SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934

For the quarter ended June 30, 2001
Commission File No. 1-7434

AFLAC INCORPORATED
------------------------------------------------------

GEORGIA 58-1167100
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1932 WYNNTON ROAD, COLUMBUS, GEORGIA 31999
-----------------------------------------------------
(Address of principal executive offices and zip code)

Registrant's telephone number, including area code (706) 323-3431

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
------ ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class August 6, 2001
- ---------------------------- ------------------
Common Stock, $.10 Par Value 524,716,745 shares

AFLAC INCORPORATED AND SUBSIDIARIES
INDEX

Page
No.
----
Part I. Financial Information:

Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000 . . . . . . . . . . 1

Consolidated Statements of Earnings
Three Months Ended June 30, 2001 and 2000
Six Months Ended June 30, 2001 and 2000. . . . . . . . . 3

Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 2001 and 2000. . . . . . . . . 5

Consolidated Statements of Cash Flows
Six Months Ended June 30, 2001 and 2000. . . . . . . . . 6

Consolidated Statements of Comprehensive Income
Three Months Ended June 30, 2001 and 2000
Six Months Ended June 30, 2001 and 2000. . . . . . . . . 8

Notes to the Consolidated Financial Statements . . . . . . 9

Review by Independent Auditors . . . . . . . . . . . . . . 19

Independent Auditors' Review Report. . . . . . . . . . . . 20

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . 21

Item 3. Quantitative and Qualitative Disclosures
about Market Risk. . . . . . . . . . . . . . . . . . . . . 35

Part II. Other Information:

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 39

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 40

Items other than those listed above are omitted because they are not
required or are not applicable.

Part I. Financial Information
AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions)

June 30, December 31,
2001 2000
(Unaudited)
------------ ------------
Assets:
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities (amortized cost
$18,980 in 2001 and $20,405 in 2000) $ 21,963 $ 22,172
Perpetual debentures (amortized cost
$2,655 in 2001 and $2,347 in 2000) 2,828 2,046
Equity securities (cost $184 in 2001
and $161 in 2000) 230 236
Securities held to maturity, at amortized cost:
Fixed maturities (fair value $5,155 in
2001 and $3,702 in 2000) 4,881 3,645
Perpetual debentures (fair value $3,416
in 2001 and $3,323 in 2000) 3,148 3,442
Other investments 19 17
Cash and cash equivalents 736 609
-------- --------
Total investments and cash 33,805 32,167
Receivables, primarily premiums 297 300
Accrued investment income 389 380
Deferred policy acquisition costs 3,619 3,685
Property and equipment, at cost less
accumulated depreciation 474 481
Other 209 218
-------- --------
Total assets $ 38,793 $ 37,231
======== ========

(continued)

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
(In millions, except for share and per-share amounts)

June 30, December 31,
2001 2000
(Unaudited)
------------ ------------

Liabilities and Shareholders' Equity:
Liabilities:
Policy liabilities:
Future policy benefits $ 25,696 $ 26,101
Unpaid policy claims 1,771 1,745
Unearned premiums 348 355
Other policyholders' funds 433 364
-------- --------
Total policy liabilities 28,248 28,565
Notes payable 1,356 1,079
Income taxes 2,177 1,894
Payables for return of cash collateral
on loaned securities 342 127
Payable for security transactions 455 -
Other 779 872
-------- --------
Total liabilities 33,357 32,537
-------- --------
Shareholders' equity:
Common stock of $.10 par value. In thousands:
authorized 1,000,000 shares; issued 645,872
shares in 2001 and 644,813 shares in 2000 65 32
Additional paid-in capital 320 336
Retained earnings 4,239 3,956
Accumulated other comprehensive income:
Unrealized foreign currency translation gains 211 194
Unrealized gains on investment securities 2,080 1,474
Treasury stock, at average cost (1,479) (1,298)
-------- --------
Total shareholders' equity 5,436 4,694
-------- --------
Total liabilities and shareholders' equity $ 38,793 $ 37,231
======== ========
Shareholders' equity per share $ 10.35 $ 8.87
======== ========

See the accompanying Notes to the Consolidated Financial Statements.

Share and per-share amounts reflect the two-for-one stock split distributed
March 16, 2001.

Certain reclassifications have been made to prior period amounts to conform
to current period reporting classifications. These reclassifications had no
impact on net earnings.

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings

(In millions - Unaudited) Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------

Revenues:
Premiums, principally supplemental health insurance $ 1,980 $ 2,050 $ 3,990 $ 4,069
Net investment income 382 385 763 761
Realized investment gains (losses) (4) (91) (5) (94)
Other income (loss) (10) 11 1 16
------- ------- ------- -------
Total revenues 2,348 2,355 4,749 4,752
------- ------- ------- -------
Benefits and expenses:
Benefits and claims 1,550 1,647 3,136 3,266
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs 84 77 164 146
Insurance commissions 252 258 502 513
Insurance expenses 188 193 372 382
Interest expense 5 5 10 10
Release of retirement liability - (101) - (101)
Other operating expenses 20 17 42 33
------- ------- ------- -------
Total acquisition and
operating expenses 549 449 1,090 983
------- ------- ------- -------
Total benefits and expenses 2,099 2,096 4,226 4,249
------- ------- ------- -------
Earnings before income taxes 249 259 523 503
Income taxes 96 57 191 145
------- ------- ------- -------
Net earnings $ 153 $ 202 $ 332 $ 358
======= ======= ======= =======

(continued)

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings (continued)

(In millions, except for share and Three Months Ended June 30, Six Months Ended June 30,
per-share amounts - Unaudited) ---------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------

Net earnings per share:
Basic $ .29 $ .38 $ .63 $ .67
Diluted .28 .37 .61 .66
======= ======= ======= =======
Shares used in computing earnings per share (In thousands):
Basic 525,786 531,143 526,976 531,171
Diluted 539,151 544,861 540,453 544,692
======= ======= ======= =======
Cash dividends per share $ .05 $ .043 $ .093 $ .081
======= ======= ======= =======

See the accompanying Notes to the Consolidated Financial Statements.

Share and per-share amounts reflect the two-for-one stock split distributed March 16, 2001.

Certain reclassifications have been made to prior period amounts to conform to current period reporting classifications.
These reclassifications had no impact on net earnings.

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(In millions, except for per-share amounts - Unaudited)

Six Months Ended June 30,
----------------------------
2001 2000
Common Stock: ------ ------
Balance at beginning of period $ 32 $ 32
Exercise of stock options 1 -
Two-for-one stock split 32 -
------ ------
Balance at end of period 65 32
------ ------
Additional paid-in capital:
Balance at beginning of period 336 310
Exercise of stock options 5 11
Gain on treasury stock reissued 11 3
Two-for-one stock split (32) -
------ ------
Balance at end of period 320 324
------ ------
Retained earnings:
Balance at beginning of period 3,956 3,356
Net earnings 332 358
Dividends to shareholders ($.093 per share
in 2001 and $.081 in 2000) (49) (42)
------ ------
Balance at end of period 4,239 3,672
------ ------
Accumulated other comprehensive income:
Balance at beginning of period 1,668 1,264
Change in unrealized foreign currency
translation gains (losses) during
period, net of income taxes 17 (50)
Change in unrealized gains (losses) on
investment securities during period, net
of income taxes 606 123
------ ------
Balance at end of period 2,291 1,337
------ ------
Treasury stock:
Balance at beginning of period (1,298) (1,094)
Purchases of treasury stock (205) (133)
Cost of shares issued 24 23
------ ------
Balance at end of period (1,479) (1,204)
------ ------
Total shareholders' equity $ 5,436 $ 4,161
====== ======
See the accompanying Notes to the Consolidated Financial Statements.

Per-share amounts reflect the two-for-one stock split distributed March 16,
2001.

Certain reclassifications have been made to prior period amounts to conform
to current period reporting classifications. These reclassifications had no
impact on net earnings.
5

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions - Unaudited)

Six Months Ended
June 30,
2001 2000
------ ------

Cash flows from operating activities:
Net earnings $ 332 $ 358
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Increase in policy liabilities 1,200 1,354
Deferred income taxes 37 47
Change in income taxes payable 306 103
Increase in deferred policy
acquisition costs (150) (146)
Change in receivables and advance premiums 15 (14)
Realized investment (gains) losses 5 94
Change in fair value of interest component
of cross-currency swaps 19 -
Release of retirement liability - (101)
Other, net (371) (93)
------ ------
Net cash provided by operating activities 1,393 1,602
------ ------
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold 941 400
Fixed maturities matured 249 215
Equity securities 67 22
Securities held to maturity:
Fixed maturities matured 50 -
Other investments, net (2) (1)
Costs of investments acquired:
Securities available for sale:
Fixed maturities (1,226) (2,559)
Perpetual debentures (500) (21)
Equity securities (79) (42)
Securities held to maturity:
Fixed maturities (1,079) -
Perpetual debentures (42) -
Cash received as collateral on
loaned securities, net 266 880
Additions to property and equipment, net (64) (7)
Other, net (6) (8)
------ ------
Net cash used by investing activities $(1,425) $(1,121)
------ ------

(continued)

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In millions - Unaudited)

Six Months Ended
June 30,
2001 2000
------ ------
Cash flows from financing activities:
Proceeds from borrowings $ 333 $ 15
Principal payments under debt obligations (6) (5)
Change in deposit funds 98 14
Dividends paid to shareholders (46) (39)
Purchases of treasury stock (205) (133)
Treasury stock reissued 24 19
Other, net 5 10
------ ------
Net cash provided (used) by financing activities 203 (119)
------ ------
Effect of exchange rate changes on cash
and cash equivalents (44) (12)
------ ------
Net change in cash and cash equivalents 127 351

Cash and cash equivalents, beginning of period 609 616
------ ------
Cash and cash equivalents, end of period $ 736 $ 967
====== ======

Supplemental disclosures of cash flow information:
Cash payments during the period for:
Interest paid $ 11 $ 11
Income taxes paid 186 78
Impairment loss on available-for-sale security 42 57
Noncash financing activities:
Capital lease obligations 12 9
Treasury shares issued to AFL stock plan for:
Shareholder dividend reinvestment 3 3
Associates stock bonus 9 4

See the accompanying Notes to the Consolidated Financial Statements.

Certain reclassifications have been made to prior period amounts to conform
to current period reporting classifications. These reclassifications had no
impact on net earnings.

AFLAC INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In millions - Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------

Net earnings $ 153 $ 202 $ 332 $ 358
------- ------- ------- -------
Other comprehensive income, before
income taxes:
Change in unrealized foreign currency translation
gains (losses) during the period 15 (4) 77 28
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising
during the period 159 (135) 854 97
Reclassification adjustment for realized (gains)
losses included in net earnings 4 92 5 93
Unrealized gains (losses) on interest rate swap contracts:
Unrealized holding gains (losses) arising
during the period - - (1) -
Reclassification adjustment for (gains) losses
included in net earnings 1 - 1 -
------- ------- ------- -------
Total other comprehensive income (loss),
before income taxes 179 (47) 936 218

Income tax expense related to items of
other comprehensive income 66 5 313 145
------- ------- ------- -------
Other comprehensive income (loss), net
of income taxes 113 (52) 623 73
------- ------- ------- -------
Total comprehensive income $ 266 $ 150 $ 955 $ 431
======= ======= ======= =======

See the accompanying Notes to the Consolidated Financial Statements.

</TABLE

AFLAC INCORPORATED AND SUBSIDIARIES
Notes to the Consolidated Financial Statements

1. Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated
financial statements of AFLAC Incorporated and subsidiaries (the "Company")
contain all adjustments necessary to fairly present the consolidated balance
sheet as of June 30, 2001, and the consolidated statements of earnings and
comprehensive income for the three and six month periods ended June 30, 2001
and 2000, and consolidated statements of cash flows and shareholders' equity
for the six months ended June 30, 2001 and 2000. Results of operations for
interim periods are not necessarily indicative of results for the entire
year.

We prepare our financial statements in accordance with accounting
principles generally accepted in the United States of America (GAAP). These
principles are established primarily by the Financial Accounting Standards
Board and the American Institute of Certified Public Accountants. The
preparation of financial statements in conformity with GAAP requires us to
make estimates when recording transactions resulting from business
operations, based on information currently available. The most significant
items on our balance sheet that involve a greater degree of accounting
estimates and actuarial determinations subject to changes in the future are:
deferred policy acquisition costs and liabilities for future policy benefits
and unpaid policy claims. As additional information becomes available (or
actual amounts are determinable), the recorded estimates will be revised and
reflected in operating results. Although some variability is inherent in
these estimates, we believe the amounts provided are adequate.

The financial statements should be read in conjunction with the
financial statements included in our annual report to shareholders for the
year ended December 31, 2000.

Certain reclassifications have been made to prior period amounts to
conform to current period reporting classifications. These
reclassifications had no impact on net earnings.

2. Accounting Pronouncements

We adopted Statement of Financial Accounting Standards (SFAS) No. 133
as amended, Accounting for Derivative Instruments and Hedging Activities, on
January 1, 2001. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in investment securities and other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. The accounting for changes in the fair value of
a derivative is included in either earnings or other comprehensive income
depending on the intended use of the derivative instrument and the nature of
any hedge designation thereon.

This standard changed the accounting for our interest rate swaps and
the interest component of our cross-currency swaps. In accordance with SFAS
No. 133, we now recognize in net earnings the change in fair value of the

interest component of our cross-currency swaps. Unrealized gains and losses
related to the change in fair value of our interest rate swaps are included
in accumulated other comprehensive income until the hedged transaction
terminates. The changes described above affect only the pattern and the
timing of non-cash accounting recognition.

The cumulative transition effect of adopting this new accounting
standard as of January 1, 2001, was immaterial. See Note 5 for additional
information on our derivative and nonderivative financial instruments.

3. Segment Information

Information regarding components of operations follows:

(In millions) Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
AFLAC Japan:
Earned premiums $ 1,528 $ 1,673 $ 3,099 $ 3,318
Net investment income 304 314 609 621
Other income 1 6 1 5
------- ------- ------- -------
Total AFLAC Japan revenues 1,833 1,993 3,709 3,944
------- ------- ------- -------
AFLAC U.S.:
Earned premiums 451 377 890 751
Net investment income 75 68 148 135
Other income 3 2 4 2
------- ------- ------- -------
Total AFLAC U.S. revenues 529 447 1,042 888
------- ------- ------- -------
Other business segments 9 7 17 13
------- ------- ------- -------
Total business
segment revenues 2,371 2,447 4,768 4,845
Realized investment gains
(losses) (4) (91) (5) (94)
Corporate* (12) 7 (2) 17
Intercompany eliminations (7) (8) (12) (16)
------- ------- ------- -------
Total revenues $ 2,348 $ 2,355 $ 4,749 $ 4,752
======= ======= ======= =======
Earnings before income taxes:
AFLAC Japan $ 201 $ 191 $ 405 $ 379
AFLAC U.S. 85 71 167 141
Other business segments (1) (2) (1) (2)
------- ------- ------- -------
Total business
segment earnings 285 260 571 518
Realized investment gains
(losses) (4) (91) (5) (94)
Release of retirement liability - 101 - 101
Interest expense,
noninsurance operations (4) (4) (8) (8)
Corporate* (28) (7) (35) (14)
------- ------- ------- -------
Total earnings before
income taxes $ 249 $ 259 $ 523 $ 503
======= ======= ======= =======

*Includes investment income of $3 in both 2001 and 2000 for the three-month
period and $7 in 2001 and $6 in 2000 for the six-month period. In 2001,
includes a $21 loss for the three-month period and a $19 loss for the six-
month period related to the change in fair value of the interest component
of our cross-currency swaps.

Assets were as follows:
June 30, December 31,
(In millions) 2001 2000
------------ -----------
Assets:
AFLAC Japan $ 32,846 $ 31,881
AFLAC U.S. 5,456 4,964
Other business segments 42 46
-------- --------
Total business segment assets 38,344 36,891
Corporate 6,986 5,993
Intercompany eliminations (6,537) (5,653)
-------- --------
Total assets $ 38,793 $ 37,231
======== ========

4. Notes Payable

A summary of notes payable is as follows:
June 30, December 31,
(In millions) 2001 2000
---------- -----------
6.50% senior notes due April 2009 (principal
amount $450) $ 449 $ 449
Yen-denominated Samurai notes:
1.55% notes due October 2005 (principal
amount 30 billion yen) 241 261
.87% notes due June 2006 (principal
amount 40 billion yen) 321 -
Unsecured, yen-denominated notes payable to banks:
Reducing revolving credit agreement, due
July 2001:
2.29% fixed interest rate 91 99
Variable interest rate (.35% at June 30, 2001) 13 14
Revolving credit agreement, due November 2002:
1.24% fixed interest rate 62 68
Variable interest rate (.30% at June 30, 2001) 145 157
Obligations under capitalized leases payable
monthly through 2006, secured by computer
equipment in Japan 34 31
------ ------
Total notes payable $ 1,356 $ 1,079
====== ======

For those loans denominated in yen, the principal amount of the loans
as stated in dollar terms will fluctuate from period to period due to
changes in the yen/dollar exchange rate.

In September 2000, we filed a shelf registration statement with
Japanese regulatory authorities to issue up to 100 billion yen of yen-
denominated Samurai notes. These securities are not for sale to United
States residents or entities. In October 2000, we issued in Japan 30
billion yen of 1.55% Samurai notes due October 2005 ($241 million using the
June 30, 2001 exchange rate). In June 2001, we issued in Japan 40 billion
yen of .87% Samurai notes due June 2006 ($321 million using the June 30,
2001 exchange rate). Both issues are redeemable at our option at any time
with a redemption price equal to the principal amount of the notes being
redeemed plus a premium.
12

In April 1999, we issued $450 million of 6.50% senior notes, due April
2009. The current outstanding balance after discount is $449 million. The
notes are redeemable at our option at any time with a redemption price equal
to the principal amount of the notes being redeemed plus a make-whole
amount. We have entered into cross-currency swaps that have the effect of
converting the dollar-denominated principal and interest into yen-
denominated obligations (see Note 5).

In July 2001, we paid in full (12.9 billion yen, or $104 million at the
June 30, 2001 exchange rate) the unsecured reducing, revolving credit
agreement.

We have an unsecured revolving credit agreement that provides for bank
borrowings through November 2002 in either U.S. dollars or Japanese yen.
The borrowing limit is $250 million. The debt is currently payable in
Japanese yen. At June 30, 2001, 7.8 billion yen ($62 million) was
outstanding at a fixed interest rate and 18.1 billion yen ($145 million) was
outstanding at a variable interest rate under this agreement.

At June 30, 2001, we had outstanding interest rate swaps on 19.1
billion yen ($153 million) of our variable-interest-rate yen-denominated
borrowings (see Note 5). In July 2001, 15.2 billion yen ($122 million) of
the interest rate swaps expired.

5. Financial Instruments

We have only limited activity with derivative financial instruments.
We do not use them for trading purposes, nor do we engage in leveraged
derivative transactions. Our risk management objectives are to minimize the
exposure of our shareholders' equity to foreign currency translation
fluctuations and also reduce our interest expense by converting the
principal and interest of our dollar-denominated debt into yen-denominated
obligations. We currently use two types of derivatives: interest rate swaps
and cross-currency swaps.

AFLAC documents all relationships between hedging instruments and
hedged items, as well as its risk-management objectives and strategy for
undertaking various hedge transactions. This process includes linking all
derivatives that are designated as hedges to specific assets or liabilities
on the balance sheet or specific forecasted transactions. We also assess,
both at hedge inception and on an ongoing basis, whether the derivatives and
nonderivatives used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of the hedged items.

The assessment of hedge effectiveness determines the non-cash
accounting treatment of changes in fair value. Our accounting for changes
in the fair value of derivatives is as follows:

Derivative's Change in Fair Value
Nature of Hedge Designation Reflected in:
- --------------------------- ---------------------------------
Cash flow Other comprehensive income, with
subsequent reclassifications to
earnings when the hedged transaction
impacts earnings

Net investment in foreign Other comprehensive income as part of
operations the cumulative translation adjustment;
ineffective portions of the hedge are
included in other income

Derivative Hedging Instruments

We have cross-currency swaps outstanding related to our $450 million
senior notes (see Note 4). These cross-currency swaps have the effect of
converting the dollar-denominated principal and interest into yen-
denominated obligations. Our interest expense is reduced from 6.50% payable
in dollars to 1.67% payable in yen. The notional amount and terms of the
swaps match the principal amount and terms of the senior notes. The cross-
currency swaps have been designated as a hedge of the foreign currency
exposure of our net investment in AFLAC Japan.

The fair value of the cross-currency swaps includes three components:
the effect of changes in foreign currency exchange rates, the accrued
interest at the valuation date, and the effect of changes in interest rates
in the United States and Japan.

The foreign currency portion of our cross-currency swaps is included at
fair value in other assets at $5 million as of June 30, 2001, and in other
liabilities at $34 million as of December 31, 2000. The related $39 million
increase in fair value during the six months ended June 30, 2001 (a $19
million increase during the six months ended June 30, 2000) is reflected in
accumulated other comprehensive income - unrealized foreign currency
translation gains (losses).

The ineffective portion of the hedging instruments is the fair value of
the interest components of the cross-currency swaps. At June 30, 2001, the
accrued interest receivable was $5 million. The balance was $4 million at
December 31, 2000. The change in the accrued interest receivable is
included in interest expense. The decrease in fair value related to changes
in interest rates was $21 million for the three-month period and $19 million
for the six-month period. These losses are reflected in other liabilities
and other income (loss).

The fair value of the interest components, not related to accrued
interest, was not reflected in the financial statements prior to January 1,
2001.

At June 30, 2001, we had outstanding interest rate swaps on 19.1
billion yen ($153 million) of our variable-interest-rate yen-denominated

borrowings (Note 4). In July 2001, 15.2 billion yen ($122 million) of the
19.1 billion yen outstanding as of quarter end expired. The remaining swap
agreements expire in July 2002. These swaps reduce the impact of changes in
interest rates on our borrowing costs and effectively change our interest
rate from variable to fixed. After the effect of the remaining swap
agreements, we make fixed-rate payments at 1.24% and receive floating-rate
payments (.08% at June 30, 2001, plus loan costs of 20 basis points) based
on three-month Japanese yen LIBOR. We do not expect to reclassify a
significant amount of gains/losses from accumulated other comprehensive
income to earnings during the next 12 months related to our interest rate
swaps. For additional information on the credit agreements, see Note 4.

Our risk management objective is to fix the net interest cash outflows
on a portion of our debt obligations. We have designated these interest
rate swaps as a cash flow hedge of our exposure to the variability in future
cash flows attributable to the variable interest payments due. These
interest rate swaps are included in other liabilities at a fair value of $1
million at June 30, 2001, and the change in such fair value during the six
months ended June 30, 2001 is reflected in accumulated other comprehensive
income. The change in accrued interest payable is included in interest
expense. The fair value of the interest rate swaps was not reflected in the
financial statements prior to January 1, 2001. For additional information
on the adoption of SFAS No. 133 and our accounting for derivatives, see Note
2.

Nonderivative Hedging Instruments

The following yen-denominated debt instruments (see Note 4) have been
designated as hedges of the foreign currency exposure of our net investment
in AFLAC Japan - the 1.55% Samurai notes due October 2005, principal amount
30.0 billion yen; the .87% Samurai notes due June 2006, principal amount
40.0 billion yen; the unsecured reducing, revolving credit agreement due
July 2001, currently payable in Japanese yen, principal amount 12.9 billion
yen; and the unsecured, revolving credit agreement due November 2002,
currently payable in Japanese yen, principal amount 25.8 billion yen.

Other Nonderivative Instruments

We lend fixed-maturity securities to financial institutions in short-
term security lending transactions. These securities continue to be carried
as investment assets on our balance sheet during the term of the loans and
are not recorded as sales. We receive cash or other securities as
collateral for such loans. These short-term security lending arrangements
increase investment income with minimal risk. At June 30, 2001, and
December 31, 2000, we had security loans outstanding in the amounts of $334
million and $123 million at fair value, respectively. At June 30, 2001, and
December 31, 2000, we held cash in the amount of $342 million and $127
million, respectively, as collateral for loaned securities.

For loans involving unrestricted cash collateral, the collateral is
recorded as an asset with a corresponding liability for the return of the
collateral. For loans collateralized by securities, the collateral is not
recorded as an asset or liability.

Our security lending policy requires that the fair value of the
securities received as collateral and cash received as collateral be 102%
and 100% or more, respectively, of the fair value of the loaned securities
as of the date the securities are loaned and not less than 100% thereafter.
15

6. Investment Securities

Realized Investment Gains and Losses

In March 2001, we recognized a pretax impairment loss of $42 million in
realized investment gains and losses on the corporate debt securities of a
U.S. issuer, which experienced a significant credit rating downgrade during
the first quarter of 2001. These debt securities are carried in the
available-for-sale category.

We also executed several bond sales and purchase transactions during
the first quarter in an effort to increase investment income and extend
investment maturities. The sales of these debt securities resulted in
pretax realized investment gains of $21 million.

Also, in the first quarter of 2001, we realized a pretax investment
gain of $18 million related to the sale of a portion of our U.S. equity
securities portfolio in connection with a change in outside investment
managers.

During the first half of 2000, the North American issuers of two debt
securities held in our debt portfolio experienced significant credit rating
downgrades. In the second quarter, we sold one security at a realized loss
of $34 million. We recorded an impairment loss of $57 million on the other
security. These losses decreased net earnings by $58 million ($.11 per
basic and diluted share) for the three months and six months ended June 30,
2000.

Unrealized Investment Gains and Losses

The unrealized gains and losses on debt securities, less amounts
applicable to policy liabilities and deferred income taxes, are reported in
accumulated other comprehensive income. The portion of unrealized gains
credited to policy liabilities represents gains that would not inure to the
benefit of our shareholders if such gains were actually realized.

The net effect on shareholders' equity of unrealized gains and losses
from investment securities at the following dates was:

(In millions) June 30, December 31,
2001 2000
------------ ------------
Unrealized gains on securities
available for sale $ 3,202 $ 1,541
Unamortized unrealized gains on
securities transferred to held
to maturity 677 1,001
Less:
Policy liabilities 478 -
Deferred income taxes 1,321 1,068
--------- ---------
Shareholders' equity, net
unrealized gains on
investment securities $ 2,080 $ 1,474
========= =========

As of March 31, 2001, new Japanese accounting principles and regulatory
requirements became effective, which impact investment classifications and
solvency margin calculations on a Japanese accounting basis. As a result of
these new regulatory requirements, we re-evaluated AFLAC Japan's investment
portfolio and our holding period intent related to certain investment
securities. In order to minimize future unfavorable solvency margin results
under the new Japanese accounting methods, debt securities with amortized
cost of $1.8 billion were reclassified from the held-to-maturity category to
the available-for-sale category as of March 31, 2001. The related
unamortized unrealized gain, included in accumulated other comprehensive
income immediately prior to the transfer, was $327 million.

We also reclassified debt securities with a fair value of $2.3 billion
from the available-for-sale category to the held-to-maturity category as of
March 31, 2001. The related unrealized gain of $118 million is being
amortized from accumulated other comprehensive income to investment income
over the remaining term of the securities. The related premium in the
carrying value of the debt securities that was created when the
reclassification occurred is also being amortized as an offsetting charge to
investment income.

7. Common Stock

The following is a reconciliation of the number of shares of our common
stock for the six months ended June 30:

(In thousands of shares) 2001 2000
---------- ----------
Common stock - issued:
Balance at beginning of period 644,813 640,698
Exercise of stock options 1,059 3,149
-------- --------
Balance at end of period 645,872 643,847
-------- --------
Treasury stock:
Balance at beginning of period 115,603 109,216
Purchases of treasury stock:
Open market 6,675 6,209
Other 165 175
Shares issued to AFL Stock Plan (944) (727)
Exercise of stock options (1,048) (1,449)
-------- --------
Balance at end of period 120,451 113,424
-------- --------
Shares outstanding at end of period 525,421 530,423
======== ========

On February 13, 2001, the board of directors declared a two-for-one
stock split, consisting of 323 million shares, payable to shareholders of
record at the close of business on February 27, 2001. The stock split was
distributed on March 16, 2001. Share and per-share amounts have been
retroactively adjusted to reflect this split.

For the three months ended June 30, 2001 and 2000, there were
approximately 539,200 and 489,800 weighted average shares, respectively, for

outstanding stock options that were not included in the weighted average
shares used in the computation of diluted earnings per share because the
exercise price for these options was greater than the average market price
during the second three months of 2001 and 2000. For the six months ended
June 30, 2001 and 2000, there were approximately 543,700 and 1,873,100
weighted average shares, respectively, for outstanding stock options that
were not included in the weighted average shares used in the computation of
diluted earnings per share because the exercise price for these options was
greater than the average market price during the first six months of 2001
and 2000.

8. Litigation

We are a defendant in various litigation considered to be in the normal
course of business. Some of this litigation is pending in Alabama, where
large punitive damages bearing little relation to the actual damages
sustained by plaintiffs have been awarded against other companies, including
insurers, in recent years. Although the final results of any litigation
cannot be predicted with certainty, we believe the outcome of pending
litigation will not have a material adverse effect on our financial
position, results of operations, or cash flows.

9. Release of Retirement Liability

In May 2000, the surviving spouse of John B. Amos, former chairman of
the board, unexpectedly passed away. The Company had accrued an unfunded
liability under a shareholder-approved employment contract for projected
retirement payments based on a normal life expectancy. The release of the
remaining accrued liability increased net earnings by $99 million ($.19 per
basic share and $.18 per diluted share) for the three and six months ended
June 30, 2000.

REVIEW BY INDEPENDENT AUDITORS

The June 30, 2001, and 2000, financial statements included in this
filing have been reviewed by KPMG LLP, independent auditors, in accordance
with established professional standards and procedures for such a review.

The report of KPMG LLP commenting upon their review is included on
page 20.

KPMG LLP
Certified Public Accountants
303 Peachtree Street, N.E. Telephone: (404) 222-3000
Suite 2000 Telefax: (404) 222-3050
Atlanta, GA 30308

INDEPENDENT AUDITORS' REVIEW REPORT

The shareholders and board of directors AFLAC Incorporated:

We have reviewed the consolidated balance sheet of AFLAC Incorporated and
subsidiaries as of June 30, 2001, and the related consolidated statements of
earnings and comprehensive income for the three-month and six-month periods
ended June 30, 2001 and 2000, and the consolidated statements of
shareholders' equity and cash flows for the six-month periods ended June 30,
2001 and 2000. These consolidated financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the
United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above
for them to be in conformity with accounting principles generally accepted
in the United States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the accompanying consolidated
balance sheet of AFLAC Incorporated and subsidiaries as of December 31,
2000, and the related consolidated statements of earnings, shareholders'
equity, cash flows and comprehensive income for the year then ended (not
presented herein); and in our report dated January 26, 2001, we expressed an
unqualified opinion on those financial statements.

KPMG LLP

Atlanta, GA
July 24, 2001

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

AFLAC Incorporated is the parent company of American Family Life
Assurance Company of Columbus, AFLAC. Our principal business is
supplemental health and life insurance, which is marketed and administered
through AFLAC. Most of AFLAC's policies are individually underwritten and
marketed at worksites through independent agents, with premiums paid by the
employee. Our operations in Japan (AFLAC Japan) and the United States
(AFLAC U.S.) service the two markets for our insurance business.

On February 13, 2001, the board of directors declared a two-for-one
stock split, effectively increasing the issued and outstanding shares by
100%. All share and per-share amounts have been restated for the split.

RESULTS OF OPERATIONS

The following nonoperating items affected our net earnings during 2001
and 2000.

The second quarter of 2001 included a $21 million pretax loss ($21
million after tax, or $.04 per basic and diluted share) in connection with
Statement of Financial Accounting Standards (SFAS) No. 133. The year-to-
date impact of SFAS No. 133 was to reduce pretax earnings by $19 million
($18 million after tax, or $.04 per basic and diluted share). These losses,
which are included in other income, arose from the change in fair value of
the interest component of cross-currency swaps related to the Company's
debt. (See Notes 2 and 5 of the Notes to the Consolidated Financial
Statements.)

In the second quarter of 2000, the release of an accrued unfunded
liability for projected retirement payments increased pretax earnings by
$101 million ($99 million after tax, or $.19 per basic share and $.18 per
diluted share) for the three months and six months ended June 30, 2000.
(See Note 9 of the Notes to the Consolidated Financial Statements.)

During the second quarter of 2000, we sold one security at a pretax
loss of $34 million. We also recorded a pretax impairment loss of $57
million on another security. These losses are included in realized
investment gains and losses. The combined effect of these losses decreased
net earnings by $58 million ($.11 per basic and diluted share) for the three
months and six months ended June 30, 2000. (See Note 6 of the Notes to the
Consolidated Financial Statements.)

The following table sets forth the results of operations by business segment for the periods shown.

SUMMARY OF OPERATING RESULTS BY BUSINESS SEGMENT
(In millions, except for per-share amounts)

Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------- -----------------------------------------
Percentage Change 2001 2000 Percentage Change 2001 2000
----------------- ------------------ ----------------- ------------------

Operating earnings:
AFLAC Japan. . . . . . . . . . . . 5.3% $ 201 $ 191 6.7% $ 405 $ 379
AFLAC U.S. . . . . . . . . . . . . 19.6 85 71 18.2 167 141
Other business segments. . . . . . (1) (2) (1) (2)
----- ----- ----- -----
Total business segments. . . . . 9.8 285 260 10.1 571 518
Interest expense,
noninsurance operations. . . . . .4 (4) (4) (2.2) (8) (8)
Corporate and eliminations . . . . (18.4) (7) (6) (6.4) (16) (15)
----- ----- ----- -----
Pretax operating earnings. . . . 9.7 274 250 10.4 547 495
Income taxes . . . . . . . . . . . 8.9 97 89 9.6 193 175
----- ----- ----- -----
Operating earnings . . . . . . . 10.2 177 161 10.8 354 320
Nonoperating items:
Change in fair value of the
interest component of cross-
currency swaps, net of tax . . . (21) - (18) -
Realized investment gains
(losses), net of tax . . . . . . (3) (58) (4) (61)
Release of retirement liability,
net of tax . . . . . . . . . . . - 99 - 99
----- ----- ----- -----
Net earnings . . . . . . . . . . (24.0)% $ 153 $ 202 (7.4)% $ 332 $ 358
===== ===== ===== =====
Operating earnings per basic share . 13.3% $ .34 $ .30 11.7% $ .67 $ .60
Operating earnings per diluted share 10.0 .33 .30 11.9 .66 .59
===== ===== ===== =====
Net earnings per basic share . . . . (23.7)% $ .29 $ .38 (6.0)% $ .63 $ .67
Net earnings per diluted share . . . (24.3) .28 .37 (7.6) .61 .66
===== ===== ===== =====
===========================================================================================================================
22

The following discussion of earnings comparisons focuses on operating
earnings and excludes realized investment gains/losses, the change in fair
value of the interest component of cross-currency swaps in 2001 and the gain
from the release of the retirement accrual in 2000. Operating earnings per
share amounts referenced in the following discussion are based on the
diluted number of average outstanding shares and retroactively reflect the
two-for-one stock split distributed March 16, 2001. For the first half of
2001, the weakening yen, or strengthening dollar, masked our true operating
performance. Our business, in functional currency terms, continued to be
strong, and we believe it is more appropriate to measure our performance
excluding the effect of the yen in order to understand the basic operating
results of the business.

FOREIGN CURRENCY TRANSLATION

Due to the relative size of AFLAC Japan, fluctuations in the yen/dollar
exchange rate can have a significant effect on our reported results. In
years when the yen weakens, translating yen into dollars causes fewer
dollars to be reported. When the yen strengthens, translating yen into
dollars causes more dollars to be reported.

The following table illustrates the effect of foreign currency
translation by comparing our reported operating results with those that
would have been reported had foreign currency rates remained unchanged from
the comparable period in the prior year.

AFLAC Incorporated and Subsidiaries
Foreign Currency Translation Effect on Operating Results
Percentage Changes Over Previous Period
(For the periods ended June 30, 2001)

Three Months Six Months
Operating Results Operating Results
--------------------- ---------------------
Including Excluding Including Excluding
Currency Currency Currency Currency
Changes Changes* Changes Changes*
--------- --------- --------- ---------
Premium income (3.4)% 7.8% (1.9)% 7.7%
Net investment income (.9) 7.5 .3 7.4
Operating revenues (3.0) 7.7 (1.5) 7.7
Total benefits and expenses (4.5) 6.7 (2.9) 6.7
Operating earnings 10.2 16.8 10.8 16.4
Operating earnings per
diluted share 10.0 16.7 11.9 16.9
- ----------------------------------------------------------------------------
*Amounts excluding foreign currency changes were determined using the
same yen/dollar exchange rate for the current period as the comparable
period in the prior year.
============================================================================

The yen weakened in relation to the dollar during 2000 and the first
half of 2001. The average yen/dollar exchange rates were 122.71 and 106.69
for the three months ended June 30, 2001 and 2000, and 120.43 and 106.91 for
the six months ended June 30, 2001 and 2000, respectively. The weakening of
the yen in 2001 decreased operating earnings by approximately $.02 per share

for the three months ended June 30, 2001, and $.03 per share for the six
months ended June 30, 2001. Operating earnings per share increased 10.0% to
$.33 for the three-month period ended June 30, 2001, compared with the same
period in 2000 and increased 11.9% to $.66 for the six-month period ended
June 30, 2001, compared with the same period in 2000. Operating earnings
per share, excluding the effect of foreign currency translation, increased
16.7%, to $.35 for the quarter and increased 16.9% to $.69 for the six
months ended June 30, 2001 compared with the same periods in 2000.

Our primary financial objective is the growth of operating earnings per
share excluding the effect of foreign currency fluctuations. Our objective
for 2001 through 2003 is to increase operating earnings per share by 15% to
17% excluding the impact of currency translation.

We expect to achieve the high end of our objective for 2001. If we
achieve a 17% increase, the following table shows the likely results for
operating earnings per share in 2001 using various yen/dollar exchange rate
scenarios.

2001 Operating EPS Scenarios
----------------------------
Annual
Average Yen Annual Operating % Growth Yen Impact
Exchange Rate Diluted EPS Over 2000 on EPS
------------- ---------------- --------- ----------
100.00 $ 1.45 20.8% $ .05
105.00 1.42 18.3 .02
107.83* 1.40 16.7 -
110.00 1.39 15.8 (.01)
115.00 1.36 13.3 (.04)
120.00 1.33 10.8 (.07)
125.00 1.31 9.2 (.09)
130.00 1.29 7.5 (.11)

*Actual 2000 average exchange rate.

If we reach the high end of our earnings objective and the yen averages
120 to 125 to the dollar for the remainder of the year, we would expect
operating earnings for the full year to be in the range of $1.33 to $1.31
per share.

SHARE REPURCHASE PROGRAM

During the second quarter, we acquired 1.3 million shares of AFLAC
stock, bringing the total number of shares purchased in the first six months
to 6.7 million. At the end of June 2001, we had 9.8 million shares
remaining for purchase under authorization from the board of directors.

INCOME TAXES

Our combined U.S. and Japanese effective income tax rates on operating
earnings for the six months ended June 30, 2001 and 2000 were 35.2% and
35.4%, respectively.

INSURANCE OPERATIONS, AFLAC JAPAN

AFLAC Japan, a branch of AFLAC and the principal contributor to our
earnings, ranks number one in terms of premium income and profits among all
foreign life and non-life insurance companies operating in Japan. Among all
life insurance companies operating in Japan, AFLAC Japan ranked second in
terms of individual policies in force and 12th in terms of assets according
to Financial Services Agency (FSA) data as of March 31, 2001.

The following table presents a summary of AFLAC Japan's operating
results.

AFLAC JAPAN
SUMMARY OF OPERATING RESULTS

Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2001 2000 2001 2000
------------------ ------------------
Premium income. . . . . . . . . $ 1,528 $ 1,673 $ 3,099 $ 3,318
Investment income . . . . . . . 304 314 609 621
Other income. . . . . . . . . . 1 6 1 5
------ ------ ------ ------
Total revenues. . . . . . . . 1,833 1,993 3,709 3,944
------ ------ ------ ------
Benefits and claims . . . . . . 1,272 1,411 2,586 2,794
Operating expenses. . . . . . . 360 391 718 771
------ ------ ------ ------
Total benefits and expenses . 1,632 1,802 3,304 3,565
------ ------ ------ ------

Pretax operating earnings . $ 201 $ 191 $ 405 $ 379
====== ====== ====== ======
- ----------------------------------------------------------------------------
Percentage changes in dollars
over previous period:
Premium income. . . . . . . . (8.7)% 21.9% (6.6)% 19.8%
Investment income . . . . . . (3.4) 20.0 (1.9) 18.5
Total revenues. . . . . . . . (8.0) 21.9 (6.0) 19.7
Pretax operating earnings . . 5.3 25.7 6.7 22.3

- ----------------------------------------------------------------------------
Percentage changes in yen
over previous period:
Premium income. . . . . . . . 5.1% 7.5% 5.2% 7.8%
Investment income . . . . . . 11.1 5.8 10.5 6.6
Total revenues. . . . . . . . 5.9 7.4 5.9 7.7
Pretax operating earnings . . 21.0 10.8 20.2 10.0

- ----------------------------------------------------------------------------
Ratios to total revenues:
Benefits and claims . . . . . 69.4% 70.8% 69.7% 70.9%
Operating expenses. . . . . . 19.6 19.6 19.4 19.5
Pretax operating earnings . . 11.0 9.6 10.9 9.6

============================================================================

The benefit ratio has decreased slightly as the mix of business
continues to shift to newer products, which have lower loss ratios than the
earlier versions of our cancer life products.

In the second quarter of 2001, the average yen/dollar exchange rate
used to translate AFLAC Japan's income statement was 122.71, compared with
an average rate of 106.69 in the second quarter of 2000. For the six-month
period ended June 30, 2001 the average exchange rate was 120.43, compared
with 106.91 for the six-month period ended June 30, 2000. This weakening of
the average exchange rate held down rates of growth for AFLAC Japan in
dollar terms and inflated rates of growth in yen terms. Because
approximately one-fourth of AFLAC Japan's investment income is dollar-
denominated, increases as reported in yen for total revenues, net investment
income and pretax operating earnings were magnified.

The following table illustrates the effect of foreign currency
translation on dollar-denominated items in AFLAC Japan's operating results
by comparing certain operating results in yen with those that would have
been reported had foreign currency exchange rates remained unchanged from
the comparable period in the previous year:

Percentage Changes in Yen Over Previous Period
----------------------------------------------
Three Months Six Months
Operating Results Operating Results
--------------------- ---------------------
Including Excluding Including Excluding
Currency Currency Currency Currency
Changes Changes* Changes Changes*
--------- --------- --------- ---------
Net investment income 11.1% 6.8% 10.5% 6.9%
Total revenues 5.9 5.2 5.9 5.4
Pretax operating earnings 21.0 14.7 20.2 14.8
- ----------------------------------------------------------------------------
*Amounts excluding foreign currency changes on dollar-denominated items
were determined using the same yen/dollar exchange rate for the current
period as the comparable period in the prior year.
============================================================================

JAPANESE ECONOMY

For the last several years, Japan has been working to overcome its
depressed economy. The financial strength of many Japanese businesses
continued to deteriorate with some experiencing bankruptcy or requesting
financial protection or assistance. As we have indicated in the past,
Japan's weak economy has created a challenging environment for AFLAC Japan,
as yields available for new yen-denominated investments remain at very low
levels and consumer confidence continues to lag. The time required for the
Japanese economy to fully recover remains uncertain.

AFLAC JAPAN SALES

AFLAC Japan's new annualized premium sales rose .6% to 25.6 billion
yen, or $208 million in the second quarter, which was below our
expectations. For the first half of 2001, new sales increased 2.0% to
48.7 billion yen, or $403 million. Second-quarter sales were negatively

impacted by a 45% decline in Rider MAX production. Rider MAX provides
accident and medical/sickness benefits as an attachment to our cancer life
policy.

Instead of Rider MAX, we emphasized sales of Rider Pack and 21st
Century Cancer Life, our newest cancer life policy. Rider Pack was
introduced in January to offer our existing cancer life policyholders
additional benefits that bring their coverage up to the level of 21st
Century Cancer Life. This new cancer life product gives customers a wide
variety of benefit options when buying our product. Total cancer life
annualized premium sales rose 31.4% in the second quarter including sales
through Dai-ichi Mutual Life. However, we believe cancer life policy sales
were somewhat suppressed in the first half of the year because many of our
agencies had difficulty marketing the new cancer life product due to the
dramatic change in policy benefit combinations. As a result, we are in the
process of packaging the benefit options and redesigning our sales
literature and applications, which we expect to help future sales. We were
pleased with the initial sales efforts of our marketing partner, Dai-ichi
Mutual Life. In the second quarter, Dai-ichi Life sold 62,000 of our cancer
life policies, accounting for 10.5% of new annualized premium sales in the
quarter.

During the second quarter, we also carefully analyzed our annuity
business. We concluded that our best-selling annuity product, sold as
business insurance, while profitable, did not meet our profit objectives.
As a result, we have stopped selling that type of annuity business.

In light of our sales results for the first half of the year, the
discontinuation of the business-insurance annuity product, and the redesign
of the marketing literature and applications for 21st Century Cancer Life,
we have revised our sales outlook for the full year. We believe sales will
likely be flat to up slightly for the year. Our previous objective had been
a 15% increase in new annualized premium sales for the year in yen.
However, we continue to believe that Japan remains a sizable market for
quality, affordable supplemental insurance products. And due to AFLAC
Japan's many competitive strengths including distribution, product
innovation, brand recognition and operating efficiency, we believe we are in
a good position to benefit from that potential.

AFLAC JAPAN INVESTMENTS

Reflecting the continued weakness in Japan's economy, rates of return
on yen-denominated debt securities remained low in the second quarter. For
instance, the yield of a composite index of 20-year Japanese government
bonds averaged 1.90% during the second quarter, compared with 1.84% in the
first quarter of 2001. However, we purchased yen-denominated securities at
an average yield of 3.54% in the quarter by focusing on selected sectors of
the fixed-maturity market. Including dollar-denominated investments, our
blended new money yield was 3.84% for the quarter.

At the end of the second quarter, the yield on AFLAC Japan's fixed-
maturity portfolio was 4.95%, compared with 5.07% a year ago. The return on
average invested assets, net of investment expenses, was 4.85% for the six
months ended June 30, 2001, compared with 4.83% a year ago.

INSURANCE DEREGULATION IN JAPAN

Trade talks in 1994 and 1996 between the governments of the United
States and Japan, and Japan's 1996 plan for a financial "Big Bang," produced
a framework for the deregulation of the Japanese insurance industry. These
measures called for the gradual liberalization of the industry through the
year 2001 and included provisions to avoid "radical change" in the third
sector of the insurance industry. AFLAC and other foreign-owned insurers,
as well as many small to medium-sized Japanese insurers, operate primarily
in the third sector.

As of January 1, 2001, additional insurance companies were permitted to
sell the type of third-sector products that AFLAC Japan currently offers.
On July 1, 2001, all insurance companies were permitted to compete in the
third sector. We recognize that we will face increased competition in the
future, however, we continue to believe we will be a very strong competitor
because our low-cost structure allows us to provide competitive benefits and
services to policyholders and above-average compensation to our sales force.

INSURANCE OPERATIONS, AFLAC U.S.

The following table presents a summary of AFLAC U.S. operating results.

AFLAC U.S.
SUMMARY OF OPERATING RESULTS

Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2001 2000 2001 2000
------------------ ------------------
Premium income. . . . . . . . . $ 451 $ 377 $ 890 $ 751
Investment income . . . . . . . 75 68 148 135
Other income. . . . . . . . . . 3 2 4 2
----- ----- ----- -----
Total revenues. . . . . . . . 529 447 1,042 888
----- ----- ----- -----
Benefits and claims . . . . . . 277 236 548 471
Operating expenses. . . . . . . 167 140 327 276
----- ----- ----- -----
Total benefits and expenses . 444 376 875 747
----- ----- ----- -----
Pretax operating earnings . $ 85 $ 71 $ 167 $ 141
===== ===== ===== =====
- ----------------------------------------------------------------------------
Percentage changes
over previous period:
Premium income. . . . . . . . 19.5% 13.0% 18.4% 13.2%
Investment income . . . . . . 10.4 14.4 9.8 14.8
Total revenues. . . . . . . . 18.4 13.3 17.3 13.5
Pretax operating earnings . . 19.6 12.3 18.2 11.9
- ----------------------------------------------------------------------------
Ratios to total revenues:
Benefits and claims . . . . . 52.3% 52.8% 52.6% 53.0%
Operating expenses. . . . . . 31.6 31.3 31.4 31.1
Pretax operating earnings . . 16.1 15.9 16.0 15.9
============================================================================

AFLAC U.S. SALES

New annualized premium sales rose 27.8% in the second quarter to $214
million. Year-to-date, new sales as of June 30, 2001, were up 31.0% to $417
million, surpassing our sales for the entire year of 1997. Accident/
disability insurance again led our sales for the quarter, accounting for
53.0% of total sales. Cancer expense insurance also produced strong
results, accounting for 21.9% of total sales. AFLAC's indemnity dental
coverage continued to sell extremely well, accounting for 7.1% of the
quarter's sales. Introduced in July 2000, the dental product is already our
third best selling product category. We expect sales in the United States
to be up 20-25% for the year over 2000.

AFLAC U.S. continues to rapidly expand its sales force. During the
second quarter, the average number of associates producing business on a
monthly basis increased 26.1%, compared with the three months ended June 30,
2000, to more than 12,800 agents. We believe the rapid growth of our
distribution system is due in part to the ongoing popularity of our current
advertising campaign, which has dramatically increased awareness of AFLAC
and its products.

AFLAC U.S. INVESTMENTS

During the first six months of 2001, available cash flow was invested
at an average yield-to-maturity of 8.02% compared with 8.44% during the
first half of 2000. The overall return on average invested assets, net of
investment expenses, was 7.68% for the first six months of 2001 compared
with 7.58% for the first six months of 2000.

AFLAC U.S. OTHER

We expect the operating expense ratio, excluding discretionary
advertising expenses, to remain relatively level in the future. By improving
administrative systems and controlling other costs, we have been able to
redirect funds to our advertising programs without significantly affecting
the operating expense ratio.

The aggregate benefit ratio has been relatively stable. The mix of
business has shifted toward accident/disability policies, which have lower
benefit ratios than other products. We expect future benefit ratios for
some of our supplemental products to increase slightly due to our ongoing
efforts to improve policy persistency and enhance policyholder benefits.
We also expect the pretax operating profit margin to be approximately 16%
for the full year.

FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS

We adopted Statement of Financial Accounting Standard No. 133 effective
January 1, 2001. Under this standard, we are required to record in net
earnings the change in the fair value of the interest component of our
cross-currency swaps. This new accounting standard will increase volatility
in reported net earnings in the future. For additional information, see
Notes 2 and 5 of the Notes to the Consolidated Financial Statements.

ANALYSIS OF FINANCIAL CONDITION

Since December 31, 2000, our financial condition has remained strong in
the functional currencies of our operations. The investment portfolios of
AFLAC Japan and AFLAC U.S. have continued to grow with 99.5% classified as
investment-grade securities.

The yen/dollar exchange rate at the end of each period is used to
translate yen-denominated balance sheet items to U.S. dollars for reporting
purposes. The exchange rate at June 30, 2001, was 124.60 yen to one U.S.
dollar, or 7.9% weaker than the December 31, 2000 exchange rate of 114.75.
The weaker yen decreased reported investments and cash by $2.3 billion,
total assets by $2.6 billion, and total liabilities by $2.6 billion,
compared with the amounts that would have been reported for 2001 if the
exchange rate had remained unchanged from year-end 2000.

INVESTMENTS AND CASH

The continued growth in investments and cash reflects the substantial
cash flows in the functional currencies of our operations. Net unrealized
gains of $3.7 billion on investment securities at June 30, 2001, consisted
of $4.0 billion in gross unrealized gains and $261 million in gross
unrealized losses.

AFLAC invests primarily within the Japanese, U.S. and Euroyen debt
securities markets. We are exposed to credit risk in our investment
activity. Credit risk is a consequence of extending credit and/or carrying
investment positions. We require that all securities have an initial rating
of Class 1 or 2 as determined by the Securities Valuation Office of the
National Association of Insurance Commissioners (NAIC). We use specific
criteria to judge the credit quality and liquidity of our investments and
use a variety of credit rating services to monitor these criteria. Applying
those various credit ratings to a standardized rating system based on the
categories of a nationally recognized rating service, the percentages of our
debt securities, at amortized cost, were as follows:

June 30, December 31,
2001 2000
------------ ------------
AAA 3.4% 25.0%
AA 41.4 22.4
A 36.5 36.8
BBB 18.2 15.1
BB .5 .7
----- -----
100.0% 100.0%
===== =====

The decrease in AAA-rated debt securities is primarily due to a credit
rating change on Japanese government bonds during the first quarter.

We also reclassified debt securities with a fair value of $2.3 billion
from the available-for-sale category to the held-to-maturity category as of
March 31, 2001. The related unrealized gain of $118 million is being
amortized from accumulated other comprehensive income to investment income
over the remaining term of the securities. See Note 6 of the Notes to the
Consolidated Financial Statements.

Private placement investments, at amortized cost, accounted for 54.2%
and 51.5% of our total debt securities as of June 30, 2001 and December 31,
2000, respectively. Of the total private placements, reverse-dual currency
debt securities (principal payments in yen, interest payments in dollars)
accounted for 27.7% and 31.5% of total private placement investments as of
June 30, 2001 and December 31, 2000, respectively. AFLAC Japan has invested
in the private placement market to secure higher yields than those available
from Japanese government bonds. At the same time, we have adhered to
prudent standards for credit quality. Most of AFLAC's private placements
are issued under medium-term note programs and have standard covenants
commensurate with credit rankings, except when internal credit analysis
indicates that additional protective and/or event-risk covenants are
required.

The following table presents an analysis of investment securities:

AFLAC Japan AFLAC U.S.
------------------------- -------------------------
June 30, December 31, June 30, December 31,
(In millions) 2001 2000 2001 2000
------------------------- -------------------------
Securities available
for sale, at fair
value:
Fixed maturities $18,016 $18,616 $ 3,947* $ 3,556*
Perpetual debentures 2,649 1,877 179 169
Equity securities 86 68 144 168
------ ------ ------ ------
Total available
for sale 20,751 20,561 4,270 3,893
------ ------ ------ ------
Securities held to
maturity, at
amortized cost:
Fixed maturities 4,881 3,645 - -
Perpetual debentures 3,148 3,442 - -
------ ------ ------ ------
Total held to
maturity 8,029 7,087 - -
------ ------ ------ ------
Total investment
securities $28,780 $27,648 $ 4,270 $ 3,893
====== ====== ====== ======

*Includes securities held by the parent company of $391 at June 30,
2001, and $262 at December 31, 2000

POLICY LIABILITIES

Policy liabilities decreased $317 million, or 1.1%, during the first
six months of 2001. AFLAC Japan decreased $477 million, or 1.8% (6.6%
increase in yen), and AFLAC U.S. increased $160 million, or 6.3%. The
weaker yen at June 30, 2001, compared with December 31, 2000, decreased
reported policy liabilities by $2.2 billion. The decrease in policy
liabilities due to the weaker yen was partially offset by increases from new
business, the aging of policies in force, and the market value adjustment
for securities available for sale (see Note 6 of the Notes to the
Consolidated Financial Statements).

DEBT

2001 exchange rate). Both issues are redeemable at our option at any time
with a redemption price equal to the principal amount of the notes being
redeemed plus a premium.

The ratio of debt to total capitalization (debt plus shareholders'
equity, excluding the unrealized gains on investment securities) was 28.8%
and 25.1% as of June 30, 2001 and December 31, 2000, respectively. On July
17, 2001, we paid in full the reducing revolving credit agreement (see Note
4 of the Notes to the Consolidated Financial Statements). The effect of
this transaction reduced our ratio of debt to total capitalization to 27.2%.

See Note 4 of the Notes to the Consolidated Financial Statements for
information on debt outstanding at June 30, 2001.

SECURITY LENDING

AFLAC Japan uses short-term security lending arrangements to increase
investment income with minimal risk. For further information regarding such
arrangements, see Note 5 of the Notes to the Consolidated Financial
Statements.

POLICYHOLDER GUARANTY FUNDS

Under insurance guaranty fund laws in most U.S. states, insurance
companies doing business in those states can be assessed for policyholder
losses up to prescribed limits that are incurred by insolvent companies with
similar lines of business. Such assessments have not been material to us in
the past. We believe that future assessments relating to companies in the
United States currently involved in insolvency proceedings will not
materially impact the consolidated financial statements.

In 1998, the Japanese government established the Life Insurance
Policyholders Protection Corporation. Funding by the life insurance
industry, as determined by government legislation, is made over a 10-year
period. We recognize charges for our estimated share of any assessment as
funding legislation is enacted. We periodically review our estimated
liability for policyholder protection fund assessments based on updated
information and any adjustments are reflected in net earnings.

SHAREHOLDERS' EQUITY

Our insurance operations continue to provide the primary sources of
liquidity. Capital needs are also supplemented by borrowed funds. The
principal sources of cash from insurance operations are premiums and
investment income. The primary uses of cash for insurance operations are
policy claims, commissions, operating expenses, income taxes and payments to
AFLAC Incorporated for management fees and dividends. Both the sources and
uses of cash are reasonably predictable. Our investment objectives provide
for liquidity through the ownership of investment-grade debt securities.
AFLAC insurance policies generally are not interest-sensitive and therefore
are not subject to unexpected policyholder redemptions due to investment
yield changes. Also, the majority of our policies provide indemnity benefits
rather than reimbursement for actual medical costs and therefore generally
are not subject to the risks of medical-cost inflation.

The achievement of continued long-term growth will require growth in
AFLAC's statutory capital and surplus. We may secure additional statutory
capital through various sources, such as internally generated statutory
earnings or equity contributions by AFLAC Incorporated from funds generated
through debt or equity offerings. We believe outside sources for additional
debt and equity capital, if needed, will continue to be available for
capital expenditures, business expansion and the funding of our share
repurchase program.

AFLAC Incorporated capital resources are largely dependent upon the
ability of AFLAC to pay management fees and dividends. The Georgia
insurance department imposes certain limitations and restrictions on
payments of dividends, management fees, loans and advances by AFLAC to AFLAC
Incorporated. The Georgia insurance statutes require prior approval for
dividend distributions that exceed the greater of statutory earnings for the
previous year, or 10% of statutory capital and surplus as of the previous
year-end. In addition, the Georgia insurance department must approve
service arrangements and other transactions within the affiliated group.
These regulatory limitations are not expected to affect the level of
management fees or dividends paid by AFLAC to AFLAC Incorporated. A life
insurance company's statutory capital and surplus is determined according to
rules prescribed by the National Association of Insurance Commissioners
(NAIC), as modified by the insurance department in the insurance company's
state of domicile. Statutory accounting rules are different from generally
accepted accounting principles and are intended to emphasize policyholder
protection and company solvency.

The NAIC has recodified Statutory Accounting Principles (SAP) to
promote standardization throughout the industry. These new accounting
principles, to be applied prospectively, were effective January 1, 2001.
Previously, prescribed or permitted SAP could vary among states and among
companies. The transition adjustments to adopt the new accounting
principles increased AFLAC statutory capital and surplus by approximately
$130 million as of January 1, 2001.

The NAIC uses a risk-based capital formula relating to insurance risk,
business risk, asset risk and interest rate risk to facilitate
identification by insurance regulators of inadequately capitalized insurance
companies based upon the types and mixtures of risks inherent in the
insurer's operations. AFLAC's NAIC risk-based capital ratio remains high
and reflects a very strong capital and surplus position. Also, there are
various ongoing regulatory initiatives by the NAIC relating to insurance
products, investments, revisions to the risk-based capital formula and other
actuarial and accounting matters.

In addition to restrictions by U.S. insurance regulators, the Japanese
Financial Services Agency (FSA) may impose restrictions on transfers of
funds from AFLAC Japan. Payments are made from AFLAC Japan to AFLAC
Incorporated for management fees and to AFLAC U.S. for allocated expenses
and remittances of earnings. Total funds received from AFLAC Japan were
approximately $104 million for the first six months of 2001 and $23 million
for the same period in 2000. AFLAC Japan repatriated profits to AFLAC U.S.
in the amounts of 10.0 billion yen ($81 million) in June 2001 and 12.9
billion yen ($103 million) in July 2001. The FSA may not allow transfers of
funds if the payment would cause AFLAC Japan to lack sufficient financial
strength for the protection of policyholders. The FSA maintains its own
solvency standards, a version of risk-based capital requirements. AFLAC

Japan's solvency margin significantly exceeds regulatory minimums. For
additional information on regulatory restrictions on dividends, profit
transfers and other remittances, see Note 9 of the Notes to the Consolidated
Financial Statements in our annual report to shareholders for the year ended
December 31, 2000.

For the Japanese reporting fiscal year ending March 31, 2002, AFLAC
Japan will be required to adopt a new Japanese statutory accounting standard
regarding fair value accounting for investments. Previously, debt
securities were generally reported at amortized cost for FSA purposes.
Under the new accounting standard AFLAC Japan will be required to record
debt securities in four categories: at fair value in an available-for-sale
category, at amortized cost in a held-to-maturity category, at amortized
cost in a special category for policy-reserve-matching bonds, or at fair
value in a trading category.

Under this new regulatory accounting standard, the unrealized gains and
losses on debt securities available for sale will be reported in FSA capital
and surplus and reflected in solvency margin calculations. This new
accounting standard may result in significant fluctuations in FSA equity, in
the AFLAC Japan solvency margin and in amounts available for annual profit
repatriation.

OTHER

In July 2001, the board of directors declared the third quarter cash
dividend of $.05 per share. The dividend is payable September 4, 2001 to
shareholders of record at the close of business on August 16, 2001.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments are exposed to primarily three types of
market risks. These are interest rate, equity price, and foreign currency
exchange rate risk.

INTEREST RATE RISK

Our primary interest rate exposure is a result of the effect of changes
in interest rates on the fair value of our investments in debt securities.
We use modified duration analysis, which provides a measure of price
percentage volatility, to estimate the amount of sensitivity to interest
rate changes in our debt securities.

We attempt to match the duration of our assets with the duration of our
liabilities. For AFLAC Japan, the duration of policy benefit liabilities is
longer than that of the related invested assets due to the unavailability of
acceptable long-duration yen-denominated securities. Currently, when our
debt securities mature, the proceeds are reinvested at a yield below that of
the interest required for the accretion of policy benefit liabilities on
policies issued in earlier years. However, the investment yield on new
investments exceeds interest requirements on policies issued in recent
years. Since 1994, premium rates on new business have been increased
several times (the latest occurred in April 2001 for ordinary life and
annuity contracts) to help offset the lower investment yields available.

At June 30, 2001, we had $3.7 billion of net unrealized gains on total
debt securities. The hypothetical reduction in the fair value of our debt
securities resulting from a 100 basis point increase in market interest
rates is estimated to be $3.1 billion based on our portfolio as of
June 30, 2001. The effect on yen-denominated debt securities is
approximately $2.6 billion and the effect on dollar-denominated debt
securities is approximately $444 million.

We have interest rate swaps on our variable-interest-rate yen-
denominated borrowings. As of June 30, 2001, we had outstanding interest
rate swaps with a notional amount of 19.1 billion yen ($153 million). On
July 15, 2001, 15.2 billion yen ($122 million) of the 19.1 billion yen
outstanding at quarter end expired. These swaps reduce the impact of
fluctuations in interest rates on borrowing costs and effectively change our
interest rates from variable to fixed. Therefore, movements in market
interest rates should have no material effect on earnings.

At June 30, 2001, we also had yen-denominated bank borrowings in the
amount of 19.6 billion yen ($158 million) with a blended variable interest
rate of .30%. The effect on net earnings in the first six months of 2001
due to changes in market interest rates was immaterial. For further
information on our notes payable, see Note 4 of the Notes to the
Consolidated Financial Statements.

EQUITY PRICE RISK

Equity securities at June 30, 2001, totaled $230 million, or .7% of
total investments and cash on a consolidated basis. We use beta analysis to
measure the sensitivity of our equity securities portfolio to fluctuations
in the broad market. The beta of our equity securities portfolio is 1.03.
For example, if the overall stock market value changed by 10%, the value of
AFLAC's equity securities would be expected to change by approximately
10.3%, or $24 million.

CURRENCY RISK

Most of AFLAC Japan's investments and cash are yen-denominated. When
yen-denominated financial instruments mature or are sold, the proceeds are
generally reinvested in yen-denominated securities and are held to fund yen-
denominated policy obligations.

In addition to the yen-denominated financial instruments held by AFLAC
Japan, AFLAC Incorporated has yen-denominated notes payable that have been
designated as a hedge of our investment in AFLAC Japan. The unrealized
foreign currency translation gains and losses related to these borrowings
are reported in accumulated other comprehensive income.

AFLAC Incorporated entered into cross-currency swaps to convert the
dollar-denominated principal and interest into yen-denominated obligations
on its $450 million senior notes that were issued in 1999. The cross-
currency swaps have a notional amount of $450 million (55.6 billion yen).
These swaps have also been designated as a hedge of our investment in AFLAC
Japan. The unrealized foreign currency translation gains and losses related
to these swaps are reported in accumulated other comprehensive income. For
information regarding new accounting requirements for derivative instruments
as of January 1, 2001, see Notes 2 and 5 of the Notes to the Consolidated
Financial Statements.

We attempt to match yen-denominated assets to yen-denominated
liabilities on a consolidated basis in order to minimize the exposure of our
shareholders' equity to foreign currency translation fluctuations. The
table below compares the U.S. dollar values of our yen-denominated assets
and liabilities at various exchange rates.

Dollar Value of Yen-Denominated Assets and Liabilities
At Selected Exchange Rates
(June 30, 2001)

109.60 124.60* 139.60
(In millions) Yen Yen Yen
- ----------------------------------------------------------------------------
Yen-denominated financial instruments:
Assets:
Securities available for sale:
Fixed maturities $ 18,431 $ 16,212 $ 14,470
Perpetual debentures 2,800 2,463 2,198
Equity securities 98 86 77
Securities held to maturity:
Fixed maturities 5,549 4,881 4,357
Perpetual debentures 3,579 3,148 2,810
Cash and cash equivalents 629 553 494
Other financial instruments 4 4 3
------- ------- -------
Sub-total 31,090 27,347 24,409
------- ------- -------
Liabilities:
Notes payable, yen-denominated 1,031 907 810
Cross-currency swaps 507 446 398
------- ------- -------
Sub-total 1,538 1,353 1,208
------- ------- -------
Net yen-denominated financial
instruments 29,552 25,994 23,201
Other yen-denominated assets 3,876 3,410 3,043
Other yen-denominated liabilities 32,437 28,533 25,466
------- ------- -------
Consolidated yen-denominated
net assets subject to foreign
currency fluctuation $ 991 $ 871 $ 778
======= ======= =======

*Actual June 30, 2001 exchange rate

For information regarding the effect of foreign currency translation on
operating earnings per share, see Foreign Currency Translation beginning on
page 23.

FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" to encourage companies to provide prospective information, so long
as those informational statements are identified as forward-looking and are
accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those

discussed. We desire to take advantage of these provisions. This report
contains cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in this
discussion and analysis, and in any other statements made by company
officials in oral discussions with the financial community and contained in
documents filed with the Securities and Exchange Commission (SEC). Forward-
looking statements are not based on historical information and relate to
future operations, strategies, financial results or other developments. In
particular, statements containing words such as "expect," "anticipate,"
"believe," "goal," "objective" or similar words as well as specific
projections of future results, generally qualify as forward-looking. AFLAC
undertakes no obligation to update such forward-looking statements.

We caution readers that the following factors, in addition to other
factors mentioned from time to time in our reports filed with the SEC, could
cause actual results to differ materially: regulatory developments,
assessments for insurance company insolvencies, competitive conditions, new
products, ability to repatriate profits from Japan, general economic
conditions in the United States and Japan, changes in U.S. and/or Japanese
tax laws or accounting requirements, adequacy of reserves, credit and other
risks associated with AFLAC's investment activities, significant changes in
interest rates, and fluctuations in foreign currency exchange rates.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

4.0 - There are no long-term debt instruments in which the total
amount of securities authorized exceeds 10% of the total
assets of AFLAC Incorporated and its subsidiaries on a
consolidated basis. We agree to furnish a copy of any
long-term debt instruments to the Securities and Exchange
Commission upon request.

12.0 - Statement regarding the computation of ratio of earnings to
fixed charges.

15.0 - Letter from KPMG LLP regarding unaudited interim financial
information.

(b) Reports on Form 8-K:

There were no reports on Form 8-K filed during the quarter ended
June 30, 2001.

Items other than those listed above are omitted because they are not
required or are not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

AFLAC INCORPORATED

Date August 9, 2001 /s/ KRISS CLONINGER, III
------------------------ ---------------------------
KRISS CLONINGER,III
President; Treasurer and
Chief Financial Officer

Date August 9, 2001 /s/ RALPH A. ROGERS, JR.
------------------------ ---------------------------
RALPH A. ROGERS, JR.
Senior Vice President,
Financial Services

EXHIBITS FILED WITH CURRENT FORM 10-Q:

12.0 - Statement regarding the computation of ratio of earnings to
fixed charges.

15.0 - Letter from KPMG LLP regarding unaudited interim financial
information.

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