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INSURANCE OPERATIONS
Aflac's insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan, which operates as a
branch of Aflac, is the principal contributor to consolidated earnings. U.S. GAAP financial reporting requires that a
company report financial and descriptive information about operating segments in its annual and interim period financial
statements. Furthermore, we are required to report a measure of segment profit or loss, certain revenue and expense
items, and segment assets.
We evaluate our sales efforts using new annualized premium sales, an industry operating measure. New annualized
premium sales, which include both new sales and the incremental increase in premiums due to conversions, represent the
premiums that we would collect over a 12-month period, assuming the policies remain in force. For Aflac Japan, new
annualized premium sales are determined by applications submitted during the reporting period. For Aflac U.S., new
annualized premium sales are determined by applications that are issued during the reporting period. Premium income, or
earned premiums, is a financial performance measure that reflects collected or due premiums that have been earned
ratably on policies in force during the reporting period.
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AFLAC JAPAN SEGMENT
Aflac Japan Pretax Operating Earnings
Changes in Aflac Japan's pretax operating earnings and profit margins are primarily affected by morbidity, mortality,
expenses, persistency and investment yields. The following table presents a summary of operating results for Aflac Japan
for the years ended December 31.
Aflac Japan Summary of Operating Results
(In millions)
2016
2015
2014
Net premium income
$ 13,537
$ 12,046
$ 13,861
Net investment income:
Yen-denominated investment income
1,346
1,227
1,429
Dollar-denominated investment income
1,208
1,209
1,233
Net investment income
2,554
2,436
2,662
Other income (loss)
40
31
32
Total operating revenues
16,131
14,513
16,555
Benefits and claims, net
9,828
8,705
10,084
Operating expenses:
Amortization of deferred policy acquisition costs
644
578
649
Insurance commissions
787
719
845
Insurance and other expenses
1,538
1,336
1,519
Total operating expenses
2,969
2,633
3,013
Total benefits and expenses
12,797
11,338
13,097
Pretax operating earnings
(1)
$ 3,334
$ 3,175
$ 3,458
Weighted-average yen/dollar exchange rate
108.70
120.99
105.46
In Dollars
In Yen
Percentage change over previous period:
2016
2015
2014
2016
2015
2014
Net premium income
12.4%
(13.1)% (7.5)%
.8%
(.4)% .1%
Net investment income
4.9
(8.5)
.4
(5.8)
4.8
8.8
Total operating revenues
11.2
(12.3)
(6.4)
(.3)
.5
1.3
Pretax operating earnings
(1)
5.0
(8.2)
(4.7)
(5.7)
5.3
3.1
(1)
See the Insurance Operations section of this MD&A for our definition of segment operating earnings.
Annualized premiums in force at December 31, 2016, were 1.61 trillion yen, compared with 1.62 trillion yen in 2015
and 1.59 trillion yen in 2014. The decrease in annualized premiums in force in yen of .7% in 2016 reflects the net effect of
sales of new policies combined with limited-pay policies becoming paid-up and the persistency of Aflac Japan’s business.