Good evening, everybody. I'm Robin Wilkey, Senior Vice President of Investor Relations and Rating Agency Relations at Aflac. I want to welcome you this year to our meeting. You'll meet our speakers tomorrow. This evening I'd like to introduce you to many of the officers who are here to support us, that may not be speaking. When I call your name, would you please stand? From the U.S., we're joined by, well, I should say from the U.S. and Japan on this one, Sue Blanck, Executive Vice President of Aflac and Aflac Japan and Corporate Actuary. Many hats worn there. Audrey Tillman, Executive Vice President, Corporate Services. Michael Ball, Senior Vice President, Chief Information Officer. Chris Covell, President and Chief Executive Officer, Aflac Benefits Solution. Tom Giddens, Senior Vice President, Director of Sales. June Howard, Senior Vice President and Chief Accounting Officer, Financial Services.
Todd Daniels, Vice President, Financial Planning and Analysis. Tom McDaniel, Second Vice President, Investor Relations. Joining us from Japan are Charles Lake, Chairman of Aflac Japan. Joe Meyer, Senior Vice President and Chief Operating Officer, Global Investment Management. Masahiko Furutani, Executive Vice President, Planning. We're also pleased to have tonight several members of our board of directors that some of you have had a chance to meet and talk to. They include Douglas Johnson. Mr. Johnson is a retired audit partner with Ernst & Young. He's the financial expert of the audit committee and also serves on the executive committee. He joined the board in 2003. Marvin Schuster. Mr. Schuster is chairman of Schuster Enterprises, which owns and operates Burger King throughout the Southeast. He chairs the corporate governance committee and is also a member of the audit and executive committee. He joined the board in the year 2000.
Dr. Charles Knapp. Dr. Knapp is President Emeritus of the University of Georgia. He retired in 2011 after six years as chairman of the board of the East Lake Foundation. Previously in his career, he was a senior partner with executive search firm Heidrick & Struggles and Executive Vice President of Tulane University. He was first elected into Aflac Incorporated's board in 1990. I would like to thank our board members and all the members of Aflac's management for their attendance and their support in this meeting tonight and tomorrow. Let's all give them a big round of applause, please. Before we begin tonight's program, I have to remind you first that some of the statements you will hear are forward-looking within the meaning of federal securities laws.
Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are perspective in nature. Our actual results could differ materially from those we discuss tonight and tomorrow. Please look at your latest 10-Q filing for some of the various risk factors that could materially impact our results. Also, please remember that this presentation is being webcast. As a courtesy, please look and ensure your cell phones, iPhones, BlackBerrys, Droids, and other electronic devices that I have no idea about are turned off. Although we will not have a Q&A session tonight, there will be ample time to answer your questions tomorrow. Now, I would like to introduce you to this evening's speaker, Dan Amos. Dan graduated from the University of Georgia with a degree in insurance and risk management.
He's been with the company on a full-time basis since 1973. He started in sales and quickly became one of our most successful state sales coordinators. In 1983, he was appointed president of Aflac, in 1990, he became CEO of Aflac and Aflac Incorporated. In 2001, he was also named as Chairman. Aflac has received many awards and accolades since Dan has been at the helm. Earlier this year, Fortune magazine recognized Aflac as one of the best places to work for the 14th year in a row. Ethisphere magazine named Aflac as one of the world's most ethical companies for six years in a row. Dan's been named the top CEO in the insurance industry by Institutional Investor magazine five times.
I suspect that one of the reasons that Dan has earned that recognition is that he listens to his shareholders, and that he is the right man to navigate Aflac in challenging environments. As he always says, challenges make us a better company and rise to new levels. Without further ado, I would like to introduce you to Dan Amos, our Chairman and CEO.
Thank you, Robin, and good evening, everyone. Tonight marks my 22nd year in being at an analyst briefing as your CEO. I'd like to start with an overview of what Aflac has done and my priorities in running the company going forward. We run Aflac in a way that ensures we honor the obligations that we've made to our policyholders, and maintaining a strong capital ratio is a priority. In fact, this priority remains a key component to the compensation of all of our officers. We want to ensure that the capital ratios support our ratings and compare favorably to our peers. I have some good news. Our risk-based capital ratio significantly improved from year-end ratio of 493 to 584 at the end of the first quarter of 2012. That's 584.
The March 31st RBC ratio was much better than initially estimated, and it reflects a strong capital contribution and a benefit from a new tax accounting standard. We also expect the solvency margin in Japan to improve significantly for fiscal year-end, which is March 31st, compared to the end of 2011. However, we won't have the final numbers until we file our FSA financial statements in June. We are using a strategic approach to assess and implement different capital management practices to better manage our capital position and mitigate potential risk to our RBC and solvency margin ratios. As you may be aware, our U.S. regulatory capital was impacted last year by a significant amount of deferred tax assets that resulted from the de-risking activities. Because of the limitations of the deferred tax assets, we had about $700 million in non-admitted assets on a statutory basis at year-end.
Addressing this issue is a top priority for us this year. Recently, we began exploring with our accounting firm, KPMG, an opportunity that we believe could be effective in utilizing a substantial portion of the tax loss carryforwards, thereby reducing our non-admitted assets. We are not far enough along in the process for me to go into any great details at this point. There are still considerable tax and legal work to be done. We will give you an update in several months. If we are successful, this would help restore the capital balance between the two segments and potentially free up a significant amount of capital, which could be used for share-related activities. As CEO, it is my job to manage our business in a way that generates value for those who have put capital into our company and invested as our investors have done.
As usual, you're going to hear a lot tomorrow on our business operations in the United States and in Japan, I won't go into too much detail. I would like to say one thing. With respect to our strategy for growth, we emerged from the financial crisis the same way we went in, with a very strong business model. Granted, the economy was weak, and it hurt our sales in the United States for a period of time, we made an investment in the U.S. segment by acquiring CAIC, which is now called Aflac Group. That acquisition will be an important element of our future U.S. growth, I also believe it positions us to better weather future economic downturns.
You may not have noticed, Aflac Japan either met or exceeded its sales and financial targets during every year of the financial crisis, Aflac Japan is doing it again this year. Every year at this meeting, the last thing you hear from me is our EPS outlook. This year, I'm not going to keep it in suspense too much longer. First, I want to remind you that last year at this meeting, I announced our earnings goal for 2012 was to increase our operating earnings per share 0%-5%, excluding the impact of the yen. I told you that there was a possibility we would raise it as we went on. We did, in fact, raise it two times, and today it is 3%-6%. I want to reaffirm the 2012, We expect to achieve that range.
For 2013, our official target is to achieve operating earnings per diluted share 4%-7% with currency neutral. However, my personal target is to have a 5% increase or better. I will not be satisfied at the low end of the range for 2013. We believe our target for 2012 and 2013 are reasonable given the negative impact on the investment income from de-risking as well as the low interest rate environment. At the same time, we will continue to look for opportunities to enhance our future growth rates of earnings per share. Keep in mind, we did not assume any improvement in the overall interest rate environment when setting next year's earnings target. As we have done in the past several years, Chris will share the other key assumptions and factors that make up our 2013 earnings outlook.
I want to emphasize that I do not view 2013 objective as a new normal rate of earnings per share growth for Aflac. I expect us to further improve our earnings growth in 2014. I normally don't comment on our shares, but I have to tell you that I'm not satisfied with our current evaluation either. We are currently trading at a significant discount to our peers on a forward earnings. Although we're trading at a premium on a price-to-book basis, given the industry high return on equity and our expectation that those returns will continue, I don't think we're getting full credit in the market today for our performance. Let me comment a bit on my views of enhancing earnings growth. We will continue to push our organization to enhance revenue and earnings growth while maintaining a favorable risk profile.
We will also zero in on three topics that I know are on your mind. Believe me, they're on my mind too, because they influence our earnings growth and our stock price. They relate to profit margin, investment returns, and share repurchase. In terms of profit margin, I know you all are interested in the margins and the returns on WAYS, our unique, hybrid whole life product. We looked at the possibility of offering a single premium whole life product or WAYS product to help respond to the needs of the banks in Japan. Our analysis showed that the WAYS product has profit characteristics that make it a better option for us. When it comes to the consumer, the life insurance component provides better life protection in the early years.
Tomorrow, Chris is going to show you what our analysis looks like in selling our WAYS product versus if we sold a single premium product. I want to emphasize one thing, WAYS is an important part of our product portfolio because it enhances sales, especially through the bank channel. We would like to see it more profitable from the contribution of earnings, but WAYS benefits our top and bottom line growth. Another issue that affects our EPS growth is investment returns. As you know, our biggest concern has been how to invest huge cash flows generated by the operations. For decades leading up to the financial crisis, it made sense for us to heavily invest in debt securities that were long-dated, investment grade, and yen-denominated. These bonds met our investment needs without fanfare.
More often than not, our investment approach was called boring by financial community, maybe even a few of you in this room said that. In fact, until the end of 2008, it was very rare that our investment portfolio was the topic of conversation. Even then, it didn't generate many questions. That all changed dramatically when the financial crisis emerged toward the end of 2008 and transformed the investment landscape into one of volatility. Because of the increased volatility of the capital markets, we reevaluated our investment approach. You'll recall last year at this dinner, I told you my top priority was to hire a Chief Investment Officer to build a world-class investment organization. Working closely with the investment committee of the board of directors, we hired Eric Kirsch, and I believe we're well on our way to becoming the best in class.
At this meeting last year, I also discussed our view of de-risking and why we believed it would be an ongoing process through 2011 in an effort to reposition our balance sheet. Our objective was to reduce riskier investment positions, particularly our exposures to the PIIGS countries, as well as the perpetuals. Later in the year, concerns about Europe reemerged with vengeance. We stopped making any new investments in Europe, and we also expanded the scope of our de-risking activities. Our goal was to reduce our exposure in European financials by approximately JPY 150 billion by June 30th. We liquidated 90% of that target. We've substantially completed our objective. We will remain vigilant and continue to closely monitor and evaluate our portfolio with an eye toward credit issues that may emerge.
Let me briefly share how we are transforming the investment function, because ultimately, our actions are all about increasing our investment returns. Last year, we made a commitment to opening a New York investment office. This is a significant undertaking that will involve a great deal of planning, time, and resources. We are committed to seeing this process through, and I'm excited and pleased with the process so far. We engaged the services of McKinsey to conduct a strategic and global review of our investment processes, the people, and the systems. With the analysis complete, you'll hear more about this tomorrow, and what it means to our investment area. Let me say that I am very pleased with our strategy to build and enrich the capacities of the investment function and the capabilities, as is our board of directors.
We will also engage Goldman Sachs Asset Management to look more closely at asset liability management and to help us optimize our portfolio. In a way that considers regulated capital requirements in Japan and in the United States. When this project is complete, we will expect to look to the asset classes beyond fixed income that will enhance our portfolio returns. As I said, at the end of last quarter, we've been able to dedicate more financial resources to the investment area, which will enable our investment team to move ahead rapidly to implement these new strategies. We expect that during the third quarter, we will be able to initiate some of these recommendations from Goldman Sachs project. For instance, we will look to buying public fixed income dollar-denominated assets and swapping them into JPY. We will also begin the outsourcing program.
With these new investment strategies, you should expect to see the reduced allocation of Japanese government bond investments. That will result in a more diverse portfolio that will provide us better returns and a portfolio management flexibility. It's also important for me to mention that the investment committee of the board of directors has retained an investment counseling expert. This expert will be assisting the investment committee in monitoring the success of the investment function as we build it out, and also how we're going to diversify the portfolio holdings. The third topic that influences our EPS is our share repurchase. We have been able to enhance our consolidated returns historically through consistent share repurchasing activities. Clearly, the financial crisis affected our ability to purchase shares in the short run as investment losses reduced the profits that we could repatriate from Japan.
However, we expect those strong profit remittances to return once the sizable investment losses are behind us, and we believe we are at that point. Our outlook for profit repatriation for this year has improved a bit recently. Furthermore, we believe that repatriation will be very large next year, assuming no significant investment losses. That will greatly enhance our ability to purchase shares. In the meantime, 2012 progresses, we will closely evaluate our resources and options and the repurchasing of shares this year. As we have said many years, when it comes to deploying capital for the benefit of the shareholders, we still believe that repurchasing our shares and growing the cash dividend are the most attractive means, and that is something that we will continue to pursue.
As I said in the first quarter call, if we do anything in terms of share repurchase this year, it will likely be in the latter part of the year or the fourth quarter. Let me reiterate that we don't need to repurchase any shares to achieve our 2012 operating earnings objective. Assuming we have no material investment losses between now and this time next year, we expect to have significant capacity for profit repatriation and share repurchase in 2013. As you are aware, 2011 marked our 29th consecutive year that we increased our cash dividend to shareholders. I believe dividends are an important component of the value that we provide our investors. We will again evaluate a dividend increase as the year progresses, I am confident that when the board meets, we will extend our consecutive annual dividend increases for 30 years.
In addition to improving our operating earnings, we're also focused on producing industry-leading return on equities. Over the last five years, our consolidated operating return on equities has averaged 25.2%. In 2012 and 2013, we believe it's reasonable to see operating return on equity in the area of 22%-26%. Throughout the decades, I believe strength, resilience, and adaptability are fitting words to describe both Aflac U.S. and Aflac Japan operations. That's because we faced many challenges, some of them more than once. In 1987, I was made chief operating officer and was put in a position where I inherited a high interest rate environment in Japan. It was 6% at the time. Within a month, interest rates dropped 2% down to 4%. All of a sudden, the bank-affiliated agencies who were selling a single premium product became unprofitable.
I worked with Chris, who at the time was head of the actuarial part for KPMG, we overcame that hurdle. Within a matter of three months, we'd stopped the sale of the product, had our sales force selling a brand-new product. In my early years as CEO, we had a major crisis, our loss ratio in Japan was rising faster than our pricing assumptions. The loss ratio was at 73% and headed higher due to the cancer insurance. We addressed it by using pathology reports for claims, introducing a new cancer product, and offering medical riders to bring the loss ratio down. In 2001, when Japan fully deregulated and allowed large domestic life insurance companies to sell third sector products, there were those that thought when deregulation occurred, it would be devastating to Aflac, it would all be over.
Not only did we maintain our number one position in cancer sales, we emerged later as the number one seller of medical insurance too. In the United States, there were those who thought the U.S. insurance market would be dominated by large insurance companies when they decided to get in our business in 1998. We came up with a marketing plan and introduced the Aflac Duck in the U.S. and our sales doubled years. There were those who thought group insurance would hurt our business. The U.S. is a thriving business and meeting its expectations, and of course, bought Aflac Group, and it is now a leading position going forward. Finally last year, when the earthquake and the tsunami struck Japan, followed by the nuclear situations, many people thought it was going to be catastrophic to our business.
If you didn't see our message board, you missed some interesting reading. As you know, we made our sales and our earnings targets, just as we told you we would. Being challenged makes you rise to new heights. Through it all, we've always found ways to overcome challenges, and more important, to come out with a better company because of them. My message to you tonight is, don't underestimate Aflac and its management team. Thank you for being here tonight, and I'll turn it over to Robin.
Thank you, Dan. Just for a few little housekeeping items. When you leave tonight, please make sure you leave your name tag and it'll be right there where you left it in the morning and come back. We'll begin tomorrow morning with a continental breakfast served at 7:30 A.M., outside in the foyer area here. The business meetings will start promptly at 8:00 A.M. in the morning, as you can tell from Dan's speech, you're not going to want to miss a word of that. Before we adjourn tonight, I want to introduce members of the investor relations team and the meeting areas team that put all this together. As you well know, I couldn't be up here tonight if it wasn't for them. First of all, Delia Moore. She's in charge of the rating agency relationship and is manager of investor relations.
Mark Caldwell, manager of investor relations. Martha Hill, who is outside tending to just stuff. Mike Pina, our technical expert. Cathy Shand, our writer. Bianca Huling, our writer. Malcolm Trammell, who's also outside, I believe. Murakami-san is our General Manager of our investor relations area in Japan and our chief photographer. We have Akiko Tachi, who joins us from Aflac Japan, and she's helping us with our translation for the next two days. Heidi Carlisle, who's Second Vice President of Meetings and Travel, who have set up the whole thing. They put in a lot of hours to make this all possible. We started in January, I would like for you to know that without them, this couldn't have happened. Thank you again for your hard work, group. If you have any questions, please see any of them.
As you know, I would have a hard time answering anything. When you leave, make sure you turn your tag in. Thank you so much for joining us tonight. Make sure you join us tomorrow for presentations.