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Aflac Japan's rapid claims payments fulfill our promise of keeping things simple for consumers in their time of need. Despite an increase in the number of claims paid, Aflac Japan has shortened the time it takes to pay a claim to less than two business days, which is measured from the point when our claims department receives a claim from the customer. This is largely due to a new claims software system implemented in July 2003.
Aflac Japan's e-App®, a system similar to our SmartApp® software that is used in the United States, enables the sales associate to electronically submit an application. This has shortened our application processing time and reduced incomplete and pended forms, creating a smoother enrollment process for customers and reducing the number of incomplete application forms for sales associates.
We also developed a new tool to streamline payroll account invoice processing called Aflac Net Billing. By using this system, payroll accounts are able to inquire about the amount billed and provide billing information via the Internet. Technology is crucial to Aflac Japan's operating efficiency, which is perhaps our greatest competitive strength. Operating as the low-cost producer allows us to offer valuable products that consumers can afford and commissions that our sales agencies find attractive.
Our conservative investment approach is the backbone of our strong balance sheet. Although our goal is to maximize investment income, we work very hard to minimize investment risk. To reduce risk, we emphasize liquidity, safety and quality when we invest. We don't own investment real estate, and equity investments continue to be immaterial. Instead, we primarily own longer-dated, yen-denominated debt securities to better match asset and liability durations. As a result, our portfolio has weathered Japan's extended low-interest-rate environment fairly well. In fact, our portfolio yield on a Japanese regulatory reporting basis has been consistently higher than the industry average for the last 11 years.
Some Aflac Japan investment highlights are listed below:
- Investments and cash rose 12.2% to $42.5 billion at the end of 2004. In yen, investments and cash were up 9.1%.
- Net investment income increased 9.6% to $1.6 billion. In yen, net investment income rose 2.3%.
- The average yield on new investments was 3.13% in 2004, compared with 3.61% in 2003.
Aflac Japan's overall credit quality remained high. At the end of 2004, 72.5% of our holdings were rated "A" or better based on amortized cost. Only 1.7% of our debt investments were rated below investment grade at the end of 2004. We believe that our conservative investment approach, which precludes us from buying junk bonds, is in the best interest of our policyholders and shareholders.
Aflac has strong brand awareness in Japan which is reinforced by the success of the Aflac Duck. The jingle in Aflac Japan's Duck commercials, "Think well, your money is important," subtly conveys the price-competitiveness of our products to potential consumers. When this jingle was initially broadcast, it generated a much greater reaction than we expected.
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