A.M. Best Affirms AFLAC "A+" (Superior) Ratings, Assigns "A+" to AFLAC Japan Branch.

OLDWICK, N.J.--(BUSINESS WIRE)--June 12, 1998--A.M. Best Co. has affirmed its "A+" (Superior) ratings on American Family Life Assurance Company of Columbus, Georgia, and its subsidiary, American Family Life Assurance Company of New York. It also assigned an "A+" rating to AFLAC's Japan branch operation, AFLAC Japan.

The ratings reflect the superior financial strength, exceptionally high-quality and well-managed investment portfolio and consistently strong earnings performance of both the parent company and its branch operation. They also recognize the company's leading market position in the supplemental health arena in Japan and its continued growth in the U.S. individual supplemental accident and health sector-where it also is one of the leading providers of such coverage.

A.M. Best does note AFLAC's relatively concentrated operational focus and the challenges it could face as a result of the generally weak economic conditions in Japan and the increased competition that will arise from the gradual deregulation of the Japanese insurance industry.

AFLAC Japan's operations contribute approximately three-fourths of the organization's pre-tax operating earnings. While it has been subject to increased competition over recent years, it remains the largest provider of supplemental health insurance products in Japan and holds a 90% share of the market for cancer insurance.

The company has also been successful in its initiatives to broaden its portfolio of insurance products. A.M. Best believes the diversification of its income sources will allow AFLAC to further build on its competitive advantage as a low-cost and efficient operator. It also should provide for more stability in revenue generation and persistency of its existing business, despite the negative impact lingering economic recession in Japan has had on new sales and on customer retention throughout the industry.

Although AFLAC Japan has been proactive and innovative in its efforts to increase sales and enhance investment yields the extremely low interest rates and weak economic conditions in Japan could present challenges in maintaining profit margins. Over recent years, Japan's Ministry of Finance has adopted more flexible guidelines, directing the industry to increase premium rates to more appropriately reflect the country's low interest rate environment.

The government also has reduced corporate and individual tax rates, placing more disposable income in the hands of consumers, which is expected to stabilize and ultimately improve economic conditions. However, over the near term, A.M. Best believes potential margin pressures in AFLAC Japan's operations are mitigated by the economies of scale it enjoys as a result of its 11.4 million policyowner base (30 million insured lives) and stable, highly productive corporate agency force. These items also present a formidable barrier to entry to AFLAC's market by other carriers in light of the ongoing deregulation of the Japanese life insurance and financial services industries.

In the U.S. market, AFLAC concentrates its activities on the sale of supplemental accident and health contracts-most of which is offered on a payroll deduction basis. In addition to ongoing state reform efforts, the rapidly evolving and increasingly competitive conditions in the U.S. health insurance market have presented challenges for virtually all companies operating in this business segment. However, similar to its initiatives in Japan, AFLAC's efforts in the U.S. to broaden its product portfolio and to maintain its advantage as a low-cost provider have mitigated any negative impacts associated with the recent market conditions. In fact, this strategy has enabled AFLAC to enhance its strong position as a supplemental accident and health insurer in the U.S. and provided AFLAC Inc. with a steady and growing source of revenues and earnings.

AFLAC's investment portfolio is of exceptionally high quality and liquidity. Investment-grade bonds, cash and short-term holdings comprise over 96% of AFLAC's consolidated invested assets. Due to its substantial operating activities in Japan, AFLAC holds a large portion of its investment portfolio in Japanese government and government agency issued securities. The company maintains minimal interest rate risks as it holds negligible proportions of collateralized mortgage obligations or other securities with less certain payment characteristics. Combined with stable nature of its businesses, its substantial cash flow from operations and high-quality investment portfolio provide AFLAC with excellent liquidity.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

CONTACT: Jeffrey Dunsavage

[phone], ext. 5618

[e-mail]