-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UAmXXIf8rKeU6FOos7rRdDCeEGShKU943xZ6/2SVmuw/j/s90HrWtWL21Q5XLHHg 6dxCycklNyqZ9SClQ9PEjw== 0000004977-94-000008.txt : 19940519 0000004977-94-000008.hdr.sgml : 19940519 ACCESSION NUMBER: 0000004977-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFLAC INC CENTRAL INDEX KEY: 0000004977 STANDARD INDUSTRIAL CLASSIFICATION: 6321 IRS NUMBER: 581167100 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07434 FILM NUMBER: 94527126 BUSINESS ADDRESS: STREET 1: 1932 WYNNTON RD CITY: COLUMBUS STATE: GA ZIP: 31999 BUSINESS PHONE: 4043233431 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN FAMILY CORP DATE OF NAME CHANGE: 19920306 10-Q 1 FIRST QUARTER 1994 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarter ended March 31, 1994 Commission File No. 1-7434 AFLAC INCORPORATED ------------------------------------------------------ (Exact name of Registrant as specified in its charter) GEORGIA 58-1167100 - - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 1932 WYNNTON ROAD, COLUMBUS, GEORGIA 31999 ----------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code (706) 323-3431 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class May 6, 1994 ---------------------------- ------------------ Common Stock, $.10 Par Value 100,606,307 shares AFLAC INCORPORATED AND SUBSIDIARIES INDEX Page No. ---- Part I. Financial Information: Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1994 and December 31, 1993........... 2 Condensed Consolidated Statements of Earnings - Three Months Ended March 31, 1994 and 1993...... 3 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1994 and 1993...... 4 Notes to Condensed Consolidated Financial Statements...................................... 5 Review by Independent Certified Public Accountants..................................... 7 Independent Auditors' Report...................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 9 Part II. Other Information: Item 4. Submission of Matters to a Vote of Security Holders...................... 13 Item 6. Reports on Form 8-K....................... 14 Part I. Financial Information AFLAC INCORPORATED AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands - Unaudited) March 31, December 31, 1994 1993* ----------- ------------ ASSETS Investments: Securities available for sale: Fixed maturities (1994 at market; 1993 at amortized cost) (amortized cost, $13,147,697 in 1994; market value, $11,570,386 in 1993) $ 14,237,289 $ 10,055,436 Equity securities, at market value (cost, $56,909 in 1994 and $67,692 in 1993) 70,350 82,065 Fixed maturities held to maturity, at amortized cost (market value $2,418,540 in 1993) - 2,082,326 Mortgage loans on real estate 27,779 57,485 Other long-term investments 4,134 1,726 Short-term investments 433,725 166,689 ----------- ----------- Total investments 14,773,277 12,445,727 Cash 35,360 23,413 Receivables, primarily premiums 258,011 231,977 Accrued investment income 168,422 184,087 Deferred policy acquisition costs 2,139,795 1,953,248 Property and equipment, net 387,614 361,246 Intangible assets, net 113,067 114,165 Other 139,844 128,823 ----------- ----------- Total assets $ 18,015,390 $ 15,442,686 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Policy liabilities $ 13,870,367 $ 11,947,137 Notes payable 166,320 122,062 Income taxes, primarily deferred 1,279,821 950,278 Payables for security transactions 546,902 659,158 Other 435,523 398,427 ----------- ----------- Total liabilities 16,298,933 14,077,062 ----------- ----------- Shareholders' equity: Common stock 10,375 10,371 Other shareholders' equity 1,706,082 1,355,253 ----------- ----------- Total shareholders' equity 1,716,457 1,365,624 ----------- ----------- Total liabilities and shareholders' equity $ 18,015,390 $ 15,442,686 =========== =========== See accompanying notes to consolidated condensed financial statements. * Condensed from consolidated balance sheet included in the 1993 Annual Report to Shareholders. 2 PAGE AFLAC INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except for per share amounts - Unaudited) Three Months Ended March 31, ---------------------------------- 1994 1993 % Change ----------- ----------- ---------- Revenues: Premiums, principally supplemental health insurance $1,179,121 $ 949,490 24.2 Net investment income 191,922 152,486 Realized investment gains 832 633 Other income 20,107 18,861 ---------- ---------- Total revenues 1,391,982 1,121,470 24.1 ---------- ---------- Benefits and expenses: Benefits and claims 962,136 765,061 25.8 Acquisition and operating expenses: Amortization of deferred policy acquisition costs 31,526 25,032 Insurance commissions 155,745 126,221 Insurance expenses 91,073 80,448 Interest expense 2,707 2,401 Capitalized interest on building construction (2,419) (1,483) Other operating expenses 29,249 26,965 ---------- ---------- Total acquisition and operating expenses 307,881 259,584 18.6 ---------- ---------- Total benefits and expenses 1,270,017 1,024,645 23.9 ---------- --------- Earnings before income taxes and cumulative effect of accounting changes 121,965 96,825 26.0 Income taxes 52,008 43,079 ---------- ---------- Earnings before cumulative effect of accounting changes 69,957 53,746 30.2 Cumulative effect on prior years of accounting changes - 11,438 ---------- ---------- Net earnings $ 69,957 $ 65,184 ========== ========== Earnings per share: Earnings before cumulative effect of accounting changes $ 0.67 $ 0.51 31.4 Cumulative effect of accounting changes - 0.11 ---------- ---------- Net earnings $ 0.67 $ 0.62 ========== ========== Shares used in computing earnings per share 104,913 105,093 ========== ========== Cash dividends per share $ 0.10 $ 0.088 13.6 ========== ========== See accompanying notes to consolidated condensed financial statements.
3 PAGE AFLAC INCORPORATED AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands - Unaudited) Three Months Ended March 31, --------------------------- 1994 1993 ----------- ----------- Net cash flows from operating activities $ 525,720 $ 404,605 ----------- ----------- Cash flows from investing activities: Proceeds from investments sold or matured 352,710 226,403 Costs of investments acquired (820,887) (521,724) Additions to property & equipment, net (11,333) (88,403) ----------- ----------- Net cash used by investing activities (479,510) (383,724) ----------- ----------- Cash flows from financing activities: Proceeds from borrowings 45,619 - Principal payments under debt obligations (3,456) (7,081) Purchase of treasury stock (68,730) - Dividends paid to stockholders (10,351) (9,068) Other, net 248 1,301 ----------- ----------- Net cash used by financing activities (36,670) (14,848) ----------- ----------- Effect of exchange rate changes on cash 2,407 2,550 ----------- ----------- Net change in cash 11,947 8,583 Cash at beginning of period 23,413 36,138 ----------- ----------- Cash at end of period $ 35,360 $ 44,721 =========== =========== See accompanying notes to consolidated condensed financial statements. 4 AFLAC INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (none of which were other than normal recurring accruals with the exception of the adjustments required for the adoption of new accounting standards discussed in Notes 2 and 3) necessary to present fairly the financial position as of March 31, 1994, and the results of operations and cash flows for the three months ended March 31, 1994 and 1993. Results of operations for interim periods are not necessarily indicative of results for the entire year. 2. Effective January 1, 1994, the Company adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, issued by the Financial Accounting Standards Board. Under the new standard, the Company has classified all fixed-maturity securities as "available for sale." Such securities are carried at market value rather than amortized cost. The related unrealized gains and losses, less amounts applicable to policy liabilities and deferred income taxes, are reported in a separate component of shareholders' equity together with unrealized gains and losses on equity securities. As a result, this change in accounting method has no effect on net earnings. The effect on shareholders' equity of applying this standard was as follows: (In millions) January 1, 1994 March 31, 1994 _______________ ______________ Invested assets $ 1,851.1 $ 1,089.6 Policy liabilities (1,088.6) (480.9) Deferred income taxes (301.0) (283.6) ____________ ____________ Shareholders' equity, net unrealized gains $ 461.5 $ 325.1 ============ ============ The changes in the separate shareholders' equity component, unrealized gains on securities available for sale, for the three months ended March 31, 1994, were as follows: (In thousands) Balance at December 31, 1993 $ 14,811 ____________ Cumulative effect of adopting SFAS No. 115 at January 1, 1994, net of deferred income taxes of $301,030 461,478 Change in unrealized gains (losses) on fixed maturity and equity securities during the first quarter, net of deferred income tax benefits of $17,106 (137,736) ____________ Net change for the quarter 323,742 ____________ Balance at March 31, 1994 $ 338,553 ============ The portion of unrealized gains credited to policy liabilities at January 1, 1994 and March 31, 1994, represents gains that would not inure 5 to the benefit of the shareholders, if such gains were actually realized. These amounts are necessary to cover policy reserve interest requirements based on market investment yields at these dates. 3. Effective January 1, 1993, three new accounting standards were adopted through a one-time cumulative net credit to earnings of $11.4 million, or $.11 per share, as follows: (In millions) SFAS No. 109 - Deferred Income Taxes $22.0 SFAS No. 106 - Other Postretirement Benefits (9.6) SFAS No. 112 - Postemployment Benefits (1.0) _____ Net effect January 1, 1993 $11.4 ===== Additional information concerning these accounting changes is included in note 1 of notes to the Company's 1993 consolidated financial statements. 4. In February 1994, the Company's board of directors authorized the purchase of up to 4.6 million shares of the Company's common stock. During the first quarter of 1994, 2.3 million shares were purchased, and at March 31, 1994, 2.5 million shares were held in the treasury at a cost of $75 million. The impact of the share purchases was not material to the first quarter earnings per share. The shares purchased in the first quarter were financed by available cash and $45.6 million of temporary borrowings in late March 1994. In April permanent bank financing was arranged under a new revolving credit and term note agreement for up to $150 million with interest at LIBOR plus 50 basis points. Principal payments on the new loan are payable over five years beginning in June 1995. As of April 30, 1994, bank borrowings of $75 million were outstanding in connection with the share purchase plan. 5. The changes in shareholders' equity during the three months ended March 31, 1994, are as follows: (In thousands) Shareholders' equity, beginning of year $ 1,365,624 __________ Change in unrealized gains on securities available for sale 323,742 Change in unrealized foreign currency translation gains 35,960 Net earnings 69,957 Shares issued for exercises of stock options 248 Purchases of treasury stock (68,730) Dividends to shareholders ($.10 per share) (10,351) Notes receivable for stock purchases 7 __________ Net change for the period 350,833 __________ Shareholders' equity at March 31, 1994 $ 1,716,457 ========== 6 REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The March 31, 1994 and 1993 financial statements included in this filing have been reviewed by KPMG Peat Marwick, independent certified public accountants, in accordance with established professional standards and procedures for such a review. The report of KPMG Peat Marwick commenting upon their review is included on page 8. 7 KPMG PEAT MARWICK Certified Public Accountants 303 Peachtree Street, N.E. Telephone: 404-222-3000 Suite 2000 Telefax: 404-222-3050 Atlanta, GA 30308 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors AFLAC Incorporated: We have reviewed the condensed consolidated balance sheet of AFLAC Incorporated and subsidiaries as of March 31, 1994, and the related condensed consolidated statements of earnings for the three-month periods ended March 31, 1994 and 1993, and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 1994 and 1993, in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, as of January 1, 1994. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of AFLAC Incorporated and subsidiaries as of December 31, 1993, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 31, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1993, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK April 25, 1994 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ANALYSIS OF FINANCIAL CONDITION Since December 31, 1993, the financial condition of AFLAC Incorporated and subsidiaries (the "Company") has remained strong. Investments have continued to increase in their functional currencies and continue to consist of high-quality securities. Due to the relative size of AFLAC Japan, our largest operating unit, changes in the yen/dollar exchange rate can have a significant effect on the Company's financial statements when reported in U.S. dollars. The yen/dollar exchange rate at the end of each reporting period is used to convert balance sheet items. The rate at March 31, 1994, of 103.15 yen to one U.S. dollar, strengthened 8.6% compared to the exchange rate of 112.00 as of December 31, 1993. Management estimates that the stronger yen rate increased invested assets by $1.0 billion and total assets by $1.2 billion, while increasing total liabilities by $1.2 billion over the amounts that would have been reported based on the exchange rate as of December 31, 1993. Since December 31, 1993, total investments (including cash) have increased by $2.3 billion, or 18.8%, with AFLAC Japan increasing $2.3 billion, or 20.3% (10.8% in yen), and AFLAC U.S. increasing $44.2 million, or 4.0%. The continued growth in invested assets reflects the strength of our main operating units, the continued strong cash flows from these operations, the effect of the stronger yen/dollar exchange rate as of March 31, 1994, compared to the exchange rate as of December 31, 1993, and the effect of SFAS No. 115. See Note 2 to the accompanying Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 1994 ("Note 2"). Deferred policy acquisition costs increased $186.5 million, or 9.6% during the first three months of 1994. AFLAC Japan increased $176.8 million, or 11.5% (2.7% in yen), with approximately $41.4 million relating to operations of AFLAC Japan and $135.4 million of the increase relating to the stronger yen rate at March 31, 1994. AFLAC U.S. increased $9.7 million, or 2.4% during the same period. Policy liabilities increased $1.9 billion, or 16.1% during the first three months of 1994. AFLAC Japan increased $1.9 billion, or 17.6% (8.3% in yen) and AFLAC U.S. increased $39.1 million, or 3.2%. These increases are due to the addition of new business as well as the maturing of existing policies in force and the effect of the stronger yen on AFLAC Japan, and the effect of SFAS No. 115. (See Note 2.) The Company negotiated new unsecured notes payable to banks. As of March 31, 1994, the additional notes payable amounted to $45.6 million. This amount, less principal payments, plus foreign exchange gains, accounts for the increase of $44.3 million in notes payable since December 31, 1993. See Note 4 to the accompanying Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 1994. The income tax liability increased by $329.5 million, or 34.7%, since December 31, 1993. The increase is primarily due to the recognition of deferred income taxes of $283.6 million on unrealized gains on securities available for sale due to the implementation of SFAS No. 115. (See Note 2.) Shareholders' equity increased $350.8 million during the first three months of 1994. This increase was principally due to the implementation of SFAS No. 115 (see Note 2). For further information on the changes in shareholders' equity, see Note 5 of the accompanying Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 1994. 9 The board of directors approved a 15% increase in the quarterly cash dividend from $.10 to $.115 per share. The second quarter cash dividend of $.115 per share is payable on June 1, 1994, to shareholders of record at the close of business on May 20, 1994. RESULTS OF OPERATIONS The results of operations for the first three months of 1993 included the cumulative effect on prior years of a one-time credit of $11.4 million ($.11 per share) due to accounting changes adopted. The following earnings comparisons exclude the effect of these accounting adjustments. See Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 1994. For the first three months of 1994, net earnings increased 30.2% to $70.0 million, up from $53.7 million for the comparable period of 1993. Net earnings per share increased 31.4%, from $0.51 to $0.67 per share. Operating earnings (excluding realized investment gains/losses, net of taxes) increased 28.4% to $69.3 million, up from $54.0 million. Operating earnings per share increased 29.4%, from $.51 to $.66 per share. The increases in consolidated earnings, and earnings of AFLAC Japan, continued to be aided by favorable translations from yen to U.S. dollars for the first quarter of 1994, compared to the exchange rates used in the comparable period of 1993. The yen/dollar exchange rates used to translate the statements of earnings are the year-to-date cumulative average exchange rates for the period. The cumulative average yen/dollar exchange rate of 107.65 for the first three months of 1994 strengthened 12.5% compared to the rate of 121.09 for the first three months of 1993. For the three month period ending March 31, 1994, management estimates that the stronger yen/dollar exchange rate increased total operating revenues by $126.7 million and increased net earnings by $7.3 million and operating earnings (excluding realized gains/losses) by $7.3 million. The foreign exchange effect was $.07 per share for both net earnings and operating earnings. Without the beneficial effect of the stronger yen, net earnings per share would have increased 17.6% and operating earnings per share would have increased 15.7% for the first three months of 1994. Premium income for the first three months of 1994 increased 24.2% to $1.2 billion. Net investment income increased 25.9% to $191.9 million. Total revenues increased 24.1% to $1.4 billion. The ratio of benefits and claims to total revenues (benefit ratio) increased to 69.1% for the first three months of 1994, up from 68.2%, continuing the upward trend experienced during the last several years due to the maturing of policies in force. The ratio of expenses to total revenues (expense ratio) decreased to 22.1% from 23.1%, which also continues the downward trend experienced during the last several years due to effective cost controls and the general growth of total revenues. The changes in the benefit and expense ratios resulted in the pretax operating profit margin increasing to 8.7%, up from 8.6% a year ago. During the first quarter the Japanese government enacted new tax legislation that terminated an extension of the temporary Special Corporate Tax of .9% of Japan's taxable income. This tax was scheduled to expire at December 31, 1994. The tax reduction was not material to first quarter net earnings and is expected to reduce the Company's income tax expense for the year 1994 by approximately $3.7 million. AFLAC JAPAN The yen continued to appreciate against the dollar in the first quarter. The cumulative average exchange rate for the first three months of 1994 was 107.65, or 12.5% stronger than the average rate of 121.09 a 10 year ago. As a result, growth rates for AFLAC Japan continued to be higher in dollars than in yen. The cumulative exchange rate for the full year of 1993 was 111.21. Premium income translated into dollars rose 27.5% (13.3% in yen) to $981.6 million for the first three months of 1994. The increase in premium income was due to collection of premiums from new policies, the continued excellent policy persistency of older policies and, in dollars, the stronger yen rate. Total new sales, including conversions of older policies to newer policies, increased 38.3% in dollars (25.5% in yen) for the first three months of 1994. New sales, excluding conversions, in dollars increased 33.6% (21.4% in yen) to $145.3 million, up from $108.8 million for the three-month period. New annualized premium sales of the Super Cancer plan were especially strong, increasing 38.8% in yen. The strong cancer insurance production is primarily due to the sales associates' efforts to sell policies prior to the implementation of a premium rate increase. The rate increases will apply to new cancer policy issues after July 1, 1994. As anticipated, Super Care sales were much lower than a year ago due to the emphasis on cancer insurance sales. Super Care accounted for 9.3% of first quarter new sales. Management expects these trends to continue into the second quarter, but in the second half of the year, Management expects this trend to reverse, with cancer insurance sales slowing and care sales improving compared with the first half of the year. Management's goal is to increase new sales by 10% in yen for the year. Investment income increased 26.9% (12.7% in yen) to $172.4 million for the first three months of 1994. The increase was due to the continued strong cash flow from operations, offset somewhat during the last two years by construction expenditures for AFLAC Japan's new administrative office building and the increasing amounts of profit transfers to AFLAC U.S. Available investment yields rose slightly during the quarter, although they remained at historically low levels. For example, the yield on a composite of 10-year Japanese government bonds reached a low of 3.26% in January and rose to 4.40% in March, averaging 3.91% for the quarter. During the quarter, available cash flow was invested at an average yield-to-maturity of 4.77% compared to 5.83% during the first quarter of 1993. The overall return on average invested assets at amortized cost, net of investment expenses, decreased slightly for the first three months of the year, to 6.05% from 6.21% for the same period last year. The Company continues to enter into forward purchase commitments in anticipation of lower investment yields in the near future. Approximately 47% of the estimated 1994 cash flow has been invested or committed to invest at an average yield-to-maturity of 4.96%. The overall return on average invested assets is expected to decrease slightly during the rest of the year, if available market investment yields remain constant or decrease further. AFLAC Japan's pretax operating earnings in dollars for the first three months of 1994 increased 22.1% (8.4% in yen) to $110.5 million. The pretax operating profit margins for the first three months of 1994 decreased slightly, from 10.0% to 9.6%. The reduction in pretax operating profit margins was principally caused by an increase in incurred benefits and reduced investment income due to profit transfers to AFLAC U.S., lower investment yields, and construction expenditures for the new building. AFLAC Japan's results continue to reflect the pattern which has developed during the last several years, slightly higher benefit ratios somewhat offset by lower expense ratios. AFLAC U.S. Premium income rose 10.6% to $193.0 million for the first three months of 1994. The increase in premium income was due to an increase 11 in new sales over the last twelve months and the recent improvement in policy persistency. Total new sales, excluding policy conversions, increased 9.6% (9.2% including conversions) for the first three months compared to last year. In 1993, new policy sales increased 11.3% for the full year. Management expects new policy sales to increase by 10% to 15% for the year. While it is not possible to predict the long-term effect on the policy sales of AFLAC U.S. associated with the uncertainty among U.S. health insurance consumers concerning the pending redesign of the U.S. health care system, Management believes the impact will not adversely affect AFLAC's major products. Investment income increased 18.3% to $18.6 million for the first three months of 1994. This increase was primarily due to the increase in invested assets associated with repatriation of profits from AFLAC Japan and the continued strong cash flow from operations. During the first quarter, available cash flow was invested at an average yield-to-maturity of 7.08% compared to 7.18% during the first quarter of 1993. The overall return on average invested assets, net of investment expenses, was down slightly for the first three months of 1994 over 1993, decreasing to 7.37% from 7.66%. Pretax operating earnings for AFLAC U.S. increased 20.4% to $20.5 million for the first three months of the year. The results continue to reflect slightly lower benefit ratios, principally due to the mix of business shifting toward accident policies which have a lower benefit ratio compared to other products, and investment income on profits transferred from AFLAC Japan. The expense ratios decreased slightly during the quarter. As a result, the pretax operating profit margins for the first three months improved to 9.7%, up from 8.9%. 12 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Shareholders was held on April 25, 1994. Matters submitted to the shareholders were: (1) Election of twenty members to the Board of Directors; (2) Amendments to Stock Option Plan (1985); (3) Adoption of Management Incentive Plan (in effect since 1985) to comply with the Omnibus Budget Reconciliation Act of 1993; (4) Ratification of the selection of auditors for 1994. The four proposals were approved by the shareholders. A summary of each vote cast for, against or withheld, as well as the number of abstention and broker non-votes, as to each such matter, including a separate tabulation with respect to each nominee for office is as follows: VOTES ------------------------------------------------- Absten- With- Broker For Against tions held Non-Votes -------------------------------------------------- (1) Election of twenty members to the Board of Directors: Paul S. Amos 199,988,232 N/A N/A 350,328 None Daniel P. Amos 199,998,691 N/A N/A 339,870 None J. Shelby Amos, II 199,936,159 N/A N/A 402,401 None Michael H. Armacost 199,706,152 N/A N/A 632,409 None M. Delmar Edwards,M.D. 199,747,842 N/A N/A 590,718 None George W. Ford, Jr. 199,861,996 N/A N/A 476,565 None Cesar E. Garcia 199,938,950 N/A N/A 399,610 None Joe Frank Harris 199,412,933 N/A N/A 925,627 None Elizabeth J. Hudson 199,739,361 N/A N/A 599,199 None Kenneth S. Janke, Sr. 200,045,985 N/A N/A 292,575 None Charles B. Knapp 199,852,164 N/A N/A 486,396 None Hisao Kobayashi 199,998,519 N/A N/A 340,041 None Peter D. Morrow 199,675,992 N/A N/A 662,568 None Yoshiki Otake 199,995,570 N/A N/A 342,990 None John M. Pope 199,935,184 N/A N/A 403,376 None E. Stephen Purdom,M.D. 199,988,084 N/A N/A 350,477 None Jack S. Schiffman 199,990,489 N/A N/A 348,071 None Henry C. Schwob 199,923,730 N/A N/A 414,830 None J. Kyle Spencer 199,929,060 N/A N/A 409,501 None Glenn Vaughn, Jr. 199,871,791 N/A N/A 466,769 None (2) Amendments to Stock Option Plan (1985) 183,713,919 13,121,642 2,599,579 N/A 903,420 (3) Adoption of Manage- ment Incentive Plan (in effect since 1985) to comply with the Omnibus Budget Reconciliation Act of 1993 184,657,155 12,830,139 1,947,846 N/A 903,420 (4) Ratification of appointment of KPMG Peat Marwick as independent auditors 197,576,637 1,371,887 1,390,036 N/A None 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the quarter ended March 31, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AFLAC INCORPORATED Date May 9, 1994 /s/ KRISS CLONINGER,III ________________________ ___________________________ KRISS CLONINGER,III Executive Vice President; Treasurer and Chief Financial Officer Date May 9, 1994 /s/ NORMAN P. FOSTER ________________________ ___________________________ NORMAN P. FOSTER Executive Vice President, Corporate Finance 14 -----END PRIVACY-ENHANCED MESSAGE-----