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AFLAC Japan - Preparing for Change

During 2000, AFLAC maintained its position as the leading supplemental insurer in Japan by continuing to offer the best supplemental value in the market. We derive our ability to offer the lowest premiums to our customers and the highest commissions to our agencies through an intense focus on efficiency. We believe our efficiency, which has long been a hallmark of AFLAC Japan, is one of the key reasons we will continue to succeed in a more competitive insurance market.

On January 1, 2001, the "third sector," which is the supplemental segment of Japan's insurance market, was deregulated. Although deregulation brings more companies into our market, we have a lot of experience competing with other insurers. AFLAC Japan has successfully competed against other foreign companies, as well as small to medium-sized Japanese insurers, for nearly two decades. In addition, we bring 45 years of experience in the most competitive insurance market in the world - the United States - to our business in Japan.

As in previous years, we spent much of 2000 preparing for the changes that further liberalization of the insurance industry will likely bring. Because an efficient operation is critical to our success, we continued to look for ways to minimize operating expenses. During the year, we introduced Cyclone, which allows our sales agencies to electronically transmit policy applications to our headquarters in Tokyo. We expect Cyclone to improve the efficiency of our agencies as well as our internal operations. We are also in the process of upgrading our computer systems. Investing in new technology will help us better administer our ever-increasing product line and maintain our expense advantage.

In addition to technology-related initiatives, we added new products and implemented new ways to market those products. For instance, we began marketing over the Internet through a joint venture called aflacdirect.com, which we formed with a subsidiary of NTT, Japan's largest telecommunications company. To meet the specific needs of Internet buyers, we developed special versions of our cancer life, Rider MAX and annuity products. In addition to Internet-related products, we introduced an entirely new cancer life policy late last year. This new plan, which can be customized to meet the needs of each payroll account, gives our customers greater choice in selecting the supplemental benefits they need.

AFLAC's total return to shareholders has compounded at 38.9% annually over the last five years.
Peer Company Comparison
(S&P Life Index Companies)
  Symbol Year-end
Market Value
(In billions)		 2000
Return*

Five-Year Returns*
Total Annual
AFLAC AFL    $ 19.1 53.9 % 418.4 % 38.9 %
American General AGC 20.5 10.2   167.2   21.7  
Conseco CNC 4.3 (25.3 ) (10.6 ) (2.2 )
Jefferson-Pilot JP 7.7 11.9   168.7   21.8  
Lincoln National LNC 9.1 21.7   103.7   15.3  
Metlife MET 26.8 67.9   **   **  
Torchmark TMK 4.9 34.0   115.5   16.6  
UnumProvident UNM 6.5 (13.9 ) 6.2   1.2  
  *Includes reinvested cash dividends
** Not applicable

A major area of attention has been the continued enhancement of our already strong distribution system. In 2000, we again aggressively recruited new agencies, especially individual agencies, which give us better access to Japan's vast market of small businesses. Our most significant move was forming a strategic marketing alliance with Dai-ichi Mutual Life Insurance Company. This agreement will allow Dai-ichi Life to sell AFLAC products through its sales force of 50,000 people. In addition, we view Dai-ichi's desire to sell our product, rather than to develop its own cancer life policy, as a testament to our strong position in the market. Our products complement Dai-ichi Life's products very well and will provide its customers the same sense of security that AFLAC customers enjoy.

We also improved the way we compensate some of our marketing employees and sales agencies. For quota-based marketing employees, we replaced the traditional bonus with one based on performance incentives. For sales agencies, we now offer an optional commission contract that allows them to earn significantly higher first-year commissions. We believe the new contract sends a strong message to the market that we will be very aggressive in maintaining our leading position. It also gives our agencies, especially new ones, a choice in compensation. However, our original commission contract remains the best in the marketplace.

Although we spent much of 2000 preparing for deregulation, we did not sacrifice current year results to achieve our goals. To the contrary, AFLAC Japan's sales grew at the high end of our target, and our financial results were strong as well. We believe our results in 2000 and our plans for the future attest to the strength of our strategy and our commitment to better serve our customers.

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