Reflecting the benefit from a stronger yen/dollar exchange rate, but higher realized investment losses, total revenues were basically flat at $4.3 billion during the second quarter of 2009, compared with a year ago. Net earnings were $314 million, or $.67 per diluted share, compared with $483 million, or $1.00 per share, a year ago.

Net earnings in the second quarter of 2009 included after-tax realized investment losses of $249 million, or $.53 per diluted share, compared with realized investment losses of $1 million, or nil per share in the second quarter of 2008. Of the realized investment losses in the second quarter of 2009, $104 million resulted from the impairment of Aflac's holdings in CIT, which were sold at the impaired book value subsequent to the conclusion of the second quarter. Two fixed-maturity securities of Kommunalkredit were also impaired in the quarter, totaling $51 million. The company also realized $2 million of after-tax losses related to the impairment of certain collateralized mortgage obligations and $1 million of realized investment gains from other transactions. In addition, the company realized $93 million of impairment losses on perpetual, or so-called "hybrid," securities of two issuers. The impairment loss on the hybrid securities was determined using the equity impairment method under generally accepted accounting principles (GAAP) because their credit ratings are below investment grade. No impairment charges will be recorded on a statutory accounting basis for these perpetual securities because Aflac's credit analysis suggests that both issuers of the perpetual securities that were impaired on a GAAP basis will be able to meet their contractual obligations for payment.

We believe that an analysis of operating earnings, a non-GAAP financial measure, is vitally important to an understanding of Aflac's underlying profitability drivers. We define operating earnings as the profits we derive from our operations before realized investment gains and losses, the impact from SFAS 133, and nonrecurring items. Management uses operating earnings to evaluate the financial performance of Aflac's insurance operations because realized gains and losses, the impact from SFAS 133, and nonrecurring items tend to be driven by general economic conditions and events, and therefore may obscure the underlying fundamentals and trends in Aflac's insurance operations.

Furthermore, because a significant portion of our business is in Japan, where our functional currency is the Japanese yen, we believe it is equally important to understand the impact on operating earnings from translating yen into dollars. We translate Aflac Japan's yen-denominated income statement from yen into dollars using an average exchange rate for the reporting period, and we translate the balance sheet using the exchange rate at the end of the period. However, except for a limited number of transactions, we do not actually convert yen into dollars. As a result, we view foreign currency as a financial reporting issue for Aflac and not as an economic event to our company or shareholders. Because changes in exchange rates distort the growth rates of our operations, we also encourage readers of our financial statements to evaluate our financial performance excluding the impact of foreign currency translation. The chart toward the end of this release presents a comparison of selected income statement items with and without foreign currency changes to illustrate the effect of currency.

Operating earnings in the second quarter were $562 million, compared with $487 million in the second quarter of 2008. Operating earnings per diluted share rose 18.8% to $1.20, compared with $1.01 a year ago. The stronger yen/dollar exchange rate increased operating earnings per diluted share by $.05 during the quarter. Excluding the impact from the stronger yen, operating earnings per share increased 13.9%.

Results for the first six months of 2009 also benefited from the stronger yen. Total revenues rose 6.1% to $9.1 billion, compared with $8.6 billion in the first half of 2008. Reflecting higher realized investment losses, net earnings were $882 million, or $1.89 per diluted share, compared with $957 million, or $1.98 per share, for the first six months of 2008. Operating earnings for the first six months of 2009 were $1.1 billion, or $2.42 per diluted share, compared with $962 million, or $1.99 per share, in 2008. Excluding the benefit of $.14 per share from the stronger yen, operating earnings per diluted share rose 14.6% for the first six months of 2009.

Total investments and cash at the end of June were $65.6 billion, compared with $61.7 billion at March 31, 2009. The increase in total investments and cash reflected improvement in the fair values of the company's investments, compared with invested asset values at the end of the first quarter. In addition, the fair values of the company's investments at the end of June also benefited from a stronger end-of-period yen/dollar exchange rate, compared with March 31, 2009. Gross unrealized losses on investment securities classified as available for sale were $4.9 billion at June 30, 2009, compared with $5.9 billion at March 31, 2009.

Shareholders' equity was $6.4 billion at June 30, 2009, compared with $5.2 billion at March 31, 2009. Shareholders' equity at June 30, 2009, included a net unrealized loss on investment securities of $2.1 billion, compared with a net unrealized loss of $3.0 billion at the end of March 2009. Shareholders' equity per share was $13.58 at the end of the second quarter of 2009, compared with $11.12 per share at the end of the first quarter of 2009. The annualized return on average shareholders' equity in the second quarter was 21.7%. On an operating basis (excluding realized investment losses, and the impact of SFAS 133 from net earnings and unrealized investment gains/losses in shareholders' equity), the annualized return on average shareholders' equity was 27.0% for the second quarter of 2009.

AFLAC JAPAN

In the second quarter, Aflac Japan's total revenues in yen were up 2.5%. Premium income in yen rose 3.1%, and net investment income declined .2%. Investment income growth in yen terms was suppressed by the stronger yen/dollar exchange rate because approximately 34% of Aflac Japan's second quarter investment income was dollar-denominated. Excluding the impact of the stronger yen, net investment income was up 2.3% in the quarter. Due to continued improvement in the benefit ratio, the pretax operating profit margin expanded from 18.2% to 19.7%. As a result, pretax operating earnings in yen increased 10.7%. For the first six months, premium income in yen increased 3.3%, and net investment income was up .2%. Total revenues were up 2.9%, and pretax operating earnings grew 10.0%.

The average yen/dollar exchange rate in the second quarter of 2009 was 97.53, or 7.1% stronger than the average rate of 104.50 in the second quarter of 2008. For the first six months, the average exchange rate was 95.44, or 9.8% stronger than the rate of 104.77 a year ago. Aflac Japan's growth rates in dollar terms for both the second quarter and first six months were magnified as a result of the stronger average yen/dollar exchange rates.

Reflecting the stronger yen, premium income in dollars rose 10.7% to $2.9 billion in the second quarter. Net investment income was up 7.2% to $544 million. Total revenues increased 10.1% to $3.5 billion. Pretax operating earnings advanced 18.6% to $679 million. For the first six months, premium income was $5.9 billion, or 13.6% higher than a year ago. Net investment income rose 10.0% to $1.1 billion. Total revenues were up 13.1% to $7.0 billion. Pretax operating earnings were $1.4 billion, or 20.7% higher than a year ago.

Aflac Japan's total new annualized premium sales increased 5.0% to 30.1 billion, or $309 million in the second quarter. For the first six months, total new premium sales were up 2.3% to 57.6 billion, or $602 million. The increase in second quarter sales primarily reflected the favorable consumer response to a recently introduced insurance product. Due to the strong initial sales of our new child endowment product, ordinary life insurance sales rose 38.7% in the second quarter. In addition, sales through the bank channel continued to improve. In the second quarter, bank channel sales rose 106.4%, compared with a year ago, to a record 1.4 billion. Bank channel sales were 39.0% higher than the first quarter of 2009.

AFLAC U.S.

Aflac U.S. total revenues rose 2.7% to $1.2 billion in the second quarter. Premium income increased 2.8% to $1.1 billion, and net investment income was up 1.8% to $127 million. Pretax operating earnings were $198 million, an increase of 4.0%. For the first six months, total revenues were up 3.7% to $2.5 billion. Premium income rose 3.9% to $2.2 billion. Net investment income increased 1.6% to $252 million. Pretax operating earnings rose 5.6% to $402 million.

Very weak economic conditions in the United States continued to influence total new annualized premium sales.