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Conservative Investing Yields Growth

AFLAC's investment portfolio continues to be conservatively postured. We take a conservative approach to investing because our assets back the commitments we have made to our policyholders while also providing a predictable source of income for the company.

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We do not buy junk bonds, and we generally avoid the investment real estate and mortgage sectors. Our holdings continue to include mostly investment-grade debt securities, which make up about 97% of investments and cash. More than 85% of our debt security investments were rated 'A' or better at year-end.

Outlook - More Growth Ahead

We remain excited about the outlook for growth at AFLAC U.S. We believe we are well-positioned to further develop what we consider to be a relatively untapped supplemental insurance market. The Small Business Administration estimates that there are about 5.4 million businesses in the United States with 500 or fewer employees. Although we are the leader in the worksite market, we have only 171,600 payroll accounts, or about 3% of the total businesses in the United States.

Large population centers are especially attractive markets. For example, our new sales in California were $1.35 per capita in 2000, compared with our overall company average of $2.55. At only $.87 in per capita sales, the state of New York is also under-penetrated.

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