|
Over the past several years, our recruiting was so strong and our sales force grew so rapidly that our sales management infrastructure couldn’t keep up. Sales growth began to slow in 2003 because our coordinator base had not expanded enough to keep up with the training needs of our new recruits. Our response was to take aggressive steps to expand the number of state, regional and district coordinators. This will improve our training and recruiting, which will ultimately lead to stronger sales for years to come.
Absolutely not. Our business model, which is driven by product and distribution, has been tremendously successful for many years. And while we continually refine our approach to the market, the basics of our business model have remained unchanged. Actually, the strong sales gains of AFLAC’s Northeast Territory in 2003, along with several individual states in other areas of the country, indicate to me that our business model is still effective. Our challenge now is to strengthen sales in all territories. We believe there is great potential for growth in the United States. Our 288,100 payroll accounts represent only about 5% of the small businesses in this country. Given this backdrop, we believe our products will continue to be valuable to consumers.
In terms of the cause of the sales slowdowns in 2001 and 2003, there really wasn’t much commonality. However, there were clear parallels in how we dealt with the sales issues. In both cases, we took quick, decisive steps to identify why our sales slowed and implemented plans to turn sales around. And in both cases, we made significant personnel changes. It’s important to understand that we aren’t afraid to make sweeping changes when they are necessary. I have no doubt that the changes we made in both markets strengthened our sales and our company.
Yes, I believe our success will continue. I expect to achieve our 2004 sales target for AFLAC Japan of a 5% to 10% increase in yen terms. Over the longer term, I think demand for AFLAC’s products will continue to increase because of the trends we see in Japan. Their national health care system has been under financial strain, and that will likely increase as Japan’s population continues to age. Our products provide the security that consumers need in the wake of rising health care costs and the reforms in Japan’s national health care system. That tells me that AFLAC Japan’s products perfectly position us for continued growth.
Investing in Japan remains our greatest challenge because interest rates, and therefore available investment yields, are still very low. When Japanese interest rates began declining in the early ’90s, we refocused our approach to ensure that our investment purchases were consistent with the assumptions we use to price our products. That’s the same approach we use today. As a result, we tend to purchase longer duration, yen-denominated fixed-maturity securities. And our investment policy prohibits us from purchasing junk bonds.
As far as Parmalat is concerned, I am convinced that our investment policy served us well. When we invested in the dairy company, it was an investment-grade credit. And based on audited financial statements, their financial condition appeared to be sound. When Parmalat was downgraded to junk last December, we followed a standardized process that we use to reassess the credit analysis of any security we own that is lowered to below investment grade. Based on that analysis, we concluded that Parmalat was no longer a suitable investment for us and we sold our entire investment, although it was at a significant loss. Not long after that sale, massive fraud was alleged and newspapers began referring to Parmalat as “Europe’s Enron.” It’s clear that by acting as quickly as we did, we avoided an even
greater loss. Don’t get me wrong. I am not at all happy that we realized such a substantial loss on Parmalat. However, I am pleased that our investment process quickly brought us to the correct decision, and I don’t anticipate any major change in our investment approach.
|
|