We're very happy to have Aflac with us today. Dan Amos, Chairman and CEO, will be presenting. Aflac is a differentiated company within the life insurance sector with a return on equity that's about double the peer group. Obviously, a very significant international business, 80% of earnings in Japan. We're also fortunate to have Eric Kirsch, who is a relatively new, very new, Global Chief Investment Officer for the company, and he will be available for the Q&A if there's anything that anyone wants to know on the investment portfolio. With that, I'm going to hand it over to Dan.
Thank you, Ed. Good morning, everyone. It's a pleasure to be here. Let me begin by providing an overview of our business operations. Before we start, let me remind you that some of the statements in this presentation are forward-looking within the meaning of the federal securities laws . Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because of the prospective nature. Please look at your annual report on the Form 10-K for some of those risk factors that could differ materially from what we've discussed. Aflac offers voluntary insurance products in both the United States and in Japan, our policies cover more than 50 million people worldwide.
Aflac's products provide a layer of financial protection against loss of income and asset loss by paying fixed cash benefits directly to the insured upon a specific health event or a life situation. We continually update our products to better reflect changes in current medical treatments and to further identify opportunities to respond to the needs of the consumers. Our strategy for growth in Japan and the United States has remained straightforward and consistent and effective. Aflac develops relevant products and sells them through expanded distribution channels, which yield new accounts and new customers. Remaining focused and disciplined in this strategy, we have gained greater access to potential customers. Aflac operations in Japan account for three-quarters of the pre-tax insurance earnings.
Today, we insure one out of four households in Japan, we are the number one insurance company in terms of policies in force, passing Nippon Life, who held that for over 100 years. Our cancer and medical products are the foundation of our product portfolio in Japan. Aflac Japan's product development team continually researches specific financial burdens Japanese consumers face and how best to present them to potential policyholders. This allows us to leverage our competitive advantages, such as branding and distribution, to grow our product offering to meet the evolving needs of consumers. Since 2002's introduction of EVER, our standalone medical plan, Aflac Japan has been number one in the medical market, and we still are today. Last month, we further strengthened our medical portfolio and upgraded our new EVER product, improving it to include even more advanced medical treatment options.
In 2011, we introduced New Cancer DAYS, our revised base cancer policy, and Days 1 Plus, which was an upgrade for older cancer policies. Most notably, these new revisions to the cancer policy enhanced outpatient and anticancer medication benefits. In 2011, the number of base cancer policies sold increased nearly 30%, reflecting lower premiums per cancer policy, though cancer sales in the category increased 10.2% for the fourth quarter and 5.8% in premium for the year. Our product portfolio in Japan has expanded beyond traditional health-related products to better serve Japanese consumers and the growing distribution channels that we have. Aflac Japan's ability to adapt its product portfolio to better meet the evolving needs of the banks has significantly benefited sales. One example is our WAYS product, our top-selling product through the banks, which is the primary driver of Aflac Japan's remarkable sales growth in 2011.
Result of both of these products and the channel diversification, we've had enormous sales increases in 2011. In regard to our distribution, Aflac Japan was represented by nearly 20,000 sales associates at the end of 2011, equating to more than 120,000 sales associates that are employed by our agencies, not to include Dai-ichi Life, which is another 50,000. The strength of the individual sales associates or agents reflects the consumer's desire to face-to-face sales to help them select the coverage that best suits their needs. Our sales results have been significantly influenced by the expansion of the distribution channels, most recently the bank channels. Bank sales continue to show strong growth trends through 2011, greatly exceeding our expectations with an increase of 134% over 2010. We continue to believe that Japan's distribution system remains the most efficient in Japan and represents a competitive advantage for us.
We are continuing our efforts to develop even more avenues to reach consumers. Top to bottom, Aflac Japan's performed extremely well in 2011, significantly exceeding our expectation. Total annualized premium sales in JPY generated an 18.6% increase in sales for the year. This is exceptionally remarkable considering the enormous challenges in the wake of the devastating earthquake and tsunami that hit back in March. Following such tremendous sales growth, we expect Aflac Japan sales to be down 2% to down 5% for 2012, which takes into account the exceptional sales comparisons we're up against in the third and fourth quarter. We anticipate strong sales through banks to carry over in the first quarter of 2012, and we expect an intense product push from banks to finish out their fiscal year on March 31st.
While Shinkin banks and regional banks were the early adapters in terms of selling our products to their customers, we've been selling our new annualized premium dramatic increases as all the mega banks started selling our products last year in late 2010. As such, the addition of the new banks will have been mostly tapped by the end of the first quarter. Following the strong push from banks in the first quarter, we expect banks to dramatically decrease in the third and fourth quarter of 2012 due to the difficult comparisons. We have had tremendous amounts of success leveraging our strong brand in an effort to drive sales. By capitalizing on the popularity of the Aflac Duck, we have achieved brand awareness of around 97% in Japan. More recently, Aflac Japan has honed its ability to take the Aflac Duck and create separate and unique characters to market specific products.
In our current campaigns, we created Manekineko Duck X, a robotic character designed to show the power of the enhanced new EVER products. Americans just don't get it, but believe me, it works in Japan. We will continue to look for new ways to connect with the consumers through innovative marketing campaigns for our product line. With the aging population, Japanese consumers increasingly understand the need for insurance products to protect their income and assets. We look ahead, we believe that the need for our products will only continue to grow. As Japan continues to deal with the strained financial system, rising healthcare or medical expenses, an aging population, a declining birth rate, it is likely that the already stressed national healthcare system will come under even more financial pressure in the future.
The upshot is that the Japanese citizens whose medical costs have already increased will continue to look for ways and solutions to protect their physical and financial well-being. We believe Aflac's products will be a large part of that solution. Now let me turn to the U.S. operations. As you may know, the U.S., we primarily distribute through voluntary insurance products at the work site or on a payroll deduction basis. Aflac U.S. products portfolio includes a variety of voluntary insurance products designed to pay cash directly to the policyholder when a serious medical event presents financial challenges. These payments are made regardless of any other insurance that they may have. Our individual products are guaranteed renewable and portable, even if the policyholder changes employers. With the addition of Aflac Group in 2009, we now offer group products that align well with the individual product line.
We also can now customize group products for the larger employee case market and the brokers who typically sell to these larger accounts. It is really about leveraging the brand and offering a choice to the accounts of all sizes, especially the large ones. This is important because half the voluntary insurance product in the U.S. now come from group products. Our strong brand and our market leading status only serves to broaden the appeal for our products to consumers through the U.S. In terms of the U.S. distribution system, we have built a diverse yet focused product line that is sold through a broad distribution of over 74,000 commissioned sales associates. Additionally, although it is in the early stages, we are expanding and growing our broker relationships to access larger case markets through the sale of our group products.
Our ability to give customers the choice of individual or group products only serves to enhance the appeal of our traditional and broker channel. We believe our distribution network is a competitive strength and no other company can be able to duplicate it. Our strategy and competitive strengths are all designed to improve sales. We are very pleased that Aflac U.S. generated a 6.8% increase in 2011. These results exceeded our annual sales target of a flat to up 5% growth. This is especially impressive considering that businesses, particularly the smaller ones where we write the majority of our business, are still being negatively impacted by the uncertainty of the economy. For 2012, we expect Aflac sales to increase in the range of 3%-8%. Our sales and marketing areas have synchronized their efforts by creating strategies that continue to benefit our sales results.
For example, strategic coordinated product pushes to promote enhanced products, including our Short-Term Disability and our dental policies, were tremendously successful in 2011. Additionally, for the first time, we've been able to enhance our recruiting results through targeted national advertising. I hope maybe some of you have seen it on TV. We continue to believe that the U.S. represents a vast opportunity for growth, and we are building our business with that potential in mind. Historically, Aflac's success in selling individual products has been the bread and butter of our company. We still regard our success in this market as the core to our operating model. According to data from the Small Business Administration, there are close to 6 million businesses in the United States with 500 or fewer employees, representing just shy of 50% of the total number of business markets.
Even though we are the market leader in individually written products that appeal to small businesses, their employees still have enormous growth potential remaining in this market. With nearly 61 million employees working at the medium to larger companies, we believe the addition of the group business and our growing relationship with the brokers represent tremendous growth potential for us in that segment as we move forward. To address this market, we've been establishing and developing relationships with large brokers to expand our presence into the large case market and define a business of 500 or more employees. Keep in mind that this initiative is still in its infancy, so we believe that there's strong opportunity to grow our large case market going forward.
I'll now spend time sharing some of the details about the general investment philosophy, how we're adapting to the changing economic global environment, the composition of the portfolio, our approach to managing potential financial risk. We primarily invest in long-term and strong cash flows from the persistent book of business that gives us the ability to continue to invest from this perspective. Historically, our products' needs and the liability profiles have been the key drivers to our asset strategy. We sought to be with durations and currency matched. In Japan, our products are yen-denominated and have high persistency, thus yielding long-duration liabilities. Our U.S. policy liabilities have a shorter duration, and our investment approach was tailored accordingly. The financial crisis that began at the end of 2008 transformed the investment landscape. Clearly, the world, and particularly Europe, remains a very dynamic and volatile macro environment.
As such, we examined our traditional approach to investing to determine how to best adapt to the changing environment. One way we've adapted over the last several years has been through reducing our exposure to financials and PIGS, which I'll expand on more. We've also invested in a new system to enable us to better evaluate market and credit risk in our portfolio. As most of you know, Eric Kirsch, who was mentioned earlier, officially joined Aflac as the Global Chief Investment Officer on November the 1st. I know that investments are top of mind for you, so I brought Eric with me to answer the technical questions after my comments. Eric's three decades of experience in building and leading global teams and managing assets will help us improve the investment functions.
As we continue to move forward, our vision is to have a world-class investment organization that pays particular attention to the needs of the insurance operations through effective ALM and capital adequacy management, while also taking into account investment income needs. We will also continue to enhance human capital, technology, and investment processes. It goes without saying that this objective is the best interest of our stakeholders, including our policyholders. Credit quality remains the central aspect of our investment approach. We remain focused on assessing the securities we hold, and if we determine that they are no longer suitable to our investment portfolio, we will evaluate the options and take appropriate measures. At year-end 2011, 94.4% of the portfolio was investment-grade. Ultimately, our goal is to increase the overall credit quality of the portfolio. Our overall portfolio is dominated by fixed maturity securities.
We have very limited exposure to residential, commercial, and asset-backed securities. Perpetual securities comprise about 6.8% of the total investments in cash, and I'll talk to you shortly about the steps we've taken to reduce our exposure to that asset class. The majority of the total assets in debt and perpetual securities fall into the senior debt category. The percentage of subordinated securities, both perpetual and fixed, declined significantly. Our holdings in Tier 1 debt included less than 15 insurers. The percentage of the senior debt holdings increased from 79.5% at the end of 2010 to 86.2% at the end of 2011. Our large fixed income portfolio is diversified by geographic and industry. The vast majority of investments in Japan are JGBs. As part of Eric's initial investment analysis, he concluded that we had too much concentration in the European financials.
In the fourth quarter, we identified securities with an intent of disposal. I want to emphasize that these impairment charges were, as a whole, different than the impairments that we'd taken in the past that did not result from a significant credit change in the specific securities. Instead, they reflected a well-thought-out strategy to reduce the overall exposure to Europe, and particularly the financial institutions within that area. Additionally, we are not presently making any new investments in Europe. Given the ongoing volatile nature of Europe, this situation is still fluid. We continue to actively monitor the economic landscape and are prepared to make any adjustments that may be needed as the environment continues to evolve. As an insurance company, we manage risks, not avoid them altogether. Currently, our total European exposure is less than $30 billion, which represents about 30% of the total portfolio.
Keep in mind that $10 billion of that total European exposure is in the U.K. and Germany, where the economic environment is not as volatile as the other areas. Let me remind you that the de-risking activity didn't just start in the fourth quarter of 2011. From January of 2008 to the end of 2011, we've dramatically cut the holdings of sovereign and financial investments in the PIG countries from 5.9% to 2.2% of total investments in cash. We've also lowered the investments in perpetual securities by more than half, going from 14.7% to 6.8% of the total investments in cash. I'd also like to point out that none of our perpetual securities are currently owned in the PIG countries. We will continue to take action to reduce our exposure to European debt as we pursue investment transactions that make financial sense.
It is worth noting that while we've been actively and successfully de-risking our portfolio, we have grown our shareholder equity from $8.8 billion at the end of 2007 to $13.5 billion on December 31st of 2011. As we look ahead, our goal is to enhance the quality and liquidity of our portfolio, expanding our portfolio's diversity and ultimately improving our returns while reducing risks to certain market cycles. We initiated two strategic reviews, one with a consulting firm and another with a global asset manager. We believe these reviews will help identify the appropriate processes, people, and asset allocation of our business. We expect the feedback from these reviews to be completed by June. As I mentioned before, we plan to further diversify by outsourcing up to 10% of the portfolio.
As we execute our strategy through these activities, we are committed to having an investment area that is best in class. I'll spend the last portion of my discussion updating you on the consolidated financial performance and capital management. For the full year, the average yen-dollar exchange rate was 10% stronger than in 2010, which magnified our reporting results in dollar terms. However, we still believe that viewing our results excluding the impact of foreign currency is the most meaningful way to evaluate our financial performance. On that basis, we were pleased with the results this year from a financial perspective. As we have communicated over the past several years, maintaining a strong risk-based capital, or RBC ratio, remains a top priority for us.
The strengthening of our capital position allows us to pursue a proactive investment de-risking program to further strengthen our balance sheet and enhance shareholder value for the long term. At year-end 2011, we had nearly $17 billion of total GAAP capital. We strive to maintain a strong balance sheet within a prudent amount of financial leverage. Our capital ratios demonstrate our commitment to maintaining financial strength on behalf of our policyholders, our bondholders, and our stakeholders. Our strong RBC ratio over the last several years are even more notable when you consider the significant losses we've incurred resulting from substantial investment portfolio de-risking. Our capital strength is driven by the huge, steady cash flows from our operations, especially in Japan, and our balance sheet is strong. We added capital strength component to our management incentive plan in 2009, tying management compensation to this important objective.
Since then, our RBC has been and continues to be one of the components of the management incentive plan. We previously conveyed that our goal at the end of 2011 was to have an RBC between 400 and 500, with a target of 450. As of the end of 2011, we estimate that the RBC will be somewhere between 480 and 520. As we look ahead to 2012, our RBC goal for 2012 is to end the year with a RBC somewhere between 400 and 500. As you know, capital adequacy in Japan is principally driven by solvency margin ratios, which we estimate was within the range of 520 to 560 at calendar year-end 2011, based on the new calculation methods. We are comfortable with this level of solvency margin ratio, but continue to test our capital adequacy ratio by applying rigorous stress tests under extreme scenarios.
As we've discussed, one of the potential risks to the solvency margin is a rise in interest rates. Although this does not seem likely in the near term, we continue to assess the impact of rising interest rates on our solvency margin ratio. In that regard, we began taking action in the second half of 2011 to help mitigate that risk. For instance, we sold part of our JGB holdings classified as available sale, and then repurchased the same amount of JGBs, classifying them as held to maturity. Additionally, we sold the remainder of our holdings in the U.S. Treasury STRIPS in the fourth quarter and reinvested those proceeds primarily in JGBs and were classified as held to maturity. We are continuing to look at ways to further enhance our capital adequacy ratios in both the U.S. and in Japan.
Our capital strength enables us to increase our cash dividend to shareholders in the fourth quarter for the 29th consecutive year. Our objective is to grow the dividend at a rate that's in line with the earnings per share growth before the impact of the yen. I believe dividends are an important component of the value we provide to investors. Additionally, in the fourth quarter, we repurchased 900,000 shares of Aflac stock, bringing the total number of shares purchased for the full year to 6 million. As we've said for many years, when it comes to deploying capital to the benefit of shareholders, we still believe the repurchasing of our shares and growing the cash dividend are the most attractive means, and that is sometimes we will continue to pursue as we move forward.
At the end of the year, we projected that the repatriation for 2012 will be approximately ¥25 million. We have no more material investment losses, though, to make sure that that can occur. As we've said in the past, repatriation helps support our share repurchase programs. We are proud of the ratings that we have recognized for our financial strength and balance sheet. Financial strength is rated an A+ superior by AM Best, Aa3 by Moody's, and AA- by S&P. We believe that an analysis of operating earnings on a non-GAAP financial measure is important to an understanding of Aflac's underlying profitability drivers. Aflac defines operating earnings as the profits derived from operations before realized investment gains and losses from security transactions, the impact from passive derivative activities and hedging, as well as non-recurring items. On an operating basis, we've had a long history of producing strong earnings growth.
In fact, 2011 marked the 22nd consecutive year in which we have met or exceeded our operating earnings per share objective. While the stronger yen significantly benefited our earnings in 2008 through 2011, we believe that operating excluding currency continues to be the best measure of our success. We have delivered consistently strong operating performance, achieving a 15.2% compound annual growth rate in operating earnings per share from 2001 through 2011. This achievement demonstrates our ability to generate significant cash flows and organic growth in our capital bases through various market cycles. We continue to focus on maintaining strong fundamentals in our core business and building on a record of earnings growth. Looking ahead, I want to reiterate that our objective for 2012 is to increase operating earnings per share diluted from 2%-5% on a currency-neutral basis. That was raised from 0% to 5%.
This range reflects the impact of the portfolio de-risking through December 31st, 2011 and investing significant cash flows at a much lower interest rate. We expect the level of earnings growth in 2013 to improve over 2012, and we'll discuss that at our analyst meeting. This slide shows how 2012 earnings might look with and without the impact of currency. On a constant currency basis, our 2%-5% objective equates to $6.46-$6.65 in operating earnings per diluted share. We estimate that for every 1 JPY change on an annual average exchange rate will equate to $0.052 in per share earnings for 2012. We are pleased with the strength of our operations and business model, and we continue to develop new and innovative products and enhance our distribution channel in both markets.
We believe that our business model is one way that competition will find it more difficult to emulate our business. We remain focused on our vision to be the leading provider of voluntary insurance in the U.S. and the number one provider of supplemental insurance in Japan. We are committed to enhancing the quality of our portfolio and maintaining a strong capital base while at the same time benefiting all of our stakeholders. Thank you. Now, I'll be glad to take any questions. Ed?
I have a naive question. I have a naive question coming from a country without nuclear power plants. You're increasing your sales in cancer policies in Japan. They had an accident last year, so if I'd be living there, I would also run out and buy a policy. Do you not see risk that this could cause more problems than benefit?
No one knows for sure. There's certainly a major difference between the radiation risk and the cancer risk. We've done a lot of study with Chernobyl and what took place with it and how much lower the actual claims were. If you'll remember, the main issue with Chernobyl ended up being the milk that the children were drinking, and they ended up getting thyroid cancer. There is a pill that you can take that helps prevent that. And the Japanese made sure that that pill was passed out and has been taken. Remember, that area affected was about 5% of the population in terms of the tsunami and the earthquake and exactly where the power issues were. We think it's been calculated in our premiums.
Ironically, what happens is when a major accident of some sort happens, actually the claims drop at first because it disrupts society in such a way that people don't go to have checkups. They don't go do all of these things because of other issues that are out there. It picks back up. Before we think we would see any major change would be 20 years out. The other thing is, remember that the number one killer of the Japanese society is cancer compared to heart attack in America. They are already owning the policies and very attuned to cancer risks no matter what. The short version is, actuarially speaking, we think we have taken all of that into account, and we're priced for those particular issues. Thank you.
Maybe I can ask one quick question of Eric. Those who purchased derivative protection for the low rate scenario when rates were high, it's proved obviously to be a very good decision. When you look at Japan, you've done things already to protect capital. Why not buy a lot of derivative protection? I would assume it's pretty cheap for kind of the high rate scenario in Japan.
That's a terrific question and a great observation. As you know, we have done a lot already with respect to, as Dan mentioned, the JGBs, moving them into HTM, which helped mitigate that interest rate risk relative to SMR. As part of the strategic reviews that we're doing, both with the asset management company, the consultant, as well as our own internal staff, we actually are evaluating right now interest rate derivative hedging strategies to protect against rising rates. That's not a simple answer. That's complex. You need to do a deep dive on your portfolio, your liabilities, your key rate durations and model all of that out. We're looking at that right now as we speak.
Thank you.
Thank you very much.