1 | 2 | 3 | 4 | 5

Strong Product Line Makes for Complete Coverage

In 2000, AFLAC U.S. extended its position as the leading seller of supplemental insurance at the worksite. Our policies are designed to pay for expenses not normally covered by major medical insurance. Out-of-pocket expenses may be medically related, including hospital care, physician services, dental services, home health care, drugs, or nursing care. They may also include nonmedical expenses. According to the Health Care Financing Administration, medically related out-of-pocket expenses in the United States have increased from $13 billion in 1960 to $200 billion in 1998. It's clear that out-of-pocket expenses pose a serious burden to U.S. consumers.

AFLAC's success in the United States stems from its ability to develop supplemental insurance products that help consumers pay these expenses and obtain complete insurance coverage. Over the last several years, we have pursued a product-broadening strategy that has dramatically impacted our business. For instance, accident/disability coverage has been our best selling product category for seven consecutive years. And while it took more than 40 years to build our cancer expense premiums in force to more than $600 million, it took only 10 years for accident/disability to surpass cancer expense premiums in force.

We have also been pleased with the sale of other recently introduced products. Payroll life insurance, which we introduced in 1998, has also done very well, accounting for approximately 5% of sales in 2000. A specified event policy that we introduced in 1999 has also been well-received by consumers. The best product introduction in our history occurred in 2000, with the launching of a new dental policy. We spent nearly three years developing this unique dental product for the small to medium-sized payroll market. Representatives from our field force made significant contributions in designing the product. Although the dental policy was available only for the last five months of 2000, it sold very well and accounted for 3% of annual sales.

Building a Larger Distribution System

For us to further tap into the U.S. market, it is crucial that we continue to expand our sales force. By year-end 2000, AFLAC was represented by more than 37,500 licensed independent sales associates and brokers. During the year, we recruited more than 15,700 sales associates. More importantly, the average number of associates producing business on a monthly basis increased 22.1% to about 10,800. In December, a record 13,500 associates produced business for AFLAC.

Our sales associates don't just sell insurance. They listen to customers, assess their needs, and help them select the appropriate coverage. Our associates also keep us abreast of customer needs, and we respond accordingly. Input from our sales associates has helped us develop new products and modify existing ones.

Demand for supplemental products remains high because medical costs continue to increase. Our customers have come to realize that our policies make their coverage complete. One common thread that has led to increased sales and recruiting has been our effective advertising program.

1 | 2 | 3 | 4 | 5