BUSINESS SEGMENT AND FOREIGN INFORMATION

12 Months Ended

Dec. 31, 2011

BUSINESS SEGMENT AND FOREIGN INFORMATION

2. BUSINESS SEGMENT AND FOREIGN INFORMATION

The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. Operating business segments that are not individually reportable are included in the “Other business segments” category.

We do not allocate corporate overhead expenses to business segments. We evaluate and manage our business segments using a financial performance measure called pretax operating earnings. Our definition of operating earnings excludes the following items from net earnings on an after-tax basis: realized investment gains/losses (securities transactions, impairments, and the impact of derivative and hedging activities) and nonrecurring items. We then exclude income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment for the years ended December 31 follows:

(In millions)	2011			2010			2009
Revenues:
Aflac Japan:
Earned premiums:
Cancer	$	7,541		$	6,852		$	6,406
Medical and other health		5,158			4,574			4,110
Life insurance		2,920			2,061			1,662
Net investment income		2,688			2,453			2,265
Other income		46			37			43
Total Aflac Japan		18,353			15,977			14,486
Aflac U.S.:
Earned premiums:
Accident/disability		2,194			2,104			2,012
Cancer		1,258			1,239			1,245
Other health		1,061			1,026			989
Life insurance		230			217			198
Net investment income		588			549			499
Other income		10			11			10
Total Aflac U.S.		5,341			5,146			4,953
Other business segments		54			51			51
Total business segment revenues		23,748			21,174			19,490
Realized investment gains (losses)		(1,552	)		(422	)		(1,212	)
Corporate		241			217			137
Intercompany eliminations		(266	)		(237	)		(161	)
Total revenues	$	22,171		$	20,732		$	18,254

(In millions)	2011			2010			2009
Pretax earnings:
Aflac Japan		$3,858			$3,283			$2,800
Aflac U.S.		917			924			776
Other business segments		1			(3	)		0
Total business segment pretax operating earnings		4,776			4,204			3,576
Interest expense, noninsurance operations		(168	)		(140	)		(73	)
Corporate and eliminations		(64	)		(57	)		(68	)
Pretax operating earnings		4,544			4,007			3,435
Realized investment gains (losses)		(1,552	)		(422	)		(1,212	)
Gain on extinguishment of debt		0			0			16
Other		0			0			(4	)
Total earnings before income taxes		$2,992			$3,585			$2,235
Income taxes applicable to pretax operating earnings		$1,571			$1,389			$1,158
Effect of foreign currency translation on operating earnings		170			92			124

Assets as of December 31 were as follows:

(In millions)	2011			2010
Assets:
Aflac Japan	$	102,323			$87,061
Aflac U.S.		14,177			13,095
Other business segments		160			155
Total business segment assets		116,660			100,311
Corporate		16,741			14,047
Intercompany eliminations		(16,299	)		(13,319	)
Total assets	$	117,102			$101,039

Yen-Translation Effects: The following table shows the yen/dollar exchange rates used for or during the periods ended December 31. Exchange effects were calculated using the same yen/dollar exchange rate for the current year as for each respective prior year.

	2011			2010			2009
Statements of Earnings:
Weighted-average yen/dollar exchange rate		79.73			87.69			93.49
Yen percent strengthening (weakening)		10.0	%		6.6	%		10.7	%
Exchange effect on net earnings (in millions)		$162			$191			$55

	2011			2010
Balance Sheets:
Yen/dollar exchange rate at December 31		77.74			81.49
Yen percent strengthening (weakening)		4.8	%		13.0	%
Exchange effect on total assets (in millions)		$4,237			$9,073
Exchange effect on total liabilities (in millions)		4,253			9,104

Aflac Japan maintains a portfolio of dollar-denominated securities, which serves as an economic currency hedge of a portion of our investment in Aflac Japan. We have designated a portion of the Parent Company’s yen-denominated notes payable as a hedge of our investment in Aflac Japan. The dollar values of our yen-denominated net assets, which are subject to foreign currency translation fluctuations for financial reporting purposes, are summarized as follows at December 31 (translated at end-of-period exchange rates):

(In millions)	2011			2010
Aflac Japan net assets	$	10,998		$	8,907
Aflac Japan dollar-denominated net assets		(7,341	)		(5,625	)
Aflac Japan yen-denominated net assets		3,657			3,282
Parent Company yen-denominated net liabilities		(1,258	)		(1,041	)
Consolidated yen-denominated net assets (liabilities) subject to foreign currency translation fluctuations	$	2,399		$	2,241

Transfers of funds from Aflac Japan: Aflac Japan makes payments to the Parent Company for management fees and to Aflac U.S. for allocated expenses and profit repatriations. Information on transfers for each of the years ended December 31 is shown below. See Note 12 for information concerning restrictions on transfers from Aflac Japan.

(In millions)	2011		2010		2009
Management fees	$	28	$	30	$	26
Allocated expenses		43		37		37
Profit repatriation		143		317		230
Total transfers from Aflac Japan	$	214	$	384	$	293

Policyholder Protection Corporation: The total liability accrued for our obligations to the Japanese Life Insurance Policyholder Protection Corporation (LIPPC) was $71 million (5.5 billion yen) at December 31, 2011, compared with $108 million (8.8 billion yen) a year ago. The obligation is payable in semi-annual installments through 2013.

Property and Equipment: The costs of buildings, furniture and equipment are depreciated principally on a straight-line basis over their estimated useful lives (maximum of 45 years for buildings and 10 years for furniture and equipment). Expenditures for maintenance and repairs are expensed as incurred; expenditures for betterments are capitalized and depreciated. Classes of property and equipment as of December 31 were as follows:

(In millions)	2011		2010
Property and equipment:
Land	$	176	$	170
Buildings		575		550
Equipment		312		309
Total property and equipment		1,063		1,029
Less accumulated depreciation		446		409
Net property and equipment	$	617	$	620

Receivables:  Receivables consist primarily of monthly insurance premiums due from individual policyholders or their employers for payroll deduction of premiums, net of an allowance for doubtful accounts. At December 31, 2011, $309 million, or 45.4% of total receivables, were related to Aflac Japan’s operations, compared with $293 million, or 44.3%, at December 31, 2010.