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Wiki Wiki Summary
Risk management Risk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.\nRisks can come from various sources including uncertainty in international markets, threats from project failures (at any phase in design, development, production, or sustaining of life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.
Balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.
Arithmetic Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today.
Special operations Special operations (S.O.) are military activities conducted, according to NATO, by "specially designated, organized, selected, trained, and equipped forces using unconventional techniques and modes of employment". Special operations may include reconnaissance, unconventional warfare, and counter-terrorism actions, and are typically conducted by small groups of highly-trained personnel, emphasizing sufficiency, stealth, speed, and tactical coordination, commonly known as "special forces".
Operations research Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of advanced analytical methods to improve decision-making. It is sometimes considered to be a subfield of mathematical sciences.
Operation (mathematics) In mathematics, an operation is a function which takes zero or more input values (called operands) to a well-defined output value. The number of operands (also known as arguments) is the arity of the operation.
Insurance Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs). Investors are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing.
Molar concentration Molar concentration (also called molarity, amount concentration or substance concentration) is a measure of the concentration of a chemical species, in particular of a solute in a solution, in terms of amount of substance per unit volume of solution. In chemistry, the most commonly used unit for molarity is the number of moles per liter, having the unit symbol mol/L or mol/dm3 in SI unit.
Market concentration In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. In any industry, a handful of firms that hold a significant portion of the market share and likely engage in the practice of consolidation will indicate higher market concentration within that industry.
Equivalent concentration In chemistry, the equivalent concentration or normality of a solution is defined as the molar concentration ci divided by an equivalence factor feq:\n\nNormality = ci/feq\n\n\n== Unit symbol N ==\nThe unit symbol "N" is used to denote "eq/L" (equivalent per liter) which is normality. Although losing favor, medical reporting of serum concentrations in "meq/L" (= 0.001 N) still occurs.
Assets under management In finance, assets under management (AUM), sometimes called funds under management, measures the total market value of all the financial assets which an individual or financial institution—such as a mutual fund, venture capital firm, or depository institution—or a decentralized network protocol controls, typically on behalf of a client. These funds may be managed for clients/users or for themselves in the case of a financial institution which has mutual funds or holds its own venture capital.
Sales Wales (Welsh: Cymru [ˈkəm.rɨ] (listen)) is a country that is part of the United Kingdom. It is bordered by England to the east, the Severn Estuary to the south-east, the Bristol Channel to the south, the Celtic sea to the south-west and the Irish Sea to the west and north.
Alternative investment An alternative investment (also called an alternative asset) is an investment in any asset class excluding stocks, bonds, and cash. The term is a relatively loose one and includes tangible assets such as precious metals, collectibles (art, wine, antiques, cars, coins, musical instruments, or stamps) and some financial assets such as real estate, commodities, private equity, distressed securities, hedge funds, exchange funds, carbon credits, venture capital, film production, financial derivatives, cryptocurrencies, non-fungible tokens, and tax receivable agreements.
Investment Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
Fisher Investments Fisher Investments is an independent money management firm headquartered in Camas, Washington.\n\n\n== History ==\nKen Fisher founded the firm in 1979, incorporated in 1986, then served as CEO until July 2016, when he was succeeded by long-time Fisher Investments employee Damian Ornani.
Significant Others The term significant other (SO) has different uses in psychology and in colloquial language. Colloquially "significant other" is used as a gender-neutral term for a person's partner in an intimate relationship without disclosing or presuming anything about marital status, relationship status, gender identity, or sexual orientation.
Statistical significance In statistical hypothesis testing, a result has statistical significance when it is very unlikely to have occurred given the null hypothesis. More precisely, a study's defined significance level, denoted by \n \n \n \n α\n \n \n {\displaystyle \alpha }\n , is the probability of the study rejecting the null hypothesis, given that the null hypothesis is true; and the p-value of a result, \n \n \n \n p\n \n \n {\displaystyle p}\n , is the probability of obtaining a result at least as extreme, given that the null hypothesis is true.
Internet In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay the lender or some third party.
Financial position of the United States The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP) as of Q1 2014.\nThe U.S. increased the ratio of public and private debt from 152% GDP in 1980 to peak at 296% GDP in 2008, before falling to 279% GDP by Q2 2011.
International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's financial performance and position so that company financial statements are understandable and comparable across international boundaries.
Financial services Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual asset managers, and some government-sponsored enterprises.\n\n\n== History ==\n\nThe term "financial services" became more prevalent in the United States partly as a result of the Gramm–Leach–Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.Companies usually have two distinct approaches to this new type of business.
Legal liability In law, liable means "responsible or answerable in law; legally obligated". Legal liability concerns both civil law and criminal law and can arise from various areas of law, such as contracts, torts, taxes, or fines given by government agencies.
Ivor Montagu Ivor Goldsmid Samuel Montagu (23 April 1904, in Kensington, London – 5 November 1984, in Watford) was an English filmmaker, screenwriter, producer, film critic, writer, table tennis player, and Communist activist in the 1930s. He helped to develop a lively intellectual film culture in Britain during the interwar years, and was also the founder of the International Table Tennis Federation.
Defence mechanism In psychoanalytic theory, a defence mechanism (American English: defense mechanism), is an unconscious psychological operation that functions to protect a person from anxiety-producing thoughts and feelings related to internal conflicts and outer stressors.Defence mechanisms may result in healthy or unhealthy consequences depending on the circumstances and frequency with which the mechanism is used. Defence mechanisms (German: Abwehrmechanismen) are psychological strategies brought into play by the unconscious mind to manipulate, deny, or distort reality in order to defend against feelings of anxiety and unacceptable impulses and to maintain one's self-schema or other schemas.
Life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment.
Alphabet Inc. Alphabet Inc. is an American multinational technology conglomerate holding company headquartered in Mountain View, California.
Operating subsidiary An operating subsidiary is a subsidiary of a corporation through which the parent company (which may or may not be a holding company) indirectly conducts some portion of its business. Usually, an operating subsidiary can be distinguished in that even if its board of directors and officers overlap with those of other entities in the same corporate group, it has at least some officers and employees who conduct business operations primarily on behalf of the subsidiary alone (that is, they work directly for the subsidiary).
Management accounting In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions.\n\n\n== Definition ==\n\nOne simple definition of management accounting is the provision of financial and non-financial decision-making information to managers.
Accounting standard Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders.
Technology Technology is the result of accumulated knowledge and application of skills, methods, and processes used in industrial production and scientific research. Technology is embedded in the operation of all machines, with or without detailed knowledge of their function, for the intended purpose of an organization.
Space technology Space technology is technology for use in outer space, in travel (astronautics) or other activities beyond Earth's atmosphere, for purposes such as spaceflight, space exploration, and Earth observation. Space technology includes space vehicles such as spacecraft, satellites, space stations and orbital launch vehicles; deep-space communication; in-space propulsion; and a wide variety of other technologies including support infrastructure equipment, and procedures.
Information technology consulting In management, information technology consulting (also called IT consulting, computer consultancy, business and technology services, computing consultancy, technology consulting, and IT advisory) is a field of activity which focuses on advising organizations on how best to use information technology (IT) in achieving their business objectives.\nOnce a business owner defines the needs to take a business to the next level, a decision maker will define a scope, cost and a time frame of the project.
Lawsuit A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today.
Vexatious litigation Vexatious litigation is legal action which is brought solely to harass or subdue an adversary. It may take the form of a primary frivolous lawsuit or may be the repetitive, burdensome, and unwarranted filing of meritless motions in a matter which is otherwise a meritorious cause of action.
Risk Factors
AFLAC INC ITEM 1A RISK FACTORS Risk Factors We face a wide range of risks, and our continued success depends on our ability to identify, prioritize and appropriately manage our enterprise risk exposures
Readers should carefully consider each of the following risks and all of the other information set forth in this Form 10-K These risks and other factors may affect forward-looking statements, including those in this document or made by the Company elsewhere, such as in earnings release webcasts, investor conference presentations or press releases
The risks and uncertainties described herein may not be the only ones facing the Company
Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business
If any of the following risks and uncertainties develop into actual events, it could materially affect our business, financial condition or results of operations
We operate in a competitive environment and in an industry that is subject to ongoing changes from market pressures brought about by customer demands, legislative reform and marketing practices
These factors require us to anticipate market trends and make changes to differentiate our products and services from those of our competitors
We also face the potential of competition from existing or new companies that have not historically been in the supplemental health insurance industry
Our concentration of business in Japan poses risks to our operations
Our operations in Japan accounted for 74prca, 75prca and 74prca of our total revenues for 2005, 2004 and 2003, respectively, and 82prca and 80prca of our total assets at December 31, 2005 and 2004, respectively
As a result, continued weakness in Japanapstas economy could adversely affect our business
A weak economy in Japan since the early 1990s resulted in a challenging marketing environment for Aflac Japan, with declining available investment yields for new investments and decreased consumer confidence
Although the Japanese economy has recently shown signs of improvement, the time required for it to fully recover remains uncertain
I-17 _________________________________________________________________ [38]Table of Contents Japanese currency translation risk could adversely impact operating results
Due to the size of Aflac Japan, where our functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on our reported financial position and results of operations
In periods when the yen weakens, translating yen into dollars causes fewer dollars to be reported
When the yen strengthens, translating yen into dollars causes more dollars to be reported
Claims and expenses are paid in yen, and we primarily purchase yen-denominated assets to support yen-denominated policy liabilities
These and other yen-denominated financial statement items are translated into dollars for financial reporting purposes
However, it is important to distinguish between translating and converting foreign currency
Except for a limited number of transactions, we do not actually convert yen into dollars
As a result, we view foreign currency translation as a financial reporting issue for Aflac and not an economic event to our Company or shareholders
General market conditions affect investments and investment income
We have substantial investment portfolios that support our policy liabilities
Low levels of interest rates on investments, such as those experienced in the United States and Japan during recent years, have negatively impacted the level of investment income earned by the Company
Slower investment income growth will occur if this lower interest rate environment should continue
Financial market conditions can also affect our realized and unrealized investment gains or losses
During periods of rising interest rates, the fair values of our investments will decline
Conversely, during periods of falling interest rates, the fair values of our investments will rise
Should significant amounts of unrealized gains/losses occur because of changes in market yields, we would not expect to realize significant gains or losses due to our ability and intent to hold the securities to maturity
See the Investments and Cash section of MD&A for more information
Availability of longer-term yen-denominated investments could adversely affect our profits
We attempt to match the duration of our assets with the duration of our liabilities
At December 31, 2005, the average duration of Aflac Japanapstas policy liabilities was approximately 13 years, and the average duration of its yen-denominated debt securities was approximately 12 years due to the limited availability of acceptable yen-denominated long-duration securities
When our debt securities mature, there is a risk that the proceeds will be reinvested at a yield below that of the interest required for the accretion of policy liabilities
If this occurs, Aflac Japanapstas business would be adversely affected
I-18 _________________________________________________________________ [39]Table of Contents Concentration of our investment portfolios in any particular sector of the economy may have an adverse effect on our financial position or results of operations
The concentration of our investment portfolios in any particular industry, group of related industries or geographic sector could have an adverse effect on our investment portfolios and, consequently, on our results of operations and financial position
Events or developments that have a negative impact on any particular industry, group of related industries or geographic sector may have a greater adverse effect on the investment portfolios to the extent that the portfolios are concentrated rather than diversified
If future policy benefits, claims or expenses exceed those anticipated in establishing premiums and reserves, our financial results would be adversely affected
We establish and carry, as a liability, reserves based on estimates of how much will be required to pay for future benefits and claims
We calculate these reserves using various assumptions and estimates, including premiums we will receive over the assumed life of the policy, the timing of the events covered by the insurance policy, the amount of benefits or claims to be paid and the investment returns on the assets we purchase with a portion of our net cash flow from operations
These assumptions and estimates are inherently uncertain
Accordingly, we cannot determine with precision the ultimate amounts that we will pay for, or the timing of payment of, actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level we assume prior to payment of benefits or claims
If our actual experience is different from our assumptions or estimates, our reserves may prove inadequate
This estimation process is a critical accounting policy for the Company
For additional information, see the Critical Accounting Policies section of MD&A Our operating subsidiaries provide cash flow to the Parent Company
Aflac Incorporated is a holding company and has no direct operations or no significant assets other than the stock of its subsidiaries
Because we conduct our operations through our operating subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations
In addition, there is no assurance that the earnings from, or other available assets of, our operating subsidiaries will be sufficient to make distributions to us to enable us to operate
I-19 _________________________________________________________________ [40]Table of Contents Extensive regulation can impact profitability and growth
Aflacapstas insurance subsidiaries are subject to complex laws and regulations that are administered and enforced by a number of governmental authorities, including state insurance regulators, the SEC, the NAIC, the FSA, the US Department of Justice, state attorneys general, and the Internal Revenue Service, each of which exercises a degree of interpretive latitude
Consequently, we are subject to the risk that compliance with any particular regulatorapstas or enforcement authorityapstas interpretation of a legal or regulatory issue may not result in compliance with another regulatorapstas or enforcement authorityapstas interpretation of the same issue, particularly when compliance is judged in hindsight
There is also a risk that any particular regulatorapstas or enforcement authorityapstas interpretation of a legal or regulatory issue may change over time to our detriment
In addition, changes in the overall legal or regulatory environment may, even absent any particular regulatorapstas or enforcemen t authorityapstas interpretation of an issue changing, cause us to change our views regarding the actions we need to take from a legal or regulatory risk management perspective, thus necessitating changes to our practices that may, in some cases, limit our ability to grow or otherwise negatively impact the profitability of our business
The primary purpose of insurance company regulation supervision is the protection of insurance policyholders, rather than investors
The extent of regulation varies, but generally is governed by state statutes in the United States and by the Financial Services Agency and the Ministry of Finance in Japan
These systems of supervision and regulation cover, among other things: * standards of establishing and setting premium rates and the approval thereof * standards of minimum capital requirements and solvency margins, including risk-based capital measures * restrictions on, limitations on and required approval of certain transactions between our insurance subsidiaries and their affiliates, including management fee arrangements * restrictions on the nature, quality and concentration of investments * restrictions on the types of terms and conditions that we can include in the insurance policies offered by our primary insurance operations * limitations on the amount of dividends that insurance subsidiaries can pay or foreign profits that can be repatriated * the existence and licensing status of the Company under circumstances where it is not writing new or renewal business * certain required methods of accounting * reserves for unearned premiums, losses and other purposes * assignment of residual market business and potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies * administrative practices requirements * imposition of fines and other sanctions I-20 _________________________________________________________________ [41]Table of Contents Sales of our products and services are dependent on our ability to attract, retain and support a network of qualified sales associates
Our sales could be adversely affected if our sales networks deteriorate or if we do not adequately provide support, training and education for our existing network
Competition exists for sales associates with demonstrated ability
We compete with other insurers and financial institutions primarily on the basis of our products, compensation, support services and financial rating
Our inability to attract and retain qualified sales associates could have a material adverse effect on sales and our results of operations and financial condition
Our sales associates are independent contractors and may sell products of our competitors
If our competitors offer products that are more attractive than ours, or pay higher commissions than we do, these sales associates may concentrate their efforts on selling our competitors &apos products instead of ours
Success of our business depends in part on effective information technology systems and on continuing to develop and implement improvements in technology; certain significant multi-year strategic information technology projects are currently in process
Our business depends in large part on our technology systems for interacting with employers, policyholders and sales associates, and our business strategy involves providing customers with easy-to-use products to meet their needs
Some of our information technology systems and software are older, legacy-type systems that are less efficient and require an ongoing commitment of significant resources to maintain or upgrade to current standards (including adequate business continuity procedures)
We are currently developing new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, and customer demands
Our success is dependent in large part on maintaining the effectiveness of existing systems and on implementing improvements and continuing to develop and enhance information systems that support our business processes in a cost-efficient manner
Changes in accounting standards issued by the FASB or other standard-setting bodies may adversely affect our financial statements
Our financial statements are subject to the application of generally accepted accounting principles in both the United States and Japan, which are periodically revised and/or expanded
Accordingly, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB It is possible that future changes we are required to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have a material adverse effect on our results and financial condition
I-21 _________________________________________________________________ [42]Table of Contents Any decrease in our financial strength ratings may have an adverse effect on our competitive position
Financial strength ratings are important factors in establishing the competitive position of insurance companies and generally have an effect on an insurance companyapstas business
On an ongoing basis, rating agencies review the financial performance and condition of insurers and could downgrade or change the outlook on an insurerapstas ratings due to, for example, a change in an insurerapstas statutory capital; a change in a rating agencyapstas determination of the amount of risk-adjusted capital required to maintain a particular rating; an increase in the perceived risk of an insurerapstas investment portfolio; a reduced confidence in management or other considerations that may or may not be under the insurerapstas control
Because all of our ratings are subject to continuous review, the retention of these ratings cannot be assured
A multiple level downgrade in any of these ratings could have a material adverse effect on our sales, our competitiveness, and the marketability of our product off erings impacting our liquidity, operating results and financial condition
See the Rating Agencies section of MD&A for additional information
We face risks related to litigation
We are a defendant in various lawsuits considered to be in the normal course of business
Some of this litigation is pending in states where large punitive damages bearing little relation to the actual damages sustained by plaintiffs have been awarded against other companies, including insurers, in recent years
Although the final results of any litigation cannot be predicted with certainty, we believe the outcome of pending litigation will not have a material adverse effect on our financial position, results of operations, or cash flows
However, litigation could adversely affect us because of the costs of defending these cases, costs of settlement or judgments against us or because of changes in our operations that could result from litigation
Managing key executive succession is critical to our success
We would be adversely affected if we fail to adequately plan for succession of our senior management and other key executives
While we have succession plans and employment arrangements with certain key executives, these do not guarantee that the services of these executives will be available to us
We also face other risks that could adversely affect our business, results of operations or financial condition, which include: * any requirement to restate financial results in the event of inappropriate application of accounting principles * failure of our processes to prevent and detect unethical conduct of employees * a significant failure of internal controls over financial reporting * failure of our prevention and control systems related to employee compliance with internal policies * failure of corporate governance policies and procedures I-22 _________________________________________________________________ [43]Table of Contents