Twice a day last week, once before daybreak, and again as dusk set in, Dan Amos and his top lieutenants sat at a crescent-shaped conference table in Columbus to assess the growing devastation in Japan.
In a semicircle in front of him, but really half a world away, his team in Tokyo relayed through a wall of video monitors the happenings on the ground.
“We’ve been in constant contact,” said Amos, chairman and CEO of Aflac, the insurer his two uncles and father founded in 1955.
Most Americans know Aflac for the star of its popular U.S. ad campaign — a nasally duck mascot — who saves customers by giving them cash when they “get hurt and miss work.”
But Aflac does 75 percent of its business in Japan, a nation brutalized by the worst natural disaster in its history. All but two of Aflac’s 82 offices in Japan were open last week, and all 5,000 employees were safe.
How a once tiny Columbus insurance company wound up in Japan, and became its biggest insurer, is one of the great eureka moments of American business.
John Amos, one of three brothers who founded Aflac and the uncle of its current chief executive, visited Osaka, Japan, for the 1970 World’s Fair. Around him he found a population so fearful of catching cold they wore surgical masks in public.
“Anybody who will wear a mask will buy health insurance,” Dan Amos said of his uncle’s business impulse, which forever changed the company.
A few years after that megawatt light bulb went off in John Amos’ brain, Aflac started selling its cancer insurance policies in Japan, to be followed by other products.
Back then, Aflac was $100 million in assets. Today, the Fortune 500 company once known as American Family Life Assurance Co. grows by $100 million in assets every five days.
Aflac is one of America’s most consistently profitable companies. Based on what is known, Amos said the company will make its earnings expectations despite the high volume of claims likely to come and any disruption in sales. Experts who follow the company agree that Aflac will weather the recent tragedies in Japan.
“This is the time we have to perform as a company,” Amos told The Atlanta Journal-Constitution on Wednesday. “People are in need and hurting.”
Aflac has faced Japanese quakes before, including the 1995 Kobe temblor that killed more than 6,000.
Before the latest quake, video conferences used to be weekly, though Amos spoke to his Japanese team daily by phone, a spokeswoman said.
“I’m not getting too much sleep,” Amos said Wednesday.
A scheduled trip to Tokyo, which is slated to begin this weekend, to meet bankers, agents and government officials has changed. Amos will now focus on his team to soothe employees’ concerns and assess the situation.
The damage wrought by the earthquake and its tsunami continues to widen. The death toll is mounting and fears persist about spreading radiation from a stricken nuclear power plant north of Tokyo.
One in four Japanese households buys Aflac insurance products, ranging from life insurance to policies that dispense cash to cover cancer expenses. Aflac also sells policies to bridge the gap between the country’s universal health care system and growing out-of-pocket costs.
But Aflac’s 20 million Japanese policies tend to be small and have fixed payouts.
The company’s exposure, for now, appears to be manageable, said Edward Shields, with Sandler O’Neill & Co. in Chicago.
Aflac’s stock price, like many firms with major Japanese operations, has taken a beating, down more than 10 percent as of Thursday since before the quake.
“The main thing weighing on Aflac’s stock price is that so much of Aflac is in Japan,” Shields said.
Amos said Aflac built the risk of natural catastrophes into its Japanese business model.
Although so many of its eggs are in a basket perched atop one of the world’s most active earthquake zones, the financial fallout to Aflac as a company is expected to remain small, experts following the company say.
Aflac doesn’t insure property, and its life and health insurance policies are relatively small, designed to supplement larger policies and the nation’s universal health care system.
Shields continues to rate Aflac a “buy.”
Sales in the near term will likely dip, and claims will probably rise “modestly” in the near term, Shields said. But sales could rebound later in the year.
Shields said it was premature to forecast risks related to radiation from the country’s damaged Fukushima Dai-ichi nuclear plant.
Alan McKnight, a partner with Atlanta-based Balentine, agreed, calling the situation in Japan “a short-term hiccup” for Aflac.
The metrics for Aflac remain strong in Japan. The nation’s population is graying and its nationalized health care system is pushing more of the cost to consumers. Aflac’s original product line, insurance for cancer expenses not covered by traditional carriers, has remained a major seller in Japan, where the prevalence of cancer has skyrocketed with the increase in the nation’s life expectancy.
Aflac earned $2.3 billion in profit last year, up 57 percent from 2009.
Japan’s importance to Aflac showed in its swift firing of comedian Gilbert Gottfried, the “voice” of its duck mascot in the U.S., who made insensitive jokes about Japan on his personal Twitter account. Aflac dumped the comedian immediately, denouncing his comments.
The company has among the most popular ad campaigns in Japan — Gottfried wasn’t used as the duck’s voice there — and its jingle was for several months that nation’s most popular ringtone.
Amos said the company is comfortable with its exposure there.
Aflac pulled out of several foreign markets in the 1990s to focus on the U.S. and Japan, the top two insurance markets in the world.
“Having a earthquake in Japan shouldn’t have stunned anyone. All of it was calculable,” he said.
