0000004977 afl:FairValueUnobservableInputInterestRatesUSDandinterestratesJPYMember currency:USD srt:MinimumMember us-gaap:CurrencySwapMember us-gaap:FairValueInputsLevel3Member us-gaap:MeasurementInputDiscountRateMember 2018-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



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

For the quarterly period ended September 30, ~~2017~~2019

~~[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



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

For the transition period from to

Commission File Number: 001-07434

Aflac Incorporated

(Exact name of registrant as specified in its charter)



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

1932 Wynnton Road ~~Columbus, Georgia~~	Columbus	Georgia	31999
(Address of principal executive offices)			(ZIP Code)

~~706.323.3431~~

706.323.3431

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 Par Value	AFL	New York Stock Exchange

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. þYes¨ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). þYes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerþ	þ	Accelerated filer	☐
Non-accelerated filer	~~Accelerated filer~~ ¨
~~Non-accelerated filer~~ ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨	☐
		Emerging growth company ¨	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes þ No

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

734,018,010 shares of the issuer's common stock were outstanding as of October 17, 2019.



~~Class~~		~~October 25, 2017~~
~~Common Stock, $.10 Par Value~~		~~393,149,620~~

Aflac Incorporated and Subsidiaries

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, ~~2017~~2019

Table of Contents



PART I.		FINANCIAL INFORMATION:	Page
		~~Page~~
~~PART I.~~	Item 1.	~~FINANCIAL INFORMATION:~~Financial Statements (Unaudited)

~~Item 1.~~	~~Financial Statements (Unaudited)~~

	Review by Independent Registered Public Accounting Firm	1

		Report of Independent Registered Public Accounting Firm	2

		Consolidated Statements of Earnings Three Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	3

		Consolidated Statements of Comprehensive Income (Loss) Three Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	4

		Consolidated Balance Sheets September 30, ~~2017,~~2019, and December 31, ~~2016~~2018	5

		Consolidated Statements of Shareholders' Equity ~~Nine~~Three Months Ended March 31, 2019 and 2018 Three Months Ended June 30, 2019 and 2018 Three Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	76

		Consolidated Statements of Cash Flows Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	810

		Notes to the Consolidated Financial Statements	911

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6771

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	94101

	Item 4.	Controls and Procedures	95101

PART II.		OTHER INFORMATION:

	Item 1.	Legal Proceedings	96102

	Item 1A.	Risk Factors	102

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96103

	Item 6.	Exhibits	97104

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Review by Independent Registered Public Accounting Firm

The September 30, ~~2017,~~2019, and ~~2016,~~2018, consolidated financial statements included in this filing have been reviewed by KPMG LLP, an independent registered public accounting firm, in accordance with established professional standards and procedures for such a review.

The report of KPMG LLP commenting upon its review is included on the following page.

Report of Independent Registered Public Accounting Firm

~~The~~

To the Shareholders and Board of Directors ~~and Shareholders~~

Aflac Incorporated:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Aflac Incorporated and subsidiaries (the Company) as of September 30, ~~2017,~~2019, the related consolidated statements of earnings and comprehensive income (loss) for the three-month and nine-month periods ended September 30, ~~2017~~2019 and ~~2016, and~~2018, the related consolidated statements of ~~shareholders'~~shareholders’ equity for the three-month periods ended March 31, June 30 and September 30, 2019 and 2018, the related consolidated statements of cash flows for the nine-month periods ended September 30, ~~2017~~2019 and ~~2016. These~~2018, and the related notes (collectively, the consolidated interim financial ~~statements~~information). Based on our reviews, we are not aware of any material modifications that should be made to the ~~responsibility of the Company's management.~~

consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our reviews~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2018, and the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States),~~PCAOB, 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 reviews, 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 U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Aflac Incorporated and subsidiaries as of December 31, 2016, and the related consolidated statements of earnings, comprehensive income (loss), shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Atlanta, Georgia

~~November 2, 2017~~October 25, 2019

Aflac Incorporated and Subsidiaries

Consolidated Statements of Earnings



	Three Months Ended September 30,								Nine Months Ended September 30,
(In millions, except for share and per-share amounts - Unaudited)	2019				2018				2019				2018
Revenues:
Net premiums, principally supplemental health insurance		$	4,736			$	4,636			$	14,109			$	14,086
Net investment income		936				870				2,692				2,569
Realized investment gains (losses):
Other-than-temporary impairment losses realized and loan loss reserves		(18		)		(5		)		(21		)		(17		)
Other gains (losses)		(135		)		61				(126		)		(59		)
Total realized investment gains (losses)		(153		)		56				(147		)		(76		)
Other income (loss)		17				15				50				53
Total revenues		5,536				5,577				16,704				16,632
Benefits and expenses:
Benefits and claims, net		3,027				3,002				8,958				9,075
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs		317				315				967				932
Insurance commissions		330				331				990				1,007
Insurance and other expenses		769				730				2,230				2,193
Interest expense		57				53				171				164
Total acquisition and operating expenses		1,473				1,429				4,358				4,296
Total benefits and expenses		4,500				4,431				13,316				13,371
Earnings before income taxes		1,036				1,146				3,388				3,261
Income taxes		259				301				865				866
Net earnings		$	777			$	845			$	2,523			$	2,395
Net earnings per share:
Basic		$	1.05			$	1.10			$	3.38			$	3.10
Diluted		1.04				1.09				3.37				3.08
Weighted-average outstanding common shares used in computing earnings per share (In thousands):
Basic		739,946				767,049				745,465				772,807
Diluted		743,842				772,070				749,452				777,867
Cash dividends per share		$	.27			$	.26			$	.81			$	.78

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions, except for share and per-share amounts - Unaudited) 2017 2016 2017 2016
Revenues:
Net premiums, principally supplemental health insurance $ 4,648
$ 5,022
$ 13,951
$ 14,447

Net investment income 811
842
2,408
2,465

Realized investment gains (losses):
Other-than-temporary impairment losses realized (8 ) (23 ) (27 ) (71 )
Sales and redemptions 61
(14 ) 60
100

Derivative and other gains (losses) (23 ) (127 ) (199 ) (387 )
Total realized investment gains (losses) 30
(164 ) (166 ) (358 )
Other income (loss) 17
16
50
50

Total revenues 5,506
5,716
16,243
16,604

Benefits and expenses:
Benefits and claims, net 3,083
3,378
9,174
9,657

Acquisition and operating expenses:
Amortization of deferred policy acquisition costs 271
282
848
858

Insurance commissions 332
353
996
1,031

Insurance and other expenses 686
675
2,025
1,948

Interest expense 59
65
181
196

Total acquisition and operating expenses 1,348
1,375
4,050
4,033

Total benefits and expenses 4,431
4,753
13,224
13,690

Earnings before income taxes 1,075
963
3,019
2,914

Income taxes 359
334
998
1,006

Net earnings $ 716
$ 629
$ 2,021
$ 1,908

Net earnings per share:
Basic $ 1.81
$ 1.54
$ 5.09
$ 4.62

Diluted 1.80
1.53
5.05
4.59

Weighted-average outstanding common shares used in
computing earnings per share (In thousands):
Basic 394,479
408,519
397,323
413,023

Diluted 397,381
411,140
400,241
415,446

Cash dividends per share $ .43
$ .41
$ 1.29
$ 1.23

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)



	Three Months Ended September 30,								Nine Months Ended September 30,
(In millions - Unaudited)	2019				2018				2019				2018
Net earnings		$	777			$	845			$	2,523			$	2,395
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period		(22		)		(383		)		393				(51		)
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities during period		1,185				(866		)		6,427				(3,099		)
Reclassification adjustment for realized (gains) losses on fixed maturity securities included in net earnings		41				(37		)		(1		)		(11		)
Unrealized gains (losses) on derivatives during period		(8		)		(2		)		(12		)		2
Pension liability adjustment during period		1				1				5				1
Total other comprehensive income (loss) before income taxes		1,197				(1,287		)		6,812				(3,158		)
Income tax expense (benefit) related to items of other comprehensive income (loss)		310				(344		)		1,712				(813		)
Other comprehensive income (loss), net of income taxes		887				(943		)		5,100				(2,345		)
Total comprehensive income (loss)		$	1,664			$	(98	)		$	7,623			$	50

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions - Unaudited) 2017 2016 2017 2016
Net earnings $ 716
$ 629
$ 2,021
$ 1,908

Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during
period (58 ) 195
325
1,783

Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) on investment securities during
period 457
(527 ) 1,006
4,855

Reclassification adjustment for realized (gains) losses on
investment securities included in net earnings (50 ) 33
(33 ) (33 )
Unrealized gains (losses) on derivatives during period (1 ) 0
0
11

Pension liability adjustment during period 1
0
(1 ) (6 )
Total other comprehensive income (loss) before income taxes 349
(299 ) 1,297
6,610

Income tax expense (benefit) related to items of other comprehensive
income (loss) 219
(231 ) 396
1,871

Other comprehensive income (loss), net of income taxes 130
(68 ) 901
4,739

Total comprehensive income (loss) $ 846
$ 561
$ 2,922
$ 6,647

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Balance Sheets

(In millions) September 30, 2017
(Unaudited) December 31,
2016
Assets:
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities (amortized cost $67,970 in 2017 and $62,195 in 2016) $ 75,191
$ 68,778

Fixed maturities - consolidated variable interest entities (amortized
cost $4,274 in 2017 and $4,168 in 2016) 5,224
4,982

Perpetual securities (amortized cost $1,310 in 2017 and $1,269 in 2016) 1,652
1,425

Perpetual securities - consolidated variable interest entities
(amortized cost $239 in 2017 and $237 in 2016) 211
208

Equity securities (cost $216 in 2017 and $231 in 2016) 238
265

Equity securities - consolidated variable interest entities
(cost $595 in 2017 and $972 in 2016) 690
1,044

Securities held to maturity, at amortized cost:
Fixed maturities (fair value $38,599 in 2017 and $40,021 in 2016) 31,998
33,350

Other investments ⁽¹⁾
2,358
1,450

Cash and cash equivalents 4,927
4,859

Total investments and cash 122,489
116,361

Receivables 937
669

Accrued investment income 730
754

Deferred policy acquisition costs 9,413
8,993

Property and equipment, at cost less accumulated depreciation 439
433

Other ⁽²⁾
2,075
2,609

Total assets $ 136,083
$ 129,819



(In millions, except for share and per-share amounts)	September 30, 2019 (Unaudited)				December 31, 2018
Assets:
Investments and cash:
Fixed maturity securities available for sale, at fair value (amortized cost $77,880 in 2019 and $73,007 in 2018)		$	89,378			$	78,429
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value (amortized cost $3,594 in 2019 and $3,849 in 2018)		4,562				4,466
Fixed maturity securities held to maturity, at amortized cost (fair value $38,822 in 2019 and $36,722 in 2018)		30,733				30,318
Equity securities, at fair value		830				987
Commercial mortgage and other loans (includes $6,813 in 2019 and $5,528 in 2018 of consolidated variable interest entities)		8,284				6,919
Other investments (includes $439 in 2019 and $328 in 2018 of consolidated variable interest entities)		1,507				787
Cash and cash equivalents		4,216				4,337
Total investments and cash		139,510				126,243
Receivables		908				851
Accrued investment income		734				773
Deferred policy acquisition costs		10,148				9,875
Property and equipment, at cost less accumulated depreciation ⁽¹⁾		562				443
Other		2,275				2,221
Total assets		$	154,137			$	140,406
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	90,824			$	86,368
Unpaid policy claims		4,741				4,584
Unearned premiums		4,544				5,090
Other policyholders’ funds		7,421				7,146
Total policy liabilities		107,530				103,188
Income taxes		5,737				4,020
Payables for return of cash collateral on loaned securities		2,189				1,052
Notes payable and lease obligations⁽¹⁾		6,233				5,778
Other		3,010				2,906
Total liabilities		124,699				116,944
Commitments and contingent liabilities (Note 12)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2019 and 2018; issued 1,349,190 shares in 2019 and 1,347,540 shares in 2018		135				135
Additional paid-in capital		2,277				2,177
Retained earnings		33,710				31,788
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)		(1,479		)		(1,847		)
Unrealized gains (losses) on fixed maturity securities		8,970				4,234
Unrealized gains (losses) on derivatives		(33		)		(24		)
Pension liability adjustment		(207		)		(212		)
Treasury stock, at average cost		(13,935		)		(12,789		)
Total shareholders’ equity		29,438				23,462
Total liabilities and shareholders’ equity		$	154,137			$	140,406

⁽¹⁾~~Includes $1,500 in 2017 and $819 in 2016~~See Note 1 of ~~loan receivables and limited partnerships from consolidated variable interest entities~~

⁽²⁾~~Includes $148 in 2017 and $127 in 2016~~the Notes to the Consolidated Financial Statements for the adoption of ~~derivatives from consolidated variable interest entities~~accounting guidance on January 1, 2019 related to leases.

See the accompanying Notes to the Consolidated Financial Statements.

~~(continued)~~

~~Aflac Incorporated and Subsidiaries~~

~~Consolidated Balance Sheets (continued)~~

(In millions, except for share and per-share amounts) September 30, 2017
(Unaudited) December 31,
2016
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits $ 81,116
$ 76,106

Unpaid policy claims 4,368
4,045

Unearned premiums 6,262
6,916

Other policyholders’ funds 6,967
6,659

Total policy liabilities 98,713
93,726

Income taxes 6,195
5,387

Payables for return of cash collateral on loaned securities 522
526

Notes payable 5,248
5,360

Other ⁽³⁾
3,428
4,338

Total liabilities 114,106
109,337

Commitments and contingent liabilities (Note 12)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000
shares in 2017 and 2016; issued 672,669 shares in 2017 and 671,249
shares in 2016 67
67

Additional paid-in capital 2,077
1,976

Retained earnings 27,489
25,981

Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) (1,715 ) (1,983 )
Unrealized gains (losses) on investment securities 5,437
4,805

Unrealized gains (losses) on derivatives (23 ) (24 )
Pension liability adjustment (168 ) (168 )
Treasury stock, at average cost (11,187 ) (10,172 )
Total shareholders’ equity 21,977
20,482

Total liabilities and shareholders’ equity $ 136,083
$ 129,819

⁽³⁾~~Includes $132 in~~ ~~2017~~ ~~and $146 in~~ ~~2016~~ ~~of derivatives from consolidated variable interest entities~~

~~See the accompanying Notes to the Consolidated Financial Statements.~~

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity



(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at December 31, 2018	$	135	$	2,177	$	31,788		$	2,151		$	(12,789	)	$	23,462
Net earnings	0		0		928			0			0			928
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			(1		)	0			(1		)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0			2,327			0			2,327
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			(2		)	0			(2		)
Pension liability adjustment during period, net of income taxes	0		0		0			6			0			6
Dividends to shareholders ($.27 per share)	0		0		(203		)	0			0			(203		)
Exercise of stock options	0		11		0			0			0			11
Share-based compensation	0		8		0			0			0			8
Purchases of treasury stock	0		0		0			0			(517		)	(517		)
Treasury stock reissued	0		12		0			0			18			30
Balance at March 31, 2019	$	135	$	2,208	$	32,513		$	4,481		$	(13,288	)	$	26,049
Net earnings	0		0		817			0			0			817
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			393			0			393
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0			1,494			0			1,494
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			(1		)	0			(1		)
Pension liability adjustment during period, net of income taxes	0		0		0			(3		)	0			(3		)
Dividends to shareholders ($.27 per share)	0		0		(200		)	0			0			(200		)
Exercise of stock options	0		12		0			0			0			12
Share-based compensation	0		15		0			0			0			15
Purchases of treasury stock	0		0		0			0			(358		)	(358		)
Treasury stock reissued	0		12		0			0			11			23
Balance at June 30, 2019	$	135	$	2,247	$	33,130		$	6,364		$	(13,635	)	$	28,241

Nine Months Ended
September 30,
(In millions - Unaudited) 2017 2016
Common stock:
Balance, beginning of period $ 67
$ 67

Balance, end of period 67
67

Additional paid-in capital:
Balance, beginning of period 1,976
1,828

Exercise of stock options 33
38

Share-based compensation 38
41

Gain (loss) on treasury stock reissued 30
29

Balance, end of period 2,077
1,936

Retained earnings:
Balance, beginning of period 25,981
24,007

Net earnings 2,021
1,908

Dividends to shareholders (513 ) (511 )
Balance, end of period 27,489
25,404

Accumulated other comprehensive income (loss):
Balance, beginning of period 2,630
625

Unrealized foreign currency translation gains (losses) during
period, net of income taxes 268
1,602

Unrealized gains (losses) on investment securities during period,
net of income taxes and reclassification adjustments 632
3,134

Unrealized gains (losses) on derivatives during period, net of
income taxes 1
7

Pension liability adjustment during period, net of income taxes 0
(4 )
Balance, end of period 3,531
5,364

Treasury stock:
Balance, beginning of period (10,172 ) (8,819 )
Purchases of treasury stock (1,053 ) (1,222 )
Cost of shares issued 38
55

Balance, end of period (11,187 ) (9,986 )
Total shareholders’ equity $ 21,977
$ 22,785

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)



(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2019	$	135	$	2,247	$	33,130		$	6,364		$	(13,635	)	$	28,241
Net earnings	0		0		777			0			0			777
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			(24		)	0			(24		)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0			915			0			915
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			(6		)	0			(6		)
Pension liability adjustment during period, net of income taxes	0		0		0			2			0			2
Dividends to shareholders ($.27 per share)	0		0		(197		)	0			0			(197		)
Exercise of stock options	0		3		0			0			0			3
Share-based compensation	0		15		0			0			0			15
Purchases of treasury stock	0		0		0			0			(311		)	(311		)
Treasury stock reissued	0		12		0			0			11			23
Balance at September 30, 2019	$	135	$	2,277	$	33,710		$	7,251		$	(13,935	)	$	29,438

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)



(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at December 31, 2017	$	135	$	2,052	$	29,895		$	4,028		$	(11,512	)	$	24,598
Cumulative effect of change in accounting principles, net of income tax⁽¹⁾	0		0		(226		)	226			0			0
Net earnings	0		0		717			0			0			717
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			447			0			447
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments⁽¹⁾	0		0		0			(984		)	0			(984		)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			2			0			2
Pension liability adjustment during period, net of income taxes	0		0		0			(34		)	0			(34		)
Dividends to shareholders ($.26 per share)	0		0		(203		)	0			0			(203		)
Exercise of stock options	0		14		0			0			0			14
Share-based compensation	0		10		0			0			0			10
Purchases of treasury stock	0		0		0			0			(309		)	(309		)
Treasury stock reissued	0		13		0			0			16			29
Balance at March 31, 2018	$	135	$	2,089	$	30,183		$	3,685		$	(11,805	)	$	24,287
Net earnings	0		0		832			0			0			832
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			(138		)	0			(138		)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments ⁽¹⁾	0		0		0			(730		)	0			(730		)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			1			0			1
Pension liability adjustment during period, net of income taxes	0		0		0			34			0			34
Dividends to shareholders ($.26 per share)	0		0		(206		)	0			0			(206		)
Exercise of stock options	0		7		0			0			0			7
Share-based compensation	0		15		0			0			0			15
Purchases of treasury stock	0		0		0			0			(306		)	(306		)
Treasury stock reissued	0		6		0			0			(2		)	4
Balance at June 30, 2018	$	135	$	2,117	$	30,809		$	2,852		$	(12,113	)	$	23,800

⁽¹⁾See Note 1 of the Notes to the Consolidated Financial Statements in the Company's 2018 Annual Report on Form 10-K

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)



(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance at June 30, 2018	$	135	$	2,117	$	30,809		$	2,852		$	(12,113	)	$	23,800
Net earnings	0		0		845			0			0			845
Unrealized foreign currency translation gains (losses) during period, net of income tax	0		0		0			(347		)	0			(347		)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments ⁽¹⁾	0		0		0			(596		)	0			(596		)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0			(1		)	0			(1		)
Pension liability adjustment during period, net of income taxes	0		0		0			1			0			1
Dividends to shareholders ($.26 per share)	0		0		(193		)	0			0			(193		)
Exercise of stock options	0		9		0			0			0			9
Share-based compensation	0		14		0			0			0			14
Purchases of treasury stock	0		0		0			0			(324		)	(324		)
Treasury stock reissued	0		11		0			0			15			26
Balance at September 30, 2018	$	135	$	2,151	$	31,461		$	1,909		$	(12,422	)	$	23,234

⁽¹⁾See Note 1 of the Notes to the Consolidated Financial Statements in the Company's 2018 Annual Report on Form 10-K

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Cash Flows



	Nine Months Ended September 30,
(In millions - Unaudited)	2019				2018
Cash flows from operating activities:
Net earnings		$	2,523			$	2,395
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in receivables and advance premiums		(36		)		(27		)
Capitalization of deferred policy acquisition costs		(1,057		)		(1,082		)
Amortization of deferred policy acquisition costs		967				932
Increase in policy liabilities		1,659				1,821
Change in income tax liabilities		(85		)		38
Realized investment (gains) losses		147				76
Other, net		145				506
Net cash provided (used) by operating activities		4,263				4,659
Cash flows from investing activities:
Proceeds from investments sold or matured:
Available-for-sale fixed maturity securities		3,127				5,991
Equity securities		570				369
Held-to-maturity fixed maturity securities		437				880
Commercial mortgage and other loans		1,293				597
Costs of investments acquired:
Available-for-sale fixed maturity securities		(5,908		)		(7,845		)
Equity securities		(321		)		(338		)
Commercial mortgage and other loans		(2,634		)		(4,150		)
Other investments, net		(682		)		(136		)
Settlement of derivatives, net		13				(141		)
Cash received (pledged or returned) as collateral, net		1,144				1,413
Other, net		15				188
Net cash provided (used) by investing activities		(2,946		)		(3,172		)
Cash flows from financing activities:
Purchases of treasury stock		(1,157		)		(923		)
Proceeds from borrowings		268				0
Dividends paid to shareholders		(579		)		(595		)
Change in investment-type contracts, net		0				(17		)
Treasury stock reissued		38				36
Other, net		1				(14		)
Net cash provided (used) by financing activities		(1,429		)		(1,513		)
Effect of exchange rate changes on cash and cash equivalents		(9		)		(36		)
Net change in cash and cash equivalents		(121		)		(62		)
Cash and cash equivalents, beginning of period		4,337				3,491
Cash and cash equivalents, end of period		$	4,216			$	3,429
Supplemental disclosures of cash flow information:
Income taxes paid		$	950			$	827
Interest paid		132				124
Noncash interest		38				41
Impairment losses and loan loss reserves included in realized investment losses		21				17
Noncash financing activities:
Lease obligations		82				10
Treasury stock issued for:
Associate stock bonus		12				7
Shareholder dividend reinvestment		21				8
Share-based compensation grants		5				2

   Nine Months Ended September 30,
(In millions - Unaudited) 2017 2016
Cash flows from operating activities:
Net earnings $ 2,021
$ 1,908

Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in receivables and advance premiums (32 ) 41

Increase in deferred policy acquisition costs (229 ) (186 )
Increase in policy liabilities 2,137
2,329

Change in income tax liabilities 323
(365 )
Realized investment (gains) losses 166
358

Other, net 210
35

Net cash provided (used) by operating activities 4,596
4,120

Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold 2,633
978

Fixed maturities matured or called 740
774

Perpetual securities matured or called 9
234

Equity securities sold 755
173

Securities held to maturity:
Fixed maturities matured or called 1,714
946

Costs of investments acquired:
Available-for-sale fixed maturities acquired (6,827 ) (4,871 )
Available-for-sale equity securities acquired (391 ) (868 )
Other investments, net (949 ) (801 )
Settlement of derivatives, net (240 ) 1,203

Cash received (pledged or returned) as collateral, net (273 ) (350 )
Other, net (58 ) (56 )
Net cash provided (used) by investing activities (2,887 ) (2,638 )
Cash flows from financing activities:
Purchases of treasury stock (1,053 ) (1,222 )
Proceeds from borrowings 524
988

Principal payments under debt obligations (660 ) (232 )
Dividends paid to shareholders (491 ) (492 )
Change in investment-type contracts, net 39
117

Treasury stock reissued 23
37

Other, net 5

(31 )
Net cash provided (used) by financing activities (1,613 ) (835 )
Effect of exchange rate changes on cash and cash equivalents (28 ) 273

Net change in cash and cash equivalents 68
920

Cash and cash equivalents, beginning of period 4,859
4,350

Cash and cash equivalents, end of period $ 4,927
$ 5,270

Supplemental disclosures of cash flow information:
Income taxes paid $ 693
$ 1,594

Interest paid 144
155

Noncash interest 38
41

Impairment losses included in realized investment losses 27
71

Noncash financing activities:
Capital lease obligations 7
2

Treasury stock issued for:
   Associate stock bonus 22
24

   Shareholder dividend reinvestment 22
19

   Share-based compensation grants 1
4

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Notes to the Consolidated Financial Statements

(Interim period data – Unaudited)


1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac)~~, which operates~~ in the United States ~~(Aflac U.S.)~~ and, effective April 1, 2018, through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan. Prior to April 1, 2018, the Company's insurance business was marketed in Japan as a branch inof Aflac. The Company’s operations consist of two reportable business segments: Aflac U.S., which includes Aflac, and Aflac Japan, ~~(Aflac Japan).~~which includes ALIJ. American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac. Most of Aflac's policies are individually underwritten and marketed through independent agents. Additionally, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. The Company's insurance operations in the United States and ~~its branch in~~ Japan service the two markets for the Company's insurance business. Aflac Japan's revenues, including realized gains and losses on its investment portfolio, accounted for 69% ~~and 74%~~ of the Company's total revenues in both the nine-month periods ended September 30, ~~2017~~2019 and ~~2016, respectively.~~2018. The percentage of the Company's total assets attributable to Aflac Japan was ~~83%~~84% at both September 30, ~~2017,~~2019 and December 31, ~~2016.~~2018.

Basis of Presentation

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles ~~(GAAP)~~(U.S. GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to the Consolidated Financial Statements, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards Codification^TM (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The most significant items on the Company's balance sheet that involve a greater degree of accounting estimates and actuarial determinations subject to changes in the future are the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits and unpaid policy claims, and income taxes. These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, mortality, morbidity, commission and other acquisition expenses, and terminations by policyholders. 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, the Company believes the amounts provided are adequate.

The unaudited consolidated financial statements include the accounts of the Parent Company, its subsidiaries and those entities required to be consolidated under applicable accounting standards. All material intercompany accounts and transactions have been eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of September 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, the consolidated statements of earnings and comprehensive income (loss) for the ~~three-~~three-month and nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, the consolidated statement of shareholders' equity for the three-month periods ended March 31, 2019 and 2018, June 30, 2019 and 2018 and September 30, 2019 and 2018, and the consolidated ~~statements~~statement of ~~shareholders' equity and~~ cash flows for the nine-month periods ended September 30, ~~2017~~2019 and ~~2016.~~2018. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, ~~2016 (2016~~2018 (2018 Annual Report).

Reclassifications: Certain reclassifications have been made to prior-year amounts to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity.

Prior year foreign currency transaction gains and losses have been reclassified from Other income (loss) to Realized investment gains (losses) - Derivative and other gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity. This change in classification was made to reflect that the major source of the Company's foreign currency transaction gains and losses is directly or indirectly a result of its investment activity.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements



Standard	Description	Date of Adoption	Effect on Financial Statements or Other Significant Matters
Accounting Standard Update (ASU) 2018-15 Intangibles - Goodwill and Other - Internal-Use Software, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	In August 2018, the FASB issued amendments to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.	Early adopted as of January 1, 2019	The adoption of this guidance did not have a significant impact on the Company’s financial position, results of operations or disclosures.

~~Consolidation - Interests Held through Related Parties That Are under Common Control:~~ In October 2016, the FASB issued amendments which clarify the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

~~Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting:~~ In March 2016, the FASB issued amendments which simplify several aspects for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equity, and classification on the statement of cash flows. The Company adopted this guidance as of January 1, 2017.



Standard	Description	Date of Adoption	Effect on Financial Statements or Other Significant Matters
ASU 2016-02 Leases as clarified and amended by: ASU 2018-01,Leases: Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases, Targeted Improvements, and ASU 2018-20, Leases: Narrow-Scope Improvements for Lessors	In February 2016, the FASB issued updated guidance for accounting for leases (“Leases Update”). Per the Leases Update, lessees are required to recognize all leases on the balance sheet with the exception of short-term leases. A lease liability will be recorded for the obligation of a lessee to make lease payments arising from a lease. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Leases Update provided a number of optional practical expedients. The Company elected the "package of practical expedients," which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. Under the Leases Update, lessor accounting is largely unchanged. In January 2018, an amendment was issued to the Leases Update which provided an entity with the option to elect a transition practical expedient to not evaluate land easements that exist or expired before the entity's adoption of the Leases Update and that were not previously accounted for as leases. In July 2018, the FASB issued two amendments to the Leases Update which clarified, corrected errors in, or made minor improvements to the Leases Update and provided entities with an optional transition method to adopt the Leases Update by recording a cumulative-effect adjustment to beginning retained earnings. Additionally, the amendments provided lessors with a practical expedient to not separate nonlease components from associated lease components and instead account for those components as a single component under certain conditions. In December 2018, an amendment to the Leases Update was issued to clarify: 1) lessor accounting for all sales (and other similar) taxes; 2) the handling of certain lessor costs when the amount of those costs is not readily determinable; and 3) lessor allocation of certain variable payments to the lease and non-lease components.	January 1, 2019	The Company has operating and finance leases for office space and equipment. The Company elected the short-term lease exemption for all classes of leases which allows the Company to not recognize right-of-use assets and lease liabilities on the consolidated balance sheet and allows the Company to recognize the lease expense for short-term leases on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components and applied it to all classes of leases where the non-lease components are not significant. Some of the Company's leases include options to extend or terminate the lease and the lease terms may include such options when it is reasonably certain that the Company will exercise that option. Certain leases also include options to purchase the leased property. The leases within scope of the leases update increased the Company's right-of-use assets and lease liabilities recorded in its consolidated balance sheet by $134 million. As of January 1, 2019, the Company did not have land easements, but has elected the practical expedient as a safe harbor. The Company elected the optional transition method and as a safe harbor, the practical expedient provided to lessors. The Company has made an accounting policy election to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. The adoption of the Leases Update and related amendments did not have a significant impact on the Company's financial position, results of operations, or disclosures.

The amendment requires prospective recognition of excess tax benefits and deficiencies in the income statement, rather than in paid-in capital. As a result of applying this requirement, the Company believes that recognition of excess tax benefits will increase volatility in its statement of operations, but the adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

The amendment also requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The guidance requires modified retrospective transition for settlements on all outstanding awards (both historical and future) that did not give rise to an excess benefit to be recorded through retained earnings on a cumulative-effect basis. The adoption of these amendments in the guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Additionally, the amendment requires that the minimum statutory tax withholding for all outstanding liability awards be reclassified at the date of adoption to equity (assuming equity classification results from the guidance change), and as a cumulative-effect adjustment to equity be recorded on a modified retrospective basis. The adoption of these amendments in the guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

The guidance requires certain reclassifications of balances on the statement of cash flows to or from operating and financing activities. The reclassification guidance did not have a significant impact on the Company's statement of cash flows.

The amendment allows an entity to elect whether to use estimates of forfeitures, or to account for forfeitures as they occur, using modified retrospective application. The Company made an entity-wide accounting policy election to estimate the number of awards that are expected to vest (consistent with the Company's prior policy). ~~The election and adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.~~

~~Investments - Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting:~~ ~~In March 2016, the FASB issued amendments which~~eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Per the amendments, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

~~Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments:~~ In March 2016, the FASB issued amendments which clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is

related to interest rates or credit risks. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

~~Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships:~~ In March 2016, the FASB issued amendments which clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Accounting Pronouncements Pending Adoption



Standard	Description	Effect on Financial Statements or Other Significant Matters
ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments	In April 2019, the FASB issued Codification improvements to clarify and correct certain areas of guidance amended as part of ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; and ASU 2017-12, Derivative and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The most significant of these improvements to the Company was related to the Codification improvement to ASU 2017-12 and the clarification that a one-time reclassification of assets that are eligible to be hedged under the last-of-layer method (i.e., certain pre-payable securities) from held-to-maturity to available-for-sale is allowed under the new hedge accounting guidance and would not impact the Company’s ability to continue to classify other bonds as held-to-maturity. This clarification is effective for the Company beginning January 1, 2020, with early adoption permitted. If a reclassification is elected, it must be reflected as of the date of adoption of this update. The other amendments related to ASU 2017-12 and 2016-01 are either not significant, or were previously implemented as part of the related ASU adoptions. Applicable amendments related to ASU 2016-13 are discussed within the pending adoption of that update below.	The Company did not reclassify any assets from held-to-maturity to available-for-sale as part of its implementation of ASU 2017-12, and is therefore eligible to reclassify qualifying securities as a result of these clarifications. As of September 30, 2019, the Company has identified approximately $6 billion to $8 billion (at amortized cost) of pre-payable fixed-maturity securities classified as held-to-maturity that qualify for the one-time reclassification to the available-for-sale category. This reclassification will result in recording a net unrealized gain or loss on an after-tax basis, to accumulated other comprehensive income based on the securities’ fair values on the reclassification date, which the Company is currently planning for January 1, 2020. As of September 30, 2019, net unrealized gains on the identified eligible securities was approximately $600 million to $1 billion, after tax. The Company is further assessing the impact of the reclassification to other pending ASUs, such as 2016-13 which will be effective January 1, 2020.
ASU 2018-17 Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities	In October 2018, the FASB issued targeted improvements which provide that indirect interests held through related parties under common control should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The amendments are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted.	The adoption of this guidance is not expected to have a significant impact on the Company’s financial position, results of operations or disclosures.
ASU 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	In August 2018, the FASB issued amendments to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Accordingly, six disclosures requirements were removed, two added and two clarified. The amendments are effective for public business entities for fiscal years ending after December 15, 2020. Early adoption is permitted.	The Company plans to early adopt this guidance in the December 31, 2019 financial statements, and the adoption of this guidance is not expected to have a significant impact on the Company’s financial position, results of operations, or disclosures.

~~Derivatives and Hedging -Targeted Improvements to Accounting for Hedging Activities:~~ In August 2017, FASB issued guidance which improves and simplifies the accounting rules around hedge accounting and will create more transparency around how economic results are presented on financial statements. Issues addressed in this new guidance include: 1) risk component hedging, 2) accounting for the hedged item in fair value hedges of interest rate risk, 3) recognition and presentation of the effects of hedging instruments, and 4) amounts excluded from the assessment of hedge effectiveness. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the guidance. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.



Standard	Description	Effect on Financial Statements or Other Significant Matters
ASU 2018-13 Fair Value Measurement, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	In August 2018, the FASB issued amendments to the disclosure requirements on fair value measurements. The amendments remove, modify, and add certain disclosures. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Further, an entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay adoption of the additional disclosures until their effective date.	The adoption of this guidance is not expected to have a significant impact on the Company’s financial position, results of operations, or disclosures.
ASU 2018-12 Financial Services - Insurance, Targeted Improvements to the Accounting for Long-Duration Contracts	In August 2018, the FASB issued amendments that will significantly change how insurers account for long-duration contracts. The amendments will change existing recognition, measurement, presentation, and disclosure requirements. Issues addressed in the new guidance include: 1) a requirement to review and, if there is a change, update assumptions for the liability for future policy benefits at least annually, and to update the discount rate assumption quarterly, 2) accounting for market risk benefits at fair value, 3) simplified amortization for deferred acquisition costs, and 4) enhanced financial statement presentation and disclosures. The amendments are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application of the amendments is permitted.	The Company is thoroughly evaluating the impact of adoption and expects that the adoption will have a significant impact on the Company’s financial position, results of operations, and disclosures. The Company anticipates that the requirement to update assumptions for liability for future policy benefits will have a significant impact on its results of operations, systems, processes and controls while the requirement to update the discount rate will have a significant impact on its equity. The Company has no products with market risk benefits. The Company does not expect to early adopt the updated standard and has tentatively selected a modified retrospective transition method.
ASU 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment	In January 2017, the FASB issued amendments simplifying the subsequent measurement of goodwill. An entity, under this update, is no longer required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, the entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendments are effective for public business entities that are SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for any goodwill impairment tests performed on testing dates after January 1, 2017.	The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

~~Compensation-Stock Compensation: Scope of Modification Accounting:~~ In May 2017, the FASB issued amendments to provide guidance clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. An entity should apply modification accounting if the fair value, vesting conditions or classification of the award (as an equity instrument or liability instrument) changes as a result of the change in terms or conditions of the award. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.



Standard	Description	Effect on Financial Statements or Other Significant Matters
ASU 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as clarified and amended by: ASU 2019-04,Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief	In June 2016, the FASB issued amendments that require a financial asset (or a group of financial assets) measured at amortized cost to be presented net of an allowance for credit losses (Credit Losses ASU) in order to reflect the amount expected to be collected on the financial asset(s). The measurement of expected credit losses is amended by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. Credit losses on available-for-sale debt securities will be measured in a manner similar to current U.S. GAAP; however, the amendments require that credit losses be presented as an allowance rather than as a write-down. Other amendments include changes to the balance sheet presentation and interest income recognition of purchased financial assets with a more-than-insignificant credit deterioration since origination (PCD financial assets). The Credit Losses ASU is effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Companies may early adopt this guidance as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments will be adopted following a modified-retrospective approach resulting in a cumulative effect adjustment in retained earnings as of the beginning of the year of adoption. Two exceptions to this adoption method are for PCD financial assets and debt securities for which other-than-temporary impairment (OTTI) will have been recognized before the effective date. Loans purchased with credit deterioration accounted for under current U.S. GAAP as "purchased credit impaired" (PCI) financial assets will be classified as PCD financial assets at transition and PCD guidance will be applied prospectively. Debt securities that have experienced OTTI before the effective date will follow a prospective adoption method which allows an entity to maintain the same amortized cost basis before and after the effective date. In April 2019, the Credit Losses ASU was amended to allow entities to make a policy election about presentation and disclosure of accrued interest receivable and the related credit losses, whereby entities that write off uncollectible accrued interest receivable in a timely manner can make a policy election not to measure an allowance on the accrued interest receivable. Other amendments made within this Update clarify and address stakeholders’ specific issues about certain aspects of the Credit Losses ASU. In May 2019, the FASB granted a targeted transition relief by allowing to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost. These amendments will be effective upon adoption of the Credit Losses ASU.	The Company has identified the following financial instruments in scope of the new guidance: certain fixed maturity securities, loans and loan receivables, reinsurance recoverable, as well as certain other receivable balances and off-balance sheet arrangements. The Company has concluded that of the held-to-maturity fixed maturity securities, Japanese government and agency securities and certain Japanese government-guaranteed mortgage backed securities meet the requirements for a zero-loss expectation and therefore will not be included in the current expected credit loss measurement process upon adoption of the new standard. The Company has substantially completed the review and validation of credit models, methodologies and inputs for all asset classes. We have performed parallel runs during the second and third quarters and will continue to refine our estimation process with additional parallel testing throughout 2019. Based on our portfolio composition at September 30, 2019 and the current economic environment, we currently estimate an allowance for current expected credit loss of up to $150 million, which primarily relates to loans and loan receivables. As noted above relative to ASU 2019-04, the Company is planning a one-time reclassification as of January 1, 2020 of approximately $6 billion to $8 billion (amortized cost as of September 30, 2019) of its eligible fixed-maturity securities from held-to-maturity to available-for-sale category. The aforementioned reclassification has been reflected in the expected impact estimate from adoption of ASU 2016-13. The ultimate effect of the Credit Losses ASU will depend on many factors which continue to be subject to change until the date of adoption, among which are: the size and composition of the Company's portfolio, the portfolio’s credit quality and economic conditions at the time of adoption, as well as any refinements to models, methodology and other key assumptions.

~~Receivables-Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities:~~ In March 2017, the FASB issued amendments to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.



Standard	Description	Effect on Financial Statements or Other Significant Matters
		The Company continues to work towards implementing the accounting, reporting, and governance processes to comply with the new standard. The Company plans to adopt this ASU on January 1, 2020.

~~Compensation-Retirement Benefit: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost:~~ In March 2017, the FASB issued amendments requiring that an employer report the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic pension cost and net periodic postretirement benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, disclosures, or statements of cash flows.

~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets:~~ In February 2017, the FASB issued amendments that clarify the scope and accounting guidance for the derecognition of a nonfinancial asset or a financial asset that meets the definition of an "in substance nonfinancial asset." The amendments define an "in substance nonfinancial asset" and provide additional accounting guidance for partial sales of nonfinancial assets. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim

periods within those fiscal years. Earlier adoption is permitted for fiscal years beginning after December 15, 2016, including interim periods therein. An entity is required to apply the amendments at the same time that it applies the FASB amendments for Revenue from Contracts with Customers. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, disclosures, and statements of cash flows.

~~Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment:~~ In January 2017, the FASB issued amendments simplifying the subsequent measurement of goodwill. An entity, under this update, is no longer required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, the entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendments are effective for public business entities that are U.S. Securities and Exchange Commission (SEC) filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for any goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, or disclosures.

~~Business Combinations - Clarifying the Definition of a Business:~~ In January 2017, the FASB issued amendments clarifying when a set of assets and activities is a business. The amendments provide a screen to exclude transactions where substantially all the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. The amendments are effective for public business entities beginning after December 15, 2017, including interim periods within those periods. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, or disclosures.

~~Statement of Cash Flows - Restricted Cash:~~ In November 2016, the FASB issued amendments requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, disclosures, or statement of cash flows.

~~Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory:~~ In October 2016, the FASB issued amendments that require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is evaluating the impact of adoption of this guidance on its financial position, results of operations, and disclosures.

~~Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payment~~s: In August 2016, the FASB issued amendments that provide guidance on eight specific statement of cash flows classification issues. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for any interim or annual period. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, disclosures, or statements of cash flows.

~~Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments:~~ In June 2016, the FASB issued amendments that require a financial asset (or a group of financial assets) measured on an amortized cost basis to be presented net of an allowance for credit losses in order to reflect the amount expected to be collected on the financial asset(s). The measurement of expected credit losses is amended by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform about a credit loss. Credit losses on available-for-sale debt securities will continue to be measured in a manner similar to current U.S. GAAP. However, the amendments require that credit losses be presented as an allowance rather than as a writedown. Other amendments include changes to the balance sheet presentation and interest income recognition of purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The amendments are effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Companies may early adopt this guidance as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has identified certain financial instruments in scope of this guidance to include certain fixed maturity securities, loans and loan receivables and reinsurance recoverables (See Notes 3 and 7 for current balances of instruments in scope). The Company continues to evaluate the impact of adoption of this guidance on its financial position, results of operations, and disclosures.

~~Leases:~~ In February 2016, the FASB issued updated guidance for accounting for leases. Per the amendments, lessees will be required to recognize all leases on the balance sheet with the exception of short-term leases. A lease liability will be recorded for the obligation of a lessee to make lease payments arising from a lease. A right-of-use asset will be recorded which represents the lessee’s right to use, or to control the use of, a specified asset for a lease term. Under the new guidance, lessor accounting is largely unchanged. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has identified certain operating leases in scope of this guidance to include office space and equipment leases (See Note 15 of the Notes to the Consolidated Financial Statements in the 2016 Annual Report for current balances of leases in scope). The leases within scope of this guidance will increase the Company's right-of-use assets and lease liabilities recorded on its statement of financial position, however the Company estimates leases within scope of the guidance to represent less than 1% of its total assets as of September 30, 2017. The Company estimates that the adoption of this guidance will not have a significant impact on its financial position, results of operations, and disclosures.

~~Financial Instruments - Overall - Recognition and Measurement of Financial Assets and Financial Liabilities:~~ In January 2016, the FASB issued guidance to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require that equity investments be measured at fair value with changes recognized in net income; that changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option be recognized in other comprehensive income; and that entities would make the assessment of the ability to realize a deferred tax asset (DTA) related to an available-for-sale (AFS) debt security in combination with the entity's other DTAs. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted, with the exception of the own credit provision if an entity has elected to measure a liability at fair value. The Company has identified certain financial instruments in scope of this guidance to include certain fixed maturity securities, perpetual securities and equity securities (See Note 3 for current balances of instruments in scope). The Company estimates that the impact of this guidance will increase volatility in its statement of operations and the Company continues to evaluate the impact of this guidance on its statement of financial position, results of operations, and disclosures.

~~Revenue from Contracts with Customers:~~ In May 2014, the FASB issued updated guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date for this standard to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods. The Company has identified revenue in scope of this guidance to include certain revenues associated with affiliated entities in support of its operations. The Company estimates the revenue within scope of the guidance to represent less than 1% of its total revenues as of September 30, 2017. The Company estimates that the adoption of this guidance will not have a significant impact on its financial position, results of operations, and disclosures.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company's business.

For additional information on new accounting pronouncements and recent accounting guidance and their impact, if any, on the Company's financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.


2.	BUSINESS SEGMENT INFORMATION

The Company consists of ~~two~~2 reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. ~~Operating~~In addition, operating business ~~segments~~units that are not individually reportable and business activities, including reinsurance retrocession activities, not included in Aflac Japan or Aflac U.S. are included in ~~the "Other business segments" category.~~Corporate and other.

The Company does not allocate corporate overhead expenses to business segments. Consistent with U.S. GAAP accounting guidance for segment reporting, the Company evaluates and manages its business segments using a financial performance measure called pretax ~~operating~~adjusted earnings. Adjusted earnings are adjusted revenues less benefits and adjusted expenses. The ~~Company's definition of operating earnings includes interest~~

~~cash flows associated with notes payable~~adjustments to both revenues and ~~amortized hedge costs related to foreign currency denominated investments, but excludes~~expenses account for certain items that cannot be predicted or that are outside ~~of management's control, such as~~management’s control. Adjusted revenues are U.S. GAAP total revenues excluding realized investment gains and losses, ~~from securities transactions, impairments, change in loan loss reserves and certain derivative and~~except for amortized hedge costs/income related to foreign currency ~~activities;~~exposure management strategies and net interest cash flows from derivatives associated with certain investment strategies. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring ~~items; and~~or other ~~non-operating income (loss) from net earnings. Nonrecurring and other non-operating~~ items ~~consist of infrequent events and activity~~ not associated with the normal course of the Company’s insurance operations and that do not reflect Aflac’s underlying business performance. The Company excludes income taxes related to operations to arrive at pretax ~~operating~~adjusted earnings. Information regarding operations by reportable segment and Corporate and other, follows:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2017		2016			2017			2016			2019			2018		2019		2018
Revenues:
Aflac Japan:
Net earned premiums	$	3,200	$	3,596		$	9,616		$	10,177		$	3,241		$	3,159	$	9,593	$	9,649
Net investment income, less amortized hedge costs ⁽¹⁾	561		607			1,676			1,802
Net investment income, less amortized hedge costs ^(1),(2)												659			606		1,878		1,801
Other income	11		10			31			29			12			10		34		31
Total Aflac Japan	3,772		4,213			11,323			12,008			3,912			3,775		11,505		11,481
Aflac U.S.:
Net earned premiums	1,393		1,365			4,172			4,093			1,445			1,426		4,365		4,280
Net investment income	181		176			539			526			183			187		540		544
Other income	1		1			3			5			2			3		6		7
Total Aflac U.S.	1,575		1,542			4,714			4,624			1,630			1,616		4,911		4,831
Other business segments	69		71			204			207
Total business segment revenues	5,416		5,826			16,241			16,839
Corporate and eliminations	19		20			59			63
Total operating revenues	5,435		5,846			16,300			16,902
Realized investment gains (losses) ^{(1), (2), (3)}	71		(130		)	(57		)	(298		)
Corporate and other ⁽³⁾												97			82		287		245
Total adjusted revenues												5,639			5,473		16,703		16,557
Realized investment gains (losses) ^(1),(2),(3)												(103		)	104		1		75
Total revenues	$	5,506	$	5,716		$	16,243		$	16,604		$	5,536		$	5,577	$	16,704	$	16,632

⁽¹⁾Amortized hedge costs ~~related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60~~of $66 and ~~$54~~$59 for the three-month periods and ~~$168~~$191 and ~~$123~~$168 for the nine-month periods ended September 30, ~~2017,~~2019, and ~~2016,~~2018, respectively, ~~and~~related to certain foreign currency exposure management strategies have been reclassified from realized investment gains (losses) and reported as a deduction from net investment income when analyzing ~~segment operations to conform to current year reporting.~~operations.

⁽²⁾~~Excluding~~ Net interest cash flows from derivatives associated with certain investment strategies of $(4) for the three-month period and $(18) for the nine-month period ended September 30, 2019 and an immaterial amount for the three- and nine-month periods in 2018, respectively, have been reclassified from realized investment gains (losses) and included in adjusted earnings as a ~~gain~~component of ~~$19~~net investment income.

⁽³⁾ Amortized hedge income of $21 and ~~$20~~$9 for the three-month periods and ~~$60~~ $61and ~~$64~~$18 for the nine-month periods ended September 30, ~~2017,~~2019, and ~~2016,~~2018, respectively, related to certain foreign currency exposure management strategies has been reclassified from realized investment gains (losses) and reported as an increase to net investment income when analyzing operations.



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Pretax earnings:
Aflac Japan ^(1),(2)	$	838		$	756		$	2,504		$	2,411
Aflac U.S.	335			334			996			1,011
Corporate and other ^(3),(4)	(17		)	(29		)	(62		)	(113		)
Pretax adjusted earnings	1,156			1,061			3,438			3,309
Realized investment gains (losses) ^{(1),(2),(3),(4)}	(120		)	88			(49		)	25
Other income (loss)	0			(3		)	(1		)	(73		)
Total earnings before income taxes	$	1,036		$	1,146		$	3,388		$	3,261
Income taxes applicable to pretax adjusted earnings	$	293		$	270		$	880		$	862
Effect of foreign currency translation on after-tax adjusted earnings	15			(1		)	2			27

⁽¹⁾Amortizedhedge costs of $66 and $59 for the three-month periods and $191 and $168 for the nine-month periods ended September 30, 2019, and 2018, respectively, related to certain foreign currency management strategies have been reclassified from realized investment gains (losses) and reported as a deduction from pretax adjusted earnings when analyzing operations.

⁽²⁾ Net interest cash flows from derivatives associated with certain investment strategies of $(4)for the three-month period and $(18) for the nine-month period ended September 30, 2019 and an immaterial amount for the three- and nine-month periods in 2018, respectively, have been reclassified from realized investment gains (losses) and included in adjusted earnings as a component of net investment income.

⁽³⁾ Amortized hedge income of $21 and $9 for the three-month periods and $61 and $18 for the nine-month periods ended September 30, 2019, and 2018, respectively, related to certain foreign currency management strategies has been reclassified from realized investment gains (losses) and reported as an increase in pretax adjusted earnings when analyzing operations.

⁽⁴⁾A gain of $16 and $17 for the three-month periods ended September 30, 2019, and 2018, respectively and $50 for both nine-month periods ended September 30, 2019, and 2018, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable ~~which is classified as an operating gain when analyzing segment operations~~

⁽³⁾Prior year foreign currency transaction gains and losses have been reclassified from other non-operating income (loss) to realized investment gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on total revenues.

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Pretax earnings:
Aflac Japan ⁽¹⁾
$ 748
$ 827
$ 2,308
$ 2,436

Aflac U.S. 316
323
956
946

Other business segments 5
4
9
12

    Total business segment pretax operating earnings 1,069
1,154
3,273
3,394

Interest expense, noninsurance operations (30 ) (31 ) (89 ) (90 )
Corporate and eliminations (25 ) (31 ) (70 ) (91 )
    Pretax operating earnings 1,014
1,092
3,114
3,213

Realized investment gains (losses) ^{(1), (2), (3)}
71
(130 ) (57 ) (298 )
Other non-operating income (loss)⁽³⁾
(10 ) 1
(38 ) (1 )
    Total earnings before income taxes $ 1,075
$ 963
$ 3,019
$ 2,914

Income taxes applicable to pretax operating earnings $ 338
$ 379
$ 1,031
$ 1,112

Effect of foreign currency translation on after-tax
operating earnings (29 ) 61
(31 ) 110

⁽¹⁾~~Amortized~~hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60 and $54 for the three-month periods and $168 and $123 for the nine-month periods ended September 30, 2017, and 2016, respectively, and have been reclassified from realized investment gains (losses) and ~~reported as a deduction from pretax operating~~included in adjusted earnings when analyzing ~~segment operations to conform to current year reporting.~~operations.

⁽²⁾Excluding a gain of $19 and $20 for the three-month periods and $60 and $64 for the nine-month periods ended September 30, 2017, and 2016, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations

Assets were as follows:



(In millions)	September 30, 2019			December 31, 2018
Assets:
Aflac Japan		$	129,178		$	118,342
Aflac U.S.		21,247			19,100
Corporate and other		3,712			2,964
Total assets		$	154,137		$	140,406

(In millions) September 30,
2017 December 31,
2016
Assets:
Aflac Japan $ 113,625
$ 107,858

Aflac U.S. 20,348
19,453

Other business segments 513
270

Total business segment assets 134,486
127,581

Corporate and eliminations 1,597
2,238

Total assets $ 136,083
$ 129,819


3.	INVESTMENTS

Investment Holdings

The amortized cost for the Company's investments in ~~debt and perpetual~~fixed maturity securities, the cost for equity securities and the fair values of these investments are shown in the following tables.



	September 30, 2019
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies		$	32,076		$	5,858		$	0		$	37,934
Municipalities		524			125			1			648
Mortgage- and asset-backed securities		235			28			0			263
Public utilities		1,864			395			0			2,259
Sovereign and supranational		717			53			0			770
Banks/financial institutions		6,384			694			98			6,980
Other corporate		5,260			956			20			6,196
Total yen-denominated		47,060			8,109			119			55,050
U.S. dollar-denominated:
U.S. government and agencies		347			15			0			362
Municipalities		1,095			155			0			1,250
Mortgage- and asset-backed securities		139			7			0			146
Public utilities		3,918			785			12			4,691
Sovereign and supranational		240			74			0			314
Banks/financial institutions		3,020			652			8			3,664
Other corporate		25,655			3,205			397			28,463
Total U.S. dollar-denominated		34,414			4,893			417			38,890
Total securities available for sale		$	81,474		$	13,002		$	536		$	93,940

September 30, 2017
(In millions) Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses   Fair
  Value
Securities available for sale, carried at fair value:
Fixed maturities:
  Yen-denominated:
Japan government and agencies $ 27,027
$ 3,272
$ 423
$ 29,876

Municipalities 315
26
15
326

Mortgage- and asset-backed securities 248
29
0
277

Public utilities 1,643
369
7
2,005

Sovereign and supranational 1,428
190
3
1,615

Banks/financial institutions 3,307
494
59
3,742

Other corporate 3,811
771
25
4,557

Total yen-denominated 37,779
5,151
532
42,398

  U.S. dollar-denominated:
U.S. government and agencies 150
12
0
162

Municipalities 818
148
0
966

Mortgage- and asset-backed securities 166
13
0
179

Public utilities 5,231
813
34
6,010

Sovereign and supranational 325
89
0
414

Banks/financial institutions 2,683
592
7
3,268

Other corporate 25,092
2,388
462
27,018

Total U.S. dollar-denominated 34,465
4,055
503
38,017

Total fixed maturities 72,244
9,206
1,035
80,415

Perpetual securities:
  Yen-denominated:
Banks/financial institutions 1,308
277
32
1,553

Other corporate 195
41
0
236

  U.S. dollar-denominated:
Banks/financial institutions 46
28
0
74

Total perpetual securities 1,549
346
32
1,863

Equity securities:

      Yen-denominated 555
95
2
648

      U.S. dollar-denominated 256
30
6
280

Total equity securities 811
125
8
928

Total securities available for sale $ 74,604
$ 9,677
$ 1,075
$ 83,206



	December 31, 2018
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies		$	30,637		$	3,700		$	140		$	34,197
Municipalities		385			32			9			408
Mortgage- and asset-backed securities		155			22			0			177
Public utilities		1,732			280			4			2,008
Sovereign and supranational		826			123			0			949
Banks/financial institutions		5,440			502			238			5,704
Other corporate		4,852			649			44			5,457
Total yen-denominated		44,027			5,308			435			48,900
U.S dollar-denominated:
U.S. government and agencies		137			9			1			145
Municipalities		1,343			120			8			1,455
Mortgage- and asset-backed securities		155			8			1			162
Public utilities		4,772			496			105			5,163
Sovereign and supranational		251			60			0			311
Banks/financial institutions		2,860			389			35			3,214
Other corporate		23,311			1,343			1,109			23,545
Total U.S. dollar-denominated		32,829			2,425			1,259			33,995
Total securities available for sale		$	76,856		$	7,733		$	1,694		$	82,895

September 30, 2017
(In millions) Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
  Yen-denominated:
Japan government and agencies $ 21,385
$ 5,070
$ 0
$ 26,455

Municipalities 359
104
0
463

Mortgage- and asset-backed securities 27
2
0
29

Public utilities 3,308
426
0
3,734

Sovereign and supranational 1,527
319
0
1,846

Banks/financial institutions 2,700
205
18
2,887

Other corporate 2,692
493
0
3,185

Total yen-denominated 31,998
6,619
18
38,599

Total securities held to maturity $ 31,998
$ 6,619
$ 18
$ 38,599



	September 30, 2019
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies		$	22,581		$	6,653		$	0		$	29,234
Municipalities		835			279			0			1,114
Mortgage- and asset-backed securities		18			1			0			19
Public utilities		2,573			394			0			2,967
Sovereign and supranational		1,187			197			0			1,384
Banks/financial institutions		930			108			8			1,030
Other corporate		2,609			473			8			3,074
Total yen-denominated		30,733			8,105			16			38,822
Total securities held to maturity		$	30,733		$	8,105		$	16		$	38,822



	December 31, 2018
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies		$	21,712		$	5,326		$	0		$	27,038
Municipalities		359			110			0			469
Mortgage- and asset-backed securities		14			1			0			15
Public utilities		2,727			254			8			2,973
Sovereign and supranational		1,551			289			0			1,840
Banks/financial institutions		1,445			158			20			1,583
Other corporate		2,510			332			38			2,804
Total yen-denominated		30,318			6,470			66			36,722
Total securities held to maturity		$	30,318		$	6,470		$	66		$	36,722

December 31, 2016
(In millions) Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses   Fair
  Value
Securities available for sale, carried at fair value:
Fixed maturities:
  Yen-denominated:
Japan government and agencies $ 22,857
$ 3,359
$ 160
$ 26,056

Municipalities 246
29
8
267

Mortgage- and asset-backed securities 1,096
33
8
1,121

Public utilities 1,533
318
3
1,848

Sovereign and supranational 862
186
5
1,043

Banks/financial institutions 2,673
403
74
3,002

Other corporate 3,192
623
3
3,812

Total yen-denominated 32,459
4,951
261
37,149

  U.S dollar-denominated:
U.S. government and agencies 148
10
0
158

Municipalities 894
142
8
1,028

Mortgage- and asset-backed securities 196
20
0
216

Public utilities 5,205
690
60
5,835

Sovereign and supranational 335
91
0
426

Banks/financial institutions 2,570
507
16
3,061

Other corporate 24,556
2,021
690
25,887

Total U.S. dollar-denominated 33,904
3,481
774
36,611

Total fixed maturities 66,363
8,432
1,035
73,760

Perpetual securities:
  Yen-denominated:
Banks/financial institutions 1,266
128
49
1,345

Other corporate 189
24
0
213

  U.S. dollar-denominated:
Banks/financial institutions 51
24
0
75

Total perpetual securities 1,506
176
49
1,633

Equity securities:
      Yen-denominated 624
83
2
705

      U.S. dollar-denominated 579
31
6
604

Total equity securities 1,203
114
8
1,309

Total securities available for sale $ 69,072
$ 8,722
$ 1,092
$ 76,702



(In millions)	September 30, 2019			December 31, 2018
Equity securities, carried at fair value through net earnings:	Fair Value			Fair Value
Equity securities:
Yen-denominated		$	628		$	641
U.S. dollar-denominated		202			346
Total equity securities		$	830		$	987

December 31, 2016
(In millions) Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies $ 20,702
$ 5,338
$ 0
$ 26,040

Municipalities 350
107
0
457

Mortgage- and asset-backed securities 30
2
0
32

Public utilities 3,201
358
23
3,536

Sovereign and supranational 2,602
283
8
2,877

Banks/financial institutions 3,731
195
26
3,900

Other corporate 2,734
452
7
3,179

Total yen-denominated 33,350
6,735
64
40,021

Total securities held to maturity $ 33,350
$ 6,735
$ 64
$ 40,021

The methods of determining the fair values of the Company's investments in ~~fixed-maturity securities, perpetual~~fixed maturity securities and equity securities are described in Note 5.

During the ~~third quarter~~first nine months of ~~2017,~~2019 and 2018, respectively, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category. During the second quarter of 2017, the Company reclassified three investments from the held-to-maturity category to the available-for-sale category as a result of the issuers' credit rating being downgraded to below investment grade. At the time of the transfer, the securities had an amortized cost of $773 million and an unrealized gain of $47 million. During the first quarter of 2017, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

~~During the first nine months of 2016, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.~~

Contractual and Economic Maturities

The contractual and economic maturities of the Company's investments in fixed ~~maturities~~maturity securities at September 30, ~~2017,~~2019, were as follows:

Aflac Japan Aflac U.S.
(In millions) Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Available for sale:
Due in one year or less $ 175
$ 181
$ 53
$ 54

Due after one year through five years 5,734
6,029
637
682

Due after five years through 10 years 9,078
9,668
3,253
3,529

Due after 10 years 43,860
49,502
8,443
9,698

Mortgage- and asset-backed securities 290
330
40
42

Total fixed maturities available for sale $ 59,137
$ 65,710
$ 12,426
$ 14,005

Held to maturity:
Due in one year or less $ 488
$ 497
$ 0
$ 0

Due after one year through five years 923
970
0
0

Due after five years through 10 years 1,638
1,810
0
0

Due after 10 years 28,922
35,293
0
0

Mortgage- and asset-backed securities 27
29
0
0

Total fixed maturities held to maturity $ 31,998
$ 38,599
$ 0
$ 0



(In millions)	Amortized Cost			Fair Value
Available for sale:
Due in one year or less		$	883		$	909
Due after one year through five years		8,415			8,525
Due after five years through 10 years		10,744			12,043
Due after 10 years		61,058			72,054
Mortgage- and asset-backed securities		374			409
Total fixed maturity securities available for sale		$	81,474		$	93,940
Held to maturity:
Due in one year or less		$	194		$	198
Due after one year through five years		1,366			1,471
Due after five years through 10 years		540			610
Due after 10 years		28,615			36,524
Mortgage- and asset-backed securities		18			19
Total fixed maturity securities held to maturity		$	30,733		$	38,822

At ~~September 30, 2017~~,

Economic maturities are used for certain debt instruments with no stated maturity where the ~~Parent Company and other business segments had portfolios~~expected maturity date is based on the combination of ~~available-for-sale fixed-maturity securities totaling $681 million at amortized cost and $700 million at fair value, which are not included~~features in the ~~table above.~~

~~Expected maturities may differ from contractual maturities because some issuers have~~financial instrument such as the right to call or prepay obligations ~~with~~ or ~~without call or prepayment penalties.~~changes in coupon rates.

The majority of the Company's perpetual securities are subordinated to other debt obligations of the issuer, but rank higher than the issuer's equity securities. Perpetual securities have characteristics of both debt and equity investments, along with unique features that create economic maturity dates for the securities. Although perpetual securities have no contractual maturity date, they have stated interest coupons that were fixed at their issuance and subsequently change to a floating short-term interest rate after some period of time. The instruments are generally callable by the issuer at the time of changing from a fixed coupon rate to a new variable rate of interest, which is determined by the combination of some market index plus a fixed amount of basis points. The net effect is to create an expected maturity date for the instrument. The economic maturities of the Company's investments in perpetual securities, which were all reported as available for sale at September 30, 2017, were as follows:

Aflac Japan Aflac U.S.
(In millions) Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Due in one year or less $ 84
$ 85
$ 0
$ 0

Due after one year through five years 194
236
0
0

Due after 10 years 1,232
1,482
39
60

Total perpetual securities available for sale $ 1,510
$ 1,803
$ 39
$ 60

Investment Concentrations

The Company's process for investing in credit-related investments begins with an independent approach to underwriting each issuer's fundamental credit quality. The Company evaluates independently those factors that it believes could influence an issuer's ability to make payments under the contractual terms of the Company's instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). The Company further evaluates the investment considering broad business and portfolio management objectives, including asset/liability needs, portfolio diversification, and expected income.

Investment exposures that individually exceeded 10% of shareholders' equity were as follows:

September 30, 2017

December 31, 2016

September 30, 2019

December 31, 2018

(In millions)

Credit
Rating

Amortized
Cost

Fair
Value

Credit
Rating

Amortized
Cost

Fair
Value

Credit
Rating

Amortized
Cost

Fair
Value

Credit
Rating

Amortized
Cost

Fair
Value

Japan National Government⁽¹⁾

$47,637

$55,444

$42,931

$51,345

A+

$53,192

$65,315

A+

$51,207

$59,945

⁽¹⁾Japan Government Bonds (JGBs) or JGB-backed securities

Realized Investment Gains and Losses

Information regarding pretax realized gains and losses from investments is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Realized investment gains (losses):
Fixed maturity securities:
Available for sale:
Gross gains from sales	$	11		$	60		$	55		$	81
Gross losses from sales	(18		)	(26		)	(29		)	(99		)
Foreign currency gains (losses) on sales and redemptions	(21		)	3			(12		)	27
Other-than-temporary impairment losses	(13		)	0			(13		)	(2		)
Total fixed maturity securities	(41		)	37			1			7
Equity securities	18			27			65			(1		)
Loan receivables:
Loan loss reserves	(5		)	(5		)	(8		)	(15		)
Total loan receivables	(5		)	(5		)	(8		)	(15		)
Derivatives and other:
Derivative gains (losses)	(146		)	(162		)	(24		)	(190		)
Foreign currency gains (losses)	21			159			(181		)	123
Total derivatives and other	(125		)	(3		)	(205		)	(67		)
Total realized investment gains (losses)	$	(153	)	$	56		$	(147	)	$	(76	)

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Realized investment gains (losses):
Fixed maturities:
Available for sale:
Gross gains from sales $ 10
$ 2
$ 27
$ 10

Gross losses from sales (8 ) (22 ) (38 ) (38 )
Net gains (losses) from redemptions 14
1
(24 ) 88

Other-than-temporary impairment losses (2 ) (1 ) (9 ) (23 )
Total fixed maturities 14
(20 ) (44 ) 37

Perpetual securities:
Available for sale:
Net gains (losses) from redemptions 0
0
4
40

Other-than-temporary impairment losses 0
0
0
(2 )
Total perpetual securities 0
0
4
38

Equity securities:
Gross gains from sales 54
5
102
10

Gross losses from sales (9 ) 0
(11 ) (10 )
Other-than-temporary impairment losses (6 ) (22 ) (18 ) (46 )
Total equity securities 39
(17 ) 73
(46 )
Derivatives and other:
Derivative gains (losses) (40 ) (107 ) (143 ) (278 )
Foreign currency gains (losses) 17
(20 ) (56 ) (109 )
  Total derivatives and other (23 ) (127 ) (199 ) (387 )
  Total realized investment gains (losses) $ 30
$ (164 ) $ (166 ) $ (358 )

~~Prior year foreign currency transaction~~The unrealized holding gains, net of losses, recorded as a component of realized investment gains and losses ~~have been reclassified~~for the three-month period ended September 30, 2019, that relates to ~~conform~~equity securities still held at the September 30, 2019, reporting date was $21 million. The unrealized holding gains, net of losses, recorded as a component of realized investment gains and losses for the nine-month period ended September 30, 2019, that relates to ~~current-year~~equity securities still held at the September 30, 2019, reporting ~~classifications~~date was $38 million.

Unrealized Investment Gains and Losses

Effect on Shareholders’ Equity

The net effect on shareholders’ equity of unrealized gains and losses from ~~investment~~fixed maturity securities was as follows:



(In millions)	September 30, 2019				December 31, 2018
Unrealized gains (losses) on securities available for sale		$	12,466			$	6,039
Deferred income taxes		(3,496		)		(1,805		)
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities		$	8,970			$	4,234

(In millions) September 30, 2017 December 31,
2016
Unrealized gains (losses) on securities available for sale $ 8,602
$ 7,630

Deferred income taxes (3,165 ) (2,825 )
Shareholders’ equity, unrealized gains (losses) on investment securities $ 5,437
$ 4,805

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale and held-to-maturity investments that were in an unrealized loss position, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.



	September 30, 2019
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed maturity securities:
Municipalities:
Yen-denominated		$	14		$	1		$	14		$	1		$	0		$	0
Public utilities:
U.S. dollar-denominated		305			12			58			2			247			10
Banks/financial institutions:
U.S. dollar-denominated		223			8			115			5			108			3
Yen-denominated		1,795			106			1,795			106			0			0
Other corporate:
U.S. dollar-denominated		5,447			397			1,369			124			4,078			273
Yen-denominated		462			28			462			28			0			0
Total		$	8,246		$	552		$	3,813		$	266		$	4,433		$	286

September 30, 2017

Total Less than 12 months 12 months or longer
(In millions) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Fixed Maturities:
  Japan government and
agencies:
  Yen-denominated $ 6,404
$ 423
$ 6,208
$ 399
$ 196
$ 24

  Municipalities:
  Yen-denominated 152
15
62
3
90
12

  Public utilities:
  U.S. dollar-denominated 879
34
252
4
627
30

  Yen-denominated 95
7
69
6
26
1

  Sovereign and supranational:
  Yen-denominated 352
3
352
3
0
0

  Banks/financial institutions:
  U.S. dollar-denominated 188
7
145
3
43
4

  Yen-denominated 1,616
77
637
29
979
48

  Other corporate:
  U.S. dollar-denominated 7,886
462
2,803
52
5,083
410

  Yen-denominated 424
25
386
24
38
1

  Total fixed maturities 17,996
1,053
10,914
523
7,082
530

Perpetual securities:
  Yen-denominated 340
32
0
0
340
32

  Total perpetual securities 340
32
0
0
340
32

Equity securities:
  U.S. dollar-denominated 58
6
50
5
8
1

  Yen-denominated 72
2
67
1
5
1

  Total equity securities 130
8
117
6
13
2

  Total $ 18,466
$ 1,093
$ 11,031
$ 529
$ 7,435
$ 564



	December 31, 2018
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed maturity securities:
U.S. government and agencies:
U.S. dollar-denominated		$	67		$	1		$	67		$	1		$	0		$	0
Japan government and agencies:
Yen-denominated		3,604			140			3,604			140			0			0
Municipalities:
U.S. dollar-denominated		515			8			515			8			0			0
Yen-denominated		148			9			148			9			0			0
Mortgage- and asset- backed securities:
U.S. dollar-denominated		74			1			74			1			0			0
Public utilities:
U.S. dollar-denominated		1,585			105			892			48			693			57
Yen-denominated		604			12			604			12			0			0
Banks/financial institutions:
U.S. dollar-denominated		625			35			340			19			285			16
Yen-denominated		3,057			258			3,057			258			0			0
Other corporate:
U.S. dollar-denominated		12,899			1,109			5,782			407			7,117			702
Yen-denominated		1,306			82			1,306			82			0			0
Total		$	24,484		$	1,760		$	16,389		$	985		$	8,095		$	775

December 31, 2016

Total Less than 12 months 12 months or longer
(In millions) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Fixed Maturities:
  Japan government and
agencies:
  Yen-denominated $ 3,958
$ 160
$ 3,958
$ 160
$ 0
$ 0

  Municipalities:
  U.S. dollar-denominated 44
8
0
0
44
8

  Yen-denominated 105
8
105
8
0
0

Mortgage- and asset-
backed securities:
  Yen-denominated 713
8
713
8
0
0

  Public utilities:
  U.S. dollar-denominated 1,265
60
790
32
475
28

  Yen-denominated 635
26
347
14
288
12

  Sovereign and supranational:
  Yen-denominated 244
13
38
5
206
8

  Banks/financial institutions:
  U.S. dollar-denominated 268
16
238
10
30
6

  Yen-denominated 1,521
100
636
19
885
81

  Other corporate:
  U.S. dollar-denominated 10,462
690
7,252
346
3,210
344

  Yen-denominated 321
10
321
10
0
0

  Total fixed maturities 19,536
1,099
14,398
612
5,138
487

Perpetual securities:
  Yen-denominated 479
49
85
1
394
48

  Total perpetual securities 479
49
85
1
394
48

Equity securities:
U.S. dollar-denominated 211
6
211
6
0
0

Yen-denominated 49
2
49
2
0
0

  Total equity securities 260
8
260
8
0
0

  Total $ 20,275
$ 1,156
$ 14,743
$ 621
$ 5,532
$ 535

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on the Company's fixed maturity ~~or perpetual~~ securities investments have been primarily related to general market changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal. The unrealized losses on the Company's investments in equity securities are primarily related to foreign exchange rates, general market conditions which reflect prospects for the economy as a whole, or specific information pertaining to an industry or an individual company.

For any significant declines in fair value of its fixed ~~income or perpetual~~maturity securities, the Company performs a more focused review of the related issuers' credit profile. For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure,

covenant ~~predictions,~~protections, or other relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal.

For any significant declines in fair value of its equity securities, the Company reviews the severity of the security’s decline in fair value coupled with the length of time the fair value of the security has been below cost. The Company also performs a more focused review of the financial condition and near-term prospects of the issuer as well as general market conditions reflecting the prospects for the economy as a whole, and determines whether it has the intent to hold the securities until they recover in value.

Assuming no credit-related factors develop, unrealized gains and losses on fixed ~~maturities and perpetual~~maturity securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its fixed maturity ~~and perpetual security~~ investments in the sectors shown in the table above have the ability to service their obligations to the Company.

Commercial Mortgage and Other Loans

The Company classifies its transitional real estate loans (TREs), commercial mortgage loans (CMLs) and middle market loans (MMLs) as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets. The Company carries them on the balance sheet at amortized cost less an estimated allowance for loan losses.

The following table reflects the composition of commercial mortgage and other loans by portfolio segment as of the periods presented.



(In millions)	September 30, 2019				December 31, 2018
Commercial mortgage and other loans:
Transitional real estate loans		$	4,853			$	4,394
Commercial mortgage loans		1,387				1,065
Middle market loans		2,079				1,487
Total gross commercial mortgage and other loans		8,319				6,946
Allowance for loan loss		(35		)		(27		)
Total net commercial mortgage and other loans		$	8,284			$	6,919

Commercial mortgage and transitional real estate loans were secured by properties entirely within the United States. Middle market loans are issued only to companies domiciled within the United States and Canada.

Transitional Real Estate Loans

Transitional real estate loans are commercial mortgage loans that are typically relatively short-term floating rate instruments secured by a first lien on the property. These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date. This loan portfolio is generally considered to be investment grade. As of September 30, 2019, the Company had $1.3 billion in outstanding commitments to fund transitional real estate loans. These commitments are contingent on the final underwriting and due diligence to be performed.

Commercial Mortgage Loans

Commercial mortgage loans are typically fixed rate loans on commercial real estate with partial repayment of principal over the life of the loan with the remaining outstanding principal being repaid upon maturity. This loan portfolio is generally considered higher quality investment grade loans. As of September 30, 2019, the Company had $293 million of outstanding commitments to fund commercial mortgage loans. These commitments are contingent on the final underwriting and due diligence to be performed.

Middle Market Loans

Middle market loans are typically first lien senior secured cash flow loans to small to mid-size companies for working capital, refinancing, acquisition, and recapitalization. These loans are generally considered to be below investment grade. The carrying value for middle market loans included $36 millionand $56 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of September 30, 2019, and December 31, 2018, respectively.

As of September 30, 2019, the Company had commitments of approximately $447 million to fund potential future loan originations related to this investment program. These commitments are contingent upon the availability of middle market loans that meet the Company's underwriting criteria.

Allowance for Loan Losses

The Company's allowance for loan losses is established using both general and specific allowances. The general allowance is used for loans grouped by similar risk characteristics where a loan-specific or market-specific risk has not been identified, but for which the Company estimates probable incurred losses. The specific allowance is used on an individual loan basis when it is probable that a loss has been incurred. As of September 30, 2019, the Company had loan loss reserves of $2 million related to a specific middle market loan. There was no specific loan loss reserve as of December 31, 2018. The following table presents the rollforward of the general allowance for loan losses by portfolio segment during the nine-month period ended September 30.



(In millions)	Commercial Mortgage Loans				Transitional Real Estate Loans				Middle Market Loans				Total
Allowance for loan losses at December 31, 2018		$	(1	)		$	(17	)		$	(9	)		$	(27	)
Addition to (release of) allowance for credit losses		(1		)		(2		)		(5		)		(8		)
Allowance for loan losses at September 30, 2019		$	(2	)		$	(19	)		$	(14	)		$	(35	)

The key credit quality indicators used by the Company in establishing the general and specific loan loss reserves, as well as in determining whether or not a loan should be impaired, include loan-to-value and debt service coverage ratios for CMLs and TREs and ratings for our middle market loan portfolio. Given that transitional real estate loans involve properties undergoing renovation or construction, loan-to-value provides the most insight on the credit risk of the property. The performance of the loans are monitored and reviewed periodically, but not less than quarterly.

As of September 30, 2019, and December 31, 2018, the Company had no loans that were past due in regards to principal and/or interest payments. Additionally, the Company held no loans that were on nonaccrual status or considered impaired as of September 30, 2019, and December 31, 2018. The Company had no troubled debt restructurings during the nine months ended September 30, 2019 and 2018.

Other Investments

The table below reflects the composition of the carrying value for other investments as of the periods presented.


(In millions)	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Other investments:
Commercial mortgage loans		$	1,199		$	855
Middle market loans		798			319
Policy loans		207			184			$	250		$	232
Short-term investments		57			89
Short-term investments ⁽¹⁾								722			152
Limited partnerships								505			377
Other		97			3			30			26
Total other investments		$	2,358		$	1,450		$	1,507		$	787

⁽¹⁾Includes securities lending collateral

~~Loans and Loan Receivables~~

The Company classifies its commercial mortgage loans (CMLs) and middle market loans (MMLs) as held-for-investment and includes them in the other investments line on the consolidated balance sheets. The Company carries them on the balance sheet at amortized cost less an estimated allowance for loan losses. The Company's allowance for loan losses is established using both general and specific allowances. The general allowance is used for loans grouped by similar risk characteristics where a loan-specific or market-specific risk has not been identified, but for which the Company estimates probable incurred losses. The specific allowance is used on an individual loan basis when it is probable that a loss has been incurred. As of September 30, 2017, and December 31, 2016, the Company's allowance for loan losses was $8 million and $3 million, respectively. As of September 30, 2017, and December 31, 2016, the Company had no loans that were past due in regards to principal and/or interest payments. Additionally, the Company held no loans that were on nonaccrual status or considered impaired as of September 30, 2017, and December 31, 2016. The Company had no troubled debt restructurings during the nine months ended September 30, 2017 and 2016.

~~Commercial Mortgage Loans~~

Commercial mortgage loans include transitional real estate (TRE) loans. As of September 30, 2017, the Company had $103 million in outstanding commitments to fund commercial mortgage loans, inclusive of loans held in unit trust structures. These commitments are contingent on the final underwriting and due diligence to be performed.

~~Middle Market Loans~~

Middle market loans are generally considered to be below investment grade. The carrying value for middle market loans included an unfunded amount of $133 million and $91 million, as of September 30, 2017, and December 31, 2016, respectively, that is reflected in other liabilities on the consolidated balance sheets.

As of September 30, ~~2017,~~2019, the Company had commitments of approximately $530 million to fund potential future loan originations related to this investment program, inclusive of loans held in unit trust structures. These commitments are contingent upon the availability of middle market loans that meet the Company's underwriting criteria.

~~Other~~

~~Other investments primarily includes investments in limited partnerships. As of September 30, 2017, the Company had $365 million~~$1.7 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

As a condition of its involvement or investment in a VIE, the Company enters into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of the Company's investment or its beneficial interest in the VIE.

For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature. The Company has not, nor has it been, required to purchase any securities issued in the future by these VIEs.

The Company's ownership interest in VIEs is limited to holding the obligations issued by them. The Company has no direct or contingent obligations to fund the limited activities of these VIEs, nor does it have any direct or indirect financial guarantees related to the limited activities of these VIEs. The Company has not provided any assistance or any other type of financing support to any of the VIEs it invests in, nor does it have any intention to do so in the future. For those VIEs in which the Company holds debt obligations, the weighted-average lives of the Company's notes are very similar to the underlying collateral held by these VIEs where applicable.

The Company also utilizes unit trust structures in its Aflac Japan segment to invest in various asset classes. As the sole investor of these VIEs, the Company is required to consolidate these entities under U.S. GAAP.

The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related investments held in the VIE.

VIEs - Consolidated

The following table presents the cost or amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities



	September 30, 2019						December 31, 2018
(In millions)	Cost or Amortized Cost			Fair Value			Cost or Amortized Cost			Fair Value
Assets:
Fixed maturity securities, available for sale		$	3,594		$	4,562		$	3,849		$	4,466
Equity securities		0			0			160			160
Commercial mortgage and other loans		6,813			6,868			5,528			5,506
Other investments ⁽¹⁾		439			439			328			328
Other assets ⁽²⁾		147			147			182			182
Total assets of consolidated VIEs		$	10,993		$	12,016		$	10,047		$	10,642
Liabilities:
Other liabilities ⁽²⁾		$	139		$	139		$	102		$	102
Total liabilities of consolidated VIEs		$	139		$	139		$	102		$	102

September 30, 2017 December 31, 2016
(In millions) Cost or Amortized
Cost Fair
Value Cost or Amortized
Cost Fair
Value
Assets:
Fixed maturities, available for sale $ 4,274
$ 5,224
$ 4,168
$ 4,982

Perpetual securities, available for sale 239
211
237
208

Equity securities 595
690
972
1,044

Other investments ⁽¹⁾
1,500
1,491
819
789

Other assets ⁽²⁾
148
148
127
127

Total assets of consolidated VIEs $ 6,756
$ 7,764
$ 6,323
$ 7,150

Liabilities:
Other liabilities ⁽²⁾
$ 132
$ 132
$ 146
$ 146

Total liabilities of consolidated VIEs $ 132
$ 132
$ 146
$ 146

⁽¹⁾ Consists entirely of ~~CMLs, MMLs, and~~ alternative investments in limited partnerships

⁽²⁾ Consists entirely of derivatives

The Company is substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, the Company has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and is therefore considered to be the primary beneficiary of the VIEs that it consolidates. The Company also participates in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding invested assets and foreign currency ~~and/or credit default~~ swaps, ~~(CDS),~~ as appropriate,

and utilizing the cash flows from these securities to service its investment. Neither the Company nor any of its creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event. For those VIEs that contain a swap, the Company is not a direct counterparty to the swap contracts and has no control over them. The Company's loss exposure to these VIEs is limited to its original investment. The Company's consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable. With the exception of its investment in unit trust structures, the underlying collateral assets and funding of the Company's consolidated VIEs are generally static in ~~nature and the underlying collateral and the reference corporate entities covered by any CDS contracts were all investment grade at the time of issuance.~~nature.

Investments in Unit Trust Structures

The Company ~~invests through~~also utilizes unit trust structures in ~~yen-denominated public equity securities, U.S. dollar-denominated public equity securities, bank loans, commercial mortgage loans, infrastructure debt, middle market loans, and alternative investments~~its Aflac Japan segment to invest in ~~limited partnerships. The~~various asset classes. As the sole investor of these VIEs, the Company is ~~the only investor in these trusts and meets the requirements~~required to consolidate these trusts under U.S. GAAP. The yen-denominated and U.S. dollar-denominated equity securities, bank loans and certain infrastructure debt are classified as available for sale in the financial statements. The commercial mortgage loans, middle market loans and certain infrastructure debt that meets the criteria to be classified as a loan are classified as loans held for investment and reflected in other investments on the consolidated balance sheets at amortized cost. Limited partnership investments are recognized as equity method investments.

~~VIEs-Not~~VIEs - Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which the Company's investment in VIEs not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated



	September 30, 2019						December 31, 2018
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturity securities, available for sale		$	4,289		$	5,027		$	4,575		$	4,982
Fixed maturity securities, held to maturity		2,016			2,385			2,007			2,254
Other investments ⁽¹⁾		66			66			49			49
Total investments in VIEs not consolidated		$	6,371		$	7,478		$	6,631		$	7,285

September 30, 2017 December 31, 2016
(In millions) Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Assets:
Fixed maturities, available for sale $ 4,766
$ 5,439
$ 4,729
$ 5,261

Perpetual securities, available for sale 177
220
172
200

Fixed maturities, held to maturity 2,645
3,047
2,563
2,948

Other investments 50
50
1
1

Total investments in VIEs not consolidated $ 7,638
$ 8,756
$ 7,465
$ 8,410

⁽¹⁾ Consists entirely of alternative investments in limited partnerships

The Company holds alternative investments in limited partnerships that have been determined to be VIEs. These partnerships invest in private equity and structured investments. The Company’s maximum exposure to loss on these investments is limited to the amount of its investment. The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The Company classifies these investments as Other investments in the consolidated balance sheets.

Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents or sponsors. These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. The Company does not have the power to direct the activities that most significantly impact the entity's economic performance, nor does it have the obligation to absorb losses of the entity or the right to receive benefits from the entity. As such, the Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

Securities Lending and Pledged Securities

The Company lends ~~fixed-maturity~~fixed maturity and public equity securities to financial institutions in short-term security-lending transactions. These short-term security-lending arrangements increase investment income with minimal risk. The Company receives cash or other securities as collateral for such loans. The Company's security lending policy requires that the fair value of the securities ~~and/or unrestricted cash~~ received as collateral be 102% or more of the fair value of the loaned securities and that unrestricted cash received as collateral be 100% or more of the fair value of the loaned securities. ~~These~~The securities loaned continue to be carried as investment

assets on the Company's balance sheet during the terms of the loans and are

not reported as sales. ~~The Company receives cash or other securities as collateral for such loans.~~ For loans involving unrestricted cash or securities as collateral, the collateral is reported as an asset with a corresponding liability for the return of the collateral. For loans where the Company receives as collateral securities that the Company is not permitted to sell or repledge, the collateral is not reflected on the consolidated financial statements.

Details of collateral by loaned security type and remaining maturity of the ~~Company's securities lending activities~~agreements were as follows:

															Securities Lending Transactions Accounted for as Secured Borrowings
September 30, 2017
September 30, 2019							September 30, 2019
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total		Overnight and Continuous⁽¹⁾		Up to 30 days		Greater than 90 days		Total
Securities lending transactions:
Fixed maturity securities:
Japan government and agencies							$	0	$	1,176	$	3,973	$	5,149
Public utilities	$	37	$	0	$	37	44		0		0		44
Banks/financial institutions	37		0		37		73		0		0		73
Other corporate	434		0		434		887		0		0		887
Equity securities	14		0		14		9		0		0		9
Total borrowings	$	522	$	0	$	522	$	1,013	$	1,176	$	3,973	$	6,162
Gross amount of recognized liabilities for securities lending transactions	Gross amount of recognized liabilities for securities lending transactions				$	522	Gross amount of recognized liabilities for securities lending transactions						$	2,189
Amounts related to agreements not included in offsetting disclosure in Note 4	Amounts related to agreements not included in offsetting disclosure in Note 4				$	0	Amounts related to agreements not included in offsetting disclosure in Note 4						$	3,973

⁽¹⁾~~These securities are pledged as collateral~~The related loaned security, under the Company's U.S. securities lending program, ~~and~~ can be ~~called~~returned to the Company at ~~its~~the transferee's discretion; therefore, they are classified as Overnight and Continuous.

															Securities Lending Transactions Accounted for as Secured Borrowings
December 31, 2016
December 31, 2018							December 31, 2018
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total		Overnight and Continuous⁽¹⁾		Up to 30 days		Greater than 90 days		Total
Securities lending transactions:
Fixed maturity securities:
Japan government and agencies							$	0	$	387	$	1,190	$	1,577
Municipalities							5		0		0		5
Public utilities	$	62	$	0	$	62	27		0		0		27
Banks/financial institutions	34		0		34		74		0		0		74
Other corporate	430		0		430		549		0		0		549
Equity securities							10		0		0		10
Total borrowings	$	526	$	0	$	526	$	665	$	387	$	1,190	$	2,242
Gross amount of recognized liabilities for securities lending transactions	Gross amount of recognized liabilities for securities lending transactions				$	526	Gross amount of recognized liabilities for securities lending transactions						$	1,052
Amounts related to agreements not included in offsetting disclosure in Note 4	Amounts related to agreements not included in offsetting disclosure in Note 4				$	0	Amounts related to agreements not included in offsetting disclosure in Note 4						$	1,190

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of September 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively.

Certain ~~fixed-maturity~~fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements or certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.


4.	DERIVATIVE INSTRUMENTS

The Company's freestanding derivative financial instruments have historically consisted of: ~~(1)~~

foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's ~~portfolio; (2)~~ portfolio

foreign currency forwards and options used to ~~hedge foreign exchange risk from the Company's net investment in Aflac Japan and~~ economically hedge certain portions of forecasted cash flows denominated in ~~yen; (3) swaps associated with~~yen and hedge the Company's ~~notes payable, consisting of~~ long term exposure to a weakening yen

cross-currency interest rate swaps, also referred to as foreign currency swaps, associated with certain senior notes and ~~its~~ subordinated ~~debentures; (4)~~ debentures

foreign currency swaps and, in prior periods, credit default swaps that are associated with investments in special-purpose entities, including VIEs where the Company is the primary ~~beneficiary; and (5) options on~~ beneficiary

interest rate swaps ~~(or~~used to economically hedge interest rate ~~swaptions) and futures~~fluctuations in certain variable-rate investments

interest rate swaptions used to hedge changes in the fair value associated with interest rate ~~risk~~fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities. ~~The Company does not use derivative financial instruments for trading purposes, nor does it engage in leveraged derivative transactions.~~

Some of the Company's derivatives are designated as cash flow hedges, fair value hedges or net investment hedges; however, other derivatives do not qualify for hedge accounting or the Company elects not to designate them as an accounting hedge. The Company utilizes a net investment hedge to mitigate foreign exchange exposure resulting from its net investment in Aflac Japan. In addition to designating derivatives as hedging instruments, the Company has designated the majority of the Parent Company's yen-denominated liabilities (notes payable and loans) as nonderivative hedging instruments for this net investment hedge.hedges.

Derivative Types

Foreign currency forwards and options are executed for the Aflac Japan segment in order to hedge the currency risk on the carrying value of certain U.S. dollar-denominated investments. The average maturity of these forwards and options can change depending on factors such as market conditions and types of investments being held. In situations where the maturity of the forwards and options ~~are~~is shorter than the underlying investment being hedged, the Company may enter into new forwards and options near maturity of the existing derivative in order to continue hedging the underlying investment. In forward transactions, Aflac Japan agrees with another party to buy a fixed amount of yen and sell a corresponding amount of U.S. dollars at a specified future date. Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options. In the purchased put transactions, Aflac Japan obtains the option to buy a fixed amount of ~~U.S. dollar put options~~yen and sell a corresponding amount of U.S. ~~dollar~~dollars at a specified future date. In the sold call ~~options.~~transaction, Aflac Japan agrees to sell a fixed amount of yen and buy a corresponding amount of U.S. dollars at a specified future date. The combination of ~~these two actions~~purchasing the put option and selling the call option results in no net premium being paid (i.e. a costless or zero-cost collar). The foreign currency forwards and options are used in fair value hedging relationships to mitigate the foreign exchange risk associated with U.S. dollar-denominated investments supporting yen-denominated liabilities.

~~Foreign~~From time to time, the Company may also enter into foreign currency forwards and options ~~are also used~~ to hedge the currency risk associated with the net investment in Aflac Japan. In these forward transactions, Aflac agrees with another party to buy a fixed amount of U.S. dollars and sell a corresponding amount of yen at a specified price at a specified future date. In the option transactions, the Company ~~uses~~may use a combination of foreign currency options to protect expected future cash flows by simultaneously purchasing yen put options (options that protect against a weakening yen) and selling yen call options (options that limit participation in a strengthening yen). The combination of these two actions ~~results in no net premium being paid (i.e.~~create a ~~costless or~~ zero-cost ~~collar).~~collar.

The Company enters into foreign currency swaps pursuant to which it exchanges an initial principal amount in one currency for an initial principal amount of another currency, with an agreement to re-exchange the ~~currencies~~principal amounts at a future ~~date at an agreed upon exchange rate.~~date. There may also be periodic exchanges of payments at specified intervals based on the agreed upon rates and notional amounts. Foreign currency swaps are used primarily in the consolidated VIEs in the Company's Aflac Japan portfolio to convert foreign-denominated cash flows to yen, the functional currency of Aflac Japan, in order to minimize cash flow fluctuations. The Company also uses foreign currency swaps to economically convert certain of its U.S. dollar-denominated senior note and subordinated debenture principal and interest obligations into yen-denominated obligations.

~~The only CDS that~~In order to reduce investment income volatility from its variable-rate investments, the Company currently holds relates to components of an investment in a VIE and is used to assume credit risk related to an individual security. This CDS contract entitles the consolidated VIE to receive periodic fees in exchange for an obligation to compensate the derivative counterparties should the referenced security issuer experience a credit event, as defined in the contract.

~~Interest~~enters into receive–fixed, pay–floating interest rate swaps involve the periodic exchange of cash flows with other parties, at specified intervals, calculated using agreed upon rates or other financial variables and notional principal amounts. Typically, at the time a swap is entered into, the cash flow streams exchanged by the counterparties are equal in value. No cash or principal payments are exchanged at the inception of the contract. Interest rate swaps are primarily used to convert interest receipts on

~~floating-rate fixed-maturity securities contracts to fixed rates.~~swaps. These derivatives are ~~predominantly~~cleared and settled through a central clearinghouse.

Swaptions are used to ~~better match cash receipts~~mitigate the adverse impact resulting from ~~assets with cash disbursements required~~significant changes in the fair value of U.S. dollar-denominated available-for-sale securities due to ~~fund liabilities.~~

fluctuation in interest rates. In a payer swaption, the Company pays a premium to obtain the right, but not the obligation, to enter into a swap contract where it will pay a fixed rate and receive a floating rate. Interest rate ~~swaptions are options on interest rate swaps. Interest rate~~swaption collars are combinations of two swaption positions and are executed in order to hedge certain U.S. dollar-denominated available-for-sale securities that are held in the Aflac Japan segment. The Company uses collars to protect against significant changes in the fair value associated with its U.S. dollar-denominated available-for-sale securities due to interest rates.positions. In order to maximize the efficiency of the collars while minimizing cost, a collar strategy is used whereby the Company ~~sets the strike price on each collar so~~purchases a long payer swaption (the Company purchases an option that ~~the premium paid for the ‘payer leg’ is offset by the premium received for having sold the ‘receiver leg.'~~

~~Periodically,~~allows it to enter into a swap where the Company ~~may~~will pay the fixed rate and receive the floating rate of the swap) and sells a short receiver swaption (the Company sells an option that provides the counterparty with the right to enter into ~~other derivative transactions depending on general economic conditions.~~a swap where the Company will receive the fixed rate and pay the floating rate of the swap). The combination of purchasing the long payer swaption and selling the short receiver swaption results in no net premium being paid (i.e. a costless or zero-cost collar).

Derivative Balance Sheet Classification

The ~~tables~~table below ~~summarize~~summarizes the balance sheet classification of the Company's derivative fair value amounts, as well as the gross asset and liability fair value amounts. The fair value amounts presented do not include income accruals. Derivative assets are included in “Other Assets,” while derivative liabilities are included in “Other Liabilities” within the Company’s Consolidated Balance Sheets. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of exposure or credit risk.


		September 30, 2017										December 31, 2016										September 30, 2019									December 31, 2018
(In millions)				Asset Derivatives			Liability Derivatives							Asset Derivatives			Liability Derivatives							Asset Derivatives			Liability Derivatives						Asset Derivatives			Liability Derivatives
Hedge Designation/ Derivative Type	Notional Amount			Fair Value			Fair Value				Notional Amount			Fair Value			Fair Value				Notional Amount			Fair Value			Fair Value			Notional Amount			Fair Value			Fair Value
Cash flow hedges:
Foreign currency swaps		$	75		$	0		$	(9	)		$	75		$	0		$	(10	)
Foreign currency swaps - VIE																						$	75		$	0		$	7		$	75		$	1		$	4
Total cash flow hedges		75			0			(9		)		75			0			(10		)		75			0			7			75			1			4
Fair value hedges:
Foreign currency forwards		9,278			0			(411		)		10,965			0			(759		)		2,568			16			58			2,086			0			34
Foreign currency options		5,660			0			(20		)		4,224			2			(32		)		11,843			0			7			9,070			3			1
Interest rate swaptions																						243			0			0			500			0			1
Total fair value hedges		14,938			0			(431		)		15,189			2			(791		)		14,654			16			65			11,656			3			36
Net investment hedge:
Foreign currency forwards		48			1			0				209			5			(2		)		3,497			30			9			0			0			0
Foreign currency options		564			17			(4		)		843			41			(17		)		2,000			1			0			0			0			0
Total net investment hedge		612			18			(4		)		1,052			46			(19		)		5,497			31			9			0			0			0
Non-qualifying strategies:
Foreign currency swaps		5,387			301			(187		)		6,266			490			(220		)		2,800			80			88			2,800			103			129
Foreign currency swaps - VIE																						2,587			147			132			2,587			181			101
Foreign currency forwards		7,124			159			(343		)		21,218			667			(956		)		15,919			124			101			16,057			126			117
Foreign currency options		25			0			0				41			0			(2		)		856			0			1			430			0			0
Credit default swaps		89			1			0				86			2			0
Interest rate swaps																						7,420			13			0			4,750			3			0
Interest rate swaptions																						7			0			0			0			0			0
Total non-qualifying strategies		12,625			461			(530		)		27,611			1,159			(1,178		)		29,589			364			322			26,624			413			347
Total derivatives		$	28,250		$	479		$	(974	)		$	43,927		$	1,207		$	(1,998	)		$	49,815		$	411		$	403		$	38,355		$	417		$	387
Balance Sheet Location
Other assets		$	9,509		$	479		$	0			$	18,329		$	1,207		$	0
Other liabilities		18,741			0			(974		)		25,598			0			(1,998		)
Total derivatives		$	28,250		$	479		$	(974	)		$	43,927		$	1,207		$	(1,998	)

Cash Flow Hedges

~~Certain of the Company's~~For certain variable-rate U.S. dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, ~~have~~ foreign currency swaps ~~that qualify for hedge accounting treatment. For those that have qualified,~~are used to swap the USD variable rate interest and principal payments to fixed rate JPY interest and principal payments. The Company has designated ~~the derivative~~foreign currency swaps as a hedge of the variability in cash flows of a forecasted transaction or of amounts to be received or paid related to a recognized asset (“cash flow” hedge). The remaining maximum length of time for which these cash flows are hedged is ~~nine~~7 years. The ~~remaining~~ derivatives in the Company's consolidated VIEs that ~~have~~are not ~~qualified for hedge~~designated as accounting hedges are ~~included~~discussed in ~~“non-qualifying strategies.”~~the "non-qualifying strategies" section of this note.

Fair Value Hedges

The Company designates and accounts for certain foreign currency forwards, options, and ~~options~~interest rate swaptions as fair value hedges when they meet the requirements for hedge accounting. ~~These foreign~~The Company recognizes gains and losses on these derivatives as well as the offsetting gain or loss on the related hedged items in current earnings.

Foreign currency forwards and options hedge the foreign currency exposure of certain U.S. dollar-denominated ~~investments. The Company recognizes gains and losses on these derivatives and the related hedged items~~available-for-sale fixed-maturity investments held in ~~current earnings within derivative and other gains (losses).~~Aflac Japan. The change in the fair value of the foreign currency forwards related to the changes in the difference between the spot rate and the forward price is excluded from the assessment of hedge effectiveness. The change in fair value of the foreign currency option related to the time value of the option is recognized in current earnings and is excluded from the assessment of hedge effectiveness.

~~The Company designates and accounts for interest rate swaptions as fair value hedges when they meet the requirements for hedge accounting. These interest~~

Interest rate swaptions hedge the interest rate exposure of certain U.S. dollar-denominated ~~fixed maturity~~available-for-sale securities ~~within~~held in Aflac Japan. For these hedging relationships, the ~~investment portfolio~~Company excludes time value from the assessment of hedge effectiveness and recognizes changes in the intrinsic value of the ~~Company's Aflac Japan segment. The Company recognizes gains and losses on these derivatives and the related hedged items~~swaptions in current earnings within ~~derivative and other gains (losses).~~net investment income. The change in ~~the fair value of the interest rate swaptions related to~~ the time value of the ~~option~~swaptions is ~~excluded from the assessment of hedge effectiveness.~~recognized in other comprehensive income (loss) and amortized into earnings (net investment income) over its legal term.

The following table presents the gains and losses on derivatives and the related hedged items in fair value hedges.

Fair Value Hedging Relationships



(In millions)		Hedging Derivatives									Hedged Items
Hedging Derivatives	Hedged Items	Total Gains (Losses)			Gains (Losses) Excluded from Effectiveness Testing⁽¹⁾			Gains (Losses) Included in Effectiveness Testing⁽²⁾			Gains (Losses)⁽²⁾			Net Realized Gains (Losses) Recognized for Fair Value Hedge
Three Months Ended September 30, 2019:
Foreign currency forwards	Fixed maturity securities	$	(19	)	$	(24	)	$	5		$	(4	)	$	1
Foreign currency options	Fixed maturity securities	(5		)	(5		)	0			0			0
Interest rate swaptions	Fixed maturity securities	(6		)	(6		)	0			0			0
Total gains (losses)		$	(30	)	$	(35	)	$	5		$	(4	)	$	1
Nine Months Ended September 30, 2019:
Foreign currency forwards	Fixed maturity securities	$	(4	)	$	(48	)	$	44		$	(43	)	$	1
Foreign currency options	Fixed maturity securities	(9		)	(9		)	0			0			0
Interest rate swaptions	Fixed maturity securities	(9		)	(9		)	0			0			0
Total gains (losses)		$	(22	)	$	(66	)	$	44		$	(43	)	$	1
Three Months Ended September 30, 2018:
Foreign currency forwards	Fixed maturity securities	$	(106	)	$	(19	)	$	(87	)	$	83		$	(4	)
Foreign currency options	Fixed maturity securities	(7		)	(7		)	0			0			0
Total gains (losses)		(113		)	(26		)	(87		)	83			(4		)
Nine Months Ended September 30, 2018:
Foreign currency forwards	Fixed maturity securities	$	93		$	(88	)	$	181		$	(195	)	$	(14	)
Foreign currency options	Fixed maturity securities	(10		)	(10		)	0			0			0
Total gains (losses)		$	83		$	(98	)	$	181		$	(195	)	$	(14	)

⁽¹⁾ Gains (losses) excluded from effectiveness testing includes the forward point on foreign currency forwards and time value change on foreign currency options which are reported in the consolidated statement of earnings as realized investment gains (losses). It also includes the change in the fair value of the interest rate swaptions related to the time value of the swaptions which is recognized as a component of other comprehensive income (loss).

⁽²⁾ Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statement of earnings as realized investment gains (losses). For interest rate swaptions and related hedged items, gains and losses included in the hedge assessment, premium amortization and time value amortization while the hedge items are still outstanding are reported within net investment income. The time value gains and losses for interest rate swaptions when the related hedged items are redeemed are reported in realized investment gains and losses consistent with the impact of the hedged item. For the three-month and nine-month periods ended September 30, 2019, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

The following table shows the carrying amounts of assets designated and qualifying as hedged items in fair value hedges of interest rate risk and the related cumulative hedge adjustment included in the carrying amount.

(In millions) Hedging Derivatives Hedged Items
Hedging Derivatives Hedged Items Total
Gains (Losses) Gains (Losses)
Excluded from Effectiveness Testing Gains (Losses)
Included in Effectiveness Testing Gains (Losses) Ineffectiveness
Recognized for Fair Value Hedge
Three Months Ended September 30, 2017:
Foreign currency
forwards Fixed-maturity and equity securities $ (114 ) $ (53 ) $ (61 ) $ 61
$ 0
Foreign currency
options Fixed-maturity securities (14 ) (14 ) 0
0
0
Nine Months Ended September 30, 2017:
Foreign currency forwards Fixed-maturity and equity securities $ 193
$ (151 ) $ 344
$ (326 ) $ 18
Foreign currency options Fixed-maturity securities 3
(8 ) 11
(10 ) 1
Three Months Ended September 30, 2016:
Foreign currency
forwards Fixed-maturity and equity securities $ 90
$ (186 ) $ 276
$ (288 ) $ (12 )
Foreign currency options Fixed-maturity securities (4 ) (4 ) 0
0
0
Nine Months Ended September 30, 2016:
Foreign currency forwards Fixed-maturity and equity securities $ 2,103
$ (278 ) $ 2,381
$ (2,406 ) $ (25 )
Foreign currency options Fixed-maturity securities 2
2
0
0
0



(In millions)	Carrying Amount of the Hedged Assets/(Liabilities)⁽¹⁾					Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets/(Liabilities)
		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Fixed maturity securities		$	4,833	$	6,593	$	262	$	294

⁽¹⁾The balance includes hedging adjustment on discontinued hedging relationships of $262 in 2019 and $294 in 2018.

The total notional amount of the Company's interest rate swaptions was $243 in 2019 and $500 in 2018. The hedging adjustment related to these derivatives was immaterial.

Net Investment Hedge

The Company's investment in Aflac Japan is affected by changes in the yen/dollar exchange rate. To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 8) have been designated as non-derivative ~~hedges and~~hedges. Beginning in July 2019, certain foreign currency forwards and options ~~have been~~were designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan. Prior to April 1, 2018, foreign currency forwards and options were also designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.

The Company used foreign exchange forwards and options to hedge foreign exchange risk on 21.9 billion yen and 45.0 billion yen of profit repatriation received from Aflac Japan in September 2017 and July 2017, respectively. As of September 30, 2017, the Company had foreign exchange forwards and options as part of a hedge on 68.9 billion yen of future profit repatriation.

The Company's net investment hedge was effective during the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Non-qualifying Strategies

For the Company's derivative instruments in consolidated VIEs that do not qualify for hedge accounting treatment, all changes in their fair value are reported in current period earnings within ~~derivative and other~~realized investment gains (losses). The amount of gain or loss recognized in earnings for the Company's VIEs is attributable to the derivatives in those investment structures. While the change in value of the swaps is recorded through current period earnings, the change in value of the available-for-sale ~~fixed-maturity or perpetual~~fixed maturity securities associated with these swaps is recorded through other comprehensive income.

~~The~~As of September 30, 2019, the Parent Company ~~has~~had cross-currency interest rate swap agreements related to its ~~$550 million senior notes due March 2020,~~ $350 million senior notes due February 2022, $700 million senior notes due June 2023, $750 million senior notes due November 2024 and $450 million senior notes due March ~~2025, and $500 million subordinated debentures due September 2052.~~2025. Changes in the values of these swaps are recorded through current period earnings. For additional information regarding these swaps, see Note ~~8 in this report and Note~~ 9 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.

~~In 2016, the~~The Company ~~began using~~uses foreign exchange forwards and options to economically mitigate the currency risk of some of its U.S. dollar-denominated loan receivables held within the Aflac Japan segment. ~~As of September 30, 2017, the outstanding derivative notional amounts associated with these U.S. dollar-denominated loan receivables were approximately $1.6 billion. The Company has~~These arrangements are not ~~elected to apply hedge~~designated as accounting ~~for these loan receivables due to the change in fair value of the foreign exchange forwards and~~hedges, as the foreign currency remeasurement of the loan receivables ~~being recorded through~~impacts current period earnings, and generally ~~offsetting each other~~offsets gains and losses from foreign exchange forwards within realized investment gains (losses). The Company also has certain foreign exchange forwards on U.S. dollar-denominated AFS securities where hedge accounting is not being applied.

Prior to July 2019, in order to economically mitigate currency risk of future yen dividends from Aflac Japan while lowering consolidated hedge costs associated with Aflac Japan's U.S. dollar investment hedging, the Parent Company entered into offsetting hedge positions using foreign exchange forwards. This activity is reported in the Corporate and other segment. As of July 1, 2019, the Parent Company designates these foreign exchange forward contracts as accounting hedges of its net investment in Aflac Japan.

The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on certain variable-rate investments.

Impact of Derivatives and Hedging Instruments

The following table summarizes the impact to realized investment gains (losses) and other comprehensive income (loss) from all derivatives and hedging instruments.

  Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In millions) Realized Investment
Gains (Losses)
Other
Comprehensive
Income (Loss)⁽¹⁾
Realized Investment
Gains (Losses)
Other
Comprehensive
Income (Loss)⁽¹⁾
Realized Investment
Gains (Losses)
Other
Comprehensive
Income (Loss)⁽¹⁾
Realized Investment
Gains (Losses)
Other
Comprehensive
Income (Loss)⁽¹⁾
Qualifying hedges:
  Cash flow
    hedges:

       Foreign
          currency
          swaps
$ 0
$ (1 ) $ 0
$ 0
$ 0
$ 0
$ 1
$ 11

  Total cash flow
    hedges
0
(1 ) 0
0
0
0
1
11

  Fair value
    hedges:

       Foreign
          currency
          forwards⁽²⁾
(53 ) 0
(198 ) 0
(133 ) 0
(303 ) 0

       Foreign
          currency
          options⁽²⁾
(14 ) 0
(4 ) 0
(7 ) 0
2
0

  Total fair value
    hedges
(67 ) 0
(202 ) 0
(140 ) 0
(301 ) 0

  Net investment
    hedge:

       Non-
          derivative
          hedging
          instruments
0
5
0
(2 ) 0
(13 ) 0
(39 )
       Foreign
          currency
          forwards
0
4
0
(28 ) 0
(24 ) 0
(161 )
       Foreign
          currency
          options
0
(5 ) 0
31
0
3
0
0

  Total net
    investment
    hedge
0
4
0
1
0
(34 ) 0
(200 )
  Non-qualifying
    strategies:

       Foreign
          currency
          swaps
17
0
(51 ) 0
43
0
(145 ) 0

       Foreign
          currency
          forwards
10
0
144
0
(46 ) 0
165
0

       Credit
          default
          swaps
0
0
2
0
0
0
2
0

  Total non-
    qualifying
    strategies
27
0
95
0
(3 ) 0
22
0

          Total $ (40 ) $ 3
$ (107 ) $ 1
$ (143 ) $ (34 ) $ (278 ) $ (189 )



	Three Months Ended September 30,
	2019														2018
(In millions)	Net Investment Income ⁽¹⁾				Realized Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾				Net Investment Income ⁽¹⁾			Realized Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	(1	)		$	(1	)				$	(2	)		$	0		$	0					$	(2	)
Total cash flow hedges		(1		)		(1		)	⁽³	⁾		(2		)		0			0			⁽³	⁾		(2		)
Fair value hedges:
Foreign currency forwards ⁽⁴⁾						(23		)											(23		)
Foreign currency options ⁽⁴⁾						(5		)											(7		)
Interest rate swaptions ⁽⁴⁾		0				0						(6		)		0			0						0
Total fair value hedges		0				(28		)				(6		)		0			(30		)				0
Net investment hedge:
Non-derivative hedging instruments						0						2							0						36
Foreign currency forwards						20						19							0						0
Foreign currency options						(3		)				0							0						0
Total net investment hedge						17						21							0						36
Non-qualifying strategies:
Foreign currency swaps						27													39
Foreign currency swaps - VIE						(93		)											(16		)
Foreign currency forwards						(70		)											(154		)
Foreign currency options						0													0
Interest rate swaps						2													(1		)
Total non- qualifying strategies						(134		)											(132		)
Total		$	(1	)		$	(146	)				$	13			$	0		$	(162	)				$	34

⁽¹⁾Net investment income (loss) includes net interest on swaps, amortization of the time value of terminated interest rate swaptions and amortization of premium of outstanding interest rate swaptions.

⁽²⁾Cash flow hedge items and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses) on derivatives and net investment hedge items are recorded in the unrealized foreign currency translation gains (losses) line in the consolidated statement of comprehensive income (loss).

⁽²⁾⁽³⁾ Impact of cash flow hedges reported as realized investment gains (losses) includes an immaterial amount of gains or losses reclassified from accumulated other comprehensive income (loss) into earnings. It also includes an immaterial amount excluded from effectiveness testing during the three-month periods ended September 30, 2019 and 2018, respectively.

⁽⁴⁾Impact shown net of effect of hedged items (see Fair Value Hedges section of this Note 4 for further detail)

~~The Company reclassified~~



	Nine Months Ended September 30,
	2019														2018
(In millions)	Net Investment Income⁽¹⁾				Realized Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾				Net Investment Income⁽¹⁾			Realized Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	(2	)		$	(1	)				$	(4	)		$	0		$	1					$	2
Total cash flow hedges		(2		)		(1		)	⁽³	⁾		(4		)		0			1			⁽³	⁾		2
Fair value hedges:
Foreign currency forwards⁽⁴⁾						(47		)											(102		)
Foreign currency options⁽⁴⁾						(9		)											(10		)
Interest rate swaptions⁽⁴⁾		(1		)		0						(8		)		0			0						0
Total fair value hedges		(1		)		(56		)				(8		)		0			(112		)				0
Net investment hedge:
Non-derivative hedging instruments						0						(52		)					0						7
Foreign currency forwards						20						19							0						0
Foreign currency options						(3		)				0							0						(8		)
Total net investment hedge						17						(33		)					0						(1		)
Non-qualifying strategies:
Foreign currency swaps						71													(22		)
Foreign currency swaps - VIE						(96		)											73
Foreign currency forwards						23													(129		)
Foreign currency options						0													0
Interest rate swaps						18													(1		)
Total non-qualifying strategies						16													(79		)
Total		$	(3	)		$	(24	)				$	(45	)		$	0		$	(190	)				$	1

⁽³⁾ Impact of cash flow hedges reported as realized investment gains (losses) includes an immaterial amount related to its cash flow hedges from accumulated other comprehensive income (loss) into earnings for the three- and nine-month periods ended September 30, 2017, and reclassified an immaterial amount and a $1 million gain for the three- and nine-month periods ended September 30, 2016, respectively. There was no gainof gains or~~loss~~ losses reclassified from accumulated other comprehensive income (loss) into ~~earnings related to~~earnings. It also includes an immaterial amount excluded from effectiveness testing during the ~~net investment hedge for the three- and~~ nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

⁽⁴⁾Impact shown net of effect of hedged items (see Fair Value Hedges section of this Note 4 for further detail)

~~respectively.~~

As of September 30, ~~2017,~~2019, deferred gains and losses on derivative instruments recorded in accumulated other comprehensive income that are expected to be reclassified to earnings during the next twelve months were immaterial.

Credit Risk Assumed through Derivatives

For the foreign currency and credit default swaps associated with the Company's VIE investments for which it is the primary beneficiary, the Company bears the risk of loss due to counterparty default even though it is not a direct counterparty to those contracts.

The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of its senior notes and subordinated debentures; foreign currency forwards; and foreign currency ~~options; and interest rate swaptions,~~options, and therefore the Company is exposed to credit risk in the event of nonperformance by the counterparties in those contracts. The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options ~~and interest rate swaptions~~ is mitigated by collateral posting requirements that counterparties to those transactions must meet.

As of September 30, ~~2017,~~2019, there were 1516 counterparties to the Company's derivative agreements, with ~~five~~3 comprising ~~67%~~54% of the aggregate notional amount. ~~The~~As of September 30, 2019, all counterparties ~~to these derivatives are financial institutions with the following credit ratings:~~were investment grade.

September 30, 2017 December 31, 2016
(In millions) Notional Amount
of Derivatives Asset Derivatives
Fair Value Liability Derivatives
Fair Value Notional Amount
of Derivatives Asset Derivatives
Fair Value Liability Derivatives
Fair Value
Counterparties' credit rating:
AA $ 5,553
$ 90
$ (189 ) $ 6,844
$ 247
$ (308 )
A 22,257
381
(718 ) 36,019
900
(1,621 )
BBB 440
8
(67 ) 1,064
60
(69 )
Total $ 28,250
$ 479
$ (974 ) $ 43,927
$ 1,207
$ (1,998 )

The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties under International Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the ISDA agreements also include Credit Support Annexes (CSAs) provisions, which generally provide for two-way collateral postings at the first dollar of exposure. The Company mitigates the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally requiring that collateral be posted at the outset of the transaction. In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of Aflac’s financial strength rating. The actual amount of payments that the Company could be required to make depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after the time of the downgrade.

The Company also engages in OTC cleared derivative transactions through regulated central clearing counterparties. These positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to these derivatives.

Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the counterparties. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately ~~$623~~$91 million and ~~$1.2 billion~~$139 million as of September 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on September 30, ~~2017,~~2019, the Company estimates that it would be required to post a maximum of $5$6 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights. (See the Offsetting tables below for collateral posted or received as of the reported balance sheet dates.)

Offsetting of Financial Instruments and Derivatives

Most of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Parent Company or ~~Aflac~~its subsidiaries and ~~its~~the respective counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements with the master netting arrangements generally provide that the Company will receive or pledge financial collateral at the first dollar of exposure.

The Company has securities lending agreements with unaffiliated financial institutions that post collateral to the Company in return for the use of its fixed maturity and public equity securities (see Note 3). When the Company has entered into securities lending agreements with the same counterparty, the agreements generally provide for net settlement in the event of default by the counterparty. This right of set-off allows the Company to keep and apply collateral received if the counterparty failed to return the securities borrowed from the Company as contractually agreed.

The tables below summarize the Company's derivatives and securities lending transactions, and as reflected in the tables, in accordance with U.S. GAAP, the Company's policy is to not offset these financial instruments in the Consolidated Balance Sheets.

Offsetting of Financial Assets and Derivative ~~Asset~~Assets


September 30, 2017
September 30, 2019																							September 30, 2019
										Gross Amounts Not Offset in Balance Sheet																						Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral		Cash Collateral Received				Net Amount			Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Received				Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement		$	331		$	0		$	331		$	(219	)	$	0		$	(112	)		$	0
OTC - bilateral																								$	251		$	0		$	251		$	(161	)	$	(24	)		$	(54	)		$	12
OTC - cleared																								13			0			13			0			0				(4		)		9
Total derivative assets subject to a master netting agreement or offsetting arrangement																								264			0			264			(161		)	(24		)		(58		)		21
Derivative assets not subject to a master netting agreement or offsetting arrangement		148						148													148
OTC - bilateral																								147						147														147
Total derivative assets not subject to a master netting agreement or offsetting arrangement																								147						147														147
Total derivative assets		479			0			479			(219		)	0			(112		)		148			411			0			411			(161		)	(24		)		(58		)		168
Securities lending and similar arrangements		509			0			509			0			0			(509		)		0			2,155			0			2,155			0			0				(2,155		)		0
Total		$	988		$	0		$	988		$	(219	)	$	0		$	(621	)		$	148		$	2,566		$	0		$	2,566		$	(161	)	$	(24	)		$	(2,213	)		$	168


December 31, 2016
December 31, 2018																							December 31, 2018
										Gross Amounts Not Offset in Balance Sheet																						Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral		Cash Collateral Received				Net Amount			Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Received				Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement		$	1,080		$	0		$	1,080		$	(698	)	$	0		$	(382	)		$	0
OTC - bilateral																								$	231		$	0		$	231		$	(152	)	$	(23	)		$	(55	)		$	1
OTC - cleared																								3			0			3			0			0				(3		)		0
Total derivative assets subject to a master netting agreement or offsetting arrangement																								234			0			234			(152		)	(23		)		(58		)		1
Derivative assets not subject to a master netting agreement or offsetting arrangement		127						127													127
OTC - bilateral																								183						183														183
Total derivative assets not subject to a master netting agreement or offsetting arrangement																								183						183														183
Total derivative assets		1,207			0			1,207			(698		)	0			(382		)		127			417			0			417			(152		)	(23		)		(58		)		184
Securities lending and similar arrangements		513			0			513			0			0			(513		)		0			1,029			0			1,029			0			0				(1,029		)		0
Total		$	1,720		$	0		$	1,720		$	(698	)	$	0		$	(895	)		$	127		$	1,446		$	0		$	1,446		$	(152	)	$	(23	)		$	(1,087	)		$	184

Offsetting of Financial Liabilities and Derivative Liabilities


September 30, 2017
September 30, 2019																								September 30, 2019
												Gross Amounts Not Offset in Balance Sheet																					Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities				Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet				Financial Instruments			Securities Collateral		Cash Collateral Pledged			Net Amount				Gross Amount of Recognized Liabilities			Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Pledged				Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement		$	(842	)		$	0		$	(842	)		$	219	$	611		$	7		$	(5	)
OTC - bilateral																									$	264		$	0		$	264		$	(161	)	$	(50	)		$	(47	)		$	6
Total derivative liabilities subject to a master netting agreement or offsetting arrangement																									264			0			264			(161		)	(50		)		(47		)		6
Derivative liabilities not subject to a master netting agreement or offsetting arrangement		(132		)					(132		)										(132		)
OTC - bilateral																									139						139														139
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement																									139						139														139
Total derivative liabilities		(974		)		0			(974		)		219		611			7			(137		)		403			0			403			(161		)	(50		)		(47		)		145
Securities lending and similar arrangements		(522		)		0			(522		)		509		0			0			(13		)		2,189			0			2,189			(2,155		)	0				0				34
Total		$	(1,496	)		$	0		$	(1,496	)		$	728	$	611		$	7		$	(150	)		$	2,592		$	0		$	2,592		$	(2,316	)	$	(50	)		$	(47	)		$	179



December 31, 2018
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities			Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Pledged				Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	285		$	0		$	285		$	(152	)	$	(37	)		$	(68	)		$	28
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		285			0			285			(152		)	(37		)		(68		)		28
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		102						102														102
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		102						102														102
Total derivative liabilities		387			0			387			(152		)	(37		)		(68		)		130
Securities lending and similar arrangements		1,052			0			1,052			(1,029		)	0				0				23
Total		$	1,439		$	0		$	1,439		$	(1,181	)	$	(37	)		$	(68	)		$	153

December 31, 2016
Gross Amounts Not Offset
in Balance Sheet
(In millions) Gross Amount of Recognized Liabilities
Gross Amount
Offset in
Balance Sheet

Net Amount of Liabilities Presented
in Balance Sheet
Financial Instruments
Securities
Collateral
Cash Collateral Pledged Net Amount
Derivative
  liabilities:

    Derivative
      liabilities subject
      to a master netting
      agreement or
      offsetting
      arrangement
$ (1,852 ) $ 0
$ (1,852 ) $ 698
$ 1,130
$ 21
$ (3 )
    Derivative
      liabilities not
      subject to a
      master netting
      agreement or
      offsetting
      arrangement
(146 ) (146 ) (146 )
    Total derivative
      liabilities
(1,998 ) 0
(1,998 ) 698
1,130
21
(149 )
Securities lending
   and similar
   arrangements
(526 ) 0
(526 ) 513
0
0
(13 )
    Total $ (2,524 ) $ 0
$ (2,524 ) $ 1,211
$ 1,130
$ 21
$ (162 )

For additional information on the Company's financial instruments, see the accompanying Notes 1, 3 and 5 and Notes 1, 3 and 5 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.


5.	FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels. Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets. Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets. Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active market.

The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and carried at fair value on a recurring basis.



	September 30, 2019
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies		$	36,705		$	1,591		$	0		$	38,296
Municipalities		0			1,898			0			1,898
Mortgage- and asset-backed securities		0			226			183			409
Public utilities		0			6,744			206			6,950
Sovereign and supranational		0			1,084			0			1,084
Banks/financial institutions		0			10,621			23			10,644
Other corporate		0			34,435			224			34,659
Total fixed maturity securities		36,705			56,599			636			93,940
Equity securities		677			74			79			830
Other investments		722			0			0			722
Cash and cash equivalents		4,216			0			0			4,216
Other assets:
Foreign currency swaps		0			80			147			227
Foreign currency forwards		0			170			0			170
Foreign currency options		0			1			0			1
Interest rate swaps		0			13			0			13
Total other assets		0			264			147			411
Total assets		$	42,320		$	56,937		$	862		$	100,119
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	88		$	139		$	227
Foreign currency forwards		0			168			0			168
Foreign currency options		0			8			0			8
Total liabilities		$	0		$	264		$	139		$	403



	December 31, 2018
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies		$	32,993		$	1,349		$	0		$	34,342
Municipalities		0			1,863			0			1,863
Mortgage- and asset-backed securities		0			162			177			339
Public utilities		0			7,062			109			7,171
Sovereign and supranational		0			1,260			0			1,260
Banks/financial institutions		0			8,895			23			8,918
Other corporate		0			28,789			213			29,002
Total fixed maturity securities		32,993			49,380			522			82,895
Equity securities		874			67			46			987
Other investments		152			0			0			152
Cash and cash equivalents		4,337			0			0			4,337
Other assets:
Foreign currency swaps		0			103			182			285
Foreign currency forwards		0			126			0			126
Foreign currency options		0			3			0			3
Interest rate swaps		0			3			0			3
Total other assets		0			235			182			417
Total assets		$	38,356		$	49,682		$	750		$	88,788
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	132		$	102		$	234
Foreign currency forwards		0			151			0			151
Foreign currency options		0			1			0			1
Interest rate swaptions		0			1			0			1
Total liabilities		$	0		$	285		$	102		$	387

U.S. GAAP requires disclosure of the fair value of certain financial instruments including those that are not carried at fair value. The carrying amounts for cash and cash equivalents, other investments (excluding loan receivables), receivables, accrued investment income, accounts payable, cash collateral and payables for security transactions approximated their fair values due to the nature of these instruments. Liabilities for future policy benefits and unpaid policy claims are not financial instruments as defined by U.S. GAAP.

The following tables present the carrying amount and fair value categorized by fair value hierarchy level for the Company's financial instruments that are not carried at fair value.


	September 30, 2017															September 30, 2019
(In millions)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Fixed maturity securities:
Government and agencies		$	21,385		$	26,455		$	0		$	0		$	26,455		$	22,581		$	28,868		$	366		$	0		$	29,234
Municipalities		359			0			463			0			463			835			0			1,114			0			1,114
Mortgage and asset-backed securities		27			0			9			20			29			18			0			8			11			19
Public utilities		3,308			0			3,734			0			3,734			2,573			0			2,967			0			2,967
Sovereign and supranational		1,527			0			1,846			0			1,846			1,187			0			1,384			0			1,384
Banks/financial institutions		2,700			0			2,887			0			2,887			930			0			1,030			0			1,030
Other corporate		2,692			0			3,185			0			3,185			2,609			0			3,074			0			3,074
Commercial mortgage and other loans																	8,284			0			0			8,360			8,360
Other investments ⁽¹⁾		2,011			0			15			1,985			2,000			30			0			30			0			30
Total assets		$	34,009		$	26,455		$	12,139		$	2,005		$	40,599		$	39,047		$	28,868		$	9,973		$	8,371		$	47,212
Liabilities:
Other policyholders’ funds		$	6,967		$	0		$	0		$	6,849		$	6,849		$	7,421		$	0		$	0		$	7,341		$	7,341
Notes payable (excluding capital leases)		5,230			506			4,780			265			5,551
Notes payable (excluding leases)																	6,095			0			5,855			277			6,132
Total liabilities		$	12,197		$	506		$	4,780		$	7,114		$	12,400		$	13,516		$	0		$	5,855		$	7,618		$	13,473

⁽¹⁾Excludes policy loans of ~~$207~~$250 and equity method investments of ~~$83,~~$505, at carrying value



	December 31, 2018
(In millions)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies		$	21,712		$	27,030		$	8		$	0		$	27,038
Municipalities		359			0			469			0			469
Mortgage and asset-backed securities		14			0			0			15			15
Public utilities		2,727			0			2,973			0			2,973
Sovereign and supranational		1,551			0			1,840			0			1,840
Banks/financial institutions		1,445			0			1,583			0			1,583
Other corporate		2,510			0			2,804			0			2,804
Commercial mortgage and other loans		6,919			0			0			6,893			6,893
Other investments ⁽¹⁾		26			0			26			0			26
Total assets		$	37,263		$	27,030		$	9,703		$	6,908		$	43,641
Liabilities:
Other policyholders’ funds		$	7,146		$	0		$	0		$	7,067		$	7,067
Notes payable (excluding leases)		5,765			0			5,606			270			5,876
Total liabilities		$	12,911		$	0		$	5,606		$	7,337		$	12,943

December 31, 2016
(In millions) Carrying
Value Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total
Fair
Value
Assets:
Securities held to maturity,
carried at amortized cost:
  Fixed maturities:
Government and agencies $ 20,702
$ 26,040
$ 0
$ 0
$ 26,040

Municipalities 350
0
457
0
457

Mortgage and asset-backed
securities 30
0
10
22
32

Public utilities 3,201
0
3,536
0
3,536

Sovereign and
supranational 2,602
0
2,877
0
2,877

Banks/financial institutions 3,731
0
3,900
0
3,900

Other corporate 2,734
0
3,179
0
3,179

Other investments 1,174
0
0
1,142
1,142

  Total assets $ 34,524
$ 26,040
$ 13,959
$ 1,164
$ 41,163

Liabilities:
Other policyholders’ funds $ 6,659
$ 0
$ 0
$ 6,540
$ 6,540

Notes payable
(excluding capital leases) 5,339
0
0
5,530
5,530

Total liabilities $ 11,998
$ 0
$ 0
$ 12,070
$ 12,070

⁽¹⁾Excludes policy loans of $232 and equity method investments of $377, at carrying value

Fair Value of Financial Instruments

Fixed ~~maturities, perpetual securities,~~maturity and equity securities

The Company determines the fair values of ~~its~~ fixed maturity ~~securities, perpetual~~ securities and public and ~~privately issued~~privately-issued equity securities using the following approaches or techniques: price quotes and valuations from third party pricing vendors (including quoted market prices readily available from public exchange markets) and non-binding price quotes the Company obtains from outside brokers.

A third party pricing vendor has developed valuation models to determine fair values of privately issued securities to reflect the impact of the persistent economic environment and the changing regulatory framework. These models are discounted cash flow (DCF) valuation models, but also use information from related markets, specifically the CDS market to estimate expected cash flows. These models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve. This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the security by discounting those loss adjusted cash flows. In cases where a credit curve cannot be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable security(ies) of the issuer; 2) issuer-specific CDS spreads; 3) bonds or CDS spreads of comparable issuers with similar characteristics such as rating, geography, or sector; or 4) bond indices that are comparative in rating, industry, maturity and region.

The pricing data and market quotes the Company obtains from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the vendor. Additionally, the Company may compare the inputs to relevant market indices and other performance measurements. ~~The output of this analysis is presented to the Company's Valuation and Classification Subcommittee (VCS).~~ Based on ~~the~~management's analysis, ~~provided to the VCS,~~ the valuation is

confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data. The

Company has performed verification of the inputs and calculations in any valuation models to confirm that the valuations represent reasonable estimates of fair value.

The fixed ~~maturities~~maturity securities classified as Level 3 consist of securities with limited or no observable valuation inputs. For Level 3 securities, the Company estimates the fair value of these securities by obtaining non-binding broker quotes from a limited number of brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market conditions. The Company considers these inputs to be unobservable. The Company also considers a variety of significant valuation inputs in the valuation process, including forward exchange rates, yen swap rates, dollar swap rates, interest rate volatilities, credit spread data on specific issuers, assumed default and default recovery rates, and certain probability assumptions. In obtaining these valuation inputs, the Company has determined that certain pricing assumptions and data used by its pricing sources are difficult to validate or corroborate by the market and/or appear to be internally developed rather than observed in or corroborated by the market. The use of these unobservable valuation inputs causes more subjectivity in the valuation process for these securities.

For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

The following tables present the pricing sources for the fair values of the Company's fixed ~~maturities, perpetual securities,~~maturity and equity securities.



	September 30, 2019
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	36,705		$	1,591		$	0		$	38,296
Total government and agencies		36,705			1,591			0			38,296
Municipalities:
Third party pricing vendor		0			1,898			0			1,898
Total municipalities		0			1,898			0			1,898
Mortgage- and asset-backed securities:
Third party pricing vendor		0			226			0			226
Broker/other		0			0			183			183
Total mortgage- and asset-backed securities		0			226			183			409
Public utilities:
Third party pricing vendor		0			6,744			0			6,744
Broker/other		0			0			206			206
Total public utilities		0			6,744			206			6,950
Sovereign and supranational:
Third party pricing vendor		0			1,084			0			1,084
Total sovereign and supranational		0			1,084			0			1,084
Banks/financial institutions:
Third party pricing vendor		0			10,575			0			10,575
Broker/other		0			46			23			69
Total banks/financial institutions		0			10,621			23			10,644
Other corporate:
Third party pricing vendor		0			34,432			0			34,432
Broker/other		0			3			224			227
Total other corporate		0			34,435			224			34,659
Total securities available for sale		$	36,705		$	56,599		$	636		$	93,940
Equity securities, carried at fair value:
Third party pricing vendor		$	677		$	74		$	0		$	751
Broker/other		0			0			79			79
Total equity securities		$	677		$	74		$	79		$	830



	September 30, 2019
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	28,868		$	366		$	0		$	29,234
Total government and agencies		28,868			366			0			29,234
Municipalities:
Third party pricing vendor		0			1,114			0			1,114
Total municipalities		0			1,114			0			1,114
Mortgage- and asset-backed securities:
Third party pricing vendor		0			8			0			8
Broker/other		0			0			11			11
Total mortgage- and asset-backed securities		0			8			11			19
Public utilities:
Third party pricing vendor		0			2,967			0			2,967
Total public utilities		0			2,967			0			2,967
Sovereign and supranational:
Third party pricing vendor		0			1,384			0			1,384
Total sovereign and supranational		0			1,384			0			1,384
Banks/financial institutions:
Third party pricing vendor		0			1,030			0			1,030
Total banks/financial institutions		0			1,030			0			1,030
Other corporate:
Third party pricing vendor		0			3,074			0			3,074
Total other corporate		0			3,074			0			3,074
Total securities held to maturity		$	28,868		$	9,943		$	11		$	38,822

September 30, 2017
(In millions) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Fair
Value
Securities available for sale, carried at fair value:
      Fixed maturities:
         Government and agencies:
            Third party pricing vendor $ 29,067
$ 971
$ 0
$ 30,038

               Total government and agencies 29,067
971
0
30,038

         Municipalities:
            Third party pricing vendor 0
1,292
0
1,292

               Total municipalities 0
1,292
0
1,292

         Mortgage- and asset-backed securities:
            Third party pricing vendor 0
278
0
278

            Broker/other 0
0
178
178

               Total mortgage- and asset-backed securities 0
278
178
456

         Public utilities:
            Third party pricing vendor 0
7,938
0
7,938

            Broker/other 0
0
77
77

               Total public utilities 0
7,938
77
8,015

         Sovereign and supranational:
            Third party pricing vendor 0
2,029
0
2,029

               Total sovereign and supranational 0
2,029
0
2,029

         Banks/financial institutions:
            Third party pricing vendor 0
6,985
0
6,985

            Broker/other 0
0
25
25

               Total banks/financial institutions 0
6,985
25
7,010

         Other corporate:
            Third party pricing vendor 0
31,473
0
31,473

            Broker/other 0
0
102
102

               Total other corporate 0
31,473
102
31,575

                  Total fixed maturities 29,067
50,966
382
80,415

      Perpetual securities:
         Banks/financial institutions:
            Third party pricing vendor 0
1,627
0
1,627

               Total banks/financial institutions 0
1,627
0
1,627

         Other corporate:
            Third party pricing vendor 0
236
0
236

               Total other corporate 0
236
0
236

                  Total perpetual securities 0
1,863
0
1,863

      Equity securities:
            Third party pricing vendor 905
5
0
910

            Broker/other 0
0
18
18

               Total equity securities 905
5
18
928

                     Total securities available for sale $ 29,972
$ 52,834
$ 400
$ 83,206



	December 31, 2018
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	32,993		$	1,349		$	0		$	34,342
Total government and agencies		32,993			1,349			0			34,342
Municipalities:
Third party pricing vendor		0			1,863			0			1,863
Total municipalities		0			1,863			0			1,863
Mortgage- and asset-backed securities:
Third party pricing vendor		0			162			0			162
Broker/other		0			0			177			177
Total mortgage- and asset-backed securities		0			162			177			339
Public utilities:
Third party pricing vendor		0			7,062			0			7,062
Broker/other		0			0			109			109
Total public utilities		0			7,062			109			7,171
Sovereign and supranational:
Third party pricing vendor		0			1,260			0			1,260
Total sovereign and supranational		0			1,260			0			1,260
Banks/financial institutions:
Third party pricing vendor		0			8,895			0			8,895
Broker/other		0			0			23			23
Total banks/financial institutions		0			8,895			23			8,918
Other corporate:
Third party pricing vendor		0			28,789			0			28,789
Broker/other		0			0			213			213
Total other corporate		0			28,789			213			29,002
Total securities available for sale		$	32,993		$	49,380		$	522		$	82,895
Equity securities, carried at fair value:
Third party pricing vendor		$	874		$	67		$	0		$	941
Broker/other		0			0			46			46
Total equity securities		$	874		$	67		$	46		$	987



	December 31, 2018
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	27,030		$	8		$	0		$	27,038
Total government and agencies		27,030			8			0			27,038
Municipalities:
Third party pricing vendor		0			469			0			469
Total municipalities		0			469			0			469
Mortgage- and asset-backed securities:
Broker/other		0			0			15			15
Total mortgage- and asset-backed securities		0			0			15			15
Public utilities:
Third party pricing vendor		0			2,973			0			2,973
Total public utilities		0			2,973			0			2,973
Sovereign and supranational:
Third party pricing vendor		0			1,840			0			1,840
Total sovereign and supranational		0			1,840			0			1,840
Banks/financial institutions:
Third party pricing vendor		0			1,583			0			1,583
Total banks/financial institutions		0			1,583			0			1,583
Other corporate:
Third party pricing vendor		0			2,804			0			2,804
Total other corporate		0			2,804			0			2,804
Total securities held to maturity		$	27,030		$	9,677		$	15		$	36,722

December 31, 2016
(In millions) Quoted Prices in Active Markets
for Identical Assets
(Level 1) Significant Observable
Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Fair
Value
Securities available for sale, carried at fair value:
      Fixed maturities:
         Government and agencies:
            Third party pricing vendor $ 25,387
$ 827
$ 0
$ 26,214

               Total government and agencies 25,387
827
0
26,214

         Municipalities:
            Third party pricing vendor 0
1,295
0
1,295

               Total municipalities 0
1,295
0
1,295

         Mortgage- and asset-backed securities:
            Third party pricing vendor 0
1,139
0
1,139

            Broker/other 0
0
198
198

               Total mortgage- and asset-backed securities 0
1,139
198
1,337

         Public utilities:
            Third party pricing vendor 0
7,667
0
7,667

            Broker/other 0
0
16
16

               Total public utilities 0
7,667
16
7,683

         Sovereign and supranational:
            Third party pricing vendor 0
1,469
0
1,469

               Total sovereign and supranational 0
1,469
0
1,469

         Banks/financial institutions:
            Third party pricing vendor 0
6,038
0
6,038

            Broker/other 0
0
25
25

               Total banks/financial institutions 0
6,038
25
6,063

         Other corporate:
            Third party pricing vendor 0
29,699
0
29,699

               Total other corporate 0
29,699
0
29,699

                  Total fixed maturities 25,387
48,134
239
73,760

      Perpetual securities:
         Banks/financial institutions:
            Third party pricing vendor 0
1,420
0
1,420

               Total banks/financial institutions 0
1,420
0
1,420

         Other corporate:
            Third party pricing vendor 0
213
0
213

               Total other corporate 0
213
0
213

                  Total perpetual securities 0
1,633
0
1,633

      Equity securities:
            Third party pricing vendor 1,300
6
0
1,306

            Broker/other 0
0
3
3

               Total equity securities 1,300
6
3
1,309

                     Total securities available for sale $ 26,687
$ 49,773
$ 242
$ 76,702

The following is a discussion of the determination of fair value of the Company's remaining financial instruments.

Derivatives

The Company uses derivative instruments to manage the risk associated with certain assets. However, the derivative instrument may not be classified in the same fair value hierarchy level as the associated asset. The Company uses pricing models to determine the estimated fair value of derivatives. Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, and interest volatility. The significant inputs to pricing derivatives are generally observable in the market or can be derived by observable market data. When these inputs are observable, the derivatives are classified as Level 2.

The fair values of the foreign currency forwards ~~options,~~ and ~~interest rate swaptions~~options associated with certain investments; the foreign currency forwards and options used to hedge foreign exchange risk from the Company's net investment in Aflac Japan and economically hedge certain portions of forecasted cash flows denominated in yen; and the foreign currency swaps associated with certain senior notes ~~and subordinated debentures~~ are based on the amounts the Company would expect to receive or pay. The determination of the fair value of these derivatives is based on observable market inputs, therefore they are classified as Level 2.

To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract, the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange since it maintains a daily margin to mitigate counterparties' credit risk. These derivatives are priced using

observable inputs, accordingly, they are classified as Level 2. For its interest rate swaptions, the Company estimates their fair values using observable market data, including interest rate curves and volatilities. Their fair values are also classified as Level 2.

For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct counterparty to the swap contracts. As a result, the fair value measurements incorporate the credit risk of the collateral associated with the VIE. The Company receives valuations from a third party pricing vendor for these derivatives. Based on an analysis of these derivatives and a review of the methodology employed by the pricing vendor, the Company determined that due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data. As a result, the derivatives associated with the Company's consolidated VIEs are classified as Level 3 of the fair value hierarchy.

~~Other investments~~Commercial mortgage and other loans

~~Other investments where fair value is disclosed above~~Commercial mortgage and other loans include ~~short-term investments and loan receivables. Loan receivables include~~transitional real estate loans, commercial mortgage loans and middle market loans. The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or London Interbank Offered Rate (LIBOR) yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. These spreads are provided by the applicable asset managers based on their knowledge of the current loan pricing environment and market conditions. The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore, these investments have been assigned a Level 3 within the fair value hierarchy.

Other investments

Other investments includes short-term investments that are measured at fair value where amortized cost approximates fair value.

Other policyholders' funds

The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified this valuation as Level 3.

Notes payable

~~As of December 31, 2016, the~~The fair values of the Company's publicly issued notes payable ~~were obtained from a limited number of independent brokers and classified as Level 3 within the fair value hierarchy. However, in 2017 recognizing the similarities of the Company's~~publicly issued notes payable to fixed income securities in its investment portfolios, the Company aligned the determination of the fair values of these liabilities with its practices of determining asset fair values whereby the Company utilizesare determined by utilizing available sources of observable inputs from third party pricing ~~vendors; therefore, the fair values of the Company's publicly issued notes payable were reclassified into~~vendors and are classified as Level 2 from Level 3 in the first quarter of 2017. Further review of available sources for these liabilities has led to reclassifying the Parent Company’s subordinated debentures into Level 1 from Level 2 in the second quarter of 2017 given these securities are listed and traded on an exchange where their valuations reflect quoted market prices for identical assets or liabilities in an active market. 2. The fair values of the Company's yen-denominated loans approximate their carrying ~~values.~~values and are classified as Level 3.

Transfers between Hierarchy Levels and Level 3 Rollforward

During the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, there were no transfers between Level 1 and 2 for assets and liabilities that are measured and carried at fair value on a recurring basis.

The following tables present the changes in fair value of the Company's ~~available-for-sale~~ investments and derivatives carried at fair value classified as Level 3.



Three Months Ended September 30, 2019
	Fixed Maturity Securities												Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities			Banks/ Financial Institutions				Other Corporate					Foreign Currency Swaps			Credit Default Swaps		Total
Balance, beginning of period	$	183	$	204		$	24			$	199		$	65	$	94		$	0	$	769
Realized investment gains (losses) included in earnings	0		0			0				0			0		(84		)	0		(84		)
Unrealized gains (losses) included in other comprehensive income (loss)	0		4			0				5			0		(2		)	0		7
Purchases, issuances, sales and settlements:
Purchases	0		0			0				19			14		0			0		33
Issuances	0		0			0				0			0		0			0		0
Sales	0		0			0				0			0		0			0		0
Settlements	0		(2		)	0				0			0		0			0		(2		)
Transfers into Level 3	0		0			0				1		⁽²⁾	0		0			0		1
Transfers out of Level 3	0		0			(1		)	⁽²⁾	0			0		0			0		(1		)
Balance, end of period	$	183	$	206		$	23			$	224		$	79	$	8		$	0	$	723
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0		$	0			$	0		$	0	$	(84	)	$	0	$	(84	)

Three Months Ended
September 30, 2017
Fixed Maturities Equity
Securities
Derivatives ⁽¹⁾

(In millions) Mortgage-
and
Asset-
Backed
Securities Public
Utilities Banks/
Financial
Institutions Other
Corporate Foreign
Currency
Swaps Credit
Default
Swaps Total
Balance, beginning of period $ 188
$ 53
$ 25
$ 77
$ 14
$ 7
$ 2
$ 366

Realized investment gains (losses) included
in earnings
0
0
0
0
0
8
(1 ) 7

Unrealized gains (losses) included in other
comprehensive income (loss)
(2 ) 0
0
1
0
0
0
(1 )
Purchases, issuances, sales and settlements:
Purchases 0
24
0
25
4
0
0
53

Issuances 0
0
0
0
0
0
0
0

Sales 0
0
0
(1 ) 0
0
0
(1 )
Settlements (8 ) 0
0
0
0
0
0
(8 )
Transfers into Level 3 0
0
0
0
0
0
0
0

Transfers out of Level 3 0
0
0
0
0
0
0
0

Balance, end of period $ 178
$ 77
$ 25
$ 102
$ 18
$ 15
$ 1
$ 416

Changes in unrealized gains (losses) relating
to Level 3 assets and liabilities still held at
the end of the period included in realized
investment gains (losses) $ 0
$ 0
$ 0
$ 0
$ 0
$ 8
$ (1 ) $ 7

⁽¹⁾ Derivative assets and liabilities are presented net

⁽²⁾ Transfer due to sector classification change

Three Months Ended
September 30, 2016
Fixed Maturities Equity
Securities
Derivatives ⁽¹⁾

(In millions) Mortgage-
and
Asset-
Backed
Securities Public
Utilities Banks/
Financial
Institutions Other
Corporate Foreign
Currency
Swaps Credit
Default
Swaps Total
Balance, beginning of period $ 252
$ 0
$ 26
$ 0
$ 3
$ 59
$ 1
$ 341

Realized investment gains (losses) included in
earnings 0
0
0
0
0
(18 ) 2
(16 )
Unrealized gains (losses) included in other
comprehensive income (loss) 1
0
0
0
0
0
0
1

Purchases, issuances, sales and settlements:
Purchases 0
0
0
0
0
0
0
0

Issuances 0
0
0
0
0
0
0
0

Sales 0
0
0
0
0
0
0
0

Settlements (13 ) 0
0
0
0
0
0
(13 )
Transfers into Level 3 0
0
0
0
0
0
0
0

Transfers out of Level 3 0
0
0
0
0
0
0
0

Balance, end of period $ 240
$ 0
$ 26
$ 0
$ 3
$ 41
$ 3
$ 313

Changes in unrealized gains (losses) relating
to Level 3 assets and liabilities still held at
the end of the period included in realized
investment gains (losses) $ 0
$ 0
$ 0
$ 0
$ 0
$ (18 ) $ 2
$ (16 )



Three Months Ended September 30, 2018
	Fixed Maturity Securities											Equity Securities			Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities			Banks/ Financial Institutions		Other Corporate							Foreign Currency Swaps			Credit Default Swaps		Total
Balance, beginning of period	$	178		$	106		$	23	$	196		$	17			$	110		$	0	$	630
Realized investment gains (losses) included in earnings	0			0			0		0			(1		)		(19		)	0		(20		)
Unrealized gains (losses) included in other comprehensive income (loss)	(6		)	(2		)	0		(4		)	0				(2		)	0		(14		)
Purchases, issuances, sales and settlements:
Purchases	0			0			0		0			0				0			0		0
Issuances	0			0			0		0			0				0			0		0
Sales	0			0			0		0			0				0			0		0
Settlements	0			0			0		(1		)	0				0			0		(1		)
Transfers into Level 3	0			0			0		0			0				0			0		0
Transfers out of Level 3	0			0			0		0			0				0			0		0
Balance, end of period	$	172		$	104		$	23	$	191		$	16			$	89		$	0	$	595
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0		$	0		$	0	$	0		$	(1	)		$	(19	)	$	0	$	(20	)

⁽¹⁾ Derivative assets and liabilities are presented net


Nine Months Ended September 30, 2017
Nine Months Ended September 30, 2019																							Nine Months Ended September 30, 2019
	Fixed Maturities										Equity Securities			Derivatives ⁽¹⁾									Fixed Maturity Securities													Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Banks/ Financial Institutions		Other Corporate						Foreign Currency Swaps			Credit Default Swaps			Total			Mortgage- and Asset- Backed Securities		Public Utilities				Banks/ Financial Institutions			Other Corporate						Foreign Currency Swaps			Credit Default Swaps		Total
Balance, beginning of period	$	198		$	16	$	25	$	0		$	3		$	(21	)	$	2		$	223		$	177	$	109			$	23		$	213			$	46	$	80		$	0	$	648
Realized investment gains (losses) included in earnings	0			0		0		0			0			36			(1		)	35			0		0				0			0				0		(68		)	0		(68		)
Unrealized gains (losses) included in other comprehensive income (loss)	4			0		0		3			0			0			0			7			6		10				1			12				0		(4		)	0		25
Purchases, issuances, sales and settlements:
Purchases	0			61		0		100			16			0			0			177			0		0				0			107				33		0			0		140
Issuances	0			0		0		0			0			0			0			0			0		0				0			0				0		0			0		0
Sales	0			0		0		(1		)	(1		)	0			0			(2		)	0		0				0			(2		)		0		0			0		(2		)
Settlements	(24		)	0		0		0			0			0			0			(24		)	0		(4		)		0			0				0		0			0		(4		)
Transfers into Level 3	0			0		0		0			0			0			0			0			0		116			⁽²⁾	0			26			⁽²⁾	0		0			0		142
Transfers out of Level 3	0			0		0		0			0			0			0			0			0		(25		)	⁽²⁾	(1		)	(132		)	^{(2), (3)}	0		0			0		(158		)
Balance, end of period	$	178		$	77	$	25	$	102		$	18		$	15		$	1		$	416		$	183	$	206			$	23		$	224			$	79	$	8		$	0	$	723
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	0		$	0	$	0	$	0		$	0		$	36		$	(1	)	$	35
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings																							$	0	$	0			$	0		$	0			$	0	$	(68	)	$	0	$	(68	)

⁽¹⁾ Derivative assets and liabilities are presented net

⁽²⁾ Transfer due to sector classification change

⁽³⁾ Transfer due to availability of observable market inputs


Nine Months Ended September 30, 2016
Nine Months Ended September 30, 2018																				Nine Months Ended September 30, 2018
	Fixed Maturities									Equity Securities		Derivatives ⁽¹⁾								Fixed Maturity Securities												Equity Securities			Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Banks/ Financial Institutions		Other Corporate				Foreign Currency Swaps			Credit Default Swaps		Total			Mortgage- and Asset- Backed Securities			Public Utilities			Banks/ Financial Institutions			Other Corporate						Foreign Currency Swaps		Credit Default Swaps			Total
Balance, beginning of period	$	220		$	0	$	26	$	0	$	3	$	(192	)	$	1	$	58		$	175		$	68		$	25		$	146		$	16		$	22	$	1		$	453
Realized investment gains (losses) included in earnings	0			0		0		0		0		250			2		252			0			0			0			0			(1		)	65		(1		)	63
Unrealized gains (losses) included in other comprehensive income (loss)	48			0		0		0		0		(16		)	0		32			(3		)	(4		)	(2		)	(6		)	0			2		0			(13		)
Purchases, issuances, sales and settlements:
Purchases	0			0		0		0		0		0			0		0			0			40			0			55			1			0		0			96
Issuances	0			0		0		0		0		0			0		0			0			0			0			0			0			0		0			0
Sales	0			0		0		0		0		0			0		0			0			0			0			0			0			0		0			0
Settlements	(28		)	0		0		0		0		(1		)	0		(29		)	0			0			0			(4		)	0			0		0			(4		)
Transfers into Level 3	0			0		0		0		0		0			0		0			0			0			0			0			0			0		0			0
Transfers out of Level 3	0			0		0		0		0		0			0		0			0			0			0			0			0			0		0			0
Balance, end of period	$	240		$	0	$	26	$	0	$	3	$	41		$	3	$	313		$	172		$	104		$	23		$	191		$	16		$	89	$	0		$	595
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	0		$	0	$	0	$	0	$	0	$	250		$	2	$	252
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings																				$	0		$	0		$	0		$	0		$	(1	)	$	65	$	(1	)	$	63

⁽¹⁾ Derivative assets and liabilities are presented net

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 ~~available-for-sale~~ investments and ~~derivatives.~~derivatives carried at fair value. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

September 30, 2019

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Assets:

Securities available for sale, carried at fair value:

Fixed maturity securities:

Mortgage- and asset-backed securities

183

Consensus pricing

Offered quotes

N/A

^(a)

Public utilities

206

Discounted cash flow

Credit spreads

N/A

^(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(a)

Other corporate

224

Discounted cash flow

Credit spreads

N/A

^(a)

Equity securities

Net asset value

Offered quotes

N/A

^(a)

Other assets:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

1.43% - 1.63%

^(b)

Interest rates (JPY)

(.03)% - .32%

^(c)

CDS spreads

12 - 106 bps

Discounted cash flow

Interest rates (USD)

1.43% - 1.63%

^(b)

Interest rates (JPY)

(.03)% - .32%

^(c)

Total assets

862

Liabilities:

Other liabilities:

Foreign currency swaps

132

Discounted cash flow

Interest rates (USD)

1.43% - 1.63%

^(b)

Interest rates (JPY)

(.03)% - .32%

^(c)

CDS spreads

22 - 176 bps

Discounted cash flow

Interest rates (USD)

1.43% - 1.63%

^(b)

Interest rates (JPY)

(.03)% - .32%

^(c)

Total liabilities

139

September 30, 2017
(In millions) Fair Value Valuation Technique(s) Unobservable Input Range
(Weighted Average)
Assets:
  Securities available for sale, carried at fair value:
    Fixed maturities:
       Mortgage- and asset-backed securities $ 178
Consensus pricing Offered quotes N/A
^(d)
       Public utilities 77
Discounted cash flow Historical volatility N/A
^(d)
       Banks/financial institutions 25
Consensus pricing Offered quotes N/A
^(d)
       Other corporate 102
Discounted cash flow Historical volatility N/A
^(e)
    Equity securities 18
Net asset value Offered quotes $1 - $724 ($6)
  Other assets:

       Foreign currency swaps 27
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
CDS spreads 11 - 116 bps
Foreign exchange rates 21.00%
^(c)
45
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
CDS spreads 11 - 83 bps
75
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
Foreign exchange rates 21.00%
^(c)
       Credit default swaps 1
Discounted cash flow Base correlation 62.73% - 66.88%
^(e)
CDS spreads 19 bps
Recovery rate 37.24%
            Total assets $ 548

(a) ~~Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps~~

~~(b) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps~~

~~(c) Based on 10 year volatility of JPY/USD exchange rate~~

~~(d)~~ N/A represents securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs.

~~(e) Range of base correlation for the Company's bespoke tranche for attachment and detachment points corresponding to market indices.~~

September 30, 2017
(In millions) Fair Value Valuation Technique(s) Unobservable Input Range
(Weighted Average)
Liabilities:
  Other liabilities:
       Foreign currency swaps $ 112
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
CDS spreads 11 - 116 bps
Foreign exchange rates 21.00%
^(c)
11
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
CDS spreads 9 - 120 bps
9
Discounted cash flow Interest rates (USD) 2.29% - 2.53%
^(a)
Interest rates (JPY) .26% - .86%
^(b)
Foreign exchange rates 21.00%
^(c)
            Total liabilities $ 132

~~(a)~~(b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps

~~(b)~~(c) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps

~~(c) Based on 10 year volatility of JPY/USD exchange rate~~

December 31, 2016

December 31, 2018

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Assets:

Securities available for sale, carried at fair value:

Fixed maturities:

Fixed maturity securities:

Mortgage- and asset-backed securities

198

Consensus pricing

Offered quotes

N/A

^(d)

177

Consensus pricing

Offered quotes

N/A

^(a)

Public utilities

Discounted cash flow

Historical volatility

N/A

^(d)

109

Discounted cash flow

Credit spreads

N/A

^(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(d)

Consensus pricing

Offered quotes

N/A

^(a)

Other corporate

213

Discounted cash flow

Credit spreads

N/A

^(a)

Equity securities

Net asset value

Offered quotes

$1-$701 ($8)

Net asset value

Offered quotes

N/A

^(a)

Other assets:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

125

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.22% - .80%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

CDS spreads

17 - 172 bps

CDS spreads

19 - 120 bps

Foreign exchange rates

21.47%

^(c)

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

Interest rates (JPY)

.18% - .71%

^(c)

Total assets

750

Liabilities:

Other liabilities:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.22% - .80%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

CDS spreads

16 - 88 bps

CDS spreads

28 - 211 bps

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.22% - .80%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

Foreign exchange rates

21.47%

^(c)

Credit default swaps

Discounted cash flow

Base correlation

52.18% - 56.07%

^(e)

CDS spreads

54 bps

Recovery rate

36.69%

Total assets

369

Total liabilities

102

(a) ~~Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps~~

~~(b) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps~~

~~(c) Based on 10 year volatility of JPY/USD exchange rate~~

~~(d)~~ N/A represents securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs.

~~(e) Range of base correlation for the Company's bespoke tranche for attachment and detachment points corresponding to market indices~~

December 31, 2016
(In millions) Fair Value Valuation Technique(s) Unobservable Input Range
(Weighted Average)
Liabilities:
  Other liabilities:
       Foreign currency swaps $ 113
Discounted cash flow Interest rates (USD) 2.34% - 2.59%
^(a)
Interest rates (JPY) .22% - .80%
^(b)
CDS spreads 17 - 172 bps
Foreign exchange rates 21.47%
^(c)
23
Discounted cash flow Interest rates (USD) 2.34% - 2.59%
^(a)
Interest rates (JPY) .22% - .80%
^(b)
CDS spreads 24 - 216 bps
10
Discounted cash flow Interest rates (USD) 2.34% - 2.59%
^(a)
Interest rates (JPY) .22% - .80%
^(b)
Foreign exchange rates 21.47%
^(c)
            Total liabilities $ 146

~~(a)~~(b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps

~~(b)~~(c) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps

~~(c) Based on 10 year volatility of JPY/USD exchange rate~~

The following is a discussion of the significant unobservable inputs or valuation techniques used in determining the fair value of securities and derivatives classified as Level 3.

Net Asset Value

The Company holds certain unlisted equity securities whose fair value is derived based on the financial statements published by the investee. These securities do not trade on an active market and the valuations derived are dependent on the availability of timely financial reporting of the investee. Net asset value is an unobservable input in the determination of fair value ofequity securities.

Offered Quotes

In circumstances where the Company's valuation model price is overridden because it implies a value that is not consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company also receives unadjusted prices from brokers for its mortgage and asset-backed securities. These quotes are non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial institutions, certain other corporate, and equity securities investments.

Interest Rates and CDS Spreads ~~Foreign Exchange Rates~~

The significant drivers of the valuation of the ~~interest and~~ foreign exchange swaps are interest rates ~~foreign exchange rates~~ and CDS spreads. ~~The~~Some of the Company's swaps have long maturities that increase the sensitivity of the swaps to interest rate fluctuations. ~~Since most of~~For the Company's ~~yen-denominated~~foreign exchange or cross currency swaps that are in a net ~~liability~~asset position, an increase in yen interest rates (all other factors held constant) will decrease the ~~liabilities and increase~~present value of the yen final settlement receivable (receive leg), thus decreasing the value of the ~~swap.~~swap as long as the derivative remains in a net asset position.

Foreign exchange swaps also have a lump-sum final settlement of foreign exchange principal ~~receivables~~amounts at the termination of the swap. AnAssuming all other factors are held constant, an increase in yen interest rates will decrease the receive leg and decrease the net value of the ~~final settlement foreign exchange receivables and decrease the value of the swap, and~~swap. Likewise, holding all other factors constant, an increase in U.S. dollar interest rates will increase the ~~swap value.~~

A similar sensitivity pattern is observed for the foreign exchange rates. When the spot U.S. dollar/Japanese yen (USD/JPY) foreign exchange rate decreases and the swap is receiving a final exchange payment in JPY, the swapswap's net value ~~will increase~~ due to the appreciation of the JPY. Most of the Company's swaps are designed to receive payments in JPY at the termination and will thus be impacted by the USD/JPY foreign exchange rate in this way. In cases where there is no final foreign exchange receivable in JPY and the Company is paying JPY as interest payments and receiving USD, a decrease in the ~~foreign exchange rate will lead to a decrease in~~present value of the ~~swap value.~~

dollar final settlement payable (pay leg).

The extinguisher feature in most of the Company's VIE swaps results in a cessation of cash flows and no further payments between the parties to the swap in the event of a default on the referenced or underlying collateral. To price this feature, the Company applies the survival probability of the referenced entity to the projected cash flows. The survival probability uses the CDS spreads and recovery rates to adjust the present value of the cash flows. For extinguisher swaps with positive values, an increase in CDS spreads decreases the likelihood of receiving the final exchange payments and reduces the value of the swap.

~~Base Correlations, CDS Spreads, Recovery Rates~~

The Company's remaining collateralized debt obligation (CDO) is a tranche on a basket of single-name credit default swaps. The risk in this synthetic CDO comes from the single-name CDS risk and the correlations between the single names. The valuation of synthetic CDOs is dependent on the calibration of market prices for interest rates, single name CDS default probabilities and base correlation using financial modeling tools. Since there is limited or no observable data available for this tranche, the base correlations must be obtained from commonly traded market tranches such as the CDX and iTraxx indices. From the historical prices of these indices, base correlations can be obtained to develop a pricing curve of CDOs with different seniorities. Since the reference entities of the market indices do not match those in the portfolio underlying the synthetic CDO to be valued, several processing steps are taken to map the CDO in the Company's portfolio to the indices. With the base correlation determined and the appropriate spreads selected, a valuation is calculated. An increase in the CDS spreads in the underlying portfolio leads to a decrease in the value due to higher probability of defaults and losses. The impact on the valuation due to base correlation depends on a number of factors, including the riskiness between market tranches and the modeled tranche based on the Company's portfolio and the equivalence between detachment points in these tranches. Generally speaking, an increase in base correlation will

~~decrease the value of the senior tranches while increasing the value of junior tranches. This may result in a positive or negative value change.~~

The CDO tranche in the Company's portfolio is a senior mezzanine tranche and, due to the low level of credit support for this type of tranche, exhibits equity-like behavior. As a result, an increase in recovery rates tends to cause its value to decrease.

~~Base correlations, CDS spreads, and recovery rates are unobservable inputs in the determination of fair value of credit default swaps.~~

For additional information on the Company's investments and financial instruments, see the accompanying Notes 1, 3 and 4 and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.


6.	POLICY LIABILITIES

Changes in the liability for unpaid policy claims were as follows:


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended September 30,							Nine Months Ended September 30,
(In millions)		2017			2016				2017			2016				2019			2018				2019			2018
Unpaid supplemental health claims, beginning of period		$	3,872		$	3,941			$	3,707		$	3,548			$	4,024		$	3,942			$	3,952		$	3,881
Less reinsurance recoverables		30			30				27			26				31			29				28			28
Net balance, beginning of period		3,842			3,911				3,680			3,522				3,993			3,913				3,924			3,853
Add claims incurred during the period related to:
Current year		1,759			1,843				5,278			5,309				1,806			1,760				5,415			5,381
Prior years		(126		)	(148		)		(386		)	(374		)		(134		)	(131		)		(437		)	(456		)
Total incurred		1,633			1,695				4,892			4,935				1,672			1,629				4,978			4,925
Less claims paid during the period on claims incurred during:
Current year		1,357			1,462				3,074			3,160				1,421			1,357				3,150			3,109
Prior years		234			232				1,697			1,722				220			217				1,794			1,751
Total paid		1,591			1,694				4,771			4,882				1,641			1,574				4,944			4,860
Effect of foreign exchange rate changes on unpaid claims		(14		)	42				69			379				(3		)	(59		)		63			(9		)
Net balance, end of period		3,870			3,954				3,870			3,954				4,021			3,909				4,021			3,909
Add reinsurance recoverables		30			31				30			31				31			29				31			29
Unpaid supplemental health claims, end of period		3,900			3,985				3,900			3,985				4,052			3,938				4,052			3,938
Unpaid life claims, end of period		468			361				468			361				689			592				689			592
Total liability for unpaid policy claims		$	4,368		$	4,346			$	4,368		$	4,346			$	4,741		$	4,530			$	4,741		$	4,530

The incurred claims development related to prior years reflects favorable claims experience compared ~~with~~to previous ~~estimates, primarily in the Company's lines of business in Japan.~~estimates. The favorable claims development of ~~$386~~$437 million for the nine-month period ended September 30, ~~2017~~2019 comprises approximately ~~$301~~$310 million from Japan, which represents approximately ~~78%~~71% of the total. Excluding the impact of foreign exchange of a ~~loss~~gain of approximately ~~$13~~$4 million from December 31, ~~2016~~2018 to September 30, ~~2017,~~2019, the favorable claims development in Japan would have been approximately ~~$315~~$306 million, representing approximately ~~82%~~70% of the total.

The Company has experienced continued favorable claim trends in ~~2017~~2019 for its core health products in Japan. The Company's experience in Japan related to the average length of stay in the hospital for cancer treatment has shown continued decline in the current period. In addition, cancer treatment patterns in Japan are continuing to be influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams. Additionally, follow-up radiation and chemotherapy treatments are occurring more often on an outpatient basis. Such changes in treatment not only increase the quality of life and initial outcomes for the patients, but also decrease the average length of each hospital stay, resulting in favorable claims development.

The remainder of the favorable claims development related to prior years for the nine-month period ended September 30, 2019, reflects Aflac U.S. favorable claims experience compared to previous estimates, primarily in the cancer and accident lines of business.


7.	REINSURANCE

The Company periodically enters into fixed quota-share coinsurance agreements with other companies in the normal course of business. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits are reported net of insurance ceded.

The Company has recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of ~~$942 million,~~$1.1 billion and $1.0 billion as of September 30, ~~2017,~~2019 and December 31, 2018, respectively, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies. The Company has also recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of ~~$906~~$990 million and ~~$860~~$941 million as of September 30, ~~2017,~~2019 and December 31, ~~2016,~~2018, respectively. The increase in the reinsurance recoverable balance was driven by ~~two aggregating factors: yen strengthening and~~ the growth in reserves related to the business that has been reinsured as the policies age. The spot yen/dollar

exchange rate strengthened by approximately 3%2.9% and ceded reserves increased approximately 2%2.6% from December 31, ~~2016,~~2018 to September 30, ~~2017.~~2019.

The following table reconciles direct premium income and direct benefits and claims to net amounts after the effect of reinsurance.


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended September 30,								Nine Months Ended September 30,
(In millions)	2017				2016				2017				2016				2019				2018				2019				2018
Direct premium income		$	4,734			$	5,119			$	14,210			$	14,724			$	4,823			$	4,720			$	14,365			$	14,346
Ceded to other companies:
Ceded Aflac Japan closed blocks		(130		)		(148		)		(390		)		(423		)		(121		)		(122		)		(361		)		(378		)
Other		(12		)		(13		)		(37		)		(37		)		(17		)		(15		)		(50		)		(45		)
Assumed from other companies:
Retrocession activities		54				62				163				177				51				51				151				158
Other		2				2				5				6				0				2				4				5
Net premium income		$	4,648			$	5,022			$	13,951			$	14,447			$	4,736			$	4,636			$	14,109			$	14,086

Direct benefits and claims		$	3,157			$	3,463			$	9,403			$	9,898			$	3,106			$	3,076			$	9,185			$	9,301
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks		(118		)		(135		)		(359		)		(385		)		(111		)		(111		)		(331		)		(343		)
Eliminations		13				16				39				44				11				10				31				33
Other		(9		)		(10		)		(31		)		(26		)		(18		)		(11		)		(41		)		(34		)
Assumed from other companies:
Retrocession activities		53				59				159				168				49				48				144				149
Eliminations		(13		)		(16		)		(39		)		(44		)		(11		)		(10		)		(31		)		(33		)
Other		0				1				2				2				1				0				1				2
Benefits and claims, net		$	3,083			$	3,378			$	9,174			$	9,657			$	3,027			$	3,002			$	8,958			$	9,075

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, the Company remains liable for the reinsured claims.

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015 in the amount of approximately ~~110~~¥110 billion ~~yen.~~of reserves. This reinsurance facility agreement was renewed in ~~2016~~2018 and is effective until December 31, ~~2017.~~2019. There are also additional commitment periods of a one-year duration, each of which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration.

The reinsurer can withdraw from the committed facility if Aflac‘s Standard and Poor's (S&P) rating drops below BBB-. As of September 30, ~~2017,~~2019, the Company has not executed a reinsurance treaty under this committed reinsurance facility.


8.	NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations follows:


(In millions)	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
2.65% senior notes paid February 2017		$	0		$	649
2.40% senior notes due March 2020		545			547
4.00% senior notes due February 2022		346			348			$	348		$	348
3.625% senior notes due June 2023		694			696			698			698
3.625% senior notes due November 2024		743			745			746			746
3.25% senior notes due March 2025		445			445			448			447
2.875% senior notes due October 2026		298			298			298			297
6.90% senior notes due December 2039		221			220			220			220
6.45% senior notes due August 2040		256			254			254			254
4.00% senior notes due October 2046		394			394			394			394
5.50% subordinated debentures due September 2052		494			486
Yen-denominated senior notes:
.932% senior notes due January 2027 (principal amount 60.0 billion yen)		529			0
4.750% senior notes due January 2049								540			540
Yen-denominated senior notes and subordinated debentures:
.932% senior notes due January 2027 (principal amount ¥60.0 billion)								553			538
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)								270			262
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)								140			136
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)								82			79
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)								551			536
.963% perpetual subordinated bonds callable April 2024 (principal amount ¥30.0 billion)								276			0
Yen-denominated loans:
Variable interest rate loan due September 2021 (.31% in 2017 and 2016, principal amount 5.0 billion yen)		44			43
Variable interest rate loan due September 2023 (.46% in 2017 and 2016, principal amount 25.0 billion yen)		221			214
Capitalized lease obligations payable through 2024		18			21
Total notes payable		$	5,248		$	5,360
Variable interest rate loan due September 2026 (.32% in 2019 and 2018, principal amount ¥5.0 billion)								46			45
Variable interest rate loan due September 2029 (.47% in 2019 and 2018, principal amount ¥25.0 billion)								231			225
Finance lease obligations payable through 2025								13			13
Operating lease obligations payable through 2028 ⁽¹⁾								125			0
Total notes payable and lease obligations								$	6,233		$	5,778

⁽¹⁾See Note 1 of the Notes to the Consolidated Financial Statements for the adoption of accounting guidance on January 1, 2019 related to leases.

Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the life of the notes.

In ~~January 2017,~~September 2019, the Parent Company ~~issued 60.0~~renewed a ¥30.0 billion ~~yen of~~ senior ~~notes through a U.S. public debt offering.~~term loan facility. The notes bear interest at a fixed rate of .932% per annum, payable semi-annually, and have a 10-year maturity. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the termsfirst tranche of the ~~issuance.~~

~~In February 2017, the Parent Company extinguished $650 million of 2.65% senior notes upon their maturity.~~

The Parent Company and Aflac have a 364-day uncommitted bilateral line of credit with a third party that provides for borrowings in the amount of $100 million. Borrowings will bear interest at the rate quoted by the bank and agreed upon at the time of making such loan and will have up to a three-month maturity period. There are no related facility, fees, upfront expenses or financial covenant requirements. Borrowings under this credit agreement may be used for general corporate purposes. Borrowings under the financing agreement will mature no later than three months after the last drawdown date of October 14, 2017. As of September 30, 2017, the Company did not have any borrowings outstanding under its $100 million credit agreement.

~~The Parent Company has a three-year senior unsecured revolving credit facility agreement with a syndicate of financial institutions that provides for borrowings of up to 100.0~~which totaled ¥5.0 billion, ~~yen on a revolving basis. Borrowings bear~~bears interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR), or alternate TIBOR, if applicable, plus ~~at the Company's option, either (a)~~ the applicable TIBOR margin ~~during the period from the closing date to the commitment termination date or (b) the applicable TIBOR margin during the term out period.~~ and will mature in September 2026. The applicable margin ranges between ~~.35%~~.30% and ~~.75% during the period from the closing date to the commitment termination date and~~ .70% ~~and 1.50% during the term out period,~~, depending on the Parent ~~Company’s~~Company's debt ratings as of the date of determination. ~~In addition,~~The second tranche, which totaled ¥25.0 billion, bears interest at a rate per annum equal to the ~~Parent Company is required to pay a~~

~~facility fee on~~TIBOR, or alternate TIBOR, if applicable, plus the ~~commitments ranging~~applicable TIBOR margin and will mature in September 2029. The applicable margin ranges between ~~.30%~~.45% and ~~.50%~~1.00%, ~~also based~~depending on the Parent ~~Company’s~~Company's debt ratings as of the date of determination. ~~Borrowings under this credit agreement may be used for general corporate purposes, including a capital contingency plan for the operations~~

In April 2019, ALIJ issued ¥30.0 billion (par value) of the Parent Company, and will expire on the earlier of (a) March 31, 2019, or (b) the date the commitments are terminated pursuant to an event of default, as such term is defined in the credit agreement. The credit facility requires compliance with certain financial covenants on a quarterly basis. As of September 30, 2017, the Parent Company did not have any borrowings outstanding under its 100.0 billion yen revolving credit agreement.

The Parent Company and Aflac have a five-year senior unsecured revolving credit facility agreement with a syndicate of financial institutions that provides for borrowings of up to 55.0 billion yen or the equivalent of yen in U.S. dollars on a revolving basis. This credit agreement provides for borrowings in Japanese yen or the equivalent of Japanese yen in U.S. dollars on a revolving basis. Borrowingsperpetual subordinated bonds. These bonds bear interest at a fixed rate of .963% per annum ~~equal to,~~and then at ~~the Company's option, either (a) a eurocurrency rate determined by reference to the~~six-month Euro Yen LIBOR for the interest period relevant to such borrowing adjusted for certain additional costs or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus ½ of 1%, (2) the rate of interest for such day announced by Mizuho Bank, Ltd. as its prime rate and (3) the eurocurrency rate for an interest period of one month plus 1.00%, in each case plus an applicable ~~margin.~~spread on and after the day immediately following April 18, 2024. The ~~applicable margin ranges between .79%~~bonds will be callable on each interest payment date on and ~~1.275% for eurocurrency rate borrowings and 0.0% and .275% for base rate borrowings, depending on the Parent Company’s debt ratings as~~after April 18, 2024. ALIJ is seeking amendment of the bonds to change their duration from perpetual to a stated maturity date of ~~determination. In addition,~~April 16, 2049 and to remove provisions that permitted ALIJ to defer payments of interest under certain circumstances.

The following table presents the ~~Parent Company~~contractual maturities and ~~Aflac are required to pay a facility fee on~~present value of lease liabilities.



	September 30, 2019
(In millions)	Operating Leases		Finance Leases		Total
2019	$	42	$	4	$	46
2020	25		3		28
2021	19		3		22
2022	10		2		12
2023	9		1		10
After 2023	30		0		30
Total lease payments	$	135	$	13	$	148
Less: Interest	10		0		10
Present value of lease liabilities	$	125	$	13	$	138

The following table presents the ~~commitments ranging between .085%~~weighted average remaining lease term and ~~.225%, also based on~~weighted average discount rate for lease liabilities.



	September 30, 2019
Weighted average remaining lease term (years):
Operating leases	4.3
Finance leases	3.8

Weighted average discount rate:
Operating leases	2.4%
Finance leases	1.6%

Operating lease costs for the ~~Parent Company’s debt ratings as~~three- and nine-month periods ended September 30, 2019 were $14 million and $43 million, respectively. Operating cash outflow for operating leases for the nine-month period ended September 30, 2019 was $42 million.

A summary of the ~~date~~Company's lines of ~~determination. Borrowings under the amended and restated~~ credit facility may be used for general corporate purposes, including a capital contingency plan for the operations of the Parent Company and Aflac. The amended and restated credit facility requires compliance with certain financial covenants on a quarterly basis and will expire on the earlier of (a) September 18, 2020, or (b) the date the commitments are terminated pursuant to an event of default, as ~~such term is defined in the credit agreement. As~~ of September 30, ~~2017, the Company did not have any borrowings outstanding under its 55.0 billion yen~~2019 follows:



Borrower	Type	Term	Expiration Date	Capacity	Amount Outstanding	Interest Rate on Borrowed Amount	Maturity Period	Commitment Fee	Business Purpose
Aflac Incorporated and Aflac	uncommitted bilateral	364 days	December 27, 2019	$100 million	$0 million	The rate quoted by the bank and agreed upon at the time of borrowing	Up to 3 months	None	General corporate purposes
Aflac Incorporated	unsecured revolving	5 years	March 29, 2024, or the date commitments are terminated pursuant to an event of default	¥100.0 billion	¥0.0 billion	A rate per annum equal to (a) Tokyo interbank market rate (TIBOR) plus, the alternative applicable TIBOR margin during the availability period from the closing date to the commitment termination date or (b) the TIBOR rate offered by the agent to major banks in yen for the applicable period plus, the applicable alternative TIBOR margin during the term out period	No later than March 29, 2024	.30% to .50%, depending on the Parent Company's debt ratings as of the date of determination	General corporate purposes, including a capital contingency plan for the operations of the Parent Company
Aflac Incorporated and Aflac	unsecured revolving	5 years	April 4, 2023, or the date commitments are terminated pursuant to an event of default	¥55.0 billion, or the equivalent amount in U.S. dollars	¥0.0 billion	A rate per annum equal to, at the Company's option, either, (a) London Interbank Offered Rate (LIBOR) adjusted for certain costs or (b) a base rate determined by reference to the highest of (1) the federal funds rate plus 1/2 of 1%, (2) the rate of interest for such day announced by Mizuho Bank, Ltd. as its prime rate, or (3) the eurocurrency rate for an interest period of one month plus 1.00%, in each case plus an applicable margin	No later than April 4, 2023	.085% to .225%, depending on the Parent Company's debt ratings as of the date of determination	General corporate purposes, including a capital contingency plan for the operations of the Parent Company
Aflac Incorporated and Aflac	uncommitted bilateral	None specified	None specified	$50 million	$0 million	A rate per annum equal to, at the Parent Company's option, either (a) a eurocurrency rate determined by reference to the agent's LIBOR for the interest period relevant to such borrowing or (b) the base rate determined by reference to the greater of (i) the prime rate as determined by the agent, and (ii) the sum of 0.50% and the federal funds rate for such day	Up to 3 months	None	General corporate purposes
Aflac⁽¹⁾	uncommitted revolving	364 days	November 29, 2019	$250 million	$0 million	USD three-month LIBOR plus 75 basis points per annum	3 months	None	General corporate purposes
Aflac Incorporated⁽¹⁾	uncommitted revolving	364 days	April 2, 2020	¥50.0 billion	¥0.0 billion	Three-month TIBOR plus 70 basis points per annum	3 months	None	General corporate purposes

⁽¹⁾ Intercompany credit ~~agreement.~~agreement

The Parent Company and Aflac have an uncommitted bilateral line of credit with a third party that provides for borrowings in the amount of $50 million. Borrowings will bear interest at the rate quoted by the bank and agreed upon at the time of making such loan and will have up to a three-month maturity period. There are no related facility fees, upfront expenses or financial covenant requirements. Borrowings under this credit agreement may be used for general corporate purposes. As of September 30, 2017, the Company did not have any borrowings outstanding under its $50 million credit agreement.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at September 30, ~~2017.~~2019. No events of default or defaults occurred during the nine-month period ended September 30, ~~2017.~~2019.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.


9.	SHAREHOLDERS’ EQUITY

The following table is a reconciliation of the number of shares of the Company's common stock for the nine-month periods ended September 30.



(In thousands of shares)	2019		2018
Common stock - issued:
Balance, beginning of period	1,347,540		1,345,762
Exercise of stock options and issuance of restricted shares	1,650		1,614
Balance, end of period	1,349,190		1,347,376
Treasury stock:
Balance, beginning of period	592,254		564,852
Purchases of treasury stock:
Share repurchase program	23,126		20,443
Other	589		361
Dispositions of treasury stock:
Shares issued to AFL Stock Plan	(1,232	)	(850	)
Exercise of stock options	(382	)	(430	)
Other	(295	)	(113	)
Balance, end of period	614,060		584,263
Shares outstanding, end of period	735,130		763,113

(In thousands of shares) 2017 2016
Common stock - issued:
Balance, beginning of period 671,249
669,723
Exercise of stock options and issuance of restricted shares 1,420
1,261
Balance, end of period 672,669
670,984
Treasury stock:
Balance, beginning of period 265,439
245,343
Purchases of treasury stock:
Open market 13,898
18,774
Other 435
329
Dispositions of treasury stock:
Shares issued to AFL Stock Plan (696 ) (822 )
Exercise of stock options (263 ) (554 )
Other (19 ) (107 )
Balance, end of period 278,794
262,963
Shares outstanding, end of period 393,875
408,021

Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic earnings per share (EPS). The following table presents the approximate number of share-based awards to purchase shares, on a weighted-average basis, that were considered to be anti-dilutive and were excluded from the calculation of diluted earnings per share for the following periods.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2019		2018		2019		2018
Anti-dilutive share-based awards		1		46		8		34

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Anti-dilutive share-based awards 266
109
335
1,162

Share Repurchase Program

During the first nine months of ~~2017,~~2019, the Company repurchased ~~13.9~~23.1 million shares of its common stock ~~in the open market~~ for ~~$1.0~~$1.2 billion as part of its share repurchase program. During the first nine months of ~~2016,~~2018, the Company repurchased ~~18.8~~20.4 million shares of its common stock ~~in the open market~~ for ~~$1.2 billion~~$923 million as part of its share repurchase program. ~~In August 2017, the Company's board of directors authorized the purchase of an additional 40 million shares of its common stock.~~ As of September 30, ~~2017,~~2019, a remaining balance of ~~52.9~~45.9 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Reclassifications from Accumulated Other Comprehensive Income

The tables below are reconciliations of accumulated other comprehensive income by component for the following periods.

Changes in Accumulated Other Comprehensive Income



Three Months Ended September 30, 2019
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities			Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total
Balance, beginning of period		$	(1,455	)		$	8,055		$	(27	)		$	(209	)		$	6,364
Other comprehensive income (loss) before reclassification		(24		)		884			(6		)		(2		)		852
Amounts reclassified from accumulated other comprehensive income (loss)		0				31			0				4				35
Net current-period other comprehensive income (loss)		(24		)		915			(6		)		2				887
Balance, end of period		$	(1,479	)		$	8,970		$	(33	)		$	(207	)		$	7,251

Three Months Ended
September 30, 2017
(In millions) Unrealized Foreign
Currency Translation
Gains (Losses) Unrealized
Gains (Losses)
on Investment Securities Unrealized
Gains (Losses)
on Derivatives Pension Liability Adjustment Total
Balance, beginning of period $ (1,580 ) $ 5,173
$ (23 ) $ (169 ) $ 3,401

Other comprehensive
income (loss) before
reclassification (135 ) 296
0
(2 ) 159

Amounts reclassified from
accumulated other
comprehensive income
(loss) 0
(32 ) 0
3
(29 )
Net current-period other
comprehensive
income (loss) (135 ) 264
0
1
130

Balance, end of period $ (1,715 ) $ 5,437
$ (23 ) $ (168 ) $ 3,531

All amounts in the table above are net of tax.


Three Months Ended September 30, 2016
Three Months Ended September 30, 2018																					Three Months Ended September 30, 2018
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities				Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total				Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities				Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total
Balance, beginning of period		$	(847	)		$	6,441			$	(19	)		$	(143	)		$	5,432			$	(1,766	)		$	4,836			$	(23	)		$	(195	)		$	2,852
Other comprehensive income (loss) before reclassification		253				(342		)		0				(1		)		(90		)		(347		)		(569		)		(1		)		(2		)		(919		)
Amounts reclassified from accumulated other comprehensive income (loss)		0				21				0				1				22				0				(27		)		0				3				(24		)
Net current-period other comprehensive income (loss)		253				(321		)		0				0				(68		)		(347		)		(596		)		(1		)		1				(943		)
Balance, end of period		$	(594	)		$	6,120			$	(19	)		$	(143	)		$	5,364			$	(2,113	)		$	4,240			$	(24	)		$	(194	)		$	1,909

All amounts in the table above are net of tax.



Nine Months Ended September 30, 2019
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities				Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total
Balance, beginning of period		$	(1,847	)		$	4,234			$	(24	)		$	(212	)		$	2,151
Other comprehensive income (loss) before reclassification		368				4,737				(9		)		(4		)		5,092
Amounts reclassified from accumulated other comprehensive income (loss)		0				(1		)		0				9				8
Net current-period other comprehensive income (loss)		368				4,736				(9		)		5				5,100
Balance, end of period		$	(1,479	)		$	8,970			$	(33	)		$	(207	)		$	7,251

Nine Months Ended
September 30, 2017
(In millions) Unrealized Foreign
Currency Translation
Gains (Losses) Unrealized
Gains (Losses)
on Investment Securities Unrealized
Gains (Losses)
on Derivatives Pension
Liability
Adjustment Total
Balance, beginning of period $ (1,983 ) $ 4,805
$ (24 ) $ (168 ) $ 2,630

Other comprehensive
income (loss) before
reclassification 268
653
1
(8 ) 914

Amounts reclassified from
accumulated other
comprehensive income
(loss) 0
(21 ) 0
8
(13 )
Net current-period other
comprehensive
income (loss) 268
632
1
0
901

Balance, end of period $ (1,715 ) $ 5,437
$ (23 ) $ (168 ) $ 3,531

All amounts in the table above are net of tax.



Nine Months Ended September 30, 2018
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities				Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total
Balance, beginning of period		$	(1,750	)		$	5,964			$	(23	)		$	(163	)		$	4,028
Cumulative effect of change in accounting principle - financial instruments		0				(148		)		0				0				(148		)
Cumulative effect of change in accounting principle - tax effects from tax reform		(325		)		734				(3		)		(32		)		374
Other comprehensive income (loss) before reclassification		(38		)		(2,302		)		2				(7		)		(2,345		)
Amounts reclassified from accumulated other comprehensive income (loss)		0				(8		)		0				8				0
Net current-period other comprehensive income (loss)		(38		)		(2,310		)		2				1				(2,345		)
Balance, end of period		$	(2,113	)		$	4,240			$	(24	)		$	(194	)		$	1,909

Nine Months Ended
September 30, 2016
(In millions) Unrealized Foreign
Currency Translation
Gains (Losses) Unrealized
Gains (Losses)
on Investment Securities Unrealized
Gains (Losses)
on Derivatives Pension Liability Adjustment Total
Balance, beginning of period $ (2,196 ) $ 2,986
$ (26 ) $ (139 ) $ 625

Other comprehensive
income (loss) before
reclassification 1,602
3,155
7
(7 ) 4,757

Amounts reclassified from
accumulated other
comprehensive income
(loss) 0
(21 ) 0
3
(18 )
Net current-period other
comprehensive
income (loss) 1,602
3,134
7
(4 ) 4,739

Balance, end of period $ (594 ) $ 6,120
$ (19 ) $ (143 ) $ 5,364

All amounts in the table above are net of tax.

The tables below summarize the amounts reclassified from each component of accumulated other comprehensive income ~~based on source~~into net earnings for the following periods.

Reclassifications Out of Accumulated Other Comprehensive Income



(In millions)	Three Months Ended September 30, 2019
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	(14	)	Other-than-temporary impairment losses realized
		(27		)	Other gains (losses)
		(41		)	Total before tax
		10			Tax (expense) or benefit⁽¹⁾
		$	(31	)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(5	)	Acquisition and operating expenses⁽²⁾
Prior service (cost) credit		0			Acquisition and operating expenses⁽²⁾
		1			Tax (expense) or benefit⁽¹⁾
		$	(4	)	Net of tax
Total reclassifications for the period		$	(35	)	Net of tax

(In millions) Three Months Ended
September 30, 2017
Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities $ 56
Sales and redemptions
(6 ) Other-than-temporary impairment
losses realized
50
Total before tax
(18 )
Tax (expense) or benefit⁽¹⁾
$ 32
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses) $ (4 )
Acquisition and operating expenses⁽²⁾
Prior service (cost) credit 0

Acquisition and operating expenses⁽²⁾
1

Tax (expense) or benefit⁽¹⁾
$ (3 ) Net of tax
Total reclassifications for the period $ 29
Net of tax

⁽¹⁾Based on ~~35%~~25% blended tax rate

⁽²⁾These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 11 for additional details).



(In millions)	Three Months Ended September 30, 2018
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	0		Other-than-temporary impairment losses realized
		37			Other gains (losses)
		37			Total before tax
		(10		)	Tax (expense) or benefit⁽¹⁾
		$	27		Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(5	)	Acquisition and operating expenses⁽²⁾
Prior service (cost) credit		0			Acquisition and operating expenses⁽²⁾
		2			Tax (expense) or benefit⁽¹⁾
		$	(3	)	Net of tax
Total reclassifications for the period		$	24		Net of tax

(In millions) Three Months Ended
September 30, 2016
Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities $ (11 ) Sales and redemptions
(22 ) Other-than-temporary impairment
losses realized
(33 ) Total before tax
12

Tax (expense) or benefit⁽¹⁾
$ (21 ) Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses) $ (4 )
Acquisition and operating expenses⁽²⁾
Prior service (cost) credit 2

Acquisition and operating expenses⁽²⁾
1

Tax (expense) or benefit⁽¹⁾
$ (1 ) Net of tax
Total reclassifications for the period $ (22 ) Net of tax

⁽¹⁾Based on ~~35%~~26% blended tax rate

⁽²⁾~~These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 11 for additional details)~~

(In millions) Nine Months Ended
September 30, 2017
Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities $ 56
Sales and redemptions
(23 ) Other-than-temporary impairment
losses realized
33
Total before tax
(12 )
Tax (expense) or benefit⁽¹⁾
$ 21
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses) $ (12 )
Acquisition and operating expenses⁽²⁾
Prior service (cost) credit 0

Acquisition and operating expenses⁽²⁾
4

Tax (expense) or benefit⁽¹⁾
$ (8 ) Net of tax
Total reclassifications for the period $ 13
Net of tax

⁽¹⁾~~Based on 35% tax rate~~

⁽²⁾These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 11 for additional details).



(In millions)	Nine Months Ended September 30, 2019
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	(13	)	Other-than-temporary impairment losses realized
		14			Other gains (losses)
		1			Total before tax
		0			Tax (expense) or benefit⁽¹⁾
		$	1		Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(12	)	Acquisition and operating expenses⁽²⁾
Prior service (cost) credit		0			Acquisition and operating expenses⁽²⁾
		3			Tax (expense) or benefit⁽¹⁾
		$	(9	)	Net of tax
Total reclassifications for the period		$	(8	)	Net of tax

(In millions) Nine Months Ended
September 30, 2016
Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities $ 102
Sales and redemptions
(69 ) Other-than-temporary impairment
losses realized
33
Total before tax
(12 )
Tax (expense) or benefit⁽¹⁾
$ 21
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses) $ (12 )
Acquisition and operating expenses⁽²⁾
Prior service (cost) credit 8

Acquisition and operating expenses⁽²⁾
1

Tax (expense) or benefit⁽¹⁾
$ (3 ) Net of tax
Total reclassifications for the period $ 18
Net of tax

⁽¹⁾Based on ~~35%~~26% blended tax rate

⁽²⁾These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 11 for additional details).



(In millions)	Nine Months Ended September 30, 2018
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	(2	)	Other-than-temporary impairment losses realized
		13			Other gains (losses)
		11			Total before tax
		(3		)	Tax (expense) or benefit⁽¹⁾
		$	8		Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(13	)	Acquisition and operating expenses⁽²⁾
Prior service (cost) credit		0			Acquisition and operating expenses⁽²⁾
		5			Tax (expense) or benefit⁽¹⁾
		$	(8	)	Net of tax
Total reclassifications for the period		$	0		Net of tax

⁽¹⁾Based on 27% blended tax rate

⁽²⁾These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 11 for additional details).

10. SHARE-BASED COMPENSATION

As of September 30, ~~2017,~~2019, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (the ~~“Plan”)~~Plan). Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors.

The Plan, as amended on February 14, 2017, allows for a maximum number of shares issuable over its term of ~~37.5~~75 million shares including 1938 million shares that may be awarded in respect of awards other than options or stock

appreciation rights. If any awards granted under the Plan are forfeited or are terminated before being exercised or settled for any reason other than tax forfeiture, then the shares underlying the awards will again be available under the Plan.

The Plan allows awards to Company employees for incentive stock options (ISOs), non-qualifying stock options (NQSOs), restricted stock, restricted stock units, and stock appreciation rights. Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights. As of September 30, ~~2017,~~2019, approximately ~~20.6~~39.4 million shares were available for future grants under this plan. The ISOs and NQSOs have a term of 10 years, and the share-based awards generally vest upon time-based conditions or time and performance-based conditions. Time-based vesting generally occurs after three years. Performance-based vesting conditions generally include the attainment of goals related to Company financial performance. As of September 30, ~~2017,~~2019, the only performance-based awards issued and outstanding were restricted stock awards.

Stock options and stock appreciation rights granted under the amended Plan have an exercise price of at least ~~100% of~~ the fair market value of the underlying stock on the grant date and have an expiration date no later than 10 years from the grant date. Time-based restricted stock awards, restricted stock units and stock options granted after January 1, 2017 generally vest on a ratable basis over three years, and awards granted prior to the amendment vest on a ~~three-year~~three years cliff basis. The Compensation Committee of the Board of Directors has the discretion to determine vesting schedules.

Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while those issued to Japan-based grantees are settled with treasury shares.

The following table provides information on stock options outstanding and exercisable at September 30, ~~2017.~~2019.



	Stock Option Shares (in thousands)		Weighted-Average Remaining Term (in years)		Aggregate Intrinsic Value (in millions)			Weighted-Average Exercise Price Per Share
Outstanding		3,864		4.6		$	88		$	29.61
Exercisable		3,643		4.4		84			29.26

Stock
Option Shares
(in thousands) Weighted-Average
Remaining Term
(in years) Aggregate
Intrinsic
Value
(in millions) Weighted-Average
Exercise Price Per
Share
Outstanding 4,181
5.4 $ 108
$ 55.61

Exercisable 2,563
3.6 79
50.73

The Company received cash from the exercise of stock options in the amount of ~~$48~~$36 million during the first nine months of ~~2017,~~2019, compared with ~~$59~~$42 million in the first nine months of ~~2016.~~2018. The tax benefit realized as a result of stock option exercises and restricted stock releases was ~~$37~~$26 million in the first nine months of ~~2017,~~2019, compared with ~~$29~~$17 million in the first nine months of ~~2016.~~2018.

As of September 30, ~~2017,~~2019, total compensation cost not yet recognized in the Company's financial statements related to restricted stock awards was ~~$43~~$48 million, of which ~~$17~~$22 million ~~(968~~(761 thousand shares) was related to restricted stock awards with a performance-based vesting condition. The Company expects to recognize these amounts over a weighted-average period of approximately ~~1.1~~1.0 years. There are no other contractual terms covering restricted stock awards once vested.

The following table summarizes restricted stock activity during the nine-month period ended September 30.



(In thousands of shares)	Shares		Weighted-Average Grant-Date Fair Value Per Share
Restricted stock at December 31, 2018	3,407			$	36.52
Granted in 2019	998			49.37
Canceled in 2019	(30	)		40.59
Vested in 2019	(1,858	)		32.71
Restricted stock at September 30, 2019	2,517			$	44.37

(In thousands of shares) Shares
Weighted-Average
Grant-Date Fair Value
Per Share
Restricted stock at December 31, 2016 1,868
$ 61.76

Granted in 2017 555
72.85

Canceled in 2017 (79 ) 64.22

Vested in 2017 (486 ) 62.22

Restricted stock at September 30, 2017 1,858
$ 64.71

In February ~~2017,~~2019, the Company granted ~~253~~399 thousand performance-based stock awards, which are contingent on the achievement of the Company's financial performance metrics and its market-based conditions. On the date of grant, the Company estimated the fair value of restricted stock awards with market-based conditions using a Monte Carlo simulation model. The model discounts the value of the stock at the assumed vesting date based on the risk-free interest rate. Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter.

The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, a Monte Carlo simulation model. The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards.

On January 1, 2017, the Company adopted accounting guidance related to employee share-based payment accounting, which requires an entity to elect whether to use estimates of forfeitures, or to account for forfeitures as they occur, using modified retrospective application. The Company has made an entity-wide accounting policy election to estimate the number of awards that are expected to vest (consistent with the Company's prior policy). The election and adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

For additional information on the Company's long-term share-based compensation plans and the types of share-based awards, see Note 12 of the Notes to the Consolidated Financial Statements included in the ~~2016~~2018 Annual Report.


11.	BENEFIT PLANS

The Company has funded defined benefit plans in Japan and the United States, however the U.S. plan was frozen to new participants effective October 1, 2013. The Company also maintains non-qualified, unfunded supplemental retirement plans that provide defined pension benefits in excess of limits imposed by federal tax law for certain Japanese, U.S. and former employees, however the U.S. plan was frozen to new participants effective January 1, 2015. U.S. employees who are not participants in the defined benefit plan receive a nonelective 401(k) employer contribution.

The Company provides certain health care benefits for eligible U.S. retired employees, their beneficiaries and covered dependents ~~("other~~(other postretirement ~~benefits")~~benefits). The health care plan is contributory and unfunded. Effective January 1, 2014, employees eligible for benefits included the following: (1) active employees whose age plus service, in years, equaled or exceeded 80 (rule of 80); (2) active employees who were age 55 or older and have met the 15 years of service requirement; (3) active employees who would meet the rule of 80 in the next ~~five~~5 years; (4) active employees who were age 55 or older and who would meet the 15 years of service requirement within the next ~~five~~5 years; and (5) current retirees. For certain employees and former employees, additional coverage is provided for all medical expenses for life.

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statement of earnings, ~~included~~which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $6 million and $7 million for the three-month periods and $18 million and $20 million for the nine-month periods ended September 30, 2019 and 2018, respectively. Total net periodic cost includes the following components:


	Three Months Ended September 30,																							Three Months Ended September 30,
	Pension Benefits																Other							Pension Benefits																Other
	Japan								U.S.								Postretirement Benefits							Japan								U.S.								Postretirement Benefits
(In millions)	2017				2016				2017				2016				2017			2016				2019				2018				2019				2018				2019			2018
Components of net periodic benefit cost:
Service cost		$	4			$	4			$	6			$	5			$	0		$	0			$	6			$	4			$	5			$	7			$	0		$	0
Interest cost		2				2				8				8				0			0				1				1				10				9				0			0
Expected return on plan assets		(1		)		(1		)		(6		)		(6		)		0			0				(2		)		(1		)		(8		)		(7		)		0			0
Amortization of net actuarial loss		1				0				3				4				0			0				1				1				3				4				1			0
Amortization of prior service cost (credit)		0				0				0				0				0			(2		)
Net periodic (benefit) cost		$	6			$	5			$	11			$	11			$	0		$	(2	)		$	6			$	5			$	10			$	13			$	1		$	0


	Nine Months Ended September 30,																							Nine Months Ended September 30,
	Pension Benefits																Other							Pension Benefits																Other
	Japan								U.S.								Postretirement Benefits							Japan								U.S.								Postretirement Benefits
(In millions)	2017				2016				2017				2016				2017			2016				2019				2018				2019				2018				2019			2018
Components of net periodic benefit cost:
Service cost		$	13			$	12			$	18			$	17			$	0		$	0			$	16			$	14			$	17			$	21			$	0		$	0
Interest cost		5				5				24				24				1			1				4				4				28				26				1			1
Expected return on plan assets		(3		)		(3		)		(17		)		(17		)		0			0				(5		)		(4		)		(22		)		(20		)		0			0
Amortization of net actuarial loss		2				1				10				10				0			1				3				1				8				12				1			0
Amortization of prior service cost (credit)		0				0				0				0				0			(8		)
Net periodic (benefit) cost		$	17			$	15			$	35			$	34			$	1		$	(6	)		$	18			$	15			$	31			$	39			$	2		$	1

During the nine months ended September 30, ~~2017,~~2019, Aflac Japan contributed approximately ~~$18~~$26 million (using the weighted-average yen/dollar exchange rate for the nine-month period ending September 30, ~~2017)~~2019) to the Japanese funded defined benefit plan, and Aflac U.S. contributed ~~$40~~$20 million to the U.S. funded defined benefit plan.

For additional information regarding the Company's Japanese and U.S. benefit plans, see Note 14 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.


12.	COMMITMENTS AND CONTINGENT LIABILITIES

Effective for ~~2017,~~2019, the Company entered into an outsourcing agreement with an information technology and data services company to provide application maintenance and development services for its Japanese operation. As of September 30, ~~2017,~~2019, the agreement has a remaining term of ~~five~~three years and an aggregate remaining cost of ~~7.8~~¥6.1 billion ~~yen~~ ($6957 million using the September 30, ~~2017,~~2019, exchange rate).

The Company is a defendant in various lawsuits considered to be in the normal course of business. Members of the Company's senior legal and financial management teams review litigation on a quarterly and annual basis. The final results of any litigation cannot be predicted with certainty. 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.

See Note 3 of the Notes to the Consolidated Financial Statements for details on certain investment commitments.

Guaranty Fund Assessments

The United States insurance industry has a policyholder protection system that is monitored and regulated by state insurance departments. These life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association. Under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business.

In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and its subsidiary American Network Insurance Company (collectively referred to as Penn Treaty), neither of which is affiliated with Aflac, in rehabilitation and petitioned a state court for approval to liquidate Penn Treaty. A final order of liquidation was granted by a recognized judicial authority on March 1, 2017, and as a result, Penn Treaty is in the process of liquidation. The Company estimated and recognized the impact of its share of guaranty fund assessments resulting from the liquidation using a discounted rate of 4.25%. The Company recognized a discounted liability for the assessments of $62 million (undiscounted $94 million), offset by discounted premium tax credits of $48 million (undiscounted $74 million), for a net $14 million impact to net income in the quarter ended March 31, 2017. The

Company ~~expects~~paid a majority of these assessments ~~to be paid over~~by March 31, 2019. The Company used the ~~next year and a majority~~cost estimate provided as of the ~~tax credits to be realized over the next five years. The Company uses the most current cost estimate provided~~liquidation date by the National Organization of Life and Health Guaranty Associations (NOLHGA) to calculate its estimated assessments and tax credits. To the extent Medicare part D related premiums are included in the industry premiums within the latest NOLHGA annual report, the Company's assessments estimate will increase. Since this information is not available at this time, the Company cannot at this time estimate the extent of the increase, if any.

Guaranty fund assessments infor the ~~second and third quarters of 2017~~nine-month period ended September 30, 2019 were immaterial.


~~13.~~	~~SUBSEQUENT EVENTS~~

In October 2017, the Parent Company issued 60.0 billion yen of subordinated debentures through a public debt offering under its U.S. shelf registration statement. The debentures bear interest at an initial rate of 2.108% per annum through October 22, 2027, or earlier redemption. Thereafter, the rate of the interest of the debentures will be reset every five years at a rate of interest equal to the then-current JPY 5-year Swap Offered Rate plus 205 basis points. The debentures are payable semi-annually in arrears and have a 30-year maturity. The debentures are redeemable (i) at any time, in whole but not in part, upon the occurrence of certain tax events or certain rating agency events, as specified in the indenture governing the terms of the debentures or (ii) in 10 years, in whole or in part, at a redemption price equal to their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption.

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

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 included in the forward-looking statements. The Company desires 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 herein, and in any other statements made by Company officials in communications 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. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target,” "outlook"the following or similar words as well as specific projections of future results, generally qualify as forward-looking. ~~Aflac~~The Company undertakes no obligation to update such forward-looking statements.



• expect	• anticipate	• believe	• goal	• objective
• may	• should	• estimate	• intends	• projects
• will	• assumes	• potential	• target	• outlook

The Company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:

events related to the ongoing Japan Post investigation

difficult conditions in global capital markets and the economy

exposure to significant interest rate risk

concentration of business in Japan

foreign currency fluctuations in the yen/dollar exchange rate

~~failure~~limited availability of acceptable yen-denominated investments

U.S. tax audit risk related to ~~execute or implement the~~ conversion of the Japan branch to a ~~legal~~ subsidiary

~~limited availability of acceptable yen-denominated investments~~

deviations in actual experience from pricing and reserving assumptions

ability to continue to develop and implement improvements in information technology systems

~~governmental actions for~~competitive environment and ability to anticipate and respond to market trends

ability to protect the ~~purpose of stabilizing~~Aflac brand and the ~~financial markets~~Company's reputation

ability to attract and retain qualified sales associates, brokers, employees, and distribution partners

interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems

~~ongoing changes in the Company's industry~~

failure to comply with restrictions on patient privacy and information security

extensive regulation and changes in law or regulation by governmental authorities

tax rates applicable to the Company may change

defaults and credit downgrades of investments

~~ability to attract and retain qualified sales associates and employees~~

decline in creditworthiness of other financial institutions

significant valuation judgments in determination of amount of impairments taken on the Company's investments

subsidiaries' ability to pay dividends to ~~Aflac Incorporated~~the Parent Company

decreases in the Company's financial strength or debt ratings

inherent limitations to risk management policies and procedures

concentration of the Company's investments in any particular single-issuer or sector

differing judgments applied to investment valuations

ability to effectively manage key executive succession

~~significant valuation judgments in determination of amount of impairments taken on the Company's investments~~

catastrophic events including, but not necessarily limited to, epidemics, pandemics, tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, terrorism or other acts of ~~terrorism~~violence, and damage incidental to such events

changes in ~~U.S. and/or Japanese~~ accounting standards

~~loss of consumer trust resulting from events external to the Company's operations~~

increased expenses and reduced profitability resulting from changes in assumptions for pension and other postretirement benefit plans

level and outcome of litigation

~~failure~~allegations or determinations of ~~internal controls or corporate governance policies and procedures~~worker misclassification in the United States

MD&A OVERVIEW

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, the following discussion should be read in conjunction with the consolidated financial statements and notes that are included in the Company's annual report on Form 10-K for the year ended December 31, ~~2016 (2016~~2018 (2018 Annual Report). In this MD&A, amounts may not foot due to rounding. This MD&A is divided into the following sections:



	Page
The Company’s Business	72
Performance Highlights	72
Critical Accounting Estimates	73
Results of Operations	73
Insurance Operations	77
Analysis of Financial Condition	88
Capital Resources and Liquidity	96

~~The Company's Business~~

~~Performance Highlights~~

~~Critical Accounting Estimates~~

~~Results of Operations, consolidated and by segment~~

~~Analysis of Financial Condition~~

~~Capital Resources and Liquidity, including discussion of availability of capital and the sources and uses of cash~~

THE COMPANY'S BUSINESS

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States and Japan. The ~~Company’s~~Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac)~~, which operates~~ in the United States ~~(Aflac U.S.)~~ and, effective April 1, 2018, through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan. Prior to April 1, 2018, the Company's insurance business was marketed in Japan as a branch inof Aflac. (For more information about the conversion of Aflac Japan ~~(Aflac Japan)~~to a legal subsidiary, see the Insurance Operations subsection of this MD&A). The Company’s operations consist of two reportable business segments: Aflac U.S., which includes Aflac, and Aflac Japan, which includes ALIJ. American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac. Most of Aflac’s policies are individually underwritten and marketed through independent agents. Additionally, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. The Company's insurance operations in the United States and ~~its branch in~~ Japan service the two markets for ~~its~~the Company's insurance business.

PERFORMANCE HIGHLIGHTS

Yen-denominated income statement accounts are translated to U.S. dollars using a weighted-average Japanese yen/U.S. dollar foreign exchange rate, while yen-denominated balance sheet accounts are translated to U.S. dollars using a spot Japanese yen/U.S. dollar foreign exchange ~~rate.~~rate⁽¹⁾. The spot yen/dollar exchange rate at September 30, ~~2017~~2019 was ~~112.73,~~107.92, or ~~3.3%~~2.9% stronger than the the spot yen/dollar exchange rate of ~~116.49~~111.00 at December 31, ~~2016.~~2018. The weighted-average yen/dollar exchange rate for the three-month period ended September 30, ~~2017~~2019 was ~~111.03,~~107.31, or ~~7.8% weaker~~3.9% stronger than the weighted-average yen/dollar exchange rate of ~~102.37~~111.48 for the same period in ~~2016.~~2018. The weighted-average yen/dollar exchange rate for the nine-month period ended September 30, ~~2017~~2019 was ~~111.89,~~109.16, or ~~3.0% weaker~~.3% stronger than the weighted-average yen/dollar exchange rate of ~~108.58~~109.54 for the same period in ~~2016.~~2018.

~~Revenues~~Total revenues were $5.5 billion in the third quarter of ~~2017,~~2019, compared with ~~$5.7~~$5.6 billion in the third quarter of ~~2016.~~2018. Net earnings were ~~$716~~$777 million, or ~~$1.80~~$1.04 per diluted share in the third quarter of ~~2017,~~2019, compared with ~~$629~~$845 million, or ~~$1.53~~$1.09 per diluted share, in the third quarter of ~~2016. The increase in net earnings in the third quarter of 2017 primarily reflects realized investment gains compared with realized investment losses in the third quarter of 2016.~~2018.

~~Revenues~~Total revenues were ~~$16.2~~$16.7 billion in the first nine months of ~~2017,~~2019, compared with $16.6 billion in the first nine months of ~~2016. The decline in revenues was primarily driven by the change in the yen/dollar exchange rate as noted.~~2018. Net earnings were ~~$2.0~~$2.5 billion, or ~~$5.05~~$3.37 per diluted share in the first nine months of ~~2017,~~2019, compared with ~~$1.9~~$2.4 billion, or ~~$4.59~~$3.08 per diluted share, ~~for~~in the first nine months of ~~2016.~~2018.

⁽¹⁾Yen/U.S. dollar exchange rates are based on the published MUFG Bank, Ltd. telegraphic middle rate (TTM).

Results in the third quarter of ~~2017~~2019 included pretax net realized investment losses of $153 million, compared with net realized investment gains of ~~$30~~$56 million in the the third quarter of 2018. Net investment losses in the the third quarter of 2019 included $18 million of other-than-temporary impairment losses and changes in loan loss reserves; $125 million of net losses from certain derivative and foreign currency gains or losses; $18 million of net gains on equity securities; and $28 million of net losses from sales and redemptions in the third quarter of 2019.

Results in the first nine months of 2019 included pretax net realized investment losses of $147 million, compared with net realized investment losses of $164 million in the third quarter of 2016. Net investment gains in the third quarter of 2017 included $8 million of other-than-temporary impairment losses; $61 million of net gains from the sale or redemption of securities; and $23 million of net losses from derivatives and foreign currency gains (losses).

~~Results in the first nine months of 2017 included pretax net realized investment losses of $166 million, compared with net realized investment losses of $358~~$76 million in the first nine months of ~~2016.~~2018. Net investment losses in the first nine months of ~~2017~~2019 included ~~$27~~$21 million of other-than-temporary impairment losses and changes in loan loss reserves; $205 million in net losses from certain derivative and foreign currency gains or losses; ~~$60~~$65 million of net gains on equity securities; and $14 million of net gains from sales and redemptions in the ~~sale or redemption~~first nine months of ~~securities; and $199 million of net losses from derivatives and foreign currency gains (losses).~~2019.

In January 2017, the Parent Company issued 60.0 billion yen of senior notes through a U.S. public debt offering. In February 2017, the Parent Company extinguished $650 million of 2.65% senior notes upon their maturity. For further information regarding these transactions, see Note 8 of the Notes to the Consolidated Financial Statements and the Capital Resources and Liquidity section of this MD&A.

In the first nine months of ~~2017,~~2019, the Company repurchased ~~13.9~~23.1 million shares of its common stock ~~in the open market~~ for ~~$1.0~~$1.2 billion under its share repurchase program.

CRITICAL ACCOUNTING ESTIMATES

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In this MD&A, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards Codification^™ (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The estimates that the Company deems to be most critical to an understanding of Aflac’s results of operations and financial condition are those related to the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits and unpaid policy claims, and income taxes. The preparation and evaluation of these critical accounting estimates involve the use of various assumptions developed from management’s analyses and judgments. The application of these critical accounting estimates determines the values at which ~~93%~~94% of the Company's assets and ~~80%~~81% of its liabilities are reported as of September 30, ~~2017,~~2019, and thus has a direct effect on net earnings and shareholders’ equity. Subsequent experience or use of other assumptions could produce significantly different results.

There have been no changes in the items that the Company has identified as critical accounting estimates during the nine months ended September 30, ~~2017.~~2019. For additional information, see the Critical Accounting Estimates section of MD&A included in the ~~2016~~2018 Annual Report.

New Accounting Pronouncements

For information on new accounting pronouncements and the impact, if any, on the Company's financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following discussion includes references to the Company's performance measures, ~~operating~~adjusted earnings, ~~operating~~adjusted earnings per diluted share, and amortized hedge ~~costs,~~costs/income, which are not calculated in accordance with U.S. GAAP. These measures exclude items that the Company believes may obscure the underlying fundamentals and trends in the Company's insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with its insurance operations. The Company's management uses ~~operating~~adjusted earnings and ~~operating~~adjusted earnings per diluted share to evaluate the financial performance of its insurance operations on a consolidated basis, and the Company believes that a presentation of these measures is vitally important to an understanding of its underlying profitability drivers and trends of its insurance business. The Company believes that amortized hedge ~~costs,~~costs/income, which are a component of ~~operating~~adjusted earnings, measure the periodic currency risk management ~~costs associated with~~costs/income related to hedging ~~a portion of Aflac Japan’s U.S. dollar-denominated investments~~certain foreign currency exchange risks and are an important component of net investment income.

~~Aflac~~The Company defines ~~operating~~adjusted earnings (a non-U.S. GAAP financial measure) as the profits derived from operations. ~~Operating~~The most comparative U.S. GAAP measure is net earnings. Adjusted earnings ~~includes interest cash flows associated with notes payable~~are adjusted revenues less benefits and ~~amortized hedge costs related~~adjusted expenses. The adjustments to ~~foreign currency denominated investments, but excludes~~both revenues and expenses account for certain items that cannot be predicted or that are outside ~~of management's control, such as~~management’s control. Adjusted revenues are U.S. GAAP total revenues excluding realized investment gains and losses, ~~from securities transactions, impairments, change in loan loss reserves and certain derivative and~~except for amortized hedge costs/income related to foreign currency ~~activities;~~exposure management strategies and net interest cash flows from derivatives associated with certain investment strategies. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated

with notes payable but excluding any nonrecurring ~~items; and~~or other ~~non-operating income (loss) from net earnings. Nonrecurring and other non-operating~~ items ~~consist of infrequent events and activity~~ not associated with the normal course of the Company’s insurance operations and that do not reflect ~~Aflac’s~~the Company's underlying business performance.

The Company defines ~~operating~~adjusted earnings per share (basic or ~~dilutive)~~diluted) to be ~~operating~~adjusted earnings for the period divided by the weighted average outstanding shares (basic or ~~dilutive)~~diluted) for the period presented. The most comparable U.S. GAAP measure is net earnings per share.

Amortized hedge costs/income represent costs/income incurred or recognized in using foreign currency forward contracts to hedge certain foreign exchange risks in the Company's Japan segment (costs) or in the Corporate and Other segment (income). These amortized hedge costs/income are derived from the difference between the foreign currency spot rate at time of trade inception and the contractual foreign currency forward rate, recognized on a straight line basis over the term of the hedge. There is no comparable U.S. GAAP financial measure for amortized hedge costs/income.

Because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside of management’s control, the Company believes it is important to understand the impact of translating Japanese yen into U.S. dollars. ~~Operating~~Adjusted earnings and ~~operating~~adjusted earnings per diluted share excluding current period foreign currency impact are computed using the average yen/dollar exchange rate for the comparable prior year period, which

eliminates ~~dollar based~~ fluctuations driven solely ~~from~~by yen-to-dollar currency rate changes.

The following table is a reconciliation of items impacting ~~operating~~adjusted earnings and ~~operating~~adjusted earnings per diluted share to the most directly comparable U.S. GAAP measures of net earnings and net earnings per diluted share, respectively.

Reconciliation of Net Earnings to ~~Operating~~Adjusted Earnings⁽¹⁾

In Millions Per Diluted Share In Millions Per Diluted Share
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016 2017 2016 2017 2016
Net earnings $ 716
$ 629
$ 1.80
$ 1.53
$ 2,021
$ 1,908
$ 5.05
$ 4.59

Items impacting net earnings:
Realized investment (gains) losses:
Securities transactions and impairments (53 ) 37
(.13 ) .09
(33 ) (29 ) (.08 ) (.07 )
Certain derivative and foreign currency
(gains) losses ^(2),(3),(4)
(18 ) 93
(.05 ) .23
90
327
.22
.79

Other and non-recurring (income) loss ⁽⁴⁾
10
0
.03
.00
38
0
.09
.00

Income tax (benefit)
expense on items
excluded from operating
earnings^(2),(5)
21
(46 ) .05
(.11 ) (33 ) (104 ) (.08 ) (.25 )
Operating earnings 676
713
1.70
1.74
2,083
2,101
5.20
5.06

Current period foreign
currency impact ⁽⁶⁾
29
N/A
.07
N/A
31
N/A
.08
N/A

Operating earnings excluding
current period foreign
currency impact ⁽⁷⁾
$ 705
$ 713
$ 1.77
$ 1.74
$ 2,114
$ 2,101
$ 5.28
$ 5.06



	In Millions						Per Diluted Share						In Millions						Per Diluted Share
	Three Months Ended September 30,												Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Net earnings	$	777		$	845		$	1.04		$	1.09		$	2,523		$	2,395		$	3.37		$	3.08
Items impacting net earnings:
Realized investment (gains) losses ^{(2),(3),(4),(5)}	119			(88		)	.16			(.11		)	49			(25		)	.07			(.03		)
Other and non-recurring (income) loss	0			3			.00			.00			1			73			.00			.09
Income tax (benefit) expense on items excluded from adjusted earnings	(33		)	21			(.04		)	.03			(15		)	(7		)	(.02		)	(.01		)
Tax reform adjustment ⁽⁶⁾	0			11			.00			.01			0			11			.00			.01
Adjusted earnings	863			792			1.16			1.03			2,558			2,447			3.41			3.15
Current period foreign currency impact ⁽⁷⁾	(15		)	N/A			(.02		)	N/A			(2		)	N/A			.00			N/A
Adjusted earnings excluding current period foreign currency impact ⁽⁸⁾	$	848		$	792		$	1.14		$	1.03		$	2,556		$	2,447		$	3.41		$	3.15

⁽¹⁾ Amounts may not foot due to rounding.

⁽²⁾~~Excludes amortized~~Amortized hedge costs of ~~$60~~$66 and ~~$54~~$59 for the three-month periods and ~~$168~~$191 and ~~$123~~$168 for the nine-month periods ended September 30, ~~2017,~~2019, and ~~2016,~~2018, respectively, related to ~~hedging U.S. dollar-denominated investments held~~certain foreign currency exposure management strategies have been reclassified from realized investment gains (losses) and included in ~~Aflac Japan which are classified~~adjusted earnings as a ~~component of operating earnings~~decrease to ~~conform to current year reporting.~~net investment income. See "Hedge ~~Costs"~~Costs/Income" discussion below for further information.

⁽³⁾ ~~Excludes a gain~~ Amortized hedge income of ~~$19~~$21 and ~~$20~~$9 for the three-month periods and ~~$60~~$61 and ~~$64~~$18 for the nine-moth periods ended September 30, 2019 and 2018, respectively, related to certain foreign currency exposure management strategies have been reclassified from realized investment gains (losses) and included in adjusted earnings as an increase to net investment income. See "Hedge Costs/Income" discussion below for further information.

⁽⁴⁾ Net interest cash flows from derivatives associated with certain investment strategies of $(4) for the three-month period and $(18) for the nine-month period ended September 30, 2019, and an immaterial amount for the three- and nine-month periods in 2018, respectively, have been reclassified from realized investment gains (losses) and included in adjusted earnings as a component of net investment income.

⁽⁵⁾ A gain of $16 and $17 for the three-month periods and $50 for both the nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable ~~which is classified as an operating gain when analyzing segment operations~~

⁽⁴⁾ ~~Foreign currency gains (losses) for all periods~~ have been reclassified from ~~other income (loss) to~~ realized investment gains (losses) ~~- certain derivative~~ and ~~foreign currency gains (losses) for consistency with current~~included in adjusted earnings as a component of interest expense.

⁽⁶⁾An adjustment of $11 was made in the three- month period ~~presentation.~~ended September 30, 2018, as a result of return-to-provision adjustments and various amended returns filed by the Company.

⁽⁵⁾⁽⁷⁾ ~~Calculated using a 35% tax rate~~

⁽⁶⁾ Prior period foreign currency impact reflected as “N/A” to isolate change for current period only.

⁽⁷⁾⁽⁸⁾Amounts excluding current period foreign currency impact are computed using the average yen/dollar exchange rate for the comparable prior-year period, which eliminates ~~dollar-based~~ fluctuations driven solely ~~from~~by yen-to-dollar currency rate changes.

Realized Investment Gains and Losses

The Company's investment strategy is to invest primarily in ~~fixed-maturity~~fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s growth and profitability. This investment strategy incorporates asset-liability matching (ALM) to align the expected cash flows of the portfolio to the needs of the Company's liability structure. The Company does not purchase securities with the intent of generating capital gains or losses. However, investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers, tax planning strategies, and/or general portfolio management and rebalancing. The realization of investment gains and losses is independent of the underwriting and administration of the Company's insurance products. Realized investment gains and losses include securities transactions, impairments, changes in loan loss reserves, derivative and foreign currency activities and changes in fair value of equity securities.

Securities Transactions, Impairments, and ~~Impairments~~Gains (Losses) on Equity Securities

Securities transactions include gains and losses from sales and redemptions of investments where the amount received is different from the amortized cost of the investment. Impairments include other-than-temporary-impairment losses on investment securities as well as changes in loan loss reserves for loan receivables. Starting in the first quarter of 2018, gains and losses from changes in fair value of equity securities are recorded in earnings.

Certain Derivative and Foreign Currency Gains (Losses)

The Company's derivative activities include foreign currency forwards and options ~~interest rate swaptions and futures~~ on certain ~~fixed-maturity~~fixed maturity securities; foreign currency forwards and options that economically hedge certain portions of forecasted cash flows denominated in yen and hedge the Company's long-term exposure to a weakening yen; foreign currency swaps associated with certain senior notes and subordinated debentures; ~~and~~ foreign currency swaps and credit defaults swaps held in consolidated variable interest entities (VIEs).; interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments; and interest rate swaptions to hedge changes in the fair value associated with interest rate changes for certain dollar-denominated available-for-sale securities. Gains and losses are recognized as a result of valuing these derivatives, net of the effects of hedge accounting. The Company also ~~includes~~excludes the accounting impacts of remeasurement associated with changes in the yen/dollar exchange rate ~~as a non-operating item. Certain derivative and~~from adjusted earnings. Amortized hedge costs/income related to certain foreign currency exposure management strategies (see Amortized Hedge Cost/Income section below), and net interest cash flows from derivatives associated with certain investment strategies and notes payable are reclassified from realized investment gains (losses) ~~exclude amortized hedge costs (see~~and included in adjusted earnings.

Amortized Hedge ~~Cost section below) and the interest rate component of the change in fair value of foreign currency swaps on notes payable that are both classified as operating items.~~Costs/Income

~~Hedge Costs~~

~~Effective January 1, 2017, operating~~Adjusted earnings includes the impact of amortized hedge ~~costs.~~costs/income. Amortized hedge ~~costs~~costs/income represent ~~costs~~costs/income incurred or recognized in using foreign currency forward contracts to hedge ~~the~~certain foreign currency exchange ~~risk of a portion of U.S. dollar-denominated assets~~risks in the ~~Company's~~company's Japan segment ~~investment portfolio.~~(costs) or in the Corporate and Other segment (income). These amortized hedge ~~costs~~costs/income are derived from the difference between the foreign currency spot rate at time of trade inception and the contractual foreign currency forward rate, recognized on a straight line basis over the term of the hedge. There is no comparable U.S. GAAP financial measure for amortized hedge ~~costs. Prior year operating earnings have been revised to conform to this change. Beginning in 2016, the Company changed its non-U.S. GAAP reporting for these~~costs/income.

Amortized hedge costs by amortizing them evenly over the life of the foreign currency forward contracts. In 2016, the Company began increasing the duration of the foreign currency forward contracts used to hedge its U.S. dollar-denominated assets in Aflac Japan's investment portfolio to cover periods extending beyond one year. Therefore, recognizing these costs over the extended hedging periods provides a better measure of the Company's costs, and better reflects the economics of how hedge costs emerge over the life of the hedge. For additional information regarding the change in methodology for hedge costs, see the Hedge Costs subsection of MD&A in the 2016 Annual Report.

~~Hedge costs~~costs/income can fluctuate based upon many factors, including the derivative notional amount, the length of time of the derivative contract, changes in both U.S. and Japan interest rates, and supply and demand for dollar funding. ~~Hedge~~Amortized hedge costs and income have increased in recent periods due to changes in the previously mentioned factors. For additional information regarding foreign currency hedging, refer to Hedging Activities in the Analysis of Financial Condition section of this MD&A.

For additional information regarding realized investment gains and losses, including details of reported amounts for the periods presented, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements.

Other and Non-recurring Items

The United States insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. The system can result in periodic charges to the Company as a result of insolvencies/bankruptcies that occur with other companies in the life insurance industry. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. These charges neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance, but result from external situations not controlled by the Company.

~~Based on the underlying nature of these assessments, effective January 1, 2017, the~~ The Company ~~adopted a policy of excluding~~excludes any charges associated with U.S. guaranty fund assessments and the corresponding tax benefit or expense from ~~operating~~adjusted earnings.

~~For~~In Japan, the ~~Penn Treaty liquidation~~government also requires the insurance industry to contribute to a policyholder protection corporation that ~~was recognized by judicial authority~~provides funds for the policyholders of insolvent insurers; however, these costs are calculated and administered differently than in ~~March 2017,~~the United States. In Japan, these costs are not directly related to specific insolvencies or bankruptcies, but are rather a regular operational cost for an insurance company. Based on this structure, the Company estimated and recognized a discounted liability for assessments of $62 million (undiscounted $94 million), offset by discounted premium tax credits of $48 million (undiscounted $74 million), for a net $14 million impact to net income indoes not remove the quarter ended March 31, 2017. Guaranty fund assessments in the second and third quarters of 2017 were immaterial. For additional information regarding guaranty fund assessments, see Note 12 of the Notes to the Consolidated Financial Statements.Japan policyholder protection expenses from adjusted earnings.

~~Effective January 1, 2017, nonrecurring~~Nonrecurring items also include conversion costs related to legally converting the Company's Japan business to a subsidiary; these costs primarily consist of expenditures for legal, accounting, consulting, integration of systems and processes and other similar services. These Japan branch conversion costs ~~amounted to $10~~were an immaterial amount for 2019 and $3 million infor the three-month period and ~~$24~~$73 million for the nine-month period ended September 30, ~~2017.~~2018.

Foreign Currency Translation

Aflac Japan’s premiums and a significant portion of its investment income are received in yen, and its claims and most expenses are paid in yen. Aflac Japan purchases yen-denominated assets and U.S. dollar-denominated assets, which may be hedged to yen, to support yen-denominated policy liabilities. These and other yen-denominated financial statement items are, however, translated into dollars for financial reporting purposes. The Company translates Aflac Japan’s yen-denominated income statement into dollars using the average exchange rate for the reporting period, and the Company translates its yen-denominated balance sheet using the exchange rate at the end of the period.

Due to the size of Aflac Japan, whose functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on the Company's reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. ~~Because changes in exchange rates distort the Company's operating results when translated into dollars, management~~Management evaluates the Company's financial performance both including and excluding the impact of foreign currency ~~translation.~~translation to monitor, respectively, cumulative currency impacts on book value and the currency-neutral operating performance over time.

Income Taxes

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was ~~33.4%~~25.0% for the three-month period ended September 30, ~~2017,~~2019, compared with ~~34.7%~~26.3% for the same period in ~~2016. The decline in the quarterly tax rate was primarily due to the adoption of a new accounting standard related to stock compensation.~~2018. The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was ~~33.1%~~25.5% for the nine-month period ended September 30, ~~2017,~~2019, compared with ~~34.5%~~26.5% for the same period in ~~2016. The decline in the year-to-date~~2018. This combined effective tax rate ~~was~~differs from the U.S. statutory rate primarily due to ~~a $24 million favorable resolution~~foreign earnings taxed at different rates. For further information, see Critical Accounting Estimates - Income Taxes section of ~~uncertain tax positions related to tax years that closed~~the MD&A in ~~2017, in addition to benefits associated with filing amended tax returns and~~ the ~~adoption of new accounting guidance related to stock compensation.~~2018 Annual Report.

INSURANCE OPERATIONS

~~Aflac's insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan, which operates as a branch of Aflac, is the principal contributor to consolidated earnings.~~ U.S. GAAP financial reporting requires that a company report financial and descriptive information about operating segments in its annual and interim period financial statements. Furthermore, the Company is required to report a measure of segment profit or loss, certain revenue and expense items, and segment assets.

~~We evaluate~~ Aflac's insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan is the principal contributor to consolidated earnings. Businesses that are not individually reportable, such as the Parent Company, and business activities, including reinsurance retrocession activities, not included in Aflac Japan or Aflac U.S. are included in the Corporate and other segment. See the Item 1. Business section of the Company's 2018 Annual Report for a summary of each segment's products and distribution channels, and a discussion of the conversion of Aflac Japan from a branch to a subsidiary and the creation of asset management subsidiaries in 2018.

The Company evaluates its premium growth and sales efforts using ~~new annualized~~the following performance measures:

Annualized premiums in force is defined as the amount of gross premium ~~sales, an industry operating measure.~~ that a policyholder must pay over a full year in order to keep coverage. The growth of net premiums (defined below) is directly affected by the change in premiums in force and by the change in weighted-average yen/dollar exchange rates.

New annualized premium sales ~~which include both~~(sometimes referred to as new sales ~~and~~or sales) is an operating measure that is not reflected on the ~~incremental increase in~~Company's financial statements. New annualized premium sales generally represents annual premiums ~~due to conversions, generally represent the premiums that~~on policies the Company sold and incremental increases from policy conversions that would ~~collect~~be collected over a 12-month period assuming the policies remain in ~~force.~~force for that entire period. For Aflac Japan, new annualized premium sales are determined by applications submitted during the reporting period. For Aflac U.S., new annualized premium sales are determined by applications that are issued during the reporting period. ~~Premium~~Policy conversions are defined as the positive difference in the annualized premium when a policy upgrades in the current reporting period.

Net premiums (sometimes referred to as net premium income or net earned ~~premiums,~~premium) is a financial ~~performance~~ measure that appears on the Company's Consolidated Statement of Earnings and in segment reporting. This measure reflects collected or due premiums that have been earned ratably on policies in force during the reporting ~~period.~~period, reduced by premiums that have been ceded to third parties and increased by premiums assumed through reinsurance.

AFLAC JAPAN SEGMENT

Aflac Japan Pretax ~~Operating~~Adjusted Earnings

Changes in Aflac Japan’s pretax ~~operating~~adjusted earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency and investment yields. The following table presents a summary of operating results for Aflac Japan.

Aflac Japan Summary of Operating Results


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2017		2016		2017		2016		2019		2018		2019		2018
Net premium income	$	3,200	$	3,596	$	9,616	$	10,177	$	3,241	$	3,159	$	9,593	$	9,649
Net investment income:
Yen-denominated investment income	326		356		972		1,015		357		318		986		975
U.S. dollar-denominated investment income	295		305		872		910		368		347		1,083		994
Net investment income	621		661		1,844		1,925		725		665		2,069		1,969
Amortized hedge costs related to foreign currency denominated investments	60		54		168		123
Amortized hedge costs related to certain foreign currency exposure management strategies									66		59		191		168
Net investment income, less amortized hedge costs	561		607		1,676		1,802		659		606		1,878		1,801
Other income (loss)	11		10		31		29		12		10		34		31
Total operating revenues	3,772		4,213		11,323		12,008
Total adjusted revenues									3,912		3,775		11,505		11,481
Benefits and claims, net	2,300		2,603		6,859		7,341		2,268		2,232		6,652		6,763
Operating expenses:
Adjusted expenses:
Amortization of deferred policy acquisition costs	155		166		477		484		179		182		538		530
Insurance commissions	186		208		559		593		185		185		546		568
Insurance and other expenses	383		409		1,120		1,154		442		420		1,265		1,209
Total operating expenses	724		783		2,156		2,231
Total benefits and expenses	3,024		3,386		9,015		9,572
Pretax operating earnings⁽¹⁾	$	748	$	827	$	2,308	$	2,436
Total adjusted expenses									806		787		2,349		2,307
Total benefits and adjusted expenses									3,074		3,019		9,001		9,070
Pretax adjusted earnings									$	838	$	756	$	2,504	$	2,411
Weighted-average yen/dollar exchange rate	111.03		102.37		111.89		108.58		107.31		111.48		109.16		109.54

In Dollars In Yen
Percentage change over
previous period:
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016 2017 2016 2017 2016
Net premium income (11.0 )% 20.6 % (5.5 )% 12.6 % (3.5 )% 1.1 % (2.4 )% 1.0 %
Net investment income,
less amortized hedge
costs (7.6 ) 3.1
(7.0 ) 1.4
1.1
(14.1 ) (3.4 ) (9.4 )
Total operating revenues (10.5 ) 17.8
(5.7 ) 10.8
(2.8 ) (1.4 ) (2.5 ) (.7 )
Pretax operating
earnings⁽¹⁾
(9.6 ) 7.2
(5.3 ) 5.0
(1.3 ) (10.6 ) (1.8 ) (5.9 )

⁽¹⁾Aflac defines pretax operating earnings (a non-U.S. GAAP financial measure) as operating earnings before the application of income taxes. See the Results of Operations section of this MD&A for the Company's definition of operating earnings.



	In Dollars								In Yen
Percentage change over previous period:	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Percentage change over previous period:	2019		2018		2019		2018		2019		2018		2019		2018
Net premium income	2.6	%	(1.3	)%	(.6	)%	.3	%	(1.2	)%	(.9	)%	(1.0	)%	(1.8	)%
Net investment income, less amortized hedge costs	8.7		8.0		4.3		7.5		4.0		8.3		3.4		4.9
Total adjusted revenues	3.6		.1		.2		1.4		(.3	)	.4		(.3	)	(.8	)
Pretax adjusted earnings	10.8		1.1		3.9		4.5		6.1		1.4		3.2		2.0

In ~~yen terms,~~the three- and nine-month periods ended September 30, 2019, Aflac Japan's net premium income decreased, in ~~the three-month period ended September 30, 2017, with growth in third sector premium more than offset by~~yen terms, primarily due to an anticipated ~~reduction~~decrease in first sector premium ~~due to~~as savings products ~~reaching~~reached premium paid-up ~~status in the period.~~status. Net investment income, net of amortized hedge costs, increased ~~in the three-month period ended September 30, 2017,~~ primarily due to ~~the foreign currency impact~~$25 million of income related to a partial call of a concentrated yen-denominated exposure and increased investments in U.S. dollar-denominated ~~investments. The increases in net investment income from the strengthening U.S. dollar were partially offset by lower re-investment rates and increased amortized hedge costs.~~floating rate assets.

Annualized premiums in force decreased ~~3.7%~~2.2% to ~~1.56~~¥1.50 trillion ~~yen~~ as of September 30, ~~2017,~~2019, compared with ~~1.62~~¥1.53 trillion ~~yen~~ as of September 30, ~~2016.~~2018. The decrease in annualized premiums in force in yen was driven primarily by

limited-pay ~~policies becoming paid-up during the year.~~products reaching paid up status. Annualized premiums in force, translated into dollars at respective period-end exchange rates, were ~~$13.8~~$13.9 billion at September 30, ~~2017,~~2019, compared with ~~$16.0~~$13.5 billion a year ~~ago, reflecting the weaker yen to U.S. dollar exchange rate.~~ago.

Aflac Japan's investment portfolios include U.S. dollar-denominated securities and reverse-dual currency securities (yen-denominated debt securities with dollar coupon payments). In years when the yen strengthens in relation to the dollar, translating Aflac Japan's U.S. dollar-denominated investment income into yen lowers growth rates for net investment income, total ~~operating~~adjusted revenues, and pretax ~~operating~~adjusted earnings in yen terms. In years when the yen weakens, translating U.S. dollar-denominated investment income into yen magnifies growth rates for net investment income, total ~~operating~~adjusted revenues, and pretax ~~operating~~adjusted earnings in yen terms.

The following table illustrates the effect of translating Aflac Japan’s U.S. dollar-denominated investment income and related items into yen by comparing certain segment results with those that would have been reported had ~~yen/dollar~~dollar/yen exchange rates remained unchanged from the comparable period in the prior year. ~~In order to compare the current period to the prior period without the impact of~~Amounts excluding foreign currency impact on U.S. dollar denominated investment income were determined using the ~~current period income statement is translated at~~average dollar/yen exchange rate for the comparable prior ~~year's comparable period average exchange rate.~~year period.

Aflac Japan Percentage Changes Over Previous Period

(Yen Operating Results)

For the Periods Ended September 30,,

Including Foreign
Currency Changes
Excluding Foreign
Currency Changes⁽²⁾
Three Months Nine Months Three Months Nine Months

2017
2016
2017
2016 2017 2016 2017 2016

Net investment income, less
amortized hedge costs 1.1
% (14.1 ) % (3.4 ) % (9.4 ) % (3.2 ) % (5.8 ) % (4.9 ) % (4.2 ) %
Total operating revenues (2.8 ) (1.4 ) (2.5 ) (.7 ) (3.4 ) .0
(2.8 ) .2

Pretax operating earnings⁽¹⁾
(1.3 ) (10.6 ) (1.8 ) (5.9 ) (4.4 ) (4.4 ) (2.9 ) (2.1 )



	Including Foreign Currency Changes											Excluding Foreign Currency Changes⁽¹⁾
	Three Months					Nine Months						Three Months				Nine Months
	2019			2018		2019			2018			2019		2018		2019		2018
Net investment income, less amortized hedge costs	4.0		%	8.3	%	3.4		%	4.9		%	6.1	%	8.1	%	3.6		6.1		%
Total adjusted revenues	(.3	)		.4		(.3	)		(.8	)		.0		.4		(.2	)	(.6	)
Pretax adjusted earnings	6.1			1.4		3.2			2.0			7.8		1.3		3.4		2.8

⁽²⁾Amounts excluding foreign currency impact on U.S. dollar-denominated ~~items~~investment income (a non-U.S. GAAP financial measure) were determined using the same yen/dollar exchange rate for the current period as the comparable period in the prior year.

The following table presents a summary of operating ratios in yen terms for Aflac Japan.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Ratios to total revenues:	2017		2016		2017		2016
Ratios to total adjusted revenues:									2019		2018		2019		2018
Benefits and claims, net	60.9	%	61.9	%	60.5	%	61.1	%	58.0	%	59.1	%	57.8	%	58.9	%
Operating expenses:
Adjusted expenses:
Amortization of deferred policy acquisition costs	4.1		3.9		4.2		4.0		4.6		4.8		4.7		4.6
Insurance commissions	4.9		4.9		4.9		4.9		4.7		4.9		4.8		5.0
Insurance and other expenses	10.1		9.7		9.9		9.7		11.3		11.1		11.0		10.5
Total operating expenses	19.2		18.5		19.0		18.6
Pretax operating earnings⁽¹⁾	19.9		19.6		20.4		20.3
Total adjusted expenses									20.6		20.8		20.4		20.1
Pretax adjusted earnings									21.4		20.1		21.7		21.0
Ratios to total premiums:
Benefits and claims, net									70.0	%	70.7	%	69.3	%	70.1	%
Adjusted expenses:
Amortization of deferred policy acquisition costs									5.5		5.7		5.6		5.5

In the three- and nine-month periods ended September 30, ~~2017,~~2019, the benefit ratio decreased, compared with the same respective periods in the prior year, primarily due to the continued change in mix of first and third sector business as first sector products become paid-up, ~~and a de-emphasis on first sector savings products,~~ as well as continued favorable claims ~~experience.~~trends for the Company's third sector products in Japan. In the ~~three- and nine-month periods~~three-month period ended September 30, ~~2017,~~2019, the ~~operating~~adjusted expense ratio decreased mainly due to lower DAC amortization caused by lower surrender for cancer products. However, in the nine-month period ended September 30, 2019, the adjusted expense ratio increased ~~primarily~~mainly due to lower premium income ~~impacted by~~from paid-up first sector products ~~becoming paid-up, however~~and higher expenses ~~incurred remained consistent.~~for advanced technology implementation. In total, the pretax ~~operating~~adjusted profit margin

(calculated by dividing adjusted earnings by adjusted revenues) increased in the three- and nine-month periods ended September 30, ~~2017,~~2019, reflecting ~~the decrease~~continued strength in ~~the~~ benefit ~~ratio partially offset by a smaller increase in the expense~~

~~ratio.~~ratios and favorable net investment income. For the full year of ~~2017,~~2019, the Company anticipates the Aflac Japan pretax ~~operating~~adjusted profit margin ~~(calculated by dividing operating earnings by operating revenues)~~ to ~~be comparable to 2016 levels.~~remain stable.

Aflac Japan Sales

The following table presents Aflac Japan’s new annualized premium sales for the periods ended September 30.


	In Dollars												In Yen								In Dollars												In Yen
	Three Months						Nine Months						Three Months				Nine Months				Three Months						Nine Months						Three Months						Nine Months
(In millions of dollars and billions of yen)	2017			2016			2017			2016			2017		2016		2017		2016		2019			2018			2019			2018			2019			2018			2019			2018
New annualized premium sales	$	214		$	259		$	637		$	809		23.7		26.5		71.2		87.9		$	172		$	212		$	560		$	655		¥	18.5		¥	23.6		¥	61.2		¥	71.7
Increase (decrease) over prior period	(17.3		)%	(.1		)%	(21.3		)%	9.8		%	(10.5	)%	(16.2	)%	(19.0	)%	(1.4	)%	(18.7		)%	(1.0		)%	(14.4		)%	2.8		%	(21.5		)%	(.7		)%	(14.7		)%	.7		%

The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the periods ended September 30.


	Three Months				Nine Months				Three Months				Nine Months
	2017		2016		2017		2016		2019		2018		2019		2018
Cancer	58.2	%	52.9	%	54.9	%	44.3	%	52.2	%	65.8	%	59.5	%	65.6	%
Medical	32.9		26.2		35.0		25.7		37.5		23.6		30.9		25.5
Income support									1.2		1.9		1.2		1.8
Ordinary life:
WAYS	.4		5.7		.6		15.3		.5		.4		.5		.5
Other ordinary life	5.1		6.4		6.0		5.9
Child endowment	.4		4.5		.6		6.3		.3		.3		.2		.3
Income support	2.5		.0		2.2		.0
Other ordinary life ⁽¹⁾									7.8		7.5		7.2		5.8
Other	.5		4.3		.7		2.5		.5		.5		.5		.5
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

⁽¹⁾Includes term and whole life

The foundation of Aflac Japan's product portfolio has been, and continues to be, third sector products, which include cancer, medical and ~~Income Support~~income support insurance products. ~~Sales of third sector products on a yen basis increased 2.1% during the third quarter and increased 5.0% in the first nine months of 2017, compared with the same respective periods in 2016.~~ Aflac Japan has been focusing more on promotion of cancer and medical insurance products in this low-interest-rate environment. These products are less interest-rate sensitive and more profitable compared to first sector savings products. With continued cost pressure on Japan’s health care system, the Company expects the need for third sector products will continue to rise in the future and that the medical and cancer insurance products Aflac Japan provides will continue to be an important part of its product portfolio.

~~As a result~~Sales of ~~the interest rate policy in Japan, Aflac Japan has taken significant actions to limit its sales of certain~~protection-type first sector and third sector products ~~including WAYS and child endowment. Those actions gained traction in mid-2016, and as~~on a ~~result first sector product sales were down 66.7%~~yen basis decreased 21.5% in the third quarter of ~~2017,~~2019 and decreased 14.5% in the first nine months of 2019, compared with the same ~~period~~respective periods in 2018, reflecting reduced sales of cancer insurance through the Japan Post channel and following the 2018 launch of Aflac Japan's revised cancer insurance product.

Based on a material decline in sales of Aflac Japan cancer products in the ~~prior year. The Company expects that~~Japan Post channel during the period ended September 30, 2019, and assuming a continuation of these trends to date for the ~~remainder~~rest of ~~2017,~~the year, the Company anticipates that sales during calendar year 2019 in the Japan Post channel may decline by as much as 50% from calendar year 2018. Based on this ~~deliberate trend will continue, and Aflac Japan's focus will remain on less interest-sensitive~~same assumption, the Company anticipates this would result in total third sector ~~products.~~and first sector protection sales down in the mid-teens for calendar year 2019. Based on Aflac Japan’s observation of normal retention levels, the Company continues to project protection-type first and third sector earned premium growth of 1% to 2% for calendar year 2019.

Independent corporate agencies and individual agencies contributed ~~39.9%~~48.1% of total new annualized premium sales for Aflac Japan in the third quarter of ~~2017,~~2019, compared with ~~43.0%~~38.7% for the same period in ~~2016.~~2018. Affiliated corporate agencies, which include Japan Post, contributed ~~53.3%~~46.3% of total new annualized premium sales in the third quarter of ~~2017,~~2019, compared with ~~50.1%~~55.3% in the third quarter of ~~2016.~~2018. Japan Post offers Aflac's cancer insurance products in more than 20,000 post offices. ~~The~~Notwithstanding the recent reduction in sales of Aflac Japan's cancer products in the Japan Post channel, the Company believes this alliance with Japan Post has and will further benefit its cancer insurance sales. During the three-month period ended September 30, ~~2017,~~2019, Aflac Japan recruited 3824 new sales agencies. At

September 30, ~~2017,~~2019, Aflac Japan was represented by more than ~~11,200~~9,200 sales agencies, ~~and~~with more than ~~107,000~~109,000 licensed sales associates employed by those agencies.

At September 30, ~~2017,~~2019, Aflac Japan had agreements to sell its products at ~~374~~367 banks, approximately 90% of the total number of banks in Japan. Bank channel sales accounted for ~~6.8%~~5.6% of new annualized premium sales in the third quarter of ~~2017~~2019 for Aflac Japan, compared with ~~6.9%~~6.0% during the third quarter of ~~2016.~~2018.

Strategic Alliance with Japan Post Holdings

On December 19, 2018, the Parent Company and Aflac Japan entered into a Basic Agreement with Japan Post Holdings Co., Ltd., a Japanese corporation (Japan Post Holdings). Pursuant to the terms of the Basic Agreement, Japan Post Holdings agreed to form a capital relationship with the Parent Company, and Japan Post Holdings and Aflac Japan agreed to reconfirm existing initiatives regarding cancer insurance and to consider new joint initiatives, including leveraging digital technology in various processes, cooperation in new product development to promote customer-centric business management, cooperation in domestic and/or overseas business expansion and joint investment in third party entities and cooperation regarding asset management.

On February 28, 2019, the Parent Company entered a Shareholders Agreement with Japan Post Holdings, J&A Alliance Holdings Corporation, a Delaware corporation, solely in its capacity as trustee of J&A Alliance Trust, a New York voting trust (Trust), and General Incorporated Association J&A Alliance, a Japanese general incorporated association. Pursuant to the terms of the Shareholders Agreement, the Trust will use commercially reasonable efforts to acquire, through open market or private block purchases in the United States, beneficial ownership of approximately 7% of the outstanding shares of the Parent Company’s common stock within a period of 12 months following the date the Trust begins acquiring such stock. On May 7, 2019, a press release issued by Japan Post Holdings announced that purchases of shares of the Parent Company’s common stock commenced on April 29, 2019 through the Trust and that it planned to complete such purchases within Japan Post’s fiscal year 2019 (which ends March 31, 2020).

The Trust has agreed not to own more than 10% of the Parent Company’s outstanding shares for a period expiring on the earlier of four years after the Trust acquires 7% of such shares, five years after it acquires 5% of such shares, or ten years after the Trust begins acquiring the Parent Company’s stock. After expiration of such period, the Trust has agreed not to own more than the greater of 10% of the Parent Company’s outstanding shares or such shares representing 22.5% of the voting rights in the Parent Company.

In light of the fact that the shares acquired by the Trust, like all Aflac Incorporated common shares, will be eligible for 10-for-1 voting rights after being held for 48 consecutive months, the Shareholders Agreement further provides for voting restrictions that effectively limit the trustee’s voting rights to no more than 20% of the voting rights in the Parent Company and further restrict the trustee’s voting rights with respect to certain change in control transactions. Japan Post Holdings will not have a Board seat on the Parent Company’s Board of Directors and will not have rights to control, manage or intervene in the management of the Parent Company.

This strategic investment is subject to certain regulatory approvals in Japan and the U.S. The Company anticipates that regulatory approvals will be received in the second half of 2019.

Aflac Japan Investments

The level of investment income in yen is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, the effect of yen/dollar exchange rates on U.S. dollar-denominated investment income, and other factors.

As part of the Company's portfolio management and asset allocation process, Aflac Japan invests in yen and U.S. dollar-denominated investments. Yen-denominated investments primarily consist of JGBs and public and private fixed maturity securities. Aflac Japan's U.S. dollar-denominated investments ~~fixed-maturity~~include fixed maturity investments and growth assets, including public ~~equities~~equity securities and alternative investments in limited partnerships or similar investment vehicles. Aflac Japan has been investing in both publicly-traded and privately originated U.S. dollar-denominated investment-grade and below-investment-grade ~~fixed-maturity~~fixed maturity securities and ~~loans,~~loan receivables, and has entered into foreign currency forwards and options to hedge the currency risk on the fair value of a portion of the U.S. dollar investments.

The following table details the investment purchases for Aflac Japan.

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Yen-denominated:
  Fixed maturities:
     Japan government and agencies $ 212
$ 125
$ 3,439
$ 2,395

     Other fixed maturities 359
128
1,268
279

  Equities ⁽¹⁾
21
65
173
257

        Total yen-denominated $ 592
$ 318
$ 4,880
$ 2,931

U.S. dollar-denominated:
  Fixed maturities:
     Other fixed maturities $ 138
$ 9
$ 219
$ 602

     Infrastructure debt 40
0
134
0

     Bank loans ⁽²⁾
0
0
0
535

  Equities ⁽¹⁾
2
0
153
504

  Other investments:
     Middle market loans 186
8
437
8

     Commercial mortgage loans 85
⁽³⁾
329
279
⁽³⁾
512

     Limited partnerships 24
0
65
0

        Total dollar-denominated $ 475
$ 346
$ 1,287
$ 2,161

            Total Aflac Japan purchases $ 1,067
$ 664
$ 6,167
$ 5,092

⁽¹⁾~~Primarily rebalancing activity in 2017 and includes rebalancing activity in 2016~~

⁽²⁾~~Represents funding made to unit trust structures~~

⁽³⁾ ~~Includes $85 and $231 of transitional real estate (TRE) loans for the three- and nine-month periods ended September 30, 2017, respectively.~~

Aflac Japan's yen-denominated private placement portfolio had declined over the last several years as a result of call and maturity activity and no reinvestment activity. However, beginning in 2016 and continuing into 2017, Aflac Japan began to selectively purchase yen-denominated private placements. In the first nine months of 2017, Aflac Japan purchased $886 million of yen-denominated private placements, after purchasing $268 million for the full year of 2016.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Yen-denominated:
Fixed maturity securities:
Japan government and agencies	$	0	$	42	$	583	$	3,441
Private placements	92		547		985		1,098
Other fixed maturity securities	168		174		524		657
Equity securities	79		110		199		216
Total yen-denominated	$	339	$	873	$	2,291	$	5,412

U.S. dollar-denominated:
Fixed maturity securities:
Other fixed maturity securities	$	738	$	114	$	2,260	$	1,152
Infrastructure debt	10		0		20		0
Bank loans	0		0		0		346
Equity securities	29		0		58		80
Commercial mortgage and other loans:
Transitional real estate loans	398		610		1,069		2,759
Commercial mortgage loans	197		0		235		13
Middle market loans	274		352		962		627
Other investments	19		29		92		201
Total dollar-denominated	$	1,665	$	1,105	$	4,696	$	5,178
Total Aflac Japan purchases	$	2,004	$	1,978	$	6,987	$	10,590

See the Analysis of Financial Condition section of this MD&A for further discussion of these investment programs, and see Notes 3 and 4 of the Notes to the Consolidated Financial Statements and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for more information regarding loans and loan receivables.

The following table presents the results of Aflac Japan’s investment yields for the periods ended September 30.


	Three Months						Nine Months						Three Months						Nine Months
	2017			2016			2017			2016			2019			2018			2019			2018
Total purchases for the period (in millions) ⁽¹⁾	$	1,043		$	664		$	6,102		$	5,092		$	1,985		$	1,949		$	6,895		$	10,389
New money yield ^{(1), (2)}	3.02		%	2.22		%	1.79		%	1.96		%	3.98		%	3.77		%	3.64		%	3.01		%
Return on average invested assets ⁽³⁾	2.29			2.38			2.31			2.55			2.40			2.35			2.34			2.31
Portfolio book yield, including U.S. dollar-denominated investments, end of period ⁽¹⁾	2.55		%	2.71		%	2.55		%	2.71		%	2.62		%	2.63		%	2.62		%	2.63		%

⁽¹⁾Includes fixed ~~maturities~~maturity securities, commercial mortgage and ~~perpetual~~other loans, equity securities, ~~loan receivables, equities,~~ and excludes alternative investments in limited partnerships

⁽²⁾Reported on a gross yield basis; excludes investment expenses, external management fees, and amortized hedge costs

⁽³⁾Net of investment expenses and amortized hedge costs, year-to-date number reflected on a quarterly average basis

On January 1, 2016, the company revised its definition of purchases to include the reinvestment of proceeds related to unplanned sale activity. New purchases include all purchases related to fixed maturities and perpetuals, loan receivables, and equities. Securities lending/repurchase agreement activity and capital contributions to alternatives are excluded. The definition of new money yield has also been revised to reflect this change. Yields for equities are based on the assumed dividend yield at the time of purchase.

The increase in the Aflac Japan new money yield in the ~~three-month period~~three- and nine-month periods ended September 30, ~~2017~~2019 was primarily due to ~~increases in U.S. and Japan interest rates, compared with the same period in 2016, and increased~~decreased allocations to ~~higher-yielding U.S. dollar-denominated~~lower yielding yen-denominated asset classes. The decrease in the Aflac Japan new money yield in the nine-month period ended September 30, 2017 was primarily due to the increased allocation to Japan Government Bonds (JGBs) and other high quality yen-denominated investments.

See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the Analysis of Financial Condition section of this MD&A for additional information on the Company's investments and hedging strategies.

AFLAC U.S. SEGMENT

Aflac U.S. Pretax ~~Operating~~Adjusted Earnings

Changes in Aflac U.S. pretax ~~operating~~adjusted earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency and investment yields. The following table presents a summary of operating results for Aflac U.S.

Aflac U.S. Summary of Operating Results

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Net premium income $ 1,393
$ 1,365
$ 4,172
$ 4,093

Net investment income 181
176
539
526

Other income 1
1
3
5

Total operating revenues 1,575
1,542
4,714
4,624

Benefits and claims 731
715
2,156
2,148

Operating expenses:
Amortization of deferred policy acquisition costs 116
116
371
373

Insurance commissions 146
145
436
439

Insurance and other expenses 266
243
795
718

Total operating expenses 528
504
1,602
1,530

Total benefits and expenses 1,259
1,219
3,758
3,678

             Pretax operating earnings⁽¹⁾
$ 316
$ 323
$ 956
$ 946

Percentage change over previous period:
Net premium income 2.1
% 1.4
% 1.9
% 1.9
%
Net investment income 2.8
1.7
2.5
3.7

Total operating revenues 2.1
1.4
1.9
2.1

  Pretax operating earnings⁽¹⁾
(2.2 ) 12.4
1.1
9.5



	Three Months Ended September 30,							Nine Months Ended September 30,
(In millions)	2019				2018			2019				2018
Net premium income	$	1,445			$	1,426		$	4,365			$	4,280
Net investment income	183				187			540				544
Other income	2				3			6				7
Total adjusted revenues	1,630				1,616			4,911				4,831
Benefits and claims	710				722			2,162				2,163
Adjusted expenses:
Amortization of deferred policy acquisition costs	139				133			429				402
Insurance commissions	145				146			444				439
Insurance and other expenses	301				281			880				816
Total adjusted expenses	585				560			1,753				1,657
Total benefits and adjusted expenses	1,295				1,282			3,915				3,820
Pretax adjusted earnings	$	335			$	334		$	996			$	1,011
Percentage change over previous period:
Net premium income	1.3			%	2.4		%	2.0			%	2.6		%
Net investment income	(2.1		)		3.3			(.7		)		.9
Total adjusted revenues	.9				2.6			1.7				2.5
Pretax adjusted earnings	.3				5.7			(1.5		)		5.8

Annualized premiums in force increased ~~2.6%~~1.5% to ~~$5.9~~$6.1 billion at September 30, ~~2017,~~2019, compared with ~~$5.8~~$6.1 billion at September 30, ~~2016, reflecting improving sales and persistency.~~2018.

The following table presents a summary of operating ratios for Aflac U.S.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Ratios to total revenues:	2017		2016		2017		2016
Ratios to total adjusted revenues:									2019		2018		2019		2018
Benefits and claims	46.4	%	46.4	%	45.7	%	46.5	%	43.6	%	44.7	%	44.0	%	44.8	%
Operating expenses:
Adjusted expenses:
Amortization of deferred policy acquisition costs	7.4		7.5		7.9		8.1		8.5		8.2		8.7		8.3
Insurance commissions	9.3		9.4		9.2		9.5		8.9		9.0		9.0		9.1
Insurance and other expenses	16.9		15.8		16.9		15.4		18.5		17.5		17.9		16.9
Total operating expenses	33.5		32.7		34.0		33.0
Pretax operating earnings⁽¹⁾	20.1		20.9		20.3		20.5
Total adjusted expenses									35.9		34.7		35.7		34.3
Pretax adjusted earnings									20.6		20.7		20.3		20.9
Ratios to total premiums:
Benefits and claims									49.1	%	50.6	%	49.5	%	50.5	%
Adjusted expenses:
Amortization of deferred policy acquisition costs									9.6		9.3		9.8		9.4

The benefit ratio in the three-month period ended September 30, 2017 was consistent with the same period in 2016. The benefit ratio in the nine-month period ended September 30, 2017 decreased slightly, compared with the same period in 2016. For the three- and nine-month periods ended September 30, ~~2017,~~2019, the ~~operating~~benefit ratio decreased compared with the same periods in 2018, primarily due to the change in business mix from higher loss ratio, reserve building products to

lower loss ratio, guaranteed issue products. The adjusted expense ratio was somewhat elevated compared to 2016, reflecting larger investment in the Aflac U.S. platform. The higher expenses are partially offset by decreasing amortization and commission expense ratios. Therefore, the pretax operating profit margin (calculated by dividing operating earnings by operating revenues) decreased slightlyincreased for the three- and nine-month periods ended September 30, ~~2017,~~2019, when compared ~~with~~to the same periods in ~~2016. For the full year of 2017, the Company expects the Aflac U.S. benefit ratio~~2018, primarily due to ~~be slightly~~DAC capitalization related to lower than ~~full year 2016, while expense~~anticipated sales as well as anticipated spending increases reflecting ongoing investments in the U.S. platform, distribution, and customer experience. Both the lower benefit and higher DAC amortization ratios were also impacted by increases in lapses as a result of large case volatility and replacement of an administrative partner. These items impacted persistency in the short-term but are expected to ~~increase marginally as Aflac U.S. continues~~drive profitable earned premium growth in future periods. The pretax adjusted profit margin declined in the three- and nine- month periods, when compared to ~~invest~~the same periods in ~~its platform and shift some of its costs from commissions~~2018, due to ~~insurance expenses.~~higher expense ratios, offset somewhat by lower benefit ratios.

Aflac U.S. Sales

The following table presents Aflac's U.S. new annualized premium sales for the periods ended September 30.30.


	Three Months							Nine Months						Three Months							Nine Months
(In millions)	2017			2016				2017			2016			2019				2018			2019				2018
New annualized premium sales	$	348		$	324			$	1,037		$	999		$	344			$	359		$	1,046			$	1,064
Increase (decrease) over prior period	7.5		%	(1.8		)	%	3.8		%	.9		%	(4.2		)	%	3.3		%	(1.6		)	%	2.6		%

~~The increase in sales in the three-month and nine-month periods ended September 30, 2017, was driven by increases in both career and broker channels.~~

The following table details the contributions to Aflac's U.S. new annualized premium sales by major insurance product category for the periods ended September 30.


	Three Months				Nine Months				Three Months				Nine Months
	2017		2016		2017		2016		2019		2018		2019		2018
Income-loss protection:
Accident									29.0	%	29.7	%	28.8	%	29.5	%
Short-term disability	23.6	%	25.0	%	24.1	%	23.9	%	22.6		23.3		23.3		23.3
Life	5.5		5.4		5.4		5.5
Asset-loss protection:
Accident	29.9		29.9		29.6		30.0
Critical care⁽¹⁾	21.8		19.9		21.2		20.9		20.9		20.6		20.6		21.1
Supplemental medical:
Hospital indemnity	14.1		14.1		14.0		14.1		16.1		15.6		15.8		15.2
Dental/vision	5.1		5.7		5.7		5.6		5.0		5.0		5.0		5.3
Life									6.4		5.8		6.5		5.6
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

⁽¹⁾Includes cancer, critical illness, and hospital intensive care products

New annualized premium sales for accident insurance, the leading Aflac U.S. ~~leading~~ product category, ~~increased 7.5%~~decreased 6.3%; short-term disability sales ~~increased 1.2%~~decreased 7.4%; critical care insurance sales (including cancer insurance) ~~increased 17.1%~~decreased 2.3%; and hospital indemnity insurance sales ~~increased 7.3%~~decreased .4% in the third quarter of ~~2017,~~2019, compared with the same period in ~~2016.~~2018.

The addition of group products has expanded Aflac U.S.'s reach and enabled Aflac U.S. to generate more sales opportunities with larger employers and through broker and ~~traditional~~ sales agent channels. The Company anticipates that the appeal of Aflac U.S. group products will continue to enhance opportunities to connect with larger businesses and their employees. The Aflac U.S. portfolio of group and individual products offers businesses the opportunity to give their employees a more valuable and comprehensive selection of benefit options.

In the third quarter of ~~2017,~~2019, the Aflac U.S. sales force included an average of approximately ~~8,500~~8,000 U.S. agents, including brokers, who were actively producing business on a weekly basis. The Company believes that this ~~metric, the~~ average weekly producer equivalent metric allows sales management to monitor progress and needs.

One Day Pay^SMis a claims initiative that ~~we have~~Aflac U.S. has focused on ~~at Aflac U.S.~~ to process, approve and pay eligible claims in just one day. The Company believes that this claims practice enhances the Aflac U.S. brand reputation and the trust policyholders have in Aflac, and it helps Aflac stand out from competitors.

Aflac U.S. products provide cash benefits that can be used to help with increasing out-of-pocket medical expenses, help cover household costs, or protect against income and asset loss. Group products and relationships with insurance brokers that handle the larger-case market are helping Aflac U.S. expand its reach by selling to larger businesses. Aflac U.S. is regularly evaluating the marketplace to identify opportunities to bring the most relevant, cost-effective products to customers. The Company believes the need for its products remains very strong, and Aflac U.S. continues to work on enhancing its distribution capabilities to access employers of all sizes, including initiatives that benefit the field force and

the broker community. At the same time, the Company is seeking opportunities to leverage its brand strength and attractive product portfolio in the evolving health care environment.

In July 2019, the Company entered into an agreement to acquire Argus Holdings, LLC and its subsidiary Argus Dental & Vision, Inc., a benefits management organization and national network dental and vision company. This transaction represents a commitment of $75 million in capital at closing and an additional $21 million in consideration paid over three years based on achieving certain performance targets. The transaction is subject to regulatory approval and other closing conditions. Tampa, Florida will serve as the home for the Aflac U.S. Network Dental and Vision platform. This acquisition is expected to provide opportunities for sales growth, improved account penetration and distribution productivity.

U.S. Regulatory Environment

Healthcare Reform Legislation

The Affordable Care Act (ACA), federal health care legislation, was intended to give Americans of all ages and income levels access to comprehensive major medical health insurance and gave the U.S. federal government direct regulatory authority over the business of health insurance. While the ACA was enacted in 2010, the major elements of the law became effective on January 1, 2014. The ACA included major changes to the U.S. health care insurance marketplace. Among other changes, the ACA included an individual medical insurance coverage mandate (the monetary penalty for noncompliance with which has since been repealed effective 2019 by the Tax Cuts and Jobs Act (Tax Act)), provided for penalties on certain employers for failing to provide adequate coverage, created health insurance exchanges, and addressed coverage and exclusions as well as medical loss ratios. It also imposed an excise tax on certain high cost plans, known as the “Cadillac tax,” that is currently scheduled to begin in ~~2020.~~2022. The ACA also included changes in government reimbursements and tax credits for individuals and employers and altered federal and state regulation of health insurers. ~~While the ACA was enacted in 2010, the major elements of the law became effective on January 1, 2014.~~ The ACA, as enacted, does not require material changes in the design of the Company's insurance products. However, indirect consequences of the legislation and regulations could present challenges ~~and/or opportunities~~ that could potentially have an impact on the Company's sales model, financial condition and results of operations. ~~The United States~~Members of Congress ~~has considered and may~~ continue to consider legislation that would repeal and replace key provisions of the ACA. There can be no assurance that any legislation affecting the ACA will be passed by Congress, nor as to the ultimate timing or provisions of any such legislation, nor as to the effect of any such legislation on the design or marketability of the Company's insurance products. Further, certain provisions of the ACA have been and may continue to be subject to challenge through litigation, the ultimate effects of which on the ACA are uncertain.

While the current U.S. presidential administration has pursued a stated policy of attempting to create more competition in the marketplace through executive orders and rule making, it is unclear what impact these will have on the U.S. healthcare market, nor is it known whether proposed or final rules will be challenged or withstand judicial scrutiny. The President ~~Trump~~ signed an Executive Order in October 2017 directing federal regulatory agencies to review and modify certain regulations issued under the ACA. The stated objectives of the Executive Order are to increase competition and consumer choices in health care markets, and to lower costs for health care, by making association health plans available to more employers, allowing employers to make better use of health reimbursement arrangements, and expanding coverage through short-term insurance. The Executive Order tasks three federal agencies, the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) with reviewing current rules and developing guidance to implement the order. ~~While the details of any~~These agencies have since proposed ~~modifications will~~or finalized certain rules and guidance, although their ultimate impact on healthcare markets is not be known, ~~until further action by the agencies,~~ the Company ~~anticipates~~continues to anticipate that the Executive Order will not have a significant impact on the availability or marketability of its products. The U.S. Department of Justice recently indicated its support for a previous U.S. district court ruling that the individual mandate is unconstitutional and that the remainder of the ACA is invalid.

Tax Reform Legislation

The Tax Act was signed into law on December 22, 2017. Among other things, effective January 1, 2018, the Tax Act reduced the U.S. federal statutory corporate income tax rate from 35% to 21%, eliminated or reduced certain deductions and credits and limited the deductibility of interest expense and executive compensation.

The Tax Act also transitions international corporate taxation from a worldwide system to a modified territorial system, which in light of the current tax treatment of Aflac Japan as a branch has the effect of subjecting the earnings of Aflac Japan to Japan taxation and subjecting the Company's other earnings, including the consolidated earnings of the Parent Company, to U.S. taxation. The treatment of Aflac Japan as a branch for U.S. tax purposes did not change following the completion of its conversion from a branch structure to a subsidiary structure for legal purposes on April 1, 2018.

Aflac U.S. prices its business on an internal rate of return basis. The Aflac U.S. business has a financial structure that the Company expects to be neutral on a pricing basis from these tax changes. The Aflac U.S. products have high initial costs for marketing, underwriting and administration, which will have less tax relief under the changes and will increase the amount required to invest in new business. In addition, the Company expects that RBC requirements will increase on an after-tax basis, being another source of initial funding required for these products. The tax basis for reserves and DAC may also change the timing of tax payments in an accelerated or unfavorable direction. All of these effects will offset a favorable lower tax rate on income in later years. The overall impact is expected to be neutral on a pricing basis from these various effects.

The Tax Act changes became effective on January 1, 2018. However, 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 as of that date. In the fourth quarter of 2018, the Company recorded an immaterial adjustment to the provisional Japan deferred tax balances and no valuation allowance adjustment related to anticipatory foreign tax credit asset, rendering final values for the Company's deferred tax liability.For information on the effects of the Tax Act during the period ended December 31, 2018, see Note 10 of the Notes to the Consolidated Financial Statements presented in the 2018 Annual Report. For information on the conversion of Aflac Japan from a branch to a subsidiary, see General Business under Item 1, Business, in the 2018 Annual Report.

Dodd-Frank Act

Title VII of the Dodd-Frank Act and regulations issued thereunder, in particular rules to require central clearing for certain types of derivatives, may have an impact on Aflac's derivative activity, including activity on behalf of Aflac Japan. In addition, in 2015 and 2016, six U.S. financial regulators, including the U.S. Commodity Futures Trading Commission (CFTC), issued final rules regarding the exchange of initial margin (IM) and variation margin (VM) for uncleared swaps that impose greater obligations on swap dealers regarding uncleared swaps with certain counterparties, such as Aflac. The requirements of such rules with respect to VM, as well as similar regulations in Europe, became effective on March 1, 2017. Full compliance with respect to all counterparties was required by September 1, 2017. The requirements of such rules with respect to IM are currently being phased in and will be fully implemented by September 1, ~~2020.~~2020, although an extension to September 1, 2021 is expected for covered entities with an aggregate average notional amount below $50 billion. In October of 2017, the CFTC and the European Commission each finalized comparability determinations that permit certain swap dealers who are subject to both regulatory margin regimes to take advantage of substituted compliance by complying with one set of margin requirements. The margin requirements are expected to result in more stringent collateral requirements and to affect other aspects of Aflac's derivatives activity.

The Dodd-Frank Act also established a Federal Insurance Office (FIO) under the U.S. Treasury Department to monitor all aspects of the insurance industry and of lines of business other than certain health insurance, certain long-term care insurance and crop insurance. Traditionally, U.S. insurance companies have been regulated primarily by state insurance departments. The FIO does not directly regulate the insurance industry, but under Dodd-Frank it has the power to preempt state insurance regulations that are inconsistent with international agreements reached by the federal government, subject to certain requirements and restrictions. The FIO and certain federal agencies must achieve consensus positions with the state insurance regulators when taking positions on insurance proposals by certain international forums. In December 2013, the FIO released a report entitled "How To Modernize And Improve The System Of Insurance Regulation In The United States." The report was required by the Dodd-Frank Act, and included 18 recommended areas of near-term reform for the states, including addressing capital adequacy and safety/soundness issues, reform of insurer resolution practices, and reform of marketplace regulation. The report also listed nine recommended areas for direct federal involvement in insurance regulation. Some of the recommendations outlined in the FIO report released in December 2013 have been implemented. The ~~National Association of Registered Agents and Brokers Reform Act, signed into law in January 2015, simplifies the agent and broker licensing process across state lines. The~~ FIO has also engaged with the supervisory colleges to monitor financial stability and identify regulatory gaps for large national and internationally active insurers. The ~~new presidential administration in the United States~~President and Congress have stated proposals to reform or repeal certain provisions of the Dodd-Frank ~~Act.~~Act, some of which have been implemented. The Company cannot predict with any degree of certainty what impact, if any, such proposals ~~will~~might have on Aflac's business, financial condition, or results of operations.

Insurance Guaranty Laws

Under state insurance guaranty association laws and similar laws in international jurisdictions, Aflac is subject to assessments, based on the share of business it 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.

Aflac U.S. Investments

The level of investment income is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, and other factors.

As part of the Company's portfolio management and asset allocation process, Aflac U.S. invests in ~~fixed-maturity~~fixed maturity investments and growth assets, including public ~~equities~~equity securities and alternative investments in limited partnerships. Aflac U.S. has been investing in both publicly traded and privately originated investment-grade and below-investment-grade ~~fixed-maturity~~fixed maturity securities and loan receivables.

The following table details the investment purchases for Aflac U.S.


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2017			2016		2017			2016		2019		2018		2019		2018
Fixed maturities:
Other fixed maturities	$	284		$	145	$	770		$	502
Fixed maturity securities:
Other fixed maturity securities											$	73	$	113	$	947	$	791
Infrastructure debt	10			0		25			0		5		0		78		97
Equities	16			7		54			110
Other investments:
Equity securities											16		6		43		55
Commercial mortgage and other loans:
Transitional real estate loans											82		377		224		547
Commercial mortgage loans											35		65		104		120
Middle market loans	67			14		161			158		18		43		74		118
Commercial mortgage loans	48		⁽¹⁾	50		89		⁽¹⁾	73
Limited partnerships	3			0		13			0
Other investments											2		4		10		31
Total Aflac U.S. Purchases	$	428		$	216	$	1,112		$	843	$	231	$	608	$	1,480	$	1,759

⁽¹⁾~~Includes $30 and $71 of TRE loans for the three- and nine-month periods ended September 30, 2017, respectively.~~

See Note 3 of the Notes to the Consolidated Financial Statements and Notes 1 and 3 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for more information regarding loans and loans receivables.

The following table presents the results of Aflac's U.S. investment yields for the periods ended September 30.


	Three Months						Nine Months						Three Months						Nine Months
	2017			2016			2017			2016			2019			2018			2019			2018
Total purchases for period (in millions) ⁽¹⁾	$	425		$	216		$	1,099		$	843		$	229		$	604		$	1,470		$	1,728
New money yield ^{(1), (2)}	4.40		%	3.28		%	4.40		%	3.93		%	4.58		%	5.44		%	4.49		%	4.72		%
Return on average invested assets ⁽³⁾	5.05			5.06			5.03			5.04			5.09			5.25			5.07			5.14
Portfolio book yield, end of period⁽¹⁾	5.50		%	5.65		%	5.50		%	5.65		%	5.40		%	5.55		%	5.40		%	5.55		%

⁽²⁾Reported on a gross yield basis; excludes investment expenses and external management fees

⁽³⁾Net of investment expenses, year-to-date number reflected on a quarterly average basis

The ~~increase~~decrease in the Aflac U.S. new money yield for the three- and nine-month periods ended September 30, ~~2017~~2019 was primarily due to ~~increases in U.S. interest rates, compared with the same respective periods in 2016.~~decreased allocations to higher yielding asset classes. See Notes 3

and 5 of the Notes to the Consolidated Financial Statements and the Analysis of Financial Condition section of this MD&A for additional information on the Company's investments.

CORPORATE AND OTHER

The Company defines pretax adjusted earnings, a non-U.S. GAAP financial measure, as adjusted earnings before the application of income taxes. See the Results of Operations section of this MD&A for the Company's definition of adjusted earnings and a reconciliation of adjusted earnings to the most directly comparable U.S. GAAP measure of net earnings. Changes in the pretax adjusted earnings of Corporate and other are primarily affected by investment income. The following table presents a summary of results for Corporate and other.

Corporate and Other Summary of Operating Results



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Premium income	$	51		$	51		$	151		$	158
Net investment income	23			18			65			56
Amortized hedge income related to certain foreign currency management strategies	21			9			61			18
Net investment income, including amortized hedge income	44			27			126			74
Other income	2			4			10			13
Total adjusted revenues	97			82			287			245
Benefits and claims, net	49			47			144			149
Adjusted expenses:
Interest expense	33			28			100			88
Other adjusted expenses	32			36			105			120
Total adjusted expenses	65			64			205			208
Total benefits and adjusted expenses	114			111			349			357
Pretax adjusted earnings	$	(17	)	$	(29	)	$	(62	)	$	(113	)

Net investment income benefited from the Company’s corporate hedging program in the three- and nine-month periods ended September 30, 2019 and 2018, respectively. See the Hedging Activities subsection of this MD&A for further information on the Parent Company's foreign currency hedge program.

In December 2018, the Parent Company invested $20 million in Singapore Life Pte. Ltd. (Singapore Life), a digitally-focused life insurance company based in Singapore. The Parent Company made an additional investment of $16 million in the second quarter of 2019, bringing the total investment to $36 million. As part of the relationship, Aflac entered into a reinsurance agreement on certain protection products with Singapore Life in September 2019. However, the Company does not currently expect the equity investment or the reinsurance agreement to have a material impact on its financial position or results of operations.

ANALYSIS OF FINANCIAL CONDITION

The Company's financial condition has remained strong in the functional currencies of its operations. 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.

Investments

The ~~Company's~~Company’s investment ~~philosophy is~~strategy 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, and preserving shareholder value. In attempting to ~~fulfill its fiduciary responsibility~~optimally balance these objectives, the Company seeks to ~~invest~~maintain on behalf of Aflac Japan a diversified portfolio of yen-denominated investment assets, inU.S. dollar-denominated investment portfolio hedged back to yen and a ~~prudent manner to meet the present and future needs~~portfolio of ~~its policyholders’ contractual obligations while maximizing the long-term financial return on assets consistent with~~unhedged U.S. dollar-denominated assets. As part of the Company's ~~goals of maximizing long-term shareholder value within defined risk appetites~~portfolio management and ~~limits,~~asset allocation process, Aflac U.S. invests in fixed maturity investments and ~~maintaining adequate liquidity.~~growth assets, including public equity securities and alternative investments in limited partnerships. Aflac U.S. invests in both publicly traded and privately originated investment-grade and below-investment-grade fixed maturity securities and loans.

The following table details investments by segment.

Investments by Segment


		Aflac Japan							Aflac U.S.							Aflac Japan						Aflac U.S.
(In millions)	September 30, 2017				December 31, 2016			September 30, 2017				December 31, 2016			September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Securities available for sale, at fair value:
Fixed maturities		$	65,710			$	59,903		$	14,005			$	13,250
Perpetual securities		1,803				1,577			60				56
Available for sale, fixed maturity securities, at fair value																$	78,036		$	69,409		$	14,136		$	12,132
Held to maturity, fixed maturity securities, at amortized cost																30,733			30,318			0			0
Equity securities		804				1,185			84				124			627			806			126			137
Total available for sale		68,317				62,665			14,149				13,430
Securities held to maturity, at amortized cost:
Fixed maturities		31,998				33,350			0				0
Total held to maturity		31,998				33,350			0				0
Other investments:
Commercial mortgage and other loans:
Transitional real estate loans																4,045			3,621			789			756
Commercial mortgage loans		1,002		⁽¹⁾		745			197		⁽¹⁾		110			985			763			400			301
Middle market loans		467				74			331				245			1,783			1,144			282			334
Other investments:
Policy loans		195				174			11				10			235			219			15			13
Short-term investments		57				88			0				0
Short-term investments ⁽¹⁾																437			0			285			141
Limited partnerships																443			333			49			37
Other		67				0			27				0			0			0			30			26
Total other investments		1,788				1,081			566				365
Total investments		102,103				97,096			14,715				13,795			117,324			106,613			16,112			13,877
Cash and cash equivalents		1,835				1,313			1,291				1,428			1,503			1,779			450			641
Total investments and cash ⁽²⁾		$	103,938			$	98,409		$	16,006			$	15,223		$	118,827		$	108,392		$	16,562		$	14,518

⁽¹⁾Includes ~~$231 and $71 of TRE loans for Aflac Japan and Aflac U.S., respectively, as of September 30, 2017.~~securities lending collateral

⁽²⁾Excludes investments and cash held by the Parent Company and other business segments of ~~$2,545~~$4,121 in ~~2017~~2019 and ~~$2,729~~$3,333 in ~~2016.~~2018

~~See the Loans and Loan Receivables section in Note 3 of the Notes to the Consolidated Financial Statements for further discussion of these investments.~~

Cash and cash equivalents totaled ~~$4.9~~$4.2 billion, or ~~4.0%~~3.0% of total investments and cash, as of September 30, ~~2017,~~2019, compared with ~~$4.9~~$4.3 billion, or ~~4.2%~~3.4%, at December 31, ~~2016.~~2018. For a discussion of the factors affecting the Company's cash balance, see the Operating Activities, Investing Activities and Financing Activities subsections of this MD&A.

During the third quarter of 2017, Aflac U.S. became a member of the Federal Home Loan Bank of Atlanta (FHLB). As a member, Aflac U.S. can obtain access to low-cost funding and also receive dividends on FHLB stock. Additional FHLB stock purchases are required based upon the amount of funds borrowed from the FHLB. Aflac U.S. will be required to post

acceptable forms of collateral for any borrowings it makes from the FHLB. As of September 30, 2017, Aflac U.S. had not yet obtained any advances from the FHLB. The FHLB stock purchased by the Company is classified as a restricted investment and is included in other investments in the consolidated balance sheets.

For additional information concerning the Company's investments, see Notes 3, 4, and 5 of the Notes to the Consolidated Financial Statements.

The ratings of the Company's securities referenced in the table below are based on the ratings designations provided by major Nationally Recognized Statistical Rating Organizations (NRSROs) (Moody's, S&P and Fitch) or, if not rated, are determined based on the Company's internal analysis of such securities. When the ratings issued by the rating agencies differ, the Company utilizes the second lowest rating when three or more rating agency ratings are available or the lowest rating when only two rating agency ratings are available.

The distributions of ~~debt and perpetual~~fixed maturity securities the Company owns, by credit rating, were as follows:

Composition of Fixed Maturity Securities ~~Portfolio~~ by Credit Rating


		September 30, 2017						December 31, 2016						September 30, 2019						December 31, 2018
	Amortized Cost			Fair Value			Amortized Cost			Fair Value			Amortized Cost			Fair Value			Amortized Cost			Fair Value
AAA		1.0	%		.9	%		2.0	%		1.9	%		1.1	%		1.0	%		1.0	%		.9	%
AA		4.1			4.2			5.0			5.0			4.0			4.0			3.9			4.0
A		65.3			66.4			63.1			65.2			68.8			70.5			67.9			69.9
BBB		24.3			23.6			24.6			23.2			22.8			21.6			23.2			21.6
BB or lower		5.3			4.9			5.3			4.7			3.3			2.9			4.0			3.6
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

As of September 30, ~~2017,~~2019, the Company's direct and indirect exposure to securities in its investment portfolio that were guaranteed by third parties was immaterial both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of September 30, ~~2017.~~2019.


(In millions)	Credit Rating		Amortized Cost			Fair Value			Unrealized Loss				Credit Rating		Amortized Cost			Fair Value			Unrealized Loss
Diamond Offshore Drilling Inc.		BB		$	142		$	101		$	(41	)		CCC		$	135		$	60		$	(75	)
Noble Holdings International Ltd.		B		99			65			(34		)
AXA-UAP		BBB		290			276			(14		)
AXA														BBB		300			266			(34		)
Transocean Inc.														CCC		64			44			(20		)
Teva Pharmaceutical LLC														BB		67			51			(16		)
Baker Hughes Inc.														A		124			111			(13		)
Kommunal Landspensjonskasse (KLP)														BBB		139			127			(12		)
National Oilwell Varco Inc.		BBB		98			85			(13		)		BBB		80			71			(9		)
Mirvac Group Finance Ltd.														A		93			84			(9		)
Tyco Electronics Group SA		A		102			91			(11		)		A		107			98			(9		)
Bakers Hughes Inc.		A		122			112			(10		)
Transocean Inc.		B		72			62			(10		)
Deutsche Postbank AG		BB		213			204			(9		)
Mirvac Group Finance Ltd.		BBB		89			81			(8		)
Cenovus Energy Inc.		BBB		79			72			(7		)
Intesa Sanpaolo Spa														BBB		144			135			(9		)

Generally, declines in fair values can be a result of changes in interest rates, yen/dollar exchange rate, and changes in net spreads driven by a broad market move or a change in the issuer's underlying credit quality. As the Company believes these issuers have the ability to continue making timely payments of principal and interest, the Company views these changes in fair value to be ~~temporary and does not believe it is necessary to impair the carrying value of these securities.~~temporary. See the Unrealized Investment Gains and Losses section in Note 3 of the Notes to the Consolidated Financial Statements for further discussions of unrealized losses related to financial institutions ~~including perpetual securities,~~ and other corporate investments.

Below-Investment-Grade Securities

The Company's portfolio of below-investment-grade securities includes debt securities purchased while the issuer was rated investment grade plus other loans and bonds purchased as part of an allocation to that segment of the market. The following is the Company's below-investment-grade exposure.

Below-Investment-Grade Investments



	September 30, 2019
(In millions)	Par Value		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	393	$	393	$	448	$	55
Republic of South Africa	371		371		379		8
Barclays Bank PLC	185		116		148		32
Telecom Italia SpA	185		185		239		54
KLM Royal Dutch Airlines	185		136		142		6
Transnet	139		139		139		0
Diamond Offshore Drilling Inc.	124		135		60		(75		)
IKB Deutsche Industriebank AG	120		51		95		44
Republic of Tunisia	111		65		70		5
Arconic Inc.	100		86		108		22
Other Issuers	640		593		624		31
Subtotal ⁽¹⁾	2,553		2,270		2,452		182
Senior secured bank loans	686		711		680		(31		)
High yield corporate bonds	666		670		687		17
Middle market loans, net of reserves ⁽²⁾	2,096		2,064		2,067		3
Grand Total	$	6,001	$	5,715	$	5,886	$	171

⁽¹⁾ Securities initially purchased as investment grade, but have subsequently been downgraded to below investment grade

⁽²⁾Middle market loans are carried at amortized cost

The Company invests in senior secured bank loans and middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The objectives of these programs include enhancing the yield on invested assets, achieving further diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of floating rate assets.

The Company maintains an allocation to higher yielding corporate bonds within the Aflac Japan and Aflac U.S. portfolios. Most of these securities were rated below-investment-grade at the time of purchase, but the Company also purchased several that were rated investment grade which, because of market pricing, offer yields commensurate with below-investment-grade risk profiles. The objective of this allocation was to enhance the Company's yield on invested assets and further diversify credit risk. All investments must have a minimum rating of low BB using the Company's above described rating methodology and are managed by the Company's internal credit portfolio management team.

Fixed Maturity Securities by Sector

The Company maintains diversification in investments by sector to avoid concentrations to any one sector, thus managing exposure risk. The following table shows the distribution of fixed maturities by sector classification.



	September 30, 2019
(In millions)	Amortized Cost		% of Total
Government and agencies	$	55,004	49.0	%
Municipalities	2,454		2.2
Mortgage- and asset-backed securities	392		.3
Public utilities	8,355		7.6
Electric	6,574		5.9
Natural Gas	307		.3
Other	740		.7
Utility/Energy	734		.7
Sovereign and Supranational	2,144		1.9
Banks/financial institutions	10,334		9.2
Banking	6,109		5.4
Insurance	2,012		1.8
Other	2,213		2.0
Other corporate	33,524		29.8
Basic Industry	3,578		3.2
Capital Goods	3,218		2.9
Communications	4,029		3.6
Consumer Cyclical	3,417		3.0
Consumer Non-Cyclical	6,323		5.6
Energy	4,541		4.0
Other	1,282		1.1
Technology	3,215		2.9
Transportation	3,921		3.5
Total fixed maturity securities	$	112,207	100.0	%

Below-Investment-Grade Securities ~~by Type of Issuance~~

The ~~Company has investments in both publicly~~Company's portfolio of below-investment-grade securities includes debt securities purchased while the issuer was rated investment grade plus other loans and ~~privately issued securities. The Company's ability~~bonds purchased as part of an allocation to sell either type of security is a function of overall market liquidity which is impacted by, among other things, the amount of outstanding securities of a particular issuer or issuance, trading historythat segment of the ~~issue or issuer, overall~~market. The following is the Company's below-investment-grade exposure.

Below-Investment-Grade Investments



	September 30, 2019
(In millions)	Par Value		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	393	$	393	$	448	$	55
Republic of South Africa	371		371		379		8
Barclays Bank PLC	185		116		148		32
Telecom Italia SpA	185		185		239		54
KLM Royal Dutch Airlines	185		136		142		6
Transnet	139		139		139		0
Diamond Offshore Drilling Inc.	124		135		60		(75		)
IKB Deutsche Industriebank AG	120		51		95		44
Republic of Tunisia	111		65		70		5
Arconic Inc.	100		86		108		22
Other Issuers	640		593		624		31
Subtotal ⁽¹⁾	2,553		2,270		2,452		182
Senior secured bank loans	686		711		680		(31		)
High yield corporate bonds	666		670		687		17
Middle market loans, net of reserves ⁽²⁾	2,096		2,064		2,067		3
Grand Total	$	6,001	$	5,715	$	5,886	$	171

⁽¹⁾ Securities initially purchased as investment grade, but have subsequently been downgraded to below investment grade

⁽²⁾Middle market ~~conditions, and idiosyncratic events affecting the specific issue or issuer.~~loans are carried at amortized cost

Fixed Maturity Securities by Sector

The Company maintains diversification in investments by sector to avoid concentrations to any one sector, thus managing exposure risk. The following table ~~details investment securities~~shows the distribution of fixed maturities by ~~type of issuance.~~

~~Investment Securities by Type of Issuance~~sector classification.

September 30, 2017 December 31, 2016
(In millions) Amortized
Cost Fair
Value    Amortized
Cost Fair
Value
Publicly issued securities:
Fixed maturities $ 80,330
$ 91,188
$ 75,406
$ 86,132

Perpetual securities 46
74
51
75

Equity securities 797
912
1,196
1,300

      Total publicly issued 81,173
92,174
76,653
87,507

Privately issued securities: ⁽¹⁾

Fixed maturities 23,912
27,826
24,307
27,649

Perpetual securities 1,503
1,789
1,455
1,558

Equity securities 14
16
7
9

      Total privately issued 25,429
29,631
25,769
29,216

      Total investment securities $ 106,602
$ 121,805
$ 102,422
$ 116,723



	September 30, 2019
(In millions)	Amortized Cost		% of Total
Government and agencies	$	55,004	49.0	%
Municipalities	2,454		2.2
Mortgage- and asset-backed securities	392		.3
Public utilities	8,355		7.6
Electric	6,574		5.9
Natural Gas	307		.3
Other	740		.7
Utility/Energy	734		.7
Sovereign and Supranational	2,144		1.9
Banks/financial institutions	10,334		9.2
Banking	6,109		5.4
Insurance	2,012		1.8
Other	2,213		2.0
Other corporate	33,524		29.8
Basic Industry	3,578		3.2
Capital Goods	3,218		2.9
Communications	4,029		3.6
Consumer Cyclical	3,417		3.0
Consumer Non-Cyclical	6,323		5.6
Energy	4,541		4.0
Other	1,282		1.1
Technology	3,215		2.9
Transportation	3,921		3.5
Total fixed maturity securities	$	112,207	100.0	%

⁽¹⁾~~Includes Rule 144A securities~~

The perpetual securities the Company holds were largely issued by banks that are integral to the financial markets of the sovereign country of the issuer. As a result of the issuer's position within the economy of the sovereign country, the Company's perpetual securities may be subject to a higher risk of nationalization of their issuers in connection with capital injections from an issuer's sovereign government. The Company cannot be assured that such capital support will extend to all levels of an issuer's capital structure. In addition, certain governments or regulators may consider imposing interest and principal payment restrictions on issuers of hybrid securities to preserve cash and preserve the issuer's capital. Beyond the cash flow impact that additional deferrals would have on the Company's portfolio, such deferrals could result in ratings downgrades of the affected securities, which in turn could result in a reduction of fair value of the securities and increase the Company's regulatory capital requirements. The Company considers these factors in its credit review process.

~~The following table details the Company's privately issued investment securities.~~

~~Privately Issued Securities~~

(Amortized cost, in millions) September 30,
2017 December 31,
2016
Privately issued securities as a percentage of total investment securities 23.9 % 25.2 %
Privately issued securities held by Aflac Japan $ 22,734
$ 23,104

Privately issued securities held by Aflac Japan as a percentage of total
investment securities 21.3 % 22.6 %

~~Reverse-Dual Currency Securities~~⁽¹⁾

(Amortized cost, in millions) September 30,
2017 December 31,
2016
Privately issued reverse-dual currency securities $ 5,505
$ 5,628

Publicly issued collateral structured as reverse-dual currency securities 1,393
1,349

Total reverse-dual currency securities $ 6,898
$ 6,977

Reverse-dual currency securities as a percentage of total investment
securities 6.5 % 6.8 %

⁽¹⁾~~Principal payments in yen and interest payments in dollars~~

Aflac Japan has a portfolio of privately issued securities to better match liability characteristics and secure higher yields than those available on Japanese government or other public corporate bonds.Aflac Japan’s investments in yen-denominated privately issued securities consist primarily of non-Japanese issuers, are rated investment grade at purchase and have longer maturities, thereby allowing the Company to improve asset/liability matching and overall investment returns. These securities are generally either privately negotiated arrangements or issued under medium-term note programs and have standard documentation commensurate with credit ratings of the issuer, except when internal credit analysis indicates that additional protective and/or event-risk covenants were required. Many of these investments have protective covenants appropriate to the specific investment. These may include a prohibition of certain activities by the borrower, maintenance of certain financial measures, and specific conditions impacting the payment of the Company's notes.

Below-Investment-Grade Securities

Below-Investment-Grade Investments

September 30, 2017 December 31, 2016
(In millions) Par
Value Amortized
Cost Fair
Value Unrealized
Gain
(Loss) Par
Value Amortized
Cost Fair
Value Unrealized
Gain
(Loss)
Republic of South Africa $ 488
$ 488
$ 524
$ 36
$ *
$ *
$ *
$ *

Investcorp Capital Limited 378
378
374
(4 ) 368
368
346
(22 )
Navient Corp. 296
157
214
57
287
152
197
45

Republic of Tunisia 266
156
179
23
318
191
264
73

KLM Royal Dutch Airlines 266
195
236
41
257
189
213
24

Barclays Bank PLC 242
156
243
87
236
152
221
69

Deutsche Postbank AG 213
213
204
(9 ) 206
206
179
(27 )
Telecom Italia SpA 177
177
251
74
172
172
212
40

Generalitat de Catalunya 142
52
110
58
154
57
111
54

Transnet 133
133
136
3
*
*
*
*

Diamond Offshore Drilling Inc. 124
142
101
(41 ) 124
141
96
(45 )
IKB Deutsche Industriebank AG 115
49
95
46
112
47
91
44

Alcoa, Inc. 100
83
106
23
100
80
97
17

Republic of Trinidad and Tobago 98
98
109
11
*
*
*
*

Noble Holdings International Ltd. 95
99
65
(34 ) 95
98
68
(30 )
EMC Corp. 85
86
81
(5 ) 85
86
76
(10 )
Petrobras International Finance
Company 84
84
86
2
91
90
83
(7 )
Teck Resources Ltd. 70
75
71
(4 ) 70
73
66
(7 )
Nabors Industries Inc. 69
67
72
5

Transocean Inc. 68
72
62
(10 ) 68
72
57
(15 )
CF Industries Inc. 60
59
59
0
60
59
54
(5 )
National Gas Co. Trinidad and
Tobago 52
50
54
4
*
*
*
*

Votorantim Overseas Trading
IV Ltd. 50
49
55
6
50
49
54
5

UPM-Kymmene *
*
*
*
180
178
188
10

Cenovus Energy Inc. *
*
*
*
75
78
71
(7 )
Other Issuers (below $50 million
in par value) 253
241
246
5
333
321
309
(12 )
Subtotal ⁽¹⁾
3,924
3,359
3,733
374
3,441
2,859
3,053
194

Senior secured bank loans 1,666
1,709
1,663
(46 ) 1,758
1,855
1,764
(91 )
High yield corporate bonds 563
560
585
25
614
602
624
22

Middle market loans, net of
reserves ⁽²⁾
809
797
797
0
324
319
320
1

Grand Total $ 6,962
$ 6,425
$ 6,778
$ 353
$ 6,137
$ 5,635
$ 5,761
$ 126



	September 30, 2019
(In millions)	Par Value		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	393	$	393	$	448	$	55
Republic of South Africa	371		371		379		8
Barclays Bank PLC	185		116		148		32
Telecom Italia SpA	185		185		239		54
KLM Royal Dutch Airlines	185		136		142		6
Transnet	139		139		139		0
Diamond Offshore Drilling Inc.	124		135		60		(75		)
IKB Deutsche Industriebank AG	120		51		95		44
Republic of Tunisia	111		65		70		5
Arconic Inc.	100		86		108		22
Other Issuers	640		593		624		31
Subtotal ⁽¹⁾	2,553		2,270		2,452		182
Senior secured bank loans	686		711		680		(31		)
High yield corporate bonds	666		670		687		17
Middle market loans, net of reserves ⁽²⁾	2,096		2,064		2,067		3
Grand Total	$	6,001	$	5,715	$	5,886	$	171

* Investment grade at respective reporting date

⁽¹⁾ Securities initially purchased as investment grade, but have subsequently been downgraded to below investment grade

⁽²⁾Middle market loans are carried at amortized cost

The Company invests in senior secured bank loans and middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The bank loan and middle market loan investment programs are managed externally by third party firms specializing in this asset class and require a minimum average portfolio rating of low BB and a minimum single investment rating of low B from one of the NRSROs. The objectives of these programs include enhancing the yield on invested assets, achieving further diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of floating rate assets. ~~The Company's investments in these programs totaled $2.7 billion and $2.3 billion at September 30, 2017, and December 31, 2016, respectively, on an amortized cost basis.~~

Fixed Maturity Securities by Sector



	September 30, 2019
(In millions)	Amortized Cost		% of Total
Government and agencies	$	55,004	49.0	%
Municipalities	2,454		2.2
Mortgage- and asset-backed securities	392		.3
Public utilities	8,355		7.6
Electric	6,574		5.9
Natural Gas	307		.3
Other	740		.7
Utility/Energy	734		.7
Sovereign and Supranational	2,144		1.9
Banks/financial institutions	10,334		9.2
Banking	6,109		5.4
Insurance	2,012		1.8
Other	2,213		2.0
Other corporate	33,524		29.8
Basic Industry	3,578		3.2
Capital Goods	3,218		2.9
Communications	4,029		3.6
Consumer Cyclical	3,417		3.0
Consumer Non-Cyclical	6,323		5.6
Energy	4,541		4.0
Other	1,282		1.1
Technology	3,215		2.9
Transportation	3,921		3.5
Total fixed maturity securities	$	112,207	100.0	%

Securities by Type of Issuance

The Company has investments in both publicly and privately issued securities. The Company's ability to sell either type of security is a function of overall market liquidity which is impacted by, among other things, the amount of outstanding securities of a particular issuer or issuance, trading history of the issue or issuer, overall market conditions, and idiosyncratic events affecting the specific issue or issuer.

The following table details investment securities by type of issuance.

Investment Securities by Type of Issuance



		September 30, 2019								December 31, 2018
(In millions)	Amortized Cost				Fair Value				Amortized Cost			Fair Value
Publicly issued securities:
Fixed maturity securities		$	91,941			$	109,080			$	83,482		$	93,255
Equity securities		781				781				936			936
Total publicly issued		92,722				109,861				84,418			94,191
Privately issued securities: ⁽¹⁾
Fixed maturity securities		20,266		⁽²⁾		23,682		⁽²⁾		23,692			26,362
Equity securities		49				49				51			51
Total privately issued		20,315				23,731				23,743			26,413
Total investment securities		$	113,037			$	133,592			$	108,161		$	120,604

⁽¹⁾ Primarily consists of securities owned by Aflac Japan

⁽²⁾ Excludes 144A securities starting in the first quarter of 2019

The following table details the Company's reverse-dual currency securities.

Reverse-Dual Currency Securities⁽¹⁾



(Amortized cost, in millions)	September 30, 2019				December 31, 2018
Privately issued reverse-dual currency securities		$	5,066			$	5,120
Publicly issued collateral structured as reverse-dual currency securities		1,704				1,657
Total reverse-dual currency securities		$	6,770			$	6,777
Reverse-dual currency securities as a percentage of total investment securities		6.0		%		6.3		%

⁽¹⁾Principal payments in yen and interest payments in dollars

Hedging Activities

The Company uses derivative contracts to hedge foreign currency exchange rate risk and interest rate risk. Derivative hedges are designed to reduce risk on an economic basis while minimizing the impact on financial results. The Company’s derivative hedge programs vary depending on the type of risk being hedged.

Foreign Currency Exchange Rate Risk Hedge Program

The Company has deployed the following hedging strategies to mitigate exposure to foreign currency exchange rate risk:


•	Aflac Japan hedges U.S. dollar-denominated investments back to yen (see Aflac Japan’s U.S. Dollar-Denominated Hedge Program below).


•	Aflac Japan maintains certain unhedged U.S. dollar-denominated securities, which serve as an economic currency hedge of a portion of the Company's investment in Aflac Japan (see Aflac Japan’s U.S. Dollar-Denominated Hedge Program below).


•	The Parent Company designates yen-denominated liabilities (notes payable and loans) as non-derivative hedging instruments and designates certain foreign currency forwards and options as derivative hedges of the Company’s net investment in Aflac Japan (see Parent Company’s Foreign Currency Hedge Program below).


•	The Parent Company enters into forward and option contracts to accomplish a dual objective of hedging foreign currency exchange rate risk related to dividend payments by its subsidiary, ALIJ, and reducing enterprise-wide hedge costs. (see Parent Company’s Foreign Currency Hedge Program below).

Aflac Japan’s U.S. Dollar-Denominated Investments

~~Most of Aflac Japan's cash, investments, and liabilities are yen-denominated. However,~~ Aflac Japan ~~also owns~~buys U.S. dollar-denominated investments, ~~a portion of which Aflac Japan~~typically corporate bonds, and hedges them back to yen with foreign currency forwards and ~~options. As~~options to hedge foreign currency exchange rate risk. This economically creates yen assets that match yen liabilities during the life of ~~September��30, 2017,~~ the ~~cost or amortized cost~~derivative and provides liquidity and capital relief. The currency risk being hedged is generally based on fair value of ~~yen-denominated~~hedged investments. The following table summarizes the U.S. dollar-denominated investments ~~and~~held by Aflac Japan.



	September 30, 2019				December 31, 2018
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities:
Fixed maturity securities (excluding bank loans)	$	18,134	$	19,460	$	17,101	$	17,003
Fixed maturity securities - bank loans (floating rate)	953		913		1,296		1,238
Equity securities	18		18		177		177
Commercial mortgage and other loans:
Transitional real estate loans (floating rate)	4,045		4,070		3,621		3,625
Commercial mortgage loans	985		1,008		763		736
Middle market loans (floating rate)	1,783		1,790		1,144		1,146
Other investments	443		443		333		333
Total U.S. Dollar Program	26,361		27,702		24,435		24,258
Available-for-sale securities:
Fixed maturity securities - economically converted to yen	1,726		2,613		1,679		2,269
Total U.S. dollar-denominated investments in Aflac Japan	$	28,087	$	30,315	$	26,114	$	26,527

U.S. Dollar Program includes all U.S. dollar-denominated investments in Aflac Japan ~~was $71.8 billion and $23.0 billion, respectively.~~other than the investments in certain consolidated VIEs where the instrument is economically converted to yen as a result of a derivative in the consolidated variable interest entity. As of September 30, ~~2017, the Company~~2019, Aflac Japan had $9.5 billion outstanding notional amounts of foreign currency forwards ~~of $11.4~~and $12.7 billion ~~and~~outstanding notional amounts of foreign currency ~~collars~~options, of ~~$5.7 billion~~which none were in-the-money, hedging the U.S. dollar-denominated investments. The fair value of Aflac Japan's unhedged U.S. dollar portfolio was $18.2 billion (excluding certain U.S. dollar-denominated assets shown in the table above as a result of consolidation that have been economically converted to yen using derivatives).

~~Net Investment Hedge~~Foreign exchange derivatives used for hedging are periodically settled, which results in cash receipt or payment at maturity or early termination. The Company had net cash inflows of $31 million and net cash outflows of $105 million for the three-month periods and net cash outflows of $8 million and $141 million for the nine-month periods ended September 30, 2019 and 2018, respectively, associated with the currency derivatives used for hedging Aflac Japan’s U.S. dollar-denominated investments.

~~The Company's investment~~

For additional discussion of the risks associated with the foreign currency exposure refer to the Currency Risk section in ~~Aflac Japan~~Item 7A., Quantitative and Qualitative Disclosures about Market Risk, and the Risk Factor sections titled “The Company is ~~affected by changes~~exposed to foreign currency fluctuations in the yen/dollar exchange ~~rate. To mitigate this exposure,~~rate" and “Lack of availability of acceptable yen-denominated investments could adversely affect the ~~Company has taken several courses~~Company's results of ~~action. First,~~operations, financial position or liquidity" in the

2018 Annual Report. For discussion of the Company’s view on the stressed economic surplus in Aflac Japan, ~~maintains certain unhedged U.S. dollar-denominated securities, which serve as an economic currency hedge of a portion of~~refer to the Investments subsection within Item 1., Business, in the 2018 Annual Report.

Parent Company's ~~investment in Aflac Japan. Second, the~~Foreign Currency Hedge Program

The Company has designated ~~the majority of the Parent Company’s~~certain yen-denominated liabilities ~~(notes payable~~ and ~~loans) as non-derivative hedging instruments and certain~~ foreign currency forwards and options of the Parent Company as ~~derivative~~accounting hedges of ~~the Company's~~its net investment in Aflac Japan. The Company's consolidated yen-denominated net asset position was partially hedged at $7.4 billion as of September 30, 2019, compared with $1.8 billion as of December 31, 2018.

The Company makes its accounting designation of net investment hedge ~~designation~~ at the beginning of each quarter. If the total of the designated Parent Company non-derivative and ~~derivatives~~derivative notional is equal to or less than the Company's net investment in Aflac Japan, the hedge is deemed to be effective, and the currency exchange effect on the yen-denominated liabilities and the change in estimated fair value of the derivatives are reported in the unrealized foreign currency component of other comprehensive income. The Company estimates that if the designated net investment hedge positions exceeded its net investment in Aflac Japan by 10 billion yen, the Company would report a foreign exchange gain/loss of approximately $1 million for every 1% yen weakening/strengthening in the end-of-period yen/dollar exchange rate. The Company's net investment hedge was effective during the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

The yen net asset figure calculated for hedging purposes differs from the yen-denominated net asset position as discussed in the Currency Risk section of Item 7A., Quantitative and Qualitative Disclosures about Market Risk, in the 2016 Annual Report. As disclosed in that section, the consolidation of the underlying assets in certain VIEs requires that the Company derecognize its yen-denominated investment in the VIE and recognize the underlying fixed-maturity or perpetual securities and cross-currency swaps. While these U.S. dollar investments will create foreign currency fluctuations, the combination of the U.S. dollar-denominated investment and the cross-currency swap economically creates a yen-denominated investment that qualifies for inclusion as a component of the Company's investment in Aflac Japan. Similarly, the combination of the U.S. corporate bonds and the foreign currency forwards and options that the Company has entered into, as discussed in the Aflac Japan Investment subsection of MD&A, economically creates a yen-denominated investment that qualifies for inclusion as a component of the Company's investment in Aflac Japan.

The dollar values of the Company's yen-denominated net assets, including economic yen-denominated investments for net investment hedging purposes as discussed above, are summarized as follows (translated at end-of-period exchange rates):

(In millions) September 30,
2017 December 31,
2016
Aflac Japan net assets $ 17,401
$ 16,215

Aflac Japan unhedged U.S. dollar-denominated net assets (10,230 ) (9,694 )
Consolidated yen-denominated net assets (liabilities) $ 7,171
$ 6,521

For ~~the hedge of~~additional information on the Company's net investment hedging strategy, see Note 4 of the Notes to the Consolidated Financial Statements.

In order to economically mitigate risks associated with the enterprise-wide exposure to the yen and the level and volatility of hedge costs, the Parent Company enters into foreign exchange forward and option contracts. By buying U.S. dollars and selling yen, the Parent Company is effectively lowering its overall economic exposure to the yen, while Aflac Japan's U.S dollar exposure remains reduced as a result of Aflac Japan's U.S. dollar-denominated hedge program that economically creates yen assets. Among other objectives, this strategy is intended to offset the enterprise-wide amortized hedge costs by generating amortized hedge income. The portion of the enterprise-wide amortized hedge income contributed by this strategy was $21 million and $9 million for the three-month periods and $61 million and $18 million for the nine-month periods ended September 30, 2019 and 2018, respectively. This activity is reported in Corporate and Other. As this program evolves, the Company will continue to evaluate the program’s efficacy. See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income.

The following table presents metrics related to Aflac Japan amortized hedge costs and the Parent Company amortized hedge income for the periods ended September 30.

Amortized Hedge Costs/Income Metrics⁽¹⁾



	Three Months		Nine Months
	2019	2018	2019	2018
Aflac Japan:
FX forward (sell USD, buy yen) notional at end of period (in billions)⁽²⁾	$9.5	$10.0	$9.5	$10.0
Weighted average remaining tenor (in months)⁽³⁾	11.4	27.4	11.4	27.4
Amortized hedge costs for period (in millions)	$(66)	(59)	$(191)	$(168)
Parent Company:
FX forward (buy USD, sell yen) notional at end of period (in billions)⁽²⁾	$3.5	$1.7	$3.5	$1.7
Weighted average remaining tenor (in months)⁽³⁾	14.6	10.7	14.6	10.7
Amortized hedge income for period (in millions)	$21	$9	$61	$18

⁽¹⁾ See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income.

⁽²⁾ Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.

⁽³⁾ Tenor based on period reporting date to settlement date

Interest Rate Risk Hedge Program

To mitigate the risk of investment income volatility, the Company economically hedges interest rate fluctuations for certain variable-rate investments. To manage interest rate risk associated with its U.S. dollar-denominated investments held by Aflac Japan, the Company ~~has designated certain of the Parent Company's yen-denominated liabilities, certain unhedged U.S. dollar investments and foreign currency forwards and~~also utilizes interest rate swaptions.

options as a hedge of its net investment in Aflac Japan. The Company's consolidated yen-denominated net asset position was partially hedged at $1.4 billion as of September 30, 2017, compared with $1.3 billion as of December 31, 2016.

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's hedging activities. For additional discussion of the risks associated with the foreign currency exposure refer to the Currency Risk section in Item 1A. Risk Factors in the 2018 Annual Report.

Deferred Policy Acquisition Costs

The following table presents deferred policy acquisition costs by segment.


(In millions)	September 30, 2017			December 31, 2016			% Change				September 30, 2019			December 31, 2018			% Change
Aflac Japan		$	6,104		$	5,765		5.9	%	⁽¹⁾		$	6,639		$	6,384		4.0	%	⁽¹⁾
Aflac U.S.		3,309			3,228			2.5				3,509			3,491			.5
Total		$	9,413		$	8,993		4.7	%			$	10,148		$	9,875		2.8	%

⁽¹⁾Aflac Japan’s deferred policy acquisition costs increased ~~2.5%~~1.1% in yen during the nine months ended September 30, ~~2017.~~2019.

See Note 6 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for additional information on the Company's deferred policy acquisition costs.

Policy Liabilities

The following table presents policy liabilities by segment.


(In millions)	September 30, 2017				December 31, 2016				% Change				September 30, 2019				December 31, 2018				% Change
Aflac Japan		$	88,829			$	84,141			5.6	%	⁽¹⁾		$	96,838			$	92,791			4.4	%	⁽¹⁾
Aflac U.S.		10,503				10,212				2.8				11,240				10,981				2.4
Other		131				91				44.0				219				183				19.7
Intercompany eliminations⁽²⁾		(750		)		(718		)		4.5				(767		)		(767		)		.0
Total		$	98,713			$	93,726			5.3	%			$	107,530			$	103,188			4.2	%

⁽¹⁾Aflac Japan’s policy liabilities increased ~~2.2%~~1.5% in yen during the nine months ended September 30, ~~2017.~~2019.

⁽²⁾ Elimination entry necessary due to recapture of a portion of policy liabilities ceded externally, as a result of the reinsurance retrocession transaction as described in Note 7 of the Notes to the Consolidated Financial Statements.

Notes Payable

Notes payable totaled ~~$5.2~~$6.2 billion at September 30, ~~2017,~~2019, compared with ~~$5.4~~$5.8 billion as at December 31, ~~2016.~~2018.

In January 2017, the Parent Company issued 60.0 billion yen of senior notes through a public debt offering under its U.S. shelf registration statement. The notes bear interest at a fixed rate of .932% per annum, payable semi-annually, and have a 10-year maturity. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance.

~~In February 2017, the Parent Company extinguished $650 million of 2.65% senior notes upon their maturity.~~

Subsequent to September 30, 2017, in October 2017 the Parent Company issued 60.0 billion yen of subordinated debentures through a public debt offering under its U.S. shelf registration statement. The debentures have a 30-year maturity and bear interest at an initial rate of 2.108% per annum through October 22, 2027, or earlier redemption. Thereafter, the rate of the interest of the debentures will be reset every five years at a rate of interest equal to the then-current JPY 5-year Swap Offered Rate plus 205 basis points. The debentures are redeemable (i) at any time, in whole but not in part, upon the occurrence of certain tax events or certain rating agency events, as specified in the indenture governing the terms of the debentures or (ii) in 10 years, in whole or in part, at a redemption price equal to their principal amount plus accrued and unpaid interest. The Parent Company intends to use the proceeds from the October 2017 issuance of its debentures to redeem $500 million of its 5.50% subordinated debentures due 2052, and to use the remaining proceeds, if any, for general corporate purposes.

See Note 8 of the accompanying Notes to the Consolidated Financial Statements for additional information on the Company's notes payable. See Note 1 of the accompanying Notes to the Consolidated Financial Statements for additional information regarding the change in accounting for leases.

In September 2019, the Parent Company renewed a ¥30.0 billion senior term loan facility. The first tranche of the facility, which totaled ¥5.0 billion, bears interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR), or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in September 2026. The applicable margin ranges between .30% and .70%, depending on the Parent Company's debt ratings as of the date of determination. The second tranche, which totaled ¥25.0 billion, bears interest at a rate per annum equal to the TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in September 2029. The applicable margin ranges between .45% and 1.00%, depending on the Parent Company's debt ratings as of the date of determination.

In April 2019, ALIJ issued ¥30.0 billion (par value) of perpetual subordinated bonds. These bonds bear interest at a fixed rate of .963% per annum and then at six-month Euro Yen LIBOR plus an applicable spread on and after the day immediately following April 18, 2024. The bonds will be callable on each interest payment date on and after April 18, 2024. ALIJ is seeking amendment of the bonds to change their duration from perpetual to a stated maturity date of April 16, 2049 and to remove provisions that permitted ALIJ to defer payments of interest under certain circumstances.

Benefit Plans

Aflac Japan and Aflac U.S. have various benefit plans. For additional information on the Company's Japanese and U.S. plans, see Note 11 of the accompanying Notes to the Consolidated Financial Statements and Note 14 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report.

Policyholder Protection

Policyholder Protection Corporation

The Japanese insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. Legislation enacted regarding the framework of the Life Insurance Policyholder Protection Corporation (LIPPC) included government fiscal measures supporting the LIPPC. On ~~March 30, 2012, the Diet approved legislation to enhance the stability of the LIPPC by extending the government's fiscal support of the LIPPC through March 2017. On~~ November 25, 2016, Japan's Diet passed legislation that ~~again extends~~extended the government's fiscal support of the LIPPC through March 2022. Effective April 2014, the annual LIPPC contribution amount for the total life industry was lowered from 40¥40 billion ~~yen~~ to 33¥33 billion. Aflac Japan recognized an expense of ¥1.9 billion ~~yen.~~and ¥2.0 billion for the nine-month periods ended September 30, 2019 and 2018, respectively, for LIPPC assessments.

Guaranty Fund Assessments

Under U.S. state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business. The amount of the guaranty fund assessment that an insurer is assessed is based on its proportionate share of premiums in that state. Guaranty fund assessments for the three-month periods ended September 30, 2019 and 2018, were immaterial.

As of September 30, ~~2017,~~2019, the Company has estimated and recognized the impact of its share of guaranty fund assessments resulting from the liquidation of a long-term care insurer. See Note 12 of the Notes to the Consolidated Financial Statements for further information on the assessment.

Off-Balance Sheet Arrangements

As of September 30, ~~2017,~~2019, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations. See Note 15 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for information on material unconditional purchase obligations that are not recorded on the Company's balance sheet.

CAPITAL RESOURCES AND LIQUIDITY

Aflac ~~provides~~Japan and Aflac U.S. provide the primary sources of liquidity to the Parent Company through dividends and management fees. The following table presents the amounts provided for the nine-month periods ending September 30.

Liquidity Provided by Aflac Japan and Aflac U.S. to Parent Company

(In millions) 2017 2016
Dividends declared or paid by Aflac $ 1,400
$ 1,311

Management fees paid by Aflac 219
192



(In millions)	2019		2018
Dividends declared or paid by Aflac Japan and Aflac U.S.	$	2,420	$	664
Management fees paid by Aflac Japan and Aflac U.S.	108		104

The primary uses of cash by the Parent Company are shareholder dividends, the repurchase of its common stock and interest on its outstanding indebtedness and operating expenses.

In 2018, the Company announced a change in its internal dividend policy which allows the Company to increase the proportion of regulatory earnings transferred from Aflac U.S. and Aflac Japan to the Parent Company. The Company intends to maintain higher than historical levels of capital and liquidity at the Parent ~~Company's sources~~Company with the goals of addressing the Company’s hedge costs and ~~uses~~related potential need for collateral and mitigating against long-term weakening of ~~cash are reasonably predictable~~the Japanese yen. Further, the Company plans to continue to maintain a portfolio of unhedged U.S. dollar based investments at Aflac Japan and ~~are not expected~~consider whether the amount of such investments should be increased or decreased relative to ~~change~~the Company’s view of economic equity surplus in Aflac Japan in light of potentially rising hedge costs and other factors. See Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Forward-Looking Information,” for a description of factors that could cause actual results to differ materially from those contemplated by the Company in ~~the future. For additional information, see the Financing Activities subsection of this MD&A.~~regards to its capital management intentions.

The Parent Company ~~also~~ accesses debt security markets to provide additional sources of capital. In ~~August 2016,~~September 2018, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2021. In August 2018, the Parent Company filed a shelf registration with Japanese regulatory authorities that allows the Parent Company to conduct public offerings

of bonds in Japan, including yen-denominated Samurai notes, up to ~~200~~¥200 billion ~~yen~~ or its equivalent

through August ~~2018.~~2020. The shelf registration statement is for possible public offerings in Japan, but the bonds issued under the shelf may be transferred by the bondholders to U.S. persons in compliance with U.S. law. The Company filed a shelf registration statement with the SEC in May 2015 that allows the Company to issue an indefinite amount of senior and subordinated debt, in one or more series, from time to time until May 2018. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available. For additional information, see Note 8 of the Notes to the Consolidated Financial Statements.

The principal sources of cash for the Company's insurance operations are premiums and investment income. The primary uses of cash by the Company's insurance operations are investments, policy claims, commissions, operating expenses, income taxes and payments to the Parent Company for management fees and dividends. Both the sources and uses of cash are reasonably predictable.

When making an investment decision, the Company's first consideration is based on product needs. The Company's investment objectives provide for liquidity through the purchase of investment-grade debt securities. These objectives also take into account duration matching, and because of the long-term nature of the Company's business, the Company has adequate time to react to changing cash flow needs.

As a result of policyholder aging, claims payments are expected to gradually increase over the life of a policy. Therefore, future policy benefit reserves are accumulated in the early years of a policy and are designed to help fund future claims payments. The Company ~~expect~~expects its future cash flows from premiums and its investment portfolio to be sufficient to meet its cash needs for benefits and expenses.

The Parent Company and Aflac have a 364-day uncommitted bilateral line of credit with a third party that provides for borrowings in the amount of $100 million. Borrowings will bear interest at the rate quoted by the bank and agreed upon at the time of making such loan and will have up to a three-month maturity period. There are no related facility fees, upfront expenses or financial covenant requirements. Borrowings under this credit agreement may be used for general corporate purposes. Borrowings under the financing agreement will mature no later than three months after the last drawdown date of October 14, 2017. As of September 30, ~~2017, the Company did not have any borrowings outstanding under its $100 million credit agreement.~~

The Parent Company has a three-year senior unsecured revolving credit facility agreement with a syndicate of financial institutions that provides for borrowings of up to 100.0 billion yen on a revolving basis. Borrowings bear interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR) plus, at the Company's option, either (a) the applicable TIBOR margin during the period from the closing date to the commitment termination date or (b) the applicable TIBOR margin during the term out period. The applicable margin ranges between .35% and .75% during the period from the closing date to the commitment termination date and .70% and 1.50% during the term out period, depending on the Parent Company’s debt ratings as of the date of determination. In addition, the Parent Company is required to pay a facility fee on the commitments ranging between .30% and .50%, also based on the Parent Company’s debt ratings as of the date of determination. Borrowings under this credit agreement may be used for general corporate purposes, including a capital contingency plan for the operations of the Parent Company, and will expire on the earlier of (a) March 31, 2019, or (b) the date the commitments are terminated pursuant to an event of default, as such term is defined in the credit agreement. The credit facility requires compliance with certain financial covenants on a quarterly basis. As of September 30, 2017, the Company did not have any borrowings outstanding under its 100.0 billion yen revolving credit agreement.

The Parent Company and Aflac have a five-year senior unsecured revolving credit facility agreement with a syndicate of financial institutions that provides for borrowings of up to 55.0 billion yen or the equivalent of yen in U.S. dollars on a revolving basis. Borrowings bear interest at a rate per annum equal to, at the Company's option, either (a) a eurocurrency rate determined by reference to the London Interbank Offered Rate (LIBOR) for the interest period relevant to such borrowing adjusted for certain additional costs or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus ½ of 1%, (2) the rate of interest for such day announced by Mizuho Bank, Ltd. as its prime rate and (3) the eurocurrency rate for an interest period of one month plus 1.00%, in each case plus an applicable margin. The applicable margin ranges between .79% and 1.275% for eurocurrency rate borrowings and 0.0% and .275% for base rate borrowings, depending on the Parent Company’s debt ratings as of the date of determination. In addition, the Parent Company and Aflac ~~are required to pay a facility fee~~had four lines of credit with third parties as well as two intercompany lines of credit. For additional information on the ~~commitments ranging between .085% and .225%, also based on the Parent Company’s debt ratings as~~Company's lines of credit, see Note 8 of the ~~date~~Notes to the Consolidated Financial Statements.

As part of ~~determination. Borrowings~~an arrangement with Federal Home Loan Bank of Atlanta (FHLB), Aflac U.S. obtains low-cost funding from FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In the first nine months of 2019, Aflac U.S. borrowed and repaid $147 million under the amended and restated credit facility may be used for general corporate purposes, including a capital contingency plan for the operations of the Parent Company and Aflac. The amended and restated credit facility requires compliance with certain financial covenants on a quarterly basis and will expire on the earlier of (a) September 18, 2020, or (b) the date the commitments are terminated

~~pursuant to an event of default, as such term is defined in the credit agreement.~~this program. As of September 30, ~~2017,~~2019, Aflac U.S. had outstanding borrowings of $416 million reported in its balance sheet. For more information on the ~~Company did not have any borrowings outstanding under its 55.0 billion yen revolving credit agreement.~~

~~The Parent Company~~FHLB program, refer to the Investments subsection within Analysis of Financial Condition in Item 7, Management's Discussion and ~~Aflac have an uncommitted bilateral line~~Analysis of ~~credit with a third party that provides for borrowings~~Financial Condition and Results of Operations in the amount of $50 million. Borrowings will bear interest at the rate quoted by the bank and agreed upon at the time of making such loan and will have up to a three-month maturity period. There are no related facility fees, upfront expenses or financial covenant requirements. Borrowings under this credit agreement may be used for general corporate purposes. As of September 30, 2017, the Company did not have any borrowings outstanding under its $50 million credit agreement.2018 Annual Report.

The Company's financial statements convey its financing arrangements during the periods presented. The Company has not engaged in material intra-period short-term financings during the periods presented that are not otherwise reported in its balance ~~sheet.~~sheet or disclosed therein. The Company was in compliance with all of the covenants of its notes payable and lines of credit at September 30, ~~2017.~~2019. The Company has not entered into transactions involving the transfer of financial assets with an obligation to repurchase financial assets that have been accounted for as a sale under applicable accounting standards, including securities lending transactions. See Notes 3 and 4 of the Notes to the Consolidated Financial Statements and Notes 1, 3, and 4 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for more information on the Company's securities lending and derivative activities. With the exception of disclosed activities in those referenced footnotes and the Risk Factors in the 2018 Annual Report entitled, "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" and "Lack of availability of acceptable yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity," the Company does not have a known trend, demand, commitment, event or uncertainty that would reasonably result in its liquidity increasing or decreasing by a material amount. As of September 30, 2019, the Parent Company had $1.0 billion as a capital reserve and an additional $1.0 billion of contingent liquidity in order to mitigate liquidity risk of derivative positions that are reducing enterprise-wide foreign currency exposure. The Company's cash and cash equivalents include unrestricted cash on hand, money market instruments, and other debt instruments with a maturity of 90 days or less when purchased, all of which has minimal market, settlement or other risk exposure.

Consolidated Cash Flows

The Company translates cash flows for Aflac Japan’s yen-denominated items into U.S. dollars using weighted-average exchange rates. In periods 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 summarizes consolidated cash flows by activity for the nine-month periods ended September 30.


(In millions)	2017			2016			2019			2018
Operating activities	$	4,596		$	4,120		$	4,263		$	4,659
Investing activities	(2,887		)	(2,638		)	(2,946		)	(3,172		)
Financing activities	(1,613		)	(835		)	(1,429		)	(1,513		)
Exchange effect on cash and cash equivalents	(28		)	273			(9		)	(36		)
Net change in cash and cash equivalents	$	68		$	920		$	(121	)	$	(62	)

Operating Activities

The ~~following table summarizes~~principal cash inflows for the Company's insurance activities come from insurance premiums and investment income. The principal cash outflows are the result of policy claims, operating expenses, income tax, as well as interest expense. The Company expects its future cash flows ~~by source~~from premiums and investment portfolios to be sufficient to meet its cash needs for ~~the nine-month periods ended September 30.~~

(In millions) 2017 2016
Aflac Japan $ 3,657
$ 3,081

Aflac U.S. and other operations 939
1,039

Total $ 4,596
$ 4,120

benefits and expenses.

Investing Activities

Operating cash flow is primarily used to purchase debt securities and loan receivables to meet future policy obligations. The following table summarizes investing cash flows by source for the nine-month periods ended September 30.

(In millions) 2017 2016
Aflac Japan $ (2,212 ) $ (1,396 )
Aflac U.S. and other operations (675 ) (1,242 )
Total $ (2,887 ) $ (2,638 )

Prudent portfolio management dictates that the Company attempts to match the duration of its assets with the duration of its liabilities. Currently, when the Company's ~~fixed-maturity securities and perpetual~~fixed maturity securities mature, the proceeds may be reinvested at a yield below that required for the accretion of policy benefit liabilities on policies issued in earlier years. However, the long-term nature of the Company's business and its strong cash flows provide the Company with the ability to minimize the effect of mismatched durations and/or yields identified by various asset adequacy analyses. From time to time or when market opportunities arise, the Company disposes of selected ~~fixed-maturity and perpetual~~fixed maturity securities that are available for sale to improve the duration matching of ~~its~~ assets and liabilities, improve future investment yields, and/or re-balance its portfolio. As a result, dispositions before maturity can vary significantly from year to year. ~~Dispositions before maturity were approximately 3%~~

As part of its overall corporate strategy, the Company announced in September 2018 that it intends to increase its original investment in the Aflac Ventures Fund from $100 million over three years to $250 million over three to four years, as opportunities emerge. These investments are included in equity securities or the other investments line in the consolidated balance sheets. The Aflac Ventures Fund is a subsidiary of Aflac Corporate Ventures which is reported in the Corporate and 1%other segment. The central mission of Aflac Corporate Ventures is to support the organic growth and business development needs of Aflac Japan and Aflac U.S. with emphasis on digital applications designed to improve the customer experience, gain efficiencies, and develop new markets in an effort to enhance and defend long-term shareholder value.

See Note 3 of the ~~year-to-date average~~Notes to the Consolidated Financial Statements for details on certain investment ~~portfolio of fixed maturities and perpetual securities available for sale during the nine-month periods ended September 30, 2017 and 2016, respectively.~~commitments.

Financing Activities

Consolidated cash used by financing activities was ~~$1.6~~$1.4 billion in the first nine months of ~~2017,~~2019, compared with consolidated cash used by financing activities of ~~$835 million~~$1.5 billion for the same period of ~~2016.~~2018.

In ~~January 2017,~~September 2019, the Parent Company renewed a ¥30.0 billion senior term loan facility. The first tranche of the facility, which totaled ¥5.0 billion, bears interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR), or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in September 2026. The applicable margin ranges between .30% and .70%, depending on the Parent Company's debt ratings as of the date of determination. The second tranche, which totaled ¥25.0 billion, bears interest at a rate per annum equal to the TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in September 2029. The applicable margin ranges between .45% and 1.00%, depending on the Parent Company's debt ratings as of the date of determination.

In April 2019, ALIJ issued ~~60.0~~¥30.0 billion ~~yen~~(par value) of ~~senior notes through a public debt offering under its U.S. shelf registration statement. The notes~~perpetual subordinated bonds. These bonds bear interest at a fixed rate of ~~.932%~~.963% per annum ~~payable semi-annually,~~ and ~~have a 10-year maturity. These notes may only~~then at six-month Euro Yen LIBOR plus an applicable spread on and after the day immediately following April 18, 2024. The bonds will be ~~redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms~~callable on each interest payment date on and after April 18, 2024. ALIJ is seeking amendment of the ~~issuance.~~bonds to change their duration from perpetual to a stated maturity date of April 16, 2049 and to remove provisions that permitted ALIJ to defer payments of interest under certain circumstances.

~~In February 2017,~~See the ~~Parent Company extinguished $650 million~~preceding discussion in this Capital Resources and Liquidity section of ~~2.65% senior notes upon their maturity.~~

~~Cash returned to shareholders through dividends~~MD&A for details and ~~treasury stock purchases was $1.5 billion during the nine-month period ended~~any outstanding balances as of September 30, ~~2017, compared with $1.7 billion during~~2019, for the ~~nine-month period ended September 30, 2016.~~Company's lines of credit and FHLB financing arrangement.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at September 30, ~~2017.~~2019.

Cash returned to shareholders through dividends and treasury stock purchases was $1.7 billion during the nine-month period ended September 30, 2019, compared with $1.5 billion during the nine-month period ended September 30, 2018.

The following tables present a summary of treasury stock activity during the nine-month periods ended September 30.

Treasury Stock Purchased


(In millions of dollars and thousands of shares)	2017		2016		2019		2018
Treasury stock purchases	$	1,053	$	1,222	$	1,157	$	923
Number of shares purchased:
Open market	13,898		18,774
Share repurchase program					23,126		20,443
Other	435		329		589		361
Total shares purchased	14,333		19,103		23,715		20,804

Treasury Stock Issued


(In millions of dollars and thousands of shares)	2017		2016		2019		2018
Stock issued from treasury:
Cash financing	$	23	$	37	$	38	$	36
Noncash financing	45		47		38		17
Total stock issued from treasury	$	68	$	84	$	76	$	53
Number of shares issued	978		1,483		1,909		1,393

During the first nine months of ~~2017,~~2019, the Company repurchased ~~13.9~~23.1 million shares of its common stock for ~~$1.0~~$1.2 billion as part of its share repurchase program. As of September 30, ~~2017,~~2019, a remaining balance of ~~52.9~~45.9 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors. The Company currently ~~plans to~~anticipates that it will repurchase a total of $1.3 billion to ~~$1.5~~$1.7 billion of its common stock in ~~2017,~~2019, assuming stable capital conditions and absent compelling alternatives.

Cash dividends paid to shareholders were ~~$.43~~$.27 per share in the third quarter of ~~2017,~~2019, compared with ~~$.41~~$.26 per share in the third quarter of ~~2016.~~2018. The following table presents the dividend activity for the nine-month periods ended September 30.


(In millions)	2017		2016		2019		2018
Dividends paid in cash	$	491	$	492	$	579	$	595
Dividends through issuance of treasury shares	22		19		21		8
Total dividends to shareholders	$	513	$	511	$	600	$	603

In October ~~2017,~~2019, the board of directors declared the fourth quarter cash dividend of ~~$.45~~$.27 per share, an increase of ~~4.7%~~3.8% compared with the same period in ~~2016.~~2018. The dividend is payable on December ~~1, 2017,~~2, 2019 to shareholders of record at the close of business on November ~~15, 2017.~~20, 2019.

Regulatory Restrictions

Aflac and CAIC are domiciled in Nebraska and are subject to its regulations. Subsequent to the Japan branch conversion to a subsidiary, Aflac Japan is domiciled in Japan and subject to local regulations. See further discussion below. 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 U.S. GAAP and are intended to emphasize policyholder protection and company solvency. Similar laws apply in New York, the domiciliary jurisdiction of ~~the Parent Company's other~~Aflac's New York insurance ~~subsidiary, Aflac New York.~~ subsidiary.

The continued long-term growth of the Company's business may require increases in the statutory capital and surplus of its insurance operations. Aflac’s insurance operations may secure additional statutory capital through various sources, such as internally generated statutory earnings, ~~equity~~capital contributions by the Parent Company from funds generated through debt or equity offerings, or reinsurance transactions. The NAIC’s risk-based capital (RBC) formula is used by insurance regulators to help identify inadequately capitalized insurance companies. The RBC formula quantifies insurance risk, business risk, asset risk and interest rate risk by weighing the types and mixtures of risks inherent in the insurer’s operations.

As of September 30, ~~2017,~~2019, Aflac’s RBC ratio remains high and reflects a strong capital and surplus ~~position.~~ position, even reflecting the full negative impact of the U.S. Tax Act, which was fully adopted in 2018. This reduction occurs as a result of writing down deferred tax assets and the increase in required capital due to the reduction in tax rates. However, Aflac expects to recover from this negative impact over a period of three to five years through additional statutory income, assuming that the additional income is fully retained.

The maximum amount of dividends that can be paid to the Parent Company by Aflac without prior approval of Nebraska's director of insurance is the greater of the net income from operations, which excludes net realized investment gains, for the previous year determined under statutory accounting principles, or 10% of statutory capital and surplus as of the previous year-end. Dividends declared by Aflac during ~~2017~~2019 in excess of ~~$2.8~~$1.3 billion would be considered extraordinary and require such approval. Following the Japan branch conversion to a subsidiary, the Company used extraordinary dividends as needed to actively manage to appropriate RBC levels that are lower yet sufficient to maintain ratings and support prudent capital management.

In addition to limitations and restrictions imposed by U.S. insurance regulators, ~~Japan’s~~after the Japan branch conversion on April 1, 2018, the new Japan subsidiary is required to meet certain financial criteria as governed by Japanese corporate law in order to provide dividends to the Parent Company. Under these criteria, dividend capacity at the Japan subsidiary is basically defined as total equity excluding common stock, accumulated other comprehensive income amounts, capital reserves (representing statutorily required amounts in Japan) but reduced for net after-tax unrealized losses on available-for-sale securities. These dividend capacity requirements are generally aligned with the solvency margin ratio (SMR). Japan's Financial Services Agency (FSA) ~~may not allow profit repatriations from Aflac Japan if the transfers would cause Aflac Japan to lack sufficient financial strength for the protection of policyholders. The FSA~~ maintains its own solvency standard which is quantified through the ~~solvency margin ratio (SMR).~~SMR. Aflac Japan's SMR is sensitive to interest rate, credit spread, and foreign exchange rate changes, therefore the Company continues to evaluate alternatives for reducing this sensitivity.

The Company has undertaken various measures to mitigate the sensitivity of Aflac Japan's SMR and the risk of decline in Aflac Japan's repatriation or dividend capacity, which will become a more important factor upon completing the Company's Japan branch conversion to subsidiary. For example, Aflac Japan employs policy reserve matching (PRM) investment classification as part of its ALM strategies. PRM is a Japan-specific accounting treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost consistent with corresponding liabilities. For U.S. GAAP, PRM investments are categorized as available-for-sale. On a Japanese GAAP basis, Aflac Japan’s total investments had a total cost or amortized cost of 10.81 trillion yen, including available-for-sale investments of 3.46 trillion yen with a net unrealized gain of 299.4 billion yen as of June 30, 2017, the most recently reported Japanese GAAP financial results. If these investments changed in value to a net unrealized loss position, the repatriation or dividend capacity for Aflac Japan could be negatively affected. By increasing the investment portfolio’s allocation to PRM-designated investments and reducing the allocation to available-for-sale investments on a Japanese GAAP basis, Aflac Japan has reduced the risk of its SMR and repatriation or dividend capacity being negatively impacted. The Company also uses foreign currency derivatives to hedge a portion of Aflac Japan's U.S. dollar-denominated investments, which reduces the volatility in SMR and unrealized gains and losses caused by currency exchange rates when reporting these assets in yen for Aflac Japan regulatory reporting. (See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements in the 2016 Annual Report for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively.) In the event of a rapid change in market risk conditions causing SMR to decline, the Company has two senior unsecured revolving credit facilities in the amounts of ~~100~~¥100 billion ~~yen~~ and 55¥55 billion, ~~yen,~~ respectively, and a committed reinsurance facility in the amount of approximately ~~110~~¥110 billion ~~yen~~ as a capital contingency

plan. Additionally, the Company could take action to enter into derivatives on unhedged U.S. dollar-denominated investments with foreign currency options or forwards. (See Notes 7 and 8 of the Notes to the Consolidated Financial Statements for additional information.)

The Company has already undertaken various measures to mitigate the sensitivity of Aflac Japan's SMR. For example, the Company employs policy reserve matching (PRM) investment strategies, which is a Japan-specific accounting treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost consistent with corresponding liabilities. In order for a PRM-designated asset to be held at amortized cost, there are certain criteria that must be maintained. The primary criteria relates to maintaining the duration of designated assets and 9liabilities within a specified tolerance range. If the duration difference is not maintained within the specified range without rebalancing, then a certain portion of the assets must be re-classified as available for sale and held at fair value with any associated unrealized gain or loss recorded in surplus. To rebalance, assets may need to be sold in order to maintain the duration with the specified range, resulting in realizing a gain or loss from the sale. For U.S. GAAP, PRM investments are categorized as available for sale. The Company also uses foreign currency derivatives to hedge a portion of its U.S. dollar-denominated investments. (See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements in the ~~2016~~2018 Annual Report for additional information on the Company's ~~capital contingency plan.~~investment strategies, hedging activities, and reinsurance, respectively.)

As of September 30, ~~2017,~~2019, Aflac Japan's SMR remains high and reflects a strong capital and surplus position. As part of the conversion of Aflac Japan from a branch to a subsidiary on April 1, 2018, the Company experienced an accounting-driven decline in the SMR of approximately 130 points, based on the SMR as of December 31, 2017. The ~~FSA has been conducting field testing with the insurance industry concerning the introduction~~Company expects to be able to pay dividends out of certain accounts, thus restoring this accounting impact over an ~~economic value-based solvency regime. The field testing will assist the FSA in determining if an economic value-based solvency regime in Japan will be appropriate for the insurance industry.~~estimated three-year period.

Payments are made from Aflac Japan to the Parent Company for management fees, ~~and to Aflac U.S. for~~ allocated expenses and remittances of earnings. Prior to the Aflac Japan branch conversion on April 1, 2018, Aflac Japan paid allocated expenses

and profit remittances to Aflac U.S. The following table details Aflac Japan remittances for the nine-month periods ended September 30.

Aflac Japan Remittances

(In millions of dollars and billions of yen) 2017 2016
Aflac Japan management fees paid to Parent Company $ 73
$ 53

Expenses allocated to Aflac Japan (in dollars) 80
80

Aflac Japan profit remittances to Aflac U.S. (in dollars) 933
1,084

Aflac Japan profit remittances to Aflac U.S. (in yen) 104.6
115.2

The Company had foreign exchange forwards and options as part of a hedge on 21.9 billion yen of profit repatriation received from Aflac Japan in September 2017, resulting in $2 million more funds when the yen were exchanged into dollars. The Company had foreign exchange forwards and options as part of a hedge on 45.0 billion yen of profit repatriation received from Aflac Japan in July 2017, resulting in $5 million less funds received when the yen were exchanged into dollars. Provided that capital conditions remain stable, the Company believes its financial strength in Japan positions Aflac Japan to repatriate in the range of 120.0 billion yen to 140.0 billion yen to the U.S. for the full year 2017.



(In millions of dollars and billions of yen)	2019		2018
Aflac Japan management fees paid to Parent Company	$	89	$	40
Expenses allocated to Aflac Japan (in dollars)	3		8
Aflac Japan profit remittances to the Parent Company or Aflac U.S. (in dollars)	1,722		312
Aflac Japan profit remittances to the Parent Company or Aflac U.S. (in yen)	¥	186.3	¥	33.4

For additional information on regulatory restrictions on dividends, profit repatriations and other transfers, see Note 13 of the Notes to the Consolidated Financial Statements and the Regulatory Restrictions subsection of MD&A, both in the ~~2016~~2018 Annual Report.

Other

For information regarding commitments and contingent liabilities, see Note 12 of the Notes to the Consolidated Financial Statements.

Additional Information

Investors should note that the Company announces material financial information in its SEC filings, press releases and public conference calls. In accordance with SEC guidance, the Company may also use the Investor Relations section of the Company's website (http://investors.aflac.com) to communicate with investors about the Company. It is possible that the financial and other information the Company posts there could be deemed to be material information. The information on the Company's website is not part of this document. Further, the Company's references to website URLs are intended to be inactive textual references only.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed primarily to the following types of market risks: currency risk, interest rate risk, credit risk and equity risk. The Company regularly monitors its market risks and uses a variety of strategies to manage its exposure to these market risks. A description of the Company's market risk exposures may be found under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A, of the ~~2016~~2018 Annual Report. There have been no material changes to the Company's market risk exposures from the market risk exposures previously disclosed in the ~~2016~~2018 Annual Report.


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”)~~Exchange Act)) as of the end of the period covered by this quarterly report (the ~~“Evaluation Date”)~~Evaluation Date). Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the third fiscal quarter of ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

On December 14, 2017, three former independent sales contractors filed a shareholders derivative complaint in the U.S. District Court for the Southern District of New York naming the Parent Company as nominal defendant and the Parent Company’s Chairman and Chief Executive Officer, several of its directors, and a former officer and director as defendants. The complaint alleged breaches of fiduciary duty, misstatements and omissions in the Company’s public disclosures, and insider trading. On August 31, 2018, the District Court granted the Company's motion and the amended complaint was dismissed. The plaintiffs appealed the dismissal to the United States Court of Appeals for the Eleventh Circuit, and on September 5, 2019 the Court of Appeals affirmed the dismissal of the lawsuit. Although the plaintiffs are permitted to attempt to seek a review by the United States Supreme Court, the Company believes the outcome of this litigation will not have a material adverse effect on its financial position, results of operation or cash flows.


Item 1A.	Risk Factors

The following should be read in conjunction with and supplements and amends the risk factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A. of the Company's 2018 Annual Report on Form 10-K for the year ended December 31, 2018 and in Part II, Item 1A. of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

Events related to the ongoing Japan Post investigation regarding sales of Japan Post Insurance products could negatively impact the Company’s sales and results of operations.

As previously disclosed, there have been recent news reports and public comments regarding improper sales practices relating to sales of Japan Post Insurance Co., Ltd. (JPI) products by JPI and Japan Post Co., Ltd. (JPC), each an affiliate of Japan Post Holdings Co., Ltd. (Japan Post Holdings and, together with JPI and JPC, the Japan Post Group). JPC and JPI are critical distribution and alliance partners of the Company, which in recent periods have collectively accounted for approximately 25% of Aflac Japan’s third sector sales. See Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations. On July 24, 2019, after such news reports and other public comments, the Japan Post Group announced that they had established a Special Investigative Committee comprised of independent former prosecutors to determine whether JPC and JPI sales practices with respect to JPI products had caused disadvantages to customers holding such policies that were not otherwise the result of honoring such customers’ intentions. On September 30, 2019, the Japan Post Group issued a release discussing interim results of the investigation and stating that JPI had identified a number of cases involving potential violation of laws and regulations or internal rules. The Company’s understanding is that the JPI investigation does not relate to Aflac Japan insurance products sold through JPC and JPI, but only to JPI products sold through JPC and JPI. The JPI investigation remains ongoing.

On its July 26, 2019 earnings call, the Company announced that it was undertaking a voluntary review of sales of Aflac Japan cancer products through JPC and JPI. On September 30, 2019, Aflac Japan announced the results of the voluntary review. The review found that among the over 1.2 million Aflac Japan cancer insurance policies distributed through JPC and JPI with new contracts dated from April 1, 2014 to August 1, 2019, a small number of lapsed and reissued policies had been identified for which coverage of the old and new policies was the same and not aligned with customer intent (representing approximately 0.006% of the new policies reviewed). To address cases identified by the voluntary review where the old and new policies were the same and did not align with customer intent, Aflac Japan intends to take corrective measures.

Notwithstanding the JPI investigation and JPI and JPC’s decision to temporarily refrain from actively offering JPI products, the sale of Aflac Japan cancer policies has continued through JPC and JPI. However, in connection with these developments, the Company has observed a material decrease of sales in those channels and anticipates depressed sales for the duration of 2019 while the JPI investigation continues and the Japan Post Group continues to take remedial measures. See Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The final investigation results and recommendations of the Special Investigative Committee, and any remedial effects or negative effects on sales of Aflac Japan cancer products related thereto, could result in a materially adverse effect on sales of Aflac Japan cancer policies through JPC and JPI. While the Company has not yet developed cancer sales projections for 2020, sales of Aflac Japan cancer insurance through JPC and JPI may continue at low levels beyond 2019. See Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations. It is uncertain what long-term effect these developments will have on the Company’s sales, results of operations or financial condition.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

During the first nine months of ~~2017,~~2019, the Company repurchased shares of its common stock as follows:


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs		Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31	3,819,299		$	69.94	3,819,299	22,934,155		4,465,400		$	46.44	4,465,400	64,582,487
February 1 - February 28	1,988,420		70.03		1,853,000	21,081,155		4,170,417		48.65		3,624,583	60,957,904
March 1 - March 31	2,825,614		72.12		2,821,009	18,260,146		2,162,830		49.50		2,147,500	58,810,404
April 1 - April 30	1,764,523		73.70		1,764,523	16,495,623		2,177,000		49.21		2,177,000	56,633,404
May 1 - May 31	501		74.84		0	16,495,623		2,813,277		50.99		2,812,850	53,820,554
June 1 - June 30	902,308		78.08		896,795	15,598,828		1,964,259		54.44		1,952,000	51,868,554
July 1 - July 31	1,066,100		77.88		1,066,100	14,532,728		1,360,017		54.33		1,360,017	50,508,537
August 1 - August 31	1,356,142		80.95		1,356,000	53,176,728		2,491,225		51.22		2,483,400	48,025,137
September 1 - September 30	325,741		82.04		321,200	52,855,528		2,111,075		51.81		2,103,600	45,921,537
Total	14,048,648	⁽²⁾	$	73.33	13,897,926	52,855,528	⁽¹⁾	23,715,500	⁽¹⁾	$	50.00	23,126,350	45,921,537

⁽¹⁾The total remaining shares available for purchase at September 30, 2017, consisted of 12,855,528 shares related to a 40,000,000 share repurchase authorization by the board of directors announced in 2015 and 40,000,000 shares related to a 40,000,000 share repurchase authorization by the board of directors announced in August 2017.

⁽²⁾During the first nine months of ~~2017, 150,722~~2019, 589,150 shares were purchased in connection with income tax withholding obligations related to the vesting of restricted-share-based awards during the period.


Item 6.	Exhibits



(a)	EXHIBIT INDEX
	3.0		-		Articles of Incorporation, as amended – incorporated by reference from Form 10-Q for June 30, 2008, Exhibit ~~3.0 (File No. 001-07434).~~3.0.
	3.1		-		Bylaws of the Corporation, as amended and restated – incorporated by reference from Form 8-K dated November 10, 2015, Exhibit ~~3.1 (File No. 001-07434).~~3.1.
	4.0		-		There are no instruments with respect to long-term debt not being registered 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 instrument to the Securities and Exchange Commission upon request.
	~~4.1~~15	-		Indenture, dated as of May 21, 2009, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee – incorporated by reference from Form 8-K dated May 21, 2009, Exhibit 4.1 (File No. 001-07434).
	~~4.2~~	-		Second Supplemental Indenture, dated as of December 17, 2009, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 6.900% Senior Note due 2039) – incorporated by reference from Form 8-K dated December 14, 2009, Exhibit 4.1 (File No. 001-07434).
	~~4.3~~	-		Third Supplemental Indenture, dated as of August 9, 2010, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 6.45% Senior Note due 2040) - incorporated by reference from Form 8-K dated August 4, 2010, Exhibit 4.1 (File No. 001-07434).
	~~4.4~~	-		Fifth Supplemental Indenture, dated as of February 10, 2012, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.65% Senior Note due 2017) - incorporated by reference from Form 8-K dated February 8, 2012, Exhibit 4.1 (File No. 001-07434).
	~~4.5~~	-		Sixth Supplemental Indenture, dated as of February 10, 2012, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 4.00% Senior Note due 2022) - incorporated by reference from Form 8-K dated February 8, 2012, Exhibit 4.2 (File No. 001-07434).
	~~4.6~~	-		Seventh Supplemental Indenture, dated as of July 31, 2012, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.65% Senior Note due 2017) - incorporated by reference from Form 8-K dated July 27, 2012, Exhibit 4.1 (File No. 001-07434).
	~~4.7~~	-		Eighth Supplemental Indenture, dated as of June 10, 2013, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 3.625% Senior Note due 2023) - incorporated by reference from Form 8-K dated June 10, 2013, Exhibit 4.1 (File No. 001-07434).
	~~4.8~~	-		Ninth Supplemental Indenture, dated as of November 7, 2014, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 3.625% Senior Note due 2024) - incorporated by reference from Form 8-K dated November 4, 2014, Exhibit 4.1 (File No. 001-07434).
	~~4.9~~	-		Tenth Supplemental Indenture, dated as of March 12, 2015, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.40% Senior Note due 2020) - incorporated by reference from Form 8-K dated March 9, 2015, Exhibit 4.1 (File No. 001-07434).
	~~4.10~~	-		Eleventh Supplemental Indenture, dated as of March 12, 2015, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 3.25% Senior Note due 2025) - incorporated by reference from Form 8-K dated March 9, 2015, Exhibit 4.2 (File No. 001-07434).
	~~4.11~~	-		Twelfth Supplemental Indenture, dated as of September 19, 2016, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.875% Senior Note due 2026) - incorporated by reference from Form 8-K dated September 19, 2016, Exhibit 4.1 (File No. 001-07434).
	~~4.12~~	-		Thirteenth Supplemental Indenture, dated as of September 19, 2016, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 4.000% Senior Note due 2046) - incorporated by reference from Form 8-K dated September 19, 2016, Exhibit 4.2 (File No. 001-07434).
	~~4.13~~	-		Fourteenth Supplemental Indenture, dated as of January 25, 2017, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of .932% Senior Note due 2027) – incorporated by reference from Form 8-K dated January 25, 2017, Exhibit 4.1 (File No. 001-07434).



~~4.14~~	-		Subordinated Indenture, dated as of September 26, 2012, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee - incorporated by reference from Form 8-K dated September 26, 2012, Exhibit 4.1 (File No. 001-07434).
~~4.15~~	-		First Supplemental Indenture, dated as of September 26, 2012, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 5.50% Subordinated Debenture due 2052) - incorporated by reference from Form 8-K dated September 26, 2012, Exhibit 4.2 (File No. 001-07434).
~~4.16~~	-		Second Supplemental Indenture, dated as of October 23, 2017, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.108% Subordinated Debenture due 2047) - incorporated by reference from Form 8-K dated October 23, 2017, Exhibit 4.1 (File No. 001-07434).
10.1*	-		~~Aflac Separation Agreement with Paul S. Amos II, dated June 6, 2017 - incorporated by reference from Form 10-Q dated August 3, 2017, Exhibit 10.40 (File No. 001-07434).~~
15	-		Letter from KPMG LLP regarding unaudited interim financial information.
31.1		-		Certification of CEO dated ~~November 2, 2017,~~October 25, 2019, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2		-		Certification of CFO dated ~~November 2, 2017,~~October 25, 2019, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32		-		Certification of CEO and CFO dated ~~November 2, 2017,~~October 25, 2019, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		-		XBRL Instance ~~Document.~~⁽¹⁾ Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		-		XBRL Taxonomy Extension Schema.
101.CAL		-		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		-		XBRL Taxonomy Extension Definition Linkbase.
101.LAB		-		XBRL Taxonomy Extension Label Linkbase.
101.PRE		-		XBRL Taxonomy Extension Presentation Linkbase.



₍₁₎	Includes the following materials contained in this Quarterly Report on Form 10-Q for the period ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to the Consolidated Financial Statements

*	~~Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 6 of this report~~

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

~~November 2, 2017~~October 25, 2019		/s/ Frederick J. Crawford
		(Frederick J. Crawford)
		Executive Vice President, Chief Financial Officer

~~November 2, 2017~~October 25, 2019		/s/ June Howard
		(June Howard)
		Senior Vice President, Financial Services; Chief Accounting Officer

99105



(In millions)	September 30, 2017 (Unaudited)			December 31, 2016
Assets:
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities (amortized cost $67,970 in 2017 and $62,195 in 2016)		$	75,191		$	68,778
Fixed maturities - consolidated variable interest entities (amortized cost $4,274 in 2017 and $4,168 in 2016)		5,224			4,982
Perpetual securities (amortized cost $1,310 in 2017 and $1,269 in 2016)		1,652			1,425
Perpetual securities - consolidated variable interest entities (amortized cost $239 in 2017 and $237 in 2016)		211			208
Equity securities (cost $216 in 2017 and $231 in 2016)		238			265
Equity securities - consolidated variable interest entities (cost $595 in 2017 and $972 in 2016)		690			1,044
Securities held to maturity, at amortized cost:
Fixed maturities (fair value $38,599 in 2017 and $40,021 in 2016)		31,998			33,350
Other investments ⁽¹⁾		2,358			1,450
Cash and cash equivalents		4,927			4,859
Total investments and cash		122,489			116,361
Receivables		937			669
Accrued investment income		730			754
Deferred policy acquisition costs		9,413			8,993
Property and equipment, at cost less accumulated depreciation		439			433
Other ⁽²⁾		2,075			2,609
Total assets		$	136,083		$	129,819



Three Months Ended September 30, 2017
	Fixed Maturities										Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Banks/ Financial Institutions		Other Corporate					Foreign Currency Swaps		Credit Default Swaps			Total
Balance, beginning of period	$	188		$	53	$	25	$	77		$	14	$	7	$	2		$	366
Realized investment gains (losses) included in earnings	0			0		0		0			0		8		(1		)	7
Unrealized gains (losses) included in other comprehensive income (loss)	(2		)	0		0		1			0		0		0			(1		)
Purchases, issuances, sales and settlements:
Purchases	0			24		0		25			4		0		0			53
Issuances	0			0		0		0			0		0		0			0
Sales	0			0		0		(1		)	0		0		0			(1		)
Settlements	(8		)	0		0		0			0		0		0			(8		)
Transfers into Level 3	0			0		0		0			0		0		0			0
Transfers out of Level 3	0			0		0		0			0		0		0			0
Balance, end of period	$	178		$	77	$	25	$	102		$	18	$	15	$	1		$	416
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	0		$	0	$	0	$	0		$	0	$	8	$	(1	)	$	7



	Including Foreign Currency Changes												Excluding Foreign Currency Changes⁽²⁾
	Three Months						Nine Months						Three Months						Nine Months
	2017			2016			2017			2016			2017			2016			2017			2016
Net investment income, less amortized hedge costs	1.1		%	(14.1	)	%	(3.4	)	%	(9.4	)	%	(3.2	)	%	(5.8	)	%	(4.9	)	%	(4.2	)	%
Total operating revenues	(2.8	)		(1.4	)		(2.5	)		(.7	)		(3.4	)		.0			(2.8	)		.2
Pretax operating earnings⁽¹⁾	(1.3	)		(10.6	)		(1.8	)		(5.9	)		(4.4	)		(4.4	)		(2.9	)		(2.1	)