetual debentures 3,442 3,903 - -
------ ------ ------ ------
Total held to maturity 7,087 8,292 - -
------ ------ ------ ------
Total investment securities $26,081 $26,239 $ 3,919 $ 3,650
====== ====== ====== ======
*Includes securities held by the parent company of $262 in 2000 and $240 in
1999.
I-3
Net investment income was $1.6 billion in 2000, $1.4 billion in 1999
and $1.1 billion in 1998.
AFLAC invests primarily within the Japanese, U.S. and Euroyen debt
securities markets. We are exposed to credit risk in our investment
activity. Credit risk is a consequence of extending credit and/or carrying
investment positions. We require all securities to have an initial rating
of Class 1 or 2 as determined by the Securities Valuation Office of the
National Association of Insurance Commissioners. Most of AFLAC's private
placement issues are issued under medium-term note programs and have
standard covenants commensurate with credit rankings, except when internal
credit analysis indicates that additional protective and/or event risk
covenants are required.
Private placement investments held by AFLAC Japan at amortized cost
accounted for $14.3 billion, or 48.0%, and $13.6 billion, or 45.8%, of total
debt securities at December 31, 2000 and 1999, respectively. Of the total
private placements, reverse-dual currency debt securities (principal
payments in yen, interest payments in dollars) accounted for $4.8 billion
and $4.9 billion at amortized cost as of December 31, 2000 and 1999,
respectively.
In recent years we have purchased subordinated perpetual debenture
securities issued primarily by European and Japanese banks. These
securities are subordinated to other debt obligations of the issuer, but
rank higher than equity securities. Although these securities have no
contractual maturity, the issue-date fixed-rate interest coupons
subsequently increase to a market-interest rate plus 150 to 300 basis points
and change to a variable-interest rate basis, generally by the 25th year
after issuance, thereby creating an economic maturity date.
The issuers of two debt securities held in our investment portfolio
experienced significant credit rating downgrades during the first half of
2000. During the second quarter of 2000, we sold one security carried in
the available-for-sale category at a pretax loss of $34 million. We
recorded a pretax impairment loss of $57 million on the other security,
which was carried in the held-to-maturity category. We also reclassified
this security to the available-for-sale category. These losses, which were
included in realized investment losses, decreased net earnings by $58
million ($.11 per basic and diluted share) for the year ended December 31,
2000.
For information on the composition of our investment portfolio and
investment results, see Exhibit 13, pages 13-11 and 13-14 to 13-26
(discussions relating to investments, balance sheet and cash flow) and pages
13-45 to 13-55 (Notes 3 and 4 of the Notes to the Consolidated Financial
Statements), which are incorporated herein by reference.
INVESTMENTS - JAPAN
AFLAC Japan had approximately 357.3 billion yen ($3.1 billion)
available for investment in 2000. Of this amount, 95.1% was invested in
yen-denominated securities at an average yield of 3.57%. We invested 91.0%
in longer-dated securities at an average rate of 3.64%. Our longer-dated
investments include purchases of reverse dual-currency bonds (yen principal
securities that pay a dollar coupon) at an average yield of 4.80%. An
I-4
additional 4.1% was invested in yen-denominated securities of various other
sectors. Dollar-denominated securities accounted for the remaining 4.9% of
the purchases in 2000 at an average yield to maturity of 7.88%.
The following is the composition of total investments and cash (at cost
or amortized cost) for AFLAC Japan as of December 31:
2000 1999
-------- --------
Debt securities:
Government and guaranteed 27.8% 28.8%
Municipalities 2.6 3.5
Public utilities 15.9 15.0
Banks/financial institutions 39.0 38.8
Other corporate 12.6 11.5
Equity securities .2 .2
Cash and cash equivalents 1.9 2.2
------ ------
100.0% 100.0%
====== ======
We use specific criteria to judge the credit quality and liquidity of
our investments and a variety of credit rating services to monitor these
criteria. Applying those various credit ratings to a standardized rating
system based on the categories of a nationally recognized rating service,
the percentages of AFLAC Japan's debt securities, at amortized cost, as of
December 31 were as follows:
2000 1999
------ ------
AAA 26.6% 30.2%
AA 22.7 24.9
A 34.6 30.5
BBB 15.5 12.4
BB .6 2.0
----- -----
100.0% 100.0%
===== =====
Japan's life insurance industry has contended with low investment
yields for the last several years. Despite a series of premium rate
increases designed to help offset the effect of lower yields, four Japanese
life insurance companies have been declared insolvent since 1997 and two
more applied for court protection or assistance in 2000. As a result, more
attention has been paid to the composition of the life insurance industry's
assets. Our asset allocation is much different than the industry as a whole
and, we believe, is better suited to a low interest rate environment. Based
on March 31, 2000, Japanese Financial Services Agency (FSA) data, AFLAC had
the highest portfolio yield among all of Japan's life insurers with assets
in excess of 2 trillion yen. AFLAC earned this distinction while
maintaining an investment portfolio in which 99.4% of the securities are
investment grade.
Our investments in the Japanese equity and investment real estate
markets continued to be immaterial in 2000.
I-5
INVESTMENTS - U.S.
Profits repatriated from AFLAC Japan to AFLAC U.S. totaled $157 million
in 2000, compared with $243 million in 1999 and $154 million in 1998.
Including profit repatriation and bond swaps, AFLAC U.S. invested $904
million in 2000. Of that amount, approximately 19.2% was invested in U.S.
government or agency securities at an average yield of 7.59%, and 77.5% was
invested in corporate fixed-maturity securities at 7.95%. The remaining
3.3% was invested in equities.
The following is the composition of total investments and cash (at cost
or amortized cost) for AFLAC U.S. as of December 31:
2000 1999
-------- --------
Debt securities:
U.S. Government 3.3% 3.7%
Municipalities .5 .5
Mortgage-backed securities 8.8 3.0
Public utilities 6.0 5.0
Sovereign and supranational 2.4 4.4
Banks/financial institutions 42.6 44.5
Other corporate 32.9 35.7
Equity securities 2.4 2.5
Cash and cash equivalents 1.1 .7
------ ------
100.0% 100.0%
====== ======
AFLAC U.S. debt securities, at amortized cost, as of December 31 were
rated as follows:
2000 1999
------ ------
AAA 13.8% 11.3%
AA 20.9 22.5
A 51.9 56.1
BBB 12.5 10.1
BB .9 -
----- -----
100.0% 100.0%
===== =====
INSURANCE - JAPAN
AFLAC Japan's earned premiums by product lines are included in Note 2
of the Notes to the Consolidated Financial Statements, Exhibit 13, page 13-
40.
I-6
The following table presents the changes in annualized premiums in
force for AFLAC Japan for the years ended December 31:
(In millions) 2000 1999 1998
-------- -------- --------
Annualized premiums in force,
at beginning of year $ 6,803 $ 5,538 $ 4,595
Policies sold including
policy conversions 921 765 579
Change in unprocessed
policies (176) 20 (25)
Lapses and surrenders (334) (281) (212)
Other (9) (12) (11)
Foreign currency translation
adjustment (753) 773 612
-------- -------- --------
Annualized premiums in force,
at end of year $ 6,452 $ 6,803 $ 5,538
======== ======== ========
We experienced a slight increase in the lapse and surrender ratios in
2000 and 1999 compared with 1998 due to the poor economic conditions in
Japan.
INSURANCE PLANS - JAPAN
AFLAC's insurance products are designed to provide supplemental
coverage for medical and nonmedical costs that are not reimbursed under
Japan's health insurance system.
The cancer life insurance plans we offer in Japan provide a fixed daily
indemnity benefit for hospitalization and outpatient services related to
cancer and a lump-sum benefit upon initial diagnosis of internal cancer. The
plans differ from the AFLAC U.S. cancer plans (described on page I-12 and
I-13) in that the Japanese policies also provide death benefits and cash
surrender values (we estimate that approximately 27% of the premiums earned
from all cancer life plans are associated with these benefits). In mid-
2000, we began selling new, lower-premium cancer life and care products to
meet the needs of cost-sensitive buyers. Approximately 29% of new cancer
life and 59% of care policy sales were from the lower-premium products. At
the end of 2000, we introduced a major revision to our cancer life policy.
This new product, called 21st Century Cancer Life, offers a variety of
coverage choices to our customers. As a result, employers will be able to
offer a customized AFLAC cancer life policy to suit the needs of their
workers. Rider MAX, which provides accident and medical/sickness benefits
as a rider to our cancer life policy, has been extremely popular since its
introduction in 1998.
Care insurance provides periodic benefits to those who become
bedridden, demented or seriously disabled due to illness or accident. Prior
to the introduction of this care plan, we marketed a policy that primarily
provided dementia care benefits.
Our medical expense policy is similar to hospital indemnity insurance
products in the United States. It provides cash benefits to policyholders
when they are hospitalized and offers a maximum hospitalization benefit of
1,000 days.
I-7
The living benefit life plan is a life insurance policy that provides
lump-sum benefits when policyholders experience heart attack, cancer or
stroke. We are offering this product as a stand-alone policy or as a rider
to the cancer life plan. As a rider, it adds heart attack and stroke
benefits to the cancer life policy. Marketing efforts for living benefit
life primarily focus on selling the plan as a rider.
AFLAC Japan's sales mix, as measured in yen, has changed during the
last few years. Cancer life sales accounted for 40.3% of total sales in
2000, 46.7% in 1999 and 49.7% in 1998. Rider MAX accounted for 41.2% of
sales in 2000, 39.6% in 1999 and 33.0% in 1998. Ordinary life and annuities
accounted for 13.6% of sales in 2000 compared with 7.8% in 1999 and 3.8% in
1998.
Due to the continued low level of available investment yields in Japan,
industry regulators have directed insurers to increase premium rates on new
policy issues in recent years. For further information, see Exhibit 13,
page 13-11 of the Management's Discussion and Analysis.
JAPANESE ECONOMY
For the last several years, Japan has been working to overcome its
depressed economy. The financial strength of many Japanese businesses
continued to deteriorate in 2000 with some experiencing bankruptcy or
requesting financial protection or assistance. As we have indicated in the
past, Japan's weak economy has created a challenging environment for AFLAC
Japan, as yields available for new investments remain at very low levels and
consumer confidence continues to lag. The time required for the Japanese
economy to fully recover remains uncertain.
DISTRIBUTION - JAPAN
The "corporate agency" system has been important to the growth of AFLAC
Japan. Affiliated corporate agencies are formed when companies establish
subsidiary businesses to sell AFLAC products to their employees, suppliers
and customers. These agencies help us reach the employees of almost all of
Japan's large corporations.
We also sell our products through independent corporate agencies and
individual agencies that are not affiliated with large companies. As of
December 31, 2000, there were 8,938 agencies in Japan with more than 43,300
licensed agents, compared with 8,283 agencies and 41,400 licensed agents in
1999. Agents' activities are principally limited to insurance sales, with
policyholder service functions handled by the main office in Tokyo and 85
offices throughout Japan.
In the third quarter of 2000, AFLAC Japan and Dai-ichi Mutual Life
Insurance Company (Dai-ichi Life) agreed to a major marketing alliance that
anticipates the sale of each company's products through the respective
distribution systems. The initial focus will be the sale of AFLAC Japan's
cancer life and Rider MAX products through Dai-ichi Life's sales force of
50,000 people. Sales through Dai-ichi Life commenced in the second half of
March 2001.
I-8
COMPETITION - JAPAN
In 1974, AFLAC became the second foreign (non-Japanese) life insurance
company to gain direct access to the Japanese insurance market by obtaining
a license to do business in Japan. Through 1981, we were the only company
in Japan authorized to sell a cancer life insurance policy. As of December
31, 2000, 17 other life companies offered stand-alone cancer insurance.
Trade talks in 1994 and 1996 between the governments of the United
States and Japan, and Japan's 1996 plan for a financial "Big Bang," produced
a framework for the deregulation of the Japanese insurance industry. These
measures called for the gradual liberalization of the industry through the
year 2001 and included provisions to avoid "radical change" in the third
sector of the insurance industry. AFLAC, other foreign-owned insurers and
many small to medium-sized Japanese insurers operate primarily in the third
sector.
Effective January 1, 2001, additional insurance companies were
permitted to sell the type of third-sector products that AFLAC Japan
currently offers. Eight additional insurance companies began offering
cancer expense plans in January 2001. We anticipate that by July 1, 2001,
all insurance companies will be permitted to compete in the third sector.
As a result, we expect competition to increase. However, we also
expect increased product and distribution opportunities for AFLAC Japan. In
order to respond to the expected increase in competition and the
opportunities available to us, we have taken action to expand our marketing
initiatives and enhance our competitiveness.
We plan to continue expanding our distribution system through the
addition of new agencies. In support of this objective, we introduced a new
commission contract that provides increased first-year commissions to
attract new agents. Additionally, we will continue to aggressively promote
our brand and products through advertising. We plan on improving the
products we offer and introducing new ones. We will invest in new
technologies, including our laptop sales aid, to maintain our cost and
service advantages.
However, we believe we will remain the leading provider of cancer life
insurance coverage in Japan, principally due to our long experience in the
market, low-cost operations, unique marketing system (see Distribution -
Japan) and product expertise developed in the United States. AFLAC has had
a great deal of success selling cancer life policies in Japan, with 13.7
million cancer life policies in force at December 31, 2000.
We recognize that we will face increasing competition in the future,
and we continue to look for ways to improve. At the same time, we believe
companies will find it difficult to compete with us because our low-cost
structure allows us to provide competitive benefits and services to
policyholders and above-average compensation to our sales force. For
further information, see Exhibit 13, page 13-12, of the Management's
Discussion and Analysis.
I-9
REGULATION AND REMITTANCE OF FUNDS - JAPAN
Payments are made from AFLAC Japan to the Parent Company for management
fees and to AFLAC U.S. for allocated expenses and remittances of earnings.
Total payments received from AFLAC Japan were $199 million in 2000, $282
million in 1999 and $192 million in 1998. These amounts included annual
profit transfers from AFLAC Japan of $157 million in 2000, $243 million in
1999, and $154 million in 1998. In light of deregulation of the insurance
market, we elected to repatriate less than the maximum amount of profits
available in 2000 in order to maintain a stronger solvency margin in Japan.
In 2000, the maximum amount we could have repatriated was $351 million. We
repatriated the maximum amounts in 1999 and 1998.
A portion of AFLAC Japan's annual earnings, as determined on a Japanese
statutory accounting basis, can be remitted each year to AFLAC U.S. after
complying with solvency margin provisions and satisfying various conditions
imposed by Japanese regulatory authorities for protecting policyholders.
The Japanese Financial Services Agency (FSA) maintains its own solvency
standards, a version of risk-based capital requirements, which are used by
regulators in Japan to monitor the financial strength of insurance
companies. The FSA may not allow transfers of funds if the payment would
cause AFLAC Japan to lack sufficient financial strength for the protection
of policyholders. AFLAC Japan's solvency margin significantly exceeds
regulatory minimums and we do not expect these requirements to adversely
affect the funds available for repatriation from Japan.
Repatriated profits represent a portion of the after-tax earnings
reported to the FSA on a March 31 fiscal year basis. Japanese regulatory
basis earnings are determined using accounting principles that differ
materially from U.S. generally accepted accounting principles. Under
Japanese statutory accounting practices, policy acquisition costs are
charged off immediately, policy benefit and claim reserving methods are
different, policyholder protection fund obligations are not accrued,
deferred income tax liabilities are recognized on a different basis, and
investment securities are carried at cost less certain market value
adjustments for foreign exchange losses on dollar-denominated securities.
Additionally, accounting standards for financial instruments are in the
process of being revised in Japan. Japanese regulatory earnings and related
profit repatriations may therefore vary materially from year to year because
of these changes.
Effective with the Japanese reporting fiscal year ending March 31,
2002, AFLAC Japan will be required to adopt a new Japanese statutory
accounting standard regarding fair value accounting for investments.
Currently, debt securities are generally recorded at amortized cost for FSA
purposes. Under the new accounting standard, AFLAC Japan will be required
to record debt securities in four categories: at fair value in an available-
for-sale category, at amortized cost in a held-to-maturity category, at
amortized cost in a special category for securities held for long-term
holding purposes, or at fair value in a trading category.
Under this new regulatory accounting standard, the unrealized gains and
losses on debt securities available for sale will be reported in FSA capital
and surplus. This new accounting method may result in significant
fluctuations in FSA equity, in the AFLAC Japan solvency margin and in
amounts available for annual profit repatriation.
I-10
The insurance business in Japan, which is conducted as a branch office
of AFLAC, is subject to regulation by the FSA, similar to the regulation and
supervision in the United States as described on pages I-15 and I-16 under
"Regulation - U.S." AFLAC Japan files annual reports and financial
statements for the Japanese insurance operations based on a March 31 year-
end, prepared in accordance with Japanese regulatory accounting practices
prescribed or permitted by the FSA. Also, financial and other affairs of
AFLAC Japan are subject to examination by the FSA.
Reconciliations of AFLAC Japan net assets on a GAAP basis to net assets
determined on a Japanese regulatory accounting basis as of December 31 were
as follows:
(In millions - unaudited) 2000 1999
-------- --------
Net assets on GAAP basis $ 3,633 $ 3,118
Elimination of deferred policy
acquisition costs (2,706) (2,856)
Elimination of unrealized gains and
other adjustments to carrying value
of debt securities (2,633) (2,762)
Adjustment to policy liabilities 733 1,553
Adjustment to income tax liabilities 1,683 1,503
Reduction in premiums receivable (181) (146)
Policyholder protection fund 227 262
Other, net 21 (34)
-------- --------
Net assets on Japanese regulatory
accounting basis $ 777 $ 638
======== ========
In 1998, the Japanese government established the Life Insurance
Policyholders Protection Corporation. Funding by the life insurance
industry, as determined by government legislation, is made over a 10-year
period. We recognize charges for our estimated share of any assessment as
funding legislation is enacted. We periodically review our estimated
liability for policyholder protection fund assessments based on updated
information and any adjustments are reflected in net earnings.
In October 2000, two Japanese life insurance companies filed
applications for court protection under a special reorganization law for
financial institutions. Japanese government officials have indicated that
they do not expect to impose any additional protection fund assessments on
the insurance industry for the financial problems of these insurers. There
can be no assurance, however, that such assessments will not be imposed.
For further information regarding the policyholder protection fund, see
Exhibit 13, page 13-40, Note 2 of the Notes to the Consolidated Financial
Statements.
Two tax rate reductions in 1998 and 1999 lowered AFLAC Japan's tax rate
from 45.3% to 41.7% and from 41.7% to 36.2%, respectively. The 1999
reduction in the Japanese corporate income tax rate did not significantly
change our combined U.S./Japan effective tax rate due to the operation of
the U.S. foreign tax credit provisions.
For further information on the tax rate reductions, see Exhibit 13,
page 13-59, Note 7 of the Notes to the Consolidated Financial Statements.
I-11
For additional information regarding AFLAC Japan's operations, see
Exhibit 13, pages 13-9 to 13-13 (AFLAC Japan section of MD&A) and pages 13-
40 and 13-65 (Notes 2 and 9 of Notes to the Consolidated Financial
Statements), which are incorporated herein by reference.
EMPLOYEES - JAPAN
AFLAC Japan had 2,503 full-time employees at December 31, 2000. AFLAC
Japan considers its employee relations to be excellent.
INSURANCE - U.S.
AFLAC's U.S. earned premiums by product line are summarized in Note 2
of the Notes to the Consolidated Financial Statements in Exhibit 13, page
13-40.
The following table sets forth the changes in annualized premiums in
force for AFLAC U.S. insurance for the years ended December 31.
(In millions) 2000 1999 1998
------ ------ ------
Annualized premiums in force at
beginning of year $ 1,592 $ 1,393 $ 1,216
Policies sold including
policy conversions 712 555 482
Change in unprocessed policies (3) 1 1
Lapses (497) (403) (340)
Other 58 46 34
------ ------ ------
Annualized premiums in force at
end of year $ 1,862 $ 1,592 $ 1,393
====== ====== ======
HEALTH INSURANCE PLANS - U.S.
AFLAC's insurance is designed to provide supplemental coverage for
people who already have major medical or primary insurance coverage. Our
supplemental health insurance plans are guaranteed-renewable for the
lifetime of the policyholder (to age 70 for short-term disability policies).
We cannot cancel guaranteed-renewable coverage, but we can increase premium
rates on existing and future policies by class of policy in response to
claims experience higher than originally expected (subject to federal and
state loss-ratio guidelines) on a uniform, nondiscriminatory basis. Any
premium rate increases are subject to state regulatory approval.
AFLAC's cancer plans are designed to provide insurance benefits for
medical and nonmedical costs that are generally not reimbursed by major
medical insurance. We currently offer three cancer plans in the United
States that vary by benefit amount. Each plan provides a first-occurrence
benefit that pays an initial amount when internal cancer is first diagnosed,
a fixed amount for each day an insured is hospitalized for cancer treatment,
and benefits for medical, radiation, chemotherapy, surgery and a "wellness"
benefit applicable toward certain diagnostic tests such as mammograms, pap
smears, prostate exams, flexible sigmoidoscopy, etc. Each plan also
I-12
contains benefits that reimburse the insured for certain direct expenses
related to cancer treatment, up to specified policy limits. We also sell
several riders, including one that increases the amount of the first-
occurrence benefit on each rider anniversary date until the covered person
reaches age 65 or until internal cancer is diagnosed. AFLAC periodically
introduces new forms of coverage based on the anticipated needs of
policyholders and our claim experience.
We offer an accident and disability policy to protect against losses
resulting from accidents. The accident portion of the policy includes lump-
sum benefits for accidental death, dismemberment and specific injuries.
Fixed benefits for hospital confinement, emergency treatment, follow-up
treatments, ambulance, transportation, family lodging, wellness, prosthesis,
medical appliances and physical therapy are also provided. Optional
disability riders are available to the primary insured and include choices
of a sickness disability rider, on-the-job disability rider and off-the-job
disability rider. These benefits are payable up to a maximum benefit period
of one year and for one disability at a time. Short-term disability
policies provide similar disability benefits offered with a variety of
elimination period/benefit period options. The longest such benefit period
offered is two years.
In July 2000, we began offering a series of dental policies, providing
various levels of benefits for dental procedures, including check-ups and
cleanings. Plan features include a renewal guarantee, no deductible and the
flexibility to choose your dentist. The policies are portable and pay
regardless of other insurance.
AFLAC also offers other supplemental health insurance, such as
intensive care, which is a low-premium policy that provides protection
against the high cost of intensive care facilities during hospital
confinement, regardless of reimbursements from other insurers. Other types
of health insurance include qualified and non-qualified long-term care
plans, a hospital confinement indemnity policy, and a new specified health
event policy.
The sales mix in the United States has been relatively constant the
last few years. Accident/disability coverage continued to be our best-
selling product, accounting for approximately 55% of sales in 2000 and 56%
of sales in both 1999 and 1998. Cancer expense insurance accounted for 23%
to 25% of sales during the three-year period ending December 31, 2000. Our
newest product, dental insurance, generated 3.4% of sales in 2000.
LIFE INSURANCE PLANS - U.S.
AFLAC offers term and whole life policies sold through payroll
deduction at the worksite. We also sell various term and whole life
policies on a direct basis. AFLAC also offers a voluntary group term life
plan.
DISTRIBUTION - U.S.
Our sales force is composed of independent sales agents who are
licensed to sell accident and health insurance. Many are also licensed to
sell life insurance. Most agents' efforts are directed toward selling
I-13
supplemental health insurance at the worksite. The average number of U.S.
agents actively producing business on a monthly basis during 2000 was
10,757, compared with 8,807 in 1999 and 7,918 in 1998.
Agents' activities are principally limited to sales. Policyholder
service functions, including issuance of policies, premium collection,
payment notices and claims are handled by the staff at headquarters. Agents
are paid commissions based on first-year and renewal premiums from their
sales of insurance products. State, regional and district sales
coordinators are also independent contractors, and are compensated by
override commissions and bonuses.
We have concentrated on marketing our products at the worksite. This
method offers policies to individuals through common media such as
employment, trade and other associations. This manner of marketing is
distinct from "group" insurance sales in that each individual insured is
directly contacted by the sales associate. Policies are individually
underwritten, with premiums generally paid by the employee. Additionally,
AFLAC supplemental policies are portable, meaning that individuals may
retain their full insurance coverage upon separation from employment or such
affiliation, generally at the same premium. A major portion of premiums on
such sales are collected through payroll deduction or other forms of
centralized billings. Worksite-marketed plans normally result in a lower
average age of the insured at the time of policy issuance and also result in
certain savings in administrative costs, a portion of which is passed on to
the policyholder in the form of reduced premiums. Marketing at the worksite
enables the agency force to reach a greater number of prospective
policyholders than individual solicitation and lowers distribution costs.
Another valuable marketing and sales tool is the flexible benefits
program, or cafeteria plan, which allows an employee to pay for medical
insurance using pretax dollars. These programs help achieve increased
penetration, as agents are required to present the program to all employees.
They also help improve overall persistency levels due to the limited changes
allowed during the plan year.
We continue to develop marketing arrangements with large insurance
brokers. Large insurance brokers generally have better access to larger
groups than independent agents. However, the core of our distribution
network will remain independent agents.
In 2000, AFLAC's U.S. collected premiums were $1.5 billion, 7.4% of
which was collected in Texas, 6.3% in Florida, 5.5% in Georgia, 5.4% in
North Carolina and 5.2% in California. Collected premiums in all other
states were individually less than 5% of AFLAC's U.S. premiums.
COMPETITION - U.S.
The supplemental health and life insurance industry in the United
States is highly competitive. AFLAC competes with a large number of
insurers, some of which have been in business for a longer period of time.
In the United States, there are approximately 2,000 life and accident and
health insurance companies.
Private insurers and voluntary and cooperative plans, such as Blue
Cross and Blue Shield, provide insurance for meeting basic hospitalization
I-14
and medical expenses. Much of this insurance is sold on a group basis. The
federal and state governments also pay substantial costs of medical
treatment through Medicare and Medicaid programs. Such major medical
insurance generally covers a substantial amount of the medical (but not
nonmedical) expenses incurred by an insured as a result of accident and
disability, cancer or other major illnesses. AFLAC's policies are designed
to provide coverage that is supplemental to coverage provided by major
medical insurance. Our benefits may also be used to defray nonmedical
expenses.
Primary insurers generally do not provide full coverage of medical
expenses or any coverage of nonmedical expenses. Therefore, our
supplemental insurance is not an alternative to major medical insurance.
Rather, it is sold to complement (supplement) major medical insurance by
helping cover the gap between major medical insurance reimbursements and an
individual's total health care costs. Thus, we compete only indirectly with
major medical insurers in terms of premium rates and similar factors.
However, the scope of major medical coverage offered by other insurers does
represent a limitation on the market for our products. Accordingly,
expansion of coverage by other insurers, or governmental programs, could
adversely affect our business opportunities. Conversely, any reduction of
coverages, such as increased deductibles and co-payments, by other insurers
or governmental programs could favorably affect our business opportunities.
We compete directly with other insurers that offer supplemental health
and life insurance and believe that our policies and premium rates are
generally competitive with those offered by other companies selling similar
types of insurance.
For additional information regarding U.S. insurance operations, see
Exhibit 13, pages 13-13 to 13-14 (AFLAC U.S. section of MD&A), which is
incorporated herein by reference.
REGULATION - U.S.
The Parent Company and its insurance subsidiaries are subject to state
regulations in the United States as an insurance holding company system.
Such regulations generally provide that transactions between companies
within the holding company system must be fair and equitable. In addition,
transfer of assets among such affiliated companies, certain dividend
payments from insurance subsidiaries and material transactions between
companies within the system are subject to prior notice to, or approval by,
state regulatory authorities.
AFLAC and its subsidiaries, in common with all U.S. insurance
companies, are subject to regulation and supervision in the states and other
jurisdictions in which they do business. In general, the insurance laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers relating to, among other things: granting and revoking
licenses to transact business, regulating trade practices, licensing agents,
prior approval of forms of policies and premium rate increases, standards of
solvency and maintenance of specified policy benefit reserves and minimum
loss ratio requirements, capital for the protection of policyholders,
limitations on dividends to shareholders, the nature of and limitations on
investments, deposits of securities for the benefit of policyholders, filing
of financial statements prepared in accordance with statutory insurance
I-15
accounting practices prescribed or permitted by regulatory authorities, and
periodic examinations of the market conduct, financial, and other affairs of
insurance companies.
Also, there are various ongoing regulatory initiatives by the National
Association of Insurance Commissioners (NAIC) relating to insurance
products, investments, revisions to the risk-based capital formula and other
actuarial and accounting matters.
The NAIC recodified Statutory Accounting Principles (SAP) to promote
standardization throughout the industry. These new accounting principles
were effective January 1, 2001, and are to be applied prospectively.
Previously, prescribed or permitted SAP could vary among states and among
companies. The transition adjustments to adopt the new accounting
principles increased statutory net assets by approximately $130 million as
of January 1, 2001.
The NAIC uses a risk-based capital formula relating to insurance risk,
business risk, asset risk and interest rate risk to facilitate
identification by insurance regulators of inadequately capitalized insurance
companies based upon the types and mixtures of risks inherent in the
insurer's operations. The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial
balances or various levels of activity based on the perceived degree of
risk. Regulatory compliance is determined by a ratio of the company's
regulatory total adjusted capital to its authorized control level risk-based
capital as defined by the NAIC. Companies below specific trigger points or
ratios are classified within certain levels, each of which requires
specified corrective action. The levels are company action, regulatory
action, authorized control and mandatory control. AFLAC's NAIC risk-based
capital ratio remains high and reflects a very strong capital and surplus
position.
Two states, Massachusetts and New Jersey, have laws, regulations or
regulatory practices that either prohibit the sale of specified disease
insurance, such as our cancer expense insurance, or make its sale
impractical. The remainder of the states do not impose prohibitions or
restrictions that prevent us from marketing cancer expense insurance. AFLAC
U.S. is marketing several of its other products in Massachusetts and New
Jersey.
Under insurance guaranty fund laws in most U.S. states, insurance
companies doing business in those states can be assessed for policyholder
losses up to prescribed limits that are incurred by insolvent companies with
similar lines of business. Such assessments have not been material to us in
the past. We believe that future assessments relating to companies in the
United States currently involved in insolvency proceedings will not
materially impact the consolidated financial statements.
For further information concerning state regulatory and dividend
restrictions, see Exhibit 13, page 13-65 (Note 9, Statutory Accounting and
Dividend Restrictions of Notes to the Consolidated Financial Statements),
incorporated herein by reference.
I-16
EMPLOYEES - U.S.
In the U.S. insurance operations, we had 2,512 full-time employees at
December 31, 2000. We consider our employee relations to be excellent.
POLICY LIABILITIES - JAPAN AND U.S.
The reserves for policy liabilities reported in the financial
statements have been computed in accordance with generally accepted
accounting principles (GAAP). These reserves differ from those reflected in
the various regulatory financial statements filed by the Company. Such
differences arise from the use of different mortality, morbidity, interest
and lapse assumptions, and actuarial reserving methods as required by the
laws of the various states and Japan.
OTHER OPERATIONS
The Company's other operations include the parent company and a
printing subsidiary. These operations had 263 full-time employees at
December 31, 2000.
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
discussed. We desire to take advantage of these provisions. This report
contains cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in this Form
10-K and in any other statements made by company officials in oral
discussions 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. In
particular, statements containing words such as "expect," "anticipate,"
"believe," "goal," "objective" 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 in our reports filed with the SEC, could
cause actual results to differ materially: regulatory developments,
assessments for insurance company insolvencies, competitive conditions, new
products, ability to repatriate profits from Japan, general economic
conditions in the United States and Japan, changes in U.S. and/or Japanese
tax laws or accounting requirements, adequacy of reserves, credit and other
risks associated with AFLAC's investment activities, significant changes in
interest rates, and fluctuations in foreign currency exchange rates.
I-17
ITEM 2. PROPERTIES
AFLAC owns an 18-story office building, which serves as its worldwide
headquarters, and a five-story administrative office building located on
approximately 14 acres of land in Columbus, Georgia. We also own a six-
story parking garage, two additional buildings located on the same property
and additional administrative office buildings. An insurance subsidiary
occupies leased office space in Albany, New York.
A new administrative office building is under construction in Columbus,
Georgia. Construction is expected to be completed during the second quarter
of 2001 at an estimated cost of $42 million.
In Tokyo, Japan, AFLAC owns an 11-story administrative office building
and a training facility. AFLAC also leases office space in Tokyo along with
regional sales offices located throughout the country.
ITEM 3. LEGAL PROCEEDINGS
We are a defendant in various litigation considered to be in the normal
course of business. Some of this litigation is pending in Alabama, where
large punitive damages bearing little relation to the actual damages
sustained by plaintiffs have been awarded against other companies, including
insurers, in recent years. Although the final results of any litigation
cannot be predicted with certainty, we believe the outcome of pending
litigation will not have a material adverse effect on our financial
position, results of operations, or cash flows.
I-18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the security holders for a vote in
the fourth quarter ended December 31, 2000.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
NAME PRINCIPAL OCCUPATION (*) AGE
- ------------------- ------------------------------------- ---
Paul S. Amos Chairman, AFLAC Incorporated and 74
American Family Life Assurance
Company of Columbus (AFLAC)
Daniel P. Amos Chief Executive Officer, AFLAC 49
Incorporated and AFLAC; President,
AFLAC Incorporated and AFLAC;
Director, The CIT Group, Inc.,
Livingston, NJ; Director, Georgia
Power Company, Atlanta, GA; Director,
Southern Company, Atlanta, GA
Monthon Chuaychoo Vice President, Financial Services, 57
AFLAC Incorporated and AFLAC
Kriss Cloninger III Executive Vice President, Chief 53
Financial Officer, AFLAC
Incorporated and AFLAC;
Treasurer, AFLAC Incorporated
Kermitt L. Cox Senior Vice President, Corporate Actuary 57
since August 1998; Vice President,
Corporate Actuary until August 1998
Norman P. Foster Executive Vice President, Corporate 66
Finance, AFLAC Incorporated
and AFLAC
Kenneth S. Janke Jr. Senior Vice President, Investor 42
Relations, AFLAC Incorporated
Akitoshi Kan Executive Vice President, Internal 53
Operations, AFLAC U.S., since January
2000; Deputy Chief Financial Officer,
AFLAC Incorporated since April 1999
until September 2000; Executive Vice
President, AFLAC International until
December 1999; Executive Vice President,
AFLAC Japan since January 1998 until
March 1999 and Deputy Chief Financial
Officer, AFLAC, Senior Vice President,
AFLAC Japan, Accounting, Information
Systems, ABC and Legal Affairs until
March 1999; Senior Vice President,
AFLAC Japan, Accounting, Corporate
Planning, Audit, and Legal Affairs
until January 1997
I-19
Joseph P. Kuechenmeister Senior Vice President, Director 59
of Marketing, AFLAC
Joey M. Loudermilk Executive Vice President, General Counsel 47
and Corporate Secretary, AFLAC
Incorporated and AFLAC; Director, Legal
and Governmental Relations, AFLAC, since
October 2000; Senior Vice President, General
Counsel and Corporate Secretary, AFLAC
Incorporated and AFLAC; Director, Legal
and Governmental Relations, AFLAC, until
October 2000
Hidefumi Matsui President, AFLAC Japan 56
Shoichi Matsumoto Executive Vice President, Director 55
of Marketing, AFLAC Japan, since January
1998; Senior Vice President, Director of
Marketing, AFLAC Japan, until January 1998;
Senior Vice President, AFLAC Japan, until
July 1997; Vice President, Assistant
Director of Marketing, AFLAC Japan, until
January 1996
Minoru Nakai Chairman, AFLAC International, Inc. since 59
September 2000; President, AFLAC
International, Inc. until September 2000
Yoshiki Otake Chairman, AFLAC Japan; Vice Chairman, 61
AFLAC International, Inc.
Joseph W. Smith, Jr. Senior Vice President, Chief Investment 47
Officer, AFLAC
Gary L. Stegman Senior Vice President, Financial Operations, 51
AFLAC Incorporated and AFLAC; Treasurer
and Assistant Secretary, AFLAC, since
January 2001; Senior Vice President,
Assistant Chief Financial Officer, AFLAC
Incorporated and AFLAC; Treasurer and
Assistant Secretary, AFLAC until January
2001
Hitoshi Une Executive Vice President, Chief 53
Administrative Officer, AFLAC Japan, since
January 1999; Senior Vice President,
Investment Department until January 1999;
Vice President, Investment Department
until January 1998
(*) Unless specifically noted, the respective executive officer has held
the occupation(s) set forth in the table for at least five years.
Each executive officer is appointed annually by the board of
directors and serves until his successor is chosen and qualified,
or until his death, resignation or removal.
I-20
PART II
Pursuant to General Instruction G to Form 10-K, Items 5 through 8 are
incorporated by reference from the Company's 2000 Annual Report to
Shareholders, the appropriate sections of which are included herein as
Exhibit 13.
Exhibit 13 Annual Report
Pages Pages
---------- --------------
ITEM 5. MARKET FOR THE COMPANY'S COMMON 13-1; 13-2; 1; 55 (Note 9);
EQUITY AND RELATED SHAREHOLDER 13-65 60 and 63
MATTERS (Note 9)
ITEM 6. SELECTED FINANCIAL DATA 13-3; 13-4 36 - 37
ITEM 7. MANAGEMENT'S DISCUSSION AND 13-5 to 22 - 35
ANALYSIS OF FINANCIAL CONDITION 13-27
AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE 13-7 to 23; 28 -
DISCLOSURES ABOUT MARKET RISK 13-8, 13-16 30
to 13-19
ITEM 8. FINANCIAL STATEMENTS AND 13-28 to 38 - 60
SUPPLEMENTARY DATA 13-74
ITEM 9. CHANGES IN AND DISAGREEMENTS None None
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
II-1
PART III
Pursuant to General Instruction G to Form 10-K, Items 10 through 13 are
incorporated by reference from the Company's definitive Proxy Statement
relating to the Company's 2001 Annual Meeting of Shareholders, which was
filed with the Securities and Exchange Commission on March 16, 2001,
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
Refer to the Information Refer to
Contained in the Proxy Printed
Statement under Captions Proxy
(filed electronically) Statement
Pages
------------------------ ---------
ITEM 10. DIRECTORS AND EXECUTIVE Security Ownership of 3 - 7
OFFICERS OF THE COMPANY Management. 1. Election
Directors of Directors
Executive Officers -
see Part I, Item 4A
herein
ITEM 11. EXECUTIVE COMPENSATION Board and Committee 8 - 19
Meetings and Directors
Compensation; Summary
Compensation Table; De-
fined Benefit Pension
Plan; Retirement Plans
for Key Executives;
Employment Contracts and
Termination of Employ-
ment Arrangements; Option
Grants in 2000; Aggregated
Option Exercises in 2000
ITEM 12. SECURITY OWNERSHIP OF Voting Securities and 2 - 7
CERTAIN BENEFICIAL Principal Holders
OWNERS AND Thereof; Security Owner-
MANAGEMENT ship of Management
1. Election of Directors
ITEM 13. CERTAIN RELATIONSHIPS Certain Transactions 20
AND RELATED and Relationships
TRANSACTIONS
III-1
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS Page(s)
-----------
Included in Part II of this report and
incorporated by reference to the following
pages of Exhibit 13:
AFLAC Incorporated and Subsidiaries:
Consolidated Statements of Earnings for 13-28
each of the years in the three-year
period ended December 31, 2000
Consolidated Balance Sheets, at 13-29 -
December 31, 2000 and 1999 13-30
Consolidated Statements of Shareholders' 13-31
Equity, for each of the years in the
three-year period ended December 31, 2000
Consolidated Statements of Cash Flows 13-32 -
for each of the years in the three-year 13-33
period ended December 31, 2000
Consolidated Statements of Comprehensive 13-34
Income for each of the years in the
three-year period ended December 31, 2000
Notes to the Consolidated Financial 13-35 to
Statements 13-71
Report of Independent Auditors 13-73
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Auditors' Report on Financial Statement Schedules IV-5
Schedule II - Condensed Financial Information of IV-6 -
Registrant at December 31, 2000 IV-11
and 1999, and for each of the
years in the three-year period
ended December 31, 2000
Schedule III - Supplementary Insurance Information IV-12
for each of the years in the three-
year period ended December 31, 2000
Schedule IV - Reinsurance for each of the IV-13
years in the three-year period
ended December 31, 2000
Schedules other than those listed above are omitted because they are
not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
IV-1
3. EXHIBITS
3.0 - Articles of Incorporation, as amended - incorporated by
reference from Form 10-Q for June 30, 2000, Commission
file number 1-7434, Accession No. 0000004977-00-000038,
Exhibit 3.0.
3.1 - Bylaws of the Company, as amended.
4.0 - There are no long-term debt instruments in which the total
amount of securities authorized exceeds 10% of the total
assets of AFLAC Incorporated and its subsidiaries on a
consolidated basis. We agree to furnish a copy
of any long-term debt instruments to the Securities
and Exchange Commission upon request.
10.0* - American Family Corporation Stock Option Plan (1985) -
incorporated by reference from Registration Statement No.
33-44720 on Form S-8 with respect to the AFLAC Incorporated
(Formerly American Family Corporation) Incentive Stock
Option Plan (1982) and Stock Option Plan (1985).
10.1* - AFLAC Incorporated Amended 1985 Stock Option Plan -
incorporated by reference from 1994 Shareholders' Proxy
Statement, Commission file number 1-7434, Accession No.
0000004977-94-000003, Exhibit A.
10.2* - AFLAC Incorporated Amended 1985 Stock Option Plan, as
amended August 8, 1995 - incorporated by reference from
Form 10-Q for September 30, 1995, Commission file number
1-7434, Accession No. 0000004977-95-000023, Exhibit 10.
10.3* - American Family Corporation Retirement Plan for Senior
Officers, as amended and restated October 1, 1989 -
incorporated by reference from 1993 Form 10-K, Commission
file number 1-7434, Accession No. 0000004977-94-000006,
Exhibit 10.2.
10.4* - AFLAC Incorporated Supplemental Executive Retirement Plan,
as amended, effective January 1, 2001.
10.5* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993 - incorporated by reference
from 1993 Form 10-K, Commission file number 1-7434,
Accession No. 0000004977-94-000006, Exhibit 10.4.
10.6* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January 1,
1995 - incorporated by reference from 1994 Form 10-K,
Commission file number 1-7434, Accession No.
0000004977-95-000006, Exhibit 10.5.
10.7* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993 - incorporated by reference from 1993
Form 10-K, Commission file number 1-7434, Accession
No. 0000004977-94-000006, Exhibit 10.6.
10.8* - AFLAC Incorporated Employment Agreement with Paul S. Amos,
dated August 1, 1995 - incorporated by reference from Form
10-Q for September 30, 1995, Commission file number
1-7434, Accession No. 0000004977-95-000023, Exhibit 10.1.
10.9* - AFLAC Incorporated Deferred Compensation Agreement with
Paul S. Amos, dated July 15, 1997 - incorporated by
reference from 1997 Form 10-K, Commission file number
1-7434, Accession No. 0000004977-98-000006, Exhibit 10.11.
IV-2
10.10* - AFLAC Incorporated 1997 Stock Option Plan, incorporated
by reference from the 1997 Shareholders' Proxy Statement,
Commission file number 1-7434, Accession No. 0000004977-
97-000007, Appendix B.
10.11* - AFLAC Incorporated Executive Deferred Compensation Plan,
effective January 1, 1999 - incorporated by reference
from Form S-8 Registration Statement No. 333-69333,
Accession No. 0000004977-98-00024, Exhibit 4.
10.12* - AFLAC Incorporated Amended and Restated Management
Incentive Plan, effective January 1, 1999 - incorporated
by reference from the 1999 Shareholders' Proxy Statement,
Commission file number 1-7434, Accession No. 0000004977-
99-000007, Exhibit A.
10.13* - AFLAC Incorporated Retirement Agreement with E. Stephen
Purdom, dated February 15, 2000.
12.0 - Statement regarding the computation of ratio of earnings
to fixed charges for the Registrant.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 2000.
21.0 - Subsidiaries.
23.0 - Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-44720 with respect to the
AFLAC Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-01243 with respect to the
AFLAC Incorporated Amended 1985 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-41552 with respect to the
AFLAC Incorporated 401(k) Retirement Plan.
- Consent of independent auditor, KPMG LLP, to Form S-3
Registration Statement No. 33-64535 with respect to the
AFL Stock Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-27883 with respect to the
AFLAC Incorporated 1997 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-69333 with respect to the
AFLAC Incorporated Executive Deferred Compensation Plan.
- Consent of independent auditor, KPMG LLP, to Form S-4
Registration Statement No. 333-78403 with respect to the
Senior Notes.
* Management contract or compensatory plan or agreement.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the quarter ended
December 31, 2000.
IV-3
(c) EXHIBITS FILED WITH CURRENT FORM 10-K
3.1 - Bylaws of the Corporation, as amended.
10.4* - AFLAC Incorporated Supplemental Executive Retirement Plan,
as amended, effective January 1, 2001.
10.13* - AFLAC Incorporated Retirement Agreement with E. Stephen
Purdom, dated February 15, 2000.
12.0 - Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 2000.
21.0 - Subsidiaries.
23.0 - Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-44720 with respect to the
AFLAC Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-01243 with respect to the
AFLAC Incorporated Amended 1985 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-41552 with respect to the
AFLAC Incorporated 401(k) Retirement Plan.
- Consent of independent auditor, KPMG LLP, to Form S-3
Registration Statement No. 33-64535 with respect to the
AFL Stock Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-27883 with respect to the
AFLAC Incorporated 1997 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-69333 with respect to the
AFLAC Incorporated Executive Deferred Compensation Plan.
- Consent of independent auditor, KPMG LLP, to Form S-4
Registration Statement No. 333-78403 with respect to the
Senior Notes.
* Management contract or compensatory plan or agreement.
IV-4
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Shareholders and Board of Directors
AFLAC Incorporated:
Under date of January 26, 2001, we reported on the consolidated balance
sheets of AFLAC Incorporated and subsidiaries as of December 31, 2000, and
1999, and the related consolidated statements of earnings, shareholders'
equity, cash flows, and comprehensive income for each of the years in the
three-year period ended December 31, 2000, as contained in the 2000 annual
report to shareholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year 2000. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedules as listed in Item 14. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG LLP
Atlanta, Georgia
January 26, 2001
IV-5
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Balance Sheets
AFLAC Incorporated (Parent Only)
(In millions, except for share amounts)
December 31,
2000 1999
-------- --------
ASSETS:
Investments and cash:
Fixed maturity securities available
for sale (amortized cost $262 in 2000
and $240 in 1999) $ 262 $ 232
Investments in subsidiaries* 5,607 4,898
Other investments 10 9
Cash and cash equivalents 23 17
------- -------
Total investments and cash 5,902 5,156
Due from subsidiaries* 37 29
Other receivables 3 3
Property and equipment, net 5 6
Other assets 70 47
------- -------
Total assets $ 6,017 $ 5,241
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Due to subsidiaries* $ - $ 1
Notes payable 1,048 999
Employee and beneficiary benefit plans 131 250
Income taxes, primarily deferred 80 11
Other liabilities 64 112
------- -------
Total liabilities 1,323 1,373
------- -------
Shareholders' equity:
Common stock of $.10 par value: (In thousands)
Authorized 1,000,000 shares; issued
644,813 shares in 2000 and 640,698
shares in 1999 32 32
Additional paid-in capital 336 310
Retained earnings 3,956 3,356
Accumulated other comprehensive income:
Unrealized foreign currency
translation gains 194 232
Unrealized gains on investment securities 1,474 1,032
Treasury stock, at average cost (1,298) (1,094)
------- -------
Total shareholders' equity 4,694 3,868
------- -------
Total liabilities and
shareholders' equity $ 6,017 $ 5,241
======= =======
* Eliminated in consolidation.
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Auditors' Report.
IV-6
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Earnings
AFLAC Incorporated (Parent Only)
(In millions)
Years ended December 31,
2000 1999 1998
-------- -------- --------
Revenues:
Dividends from subsidiaries* $ 234 $ 162 $ 173
Management and service fees
from subsidiaries* 25 26 28
Investment income 12 13 1
Interest from subsidiaries* 2 2 -
Other income (loss) (5) - 1
------ ------ ------
Total revenues 268 203 203
------ ------ ------
Operating expenses:
Interest expense 16 15 10
Release of retirement liability (101) - -
Other operating expenses 38 45 61
------ ------ ------
Total operating expenses (47) 60 71
------ ------ ------
Earnings before income taxes and
equity in undistributed earnings
of subsidiaries 315 143 132
Income tax expense:
Current 8 2 9
Deferred 3 - -
------ ------ ------
Total income taxes 11 2 9
------ ------ ------
Earnings before equity in
undistributed earnings of
subsidiaries 304 141 123
Equity in undistributed earnings
of subsidiaries 383 430 364
------ ------ ------
Net earnings $ 687 $ 571 $ 487
====== ====== ======
*Eliminated in consolidation.
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Auditors' Report.
IV-7
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Cash Flows
AFLAC Incorporated (Parent Only)
Years ended December 31,
(In millions) 2000 1999 1998
------ ------ ------
Cash flows from operating activities:
Net earnings $ 687 $ 571 $ 487
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Equity in undistributed
earnings of subsidiaries* (383) (430) (364)
Change in income taxes payable 9 2 9
Change in liability for employee
and beneficiary benefit plans (119) 15 27
Other, net 10 (20) (2)
----- ----- -----
Net cash provided by
operating activities 204 138 157
----- ----- -----
Cash flows from investing activities:
Fixed maturity securities sold 177 100 -
Fixed maturity securities purchased (204) (341) -
Other investments (acquired) disposed of (2) (6) 10
Other, net (9) (17) (8)
----- ----- -----
Net cash provided (used) by
investing activities (38) (264) 2
----- ----- -----
Cash flows from financing activities:
Proceeds from borrowings 294 446 124
Principal payments under debt obligations (177) (89) (115)
Dividends paid to shareholders (82) (72) (63)
Net change in amount due to/from subsidiaries* (9) - (21)
Purchases of treasury stock (239) (224) (125)
Treasury stock reissued 38 51 40
Proceeds from exercise of stock options 15 16 7
----- ----- -----
Net cash provided (used) by
financing activities (160) 128 (153)
----- ----- -----
Net change in cash and cash equivalents 6 2 6
Cash and cash equivalents at beginning of year 17 15 9
----- ----- -----
Cash and cash equivalents at end of year $ 23 $ 17 $ 15
===== ===== =====
*Eliminated in consolidation.
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Auditors' Report.
IV-8
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Comprehensive Income
AFLAC Incorporated (Parent Only)
(In millions)
Years ended December 31,
2000 1999 1998
-------- -------- --------
Net earnings $ 687 $ 571 $ 487
------- ------- -------
Other comprehensive income (loss):
Foreign currency translation
adjustments:
Change in unrealized foreign
currency translation gains (losses)
during year - Parent only 125 (151) (64)
Equity in change in unrealized
foreign currency translation
gains (losses) of subsidiaries
during year (28) 23 (20)
Unrealized gains (losses) on
securities available for sale:
Unrealized holding gains (losses)
arising during the year - parent only 8 (8) -
Equity in unrealized gains (losses)
on investment securities held
by subsidiaries 513 (371) 171
Equity in reclassification adjustment
for realized (gains) losses of
subsidiaries included in net earnings 101 13 3
------ ------ ------
Other comprehensive income (loss)
before income taxes 719 (494) 90
Income tax expense (benefit) related to
items of other comprehensive income 315 (207) 98
------ ------ ------
Other comprehensive income (loss) 404 (287) (8)
------ ------ ------
Total comprehensive income $ 1,091 $ 284 $ 479
====== ====== ======
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Auditors' Report.
IV-9
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Notes to Condensed Financial Statements
AFLAC Incorporated (Parent Only)
The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto of
AFLAC Incorporated and Subsidiaries (see Part II - Item 8).
(A) NOTES PAYABLE
A summary of notes payable at December 31, 2000 and 1999 follows:
(In millions) 2000 1999
------ ------
6.50% senior notes due April 2009 (principal
amount $450) . . . . . . . . . . . . . . . . . . . . . $ 449 $ 449
1.55% yen-denominated Samurai notes due October
2005 (principal amount 30 billion yen) . . . . . . . . 261 -
Unsecured, yen-denominated notes payable to banks:
Reducing, revolving credit agreement, due July 2001:
2.29% fixed interest rate. . . . . . . . . . . . . . 99 222
Variable interest rate (.78% at December 31, 2000) . 14 31
Revolving credit agreement due November 2002:
1.24% fixed interest rate. . . . . . . . . . . . . . 68 114
Variable interest rate (.73% at December 31, 2000) . 157 138
Short term . . . . . . . . . . . . . . . . . . . . . . - 45
----- -----
Total notes payable. . . . . . . . . . . . . . . . . $1,048 $ 999
===== =====
The aggregate contractual maturities of the notes payable for each of
the years after December 31, 2000, are as follows:
(In millions)
2001 . . . . . . . . . . . . . . . . . . . . . . $ 113
2002 . . . . . . . . . . . . . . . . . . . . . . 225
2005 . . . . . . . . . . . . . . . . . . . . . . 261
2009 . . . . . . . . . . . . . . . . . . . . . . 449
For further information regarding notes payable, see Exhibit 13, page
13-58 (Note 6 of the Notes to the Consolidated Financial Statements).
IV-10
(B) INCOME TAXES
The Company and its eligible U.S. subsidiaries file a consolidated U.S.
federal income tax return. Income tax liabilities or benefits are recorded
by each principal subsidiary based upon separate return calculations, and
any difference between the consolidated provision and the aggregate amounts
recorded by the subsidiaries is reflected in the Parent Company financial
statements.
For further information on income taxes, see Exhibit 13, page 13-59,
Note 7 of the Notes to the Consolidated Financial Statements.
(C) DIVIDEND RESTRICTIONS
See Exhibit 13, page 13-65 (Note 9, Statutory Accounting and Dividend
Restrictions, of Notes to the Consolidated Financial Statements) for
information regarding dividend restrictions.
(D) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(In millions) 2000 1999 1998
-------- -------- --------
Interest paid $ 17 $ 13 $ 10
Non-cash financing activities:
Treasury shares issued for:
Dividends to shareholders 5 5 4
Associate stock bonus plan - 42 -
(E) ACCOUNTING CHANGES
For information concerning new accounting standards recently adopted,
see page 13-39 of Exhibit 13, Note 1, section on Accounting Changes Adopted,
of Notes to the Consolidated Financial Statements.
IV-11
SCHEDULE III
AFLAC INCORPORATED AND SUBSIDIARIES
Supplementary Insurance Information
Years Ended December 31,
Amorti-
Future zation of
Deferred Policy Deferred
Policy Benefits Other Net Policy Other
Acqui- & Unpaid Policy- Invest- Benefits Acquisi- Opera-
sition Policy Unearned holders' Premium ment and tion ting Premiums
(In millions) Costs Claims Premiums Funds Revenue Income Claims Costs Expenses Written
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
2000:
AFLAC Japan $ 2,706 $ 25,414 $ 267 $ 327 $ 6,685 $ 1,261 $ 5,649 $ 178 $ 1,354 $ 6,749
AFLAC U.S. 979 2,445 94 19 1,554 277 969 124 453 1,555
All other - - - - - 12 - - (19)(1) -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total $ 3,685 $ 27,859 $ 361 $ 346 $ 8,239 $ 1,550 $ 6,618 $ 302 $ 1,788 $ 8,304
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
1999:
AFLAC Japan $ 2,856 $ 26,734 $ 268 $ 296 $ 5,906 $ 1,111 $ 5,040 $ 151 $ 1,179(2) $ 5,942
AFLAC U.S. 836 2,194 93 19 1,358 245 845 106 400 1,360
All other - - - - - 13 - - 141 -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total $ 3,692 $ 28,928 $ 361 $ 315 $ 7,264 $ 1,369 $ 5,885 $ 257 $ 1,720 $ 7,302
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
1998:
AFLAC Japan $ 2,340 $ 21,507 $ 217 $ 229 $ 4,738 $ 917 $ 4,119 $ 111 $ 924(3) $ 4,756
AFLAC U.S. 727 1,974 92 15 1,198 216 749 90 349 1,197
All other - - - - 7 5 9 - 202 8
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total $ 3,067 $ 23,481 $ 309 $ 244 $ 5,943 $ 1,138 $ 4,877 $ 201 $ 1,475 $ 5,961
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
See the accompanying Auditors' Report.
(1) Includes a benefit of $101 from the termination of a retirement liability; (2) includes a charge of $64 for the
policyholder protection fund in Japan; (3) includes a charge of $111 for the policyholder protection fund in Japan.
IV-12
SCHEDULE IV
AFLAC INCORPORATED AND SUBSIDIARIES
Reinsurance
Years Ended December 31, 2000, 1999, and 1998
(In millions)
Percentage
Ceded to Assumed of amount
Gross other from other assumed
Amount companies companies Net amount to net
----------- ----------- ----------- ---------- ----------
Year ended December 31, 2000:
Life insurance in force $ 51,496 $ 640 $ - $ 50,856 -
=========== =========== =========== ========== ==========
Premiums:
Health insurance $ 7,524 $ - $ - $ 7,524 -
Life insurance 717 2 - 715 -
----------- ----------- ----------- ---------- ----------
Total earned premiums $ 8,241 $ 2 $ - $ 8,239 -
=========== =========== =========== ========== ==========
Year ended December 31, 1999:
Life insurance in force $ 44,993 $ 707 $ - $ 44,286 -
=========== =========== =========== ========== ==========
Premiums:
Health insurance $ 6,639 $ - $ - $ 6,639 -
Life insurance 627 2 - 625 -
----------- ----------- ----------- ---------- ----------
Total earned premiums $ 7,266 $ 2 $ - $ 7,264 -
=========== =========== =========== ========== ==========
Year ended December 31, 1998:
Life insurance in force $ 28,182 $ 566 $ - $ 27,616 -
=========== =========== =========== ========== ==========
Premiums:
Health insurance $ 5,435 $ - $ - $ 5,435 -
Life insurance 510 2 - 508 -
----------- ----------- ----------- ---------- ----------
Total earned premiums $ 5,945 $ 2 $ - $ 5,943 -
=========== =========== =========== ========== ==========
See the accompanying Auditors' Report.
IV-13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AFLAC Incorporated
Date MARCH 28, 2001 By /s/ PAUL S. AMOS
----------------------- ---------------------------------
(Paul S. Amos)
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ DANIEL P. AMOS Chief Executive Officer, MARCH 28, 2001
- ------------------------ President and Vice ----------------
(Daniel P. Amos) Chairman of the Board
of Directors
/s/ KRISS CLONINGER, III Executive Vice President, MARCH 28, 2001
- ------------------------ Chief Financial Officer ----------------
(Kriss Cloninger, III) and Treasurer
/s/ NORMAN P. FOSTER Executive Vice President, MARCH 28, 2001
- ------------------------ Corporate Finance ----------------
(Norman P. Foster)
IV-14
/s/ J. SHELBY AMOS, II Director MARCH 28, 2001
- ----------------------------- ----------------
(J. Shelby Amos, II)
/s/ MICHAEL H. ARMACOST Director MARCH 28, 2001
- ----------------------------- ----------------
(Michael H. Armacost)
/s/ M. DELMAR EDWARDS, M.D. Director MARCH 28, 2001
- ------------------------------ ----------------
(M. Delmar Edwards, M.D.)
/s/ JOE FRANK HARRIS Director MARCH 28, 2001
- ------------------------------ ----------------
(Joe Frank Harris)
/s/ ELIZABETH J. HUDSON MARCH 28, 2001
- ------------------------------ Director ----------------
(Elizabeth J. Hudson)
/s/ KENNETH S. JANKE, SR. Director MARCH 28, 2001
- ------------------------------ ----------------
(Kenneth S. Janke, Sr.)
/s/ CHARLES B. KNAPP Director MARCH 28, 2001
- ------------------------------ ----------------
(Charles B. Knapp)
Director MARCH 28, 2001
- ------------------------------ ----------------
(Takatsugu Murai)
Director MARCH 28, 2001
- ------------------------------ ----------------
(Yoshiki Otake)
IV-15
/s/ E. STEPHEN PURDOM Director MARCH 28, 2001
- ------------------------------- ----------------
(E. Stephen Purdom)
/s/ BARBARA K. RIMER Director MARCH 28, 2001
- ------------------------------- ----------------
(Barbara K. Rimer)
/s/ MARVIN R. SCHUSTER Director MARCH 28, 2001
- ------------------------------ ----------------
(Marvin R. Schuster)
/s/ HENRY C. SCHWOB Director MARCH 28, 2001
- ------------------------------ ----------------
(Henry C. Schwob)
/s/ J. KYLE SPENCER Director MARCH 28, 2001
- ------------------------------ ----------------
(J. Kyle Spencer)
/s/ GLENN VAUGHN, JR. Director MARCH 28, 2001
- ------------------------------ ----------------
(Glenn Vaughn, Jr.)
/s/ ROBERT L. WRIGHT Director MARCH 28, 2001
- ------------------------------ ----------------
(Robert L. Wright)
IV-16
EXHIBITS
3.0 - Articles of Incorporation, as amended - incorporated by
reference from Form 10-Q for June 30, 2000, Commission
file number 1-7434, Accession No. 0000004977-00-000038,
Exhibit 3.0.
3.1 - Bylaws of the Company, as amended.
4.0 - There are no long-term debt instruments in which the total
amount of securities authorized exceeds 10% of the total
assets of AFLAC Incorporated and its subsidiaries on a
consolidated basis. We agree to furnish a copy
of any long-term debt instruments to the Securities
and Exchange Commission upon request.
10.0* - American Family Corporation Stock Option Plan (1985) -
incorporated by reference from Registration Statement No.
33-44720 on Form S-8 with respect to the AFLAC Incorporated
(Formerly American Family Corporation) Incentive Stock
Option Plan (1982) and Stock Option Plan (1985).
10.1* - AFLAC Incorporated Amended 1985 Stock Option Plan -
incorporated by reference from 1994 Shareholders' Proxy
Statement, Commission file number 1-7434, Accession No.
0000004977-94-000003, Exhibit A.
10.2* - AFLAC Incorporated Amended 1985 Stock Option Plan, as
amended August 8, 1995 - incorporated by reference from
Form 10-Q for September 30, 1995, Commission file number
1-7434, Accession No. 0000004977-95-000023, Exhibit 10.
10.3* - American Family Corporation Retirement Plan for Senior
Officers, as amended and restated October 1, 1989 -
incorporated by reference from 1993 Form 10-K, Commission
file number 1-7434, Accession No. 0000004977-94-000006,
Exhibit 10.2.
10.4* - AFLAC Incorporated Supplemental Executive Retirement Plan,
as amended, effective January 1, 2001.
10.5* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993 - incorporated by reference
from 1993 Form 10-K, Commission file number 1-7434,
Accession No. 0000004977-94-000006, Exhibit 10.4.
10.6* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January 1,
1995 - incorporated by reference from 1994 Form 10-K,
Commission file number 1-7434, Accession No.
0000004977-95-000006, Exhibit 10.5.
10.7* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993 - incorporated by reference from 1993
Form 10-K, Commission file number 1-7434, Accession
No. 0000004977-94-000006, Exhibit 10.6.
10.8* - AFLAC Incorporated Employment Agreement with Paul S. Amos,
dated August 1, 1995 - incorporated by reference from Form
10-Q for September 30, 1995, Commission file number
1-7434, Accession No. 0000004977-95-000023, Exhibit 10.1.
10.9* - AFLAC Incorporated Deferred Compensation Agreement with
Paul S. Amos, dated July 15, 1997 - incorporated by
reference from 1997 Form 10-K, Commission file number
1-7434, Accession No. 0000004977-98-000006, Exhibit 10.11.
i
10.10* - AFLAC Incorporated 1997 Stock Option Plan, incorporated
by reference from the 1997 Shareholders' Proxy Statement,
Commission file number 1-7434, Accession No. 0000004977-
97-000007, Appendix B.
10.11* - AFLAC Incorporated Executive Deferred Compensation Plan,
effective January 1, 1999 - incorporated by reference
from Form S-8 Registration Statement No. 333-69333,
Accession No. 0000004977-98-00024, Exhibit 4.
10.12* - AFLAC Incorporated Amended and Restated Management
Incentive Plan, effective January 1, 1999 - incorporated
by reference from the 1999 Shareholders' Proxy Statement,
Commission file number 1-7434, Accession No. 0000004977-
99-000007, Exhibit A.
10.13* - AFLAC Incorporated Retirement Agreement with E. Stephen
Purdom, dated February 15, 2000.
12.0 - Statement regarding the computation of ratio of earnings
to fixed charges for the Registrant.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 2000.
21.0 - Subsidiaries.
23.0 - Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-44720 with respect to the
AFLAC Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-01243 with respect to the
AFLAC Incorporated Amended 1985 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-41552 with respect to the
AFLAC Incorporated 401(k) Retirement Plan.
- Consent of independent auditor, KPMG LLP, to Form S-3
Registration Statement No. 33-64535 with respect to the
AFL Stock Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-27883 with respect to the
AFLAC Incorporated 1997 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-69333 with respect to the
AFLAC Incorporated Executive Deferred Compensation Plan.
- Consent of independent auditor, KPMG LLP, to Form S-4
Registration Statement No. 333-78403 with respect to the
Senior Notes.
* Management contract or compensatory plan or agreement.
ii
EXHIBITS FILED WITH CURRENT FORM 10-K
3.1 - Bylaws of the Corporation, as amended.
10.4* - AFLAC Incorporated Supplemental Executive Retirement Plan,
as amended, effective January 1, 2001.
10.13* - AFLAC Incorporated Retirement Agreement with E. Stephen
Purdom, dated February 15, 2000.
12.0 - Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 2000.
21.0 - Subsidiaries.
23.0 - Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-44720 with respect to the
AFLAC Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-01243 with respect to the
AFLAC Incorporated Amended 1985 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 33-41552 with respect to the
AFLAC Incorporated 401(k) Retirement Plan.
- Consent of independent auditor, KPMG LLP, to Form S-3
Registration Statement No. 33-64535 with respect to the
AFL Stock Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-27883 with respect to the
AFLAC Incorporated 1997 Stock Option Plan.
- Consent of independent auditor, KPMG LLP, to Form S-8
Registration Statement No. 333-69333 with respect to the
AFLAC Incorporated Executive Deferred Compensation Plan.
- Consent of independent auditor, KPMG LLP, to Form S-4
Registration Statement No. 333-78403 with respect to the
Senior Notes.
* Management contract or compensatory plan or agreement.
iii