We attribute our success directly to providing products that meet the needs of consumers. Japan’s weak economy and an aging population have stressed its national health care system. As part of a health care reform plan, the government increased copayments for most Japanese citizens in 2003. This move, along with increasing health care treatment costs, is forcing individuals to bear more out-of-pocket expenses. It is also prompting them to re-evaluate their present coverages. We believe the higher copayments and consumers’ assessment of their own financial situations lead many consumers to purchase AFLAC products.

AFLAC Japan has developed products that provide valuable benefits to help consumers cope with additional medical and nonmedical expenses. Our newest medical product, EVER, experienced tremendous growth last year. EVER is the bestselling stand-alone medical product among life insurers in Japan. At the same time, Rider MAX, a medical rider to our cancer life policy, continues to be popular with consumers. And our 21st Century Cancer Life policy remains our signature product, as demand for it is also strong.

We believe the need for all of our products will remain high because the issues that are currently driving demand aren’t likely to change soon. Japan’s population will continue to age, and it’s likely that Japan’s national health care system will continue to experience financial stress. Given Japan’s demographics and economic condition, we expect that our products will continue to be a valuable component of consumers’ health care coverage.

One of the keys to AFLAC Japan’s growth in 2003 was the continued strengthening of its distribution system. We have always felt that we have the best distribution system in Japan, but we enhanced that advantage in 2003 by adding more than 4,000 agencies for the year, which exceeded our recruiting target. We have emphasized recruitment of individual agencies in particular because they are more effective in marketing to workers at the vast number of small businesses in Japan. And we remain very pleased with Dai-ichi Mutual Life’s contributions to our sales. The combination of our leading cancer life policy and Dai-ichi Life’s extensive distribution network of more than 48,000 salespeople has produced a tremendously successful marketing alliance. Since the alliance was initiated in 2001, Dai-ichi Life has sold more than 930,000 of our cancer life policies.

Although AFLAC was already the best-known foreign insurance company in Japan, we sharpened that competitive edge by introducing AFLAC Duck commercials designed specifically for the Japanese market. During 2003 we released several AFLAC Duck commercials to promote specific products and further position AFLAC as the market leader. We also produced a special AFLAC Duck commercial to draw attention to a significant achievement. Based on March 31, 2003, data, AFLAC became the number one life insurance company in Japan in terms of individual insurance policies in force. That’s an accomplishment we are all quite proud of.

Our new commercials were an immediate hit with consumers, sales agencies, and the media. CM Data Bank, an independent market research firm that specializes in rating commercials, identified two of the Japanese AFLAC Duck commercials as the top commercials in our industry. And after AFLAC Japan created a small toy AFLAC Duck, sales agencies bought more than one million of these promotional items in 2003 for distribution to their customers. In 2004 we will release more AFLAC Duck commercials in Japan. And we believe the popularity of the AFLAC Duck will continue and will prove to be an effective means for further solidifying our strong brand and reputation.

Maintaining a strong reputation for financial strength and high-quality products is critical in the current Japanese insurance market. After several years of a weak economy, accompanied by the failure of seven insurance companies since 1997, consumers are taking more care than ever when choosing an insurance company. Consumers are looking for transparent, energetic, well-branded companies that have strong balance sheets and a solid reputation for paying claims promptly and fairly. There is no doubt in our minds that AFLAC is that company.

AFLAC U.S. – Honing Our Edge for Future Growth

AFLAC’s U.S. business remained strong in 2003, even though we were disappointed in our new sales growth. We recorded solid growth in total revenues and pretax earnings. Even though our new annualized premium sales topped $1.1 billion for the year, which was a record for AFLAC U.S., we believe our sales should have grown faster. For that reason we made several changes in 2003 that we believe will strengthen our sales for years to come.