AFLAC INC — Annual Report 2008

Jun 27, 2008

11-K 1 g14006e11vk.htm AFLAC INCORPORATED AFLAC INCORPORATED PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 11-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to _______

Commission file number: 001-07434

Aflac Incorporated 401(k) Savings and Profit Sharing Plan

(Full title of the plan)

Aflac Incorporated

(Name of issuer of the securities held pursuant to the plan)

1932 Wynnton Road Columbus, Georgia 31999

(Address of the plan and address of issuer’s principal executive offices)

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Aflac Incorporated 401(k) Savings and Profit Sharing Plan

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TOC

Report of Independent Registered Public Accounting Firm	1
Statements of Net Assets Available for Plan Benefits	2
Statements of Changes in Net Assets Available for Plan Benefits	3
Notes to Financial Statements	4
Schedule 1 - Schedule H, Line 4i — Schedule of Assets (Held at End of Year)	10
Exhibit Index	12

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Pension Committee Aflac Incorporated 401(k) Savings and Profit Sharing Plan:

We have audited the accompanying statements of net assets available for plan benefits of the Aflac Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) as of December 31, 2007 and 2006, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Aflac Incorporated 401(k) Savings and Profit Sharing Plan as of December 31, 2007 and 2006, and the changes in net assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information included in Schedule 1 as of December 31, 2007 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

June 26, 2008 Atlanta, Georgia

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Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Statements of Net Assets Available for Plan Benefits

December 31,

	2007	2006
Assets:
Investments (Note 5)	$ 206,320,065	$ 168,027,649
Cash	137,773	179,870
Accrued employer contribution	68,870	255,510
Accrued participant contribution	371,832	345,062
Accrued interest	32,543	25,633
Total assets	206,931,083	168,833,724
Liabilities:
Excess participant contributions payable	11,706	14,992
Total liabilities	11,706	14,992
Net assets available for plan benefits at fair value	206,919,377	168,818,732
Adjustment from fair value to contract value for fully benefit-responsive investment contracts	60,088	96,214
Net assets available for plan benefits	$ 206,979,465	$ 168,914,946

See accompanying Notes to Financial Statements.

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Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Statements of Changes in Net Assets Available for Plan Benefits

Years Ended December 31,

	2007
Contributions and transfers:
Participant withholdings	$ 10,898,888	$	9,889,222
Participant transfers from other plans	1,069,304		765,057
Employer matching	4,111,018		3,507,477
Total contributions and transfers	16,079,210		14,161,756
Dividend income	8,671,029		5,067,175
Interest income	719,954		538,054
Net appreciation in fair value of investments (Note 5)	23,455,924		5,941,271
Distributions to participants	(10,775,151	)	(10,723,772	)
Administrative fees	(86,447	)	(78,555	)
Increase in net assets	38,064,519		14,905,929
Net assets available for plan benefits:
Beginning of year	168,914,946		154,009,017
End of year	$ 206,979,465	$	168,914,946

See accompanying Notes to Financial Statements.

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Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Notes to Financial Statements December 31, 2007 and 2006

1. DESCRIPTION OF THE PLAN

The Aflac Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) was established for the benefit of the employees of Aflac Incorporated; American Family Life Assurance Company of Columbus (excluding Japan Branch employees); American Family Life Assurance Company of New York; Aflac International, Incorporated (excluding Japan Branch employees); and Communicorp, Incorporated (collectively “the Company”).

The following description provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

| (a) |
| --- |
| The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). |
| Eligible employees may voluntarily participate in the Plan on the first day of the month, which
coincides with or next follows the completion of thirty days of employment. |
| The Plan is administered by a plan administrator appointed by the Pension Committee of Aflac
Incorporated’s Board of Directors. The majority of the Plan’s administrative expenses are paid by the
Plan sponsor. A portion of the Plan’s administrative expenses is allocated to the Plan and is deducted
from the investment earnings (losses) in participant accounts. Administrative fees on loans and
in-service withdrawal expenses are paid directly by the requesting participant and are deducted from the
loan or in-service withdrawal amount. |

| (b) |
| --- |
| Contributions to the Plan are made by both participants and the Company. Participants may contribute
portions of their salary and bonus on a pretax basis in increments of whole percentages of up to 50% in
2007 and 2006, subject to aggregate limits imposed by Internal Revenue Service (IRS) regulations.
Aggregate limits as prescribed by the IRS were $15,500 for participants under the age of 50 and $20,500
for participants age 50 and older in 2007 and $15,000 for participants under the age of 50 and $20,000
for participants age 50 and older in 2006. The first 1% to 6% of participants’ compensation contributed
may be subject to a percentage matching contribution by the Company. For the years ended December 31,
2007 and 2006, subject to certain limitations, the Company’s matching contribution was 50% of the
portion of the participants’ contributions, which were not in excess of 6% of the participants’
compensation. |

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| (c) |
| --- |
| An account is maintained for each participant and is credited with participant contributions and investment
earnings or losses thereon. Contributions may be invested in one or more of the investment funds available under
the Plan at the direction of the participant. A separate account is maintained with respect to each
participant’s interest in the Company’s matching contributions. Amounts in this account are apportioned and
invested in the same manner as the participant’s account. |

(d)
Participants are 100% vested in their contributions plus actual investment earnings or losses thereon.
Participants become vested in the Company’s matching contributions and the related earnings or losses thereon according to the following schedule.

Years of Service	Vested Percentage
Less than 1 1 2 3 4 5 or more	0% 20% 40% 60% 80% 100%

A participant’s interest in the Company’s matching contributions and the related earnings or losses thereon is also vested upon termination either because of death or disability or after attaining early retirement date or normal retirement age. Except as previously described, participants forfeit the portion of their interest which is not vested upon termination of employment. These forfeitures are available to reduce the Company’s future matching contributions or plan expenses. At December 31, 2007, forfeited non-vested accounts totaled approximately $69,900, compared with approximately $17,000 a year ago. In 2007, forfeitures of approximately $202,100 were used to reduce matching contributions, compared with approximately $512,400 in 2006.

(e)
Participants may receive a distribution equal to the vested value of their account upon death, disability, retirement, or termination of either the Plan
or the participant’s employment. Distributions may only be made in the form of a lump-sum cash payment and/or Aflac Incorporated common stock.
The Plan permits in-service withdrawals for participants who are 100% vested in the Company’s contribution and have attained age 59 1/2.

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| (f) |
| --- |
| Participants are allowed to borrow funds from their accounts. The minimum amount of any loan is
$1,000. Participants may have up to two active loans from their account at any time. The maximum
amount of loans made to a participant from the Plan, when added together, cannot exceed the lesser
of: |

a.	50% of the participant’s vested benefit (as defined by the Plan document); or
b.	$50,000, reduced by the amount, if any, of the highest balance of all
outstanding loans to the participant during the one-year period ending on
the day prior to the day on which the loan is made.

| | All participant loans carry a maturity date of up to five years for general purpose loans and up to
10 years for loans made to purchase the participant’s principal residence from the date the loan is
made and are secured by the balance in the participant’s account. Interest rates on participant
loans are established at the prevailing prime interest rate at the time the loan is made plus 2%.
The prime interest rate was 7.25% at December 31, 2007, compared with 8.25% at December 31, 2006. |
| --- | --- |
| (g) | Transactions With Parties-in-Interest |
| | As of December 31, 2007 and 2006, the statements of net assets available for plan benefits include
the following investments in and accounts with parties-in-interest to the Plan. |

	2007	2006
Aflac Incorporated common stock	$ 100,026,802	$ 75,331,971
Merrill Lynch Retirement Preservation Trust	6,544,973	5,161,993
Merrill Lynch Equity Index Trust I	3,562,533	2,925,701
Participant loans	8,476,490	7,286,278

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2. SUMMARY OF ACCOUNTING POLICIES

| (a) |
| --- |
| The accompanying statements of net assets available for plan benefits and changes in
net assets available for plan benefits have been prepared on the accrual basis of
accounting. |
| The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities and changes
therein, and disclosure of contingent assets and liabilities. Actual results could
differ from those estimates. |

| (b) |
| --- |
| Investments are stated at fair value. Investments in mutual funds and
common shares are stated at fair value based upon market quotations
obtained from national security exchanges. Investments in
common/collective trusts are valued based on the quoted market prices
of the underlying assets held in the fund, except for the Merrill
Lynch Retirement Preservation Trust. |
| The Merrill Lynch Retirement Preservation Trust, a common/collective
trust, primarily holds investments in fully benefit-responsive
insurance contracts that provide that the Plan may make withdrawals at
contract value for benefit-responsive requirements. Accordingly, the
Plan’s investment in units of the Merrill Lynch Retirement
Preservation Trust is presented at fair value in the Statements of Net
Assets Available for Plan Benefits, with an adjustment to its contract
value separately disclosed, as provided in Financial Accounting
Standards Board Staff Position (FSP) AAG INV-1 and SOP 94-4-1,
Reporting of Fully Benefit-Responsive Investment Contracts Held by
Certain Investment Companies Subject to the American Institute of
Certified Public Accountants (AICPA) Investment Company Guide and
Defined-Contribution Health and Welfare and Pension Plans. The Merrill
Lynch Retirement Preservation Trust fund’s reported fair value is
determined as the sum of (a) the fair value of the investments in
guaranteed insurance contracts and security-backed investment
contracts that are wrapped by an insurance company, bank or other
financial institution (collectively, the “Investment Contracts”), as
determined by that fund’s trustee and (b) the fair value of that
fund’s investments in externally managed collective investment funds
as determined by those funds’ trustees. |
| Securities transactions are
accounted for on the trade date (the date the order to buy or sell
is executed). Realized gains and losses on the sale of investments
are calculated based on the difference between selling price and
cost on an average cost basis. |
| Participant loans are stated at cost, which approximates fair value. |
| The Plan invests in various investment securities. Investment
securities are exposed to various risks such as interest rate,
market, and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible
that changes in the values of investment securities will occur in
the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the
statements of net assets available for plan benefits. |

(c)
Distributions to participants are recorded when paid.

| (d) |
| --- |
| Investments are stated at fair value. The carrying amounts for
cash, receivables, and payables approximated their fair values due
to the short-term nature of these instruments. |

(e)	New Accounting Pronouncements
	In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value under U.S. generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This standard applies to
other accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, SFAS 157 does not require any
new fair value measurements. Where applicable, this standard
codifies related guidance within GAAP. SFAS 157 is effective for
fiscal years beginning after November 15, 2007, with earlier
application encouraged under limited circumstances. The adoption of
this standard is not expected to have any impact on the Plan’s net
assets available for plan benefits or the changes in net assets
available for plan benefits.
(f)	Reclassifications
	Certain reclassifications have been made to prior-year amounts to
conform to reporting classifications in the current year. These
reclassifications had no impact on net assets available for plan
benefits or the changes in net assets available for plan benefits.

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3. FEDERAL INCOME TAXES

The Internal Revenue Service has determined and informed the Company by letter dated February 27, 2002, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code.

Participants in the Plan are not subject to federal and state income taxes on their contributions, on amounts contributed by the employer, or on earnings or appreciation of investments held by the Plan until withdrawn by the participant or distributed to the participant’s named beneficiary in the event of death.

4. PLAN TERMINATION

Although it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.

5. INVESTMENT FUNDS

The following table presents the fair value of individual investments that exceeded 5% of the Plan’s net assets as of December 31:

	2007	2006
Mutual Funds:
Davis New York Venture Fund	$ 11,781,067	$ 11,050,283
Dodge & Cox Balanced Fund	26,748,609	24,150,810
Dodge & Cox Stock Fund	20,945,896	21,708,765
Aflac Incorporated common stock	100,026,802	75,331,971

During 2007 and 2006, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:

Aflac Incorporated common stock	2007 — $ 26,658,094	$	(689,397
Mutual funds	(3,353,767	)	6,239,522
Common/collective trust funds	151,597		391,146
Total net appreciation in fair value of investments	$ 23,455,924	$	5,941,271

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6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

The following is a reconciliation of net assets available for plan benefits as presented in these financial statements to the balance per Form 5500 as of December 31:

Net assets available for plan benefits	2007 — $ 206,979,465	$	168,914,946
Deemed distributions	(59,664	)	(18,240	)
Net assets available for plan benefits — Form 5500	$ 206,919,801	$	168,896,706

Deemed distributions are defaulted and unpaid participant loans of active participants that are disallowed on the Form 5500.

The following is a reconciliation of changes in net assets available for plan benefits as presented in these financial statements and Form 5500 as of December 31:

| Increase in net assets per statement of changes
in net assets available for plan benefits | 2007 — $ 38,064,519 | $ | 14,905,929 | |
| --- | --- | --- | --- | --- |
| Deemed distributions | (44,526 | ) | (10,036 | ) |
| Deemed distributions paid | 3,102 | | — | |
| Net income — Part II Line K Form 5500 | $ 38,023,095 | $ | 14,895,893 | |

Paid deemed distributions are cash receipts on defaulted participant loans of active participants disallowed on Form 5500 in previous years.

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SCHEDULE 1

Aflac Incorporated 401(k) Savings and Profit Sharing Plan EIN: 58-1167100 PN: 004

Form 5500, Schedule H, Line 4i — Schedule of Assets (Held at End of Year) As of December 31, 2007

Identity of Issue and Description of Investment		Current Value
Common/Collective Trusts
Merrill Lynch Retirement Preservation Trust*	6,544,973	$ 6,544,973
Merrill Lynch Equity Index Trust I*	31,499	3,562,533
Total Common/Collective Trusts		10,107,506
Mutual Funds
Davis New York Venture Fund	294,453	11,781,067
Dodge & Cox Balanced Fund	330,230	26,748,609
Dodge & Cox Stock Fund	151,496	20,945,896
Julius Baer International Equity Fund	216,391	9,443,298
Columbia Acorn Fund	82,994	2,457,458
American Funds Growth Fund of America	241,662	8,158,521
American Funds Europacific Growth Fund	77,451	3,884,920
Columbia Total Return Bond Fund	332,893	3,195,769
The Managers Special Equity Fund	17,955	1,153,817
Total Mutual Funds		87,769,355
Aflac Incorporated common stock*	1,597,107	100,026,802
Participant loans (2,515 loans outstanding with zero cost,
interest rates from 6.0% to 11.5% and maturity dates of
less than one year to 10 years)*	—	8,476,490
Total Investments		$ 206,380,153

*Indicates a party-in-interest to the Plan.

See accompanying report of independent registered public accounting firm.

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SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

/s/ Casey Graves
Casey Graves
Vice President Human Resources

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Exhibit Index

23 — Consent of Independent Registered Public Accounting Firm

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