Aflac Incorporated qualifies as a large accelerated filer within the meaning of Rule 12b-2 under the U.S. Securities Exchange Act Rule 12b-2. Ourof 1934 as amended (the Exchange Act). The Company's Internet address is aflac.com. The information on the Company's Web sitewebsite is not incorporated by reference in this annual report on Form 10-K. We makeThe Company makes available, free of charge on our Web site, ourthe Investors portion of its website, the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto as soon as reasonably practicable after those forms have been electronically filed with or furnished to the Securities and Exchange Commission (SEC).

Effective April 1, 2018, the Company converted Aflac Japan from a branch to a subsidiary incorporated as a Japanese stock corporation. The transaction was accounted for as tax-neutral and did not have a material impact on the daily operations of either Aflac Japan or Aflac U.S. In addition, the Company obtained and expects to continue to obtain enhanced flexibility in capital management and business development as a result of the conversion.

The Company offers voluntary insurance policies in Japan and the United States that provide a layer of financial protection against income and asset loss. We continueThe Company continues to diversify ourits product offerings in both Japan and the United States. Aflac Japan sells voluntary supplemental insurance products, including cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S. sells voluntary supplemental insurance products including products designed to protect individuals from depletion of assets (accident, cancer, critical illness/ care, hospital intensive care, hospital indemnity, fixed-benefit dental, and vision care plans) and loss-of-income products (life and short-term disability plans).

The foundation of Aflac Japan's product portfolio has expanded beyond traditional health-relatedbeen, and continues to be, its third sector products, which include cancer, medical and income support insurance products. Aflac pioneered the cancer insurance market in Japan in 1974, and remains the number one provider of cancer insurance in Japan today. Over the years, Aflac Japan has customized its cancer insurance product to include more life products. Somerespond to, and anticipate, the needs of its consumers and the life products that we offeradvances in medical treatments. The cancer insurance plans the Company offers in Japan provide death benefits and cash surrender values. These products are available as stand-alone policies and riders. Some plans, such as our WAYS product, have features that allow policyholders to convert a portion of their life insurance to medical, nursing care, or fixed annuity benefits at a predetermined age. Our child endowment product offers a death benefit until a child reaches age 18. It also pays a lump-sum benefit at the timeupon initial diagnosis of the child's entry into high school, as well as an educational annuity for each of the four years during his or her college education. We believe that life insurance (first sector product) provides further opportunities for us to sell ourinternal cancer and benefits for treatment received due to internal cancer such as fixed daily benefits for hospitalization, outpatient services and convalescent care, surgical benefits, and outpatient treatments. Aflac Japan has a unique Aflac-branded cancer insurance product for Japan's postal system, Japan Post (see the Distribution - Japan section for background information). In April 2018, Aflac Japan introduced a new cancer insurance product, DAYS 1, with enhanced cancer benefits. In addition to providing benefits for hospitalization, outpatient treatment, surgery, radiation therapy and anti-cancer drug treatment, this product was designed to provide benefits to improve quality of life and to cover out-of-pocket expenses not directly related to medical treatment. At the same time, Aflac Japan introduced DAYS 1 Plus to provide existing holders with up-to-date coverage. As the number one provider of cancer insurance (third sector products) through cross-selling opportunities.in Japan, the Company believes these products further strengthen its brand, and most importantly, provide valuable benefits to consumers who are looking for solutions to manage cancer-related costs.

Aflac pioneered the cancer insurance market in Japan in 1974, and we remain the number one provider of cancer insurance today. Over the years, we’ve customized our cancer product to respond to, and anticipate, the needs of our consumers and the advances in medical treatments. The cancer insurance plans we offer in Japan provide a lump-sum benefit upon initial diagnosis of internal cancer and benefits for treatment received due to internal cancer such as fixed daily benefits for hospitalization, outpatient services and convalescent care, and surgical and terminal care benefits. In September 2014,October 2018, Aflac Japan introduced New Cancer DAYS,launched a new cancertype of medical product which provides enhanced coverage, including outpatient treatmentsreferred to as Health Promotion Medical Insurance where a policyholder is entitled to a partial refund of the premium if the policyholders' “health age” measured by certain health check items is lower than his or her actual age. This product is marketed exclusively online and multiple cancer occurrence benefits. At the same time, premiums for this product have been lowered for most ages compared to prior plans. In October 2014, Aflac Japan introduced a unique Aflac-branded cancer product for Japan Post (see the Distribution - Japan and Regulation - Japan sections for background information). As the number one provider of cancer insurance in Japan, we believe these products further strengthen our brand, and most importantly, provide valuable benefits to consumers who are looking for solutions to manage cancer-related costs. We are convincedtargeted at younger generations.

The Company believes that the affordable cancer and medical insurance products Aflac Japan provides will continue to be an important part of ourits product portfolio. Nevertheless, as the Company continues its long history of product innovation, Aflac Japan's product portfolio has expanded beyond traditional health-related products.

Beginning in 2013, Aflac Japan began to curtail sales of first sector savings-type products, such as WAYS, child endowment and fixed annuities, due to persistent low interest rates in Japan and, in particular, the relatively large capital commitment required by such products and their lower profitability, in such an environment. Aflac Japan continues to sell first sector protection-type products, which include term and whole life, to provide Aflac Japan’s traditional fixed-income annuities and care policies. sales channels with a more comprehensive product portfolio to continue to cross-sell with third sector products. In July 2018, Aflac Japan introduced a first sector protection whole life product with low cash surrender value, which offers non-smoking policyholders further discounted premiums.

For additional information on Aflac Japan's products and composition of sales, see the Aflac Japan Segment subsection of MD&A in this report.

We design ourThe Company designs its U.S. insurance products to provide supplemental coverage for people who already have major medical or primary insurance coverage. Most of ourAflac's U.S. policies are individually underwritten and marketed through independent agents. Additionally, weAflac U.S. started to market and administer group insurance products in 2009.

Aflac U.S. insurance policies are portable and pay benefits regardless of other insurance. Most products'of the Aflac U.S. insurance benefits are paid in cash directly to policyholders; therefore, our customers have the opportunity to use this cash to help with expenses of their choosing. Our individually issued health insurance plans are typically guaranteed-renewable for the lifetime of the policyholder (to age 75 for short-term disability policies). Our group insurance policies are underwritten on a group basis and often have some element of guaranteed issue.

Aflac U.S. offers short-term disability benefits on both an individual and group basis. In 2013, we introduced a completely redesigned groupThe individual short-term disability product with enhancedhas an Aflac Value Rider that pays a benefit, options and higher income replacement amounts. In 2014, this group short-term disability product was introducedless claims, for every consecutive five-year term that the policy is in additional states, formally completing the active launch of the product to the U.S. market.force.

Aflac U.S. offers coverage for critical illnessescare on both an individual and group basis. These policies are designed to protect against losses resulting frompay cash benefits in the event of critical illnesses such as heart attack, stroke, or cancer. On an individually underwritten basis, we offerAflac U.S. offers cancer plans, critical illness plans, and critical care and recovery plans (formerly called specified health event). On a group basis we offerAflac U.S. offers critical illness plans. In 2015, an updated group critical illness plan was introduced that provides benefits for 30 additional conditions in addition to more consumer options.

Aflac U.S. offers hospital indemnity coverage on both an individual and group basis. Our hospitalHospital indemnity products provide policyholders fixed dollar benefits triggered by hospitalization due to accident or sickness, or just sickness alone. Indemnity benefits for inpatient and outpatient surgeries, as well as various other diagnostic events, are also available. WeAflac U.S. also offeroffers a lump sum rider thanthat can be added to ourits individual accident, short-term disability and hospital indemnity products. This rider, may not bewhere available, on all products in all states. This rider provides a lump sum payment for a range of critical illness events including traumatic brain injury, Type 1 diabetes, advanced Alzheimer’s disease and many more. In January 2016, a new group hospital indemnity plan was introduced that includes 11 new benefits, including telemedicine and health screening. This plan provides flexibility, allowing ourthe Company's clients to personalize their plan designs to complement the underlying medical coverage that is offered to employees.

As of December 31, 2015, our2018, the U.S. sales force was composed of sales associates and brokers who are licensed to sell accident and health insurance. Many are also licensed to sell life insurance. Aflac U.S. utilizes dual-channel distribution to market its insurance products to businesses of all sizes. The career agent channel focuses on marketing Aflac to the small business market, which consists of employers with less than 100 employees. As such, Aflac U.S. has aligned its recruiting, training, compensation, marketing and incentives for its career agents to encourage specific activity and sales of individual policies in this market. The broker channel focuses on selling to the mid- and large-case market, which is comprised of employers with more than 100 employees and typically an average size of 1,000 employees or more. Since regional and national brokers have traditionally served the mid- and large-case market, the sales professionals in the broker channel are assigned a geographic market to strengthen relationships with the top brokers and sell Aflac products to their clients. As a result, Aflac U.S. is represented on 160 benefit administration platforms, sometimes referred to as exchanges, of various brokers.

Sales associates and brokers are independent contractors and are paid commissions based on first-year and renewal premiums from their sales of insurance products. In addition to receiving commissions on personal production, district and regional sales coordinators may also receive override commissions and incentive bonuses.

Aflac U.S. implemented tactical initiatives centered around providing competitive compensationhas continued to our sales hierarchyevolve its career and positioning usbroker management infrastructure to more effectivelydrive growth in sales. In 2017, Aflac hired a Chief Distribution Officer to align the strategies of career and consistently execute on thebroker channels and to further expand U.S. distribution. All Aflac U.S. sales strategy across all states. These measureschannels are now within the organizational structure of the Chief Distribution Officer. Prior to this change, the broker and career channels were designed to more effectively link sales management's success to Aflac's success. For example, we enhanced compensation through an incentive bonus forpart of separate organizational structures. Aflac U.S. believes the first leveladdition of our sales management, district sales coordinators, who are primarily responsible for selling Aflac products and training new sales associates. Additionally, we eliminated the commission-based position of state sales coordinator. To better manage our state operations, we introduced the new position of market director, effective October 1, 2014. Market directors are salaried with the opportunity to earn sales-related bonuses. We believe these changes have enhanced andthis role will continue to enhance performance management and better align compensation with new business results.augment its long-term sales strategy.

We concentrateAflac U.S. concentrates on marketing ourits insurance products at the worksite. This method offers policies to individuals through employment, trade and other associations. Historically, ourAflac U.S. policies have been individually underwritten, with premiumshowever over the past several years, guaranteed issue options have become available. Premiums are generally paid by the employee. Additionally, Aflac's individual policies are portable, meaning that individuals may retain their full insurance coverage upon separation from employment or such affiliation, generally at the same premium. We collectIndividual policies are typically guaranteed-renewable for the lifetime of the policyholder (to age 75 for short-term disability policies). Aflac U.S. collects a major portion of premiums on such sales through payroll deduction or other forms of centralized billing. With ourAflac U.S. brokerage sales expansion and CAIC, branded as Aflac Group Insurance, we offerAflac U.S. offers group voluntary insurance products desired by many large employers. These products are sold on a group basis and often have some element of guaranteed issue. Worksite marketing enables sales associates and brokers to reach a greater number of prospective policyholders and lowers distribution costs, compared with individually marketed business.

In 1974, Aflac was granted an operating license to sell life insurance in Japan, making Aflac the second non-Japanese life insurance company to gain direct access to the Japanese insurance market. Through 1981, weAflac Japan faced limited competition for cancer insurance policy sales. However, Japan has experienced two periods of deregulation since weAflac Japan entered the market. The first came in the early 1980s, when nine mid-sized insurers, including domestic and foreign companies, were allowed to sell cancer insurance products for the first time. The second period began in 2001 when all life and non-life insurers were allowed to sell stand-alone cancer and medical insurance products as well as other stand-alone health insurance products. As a result, the number of insurance companies offering stand-alone cancer and medical insurance has more than doubled since the market was deregulated in 2001. However, based on ourAflac Japan's growth of annualized premiums in force and agencies, we dodiversified distribution network, the Company does not believe that ourAflac Japan's market-leading position has been significantly impacted by increased competition. Furthermore, we believethe Company believes the continued development and maintenance of operating efficiencies will allow usAflac Japan to offer affordable products that appeal to consumers. Aflac Japan is the largest life insurer in Japan in terms of cancer and medical policies in force. As of December 31, 2015, we2018, Aflac Japan exceeded 2324 million individual policies in force in Japan.

We haveAflac Japan has also experienced substantial success selling medical insurance in Japan. While other companies have recognized the opportunities that we haveAflac Japan has seen in the medical insurance market and offeredare frequently offering new products, we endeavor to make our products stand out for their value to consumers.

Since Aflac products provide an additional level of financial protection for policyholders, we believethe Company believes the increased financial exposure some employees may face creates a favorable opportunity for ourAflac U.S. products. Further,However, given the profitability erosion some major medical carriers are facing in their core lines of business, we havethe Company has seen a more competitive landscape as they seek entry into Aflac's supplemental product segments and leverage their core benefit offerings by bundling and discounting products in an effortorder to offset this impact.gain voluntary market share.

The determination of stressed economic surplus in Aflac Japan involves multiple models using multiple statistical approaches and assuming various economic and operating scenarios that are stressed to arrive at a range of potential outcomes. This range does not account for all economic scenarios, some of which may result in values outside of the range. The Company periodically assesses the stressed economic surplus in Aflac Japan, which fluctuates over time, and adjusts the size of the unhedged portfolio accordingly. The portfolio may include medium-term and long-term fixed-rate government and corporate (investment-grade and high-yield) bonds, floating-rate loans, public equities, and alternative asset classes. In 2015, we continueddetermining the composition of the portfolio, the Company also considers diversification, hedge cost, investment returns relative to addressyen-denominated investment yields, and Aflac Japan capital requirements. At December 31, 2018, this unhedged U.S. dollar-denominated portfolio was approximately $14.4 billion, compared with approximately $13.0 billion at December 31, 2017. For additional discussion of business and market risks associated with the challengeCompany’s investment strategy in Japan, refer to the Risk Factors and Quantitative and Qualitative Disclosures about Market Risk sections.

The Company’s investment strategy with respect to Aflac U.S. utilizes disciplined asset and liability management while seeking long-term risk-adjusted investment returns and the delivery of stable income within regulatory and capital objectives. As part of the Company's portfolio management and asset allocation process, Aflac U.S. invests in fixed-maturity investments and growth assets, including public equities and alternative investments in limited partnerships.

For further information on ourthe Company's investments and investment results, see the Insurance Operations and Analysis of Financial Condition sections of MD&A and Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements in this report.

We typically repatriatePrior to April 1, 2018, Aflac Japan repatriated a portion of Aflac Japan'sits accumulated earnings, as determined on a Japanese regulatory accounting basis, to Aflac U.S. provided that Aflac Japan has determined that it adequately protected policyholders' interests as measured by its SMR. The FSA may not allow profit repatriations to Aflac U.S. ifStarting in the transfers would causefourth quarter of 2018, Aflac Japan to lack sufficient financial strength for the protection of Japanese policyholders. In the near term, we do not expect these requirements to adversely affect the funds available for profit repatriations, nor do we expect these requirements to adversely affect the funds available for payments of allocated expenses to Aflac U.S. and management feesdistributes dividends to the Parent Company. Such dividends are subject to permitted dividend capacity under the Japan Company Law.

In June 2013, a revision to the Financial Instruments and Exchange Act established a post-funded Orderly Resolution Regime for financial institutions to prevent a financial crisis in the event of a financial institution’s failure. This regime came into effect in March 2014 and has not had, and is not expected to have, a material impact on the Company's operations in Japan.

As a branch of our principal insurance subsidiary, Aflac Japan is also subject to regulation and supervision in the United States (see Regulation - U.S.). For additional information regarding Aflac Japan's operations and regulations, see

State insurance departments conduct periodic examinations of the books and records, financial reporting, policy filings and market conduct of insurance companies domiciled in their states, generally once every three to five years. Examinations are generally carried out in cooperation with the insurance departments of other states under guidelines promulgated by the National Association of Insurance Commissioners (NAIC). In 2013,2016, full-scope, risk-focused financial examinations were conducted by the Nebraska insurance regulator, along with theNDOI, New York insurance regulator, completed a coordinated risk-focused full scope financial examination for the four-year period and three-year period, respectively, ended December 31, 2011 for Aflac and Aflac New York as partDepartment of the normal examination process. These examinations found no material deficiencies. Also, in 2011 the South Carolina insurance regulator completed a risk-focused full scope financial examination for the three-year period ended December 31, 2010 for CAIC as part of the normal examination process and found no material deficiencies. In 2016, the Nebraska and New York insurance regulators will commence a routine examination of the four-year period ended December 31, 2015,Financial Services (NYDFS), and the South Carolina Department of Insurance (SCDOI) on their state domiciled insurance regulator will commenceentities American Family Life Assurance Company of Columbus, American Family Life Assurance Company of New York, and Continental American Insurance Company, respectively. The NDOI and NYDFS exams covered a routine examination offour-year period ending December 31, 2015, whereas the SCDOI exam covered a five-year period endedending December 31, 2015. There were no material findings contained in the NDOI, NYDFS and SCDOI final exam reports. 

Under state insurance guaranty association laws and similar laws in international jurisdictions, we arethe Company is subject to assessments, based on the share of business we writethe Company writes in the relevant jurisdiction, for certain obligations of insolvent insurance companies to policyholders and claimants. In the United States, some states permit member insurers to recover assessments paid through full or partial premium tax offsets. The Company's policy is to accrue assessments when the entity for which the insolvency relates has met its state of domicile's statutory definition of insolvency, the amount of the loss is reasonably estimable and the related premium upon which the assessment is based is written. In most states, the definition is met with a declaration of financial insolvency by a court of competent jurisdiction. For additional information regarding state insurance guaranty assessments, see the U.S. Regulatory Environment subsection of MD&A in this report.

For further information concerning Aflac U.S. operations, regulation, change of control and dividend restrictions, see the Aflac U.S. Segment subsection of MD&A and Notes 2 and 13 of the Notes to the Consolidated Financial Statements in this report.

Employees

OurThe Company's results of operations are materially affected by conditions in the global capital markets and the global economy generally, including in ourits two primary operating markets of the United States and Japan. Weak global financial markets impact the value of ourthe Company's existing investment portfolio, influence opportunities for new investments, and may contribute to generally weak economic fundamentals, which can have a negative impact on ourits operating activities.

In recent years, global capital markets have been severely impacted by several major events. The financial crisis that began in the latter part of 2008 saw dramatic declines in investment values and weak economic conditions as the global financial system came under extreme pressure. Although U.S. markets began recovering in late 2009 and 2010, Europe continued to struggle under a severely weakened banking system and investor concerns with sovereign debt levels. Following a period of unprecedented intervention by governments and central banks, including the U.S. Federal Reserve and European Central Bank (ECB), financial conditions improved from the dire conditions of the global financial crisis, global recession, and European debt crisis. Recently,More recently, global markets have experienced materially higher levelsbouts of market volatility due to concerns including changes inuncertainty surrounding a British exit from the market’s perception of global growth, additional ECB intervention, uncertainty surroundingEuropean Union, Japan’s continued recovery amidst assorted policy changes, significant declinesvolatility in global commodity prices including oil, divergent monetary policies in the United States versus many other developed economies, and heightened concerns surrounding the Chinese economy.economy and increasing protectionism in U.S. foreign trade policy. While capital and market conditions have been generally favorable in the last year, volatility increased in the fourth quarter and the prospect for increased volatility remains.

As we holdthe Company holds a significant amount of fixed maturity and perpetual securities issued by borrowers located in many different parts of the world, including a large portion issued by banks and financial institutions, sovereigns, and other corporate borrowers in the U.S.United States and Europe, ourits financial results are directly influenced by global financial markets. A retrenchment of the recent improvements in overallstrength of the capital market healthmarkets could adversely affect ourthe Company's financial condition, including ourits capital position and our overall profitability. Market volatility and recessionary pressures could result in significant realized or unrealized losses due to severe price declines driven by increases in interest rates or credit spreads, defaults in payment of principal or interest, or credit rating downgrades.

Following the election of Shinzo Abe as Prime Minister of Japan in December 2012, the new administration adopted a new set of financial measures to stimulate the Japanese economy, most recentlyincluding imposing negative interest rates on excess bank reserves. In a December 2014 snap-election,and October 2017 snap-elections, the ruling Liberal Democratic Party (LDP) won a landslide victory,decisive victories further strengthening Mr. Abe's ability to implementcontinue with economic reformreforms and address key policy challenges. The Japanese financial markets have reacted with even lower rates on Japanese Government bonds, large increases in Japanese equity market values, and a weakeningIn September 2018, Mr. Abe won reelection to another three-year term as president of the yen relativeLDP. Most recently, the Bank of Japan (BoJ) signaled to hold its policy rate at zero and to continue yield curve control to maintain a targeted

Japan is the largest market for ourthe Company's products, and we ownthe Company owns substantial holdings in Japanese Government Bonds (JGBs).JGBs. Government actions to stimulate the economy affect the value of ourthe Company's existing holdings, ourits reinvestment rate on new investments in JGBs or other yen denominatedyen-denominated assets, and consumer behavior relative to ourthe Company's suite of products. The additional government debt from fiscal stimulus actions could contribute to a weakening ofadversely impact the Japan sovereign credit profile, and resultwhich could in further rating downgrades at the credit rating agencies. This couldturn lead to additional volatility in Japanese capital and currency markets.

OurThe Company's investment portfolio ownshas sizeable credit positions in many other geographic areas of the world including the Middle East, Latin America, Asia, and other emerging markets. Deterioration in their underlying economies, sovereign credit worthiness, or financial market conditions could negatively impact ourthe Company's financial position. We also own credit

While the Company has continued to add floating rate investments that result in exposure to commodity valuations, including oil, natural gas, gold, and other metals. The recent

We attemptThe Company attempts to match both the duration and currency of ourits assets with ourits liabilities. This is very difficult for Aflac Japan due to the lack of available long-dated yen-denominated fixed income instruments.instruments beyond JGBs.

Prior to the onset of the financial crisis of 2008, the Company was focused on investing cash flows in JGBs, which had relatively low yields, and utilizing private placement and perpetual securities to gain additional yield, extend the duration of the investment portfolio, and maintain yen exposure. Given call activity with respect to certain of the Company's legacy private placement investments, the Company has added a modest amount of yen-denominated private placements to its investment portfolio in recent periods. The investment in private placements and perpetual securities has led to increased riskscarries risk associated with illiquidity.

Starting in 2012, Aflac Japan augmented its investment strategy to include U.S. dollar-denominated securitiesinvestments, some of which could then be hedged back to yen. Initially this program focused on public investment-grade bonds but has evolved over time to include U.S. dollar-denominated investment-grade commercial mortgage loans, infrastructure debt, as well as other loan types, high yield corporate bonds bank loans and middle market loans. As of December 31, 2015, Aflac Japan held approximately $22.7 billion in U.S. dollar-denominated income producing securities, at amortized cost, and approximately $14.3 billion of notional in foreign currency forwards and options to hedge principal currency risk. We planequity securities. The Company plans to continue adding other instruments denominated in U.S. dollars, including floating rate investments, to improve the portfolio diversification and/or return profile. Some of the U.S. dollar-denominated asset classes that we anticipate addingthe Company has added, and anticipates continuing to add, have less liquidity than investment-grade corporate bonds. These strategies will continue to increase ourthe Company's exposure to U.S. interest rates, credit spreads and other risks. We haveThe Company has increased foreign exchange risk exposure as the comprehensive hedging program may not always correlate to the underlying U.S. dollar-denominated assets, thereby increasing earnings volatility. These risks can significantly impact the Company's consolidated results of operations, financial position or liquidity.

The Company stores confidential policyholder, employee, agent, and other proprietary information on its information technology systems. In addition, the Company depends heavily on its telecommunication, information technology and other operational systems and on the integrity and timeliness of data it uses to run its businesses and service its customers. These systems may fail to operate properly or become disabled as a result of events or circumstances wholly or partly beyond the Company's control. Additionally, design flaws may exist in certain systems, processes, software, or configurations that in turn may result in system failure, data corruption, or compromise. Despite the Company's implementation of a variety of security measures to defend against threats incurred on a daily basis, its information technology and other systems, as well as those of third party providers and participants in the Company’s distribution channels, have been and will likely continue to be subject to physical or electronic break-ins, unauthorized tampering, security breaches or other cyber-attacks, that may result in the failure to adequately maintain the security, confidentiality, integrity, or privacy of sensitive data, including personal information relating to customers and prospective customers, or in the misappropriation of the Company's intellectual property or proprietary information.

The Company relies on third parties, and in some cases subcontractors, to provide information technology and data services. It also relies on various parties in its distribution channels including agencies, banks and Japan Post in Japan, as well as sales associates and brokers in the United States, to provide services to prospective and existing customers.

The U.S. Congress and many states are considering new privacy and security requirements that would apply to ourthe Company's business. Compliance with new privacy and security laws, requirements, and new regulations may result in cost increases due to necessary systems changes, new limitations or constraints on ourthe Company's business models, the development of new administrative processes, and the effects of potential noncompliance by ourthe Company's business associates. They also may impose further restrictions on ourthe Company's collection, disclosure and use of patientcustomer identifiable data that are housed in one or more of ourthe Company's administrative databases. Noncompliance with any privacy laws or any security breach involving the misappropriation, loss, theft or other unauthorized disclosure of sensitive or confidential membercustomer information, whether by usthe Company or by one of our vendors,its third parties, could have a material adverse effect on ourthe Company's business, reputation, brand and results of operations, including: material fines and penalties; compensatory, special, punitive and statutory damages; consent orders regarding ourthe Company's privacy and security practices; adverse actions against ourthe Company's licenses to do business; and injunctive relief.

In addition, under Japanese laws and regulations, including the APPI, if a leak or loss of personal information by Aflac Japan or its business associates should occur, depending on factors such as the volume of personal data involved and the likelihood of other secondary damage, Aflac Japan may be required to file reports to the FSA; issue public releases explaining such incident to the public; or become subject to an FSA business improvement order, which could pose a risk to ourthe Company's reputation.

The primary purpose of insurance company regulatory supervision is the Japanese yen, fluctuationsprotection of insurance policyholders, rather than investors. The extent of regulation varies, but generally is governed by state statutes in the yen/dollar exchange rateUnited States and by the FSA and the MOF in Japan. These systems of supervision and regulation cover, among other things:

These changes became effective on January 1, 2018. Because changes to tax rates are accounted for in the period of enactment, during the period ended December 31, 2017, the Company revalued its deferred tax assets and liabilities and recorded a net deferred tax liability reduction of $1.9 billion benefit in 2017. During the fourth quarter of 2018, the Company recorded an immaterial adjustment to the provisional amount of deferred tax liabilities (DTLs) related to the Japan tax computation and no valuation allowance adjustment related to anticipatory foreign tax credit asset, rendering final values for the Company's deferred tax liability. The impact of the Tax Act, including the preliminary estimate for the change in tax rate that was recorded during the fourth quarter of 2017, adjustments booked during the fourth quarter of 2018 which rendered final values related to the tax rate, and the Company's combined U.S. and Japanese effective income tax rate, may be adjusted in future periods, whenpossibly materially, due to, among other things, changes in interpretations and assumptions the yen weakens, translating yen into dollars causes fewer dollarsCompany has made, tax guidance that may be issued and actions the Company make take as a result of the Tax Act. Without limiting the foregoing, additional forthcoming guidance from the U.S. Department of the Treasury and/or the U.S. IRS related to the Tax Act could significantly impact the level of valuation allowance respecting the amount of foreign tax credits claimed by the Company with regard to the operations of Aflac Japan.

Most of the Company's investments carry a rating by one or more of the NRSROs. Any change in the rating agencies' approach to evaluating credit and assigning an opinion could negatively impact the fair value of the Company's portfolio. The Company employs a team of credit analysts to monitor the creditworthiness of the issuers in its portfolio. Any credit-related declines in the fair value of positions held in the Company's portfolio believed to be reported. Whennot temporary in nature will negatively impact the yen strengthens, translating yenCompany's net income and capital position through impairment and other credit related losses. These losses would also affect the Company's solvency ratios in the United States and Japan. Aflac Japan has certain regulatory accounting requirements for realizing impairments that could be triggered by credit-related losses, which may be different from U.S. GAAP and statutory requirements. These impairment losses could negatively impact Aflac Japan's earnings, and the corresponding dividends and capital deployment.

OurThe Company's insurance operations are exposed to the risk of catastrophic events including, but not necessarily limited to, epidemics, pandemics, tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, and terrorism or other acts of terrorism.violence. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Certain events such as earthquakes, tsunamis, hurricanes and man-made catastrophes could cause substantial damage or loss of life in larger areas, especially those that are heavily populated. Claims resulting from natural or man−made catastrophic events could cause substantial volatility in ourthe Company's financial results for any fiscal quarter or year

The Company is a defendant in various lawsuits considered to be in the normal course of business. The final results of any litigation cannot be predicted with certainty, and plaintiffs may seek very large amounts in class actions or other litigation. Although some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will not have a material adverse effect on its financial position, results of operations, or cash flows. However, a substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our profitability.

A majority of our competitors. We also faceU.S. sales force is, and has historically been, comprised of independent agents. While we believe that we have properly classified such agents as independent contractors, we may be subject to claims, regulatory action by state or federal departments of labor or tax authorities or litigation asserting that such agents are employees. The laws and regulations governing the potentialclassification of competition from existing or new companiesworkers in the United States and Japanmay be changed or interpreted differently compared to past interpretations, including in states where the Company generates significant sales through independent agents. An allegation or determination that have not historically been activeindependent agents in the supplemental health insurance industry. FailureCompany’s U.S. sales force have been misclassified as independent contractors could result in changes in the Company’s operations and U.S. business model, result in material fines or penalties, result in significant costs due to anticipate market trends and/legal fees, settlements or to differentiate our products and services can affect our ability to retainjudgments against the Company, or grow profitable lines of business.