Conference with Aflac. We're privileged to have Kriss Cloninger , president of Aflac. Kriss has been with Aflac for nearly 25 years. In addition to his current role as president, Kriss served as CFO from 2001 to 2015. The Aflac Duck is ubiquitous in both the U.S. and in Japan. In Japan, Aflac's focus on medical and cancer policies, as well as its new partnership with Japan Post led to, Kriss, I believe it's one of your strongest growth years ever in third sector sales in 2015.
Absolutely.
At least since you've been breaking it out for us. With that, I'm happy to turn it over to Kriss, who will be giving a presentation on Aflac.
All right. Thank you, Seth, and good morning. It's a pleasure to join you at this year's BofA Merrill Lynch 2016 Insurance Conference. Before we begin, let me remind you that some statements in this presentation 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 prospective in nature. Please look at our annual report on Form 10-K for some of the risk factors that could cause actual results to differ materially from those we discuss today. Aflac operates in the two largest insurance markets in the world, Japan and the United States. Our policies cover more than 50 million people. Our strategy for growth in Japan and the U.S. has remained straightforward and consistent for many years.
Aflac develops relevant voluntary insurance products and sells them through expanded distribution channels, which yields new accounts and customers. First, let me remind you that our products' benefit payments are not structured to build wealth. Rather, Aflac products provide a layer of financial protection against loss of income and assets based on a qualifying health event. Benefits are paid directly to the insured, regardless of any other insurance they might have. Because the benefits are fixed rather than open-ended, they're not subject to inflation. Aflac's operation in Japan accounts for three-quarters of our pre-tax insurance operating earnings. Today, we insure one in four Japanese households and are the leading provider of both medical and cancer insurance. Aflac's been operating in Japan for more than 40 years.
Since inception, Aflac Japan has focused primarily on what is referred to as third sector products, which include cancer and medical insurance, although Aflac does write some first sector products, including traditional life and fixed annuities. Our products help our policyholders with out-of-pocket expenses that are not covered by Japan's national medical insurance. We introduced two new cancer insurance products under the name New Cancer Days at the end of 2014. Excuse me. One is available for sale through all distribution channels, and the other is for sale exclusively through Japan Post and its marketing insurance group referred to as Kampo. Today, there's also demand from customers and sales agents for protection that addresses critical illnesses like cancer, heart attack, and stroke, which are the leading causes of death in Japan.
In June of 2015, we enhanced our medical product with three new riders that pay benefits upon diagnoses of any of these critical illnesses. Distribution is a vital component of our growth strategy for broadening our reach to consumers. Our goal is to have a presence in all the outlets where consumers want to make their insurance purchase decisions. Our traditional agencies have been and remain key to our success and generate a significant portion of our sales. We've also developed strategic alliances with other channels that have contributed to our top line. We're very pleased with our relationship with Japan Post in particular. In 2015, approximately 20,000 postal locations were eligible to sell Aflac's cancer products. With this expansion, we've continued our training of Japan Post employees to ensure that they have the knowledge and tools to sell Aflac products successfully.
We believe this alliance will continue to be mutually beneficial to both organizations. As a product innovator and trusted brand, we have experienced a tremendous amount of success leveraging the strength of our brand to drive sales. For example, to promote our latest cancer insurance products, we introduced an advertising campaign in Japan with a new character we call Hajimete, which means pioneer duck. This character was created to celebrate Aflac Japan's 40th anniversary and to remind customers that Aflac was the first company, or the pioneer, of cancer insurance in Japan. By leveraging the popularity of the Aflac Duck over the years, nine out of 10 people in Japan recognize the Aflac brand. Let me update you on Aflac Japan's performance. Our sales target is based on Aflac Japan's third sector products, which include the cancer and medical.
Sales of third sector products were up 13.4% for the year, greatly exceeding our original expectations. Not only were our 2015 results impressive across all channels, but this increase marks the highest annual third sector growth rate we've had in 10 years. Within the low interest rate environment, Aflac Japan took a very disciplined approach to the sale of first sector products, which were down 7.3% for the year. Overall, our revenues grew one-half of 1% in yen terms for the year, largely reflecting the cumulative impact of some reinsurance we've done. Our benefit ratio decreased to 60%, reflecting favorable claims experience, and the expense ratio remained fairly steady at 18.1%. Our pre-tax profit margin increased overall as a result of the improvement in the benefit ratio, and the persistency of our business remained solid at 94.9%.
As we communicated during our earnings conference call last week, the double edge of tremendous sales results is the difficult comparison it creates in the next period. As we've indicated, we believe sales of third sector products in 2016 will be down mid-single digits following our great sales in 2015. Looking further out, we continue to believe that Aflac Japan's long-term compound annual growth rate will be in the range of 4%-6%. We believe that continued revision and expansion of our third sector product line will aid in achieving this objective. As we also communicated on February 2nd, the Bank of Japan's negative interest rate policy reinforces our strategy to actively manage down the sale of lump sum First Sector products. We're focused on appropriately priced level premium products in support of our high return third sector business and our core agency distribution.
We'll continue to review potential further actions as the interest rate environment plays out during 2016. At the same time, we've also lightened our new money allocation to JGBs, Japanese Government Bonds, and this will continue in 2016 as we expand opportunistically into new asset classes and continue with our dollar bond program. Japan's population is covered by a national healthcare system, but citizens still have significant out-of-pocket costs associated with healthcare. As such, we believe the need for Aflac products will only continue to grow. Given Japan's aging population and declining birth rate, the national healthcare system has been under increasing strain. Co-payments for citizens under age 70 have grown to 30% of the total cost of medical treatments covered by the national healthcare system. As you can see, the growth of medical expenses is projected to significantly outpace GDP growth in Japan.
Because of the rapidly aging population and higher co-payments for medical expenses, the market for medical products has been steadily increasing, a trend we expect to continue, allowing us to expand our leading position as the medical market grows. Let me turn to Aflac U.S. operations. Aflac is the number one provider of voluntary insurance at the work site in the United States, where about 98% of our products are sold on a payroll deduction basis. Our portfolio of individual and group products provides consumers with outstanding value. At the same time, we offer businesses of all sizes the opportunity to provide their employees with a more valuable and comprehensive selection of benefit solutions. The Aflac U.S. product portfolio includes a variety of voluntary insurance products that pay cash directly to policyholders to help them cope with out-of-pocket expenses.
Despite changes in the healthcare environment over the last several years, the one constant has been and continues to be the need for our products. No major medical plan, not even the best, is designed to cover all out-of-pocket expenses. Small businesses have been Aflac's bread and butter for 60 years and represent the focus of our career sales agents. The majority of these sales come through smaller employers with fewer than 100 employees. The reason for our focus on the small case market is straightforward. These businesses are the most underserved by insurers, which gives our career sales agents a significant opportunity to sell our insurance to employees of small businesses. There are also vast opportunities to sell our products through medium and larger employers. To ensure we're equipped to tap into these opportunities, we're building out and managing relationships with large national brokers.
Through various brokers, we're already represented on more than 80 benefit administration platforms, sometimes referred to as insurance exchanges. Like in Japan, the Aflac brand is an important aspect of our strategy, and more than 9 out of 10 people in the U.S. recognize Aflac. The brand is a combination of many elements, with the most visible being the Aflac Duck. It's also made up of the trust we build through relationships with businesses, policyholders, and consumers. That's especially important because businesses and consumers want to turn to a brand they know and trust. Aflac's established brand has served as an effective door opener and catalyst for many consumers and payroll accounts to be more receptive to learning how Aflac products can help them. Our recent groundbreaking initiative, One Day Pay, further enhances our brand.
Through One Day Pay, we process, approve, and pay eligible claims in just one day. In 2015, 100% of the 1.2 million eligible claims we paid using One Day claims submitted were paid within one day. We continue to receive phenomenal feedback from policyholders telling us that our commitments to paying claims fast through One Day Pay underscores Aflac's integrity and commitment to delivering on our promises. Even further differentiating Aflac, we're proud that Aflac's contact centers have been recognized by J.D. Power for providing an outstanding customer service experience. This recognition is based on a successful completion of an audit and exceeding a customer satisfaction benchmark that J.D. Power uses. It's these kinds of initiatives and feedback that demonstrate our commitment to delivering on our promise to our policyholders. Now let me update you on Aflac U.S. performance.
With respect to Aflac U.S. sales, 2015 was a year of building out our career and broker distribution channels. We not only enhanced our career sales management infrastructure over the last year and a half, but also laid the foundation for greater opportunities within the broker market. Aflac U.S. hit an all-time quarterly record with $497 million in new premium sales, which equated to a 99.6% increase. Our fourth quarter results exceeded our expectations and drove our total annual sales to $1.5 billion, which translates to a 3.7% increase for the year. From a financial perspective, Aflac U.S. also performed well in 2015. Revenues grew by 3%, with premiums benefiting from strong sales in the fourth quarter of 2014. Our benefit ratio decreased from last year, the expense ratio increased, primarily reflecting the expenses associated with changes made to our sales organization starting in the fourth quarter of 2014.
The pre-tax profit margin and policy persistency remained stable. Looking ahead, keep in mind that as our production through brokers grows, we anticipate sales will be increasingly concentrated in the fourth quarter, and even more specifically, during the last four weeks of the year. While 2015 was a year of building, we see 2016 as a year of stabilization and growth. We continue to believe Aflac new annualized premium growth in 2016 will be in the range of 3%-5%. We believe Aflac U.S. has the opportunity to emerge better positioned from the ever-evolving healthcare environment. Like national healthcare in Japan, we believe that this trend toward more uniform coverage will initiate a better understanding and appreciation for Aflac's products.
We believe that Aflac U.S. small and large businesses alike represent a vast opportunity for growth, and we're building our business and enhancing our distribution system with that potential in mind. According to the United States Census Bureau, for the business market, the United States has about 5.6 million businesses with fewer than 100 workers. These small businesses employ more than 39 million people. Although our traditional focus has been on payroll accounts with fewer than 100 employees, we also believe our strategy for working with local, regional, and national brokers will better position Aflac in businesses with more than 100 employees. I'll spend the last portion of my discussion updating you on the consolidated financial performance and our capital management activities. Aflac Incorporated has a long history of delivering strong financial performance in the face of a fluctuating yen.
Due to the significant contribution of Aflac Japan's operations to our overall earnings, a weaker yen suppresses Aflac Incorporated's results as reported in dollars. However, Aflac's currency exposure is primarily translation related as opposed to transaction and currency related. As such, we believe that viewing our results, excluding the impact from foreign currency, is the most meaningful way to assess our financial performance, whether the yen has helped us or hurt us. While the yen to the dollar exchange rate was little changed between 2011 and 2012, the yen weakened dramatically between 2013 and 2015. It's important to note that our sensitivity to the yen has decreased during that period, given the fact that our dollar-denominated pretax investment income has increased to about half of the total.
We remain focused on our capital ratios, which demonstrates our commitments to maintaining financial strength and flexibility on behalf of our policyholders, shareholders, and bondholders. Earnings have positively impacted our capital levels, shown by the relative and significant improvement in our capital ratios. At the end of 2014, our risk-based capital ratio was 945%, which was dramatically higher than our 2013 ratio. Additionally, as a result of the significant decline in interest rates and the weaker yen, Aflac Japan's 2014 solvency margin ratio, or SMR, as it's referred to, was 857%, which was also higher than our 2013 SMR. Our capital and liquidity position has remained strong throughout 2015, ending the third quarter with an SMR ratio of 827%.
As is typically the case, we only have estimates on SMR and RBC at the moment for 2015 year-end because we haven't completed our statutory financials, but we expect both to remain strong and consistent with these numbers. Another high priority for us is maintaining our industry-leading return on equity. For 2015, our operating return on equity, excluding the impact of currency, was 20.4%. We believe that an analysis of operating earnings, which is 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, including cash flows associated with notes payable, but before the effect of realized investment gains and losses from securities transactions and impairments, and also derivative and hedging activities, as well as other and non-recurring items. On an operating basis, we have a long history of producing solid earnings growth.
As this chart shows, our growth in operating earnings per diluted share was suppressed by the weakening of the yen for 2015. Excluding that impact, the growth in operating earnings per share exceeded the high end of our earnings guidance for the full year, driven by the strong overall margins in both the U.S. and Japan. Let me now turn to a topic I know is important to our shareholders. We were pleased that 2015 marked the 33rd consecutive year of increasing our annual dividend. Our objective is to grow the shareholder dividend at a rate generally in line with the increase in operating earnings before the impact of the yen. As a result of a significant decrease in realized investment losses, as well as the benefits of our reinsurance programs, profit repatriation from Japan has continued to improve over the last few years.
Based on our assessment of the company's financial strength, we repatriated approximately JPY 259 billion in 2015, which exceeded our expectation for the year. This was driven in parts by proceeds from a reinsurance transaction we executed in March. We continue to estimate we'll repurchase $1.4 billion worth of our shares in 2016 Largely front-end loaded for the first half of the year. For the three years 2015 through 2017, we believe there will be opportunities to deploy capital in the range of $6.3 billion-$7.5 billion. Our deployment range is dependent on both opportunities to drive attractive excess returns and maintaining strong capital ratios in the face of potential market volatility. As we have communicated, when looking at ways to deploy packed capital, we've primarily considered enhancing economic or organic growth, paying dividends, and repurchasing shares. Those have been our priorities.
While the scales have always been tipped toward shareholder dividends and share repurchase, we continue to explore other options for deploying capital to grow our businesses. As we continue to evaluate alternative uses of capital, share repurchase will continue to be the base against which all other opportunities are measured. We continue to focus on maintaining strong fundamentals in our core businesses and building on our record of earnings growth. As we look to 2016, our guidance remains unchanged since our December outlook call. Excuse me. Our objective is to produce stable operating earnings per diluted share of $6.17-$6.41 if the average exchange rate of JPY 120.99 to the dollar prevails in 2016. That was the average. The 121 was the average in 2015.
I'll remind you that with volatile financial markets and interest rates at significantly depressed levels, it's difficult to safely invest cash flows at attractive yields. Additionally, the 2016 benefit ratios in both the U.S. and Japan anticipate continued favorable experience. As always, we're working very hard to achieve our earnings per share objectives, while also ensuring we deliver on our promises to policyholders. This next slide shows how our 2016 EPS might look at various currency scenarios. It's noteworthy that we've become less sensitive to changes in currency rates. We estimate that every one yen move in the average annual exchange rate will equal approximately $0.025 per share impact on the 2016 earnings this year. ROE is expected to remain in the 18%-21%, again, excluding the impact of currency. As we have communicated, our approach to creating value is straightforward.
First, we want to defend the attractive margins in our core supplemental health business. In Japan, we'll allocate capital away from more volatile return and capital intensive businesses to the stable businesses that earn consistently above our cost of capital. We'll continue to invest to improve service and efficiency in the fast-growing U.S. brokerage and group businesses. We'll continue to manage the risk in our investment portfolio and manage the associated SMR volatility. That's to protect profit repatriation. Finally, to identify idle or excess capital for future deployment at higher rates of excess return for the benefit of our stakeholders. As communicated on our fourth quarter earnings call, we're well-positioned in the face of market volatility. Core margins are expected to remain strong and largely resilient to market volatility. Balance sheet exposures to low-for-long interest rates in the U.S. and Japan are modest.
Our general account assets are defensively positioned with limited exposure to naturally volatile asset classes, and we're well-positioned in terms of the energy and energy-related exposures. We remain focused on being the number one provider of voluntary insurance at the work site in the United States and the number one provider of supplemental insurance in Japan. As we've worked toward our objectives and goals, we have confidence in our business model, the fundamental need for our products, and most importantly, the future success of Aflac. Thank you. Now I'll take some time to respond to questions, assuming we have time, Seth.
Kriss, thanks so much. If I could just lead off real quickly and if anyone has a question, please raise a hand, we have gentlemen and ladies in the back with the mics. Real quick on capital deployment. You commented about a three-year target of $6.3 billion-$7.5 billion, I know it's on the slide, you have $6.3 billion in terms of what is displayed on the bars. Should we think of $6.3 billion as more of a base case. And how should we think about the determining factors that get you either to low point or a high point of that range?
Well, I think the $6.3 billion is kind of our fundamental target. We've talked about maintaining our shareholder dividend and increasing it, as we have every year for 33 years, roughly in line with our increase in operating earnings. We anticipate we'll continue to generate free cash flow and excess capital in the order of magnitude of the $1.3 billion we generated in 2015, the $1.4 billion we intend to expend on share repurchase in 2016, and another $1.5 billion in 2017. That gets you to the 6.3. As I said earlier, if we identify other opportunities to attractively invest in ways to improve either our organic growth or to support additional initiatives that might generate returns well in excess of our cost to capital, we'll be interested in looking at those opportunities.
Our CEO said we're not really interested in a lot of properties that are high priced today, anything like that. I think we've been looking to improve our organic growth, and we're looking for ways to do that.
Could you talk a little bit more about how you're going to manage the challenges of negative rates in Japan and what strategies you're considering?
Yeah. Well, our team has been spending a lot of time thinking about that over the last week or two. We concluded an Aflac Incorporated board of directors meeting Monday and Tuesday. The investment guys felt a little pressure to respond to that sort of question. There aren't really many good answers as far as an investment strategy for dealing with negative interest rates. I mean, when your 10-year JGB has a negative yield, which it did have yesterday in Japan, your strategy is to stay away from 10-year JGBs. At least that'd be my strategy. I have a pretty common sense approach to these things. When people are going to tax you at 100% of your operating earnings and pay you a fee for doing business, why bother? Let's go to Hawaii or something. Let's do something else.
Quite frankly, we've been de-emphasizing the so-called first sector products that are asset intensive. In Japan, we've been concentrating on the third sector products that generate profits through strong morbidity and underwriting margins, and we'll continue to do that in Japan. I know each of you is concerned about the way the central bankers are influencing the markets and the like. I only give thanks that Aflac's had a conservative approach to investments for years. We have a long duration portfolio in support of long duration liabilities. A pretty good match between asset and liability durations, at least as best we can. The best we can do is manage down our new business to try to minimize the asset intensive products. We'll still sell some first sector products in support of maintaining relationships with our distribution system. We've already put caps. We did this last year.
We put caps in place on production of certain asset intensive products, and we've been dealing with this for a long time in Japan. 10 years ago, somebody asked me, "How do you deal with a weak economic environment in Japan?" I said, "Well, we've been doing it for the last 15 years, so maybe we'll continue to be successful doing it for the next 10," and here we are. It's not a new challenge. That's why you hire management. We have an experienced management team dealing with these low interest rate situations, and we continue to generate solid earnings, and I believe we'll continue to do that for the future.
Great. Thank you so much. We're going to have to end it there. Appreciate your time and your insights.
Okay. Thank you for the opportunity. Appreciate y'all.