Naming Policy is not incrementing by number

Version 7.1.1 P2 (Prod) P3 (Dev)

The naming policy is set to increment user IDs to prevent duplicate IDs.

Example: if there are 3 JSMITHs, the IDs should be JSMITH, JSMITH1, and JSMITH2.

However, when it should be 2 or higher, G&L says it is created as jsmith1 instead of jsmith2.

Of course, AFX does not create jsmith1 since there is one already.

The Naming Policy is set as.

Uniqueness is set 

Increment is set to start at 1

Business source is set to Active Directory.

Am I missing something?

Thank you

Shlomo