AFLAC JAPAN – STRONG RESULTS IN A DIFFICULT ENVIRONMENT
As in previous years, AFLAC operated in a weak economic environment in Japan. The country's slumping economy has taken its toll on consumer confidence. Available investment yields remained very low, and many employers struggled to stay afloat. With Japan's national health care system already under stress because of the weak economy, the medical needs of an aging population created even more financial pressure for Japan's government.

To ease some of the pressure on the national health care system, Japan's government passed health care reform legislation in 2002 that increased copayments for most Japanese citizens effective April 2003. These higher copayments simply transfer some of that pressure from the health care system to consumers. With that in mind, our innovative products can be very useful to Japanese consumers by helping them pay for additional health care costs. And we believe that helped boost our new sales to record levels in 2002.

In response to changing consumer needs, we developed a new medical product and upgraded an existing product in 2002. In February we introduced a new stand-alone medical product called EVER. We developed this new medical product based on market research, which suggested that a significant percentage of consumers wanted stand-alone medical coverage rather than cancer insurance with medical riders. The consumer response to EVER was immediate and outstanding. We quickly became the number one seller of standalone medical insurance policies in Japan. That was a remarkable accomplishment considering that the supplemental medical insurance business is relatively mature compared with the cancer insurance market. Furthermore, our analysis of medical policy sales indicated that 65% of the purchasers of EVER were new customers, which means that AFLAC Japan has tapped into a new market.