Japan's Consumers Ask About AFLAC at Work

       We have had great success at marketing cancer life and other products at the worksite. In fact, through our extensive distribution network, we insure workers at 95% of the companies listed on the Tokyo Stock Exchange. AFLAC Japan was founded in 1974 with a unique cancer life policy that provided cash to consumers when they were diagnosed with and treated for cancer. Today, cancer life insurance remains a core product for AFLAC, and it is also one of the most popular insurance products in Japan.

       To maintain our strong position in what is known as the "third sector" of Japan's insurance market, we developed and introduced the most sophisticated cancer life insurance product in the marketplace in 2001. This new policy, called 21st Century Cancer Life, offers consumers a wide variety of benefit choices. However, many of our agents had difficulty in marketing the product early in the year because of the dramatic change in policy benefit combinations. To improve the marketability of our new cancer life policy, we streamlined the benefit options and redesigned the policy's sales literature and application. As a result, cancer life sales improved toward the end of 2001. We sold more than 825,000 cancer life policies during the year. Cancer life was our top-selling product in 2001, accounting for more than ¥47 billion in premium for the year and representing about 52% of our total sales in Japan.

Broadened Product Line Meets Consumer Needs

       In addition to cancer life insurance, AFLAC Japan offers a variety of products that supplement Japan's national health care system. Actually, adding new policies to our product portfolio has been a central part of our growth strategy in the last 10 years. It was also one of the tactics we used to prepare for a deregulated market. Our products provide valuable protection because they help consumers pay for the additional costs that arise as a result of illnesses or accidents.

       Rider MAX, which provides accident and medical/sickness benefits as a rider to our cancer life plan, continues to be an important product in our lineup. Although Rider MAX sales declined throughout the year, we redesigned the product and intensified our advertising efforts late in the year to improve its sales.

       In July 2001, AFLAC became the first life insurer to introduce an accident insurance policy in Japan. We believe accident insurance is a natural extension of our business, especially considering our success at selling the product in the United States. We were also pleased with the continued sales growth of our ordinary life products. Ordinary life sales, which are made primarily through individual agencies, were up 39.3% for the year and accounted for 14% of sales.

       Japan's market for health-related insurance products continues to change rapidly, and we expect consumers will be required to shoulder a larger portion of health care expenses in the future. In 2001 for instance, the Ministry of Health, Labor and Welfare promoted a health care reform plan that would increase workers' copayments from 20% of costs to 30%. It was also recommended that the eligible age for special medical benefits for the elderly be increased from the current age of 70 to 75. We believe that if health care reform occurs, it should increase the need for our products.