10 / 40
Average
Yen/Dollar Exchange Rates
2005 2006 2007 2008 2009 2010 2011
2012
2013
2014
Yen/Dollar
Exchange Rate
(Average)
90
100
80
70
110
120
¥130
YEN
WEAKENING
YEN
STRENGTHENING
Source: Bloomberg ©
The company believes that it is important to understand
the impact of translating yen into dollars on our financial
statements. A significant portion of Aflac’s business is
in Japan, where the functional currency is the yen. For
financial reporting purposes, we translate Aflac Japan’s
results in yen into U.S. dollars. It’s noteworthy that Aflac’s
currency exposure is primarily translation-related as
opposed to currency transactions. Due to the significant
05 06 07 08 09 10 11 12
13
14
4.5 4.4
2.0
2.2
2.5
2.9
3.4
4.0
4.7
4.3
U.S.
Japan
10 11 12
13
14
4.5 4.4
4.0
4.7
4.3
U.S.
Japan
2014
2014
4.4
4.3
As Reported
Excluding Yen Impact
THE IMPACT OF FOREIGN CURRENCY ON AFLAC
Impact of Currency on the Income Statement
Aflac’s income statement is translated at the average exchange
rate for the period. In years when the yen strengthens, trans-
lating yen into dollars causes more dollars to be reported. In
years when the yen weakens, translating yen into dollars causes
fewer dollars to be reported. After several years of strength-
ening, the yen has weakened for the past two years. In 2014, the
average yen/dollar exchange rate weakened 7.5% from 97.54
yen to the dollar to 105.46 yen to the dollar, which suppressed
Aflac’s income statement in dollar terms. We believe that viewing
our results excluding the impact from foreign currency is the
most meaningful way to evaluate our financial performance.
Operating earnings for the full year of 2014 were $4.3 billion.
Excluding the impact from the weaker yen, operating earnings
were $4.4 billion.
*Aflac believes that an analysis of operating earnings, a non-GAAP financial measure, is vitally important to an understanding of the company’s underlying profit-
ability drivers. Aflac defines operating earnings as the profits derived from operations, inclusive of interest cash flows associated with notes payable, but before
realized investment gains and losses from securities transactions, impairments, and derivative and hedging activities, as well as other and nonrecurring items.
PRETAX OPERATING EARNINGS*
(Dollars, In Billions)
8