INVESTING SAFELY IN A DIFFICULT ENVIRONMENT
AFLAC's conservative investment policy took on even greater importance in 2002 in the United States following the financial scandals that rocked many well-known companies. Unlike many U.S. insurance companies, we had no investment exposure to Enron, Global Crossing or any of the other high-profile U.S. bankruptcies. Some investing highlights from 2002 include:

Investments and cash reached $4.8 billion at the end of 2002, an increase of 16.0% compared with 2001.

Net investment income increased 9.2% from $303 million to $331 million.

The average yield on new purchases was 7.58% in 2002, compared with 7.80%
the previous year.

Corporate debt securities continue to be our primary asset sector. We continue to have no mortgage loans and we have no plans to enter that sector. Our U.S. investment portfolio's overall credit quality was rated "A." In fact, at year-end, 65% of our debt securities were rated "A" or better.

Even with the market turmoil caused by corporate scandals, we have not had to change the way we invest. Our investment strategy, which includes extensive credit research, has always taken us down a fairly conservative path. That approach has helped us earn a great deal of trust from those who have invested in our company or purchased our insurance coverage. We are proud of that trust and we intend to do everything we can to keep it.

OUTLOOK – CONTINUED STRONG RESULTS
Looking ahead, we believe the United States is a great market for AFLAC's insurance products. As consumers' medical costs increase and employer-paid benefits decrease, we believe the need for our products will continue to expand. A survey conducted last year by The UCLA Anderson Forecast indicated that employees are being forced to pay more of their own health care costs. Just over 75% of the companies surveyed increased their employees' copayments or deductibles, and 27% of those companies reduced the level of benefits coverage.

Our 248,100 payroll accounts at the end of 2002 represented only about 4.5% of the nation's small businesses. We believe this illustrates the significantly underpenetrated nature of the U.S. market. We also believe our products will be more valuable than ever. To further tap into this market we will:

Develop new products. As consumers' needs continue to evolve, we will continue developing new products and enhancing existing ones to meet those needs.

Expand distribution. We believe that our tremendous growth potential and strong national advertising campaign will attract an increasing number of sales associates to AFLAC.

Focus on population centers. AFLAC has strong growth potential throughout the United States, but we believe our best growth opportunities are in large population states such as California, Florida, New York and Texas.

Improve operational efficiency. Our extensive use of technology is key to ensuring that we can provide our customers with the service they deserve. Technology can also help us control our costs as we provide that service to our ever-increasing customer base.

Kyle Gruce, 5, Samantha Sells, 10, and Erin Houston, 3, are among the many children receiving treatment at the AFLAC Cancer Center and Blood Disorders Service at Children's Healthcare of Atlanta. AFLAC and its sales associates have raised more than $14 million for the AFLAC Cancer Center since the company became the naming sponsor for the center in 1995. AFLAC and the AFLAC Cancer Center share the dream that one day medical science will wipe out childhood cancers and blood disorders.