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

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

~~[ ]~~

☐

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

(Registrant's telephone number, including area code)



~~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 per share

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. þ Yes ¨ 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). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ¨ ~~(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. 679,667,234 shares of the issuer's common stock were outstanding as of April 20, 2021.



~~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~~March 31, 2021

Table of Contents


PART I.					FINANCIAL INFORMATION:	Page

			Item 1.		Financial Statements (Unaudited)

				~~Page~~
~~PART I.~~					~~FINANCIAL INFORMATION:~~

~~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~~March 31, 2021 and ~~2016~~ ~~Nine Months Ended September 30, 2017 and 2016~~2020	31

					Consolidated Statements of Comprehensive Income (Loss) Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~ ~~Nine Months Ended September 30, 2017 and 2016~~2020	42

					Consolidated Balance Sheets ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016~~2020	53

					Consolidated Statements of Shareholders' Equity ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	74

					Consolidated Statements of Cash Flows ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	85

					Notes to the Consolidated Financial Statements	96

			Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	6760

			Item 3.		Quantitative and Qualitative Disclosures about Market Risk	9493

			Item 4.		Controls and Procedures	9593

PART II.					OTHER INFORMATION:	96

			Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	9694

			Item 6.5.		~~Exhibits~~Other Information	9794

			Item 6.		Exhibits	95

Glossary of Selected Terms						96

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, and 2016, 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 Board of Directors and Shareholders~~

~~Aflac Incorporated:~~

We have reviewed the consolidated balance sheet of Aflac Incorporated and subsidiaries (the Company) as of September 30, 2017, the related consolidated statements of earnings, and comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2017 and 2016, and the related consolidated statements of shareholders' equity, and cash flows for the nine-month periods ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of 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), 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~~

Aflac Incorporated and Subsidiaries

Consolidated Statements of Earnings


	Three Months Ended March 31,
(In millions, except for share and per-share amounts - Unaudited)		2021	2020
Revenues:
Net premiums, principally supplemental health insurance				$	4,593	$	4,681
Net investment income				925		904
Net investment gains (losses)				307		(463)
Other income (loss)				44		40
Total revenues				5,869		5,162
Benefits and expenses:
Benefits and claims, net				2,735		2,939
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs				311		333
Insurance commissions				326		336
Insurance and other expenses				832		779		(1)
Interest expense				62		55
Total acquisition and operating expenses				1,531		1,503
Total benefits and expenses				4,266		4,442
Earnings before income taxes				1,603		720
Income taxes				310		154
Net earnings				$	1,293	$	566
Net earnings per share:
Basic				$	1.88	$	.78
Diluted				1.87		.78
Weighted-average outstanding common shares used in computing earnings per share (In thousands):
Basic				688,938		724,366
Diluted				691,940		727,512
Cash dividends per share				$	.33	$	.28

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

(1) Includes expense of $15 for the early extinguishment of debt

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) 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

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

⁽²⁾~~Includes $148 in 2017 and $127 in 2016 of derivatives from consolidated variable interest entities~~


	Three Months Ended March 31,
(In millions - Unaudited)		2021	2020
Net earnings				$	1,293	$	566
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period				(581)		85
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities during period				(2,003)		(4,605)
Reclassification adjustment for (gains) losses on fixed maturity securities included in net earnings				20		7
Unrealized gains (losses) on derivatives during period				0		(4)
Pension liability adjustment during period				5		0
Total other comprehensive income (loss) before income taxes				(2,559)		(4,517)
Income tax expense (benefit) related to items of other comprehensive income (loss)				(432)		(1,242)
Other comprehensive income (loss), net of income taxes				(2,127)		(3,275)
Total comprehensive income (loss)				$	(834)	$	(2,709)

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~~


(In millions, except for share and per-share amounts)	March 31, 2021 (Unaudited)			December 31, 2020
Assets:
Investments and cash:
Fixed maturity securities available for sale, at fair value, (allowance for credit losses of $27 in 2021 and $38 in 2020, amortized cost $85,174 in 2021 and amortized cost $88,143 in 2020)		$	96,391		$	101,286
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value (amortized cost $3,291 in 2021 and amortized cost of $3,487 in 2020)		4,353			4,596
Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses of $8 in 2021 and $10 in 2020 (fair value $28,056 in 2021 and $30,399 in 2020)		22,868			24,464
Equity securities, at fair value		1,174			1,283
Commercial mortgage and other loans, net of allowance for credit losses of $154 in 2021 and $180 in 2020 (includes $9,210 in 2021 and $8,964 in 2020 of consolidated variable interest entities)		10,847			10,554
Other investments (includes $908 in 2021 and $826 in 2020 of consolidated variable interest entities)		2,666			2,429
Cash and cash equivalents		4,990			5,141
Total investments and cash		143,289			149,753
Receivables		777			796
Accrued investment income		706			780
Deferred policy acquisition costs		9,835			10,441
Property and equipment, at cost less accumulated depreciation		578			601
Other		2,972			2,715
Total assets		$	158,157		$	165,086
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	92,396		$	97,783
Unpaid policy claims		4,948			5,187
Unearned premiums		3,194			3,597
Other policyholders’ funds		7,367			7,824
Total policy liabilities		107,905			114,391
Income taxes		4,350			4,661
Payables for return of cash collateral on loaned securities		1,896			964
Notes payable and lease obligations		8,088			7,899
Other		3,815			3,612
Total liabilities		126,054			131,527
Commitments and contingent liabilities (Note 12)		0			0
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2021 and 2020; issued 1,352,279 shares in 2021 and 1,351,018 shares in 2020		135			135
Additional paid-in capital		2,438			2,410
Retained earnings		39,277			37,984
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)		(1,674)			(1,109)
Unrealized gains (losses) on fixed maturity securities		8,794			10,361
Unrealized gains (losses) on derivatives		(33)			(34)
Pension liability adjustment		(280)			(284)
Treasury stock, at average cost		(16,554)			(15,904)
Total shareholders’ equity		32,103			33,559
Total liabilities and shareholders’ equity		$	158,157		$	165,086

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity

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


(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, 2020	$	135	$	2,410	$	37,984	$	8,934	$	(15,904)	$	33,559
Net earnings	0		0		1,293		0		0		1,293
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(565)		0		(565)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		(1,567)		0		(1,567)
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		4		0		4
Dividends to shareholders ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		9		0		0		0		9
Share-based compensation	0		9		0		0		0		9
Purchases of treasury stock	0		0		0		0		(668)		(668)
Treasury stock reissued	0		10		0		0		18		28
Balance at March 31, 2021	$	135	$	2,438	$	39,277	$	6,807	$	(16,554)	$	32,103


(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, 2019	$	135	$	2,313	$	34,291	$	6,615	$	(14,395)	$	28,959
Cumulative effect of change in accounting principle - Accounting Standards Update (ASU) 2016-13, net of income taxes (1)	0		0		(56)		0		0		(56)
Cumulative effect of change in accounting principle - ASU 2019-04, net of income taxes (1)	0		0		0		848		0		848
Balance at January 1, 2020	135		2,313		34,235		7,463		(14,395)		29,751
Net earnings	0		0		566		0		0		566
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		80		0		80
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		(3,353)		0		(3,353)
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		0		0		0
Dividends to shareholders ($.28 per share)	0		0		(202)		0		0		(202)
Exercise of stock options	0		5		0		0		0		5
Share-based compensation	0		7		0		0		0		7
Purchases of treasury stock	0		0		0		0		(476)		(476)
Treasury stock reissued	0		9		0		0		17		26
Balance at March 31, 2020	$	135	$	2,334	$	34,599	$	4,188	$	(14,854)	$	26,402

(1) See Note 1 of the Notes to the Consolidated Financial Statements in the Company's 2020 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,									Three Months Ended March 31,
(In millions - Unaudited)	2017				2016				(In millions - Unaudited)	2021			2020
Cash flows from operating activities:									Cash flows from operating activities:
Net earnings		$	2,021			$	1,908		Net earnings		$	1,293		$	566
Adjustments to reconcile net earnings to net cash provided by operating activities:
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:									Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Change in receivables and advance premiums		(32		)		41			Change in receivables and advance premiums		(19)			15
Increase in deferred policy acquisition costs		(229		)		(186		)
Capitalization of deferred policy acquisition costs									Capitalization of deferred policy acquisition costs		(262)			(325)
Amortization of deferred policy acquisition costs									Amortization of deferred policy acquisition costs		311			333
Increase in policy liabilities		2,137				2,329			Increase in policy liabilities		204			368
Change in income tax liabilities		323				(365		)	Change in income tax liabilities		331			153
Realized investment (gains) losses		166				358
Net investment (gains) losses									Net investment (gains) losses		(307)			463
Other, net		210				35			Other, net		(185)			(159)
Net cash provided (used) by operating activities		4,596				4,120			Net cash provided (used) by operating activities		1,366			1,414
Cash flows from investing activities:									Cash flows from investing activities:
Proceeds from investments sold or matured:									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
Available-for-sale fixed maturity securities									Available-for-sale fixed maturity securities		651			726
Equity securities									Equity securities		123			3

Commercial mortgage and other loans									Commercial mortgage and other loans		725			408
Costs of investments acquired:									Costs of investments acquired:
Available-for-sale fixed maturities acquired		(6,827		)		(4,871		)
Available-for-sale equity securities acquired		(391		)		(868		)
Available-for-sale fixed maturity securities									Available-for-sale fixed maturity securities		(2,475)			(1,817)
Equity securities									Equity securities		(126)			(6)
Commercial mortgage and other loans									Commercial mortgage and other loans		(956)			(1,787)
Other investments, net		(949		)		(801		)	Other investments, net		(201)			(361)
Settlement of derivatives, net		(240		)		1,203			Settlement of derivatives, net		116			13
Cash received (pledged or returned) as collateral, net		(273		)		(350		)	Cash received (pledged or returned) as collateral, net		1,206			1,160
Other, net		(58		)		(56		)	Other, net		(32)			(55)
Net cash provided (used) by investing activities		(2,887		)		(2,638		)	Net cash provided (used) by investing activities		(969)			(1,716)
Cash flows from financing activities:									Cash flows from financing activities:
Purchases of treasury stock		(1,053		)		(1,222		)	Purchases of treasury stock		(650)			(449)
Proceeds from borrowings		524				988			Proceeds from borrowings		400			545
Principal payments under debt obligations		(660		)		(232		)	Principal payments under debt obligations		0			(350)
Dividends paid to shareholders		(491		)		(492		)	Dividends paid to shareholders		(219)			(195)
Change in investment-type contracts, net		39				117			Change in investment-type contracts, net		(12)			(5)
Treasury stock reissued		23				37			Treasury stock reissued		9			9
Other, net		5				(31		)	Other, net		2			(1)
Net cash provided (used) by financing activities		(1,613		)		(835		)	Net cash provided (used) by financing activities		(470)			(446)
Effect of exchange rate changes on cash and cash equivalents		(28		)		273			Effect of exchange rate changes on cash and cash equivalents		(78)			0
Net change in cash and cash equivalents		68				920			Net change in cash and cash equivalents		(151)			(748)
Cash and cash equivalents, beginning of period		4,859				4,350			Cash and cash equivalents, beginning of period		5,141			4,896
Cash and cash equivalents, end of period		$	4,927			$	5,270		Cash and cash equivalents, end of period		$	4,990		$	4,148
Supplemental disclosures of cash flow information:									Supplemental disclosures of cash flow information:
Income taxes paid		$	693			$	1,594		Income taxes paid		$	(20)		$	2
Interest paid		144				155			Interest paid		35			39
Noncash interest		38				41			Noncash interest		27			15
Impairment losses included in realized investment losses		27				71
Noncash financing activities:									Noncash financing activities:
Capital lease obligations		7				2
Lease obligations									Lease obligations		20			13
Treasury stock issued for:									Treasury stock issued for:
Associate stock bonus		22				24			Associate stock bonus		7			5
Shareholder dividend reinvestment		22				19			Shareholder dividend reinvestment		8			7
Share-based compensation grants		1				4			Share-based compensation grants		4			5

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~~

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 (U.S.) and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the U.S. and through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan. The Company’s operations consist of 2 reportable business segments: Aflac U.S., which ~~operates in the United States (Aflac U.S.)~~includes Aflac, and ~~as a branch in~~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,~~With the exception of group dental and vision products administered by Argus Dental & Vision, Inc. (Argus) and certain group life insurance products, 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~~U.S. and ~~its branch in~~ Japan service the two markets for the Company's insurance business. Aflac Japan's revenues, including ~~realized~~net gains and losses on its investment portfolio, accounted for ~~69%~~70% and ~~74%~~67% of the Company's total revenues in the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 83% at both ~~September 30, 2017,~~March 31, 2021 and December 31, ~~2016.~~2020.

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,~~March 31, 2021 and December 31, ~~2016,~~2020, and the consolidated statements of earnings, ~~and~~ comprehensive income (loss) ~~for the three- and nine-month periods ended September 30, 2017 and 2016, and the consolidated statements of~~, shareholders' equity and cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020. 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~~2020 (2020 Annual Report).

COVID-19: The impact of the COVID-19 global pandemic on the Company continues to evolve, and its future effects remain uncertain. The Company continues to closely monitor the effects and risks of COVID-19 to assess its impact on economic conditions in Japan and the U.S. and on the Company's business, financial condition, results of operations, liquidity and capital position.

The Company entered the crisis in a strong capital and liquidity position, having maintained capital ratios in Japan and the U.S. at a level designed to absorb a degree of market volatility. The Company has the ability to adjust cash flow management from other sources of liquidity including reinvestment cash flows and selling investments.

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 Standards Update (ASU) 2020-01 Clarifying the interactions between Topic 321, Topic 323, and Topic 815	In January 2020, the FASB issued amendments clarifying that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify that for the purpose of applying certain derivative guidance in Topic 815, an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. An entity also would evaluate the remaining characteristics in Topic 815 to determine the accounting for those forward contracts and purchased options. The amendments are effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.	January 1, 2021	The adoption of the new guidance did not have an impact on the Company’s financial position, results of operation, 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.

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 2018-12 Financial Services - Insurance, Targeted Improvements to the Accounting for Long-Duration Contracts as clarified and amended by: ASU 2019-09 Financial Services - Insurance (Topic 944): Effective Date ASU 2020-11 Financial Services - Insurance (Topic 944):Effective Date and Early Application	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. In November 2019, the FASB issued an amendment extending the effective date for public business entities that meet the definition of an SEC filer, excluding entities eligible to be small reporting companies as defined by the SEC, by one year. In November 2020, the FASB issued an amendment providing an additional year deferral for all insurance entities due to the impact of COVID-19. The amendments are now effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. 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 selected a modified retrospective transition method.

~~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.

~~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.

~~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.

~~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 or disclosures, see Note 1 of the Notes to the Consolidated Financial Statements in the ~~2016~~2020 Annual Report.


2.	~~BUSINESS SEGMENT INFORMATION~~

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 realized~~management’s control. Adjusted revenues are U.S. GAAP total revenues excluding net 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 March 31,
(In millions)	2017		2016			2017			2016			(In millions)		2021		2020
Revenues:												Revenues:
Aflac Japan:												Aflac Japan:
Net earned premiums	$	3,200	$	3,596		$	9,616		$	10,177		Net earned premiums		$	3,123	$	3,150
Net investment income, less amortized hedge costs ⁽¹⁾	561		607			1,676			1,802
Adjusted net investment income (1),(2)												Adjusted net investment income (1),(2)		705		642
Other income	11		10			31			29			Other income		13		11
Total Aflac Japan	3,772		4,213			11,323			12,008
Total adjusted revenue Aflac Japan												Total adjusted revenue Aflac Japan		3,841		3,803
Aflac U.S.:												Aflac U.S.:
Net earned premiums	1,393		1,365			4,172			4,093			Net earned premiums		1,422		1,483
Net investment income	181		176			539			526
Adjusted net investment income												Adjusted net investment income		176		177
Other income	1		1			3			5			Other income		30		27
Total Aflac U.S.	1,575		1,542			4,714			4,624
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		)
Total adjusted revenue Aflac U.S.												Total adjusted revenue Aflac U.S.		1,628		1,687
Corporate and other (3)												Corporate and other (3)		83		104
Total adjusted revenues												Total adjusted revenues		5,552		5,594
Net investment gains (losses) (1),(2),(3)												Net investment gains (losses) (1),(2),(3)		317		(432)
Total revenues	$	5,506	$	5,716		$	16,243		$	16,604		Total revenues		$	5,869	$	5,162

⁽¹⁾Amortized hedge costs ~~related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60~~of $19 and ~~$54~~$55 for the three-month periods ended March 31, 2021, and ~~$168 and $123 for the nine-month periods ended September 30, 2017, and 2016,~~2020, respectively, ~~and~~related to certain foreign currency exposure management strategies have been reclassified from ~~realized~~net 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 a gain~~ Net interest cash flows from derivatives associated with certain investment strategies of ~~$19~~$(8) and ~~$20~~$(6) for the three-month periods ended March 31, 2021 and ~~$60~~2020, respectively, have been reclassified from net investment gains (losses) and ~~$64~~included in adjusted earnings as a component of net investment income when analyzing operations.

(3) Amortized hedge income of $17and $29 for the ~~nine-month~~three-month periods ended ~~September 30, 2017,~~March 31, 2021, and ~~2016,~~2020, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase to net investment income when analyzing operations.


	Three Months Ended March 31,
(In millions)		2021		2020
Pretax earnings:
Aflac Japan (1),(2)		$	887	$	855
Aflac U.S.		445		326
Corporate and other (3),(4)		(26)		2
Pretax adjusted earnings (5)		1,306		1,183
Net investment gains (losses) (1),(2),(3),(4)		304		(448)
Other income (loss)		(7)		(15)
Total earnings before income taxes		$	1,603	$	720
Income taxes applicable to pretax adjusted earnings		$	248	$	301
Effect of foreign currency translation on after-tax adjusted earnings		13		9

(1) Amortizedhedge costs of $19 and $55 for the three-month periods ended March 31, 2021, and 2020, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(2) Net interest cash flows from derivatives associated with certain investment strategies of $(8) and $(6) for the three-month periods ended March 31, 2021 and 2020, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(3) Amortized hedge income of $17 and $29 for the three-month periods ended March 31, 2021, and 2020, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase in net investment income when analyzing operations.

(4) A gain of $14 and $16 for the three-month periods ended March 31, 2021, and 2020, 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~~

⁽³⁾~~Prior year foreign currency transaction gains and losses have~~has been reclassified from ~~other non-operating income (loss) to realized~~net investment gains (losses) ~~to conform to current-year reporting classifications. These reclassifications had no impact on total revenues.~~and included in adjusted earnings when analyzing operations.

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⁾~~Amortizedhedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60~~(5) Includes $45 and ~~$54~~$33 for the three-month periods ended March 31, 2021, and ~~$168 and $123 for the nine-month periods ended September 30, 2017, and 2016,~~2020, respectively, ~~and have been reclassified from realized investment gains (losses) and reported as a deduction from pretax operating earnings when analyzing segment operations to conform to current year reporting.~~of interest expense on debt.

⁽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

⁽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 earnings before income taxes.

Assets were as follows:


(In millions)	March 31, 2021			December 31, 2020
Assets:
Aflac Japan		$	130,611		$	137,271
Aflac U.S.		22,278			22,864
Corporate and other		5,268			4,951
Total assets		$	158,157		$	165,086

(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~~

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.


	March 31, 2021
(In millions)	Amortized Cost		Allowance for Credit Losses		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	$	32,013	$	0	$	3,614	$	80	$	35,547
Municipalities	1,238		0		331		6		1,563
Mortgage- and asset-backed securities	318		0		23		1		340
Public utilities	4,616		0		970		5		5,581
Sovereign and supranational	902		0		89		0		991
Banks/financial institutions	7,188		0		837		103		7,922
Other corporate	7,452		0		1,577		35		8,994
Total yen-denominated	53,727		0		7,441		230		60,938
U.S. dollar-denominated:
U.S. government and agencies	234		0		10		0		244
Municipalities	1,188		0		154		4		1,338
Mortgage- and asset-backed securities	816		0		29		1		844
Public utilities	3,867		0		760		9		4,618
Sovereign and supranational	226		0		61		3		284
Banks/financial institutions	2,991		0		668		6		3,653
Other corporate	25,416		27		3,592		156		28,825
Total U.S. dollar-denominated	34,738		27		5,274		179		39,806
Total securities available for sale	$	88,465	$	27	$	12,715	$	409	$	100,744


	September 30, 2017													December 31, 2020
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			(In millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Securities available for sale, carried at fair value through other comprehensive income:													Securities available for sale, carried at fair value through other comprehensive income:
Fixed maturity securities:													Fixed maturity securities:
Yen-denominated:													Yen-denominated:
Japan government and agencies		$	27,027		$	3,272		$	423		$	29,876	Japan government and agencies	$	32,959	$	0	$	4,182	$	52	$	37,089
Municipalities		315			26			15			326		Municipalities	1,324		0		374		5		1,693
Mortgage- and asset-backed securities		248			29			0			277		Mortgage- and asset-backed securities	342		0		27		1		368
Public utilities		1,643			369			7			2,005		Public utilities	4,777		0		1,096		1		5,872
Sovereign and supranational		1,428			190			3			1,615		Sovereign and supranational	981		0		108		0		1,089
Banks/financial institutions		3,307			494			59			3,742		Banks/financial institutions	7,552		0		886		102		8,336
Other corporate		3,811			771			25			4,557		Other corporate	8,114		0		1,747		37		9,824
Total yen-denominated		37,779			5,151			532			42,398		Total yen-denominated	56,049		0		8,420		198		64,271
U.S. dollar-denominated:													U.S. dollar-denominated:
U.S. government and agencies		150			12			0			162		U.S. government and agencies	245		0		16		0		261
Municipalities		818			148			0			966		Municipalities	1,154		0		173		2		1,325
Mortgage- and asset-backed securities		166			13			0			179		Mortgage- and asset-backed securities	667		0		8		5		670
Public utilities		5,231			813			34			6,010		Public utilities	4,013		0		947		15		4,945
Sovereign and supranational		325			89			0			414		Sovereign and supranational	232		0		64		3		293
Banks/financial institutions		2,683			592			7			3,268		Banks/financial institutions	2,973		0		758		7		3,724
Other corporate		25,092			2,388			462			27,018		Other corporate	26,297		38		4,385		251		30,393
Total U.S. dollar-denominated		34,465			4,055			503			38,017		Total U.S. dollar-denominated	35,581		38		6,351		283		41,611
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	Total securities available for sale	$	91,630	$	38	$	14,771	$	481	$	105,882


	March 31, 2021
(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		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	$	21,918	$	3	$	21,915	$	4,924	$	0	$	26,839
Municipalities	352		0		352		108		0		460

Public utilities	45		1		44		13		0		57
Sovereign and supranational	538		4		534		136		0		670

Other corporate	23		0		23		7		0		30
Total yen-denominated	22,876		8		22,868		5,188		0		28,056
Total securities held to maturity	$	22,876	$	8	$	22,868	$	5,188	$	0	$	28,056


	September 30, 2017													December 31, 2020
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities held to maturity, carried at amortized cost:													Securities held to maturity, carried at amortized cost:
Fixed maturities:
Fixed maturity securities:													Fixed maturity securities:
Yen-denominated:													Yen-denominated:
Japan government and agencies		$	21,385		$	5,070		$	0		$	26,455	Japan government and agencies	$	23,448	$	3	$	23,445	$	5,625	$	0	$	29,070
Municipalities		359			104			0			463		Municipalities	377		0		377		122		0		499
Mortgage- and asset-backed securities		27			2			0			29
Public utilities		3,308			426			0			3,734		Public utilities	48		1		47		14		0		61
Sovereign and supranational		1,527			319			0			1,846		Sovereign and supranational	577		6		571		165		0		736
Banks/financial institutions		2,700			205			18			2,887
Other corporate		2,692			493			0			3,185		Other corporate	24		0		24		9		0		33
Total yen-denominated		31,998			6,619			18			38,599		Total yen-denominated	24,474		10		24,464		5,935		0		30,399
Total securities held to maturity		$	31,998		$	6,619		$	18		$	38,599	Total securities held to maturity	$	24,474	$	10	$	24,464	$	5,935	$	0	$	30,399


(In millions)	March 31, 2021			December 31, 2020
Equity securities, carried at fair value through net earnings:	Fair Value			Fair Value
Equity securities:
Yen-denominated		$	727		$	680
U.S. dollar-denominated		405			603
Other currencies		42			0
Total equity securities		$	1,174		$	1,283

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

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~~first quarter of ~~2017,~~2021, the Company did ~~not~~0t reclassify any investments from the held-to-maturity category to the available-for-sale category. During the ~~second~~first quarter of ~~2017,~~2020, as a result of the adoption of ASU 2019-04, the Company reclassified ~~three investments~~$6.9 billion (at amortized cost) of pre-payable fixed-maturity securities from the held-to-maturity category to the available-for-sale ~~category as~~category. This reclassification resulted in recording in accumulated other comprehensive income 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~~net 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.~~$848 million on an after-tax basis.

~~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,~~March 31, 2021, were as follows:


	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value			(In millions)	Amortized Cost (1)			Fair Value
Available for sale:													Available for sale:
Due in one year or less		$	175		$	181		$	53		$	54	Due in one year or less		$	907		$	922
Due after one year through five years		5,734			6,029			637			682		Due after one year through five years		8,487			9,005
Due after five years through 10 years		9,078			9,668			3,253			3,529		Due after five years through 10 years		13,637			15,827
Due after 10 years		43,860			49,502			8,443			9,698		Due after 10 years		64,274			73,806
Mortgage- and asset-backed securities		290			330			40			42		Mortgage- and asset-backed securities		1,134			1,184
Total fixed maturities available for sale		$	59,137		$	65,710		$	12,426		$	14,005
Total fixed maturity securities available for sale													Total fixed maturity securities available for sale		$	88,439		$	100,744
Held to maturity:													Held to maturity:
Due in one year or less		$	488		$	497		$	0		$	0	Due in one year or less		$	0		$	0
Due after one year through five years		923			970			0			0		Due after one year through five years		45			50
Due after five years through 10 years		1,638			1,810			0			0		Due after five years through 10 years		4,103			4,788
Due after 10 years		28,922			35,293			0			0		Due after 10 years		18,720			23,218
Mortgage- and asset-backed securities		27			29			0			0		Mortgage- and asset-backed securities		0			0
Total fixed maturities held to maturity		$	31,998		$	38,599		$	0		$	0
Total fixed maturity securities held to maturity													Total fixed maturity securities held to maturity		$	22,868		$	28,056

(1) Net of allowance for credit losses

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:

March 31, 2021

December 31, 2020

(In millions)

Credit
Rating

Amortized
Cost

Fair
Value

Credit
Rating

Amortized
Cost

Fair
Value

Japan National Government(1)

A+

$52,645

$60,867

A+

$55,153

$64,657

September 30, 2017 December 31, 2016
(In millions) Credit
Rating Amortized
Cost Fair
Value Credit
Rating Amortized
Cost Fair
Value
Japan National Government⁽¹⁾
A $47,637 $55,444 A $42,931 $51,345

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

~~Realized~~

Net Investment Gains and Losses

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


	Three Months Ended March 31,
(In millions)		2021		2020
Net investment gains (losses):
Sales and redemptions:
Fixed maturity securities available for sale:
Gross gains from sales		$	2	$	7
Gross losses from sales		(1)		0
Foreign currency gains (losses) on sales and redemptions		(12)		(14)
Total sales and redemptions		(11)		(7)
Equity securities		(68)		(149)


Credit losses:
Fixed maturity securities available for sale		11		(63)
Fixed maturity securities held to maturity		1		1
Commercial mortgage and other loans		27		(37)
Impairment losses		(20)		0
Loan commitments		5		(46)
Reinsurance recoverables and other		(2)		0
Total credit losses		22		(145)
Derivatives and other:
Derivative gains (losses)		(287)		(85)
Foreign currency gains (losses)		651		(77)
Total derivatives and other		364		(162)
Total net investment gains (losses)		$	307	$	(463)

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 losses, net of gains, recorded as a component of net investment gains and losses ~~have been reclassified~~for the three-month period ended March 31, 2021, that relate to ~~conform to current-year~~equity securities still held at the March 31, 2021 reporting ~~classifications~~date, were $77 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)	March 31, 2021			December 31, 2020
Unrealized gains (losses) on securities available for sale		$	12,306		$	14,290
Deferred income taxes		(3,512)			(3,929)
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities		$	8,794		$	10,361

(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 investments for the periods ended March 31, 2021 and ~~held-to-maturity investments that were in an unrealized loss position,~~December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


	March 31, 2021
	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 available for sale:


Japan government and agencies:
Yen-denominated		$	3,207		$	80		$	2,529		$	32		$	678		$	48
Municipalities:
U.S. dollar-denominated		147			4			147			4			0			0
Yen-denominated		193			6			140			3			53			3
Mortgage- and asset- backed securities:
U.S. dollar-denominated		55			1			55			1			0			0
Yen-denominated		34			1			26			1			8			0
Public utilities:
U.S. dollar-denominated		323			9			235			6			88			3
Yen-denominated		314			5			279			5			35			0
Sovereign and supranational:
U.S. dollar-denominated		39			3			0			0			39			3

Banks/financial institutions:
U.S. dollar-denominated		204			6			145			2			59			4
Yen-denominated		2,098			103			590			7			1,508			96
Other corporate:
U.S. dollar-denominated		3,826			156			2,280			81			1,546			75
Yen-denominated		811			35			351			5			460			30
Total		$	11,251		$	409		$	6,777		$	147		$	4,474		$	262


	September 30, 2017																			December 31, 2020
	Total						Less than 12 months						12 months or longer							Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed Maturities:
Fixed maturity securities available for sale:																			Fixed maturity securities available for sale:

Japan government and agencies:																			Japan government and agencies:
Yen-denominated		$	6,404		$	423		$	6,208		$	399		$	196		$	24	Yen-denominated		$	2,604		$	52		$	2,604		$	52		$	0		$	0
Municipalities:																			Municipalities:
U.S. dollar-denominated																			U.S. dollar-denominated		94			2			94			2			0			0
Yen-denominated																			Yen-denominated		183			5			169			4			14			1
Mortgage- and asset- backed securities:																			Mortgage- and asset- backed securities:
U.S. dollar-denominated																			U.S. dollar-denominated		360			5			360			5			0			0
Yen-denominated		152			15			62			3			90			12		Yen-denominated		37			1			37			1			0			0
Public utilities:																			Public utilities:
U.S. dollar-denominated		879			34			252			4			627			30		U.S. dollar-denominated		326			15			208			7			118			8
Yen-denominated		95			7			69			6			26			1		Yen-denominated		135			1			135			1			0			0
Sovereign and supranational:																			Sovereign and supranational:
Yen-denominated		352			3			352			3			0			0
U.S. dollar-denominated																			U.S. dollar-denominated		39			3			39			3			0			0
Banks/financial institutions:																			Banks/financial institutions:
U.S. dollar-denominated		188			7			145			3			43			4		U.S. dollar-denominated		82			7			44			1			38			6
Yen-denominated		1,616			77			637			29			979			48		Yen-denominated		1,809			102			765			36			1,044			66
Other corporate:																			Other corporate:
U.S. dollar-denominated		7,886			462			2,803			52			5,083			410		U.S. dollar-denominated		4,499			251			2,157			59			2,342			192
Yen-denominated		424			25			386			24			38			1		Yen-denominated		613			37			290			13			323			24
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	Total		$	10,781		$	481		$	6,902		$	184		$	3,879		$	297

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.~~Company, and the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, the Company has identified certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit related factors and as a result, a credit

allowance has been calculated. As of March 31, 2021, the Company held an allowance of $27 million. Refer to the Credit Losses section below for additional information.

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 credit losses.

The following table reflects the composition of the carrying value for commercial mortgage and other loans by property type as of the periods presented.


(In millions)	March 31, 2021				December 31, 2020
	Amortized Cost		% of Total		Amortized Cost		% of Total
Commercial Mortgage and other loans:
Transitional real estate loans:
Office	$	1,945	17.7	%	$	2,115	19.7	%
Retail	126		1.1		125		1.2
Apartments/Multi-Family	1,658		15.1		1,782		16.6
Industrial	85		0.8		85		.8
Hospitality	1,112		10.1		1,106		10.3
Other	81		0.7		81		.7
Total transitional real estate loans	5,007		45.5		5,294		49.3
Commercial mortgage loans:
Office	389		3.5		401		3.7
Retail	338		3.1		340		3.2
Apartments/Multi-Family	585		5.3		588		5.5
Industrial	423		3.8		391		3.6

Other	5		0.0		0		0.0
Total commercial mortgage loans	1,740		15.8		1,720		16.0
Middle market loans	4,254		38.7		3,720		34.7
Total commercial mortgage and other loans	$	11,001	100.0	%	$	10,734	100.0	%
Allowance for credit losses	(154)				(180)
Total net commercial mortgage and other loans	$	10,847			$	10,554

Commercial mortgage and transitional real estate loans were secured by properties entirely within the U.S. (with the largest concentrations in California (21%), Texas (11%) and Florida (9%)). Middle market loans are issued only to companies domiciled within the U.S. 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 March 31, 2021, the Company had $515 million 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 March 31, 2021, the Company had commitments of approximately $104 million 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 $29 million and $25 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of March 31, 2021, and December 31, 2020, respectively.

As of March 31, 2021, the Company had commitments of approximately $1.8 billion to fund future middle market loans. These commitments are contingent upon the availability of middle market loans that meet the Company's underwriting criteria.

Credit Quality Indicators

For TREs, the Company’s key credit quality indicator is loan-to-value (LTV). Given that TRE loans involve properties undergoing renovation or construction, LTV provides the most insight into the credit risk of the loan. The Company monitors the performance of the loans periodically, but not less frequently than quarterly.

For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR). LTV is calculated by dividing the current outstanding loan balance by the most recent estimated property value. DSCR is the most recently available operating income of the underlying property compared to the required debt service of the loan.

For MMLs and held-to-maturity fixed maturity securities, the Company’s key credit quality indicator is credit ratings. The Company’s held-to-maturity portfolio is composed of investment grade securities that are senior unsecured instruments, while its MMLs generally have below-investment-grade ratings but are typically senior secured instruments. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

For the Company’s reinsurance recoverable balance, the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty. The Company uses external credit ratings focused on the reinsurer’s financial strength and credit worthiness. The Company's counterparties are rated A+. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

The following tables present as of March 31, 2021 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator.


Transitional Real Estate Loans
(In millions)	2021		2020		2019		2018		2017		Total
Loan-to-Value Ratio:
0%-59.99%	$	0	$	53	$	548	$	396	$	77	$	1,074
60%-69.99%	0		170		830		766		208		1,974
70%-79.99%	23		259		731		735		185		1,933
80% or greater	0		26		0		0		0		26
Total	$	23	$	508	$	2,109	$	1,897	$	470	$	5,007


Commercial Mortgage Loans
(In millions)	2021		2020		2019		2018		2017		Prior		Total		Weighted-Average DSCR
Loan-to-Value Ratio:
0%-59.99%	$	20	$	32	$	441	$	129	$	68	$	541	$	1,231	2.46
60%-69.99%	34		16		179		40		0		160		429		1.97
70%-79.99%	0		0		32		0		0		22		54		1.63
80% or greater	0		0		0		0		0		26		26		1.62
Total	54		48		652		169		68		749		1,740		2.30
Weighted Average DSCR	2.98		1.91		2.38		2.16		2.48		2.22


Middle Market Loans
(In millions)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Credit Ratings:
BBB	$	7	$	70	$	73	$	30	$	10	$	4	$	44	$	238
BB	62		387		283		207		94		47		123		1,203
B	80		569		714		409		251		156		174		2,353
CCC	0		5		85		105		90		59		74		418
CC	0		0		0		0		32		0		1		33
C and lower	0		8		0		0		0		0		1		9
Total	$	149	$	1,039	$	1,155	$	751	$	477	$	266	$	417	$	4,254

Allowance for Credit Losses

The Company calculates its allowance for credit losses for held-to-maturity fixed maturity securities, loan receivables, loan commitments and reinsurance recoverable by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset. For held-to-maturity fixed maturity securities, MMLs, and MML commitments, the Company groups assets by credit ratings, industry, and country. The Company groups CMLs and TREs and respective loan commitments by property type, property location and the property’s LTV and debt service coverage ratios. The credit allowance for the reinsurance recoverable balance is estimated using a probability-of-default (PD) / loss-given-default (LGD) method.

The credit allowance for held-to-maturity fixed maturity securities and loan receivables is estimated using a PD / LGD method, discounted for the time value of money. For held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities and loan receivables, the Company includes the change in present value due to the passage of time in the change in the allowance for credit losses. The Company’s methodology for estimating credit losses utilizes the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment

(such as prepayment options, renewal options, call options, or extension options). The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for held-to-maturity fixed maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period. For the CML and TRE portfolio, the Company applies reasonable and supportable forecasts of macroeconomic variables as well as national and local real-estate market factors to estimate future credit losses where the market factors revert back to historical levels over time with the period being dependent on current market conditions, projected market conditions and difference in the current and historical market levels for each factor. The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in underwriting practices and significant events or conditions and makes adjustments as necessary.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $21.7 billion amortized cost as of March 31, 2021 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement.

An investment in an available-for-sale fixed maturity security is impaired if the fair value falls below amortized cost. The Company regularly reviews its fixed maturity security investments portfolio for declines in fair value. The Company's debt impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost. The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective securities. Such evaluations and assessments are revised as conditions change and new information becomes available.

When determining the Company's intention to sell a security prior to recovery of its fair value to amortized cost, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings. The Company performs ongoing analyses of its liquidity needs, which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow and liquidity needs.

The Company’s methodology for estimating credit losses for available-for-sale fixed maturity securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the fixed maturity securities. In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.

The Company granted certain loan modifications in its MML and TRE portfolios during the period ended March 31, 2021. As of March 31, 2021, these loan modifications did not have a material impact on the Company’s results of operations.

The Company had 0 TDRs during the period ended March 31, 2021 and an immaterial amount due to COVID-19 during the year ended December 31, 2020.

The Company designates nonaccrual status for a nonperforming debt security or a loan that is not generating its stated interest rate because of nonpayment of periodic interest by the borrower. The Company applies the cash basis method to record any payments received on non-accrual assets. The Company resumes the accrual of interest on fixed maturity securities and loans that are currently making contractual payments or for those that are not current where the borrower has paid timely (less than 30 days outstanding).

As of March 31, 2021 and December 31, 2020, the Company had an immaterial amount (cost basis) of loans and fixed maturities on nonaccrual status.

The following table presents the roll forward of the allowance for credit losses by portfolio segment during the three-month period ended March 31, 2021.


(in millions)	Transitional Real Estate Loans		Commercial Mortgage Loans		Middle Market Loans		Held to Maturity Securities		Available for Sale Securities		Reinsurance Recoverables
Balance at December 31, 2020	$	(63)	$	(33)	$	(85)	$	(9)	$	(38)	$	(11)
(Addition to) release of allowance for credit losses	16		9		2		1		0		(2)
Write-offs, net of recoveries	0		0		0		0		11		0

Balance at March 31, 2021	$	(47)	$	(24)	$	(83)	$	(8)	$	(27)	$	(13)

For assets that are subject to the credit loss measurement, the change in credit loss allowance will be significantly impacted by purchases and sales in those assets during the period as well as entering into new non-cancelable loan commitments. The estimate of credit losses for loan commitments as of March 31, 2021 was $30 million.

Other Investments

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


(In millions)	March 31, 2021			December 31, 2020
Other investments:
Policy loans		$	242		$	260
Short-term investments (1)		1,295			1,139
Limited partnerships		1,110			1,004
Other		19			26
Total other investments		$	2,666		$	2,429

(In millions) September 30, 2017
December 31,
2016
Other investments:
Commercial mortgage loans $ 1,199
$ 855

Middle market loans 798
319

Policy loans 207
184

Short-term investments 57
89

Other 97
3

Total other investments $ 2,358
$ 1,450

(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~~March 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,~~2021, 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, 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~~$1.6 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, 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


	March 31, 2021						December 31, 2020
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Assets:
Fixed maturity securities, available for sale		$	3,291		$	4,353		$	3,487		$	4,596

Commercial mortgage and other loans		9,210			9,247			8,964			9,040
Other investments (2)		908			908			826			826
Other assets (3)		138			138			133			133
Total assets of consolidated VIEs		$	13,547		$	14,646		$	13,410		$	14,595
Liabilities:
Other liabilities (3)		$	218		$	218		$	231		$	231
Total liabilities of consolidated VIEs		$	218		$	218		$	231		$	231

⁽¹⁾Net of allowance for credit losses

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

⁽²⁾(3) 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


	March 31, 2021						December 31, 2020
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturity securities, available for sale		$	5,142		$	6,269		$	5,477		$	6,767
Other investments (1)		202			202			178			178
Total investments in VIEs not consolidated		$	5,344		$	6,471		$	5,655		$	6,945

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
Remaining Contractual Maturity of the Agreements
	March 31, 2021						December 31, 2020
(In millions)	Overnight and Continuous(1)		Up to 30 days		Total			Overnight and Continuous(1)		Up to 30 days		Total
Securities lending transactions:
Fixed maturity securities:
Japan government and agencies	$	0	$	829	$	829		$	0	$	0	$	0

Public utilities	44		0		44			57		0		57
Sovereign and supranational	3		0		3			3		0		3
Banks/financial institutions	89		0		89			63		0		63
Other corporate	931		0		931			841		0		841
Total borrowings	$	1,067	$	829	$	1,896		$	964	$	0	$	964
Gross amount of recognized liabilities for securities lending transactions					$	1,896						$	964

Securities Lending Transactions Accounted for as Secured Borrowings
September 30, 2017
Remaining Contractual Maturity of the Agreements
(In millions)
Overnight
and
Continuous⁽¹⁾
Up to 30
days Total
Securities lending transactions:
Public utilities $ 37
$ 0
$ 37
Banks/financial institutions 37
0
37
Other corporate 434
0
434
Equity securities 14
0
14
Total borrowings $ 522
$ 0
$ 522
Gross amount of recognized liabilities for securities lending transactions $ 522
Amounts related to agreements not included in offsetting disclosure in Note 4 $ 0

⁽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
Remaining Contractual Maturity of the Agreements
(In millions)
Overnight
and
Continuous⁽¹⁾
Up to 30
days Total
Securities lending transactions:
Public utilities $ 62
$ 0
$ 62
Banks/financial institutions 34
0
34
Other corporate 430
0
430
Total borrowings $ 526
$ 0
$ 526
Gross amount of recognized liabilities for securities lending transactions $ 526
Amounts related to agreements not included in offsetting disclosure in Note 4 $ 0

⁽¹⁾~~These securities are pledged as collateral under the Company's U.S.~~In connection with securities lending, ~~program~~in addition to cash collateral received, the Company received from counterparties securities collateral of $7,475 million and ~~can~~$6,654 million at March 31, 2021 and December 31, 2020, respectively, which may not be ~~called at its discretion; therefore, they are classified as Overnight and Continuous.~~sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected on the consolidated financial statements.

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016,~~2020, respectively.

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


4.	~~DERIVATIVE INSTRUMENTS~~

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 credit default~~ swaps that are associated with VIE bond purchase commitments, and 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~~

•bond purchase commitments at the inception of investments in ~~leveraged derivative transactions.~~ consolidated VIEs

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~~

From time to time, the Company may also enter into 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 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~~create a zero-cost collar. Additionally, the Company enters into purchased options to hedge cash flows from the net investment in ~~no net premium being paid (i.e. a costless or zero-cost collar).~~Aflac Japan.

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~~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).

Bond purchase commitments result from repackaged bond structures that are consolidated VIEs whereby there is a delay in the trade date and settlement date of the bond within the structure to ensure completion of all necessary legal agreements to support the consolidated VIE that issues the repackaged bond. Since the Company has a commitment to purchase the underlying bond at a specified price, the agreement meets the definition of a derivative ~~transactions depending~~where the value is derived based on ~~general economic conditions.~~the current market value of the bond compared to the fixed purchase price to be paid on the settlement date.

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.


		March 31, 2021									December 31, 2020
(In millions)				Asset Derivatives			Liability Derivatives						Asset Derivatives			Liability Derivatives
Hedge Designation/ Derivative Type	Notional Amount			Fair Value			Fair Value			Notional Amount			Fair Value			Fair Value
Cash flow hedges:
Foreign currency swaps - VIE		$	18		$	0		$	2		$	18		$	0		$	1
Total cash flow hedges		18			0			2			18			0			1
Fair value hedges:
Foreign currency forwards		64			0			2			64			2			0
Foreign currency options		8,672			0			85			8,865			0			0

Total fair value hedges		8,736			0			87			8,929			2			0
Net investment hedge:
Foreign currency forwards		4,978			277			1			5,010			14			84
Foreign currency options		1,896			0			0			2,027			1			0
Total net investment hedge		6,874			277			1			7,037			15			84
Non-qualifying strategies:
Foreign currency swaps		2,250			63			24			2,250			47			81
Foreign currency swaps - VIE		2,904			138			216			2,857			133			230
Foreign currency forwards		15,285			319			763			26,528			386			301
Foreign currency options		9,094			44			1			11,037			0			0




Total non-qualifying strategies		29,533			564			1,004			42,672			566			612
Total derivatives		$	45,161		$	841		$	1,094		$	58,656		$	583		$	697

September 30, 2017 December 31, 2016
(In millions) Asset
Derivatives Liability
Derivatives Asset
Derivatives Liability
Derivatives
Hedge Designation/ Derivative
Type Notional
Amount Fair Value Fair Value Notional
Amount Fair Value Fair Value
Cash flow hedges:
Foreign currency swaps $ 75
$ 0
$ (9 ) $ 75
$ 0
$ (10 )
Total cash flow hedges 75
0
(9 ) 75
0
(10 )
Fair value hedges:
Foreign currency forwards 9,278
0
(411 ) 10,965
0
(759 )
Foreign currency options 5,660
0
(20 ) 4,224
2
(32 )
Total fair value hedges 14,938
0
(431 ) 15,189
2
(791 )
Net investment hedge:
Foreign currency forwards 48
1
0
209
5
(2 )
Foreign currency options 564
17
(4 ) 843
41
(17 )
Total net investment hedge 612
18
(4 ) 1,052
46
(19 )
Non-qualifying strategies:
Foreign currency swaps 5,387
301
(187 ) 6,266
490
(220 )
Foreign currency forwards 7,124
159
(343 ) 21,218
667
(956 )
Foreign currency options 25
0
0
41
0
(2 )
Credit default swaps 89
1
0
86
2
0

Total non-qualifying strategies 12,625
461
(530 ) 27,611
1,159
(1,178 )
Total derivatives $ 28,250
$ 479
$ (974 ) $ 43,927
$ 1,207
$ (1,998 )
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~~approximately 6 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 Investment Gains (Losses) Recognized for Fair Value Hedge
Three Months Ended March 31, 2021:
Foreign currency forwards	Fixed maturity securities	$	(4)	$	0	$	(4)	$	4	$	0
Foreign currency options	Fixed maturity securities	(60)		(3)		(57)		59		2

Total gains (losses)		$	(64)	$	(3)	$	(61)	$	63	$	2





Three Months Ended March 31, 2020:
Foreign currency forwards	Fixed maturity securities	$	(16)	$	(7)	$	(9)	$	10	$	1


Total gains (losses)		$	(16)	$	(7)	$	(9)	$	10	$	1

(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
(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 net 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 net 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 net investment gains and losses consistent with the impact of the hedged item. For the three-month periods ended March 31, 2021 and 2020, 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)	Carrying Amount of the Hedged Assets/(Liabilities)(1)					Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets/(Liabilities)
		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Fixed maturity securities		$	3,984	$	4,331	$	234	$	237

(1) The balance includes hedging adjustment on discontinued hedging relationships of $234 in 2021 and $237 in 2020.

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.

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~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, 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~~net 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 March 31, 2021, the Parent Company ~~has~~had $2.3 billion notional amount of cross-currency interest rate swap agreements related to certain of its ~~$550 million~~U.S. dollar-denominated senior notes ~~due March 2020, $350 million senior~~to effectively convert a portion of the interest on the notes due February 2022, $700 million senior notes due June 2023, $750 million senior notes due November 2024, $450 million senior notes due March 2025, and $500 million subordinated debentures due September 2052.from U.S dollar to Japanese yen. 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~~2020 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~~net investment gains (losses). The Company also has certain foreign exchange forwards on U.S. dollar-denominated available-for-sale securities where hedge accounting is not being applied.

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)~~earnings and other comprehensive income (loss) from all derivatives and hedging instruments.


	Three Months Ended March 31,
	2021										2020
(In millions)	Net Investment Income(1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)			Net Investment Income(1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	0		$	(1)			$	0		$	(1)		$	0			$	(4)
Total cash flow hedges		0			(1)		(3)		0			(1)			0		(3)		(4)
Fair value hedges:
Foreign currency forwards(3)					0										(6)
Foreign currency options(3)					(1)										0

Total fair value hedges		0			(1)				0			0			(6)				0
Net investment hedge:
Non-derivative hedging instruments					0				188						0				6
Foreign currency forwards					18				335						51				(25)
Foreign currency options					(2)				0						6				0
Total net investment hedge					16				523						57				(19)
Non-qualifying strategies:
Foreign currency swaps					87										50
Foreign currency swaps - VIE					29										(195)
Foreign currency forwards					(432)										(36)
Foreign currency options					16										(2)
Interest rate swaps					0										47
Forward bond purchase commitment - VIE					(1)										0
Total non-qualifying strategies					(301)										(136)
Total		$	0		$	(287)			$	523		$	(1)		$	(85)			$	(23)

  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 )
(1) Interest expense/income on cash flow hedges are recorded in net investment income. For interest rate swaptions classified as fair value hedges, the change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into net investment income over its legal term. If the swaption is early terminated but the hedge item is still outstanding, the amortization of disposal amount of the swaptions is recorded in net investment income over the remaining life of the hedged items.

⁽¹⁾~~Cash~~(2) Gains and losseson cash flow ~~hedge items~~hedges 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). Gains and losses on ~~derivatives and~~ net investment ~~hedge items~~hedges related to change in foreign currency spot rates 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 net 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 March 31, 2021 and 2020. Impact shown net of effect of hedged items (see Fair Value Hedges section of this Note 4 for further detail).

The Company reclassified 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 gain or~~loss reclassified from accumulated other comprehensive income (loss) into earnings related to the net investment hedge for the three- and nine-month periods ended September 30, 2017 and 2016,~~

~~respectively.~~ As of ~~September 30, 2017,~~March 31, 2021, $5 million of 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.~~months.

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, there were 15 counterparties to~~March 31, 2021, all of the Company's derivative ~~agreements, with five comprising 67% of the aggregate notional amount. The~~agreement 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~~$497 million and ~~$1.2 billion~~$268 million as of ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016,~~2020, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on ~~September 30, 2017,~~March 31, 2021, the Company estimates that it would be required to post a maximum of $5$38 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


March 31, 2021
										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
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	703		$	0		$	703		$	(387)	$	(5)		$	(250)		$	61

Total derivative assets subject to a master netting agreement or offsetting arrangement		703			0			703			(387)		(5)			(250)			61
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		138						138											138

Total derivative assets not subject to a master netting agreement or offsetting arrangement		138						138											138
Total derivative assets		841			0			841			(387)		(5)			(250)			199
Securities lending and similar arrangements		1,860			0			1,860			0		0			(1,860)			0
Total		$	2,701		$	0		$	2,701		$	(387)	$	(5)		$	(2,110)		$	199


September 30, 2017
December 31, 2020																							December 31, 2020
										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			(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
Derivative assets:																							Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement		$	331		$	0		$	331		$	(219	)	$	0		$	(112	)		$	0	Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral																							OTC - bilateral		$	450		$	0		$	450		$	(295)	$	(73)		$	(76)		$	6

Total derivative assets subject to a master netting agreement or offsetting arrangement																							Total derivative assets subject to a master netting agreement or offsetting arrangement		450			0			450			(295)		(73)			(76)			6
Derivative assets not subject to a master netting agreement or offsetting arrangement		148						148													148		Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral																							OTC - bilateral		133						133											133

Total derivative assets not subject to a master netting agreement or offsetting arrangement																							Total derivative assets not subject to a master netting agreement or offsetting arrangement		133						133											133
Total derivative assets		479			0			479			(219		)	0			(112		)		148		Total derivative assets		583			0			583			(295)		(73)			(76)			139
Securities lending and similar arrangements		509			0			509			0			0			(509		)		0		Securities lending and similar arrangements		940			0			940			0		0			(940)			0
Total		$	988		$	0		$	988		$	(219	)	$	0		$	(621	)		$	148	Total		$	1,523		$	0		$	1,523		$	(295)	$	(73)		$	(1,016)		$	139

December 31, 2016
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
Derivative
  assets:

    Derivative
      assets subject to a
      master netting
      agreement or
      offsetting
      arrangement
$ 1,080
$ 0
$ 1,080
$ (698 ) $ 0
$ (382 ) $ 0

    Derivative
      assets not subject
      to a master netting
      agreement or
      offsetting
      arrangement
127
127
127

    Total derivative
      assets
1,207
0
1,207
(698 ) 0
(382 ) 127

Securities lending
   and similar
   arrangements
513
0
513
0
0
(513 ) 0

    Total $ 1,720
$ 0
$ 1,720
$ (698 ) $ 0
$ (895 ) $ 127

Offsetting of Financial Liabilities and Derivative Liabilities


March 31, 2021
										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		$	876		$	0		$	876		$	(387)	$	(447)		$	(12)		$	30

Total derivative liabilities subject to a master netting agreement or offsetting arrangement		876			0			876			(387)		(447)			(12)			30
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		218						218											218

Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		218						218											218
Total derivative liabilities		1,094			0			1,094			(387)		(447)			(12)			248
Securities lending and similar arrangements		1,896			0			1,896			(1,860)		0			0			36
Total		$	2,990		$	0		$	2,990		$	(2,247)	$	(447)		$	(12)		$	284


September 30, 2017
December 31, 2020																								December 31, 2020
												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				(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:
Derivative liabilities subject to a master netting agreement or offsetting arrangement		$	(842	)		$	0		$	(842	)		$	219	$	611		$	7		$	(5	)	Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral																								OTC - bilateral		$	466		$	0		$	466		$	(295)	$	(43)		$	(69)		$	59

Total derivative liabilities subject to a master netting agreement or offsetting arrangement																								Total derivative liabilities subject to a master netting agreement or offsetting arrangement		466			0			466			(295)		(43)			(69)			59
Derivative liabilities not subject to a master netting agreement or offsetting arrangement		(132		)					(132		)										(132		)	Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral																								OTC - bilateral		231						231											231

Total derivative liabilities not subject to a master netting agreement or offsetting arrangement																								Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		231						231											231
Total derivative liabilities		(974		)		0			(974		)		219		611			7			(137		)	Total derivative liabilities		697			0			697			(295)		(43)			(69)			290
Securities lending and similar arrangements		(522		)		0			(522		)		509		0			0			(13		)	Securities lending and similar arrangements		964			0			964			(940)		0			0			24
Total		$	(1,496	)		$	0		$	(1,496	)		$	728	$	611		$	7		$	(150	)	Total		$	1,661		$	0		$	1,661		$	(1,235)	$	(43)		$	(69)		$	314

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~~2020 Annual Report.


5.	~~FAIR VALUE MEASUREMENTS~~

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.


	March 31, 2021
(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		$	34,432		$	1,359		$	0		$	35,791
Municipalities		0			2,901			0			2,901
Mortgage- and asset-backed securities		0			980			204			1,184
Public utilities		0			9,720			479			10,199
Sovereign and supranational		0			1,207			68			1,275
Banks/financial institutions		0			11,547			28			11,575
Other corporate		0			37,500			319			37,819
Total fixed maturity securities		34,432			65,214			1,098			100,744
Equity securities		971			81			122			1,174
Other investments		1,295			0			0			1,295
Cash and cash equivalents		4,990			0			0			4,990
Other assets:
Foreign currency swaps		0			63			138			201
Foreign currency forwards		0			596			0			596
Foreign currency options		0			44			0			44



Total other assets		0			703			138			841
Total assets		$	41,688		$	65,998		$	1,358		$	109,044
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	24		$	218		$	242
Foreign currency forwards		0			766			0			766
Foreign currency options		0			86			0			86


Total liabilities		$	0		$	876		$	218		$	1,094


	September 30, 2017													December 31, 2020
(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			(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:													Assets:
Securities available for sale, carried at fair value:													Securities available for sale, carried at fair value:
Fixed maturities:
Fixed maturity securities:													Fixed maturity securities:
Government and agencies		$	29,067		$	971		$	0		$	30,038	Government and agencies		$	36,032		$	1,318		$	0		$	37,350
Municipalities		0			1,292			0			1,292		Municipalities		0			3,018			0			3,018
Mortgage- and asset-backed securities		0			278			178			456		Mortgage- and asset-backed securities		0			814			224			1,038
Public utilities		0			7,938			77			8,015		Public utilities		0			10,395			422			10,817
Sovereign and supranational		0			2,029			0			2,029		Sovereign and supranational		0			1,334			48			1,382
Banks/financial institutions		0			6,985			25			7,010		Banks/financial institutions		0			12,036			24			12,060
Other corporate		0			31,473			102			31,575		Other corporate		0			39,918			299			40,217
Total fixed maturities		29,067			50,966			382			80,415
Perpetual securities:
Banks/financial institutions		0			1,627			0			1,627
Other corporate		0			236			0			236
Total perpetual securities		0			1,863			0			1,863
Total fixed maturity securities													Total fixed maturity securities		36,032			68,833			1,017			105,882
Equity securities		905			5			18			928		Equity securities		1,095			86			102			1,283
Other investments													Other investments		1,139			0			0			1,139
Cash and cash equivalents													Cash and cash equivalents		5,141			0			0			5,141
Other assets:													Other assets:
Foreign currency swaps		0			154			147			301		Foreign currency swaps		0			47			133			180
Foreign currency forwards		0			160			0			160		Foreign currency forwards		0			402			0			402
Foreign currency options		0			17			0			17		Foreign currency options		0			1			0			1
Credit default swaps		0			0			1			1

Total other assets		0			331			148			479		Total other assets		0			450			133			583
Other investments		57			0			0			57
Cash and cash equivalents		4,927			0			0			4,927
Total assets		$	34,956		$	53,165		$	548		$	88,669	Total assets		$	43,407		$	69,369		$	1,252		$	114,028
Liabilities:													Liabilities:
Other liabilities:													Other liabilities:
Foreign currency swaps		$	0		$	64		$	132		$	196	Foreign currency swaps		$	0		$	81		$	231		$	312
Foreign currency forwards		0			754			0			754		Foreign currency forwards		0			385			0			385
Foreign currency options		0			24			0			24

Total liabilities		$	0		$	842		$	132		$	974	Total liabilities		$	0		$	466		$	231		$	697

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
Assets:
Securities available for sale, carried at
fair value:
  Fixed maturities:
Government and agencies $ 25,387
$ 827
$ 0
$ 26,214

Municipalities 0
1,295
0
1,295

Mortgage- and asset-backed securities 0
1,139
198
1,337

Public utilities 0
7,667
16
7,683

Sovereign and supranational 0
1,469
0
1,469

Banks/financial institutions 0
6,038
25
6,063

Other corporate 0
29,699
0
29,699

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

  Perpetual securities:
Banks/financial institutions 0
1,420
0
1,420

Other corporate 0
213
0
213

Total perpetual securities 0
1,633
0
1,633

Equity securities 1,300
6
3
1,309

Other assets:
Foreign currency swaps 0
365
125
490

Foreign currency forwards 0
672
0
672

Foreign currency options 0
43
0
43

Credit default swaps 0
0
2
2

Total other assets 0
1,080
127
1,207

Other investments 276
0
0
276

Cash and cash equivalents 4,859
0
0
4,859

Total assets $ 31,822
$ 50,853
$ 369
$ 83,044

Liabilities:
Other liabilities:
Foreign currency swaps $ 0
$ 84
$ 146
$ 230

Foreign currency forwards 0
1,717
0
1,717

Foreign currency options 0
51
0
51

Total liabilities $ 0
$ 1,852
$ 146
$ 1,998

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.


	March 31, 2021
(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		$	21,915		$	26,599		$	240		$	0		$	26,839
Municipalities		352			0			460			0			460

Public utilities		44			0			57			0			57
Sovereign and supranational		534			0			670			0			670

Other corporate		23			0			30			0			30
Commercial mortgage and other loans		10,847			0			0			10,898			10,898
Other investments (1)		18			0			18			0			18
Total assets		$	33,733		$	26,599		$	1,475		$	10,898		$	38,972
Liabilities:
Other policyholders’ funds		$	7,367		$	0		$	0		$	7,258		$	7,258
Notes payable (excluding leases)		7,937			0			8,303			269			8,572
Total liabilities		$	15,304		$	0		$	8,303		$	7,527		$	15,830

September 30, 2017
(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 $ 21,385
$ 26,455
$ 0
$ 0
$ 26,455

Municipalities 359
0
463
0
463

Mortgage and asset-backed
securities 27
0
9
20
29

Public utilities 3,308
0
3,734
0
3,734

Sovereign and
supranational 1,527
0
1,846
0
1,846

Banks/financial institutions 2,700
0
2,887
0
2,887

Other corporate 2,692
0
3,185
0
3,185

Other investments ⁽¹⁾
2,011
0
15
1,985
2,000

Total assets $ 34,009
$ 26,455
$ 12,139
$ 2,005
$ 40,599

Liabilities:
Other policyholders’ funds $ 6,967
$ 0
$ 0
$ 6,849
$ 6,849

Notes payable
(excluding capital leases) 5,230
506
4,780
265
5,551

Total liabilities $ 12,197
$ 506
$ 4,780
$ 7,114
$ 12,400

⁽¹⁾Excludes policy loans of ~~$207~~$242 and equity method investments of ~~$83,~~$1,110, at carrying value


	December 31, 2016																December 31, 2020
(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			(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:																Assets:
Securities held to maturity, carried at amortized cost:																Securities held to maturity, carried at amortized cost:
Fixed maturities:
Fixed maturity securities:																Fixed maturity securities:
Government and agencies		$	20,702		$	26,040		$	0		$	0		$	26,040	Government and agencies			$	23,445			$	28,810			$	260			$	0			$	29,070
Municipalities		350			0			457			0			457		Municipalities			377				0				499				0				499
Mortgage and asset-backed securities		30			0			10			22			32

Public utilities		3,201			0			3,536			0			3,536		Public utilities			47				0				61				0				61
Sovereign and supranational		2,602			0			2,877			0			2,877		Sovereign and supranational			571				0				736				0				736
Banks/financial institutions		3,731			0			3,900			0			3,900

Other corporate		2,734			0			3,179			0			3,179		Other corporate			24				0				33				0				33
Commercial mortgage and other loans																Commercial mortgage and other loans			10,554				0				0				10,655				10,655
Other investments(1)		1,174			0			0			1,142			1,142				26				0				26				0				26
Total assets		$	34,524		$	26,040		$	13,959		$	1,164		$	41,163	Total assets			$	35,044			$	28,810			$	1,615			$	10,655			$	41,080
Liabilities:																Liabilities:
Other policyholders’ funds		$	6,659		$	0		$	0		$	6,540		$	6,540	Other policyholders’ funds			$	7,824			$	0			$	0			$	7,709			$	7,709
Notes payable (excluding capital leases)		5,339			0			0			5,530			5,530
Notes payable (excluding leases)																Notes payable (excluding leases)			7,745				0				8,396				288				8,684
Total liabilities		$	11,998		$	0		$	0		$	12,070		$	12,070	Total liabilities			$	15,569			$	0			$	8,396			$	7,997			$	16,393

(1)Excludes policy loans of $260 and equity method investments of $1,004, 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.~~securities. These models are discounted cash flow (DCF) valuation models, but also use information from related markets, specifically the ~~CDS~~credit default swap (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;~~ issuer

2) issuer-specific CDS ~~spreads;~~ spreads

3) bonds or CDS spreads of comparable issuers with similar characteristics such as rating, geography, or ~~sector; or~~ sector

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. Beginning in the third quarter of 2020, the Company refined these valuation models to explicitly incorporate currency basis swap adjustments (market observable data) to assumed interest rate curves where appropriate. 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 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.


	March 31, 2021
(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		$	34,432		$	1,359		$	0		$	35,791
Total government and agencies		34,432			1,359			0			35,791
Municipalities:
Third party pricing vendor		0			2,901			0			2,901
Total municipalities		0			2,901			0			2,901
Mortgage- and asset-backed securities:
Third party pricing vendor		0			406			0			406
Broker/other		0			574			204			778
Total mortgage- and asset-backed securities		0			980			204			1,184
Public utilities:
Third party pricing vendor		0			9,720			0			9,720
Broker/other		0			0			479			479
Total public utilities		0			9,720			479			10,199
Sovereign and supranational:
Third party pricing vendor		0			1,207			0			1,207
Broker/other		0			0			68			68
Total sovereign and supranational		0			1,207			68			1,275
Banks/financial institutions:
Third party pricing vendor		0			11,547			0			11,547
Broker/other		0			0			28			28
Total banks/financial institutions		0			11,547			28			11,575
Other corporate:
Third party pricing vendor		0			37,500			0			37,500
Broker/other		0			0			319			319
Total other corporate		0			37,500			319			37,819
Total securities available for sale		$	34,432		$	65,214		$	1,098		$	100,744
Equity securities, carried at fair value:
Third party pricing vendor		$	971		$	81		$	0		$	1,052
Broker/other		0			0			122			122
Total equity securities		$	971		$	81		$	122		$	1,174


	September 30, 2017													March 31, 2021
(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			(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:
Securities held to maturity, carried at amortized cost:													Securities held to maturity, carried at amortized cost:
Fixed maturity securities:													Fixed maturity securities:
Government and agencies:													Government and agencies:
Third party pricing vendor		$	29,067		$	971		$	0		$	30,038	Third party pricing vendor		$	26,599		$	240		$	0		$	26,839
Total government and agencies		29,067			971			0			30,038		Total government and agencies		26,599			240			0			26,839
Municipalities:													Municipalities:
Third party pricing vendor		0			1,292			0			1,292		Third party pricing vendor		0			460			0			460
Total municipalities		0			1,292			0			1,292		Total municipalities		0			460			0			460
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:													Public utilities:
Third party pricing vendor		0			7,938			0			7,938		Third party pricing vendor		0			57			0			57
Broker/other		0			0			77			77

Total public utilities		0			7,938			77			8,015		Total public utilities		0			57			0			57
Sovereign and supranational:													Sovereign and supranational:
Third party pricing vendor		0			2,029			0			2,029		Third party pricing vendor		0			670			0			670
Total sovereign and supranational		0			2,029			0			2,029		Total sovereign and supranational		0			670			0			670
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:													Other corporate:
Third party pricing vendor		0			31,473			0			31,473		Third party pricing vendor		0			30			0			30
Broker/other		0			0			102			102

Total other corporate		0			31,473			102			31,575		Total other corporate		0			30			0			30
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
Total securities held to maturity													Total securities held to maturity		$	26,599		$	1,457		$	0		$	28,056


	September 30, 2017													December 31, 2020
(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			(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 maturities:
Securities available for sale, carried at fair value:													Securities available for sale, carried at fair value:
Fixed maturity securities:													Fixed maturity securities:
Government and agencies:													Government and agencies:
Third party pricing vendor		$	26,455		$	0		$	0		$	26,455	Third party pricing vendor		$	36,032		$	1,318		$	0		$	37,350
Total government and agencies		26,455			0			0			26,455		Total government and agencies		36,032			1,318			0			37,350
Municipalities:													Municipalities:
Third party pricing vendor		0			463			0			463		Third party pricing vendor		0			3,018			0			3,018
Total municipalities		0			463			0			463		Total municipalities		0			3,018			0			3,018
Mortgage- and asset-backed securities:													Mortgage- and asset-backed securities:
Third party pricing vendor		0			9			0			9		Third party pricing vendor		0			364			0			364
Broker/other		0			0			20			20		Broker/other		0			450			224			674
Total mortgage- and asset-backed securities		0			9			20			29		Total mortgage- and asset-backed securities		0			814			224			1,038
Public utilities:													Public utilities:
Third party pricing vendor		0			3,734			0			3,734		Third party pricing vendor		0			10,395			0			10,395
Broker/other													Broker/other		0			0			422			422
Total public utilities		0			3,734			0			3,734		Total public utilities		0			10,395			422			10,817
Sovereign and supranational:													Sovereign and supranational:
Third party pricing vendor		0			1,846			0			1,846		Third party pricing vendor		0			1,334			0			1,334
Broker/other													Broker/other		0			0			48			48
Total sovereign and supranational		0			1,846			0			1,846		Total sovereign and supranational		0			1,334			48			1,382
Banks/financial institutions:													Banks/financial institutions:
Third party pricing vendor		0			2,887			0			2,887		Third party pricing vendor		0			12,036			0			12,036
Broker/other													Broker/other		0			0			24			24
Total banks/financial institutions		0			2,887			0			2,887		Total banks/financial institutions		0			12,036			24			12,060
Other corporate:													Other corporate:
Third party pricing vendor		0			3,185			0			3,185		Third party pricing vendor		0			39,886			0			39,886
Broker/other													Broker/other		0			32			299			331
Total other corporate		0			3,185			0			3,185		Total other corporate		0			39,918			299			40,217
Total securities held to maturity		$	26,455		$	12,124		$	20		$	38,599
Total securities available for sale													Total securities available for sale		$	36,032		$	68,833		$	1,017		$	105,882
Equity securities, carried at fair value:													Equity securities, carried at fair value:
Third party pricing vendor													Third party pricing vendor		$	1,095		$	86		$	0		$	1,181
Broker/other													Broker/other		0			0			102			102
Total equity securities													Total equity securities		$	1,095		$	86		$	102		$	1,283


	December 31, 2016													December 31, 2020
(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			(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:
Securities held to maturity, carried at amortized cost:													Securities held to maturity, carried at amortized cost:
Fixed maturity securities:													Fixed maturity securities:
Government and agencies:													Government and agencies:
Third party pricing vendor		$	25,387		$	827		$	0		$	26,214	Third party pricing vendor		$	28,810		$	260		$	0		$	29,070
Total government and agencies		25,387			827			0			26,214		Total government and agencies		28,810			260			0			29,070
Municipalities:													Municipalities:
Third party pricing vendor		0			1,295			0			1,295		Third party pricing vendor		0			499			0			499
Total municipalities		0			1,295			0			1,295		Total municipalities		0			499			0			499
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:													Public utilities:
Third party pricing vendor		0			7,667			0			7,667		Third party pricing vendor		0			61			0			61
Broker/other		0			0			16			16
Total public utilities		0			7,667			16			7,683		Total public utilities		0			61			0			61
Sovereign and supranational:													Sovereign and supranational:
Third party pricing vendor		0			1,469			0			1,469		Third party pricing vendor		0			736			0			736
Total sovereign and supranational		0			1,469			0			1,469		Total sovereign and supranational		0			736			0			736
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:													Other corporate:
Third party pricing vendor		0			29,699			0			29,699		Third party pricing vendor		0			33			0			33

Total other corporate		0			29,699			0			29,699		Total other corporate		0			33			0			33
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
Total securities held to maturity													Total securities held to maturity		$	28,810		$	1,589		$	0		$	30,399

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 held to maturity, carried at amortized cost:
      Fixed maturities:
         Government and agencies:
            Third party pricing vendor $ 26,040
$ 0
$ 0
$ 26,040

               Total government and agencies 26,040
0
0
26,040

         Municipalities:
            Third party pricing vendor 0
457
0
457

               Total municipalities 0
457
0
457

         Mortgage- and asset-backed securities:
            Third party pricing vendor 0
10
0
10

            Broker/other 0
0
22
22

               Total mortgage- and asset-backed securities 0
10
22
32

         Public utilities:
            Third party pricing vendor 0
3,536
0
3,536

               Total public utilities 0
3,536
0
3,536

         Sovereign and supranational:
            Third party pricing vendor 0
2,877
0
2,877

               Total sovereign and supranational 0
2,877
0
2,877

         Banks/financial institutions:
            Third party pricing vendor 0
3,900
0
3,900

               Total banks/financial institutions 0
3,900
0
3,900

         Other corporate:
            Third party pricing vendor 0
3,179
0
3,179

               Total other corporate 0
3,179
0
3,179

                  Total securities held to maturity $ 26,040
$ 13,959
$ 22
$ 40,021

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. ~~Inputs used~~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 Company uses present value techniques to value ~~derivatives include, but~~non-option based derivatives. It also uses option pricing models to value option based derivatives. Key inputs are ~~not limited to, interest rates, credit spreads, foreign currency forward and spot rates, and interest volatility.~~as follows:


Instrument Type	Level 2	Level 3
Interest rate derivatives	Swap yield curves Basic curves Interest rate volatility (1)	Not applicable
Foreign currency exchange rate derivatives - Non-VIES (forwards, swaps and options)	Foreign currency forward rates Swap yield curves Basis curves Foreign currency spot rates Cross foreign currency basis curves Foreign currency volatility(1)	Not applicable
Foreign currency exchange rate derivatives - VIEs (swaps)	Foreign currency spot rates	Swap yield curves (2) Credit default swap curves (2) Basis curves (2) Recovery rates Foreign currency forward rates (2) Foreign cross currency basis curves (2)

(1) Option-based only

(2) Extrapolation beyond the observable limits of the curve(s).

The fair values of the foreign currency forwards ~~options, and interest rate swaptions 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 volatility. 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~~

~~Other investments where~~For forward bond purchase commitments with VIEs, the fair value of the derivative is ~~disclosed above~~based on the difference in the fixed purchase price and the current market value of the related bond prior to the settlement date. Since the bond is typically a public bond with readily available pricing, the derivatives associated with the forward purchase commitment are classified as Level 2 of the fair value hierarchy.

Commercial mortgage and other loans

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 and 2016, 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, 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

^{Three Months Ended
March 31, 2021
Fixed Maturity Securities Equity
Securities Derivatives (1)
(In millions) Mortgage-
and
Asset-
Backed
Securities Public
Utilities Sovereign
and
Supranational Banks/
Financial
Institutions Other
Corporate Foreign
Currency
Swaps Total
Balance, beginning of period $ 224 $ 422 $ 48 $ 24 $ 299 $ 102 $ (98) $ 1,021
Net investment gains (losses)
included in earnings 0 0 0 0 0 9 19 28
Unrealized gains (losses) included
in other comprehensive income
(loss) (15) (18) (3) (1) (12) 0 (1) (50)
Purchases, issuances, sales
and settlements:
Purchases 10 78 0 5 0 11 0 104
Issuances 0 0 0 0 0 0 0 0
Sales 0 0 0 0 0 0 0 0
Settlements 0 (3) 0 0 0 0 0 (3)
Transfers into Level 3 0 0 23 (2) 0 32 (2) 0 0 55
Transfers out of Level 3 (15) (3) 0 0 0 0 0 0 (15)
Balance, end of period $ 204 $ 479 $ 68 $ 28 $ 319 $ 122 $ (80) $ 1,140
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 $ 0 $ 19 $ 19}

(1) Derivative assets and liabilities are presented net

(2) Transfer due to a lack of availability of observable market inputs

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 )
(3) Transfer due to availability of observable market inputs

^{Three Months Ended
March 31, 2020
Fixed Maturity Securities Equity
Securities Derivatives (1)
(In millions) Mortgage-
and
Asset-
Backed
Securities Public
Utilities Banks/
Financial
Institutions Other
Corporate Foreign
Currency
Swaps Total
Balance, beginning of period $ 178 $ 224 $ 23 $ 262 $ 80 $ 43 $ 810
Net investment gains (losses) included
in earnings 0 0 0 0 0 (185) (185)
Unrealized gains (losses) included in other
comprehensive income (loss) 1 (8) 0 (17) 0 (4) (28)
Purchases, issuances, sales and settlements:
Purchases 0 83 0 0 2 0 85
Issuances 0 0 0 0 0 0 0
Sales 0 0 0 0 0 0 0
Settlements 0 (1) 0 0 0 0 (1)
Transfers into Level 3 9 (2) 0 0 0 0 0 9
Transfers out of Level 3 0 0 0 0 0 0 0
Balance, end of period $ 188 $ 298 $ 23 $ 245 $ 82 $ (146) $ 690
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 $ (185) $ (185)}

(1) Derivative assets and liabilities are presented net

(2) Transfer due to reclassification of level 3 securities from HTM to AFS

Nine 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 $ 198
$ 16
$ 25
$ 0
$ 3
$ (21 ) $ 2
$ 223

Realized investment gains (losses) included
in earnings 0
0
0
0
0
36
(1 ) 35

Unrealized gains (losses) included in other
comprehensive income (loss) 4
0
0
3
0
0
0
7

Purchases, issuances, sales and settlements:
Purchases 0
61
0
100
16
0
0
177

Issuances 0
0
0
0
0
0
0
0

Sales 0
0
0
(1 ) (1 ) 0
0
(2 )
Settlements (24 ) 0
0
0
0
0
0
(24 )
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
$ 36
$ (1 ) $ 35

⁽¹⁾ ~~Derivative assets and liabilities are presented net~~

Nine 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 $ 220
$ 0
$ 26
$ 0
$ 3
$ (192 ) $ 1
$ 58

Realized investment gains (losses) included
in earnings
0
0
0
0
0
250
2
252

Unrealized gains (losses) included in other
comprehensive income (loss)
48
0
0
0
0
(16 ) 0
32

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 (28 ) 0
0
0
0
(1 ) 0
(29 )
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
$ 250
$ 2
$ 252

⁽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, 2017

March 31, 2021

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

(In millions)

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

178

Consensus pricing

Offered quotes

N/A

^(d)

Mortgage- and asset-backed securities

204

Consensus pricing

Offered quotes

N/A

(a)

Public utilities

Discounted cash flow

Historical volatility

N/A

^(d)

Public utilities

479

Discounted cash flow

Credit spreads

N/A

(a)

Sovereign and supranational

Discounted cash flow

Historical volatility

N/A

(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(d)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

(a)

Other corporate

102

Discounted cash flow

Historical volatility

N/A

^(e)

Other corporate

319

Discounted cash flow

Credit spreads

N/A

(a)

Equity securities

Net asset value

Offered quotes

$1 - $724 ($6)

Equity securities

122

Net asset value

Offered quotes

N/A

(a)

Other assets:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

2.29% - 2.53%

^(a)

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

1.78%

2.20%

(b)

Interest rates (JPY)

.26% - .86%

^(b)

Interest rates (JPY)

.16%

.57%

(c)

CDS spreads

11 - 116 bps

CDS spreads

26 bps

127 bps

Foreign exchange rates

21.00%

^(c)

Discounted cash flow

Interest rates (USD)

2.29% - 2.53%

^(a)

Interest rates (JPY)

.26% - .86%

^(b)

CDS spreads

11 - 83 bps

Discounted cash flow

Interest rates (USD)

1.78%

2.20%

(b)

Discounted cash flow

Interest rates (USD)

2.29% - 2.53%

^(a)

Interest rates (JPY)

.16%

.57%

(c)

Interest rates (JPY)

.26% - .86%

^(b)

Foreign exchange rates

21.00%

^(c)

Credit default swaps

Discounted cash flow

Base correlation

62.73% - 66.88%

^(e)

Total assets

1,358

Liabilities:

Other liabilities:

Foreign currency swaps

140

Discounted cash flow

Interest rates (USD)

1.78%

2.20%

(b)

CDS spreads

19 bps

Interest rates (JPY)

.16%

.57%

(c)

Recovery rate

37.24%

CDS spreads

27 bps

201 bps

Total assets

548

Discounted cash flow

Interest rates (USD)

1.78%

2.20%

(b)

Interest rates (JPY)

.16%

.57%

(c)

Total liabilities

218

(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, 2020

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

(In millions)

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)

Mortgage- and asset-backed securities

224

Consensus pricing

Offered quotes

N/A

(a)

Public utilities

Discounted cash flow

Historical volatility

N/A

^(d)

Public utilities

422

Discounted cash flow

Credit spreads

N/A

(a)

Sovereign and supranational

Discounted cash flow

Historical volatility

N/A

(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(d)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

(a)

Other corporate

299

Discounted cash flow

Credit spreads

N/A

(a)

Equity securities

Net asset value

Offered quotes

$1-$701 ($8)

Equity securities

102

Net asset value

Offered quotes

N/A

(a)

Other assets:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

.93%

1.40%

(b)

Interest rates (JPY)

.22% - .80%

^(b)

Interest rates (JPY)

.05%

.43%

(c)

CDS spreads

17 - 172 bps

CDS spreads

22 bps

128 bps

Foreign exchange rates

21.47%

^(c)

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

Interest rates (JPY)

.22% - .80%

^(b)

CDS spreads

16 - 88 bps

Discounted cash flow

Interest rates (USD)

.93%

1.40%

(b)

Discounted cash flow

Interest rates (USD)

2.34% - 2.59%

^(a)

Interest rates (JPY)

.05%

.43%

(c)

Total assets

1,252

Liabilities:

Other liabilities:

Foreign currency swaps

160

Discounted cash flow

Interest rates (USD)

.93%

1.12%

(b)

Interest rates (JPY)

.22% - .80%

^(b)

Interest rates (JPY)

.05%

.35%

(c)

Foreign exchange rates

21.47%

^(c)

CDS spreads

41 bps

140 bps

Credit default swaps

Discounted cash flow

Base correlation

52.18% - 56.07%

^(e)

CDS spreads

54 bps

Recovery rate

36.69%

Total assets

369

Discounted cash flow

Interest rates (USD)

.93%

1.12%

(b)

Interest rates (JPY)

.05%

.35%

(c)

Total liabilities

231

(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~~2020 Annual Report.


6.	~~POLICY LIABILITIES~~

6. POLICY LIABILITIES

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


	Three Months Ended March 31,
(In millions)		2021		2020
Unpaid supplemental health claims, beginning of period		$	4,389	$	3,968
Less reinsurance recoverables		39		31
Net balance, beginning of period		4,350		3,937
Add claims incurred during the period related to:
Current year		1,859		1,837
Prior years		(320)		(136)
Total incurred		1,539		1,701
Less claims paid during the period on claims incurred during:
Current year		511		556
Prior years		1,061		1,144
Total paid		1,572		1,700
Effect of foreign exchange rate changes on unpaid claims		(162)		12
Net balance, end of period		4,155		3,950
Add reinsurance recoverables		37		33
Unpaid supplemental health claims, end of period		4,192		3,983
Unpaid life claims, end of period		756		710
Total liability for unpaid policy claims		$	4,948	$	4,693

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Unpaid supplemental health claims, beginning of period $ 3,872
$ 3,941
$ 3,707
$ 3,548

Less reinsurance recoverables 30
30
27
26

Net balance, beginning of period 3,842
3,911
3,680
3,522

Add claims incurred during the period related to:
Current year 1,759
1,843
5,278
5,309

Prior years (126 ) (148 ) (386 ) (374 )
Total incurred 1,633
1,695
4,892
4,935

Less claims paid during the period on claims incurred during:
Current year 1,357
1,462
3,074
3,160

Prior years 234
232
1,697
1,722

Total paid 1,591
1,694
4,771
4,882

Effect of foreign exchange rate changes on unpaid claims (14 ) 42
69
379

Net balance, end of period 3,870
3,954
3,870
3,954

Add reinsurance recoverables 30
31
30
31

Unpaid supplemental health claims, end of period 3,900
3,985
3,900
3,985

Unpaid life claims, end of period 468
361
468
361

Total liability for unpaid policy claims $ 4,368
$ 4,346
$ 4,368
$ 4,346

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~~$320 million for the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2021 comprises approximately ~~$301~~$101 million from Japan ~~which represents~~and $219 million from the U.S., representing approximately ~~78%~~32% and 68% of the ~~total.~~total, respectively. Excluding the impact of foreign exchange of a ~~loss~~gain of approximately ~~$13~~$1 million from December 31, ~~2016~~2020 to ~~September 30, 2017,~~March 31, 2021, the favorable claims development in Japan would have been approximately ~~$315~~$100 million, representing approximately ~~82%~~31% of the total. The U.S. portion of the favorable claims development includes $137 million related to refinements in estimates for COVID and non-COVID claims as experience emerged.

The Company has experienced continued favorable claim trends in ~~2017~~2021 for its core health products in Japan. ~~The Company's experience in Japan related~~During the first quarter of 2021, there were impacts from lower utilization of healthcare services, due to the ~~average length of stay~~COVID-19 pandemic. This impacted both cancer and medical products, as the Japan population was avoiding doctor and hospital visits, and was staying home more. This resulted in ~~the hospital for~~lower sickness, accident, and cancer ~~treatment has shown continued decline in the current period.~~incurred claims. 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.

For the majority of the Company's major U.S. accident and health lines of business, including accident, hospital indemnity, cancer, critical illness and short-term disability, the incurred claims development related to prior years reflects favorable claims experience compared to previous estimates.


7.	~~REINSURANCE~~

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 and $1.0 billion as of ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, 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~~$972 million and ~~$860 million~~$1.0 billion as of ~~September 30, 2017,~~March 31, 2021 and December 31, ~~2016,~~2020, 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~~weakened by approximately 3%6.5% and ceded reserves ~~increased~~decreased approximately 2%6.4% from December 31, ~~2016,~~2020 to ~~September 30, 2017.~~March 31, 2021.

The following table reconciles direct premium income and direct benefits and claims to net amounts after the effect of reinsurance which also includes the elimination of inter-segment amounts associated with affiliated reinsurance.


	Three Months Ended March 31,
(In millions)		2021	2020
Direct premium income				$	4,652	$	4,772
Ceded to other companies:
Ceded Aflac Japan closed blocks				(114)		(116)
Other				(19)		(24)
Assumed from other companies:
Retrocession activities				48		49
Other				26		0
Net premium income				$	4,593	$	4,681

Direct benefits and claims				$	2,776	$	3,028
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks				(99)		(105)
Eliminations				8		10
Other				(8)		(25)
Assumed from other companies:
Retrocession activities				42		41
Eliminations				(8)		(10)
Other				24		0
Benefits and claims, net				$	2,735	$	2,939

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Direct premium income $ 4,734
$ 5,119
$ 14,210
$ 14,724

Ceded to other companies:
    Ceded Aflac Japan closed blocks (130 ) (148 ) (390 ) (423 )
    Other (12 ) (13 ) (37 ) (37 )
Assumed from other companies:
    Retrocession activities 54
62
163
177

    Other 2
2
5
6

Net premium income $ 4,648
$ 5,022
$ 13,951
$ 14,447

Direct benefits and claims $ 3,157
$ 3,463
$ 9,403
$ 9,898

Ceded benefits and change in reserves for future benefits:
    Ceded Aflac Japan closed blocks (118 ) (135 ) (359 ) (385 )
    Eliminations 13
16
39
44

    Other (9 ) (10 ) (31 ) (26 )
Assumed from other companies:
    Retrocession activities 53
59
159
168

    Eliminations (13 ) (16 ) (39 ) (44 )
    Other 0
1
2
2

Benefits and claims, net $ 3,083
$ 3,378
$ 9,174
$ 9,657

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~~¥120 billion ~~yen.~~of reserves. This reinsurance facility agreement was renewed in ~~2016~~2020 and is effective until December 31, ~~2017.~~2021. 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~~Aflac's Standard and Poor's (S&P) rating drops below BBB-. As of ~~September 30, 2017,~~March 31, 2021, the Company has not executed a reinsurance treaty under this committed reinsurance facility.


8.	~~NOTES PAYABLE~~

8. NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations follows:

(In millions) September 30, 2017 December 31, 2016
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

3.625% senior notes due June 2023 694
696

3.625% senior notes due November 2024 743
745

3.25% senior notes due March 2025 445
445

2.875% senior notes due October 2026 298
298

6.90% senior notes due December 2039 221
220

6.45% senior notes due August 2040 256
254

4.00% senior notes due October 2046 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

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


(In millions)	March 31, 2021			December 31, 2020
3.625% senior notes due June 2023		$	698		$	698
3.625% senior notes due November 2024		747			747
3.25% senior notes due March 2025		448			448
1.125% senior sustainability notes due March 2026		397			0
2.875% senior notes due October 2026		298			298
3.60% senior notes due April 2030		991			990
6.90% senior notes due December 2039		221			221
6.45% senior notes due August 2040		254			254
4.00% senior notes due October 2046		394			394
4.750% senior notes due January 2049		541			541
Yen-denominated senior notes and subordinated debentures:
.300% senior notes due September 2025 (principal amount ¥12.4 billion)		111			119
.932% senior notes due January 2027 (principal amount ¥60.0 billion)		540			578
.500% senior notes due December 2029 (principal amount ¥12.6 billion)		113			121
.550% senior notes due March 2030 (principal amount ¥13.3 billion)		119			127
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)		263			282
.843% senior notes due December 2031 (principal amount ¥9.3 billion)		84			90
.750% senior notes due March 2032 (principal amount ¥20.7 billion)		185			198
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)		136			146
.934% senior notes due December 2034 (principal amount ¥9.8 billion)		88			94
.830% senior notes due March 2035 (principal amount ¥10.6 billion)		95			101
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)		80			85
1.122% senior notes due December 2039 (principal amount ¥6.3 billion)		57			61
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)		538			575
.963% subordinated bonds due April 2049 (principal amount ¥30.0 billion)		270			289
Yen-denominated loans:
Variable interest rate loan due September 2026 (.43% in 2021 and 2020, principal amount ¥5.0 billion)		45			48
Variable interest rate loan due September 2029 (.58% in 2021 and 2020, principal amount ¥25.0 billion)		224			240
Finance lease obligations payable through 2027		14			11
Operating lease obligations payable through 2049		137			143
Total notes payable and lease obligations		$	8,088		$	7,899

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,~~March 2021, the Parent Company issued ~~60.0 billion yen~~$400 million of senior sustainability notes through a U.S. public debt offering. The notes bear interest at a fixed rate of ~~.932%~~1.125% per annum, payable semi-annually, and ~~have a 10-year maturity.~~will mature in March 2026. The Company intends, but is not contractually committed, to allocate an amount at least equivalent to the net proceeds from this issuance exclusively to existing or future investments in, or financing of, assets, businesses or projects that meet the eligibility criteria of the Company's sustainability bond framework described in the offering documentation in connection with such notes. These notes ~~may only be redeemed before maturity,~~are redeemable at the Parent Company's option in whole ~~but not~~at any time or 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.~~

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 thefrom 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 interesttime at a ~~rate per annum~~redemption price equal to the ~~Tokyo interbank market rate (TIBOR) plus,~~greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the ~~Company's option, either (a) the applicable TIBOR margin during the period from the closing date~~yield to maturity for a U.S. Treasury security with a maturity comparable to the ~~commitment termination date or (b) the applicable TIBOR margin during the~~remaining 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 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. 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 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 ratenotes, 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~~10 basis points, plus ~~1.00%,~~ in each case, ~~plus an applicable margin. The applicable margin ranges between .79%~~accrued and ~~1.275% for eurocurrency rate borrowings and 0.0% and .275% for base rate borrowings, depending~~unpaid interest on the ~~Parent Company’s debt ratings~~principal amount of the notes to be redeemed to, but excluding, such redemption date.

A summary of the Company's lines of credit as of March 31, 2021 follows:

Borrower(s)

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 17, 2021

$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

November 18, 2024, or the date commitments are terminated pursuant to an event of default

$1.0 billion

$0.0 billion

A rate per annum equal to, at the Company's option, either, (a) 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 November 18, 2024

.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

$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 30, 2021

$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, 2021(2)

¥50.0 billion

¥0.0 billion

Three-month TIBOR plus 70 basis points per annum

3 months

None

General corporate purposes

Aflac Incorporated(1)

uncommitted revolving

364 days

November 25, 2021

¥50.0 billion

¥0.0 billion

Three-month TIBOR plus 70 basis points per annum

3 months

None

General corporate purposes

Aflac New York(1)

uncommitted revolving

364 days

April 7, 2021(3)

$25 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

3 months

None

General corporate purposes

CAIC(1)

uncommitted revolving

364 days

March 21, 2022

$15 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

3 months

None

General corporate purposes

Tier One Insurance Company(1)

uncommitted revolving

364 days

March 21, 2022

$0.3 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

3 months

None

General corporate purposes

(1) Intercompany credit agreement

(2)Renewed in April 2021 with an expiration date April 1, 2022

(3)Renewed in April 2021 with an expiration date of determination. In addition, the Parent Company and Aflac are required to pay a facility fee on the commitments ranging between .085% and .225%, also based on the Parent Company’s debt ratings as of the date of determination. Borrowings under the amended and restatedApril 7, 2022

(continued)

Borrower(s)

Type

Term

Expiration Date

Capacity

Amount Outstanding

Interest Rate on Borrowed Amount

Maturity Period

Commitment Fee

Business Purpose

AGV Management Services Japan K.K.(1)

uncommitted revolving

364 days

May 1, 2021

¥500 million

¥350 million

A rate per annum equal to the short-term prime lending rates of banks appearing on the website for the Bank of Japan on the first day of the applicable period

No later than
May 1, 2021

None

General corporate purposes

Hatch Healthcare K.K.(1)

uncommitted revolving

364 days

January 3, 2022

¥900 million

¥0 million

A rate per annum equal to the short-term prime lending rates of banks appearing on the website for the Bank of Japan on the first day of the applicable period

No later than January 3, 2022

None

General corporate purposes

Hatch Insight K.K.(1)

uncommitted revolving

364 days

January 3, 2022

¥600 million

¥0 million

A rate per annum equal to the short-term prime lending rates of banks appearing on the website for the Bank of Japan on the first day of the applicable period

No later than January 3, 2022

None

General corporate purposes

(1) Intercompany 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 revolving 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. No~~March 31, 2021. NaN events of default or defaults occurred during the ~~nine-month~~three-month period ended ~~September 30, 2017.~~March 31, 2021.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the ~~2016~~2020 Annual Report.


9.	~~SHAREHOLDERS’ EQUITY~~

9. SHAREHOLDERS’ EQUITY

The following table is a reconciliation of the number of shares of the Company's common stock for the ~~nine-month~~three-month periods ended ~~September 30~~.March 31.


(In thousands of shares)	2021	2020
Common stock - issued:
Balance, beginning of period	1,351,018	1,349,309
Exercise of stock options and issuance of restricted shares	1,261	1,341
Balance, end of period	1,352,279	1,350,650
Treasury stock:
Balance, beginning of period	658,564	622,516
Purchases of treasury stock:
Share repurchase program	13,440	9,984
Other	378	508
Dispositions of treasury stock:
Shares issued to AFL Stock Plan	(387)	(468)
Exercise of stock options	(211)	(45)
Other	(212)	(227)
Balance, end of period	671,572	632,268
Shares outstanding, end of period	680,707	718,382

(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 March 31,
(In thousands)		2021	2020
Anti-dilutive share-based awards				1	744

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~~three months of ~~2017,~~2021, the Company repurchased ~~13.9~~13.4 million shares of its common stock ~~in the open market~~ for ~~$1.0 billion~~$650 million as part of its share repurchase program. During the first ~~nine~~three months of ~~2016,~~2020, the Company repurchased ~~18.8~~10.0 million shares of its common stock ~~in the open market~~ for ~~$1.2 billion~~$449 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,~~March 31, 2021, a remaining balance of ~~52.9~~85.7 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 March 31, 2021																					Three Months Ended March 31, 2021
(In millions)																					(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Pension Liability Adjustment			Total
Balance at December 31, 2020																					Balance at December 31, 2020		$	(1,109)		$	10,361		$	(34)		$	(284)		$	8,934

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			Other comprehensive income (loss) before reclassification		(565)			(1,583)			1			(4)			(2,151)
Amounts reclassified from accumulated other comprehensive income (loss)		0				(32		)		0				3				(29		)	Amounts reclassified from accumulated other comprehensive income (loss)		0			16			0			8			24
Net current-period other comprehensive income (loss)		(135		)		264				0				1				130			Net current-period other comprehensive income (loss)		(565)			(1,567)			1			4			(2,127)
Balance, end of period		$	(1,715	)		$	5,437			$	(23	)		$	(168	)		$	3,531
Balance at March 31, 2021																					Balance at March 31, 2021		$	(1,674)		$	8,794		$	(33)		$	(280)		$	6,807

All amounts in the table above are net of tax.


Three Months Ended September 30, 2016
Three Months Ended March 31, 2020																					Three Months Ended March 31, 2020
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)				Unrealized Gains (Losses) on Investment Securities				Unrealized Gains (Losses) on Derivatives				Pension Liability Adjustment				Total				(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Pension Liability Adjustment			Total
Balance, beginning of period		$	(847	)		$	6,441			$	(19	)		$	(143	)		$	5,432
Balance at December 31, 2019																					Balance at December 31, 2019		$	(1,623)		$	8,548		$	(33)		$	(277)		$	6,615
Cumulative effect of change in accounting principle - ASU 2019-04																					Cumulative effect of change in accounting principle - ASU 2019-04		0			848			0			0			848
Balance at January 1, 2020																					Balance at January 1, 2020		$	(1,623)		$	9,396		$	(33)		$	(277)		$	7,463
Other comprehensive income (loss) before reclassification		253				(342		)		0				(1		)		(90		)	Other comprehensive income (loss) before reclassification		80			(3,359)			(2)			(6)			(3,287)
Amounts reclassified from accumulated other comprehensive income (loss)		0				21				0				1				22			Amounts reclassified from accumulated other comprehensive income (loss)		0			6			0			6			12
Net current-period other comprehensive income (loss)		253				(321		)		0				0				(68		)	Net current-period other comprehensive income (loss)		80			(3,353)			(2)			0			(3,275)
Balance, end of period		$	(594	)		$	6,120			$	(19	)		$	(143	)		$	5,364
Balance at March 31, 2020																					Balance at March 31, 2020		$	(1,543)		$	6,043		$	(35)		$	(277)		$	4,188

All amounts in the table above are net of tax.

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, 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 March 31, 2021
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		$	(20)	Net investment gains (losses)
		4		Tax (expense) or benefit(1)
		$	(16)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(10)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		2		Tax (expense) or benefit(1)
		$	(8)	Net of tax
Total reclassifications for the period		$	(24)	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%~~21% 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 March 31, 2020
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		$	(7)	Net investment gains (losses)
		1		Tax (expense) or benefit(1)
		$	(6)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(8)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		2		Tax (expense) or benefit(1)
		$	(6)	Net of tax
Total reclassifications for the period		$	(12)	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%~~21% 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, 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% 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,~~March 31, 2021, 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,~~March 31, 2021, approximately ~~20.6~~36.7 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,~~March 31, 2021, the only performance-based awards issued and outstanding were restricted stock ~~awards.~~awards and units.

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.~~March 31, 2021.


	Stock Option Shares (in thousands)		Weighted-Average Remaining Term (in years)		Aggregate Intrinsic Value (in millions)			Weighted-Average Exercise Price Per Share
Outstanding		2,534		4.0		$	52		$	30.54
Exercisable		2,474		3.9		51			30.41

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~~$15 million during the first ~~nine~~three months of ~~2017,~~2021, compared with ~~$59~~$6 million in the first ~~nine~~three months of ~~2016.~~2020. The tax benefit realized as a result of stock option exercises and restricted stock releases was ~~$37~~$14 million in the first ~~nine~~three months of ~~2017,~~2021, compared with ~~$29~~$17 million in the first ~~nine~~three months of ~~2016.~~2020.

As of ~~September 30, 2017,~~March 31, 2021, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards was ~~$43~~$68 million, of which ~~$17~~$32 million ~~(968 thousand~~(1.7 million 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~~2.0 years. There are no other contractual terms covering restricted stock awards once vested.

The following table summarizes restricted stock activity during the ~~nine-month~~three-month period ended ~~September 30.~~March 31, 2021.


(In thousands of shares)	Shares	Weighted-Average Grant-Date Fair Value Per Share
Restricted stock at December 31, 2020	2,580		$	48.57
Granted in 2021	1,296		46.96
Canceled in 2021	(11)		51.82
Vested in 2021	(1,183)		46.23
Restricted stock at March 31, 2021	2,682		$	48.66

(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,~~2021, the Company granted ~~253~~474 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~~2020 Annual Report.


~~11.~~	~~BENEFIT PLANS~~

11. BENEFIT PLANS

The Company has funded defined benefit plans in Japan and the ~~United States,~~U.S., 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. Effective January 1, 2021, the Company increased this nonelective contribution to 4% of an employee's annual cash compensation.

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 $7 million and $6 million for the three-month periods ended March 31, 2021 and 2020, respectively. Total net periodic cost includes the following components:

Three Months Ended September 30,
Pension Benefits Other
Japan U.S. Postretirement Benefits
(In millions) 2017 2016 2017 2016 2017 2016
Components of net periodic
benefit cost:
Service cost $ 4
$ 4
$ 6
$ 5
$ 0
$ 0

Interest cost 2
2
8
8
0
0

Expected return on plan
assets (1 ) (1 ) (6 ) (6 ) 0
0

Amortization of net actuarial
loss 1
0
3
4
0
0

Amortization of prior service
cost (credit) 0
0
0
0
0
(2 )
Net periodic (benefit) cost $ 6
$ 5
$ 11
$ 11
$ 0
$ (2 )


	Three Months Ended March 31,
	Pension Benefits												Other
	Japan						U.S.						Postretirement Benefits
(In millions)	2021			2020			2021			2020			2021			2020
Components of net periodic benefit cost:
Service cost		$	6		$	6		$	7		$	7		$	0		$	0
Interest cost		1			1			8			8			0			0
Expected return on plan assets		(2)			(2)			(10)			(9)			0			0
Amortization of net actuarial loss		1			1			8			6			1			1

Net periodic (benefit) cost		$	6		$	6		$	13		$	12		$	1		$	1

Nine Months Ended September 30,
Pension Benefits Other
Japan U.S. Postretirement Benefits
(In millions) 2017 2016 2017 2016 2017 2016
Components of net periodic
benefit cost:
Service cost $ 13
$ 12
$ 18
$ 17
$ 0
$ 0

Interest cost 5
5
24
24
1
1

Expected return on plan
assets (3 ) (3 ) (17 ) (17 ) 0
0

Amortization of net actuarial
loss 2
1
10
10
0
1

Amortization of prior service
cost (credit) 0
0
0
0
0
(8 )
Net periodic (benefit) cost $ 17
$ 15
$ 35
$ 34
$ 1
$ (6 )

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, Aflac Japan contributed approximately ~~$18~~$10 million (using the weighted-average yen/dollar exchange rate for the ~~nine-month~~three-month period ~~ending September 30, 2017)~~ended March 31, 2021) to the Japanese funded defined benefit plan, and Aflac U.S. ~~contributed $40 million~~did 0t make a contribution 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~~2020 Annual Report.


~~12.~~	~~COMMITMENTS AND CONTINGENT LIABILITIES~~

Effective for 2017, 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, the agreement has a remaining term of five years and an aggregate remaining cost of 7.8 billion yen ($69 million using the September 30, 2017, exchange rate).12. COMMITMENTS AND CONTINGENT LIABILITIES

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~~U.S. 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, 2021. 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~~three-month period ended March 31, 2021 were immaterial.


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

13. SUBSEQUENT EVENTS

In ~~October 2017,~~April 2021, the Parent Company issued ~~60.0~~5 series of senior notes totaling ¥82.0 billion ~~yen of subordinated debentures~~ through a public debt offering under its U.S. shelf registration statement. The ~~debentures bear~~first series, which totaled ¥30.0 billion, bears interest at ~~an initial~~a fixed rate of ~~2.108%~~.633% per annum, ~~through October 22, 2027, or earlier redemption. Thereafter, the~~payable semi-annually, and will mature in April 2031. The second series, which totaled ¥12.0 billion, bears interest at a fixed rate of ~~the~~.844% per annum, payable semi-annually, and will mature in April 2033. The third series, which totaled ¥10.0 billion, bears interest ~~of the debentures will be reset every five years~~ at a fixed rate of ~~interest equal to the then-current JPY 5-year Swap Offered Rate plus 205 basis points. The debentures are~~1.039% per annum, payable semi-annually, and will mature in ~~arrears~~April 2036. The fourth series, which totaled ¥10.0 billion, bears interest at a fixed rate of 1.264% per annum, payable semi-annually, and ~~have~~will mature in April 2041. The fifth series, which totaled ¥20.0 billion, bears interest at a ~~30-year maturity. The debentures are redeemable (i) at any time,~~fixed rate of 1.560% per annum, payable semi-annually, and will mature in April 2051. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain ~~tax events or certain rating agency events,~~changes affecting U.S. taxation, 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.~~issuance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a ~~“safe harbor”~~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~~Aflac Incorporated (the Parent Company) and its subsidiaries (collectively with the Parent Company, ~~desires~~the Company) desire to take advantage of these provisions. This report contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected 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 ones listed below 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:

•difficult conditions in global capital markets and the economy, including those caused by COVID-19

•defaults and credit downgrades of investments

•exposure to significant interest rate risk

•concentration of business in Japan

•limited availability of acceptable yen-denominated investments

•foreign currency fluctuations in the yen/dollar exchange rate

~~failure~~•differing judgments applied to ~~execute~~investment valuations

•significant valuation judgments in determination of expected credit losses recorded on the Company's investments

•decreases in the Company's financial strength or ~~implement the conversion~~debt ratings

•decline in creditworthiness of other financial institutions

•concentration of the ~~Japan branch~~Company's investments in any particular single-issuer or sector

•the effects of COVID-19, and any resulting economic effects and government interventions, on the Company's business and financial results

•ability to ~~a legal subsidiary~~attract and retain qualified sales associates, brokers, employees, and distribution partners

~~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 the purpose of stabilizing the financial markets~~

•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~~•subsidiaries' ability to pay dividends to the ~~Company's industry~~Parent Company

•inherent limitations to risk management policies and procedures

•events related to the Japan Post investigation and other matters

•tax rates applicable to the Company may change

•failure to comply with restrictions on ~~patient~~policyholder privacy and information security

•extensive regulation and changes in law or regulation by governmental authorities

~~defaults~~•competitive environment and ~~credit downgrades of investments~~

ability to ~~attract~~anticipate and ~~retain qualified sales associates~~respond to market trends

•catastrophic events, including, but not limited to, as a result of climate change, epidemics, pandemics (such as the coronavirus COVID-19), tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, terrorism or other acts of violence, and ~~employees~~damage incidental to such events

~~decline in creditworthiness of other financial institutions~~

~~subsidiaries'~~ •ability to ~~pay dividends to~~protect the Aflac ~~Incorporated~~

~~decreases in~~brand and the Company's ~~financial strength or debt ratings~~reputation

~~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, acts of terrorism 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)~~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~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, 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~~2020 (2020 Annual Report). In this MD&A, amounts may not foot due to rounding. For additional information on the Company’s performance measures included in this MD&A, see the Glossary of Selected Terms found directly following Part II. Other Information.

This MD&A is divided into the following sections:

EXECUTIVE SUMMARY

Company Overview

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) provide financial protection to more than 50 million people worldwide. The Company’s principal business is supplemental health and life insurance products with the goal to provide customers the best value in supplemental insurance products in the United States (U.S.) and Japan. The Company's insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. The Parent Company’s primary insurance subsidiaries are Aflac Life Insurance Japan Ltd. in Japan (Aflac Japan) and American Family Life Assurance Company of Columbus (Aflac); Continental American Insurance Company (CAIC), branded as Aflac Group Insurance (AGI); American Family Life Assurance Company of New York (Aflac New York); Tier One Insurance Company (TOIC) and Argus Dental & Vision, Inc. (Argus), which provides a platform for Aflac Dental and Vision in the U.S. (collectively, Aflac U.S.).

COVID-19

The impact of the COVID-19 global pandemic on the Company continues to evolve, and its future effects remain uncertain. At the onset of the pandemic in 2020, the majority of the Company’s employees in Japan and the U.S. shifted to remote working environments, with returns to office undertaken as warranted by local conditions. Both Aflac Japan and Aflac U.S. have taken measures to address employee health and safety and increase employees’ ability to develop and maintain more flexible working conditions, and operations remained stable throughout the first quarter of 2021. The Company also took prompt action at the beginning of the pandemic to strengthen its capital and liquidity position, and continues to monitor its investment portfolios to adjust to market conditions. Both Aflac Japan and Aflac U.S. have accelerated investments in digital initiatives to improve productivity, efficiency and customer service over the long term.

In the first quarter of 2021, Aflac U.S. experienced a significant decrease in sales, compared to pre-pandemic levels of the first quarter of 2020, due to the ongoing effects of the pandemic and related government, community and individual responses. Sales for Aflac Japan were relatively flat as compared to the first quarter of 2020. Pandemic-related claims and associated reserve increases in both Japan and the U.S. have not materially impacted financial results in the first quarter of 2021 and were more than offset by a reduction in claims related to non-COVID-19 medical needs. The pandemic’s impact on economic conditions have contributed to sales declines, pressuring premium growth rates. This has been partially offset by lower lapse rates in the U.S. The Company has not experienced material realized losses or impairments and credit losses associated with the pandemic. The Company continues to closely monitor the effects and risks of COVID-19 to assess its impact on economic conditions in Japan and the U.S. and on the Company's ~~Business~~business, financial condition, results of operations, liquidity and capital position. Those impacts may cause changes to estimates of future earnings, capital deployment, regulatory capital position, segment dividend payout ratios and other measures the Company provided under 2021 Outlook in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2020 Annual Report.

The Company’s efforts and other developments are outlined below.

•Liquidity and Capital Resources

The Company remains committed to prudent liquidity and capital management. In terms of repurchases, the Company remains in the market and is being tactical in its approach to repurchasing its stock. The Company believes that this approach will allow it to increase or decrease repurchase activity depending on how the pandemic and market conditions evolve.

The Company is committed to maintaining a strong Aflac Japan solvency margin ratio (SMR) and Aflac U.S. risk-based capital (RBC) ratios.

The Company regularly evaluates adjustments to its foreign currency-hedging program in Aflac Japan to mitigate hedging cost and settlement risk while maintaining a strong SMR, including the possibility of changing the level of hedging employed with the U.S dollar-denominated investments. See the Liquidity and Capital Resources section of this MD&A for additional information regarding other potential sources of liquidity and capital resources.

•Investment Portfolio

The Company's investment portfolio was well-positioned entering the crisis, and the Company continues to follow its strategy of investing primarily in fixed maturity securities to generate a reliable stream of income. Fundamental credit analysis and de-risking activity in prior periods contributed to the current quality of the Company’s investments. Although economic and market conditions have continued to improve, the Company remains cautious about the continued path of the recovery and the potential longer term impacts on certain sectors most vulnerable to the impacts of the pandemic.The Company continues working with certain issuers to provide temporary relief of terms by providing payment deferrals and other modifications or waivers where the Company believes it improves its overall position. For additional information on these loan modifications, see Note 3 of the Notes to the Consolidated Financial Statements.

•Crisis Management

The Company established command centers in Japan and the U.S. to monitor and communicate pandemic developments to the Company's leadership. The command centers participate in regular updates to the Company's leadership, including government and regulatory actions, operations, employee policies and conditions and distribution status. In addition, capital market, central bank and government stimulus updates are provided, as well as updates on cybersecurity, including with respect to the Company's remote workforce. Moreover, the Company's financial leadership group has been meeting more frequently since the onset of the pandemic and has focused on the capital markets, capital and liquidity position, stress testing and any defensive actions that may be necessary as the crisis unfolds.

•Aflac Japan initiatives

Aflac Japan has maintained certain measures implemented at the onset of the pandemic, such as working from home, staggered work hours and limitations on the number of personnel attending in-person meetings. As of March 31, 2021, Aflac Japan had approximately 58% of its workforce working remotely. Aflac Japan continues to evaluate return to the office measures; however, throughout the development of the pandemic, Aflac Japan has evaluated its operational capabilities and anticipates that the remote configuration could remain for an indefinite period of time without materially impacting operations.

Aflac Japan also continues to maintain several additional actions taken for its employees including travel restrictions and extended paid leave.

Aflac Japan remains focused on generating new business to existing and prospective customers through direct mail and digital methods. Aflac Japan has also accelerated investments in digital and paperless initiatives designed to increase long term productivity, efficiency, customer service and business continuity.

•Aflac U.S. and Corporate and Other initiatives

The Parent Company and Aflac U.S. continue to maintain certain measures that were implemented at the onset of the pandemic, including restrictions on travel and in-person meetings applicable to U.S. employees and required work from home directives across their U.S. work force. As of March 31, 2021, over 90% of U.S. employees were working remotely. The Company currently anticipates that a return to the worksite for U.S. based employees of the Parent Company and Aflac U.S. will be conducted in phases beginning no sooner than the second half of 2021, subject to factors including the availability of treatments and vaccines, the return schedule of school systems and the availability of child care, the number of COVID–19 cases and the COVID–19 replication rate in areas of the U.S. where the Company has significant operations. However, Aflac U.S. anticipates that the remote configuration could remain for an indefinite period of time without materially impacting operations. The Parent Company and Aflac U.S. continue to maintain employee and worksite safety measures including travel restrictions, building access restrictions and in-person meeting restrictions.

Aflac U.S. also continues to maintain several actions taken for its employees. These include a commitment to cover the costs of COVID-19 testing and extended paid leave in certain circumstances.

Aflac U.S. policy sales, enrollment and agent recruiting functions are highly dependent upon face-to-face interaction between independent agents and brokers with prospective and new customers and agents. Opportunities for such interaction continue to be significantly reduced by reactions to the pandemic, such as social distancing, shelter in place orders and work from home initiatives. Further, Aflac U.S. has also accelerated

investments in digital initiatives designed to improve long term productivity, efficiency and customer service. Aflac U.S. is in its third year of the build-out of the Consumer Markets business for the digital direct-to-consumer sale of insurance and sales made through that platform have continued to grow.

•Major government initiatives

Government authorities in Japan and the U.S. have implemented several initiatives in response to the COVID-19 pandemic, including actions designed to mitigate the adverse health effects of the virus and those designed to provide broad-based relief and economic support to all aspects of the economy.

In January 2021, in response to the spread of COVID-19, the Government of Japan issued a State of Emergency Declaration covering 11 prefectures, including Tokyo and Osaka. The declaration was lifted in stages in areas where improvements in infection rates and lower healthcare system utilization were observed, and it was lifted in all areas on March 21, 2021. On April 23, 2021, due to the continued spread of COVID-19, the Government of Japan issued a new State of Emergency Declaration covering four prefectures, including Tokyo and Osaka, from April 25, 2021 until May 11, 2021, depending on circumstances, this state of emergency may be extended. Additionally, certain local governments continue to request a reduction of the onsite workforce and restraint from non-urgent traveling.

The Financial Services Agency (FSA) has requested that financial service providers in Japan respond appropriately while continuing their essential operations. This request includes insurance companies, which have been asked to continue essential operations such as benefits and claims payment, including policyholder loans. Moreover, following the expansion of the impact of COVID-19, the FSA requested insurance companies to consider flexible interpretation and application of insurance policy provisions and measures required for products from the standpoint of protecting policyholders. In accordance with the FSA’s request, Aflac Life Insurance Japan Ltd. implemented a measure to pay accidental death benefits and accidental serious disability benefits under its accidental death benefit rider in cases of death or specified serious disabilities from COVID-19.

Throughout the pandemic, Aflac Japan has also followed the guidance of the FSA in terms of treating customers with care, ensuring ease and timeliness of claims payments and extended coverage for temporary medical facilities and telemedicine in certain circumstances, and waiver of interest on certain policyholder loans. In January 2021, the grace period on premium payments was extended to July 31, 2021 for the policyholders who live in areas under the state of emergency and in February 2021, the scope was expanded to all regions in Japan. Policyholders are required to file for relief through this extension.

During 2021, in response to fluctuations in COVID-19 infection rates and the declaration of a state of emergency by the Government of Japan, Aflac Japan has responded to requests of the Government of Japan and local governments while also giving priority to customer service quality and business continuity.

In the U.S., initial statewide shelter in place or stay at home orders were lifted although reopening plans have been paused or reversed in certain states experiencing an increase in cases, and shelter in place orders have been reinstated in some areas.

Throughout the pandemic, Aflac U.S. has taken steps to comply with COVID-19-related directives issued by state regulatory authorities, including those requiring or requesting premium grace periods. As of March 31, 2021, premium grace periods remained in effect in nine states, Puerto Rico and the District of Columbia. Aflac U.S. experienced some increase in policy lapses in the first quarter of 2021 in certain states where premium grace periods expired. If the premium grace periods continue to expire throughout 2021, Aflac U.S. would expect an increase in lapse rates, and a decrease in corresponding persistency rates.

The U.S. government took action in response to the COVID-19 pandemic by providing broad-based relief and economic support to all aspects of the economy.

The American Rescue Plan (ARP) Act of 2021 was signed into law in March 2021 and was designed to provide approximately $1.9 trillion in financial stimulus in the form of financial aid to individuals, businesses, nonprofits, states, and municipalities. Among other measures, the ARP Act provides funding for vaccines and testing; for states, tribal and local governments; and for small businesses. The ARP Act also expands eligibility for the Paycheck Protection Program created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March 2020.

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 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 as a branch in Japan (Aflac Japan). 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 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. The spot yen/dollar exchange rate at September 30, 2017 was 112.73, or 3.3% stronger than the spot yen/dollar exchange rate of 116.49 at December 31, 2016. The weighted-average yen/dollar exchange rate for the three-month period ended September 30, 2017 was 111.03, or 7.8% weaker than the weighted-average yen/dollar exchange rate of 102.37 for the same period in 2016. The weighted-average yen/dollar exchange rate for the nine-month period ended September 30, 2017 was 111.89, or 3.0% weaker than the weighted-average yen/dollar exchange rate of 108.58 for the same period in 2016.

~~Revenues~~Total revenues were $5.5 billion in the third quarter of 2017, compared with $5.7 billion in the third quarter of 2016. Net earnings were $716 million, or $1.80 per diluted share in the third quarter of 2017, compared with $629 million, or $1.53 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.

~~Revenues were $16.2~~$5.9 billion in the first ~~nine months~~quarter of ~~2017,~~2021, compared with ~~$16.6~~$5.2 billion in the first ~~nine months~~quarter of ~~2016. The decline in revenues was primarily driven by the change in the yen/dollar exchange rate as noted.~~2020. Net earnings were ~~$2.0~~$1.3 billion, or ~~$5.05~~$1.87 per diluted share in the first ~~nine months~~quarter of ~~2017,~~2021, compared with ~~$1.9 billion,~~$566 million, or ~~$4.59~~$.78 per diluted share, ~~for~~in the first ~~nine months~~quarter of ~~2016.~~2020, driven by higher net investment gains.

Results in the ~~third~~first quarter of ~~2017~~2021 included pretax net ~~realized~~ investment gains of ~~$30~~$307 million, compared with net ~~realized~~ investment losses of ~~$164~~$463 million in the ~~third~~first quarter of ~~2016.~~2020. Net investment gains in the ~~third~~first quarter of ~~2017~~2021 included ~~$8 million~~a decrease in credit loss allowances of ~~other-than-temporary impairment losses; $61~~$22 million; $364 million of net gains from ~~the sale~~certain derivative and foreign currency gains or ~~redemption~~losses; $68 million of net losses on equity securities; and ~~$23~~$11 million of net losses from ~~derivatives~~sales and ~~foreign currency gains (losses).~~redemptions.

~~Results~~The average yen/dollar exchange rate(1) for the three-month period ended March 31, 2021 was 105.88, or 2.8% stronger than the average yen/dollar exchange rate of 108.84 for the same period in 2020.

Adjusted earnings(2) in the first ~~nine months~~quarter of ~~2017 included pretax net realized investment losses of $166 million,~~2021 were $1.1 billion, or $1.53 per diluted share, compared with ~~net realized investment losses of $358~~$882 million, or $1.21 per diluted share, in the first ~~nine months~~quarter of ~~2016. Net~~2020. The stronger yen/dollar exchange rate impacted adjusted earnings per diluted share by $.02.

Total investments and cash at March 31, 2021 were $143.3 billion, compared with $137.0 billion at March 31, 2020. In the first quarter of 2021, Aflac Incorporated repurchased $650 million, or 13.4 million of its common shares. At March 31, 2021, the Company had 85.7 million remaining shares authorized for repurchase.

Shareholders’ equity was $32.1 billion, or $47.16 per share, at March 31, 2021, compared with $26.4 billion, or $36.75 per share, at March 31, 2020. Shareholders’ equity at March 31, 2021 included a net unrealized gain on investment ~~losses~~securities and derivatives of $8.8 billion, compared with a net unrealized gain of $6.0 billion at March 31, 2020. Shareholders’ equity at March 31, 2021 also included an unrealized foreign currency translation lossof $1.7 billion, compared with an unrealized foreign currency translation loss of $1.5 billion at March 31, 2020. The annualized return on average shareholders’ equity in the first ~~nine months~~quarter of ~~2017 included $27 million~~2021 was 15.8%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI)(2) (adjusted book value) was $25.3 billion, or $37.16 per share at March 31, 2021, compared with $22.2 billion, or $30.92 per share, at March 31, 2020. The annualized adjusted return on equity excluding foreign currencyimpact(2) in the first quarter of ~~other-than-temporary impairment losses; $60 million~~2021 was 16.7%.

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

(2) See the Results of ~~net gains from the sale or redemption of securities; and $199 million of net losses from derivatives and foreign currency gains (losses).~~

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 LiquidityOperations section of this MD~~&A.~~&A for a definition of this non-U.S. GAAP financial measure.

~~In the first nine months~~

RESULTS OF OPERATIONS

The Company earns its revenues principally from insurance premiums and investments. The Company’s operating expenses primarily consist of ~~2017,~~insurance benefits provided and reserves established for anticipated future insurance benefits, general business expenses, commissions and other costs of selling and servicing its products. Profitability for the Company ~~repurchased 13.9 million shares of~~depends principally on its ~~common stock in~~ability to price its insurance products at a level that enables the ~~open market for $1.0 billion under its share repurchase program.~~Company to earn a margin over the costs associated with providing benefits and administering those products. Profitability also depends on, among other items, actuarial and policyholder behavior experience on insurance products, and the Company's ability to attract and retain customer assets, generate and maintain favorable investment results, effectively deploy capital and utilize tax capacity, and manage expenses.

~~CRITICAL ACCOUNTING ESTIMATES~~

~~The Company prepares its~~This document includes references to the Company's financial ~~statements~~performance measures which are not calculated 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)~~ (non-U.S. GAAP). 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% of the Company's assets and 80% of its liabilities are reported as of September 30, 2017, 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. For additional information, see the Critical Accounting Estimates section of MD&A included in the 2016 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 earnings, operating earnings per diluted share, and amortized hedge costs, 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.

Due to the size of Aflac Japan,where the 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. A significant portion of the Company's business is conducted in yen and never converted into dollars but translated into dollars for U.S. GAAP reporting purposes. Management evaluates the Company's financial

performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts on book value and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

The Company defines the non-U.S. GAAP financial measures included in this document as follows:

•Adjusted earnings are adjusted revenues less benefits and adjusted expenses. Adjusted earnings per share (basic or diluted) are adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S. GAAP total revenues excluding adjusted net investment gains and losses. 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 or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's ~~management~~underlying business performance. 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 financial measures is vitally important to an understanding of its underlying profitability drivers and trends of ~~its~~the Company's insurance business. The most comparable U.S. GAAP financial measure is net earnings and net earnings per share, respectively.

•Adjusted net investment gains and losses are net investment gains and losses adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest cash flows from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense. The most comparable U.S. GAAP financial measure is net investment gains and losses.

•Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency-derivatives to hedge certain foreign exchange risks in the Company's Japan segment or in the Corporate and Other segment. These amortized hedge costs/income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight line basis over the term of the hedge. The Company believes that amortized hedge ~~costs, which are a component of operating earnings,~~costs/income 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 defines operating earnings (a non-U.S.~~ There is no comparable U.S. GAAP financial ~~measure) as the profits derived from operations. Operating earnings includes interest cash flows associated with notes payable and~~measure for amortized hedge ~~costs related to~~costs/income

•Adjusted earnings excluding current period foreign currency ~~denominated investments, but excludes certain items that cannot be predicted or that~~impact are ~~outside of management's control, such as realized investment gains and losses from securities transactions, impairments, change in loan loss reserves and certain derivative and~~computed using the average foreign currency ~~activities; nonrecurring items; and other non-operating income (loss) from net earnings. Nonrecurring and other non-operating items consist of infrequent events and activity not associated with~~exchange rate for the ~~normal course of the Company’s insurance operations and do not reflect Aflac’s underlying business performance. The Company defines operating~~comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. Adjusted earnings per diluted share ~~(basic or dilutive) to be operating~~excluding current period foreign currency impact are adjusted earnings ~~for the~~excluding current period foreign currency impact divided by the weighted average outstanding diluted shares ~~(basic or dilutive)~~ for the period presented.

~~Because~~ The Company considers adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact important because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside of management’s ~~control,~~control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese ~~yen~~yen) into U.S. dollars. ~~Operating~~The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and ~~operating~~adjusted earnings per diluted share excluding current period foreign currency impact are ~~computed~~net earnings and net earnings per share, respectively.

•Adjusted book value is the U.S. GAAP book value (representing total shareholders' equity), less AOCI as recorded on the U.S. GAAP balance sheet. The Company considers adjusted book value important as it excludes AOCI, which fluctuates due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure is total book value.

•Adjusted return on equity (ROE) excluding foreign currency impact is calculated using adjusted earnings excluding current period foreign currency impact divided by average shareholders’ equity, excluding AOCI. The Company considers adjusted return on equity excluding foreign currency impact important as it excludes changes in foreign currency and components of AOCI, which fluctuate due to market movements that are outside

management's control. The most comparable U.S. GAAP financial measure is return on average equity as determined using net earnings and average total shareholders’ equity.

•U.S. dollar-denominated investment income excluding foreign currency impact is determined using the average ~~yen/dollar~~foreign currency exchange rate for the comparable prior year ~~period,~~period. The Company considers U.S. dollar-denominated investment income excluding foreign currency impact important as it eliminates the impact of foreign currency changes on the Aflac Japan segment results, which are outside management's control. The most comparable U.S. GAAP financial measure for U.S. dollar-denominated investment income excluding foreign currency impact is the corresponding net investment income amount from the U.S. dollar denominated investments translated to yen.

~~eliminates dollar based fluctuations driven solely from 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 financial 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
	Three Months Ended March 31,
			2021		2020		2021		2020
Net earnings			$	1,293	$	566	$	1.87	$	.78
Items impacting net earnings:
Adjusted net investment (gains) losses (2)			(304)		448		(.44)		.62
Other and non-recurring (income) loss			6		15		.01		.02
Income tax (benefit) expense on items excluded from adjusted earnings			62		(146)		.09		(.20)

Adjusted earnings			1,058		882		1.53		1.21
Current period foreign currency impact (3)			(13)		N/A		(.02)		N/A
Adjusted earnings excluding current period foreign currency impact			$	1,045	$	882	$	1.51	$	1.21

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

⁽¹⁾ Amounts may not foot due to rounding.

⁽²⁾~~Excludes amortized hedge costs~~ See reconciliation of ~~$60 and $54 for the three-month periods and $168 and $123 for the nine-month periods ended September 30, 2017, and 2016, respectively, related~~net investment (gains) losses to ~~hedging U.S. dollar-denominated investments held in Aflac Japan which are classified as a component of operating earnings to conform to current year reporting. See "Hedge Costs" discussion~~adjusted net investment (gains) losses below ~~for further information.~~

⁽³⁾ Excludes 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

⁽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 period presentation.

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

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

⁽⁷⁾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 currency rate changes.

Reconciling Items

~~Realized~~

Net Investment Gains and Losses

Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses(1)


	Three Months Ended March 31,
(In millions)		2021		2020
Net investment (gains) losses		$	(307)	$	463
Items impacting net investment (gains) losses:
Amortized hedge costs		(19)		(55)
Amortized hedge income		17		29
Net interest cash flows from derivatives associated with certain investment strategies		(8)		(6)
Interest rate component of the change in fair value of foreign currency swaps on notes payable		14		16
Adjusted net investment (gains) losses		$	(304)	$	448

(1) Amounts may not foot due to rounding.

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~~investment 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. Net investment gains and losses excluded from adjusted earnings include the following:

•Securities Transactions

•Credit Losses

•Changes in the Fair Value of Equity Securities

•Certain Derivative and Foreign Currency Activities.

Securities Transactions, Credit Losses and ~~Impairments~~Changes in the Fair Value of 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~~Credit losses include ~~other-than-temporary-impairment~~ losses ~~on investment~~for held-to-maturity fixed maturity securities, ~~as well as changes~~available-for-sale fixed maturity securities, loan receivables, loan commitments and reinsurance recoverables. Changes in ~~loan loss reserves for loan receivables.~~the fair value of equity securities are the result of gains or losses driven by fluctuations in market prices.

Certain Derivative and Foreign Currency ~~Gains (Losses)~~Activities

The Company's derivative activities ~~include~~ include:

•foreign currency forwards and options ~~interest rate swaptions and futures~~used in hedging foreign exchange risk on ~~certain fixed-maturity securities;~~ U.S. dollar-denominated investments in Aflac Japan's portfolio

•foreign currency forwards and options ~~that~~used to economically hedge certain portions of forecasted cash flows denominated in ~~yen;~~yen and hedge the Company's 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 subordinated ~~debentures; and~~ debentures

•foreign currency swaps that are associated with VIE bond purchase commitments, and ~~credit defaults~~investments in special-purpose entities, including VIEs where the Company is the primary beneficiary

•interest rate swaps ~~held~~used to economically hedge interest rate fluctuations in certain variable-rate investments

•interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities

•bond purchase commitments at the inception of investments in consolidated ~~variable interest entities (VIEs).~~ VIEs

Gains and losses are recognized as a result of valuing these derivatives, net of the effects of hedge accounting. The Company also ~~includes~~excludes from adjusted earnings the accounting impacts of remeasurement associated with changes in the ~~yen/dollar exchange rate as a non-operating item. Certain derivative and~~ foreign currency gains (losses) exclude amortized hedge costs (see 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.exchange rate.

~~Hedge Costs~~

Effective January 1, 2017, operating earnings includes the impact of amortized hedge costs. Amortized hedge costs represent costs incurred in using foreign currency forward contracts to hedge the foreign exchange risk of a portion of U.S. dollar-denominated assets in the Company's Japan segment investment portfolio. These amortized hedge costs 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 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 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 costs have increased in recent periods due to changes in the previously mentioned factors.

For additional information regarding ~~realized~~net 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~~U.S. 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 U.S. 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~~

Other items ~~also include conversion~~excluded from adjusted earnings included integration costs related to ~~legally converting~~ the Company's ~~Japan business to a subsidiary;~~acquisition of Zurich North America's U.S. Corporate Life and Pensions business; these costs primarily consist of expenditures for legal, accounting, consulting, integration of systems and processes and other similar services. These ~~Japan branch conversion~~integration costs amounted to ~~$10~~$6 million infor the three-month period ended March 31, 2021.

Income Taxes

The Company's combined U.S. and ~~$24 million~~Japanese effective income tax rate on pretax earnings was 19.4% for the ~~nine-month~~three-month period ended ~~September 30, 2017.~~March 31, 2021, compared with 21.4% for the same period in 2020. The combined effective tax rate differs from the U.S. statutory rate primarily due to foreign earnings taxed at different rates. For additional information, see Critical Accounting Estimates - Income Taxes section of the MD&A in the 2020 Annual Report.

The Company expects that its effective tax rate for future periods will be approximately 20%. The effective tax rate continues to be subject to future tax law changes both in the U.S. and in foreign jurisdictions. See risk factor entitled "Tax rates applicable to the Company may change" in the 2020 Annual Report for more information.

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~~Yen-denominated income statement ~~into~~accounts are translated to U.S. dollars using ~~the~~a weighted average Japanese yen/U.S. dollar foreign exchange rate, ~~for the reporting period,~~except realized gains and ~~the Company translates its yen-denominated balance sheet using~~losses on security transactions which are translated at 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~~trade date of each transaction. Yen-denominated balance sheet accounts are translated to U.S. 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 inusing a spot Japanese yen/U.S. dollar foreign exchange ~~rates distort the Company's operating results when translated into dollars, management evaluates the Company's financial performance excluding the impact of foreign currency translation.~~rate.

~~Income Taxes~~

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 33.4% for the three-month period ended September 30, 2017, compared with 34.7% 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. The Company's combined U.S. and Japanese effective tax rate on pretax earnings was 33.1% for the nine-month period ended September 30, 2017, compared with 34.5% for the same period in 2016. The decline in the year-to-date tax rate was primarily due to a $24 million favorable resolution of uncertain tax positions related to tax years that closed in 2017, in addition to benefits associated with filing amended tax returns and the adoption of new accounting guidance related to stock compensation.RESULTS OF OPERATIONS BY SEGMENT

~~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. The Company'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, asset management subsidiaries and other business activities, including reinsurance retrocession activities, are included in the Corporate and other segment. See the Item 1. Business section of the 2020 Annual Report for a summary of each segment's products and distribution channels.

WeConsistent with U.S. GAAP guidance for segment reporting, pretax adjusted earnings is the Company's U.S. GAAP measure of segment performance. The Company believes that a presentation of this measure is vitally important to an understanding of the underlying profitability drivers and trends of its business. Additional performance measures used to evaluate the financial condition and performance of the Company's ~~sales efforts using new annualized premium sales, an industry operating measure.~~ segments are listed below.

•Operating Ratios

•New ~~annualized premium sales, which include both new sales~~Annualized Premium Sales

•New Money Yield

•Return on Average Invested Assets

•Average Weekly Producer

For additional information on the Company’s performance measures included in this MD&A, see the Glossary of Selected Terms found directly following Part II. Other Information. See Note 2 of the Notes to the Consolidated Financial Statements for the reconciliation of segment results to the Company's consolidated U.S. GAAP results and the incremental increase in premiums due to conversions, generally represent the premiums that the Company would collect over a 12-month period, assuming the policies remain in force. 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 income, or earned premiums, is a financial performance measure that reflects collected or due premiums that have been earned ratably on policies in force during the reporting period.additional information.

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 March 31,
(In millions)		2021		2020
Net premium income		$	3,123	$	3,150
Net investment income: (1)
Yen-denominated investment income		328		322
U.S. dollar-denominated investment income		397		375
Net investment income		724		697
Amortized hedge costs related to certain foreign currency exposure management strategies		19		55
Adjusted net investment income		705		642
Other income (loss)		13		11
Total adjusted revenues		3,841		3,803
Benefits and claims, net		2,135		2,186
Adjusted expenses:
Amortization of deferred policy acquisition costs		172		173
Insurance commissions		187		185
Insurance and other expenses		460		404
Total adjusted expenses		818		762
Total benefits and adjusted expenses		2,954		2,948
Pretax adjusted earnings		$	887	$	855
Weighted-average yen/dollar exchange rate		105.88		108.84

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Net premium income $ 3,200
$ 3,596
$ 9,616
$ 10,177

Net investment income:
Yen-denominated investment income 326
356
972
1,015

U.S. dollar-denominated investment income 295
305
872
910

Net investment income 621
661
1,844
1,925

Amortized hedge costs related to foreign currency denominated
investments 60
54
168
123

Net investment income, less amortized hedge costs 561
607
1,676
1,802

Other income (loss) 11
10
31
29

Total operating revenues 3,772
4,213
11,323
12,008

Benefits and claims, net 2,300
2,603
6,859
7,341

Operating expenses:
Amortization of deferred policy acquisition costs 155
166
477
484

Insurance commissions 186
208
559
593

Insurance and other expenses 383
409
1,120
1,154

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

Weighted-average yen/dollar exchange rate 111.03
102.37
111.89
108.58


		In Dollars						In Yen
Percentage change over previous period:	Three Months Ended March 31,						Three Months Ended March 31,
			2021		2020				2021		2020
Net premium income			(.9)	%	(.9)	%			(3.6)	%	(2.1)	%
Adjusted net investment income			9.8		5.2				6.9		4.0
Total adjusted revenues			1.0		.0				(1.8)		(1.1)
Pretax adjusted earnings			3.7		2.5				.9		1.2

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~~Net interest cash flows from derivatives associated with certain investment strategies of ~~income taxes. See the Results of Operations section of this MD&A~~$(8) and $(6) for the ~~Company's definition~~three-month periods ended March 31, 2021 and 2020, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of ~~operating earnings.~~net investment income.

In ~~yen terms,~~the three-month period ended March 31, 2021, 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, due to an anticipated ~~reduction~~decrease in first sector ~~premium due to~~premiums as savings products ~~reaching~~reached premium paid-up status inand constrained sales as a result of the ~~period. Net~~COVID-19 pandemic. Adjusted net investment income ~~net of amortized hedge costs,~~ increased in the three-month period ended ~~September 30, 2017,~~March 31, 2021, primarily due to ~~the foreign currency impact of~~lower hedge costs and higher income from 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.~~assets.

Annualized premiums in force decreased ~~3.7%~~4.4% to ~~1.56~~¥1.41 trillion ~~yen~~ as of ~~September 30, 2017,~~March 31, 2021, compared with ~~1.62~~¥1.47 trillion ~~yen~~ as of ~~September 30, 2016.~~March 31, 2020. 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~~$12.7 billion at ~~September 30, 2017,~~March 31, 2021, compared with ~~$16.0~~$13.5 billion ~~a year ago, reflecting the weaker yen to U.S. dollar exchange rate.~~at March 31, 2020.

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~~foreign currency 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 foreign currency exchange rate for the comparable prior ~~year's comparable period average exchange rate.~~year period. See non-U.S. GAAP financial measures defined above.

Aflac Japan Percentage Changes Over Previous Period

(Yen Operating Results)

For the Periods Ended ~~September 30~~,March 31,

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 )

⁽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.

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


		Including Foreign Currency Changes						Excluding Foreign Currency Changes
	Three Months Ended March 31,						Three Months Ended March 31,
			2021		2020				2021	2020
Adjusted net investment income			6.9	%	4.0	%			8.5	4.8	%
Total adjusted revenues			(1.8)		(1.1)				(1.5)	(1.0)
Pretax adjusted earnings			.9		1.2				2.1	1.7

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


	Three Months Ended March 31,
Ratios to total adjusted revenues:		2021		2020
Benefits and claims, net		55.6	%	57.5	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		4.5		4.6
Insurance commissions		4.9		4.9
Insurance and other expenses		12.0		10.6
Total adjusted expenses		21.3		20.0
Pretax adjusted earnings		23.1		22.5
Ratios to total premiums:
Benefits and claims, net		68.4	%	69.4	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		5.5		5.5

Three Months Ended
September 30, Nine Months Ended
September 30,
Ratios to total revenues: 2017 2016 2017 2016
Benefits and claims, net 60.9 % 61.9 % 60.5 % 61.1 %
Operating expenses:
Amortization of deferred policy acquisition costs 4.1 3.9 4.2 4.0
Insurance commissions 4.9 4.9 4.9 4.9
Insurance and other expenses 10.1 9.7 9.9 9.7
Total operating expenses 19.2 18.5 19.0 18.6
Pretax operating earnings⁽¹⁾
19.9 19.6 20.4 20.3

In the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, the benefit ratio decreased, compared with the same ~~respective periods~~period in the prior ~~year,~~year. This is primarily due to the continued change in mix of first and third sector business, ~~as first~~favorable third sector ~~products become paid-up~~claim experience, and ~~a de-emphasis on first sector savings products, as well as continued favorable claims experience.~~higher surrenders in Aflac Japan's medical product. In the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, the ~~operating~~adjusted expense ratio increased ~~primarily~~ due to the decrease in total revenues and an increase in expenses, mainly due to increased outsourcing expenses related to system operation, partially offset by decreased DAC amortization caused by lower ~~premium income impacted by first sector products becoming paid-up, however expenses incurred remained consistent.~~sales in 2020. In total, the pretax ~~operating~~adjusted profit margin increased in the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017, reflecting the decrease in the benefit ratio partially offset by a smaller increase in the expense~~

~~ratio.~~March 31, 2021. For the full year of ~~2017,~~2021, the Company ~~anticipates~~will continue to monitor the ~~Aflac Japan~~situation with respect to COVID-19, and potential impacts on the pretax ~~operating~~adjusted profit margin ~~(calculated by dividing operating earnings by operating revenues) to be comparable to 2016 levels.~~and benefit ratio.

Aflac Japan Sales

The following table presents Aflac Japan’s new annualized premium sales for the periods ended ~~September 30.~~March 31.


	In Dollars												In Yen										In Dollars								In Yen
	Three Months						Nine Months						Three Months				Nine Months					Three Months								Three Months
(In millions of dollars and billions of yen)	2017			2016			2017			2016			2017		2016		2017		2016		(In millions of dollars and billions of yen)			2021			2020				2021			2020
New annualized premium sales	$	214		$	259		$	637		$	809		23.7		26.5		71.2		87.9		New annualized premium sales			$	132		$	129			¥	14.0		¥	14.0
Increase (decrease) over prior period	(17.3		)%	(.1		)%	(21.3		)%	9.8		%	(10.5	)%	(16.2	)%	(19.0	)%	(1.4	)%	Increase (decrease) over prior period			2.6		%	(24.5)		%		(.2)		%	(25.4)		%

The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the periods ended ~~September 30.~~March 31.


	Three Months
		2021		2020
Cancer		45.4	%	55.5	%
Medical		43.3		32.4
Income support		.6		1.2
Ordinary life:
WAYS		.7		.6
Child endowment		.3		.3
Other ordinary life (1)		8.9		9.3
Other		.8		.7
Total		100.0	%	100.0	%

Three Months Nine Months

2017 2016 2017 2016
Cancer 58.2 % 52.9 % 54.9 % 44.3 %
Medical 32.9
26.2
35.0
25.7

Ordinary life:

WAYS .4
5.7
.6
15.3

Other ordinary life 5.1
6.4
6.0
5.9

Child endowment .4
4.5
.6
6.3

Income support 2.5
.0
2.2
.0

Other .5
4.3
.7
2.5

Total 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 .3% in the ~~third~~first quarter of ~~2017,~~2021, compared with the same period in 2020, due to the ~~prior~~ongoing effects of the COVID-19 pandemic, partially offset by the launch of a new medical product in January 2021.

Sales of Aflac Japan cancer products in the Japan Post Group channel experienced a material decline beginning in August 2019 which has continued into the first quarter of 2021. On March 24, 2021, Japan Post Group announced that it planned to begin resuming proactive sales of financial products on April 1, 2021, which the Company believes will lead to gradual improvement of cancer insurance sales in the second half of the year. For additional information, see the risk factor entitled "Events related to the ongoing Japan Post investigation and other matters regarding sales of Japan Post Insurance products could negatively impact the Company’s sales and results of operations," in Item 1A. Risk Factors in the 2020 Annual Report. Beginning in the second quarter of 2020 and continuing into 2021, Aflac Japan experienced a sharp drop-off in total sales, as compared to pre-pandemic levels, due to the ongoing effects of the COVID-19 pandemic.

In response to the COVID-19 pandemic, Aflac Japan continues to promote digital and web-based sales to groups and use of its system that enables smart device-based insurance application by allowing the customer and an Aflac Japan operator to see the same screen through their smart devices. Further, Aflac Japan continues to utilize its virtual sales tool that enables online consultations and policy applications to be completed entirely online.

The ~~Company expects that for~~following table details the ~~remainder of 2017, this deliberate trend will continue, and~~contributions to Aflac Japan's ~~focus will remain on less interest-sensitive third sector products.~~

~~Independent corporate agencies and individual agencies contributed 39.9% of total~~ new annualized premium sales ~~for Aflac Japan in the third quarter of 2017, compared with 43.0%~~by agency type for the ~~same period in 2016. Affiliated corporate agencies, which include~~periods ended March 31.


	2021		2020
Independent corporate and individual	54.3	%	52.8	%
Affiliated corporate (1)	40.6		42.7
Bank	5.1		4.5
Total	100.0	%	100.0	%

(1) Includes Japan Post contributed 53.3% of total new annualized premium sales in the third quarter of 2017, compared with 50.1% in the third quarter of 2016. Japan Post offers Aflac's cancer insurance products in more than 20,000 post offices. 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,~~March 31, 2021, Aflac Japan recruited 3813 new sales agencies. At ~~September 30, 2017,~~March 31, 2021, Aflac Japan was represented by more than ~~11,200~~8,400 sales agencies, ~~and~~with more than ~~107,000~~112,000 licensed sales associates employed by those agencies. The number of sales agencies has declined in recent years due to Aflac Japan's focus on supporting agencies with strong management frameworks, high productivity and more producing agents.

At ~~September 30, 2017,~~March 31, 2021, Aflac Japan had agreements to sell its products at ~~374~~360 banks, approximately 90% of the total number of banks in Japan. ~~Bank channel sales accounted for 6.8% of new annualized premium sales in the third quarter of 2017 for Aflac Japan, compared with 6.9% during the third quarter of 2016.~~

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, public and private fixed maturity securities and public equity securities. Aflac Japan's U.S. dollar-denominated investments ~~fixed-maturity~~include fixed maturity investments and growth assets, including ~~public equities 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,							Three Months Ended March 31,
(In millions)	2017			2016			2017			2016		(In millions)		2021		2020
Yen-denominated:												Yen-denominated:
Fixed maturities:
Fixed maturity securities:												Fixed maturity securities:
Japan government and agencies	$	212		$	125		$	3,439		$	2,395	Japan government and agencies		$	1,181	$	736
Other fixed maturities	359			128			1,268			279
Equities ⁽¹⁾	21			65			173			257
Private placements												Private placements		196		90
Other fixed maturity securities												Other fixed maturity securities		107		77
Equity securities												Equity securities		117		3
Other investments												Other investments		2		0
Total yen-denominated	$	592		$	318		$	4,880		$	2,931	Total yen-denominated		$	1,603	$	906

U.S. dollar-denominated:												U.S. dollar-denominated:
Fixed maturities:
Other fixed maturities	$	138		$	9		$	219		$	602
Fixed maturity securities:												Fixed maturity securities:
Other fixed maturity securities												Other fixed maturity securities		$	606	$	527
Infrastructure debt	40			0			134			0		Infrastructure debt		0		35
Bank loans ⁽²⁾	0			0			0			535
Equities ⁽¹⁾	2			0			153			504
Other investments:

Collateralized loan obligations												Collateralized loan obligations		117		0

Commercial mortgage and other loans:												Commercial mortgage and other loans:
Transitional real estate loans												Transitional real estate loans		61		368
Commercial mortgage loans												Commercial mortgage loans		0		12
Middle market loans	186			8			437			8		Middle market loans		783		1,187
Commercial mortgage loans	85		⁽³⁾	329			279		⁽³⁾	512
Limited partnerships	24			0			65			0
Other investments												Other investments		56		50
Total dollar-denominated	$	475		$	346		$	1,287		$	2,161	Total dollar-denominated		$	1,623	$	2,179
Total Aflac Japan purchases	$	1,067		$	664		$	6,167		$	5,092	Total Aflac Japan purchases		$	3,226	$	3,085

⁽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.

See the ~~Analysis of Financial Condition~~Investments 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~~2020 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.~~March 31.


	Three Months
		2021			2020
Total purchases for the period (in millions) (1)		$	3,168		$	3,035
New money yield (1), (2)		2.72		%	4.06		%
Return on average invested assets (3)		2.47			2.35
Portfolio book yield, including U.S. dollar-denominated investments, end of period (1)		2.58		%	2.64		%

Three Months Nine Months

2017
2016
2017
2016

Total purchases for the period (in millions) ⁽¹⁾
$ 1,043
$ 664
$ 6,102
$ 5,092

New money yield ^{(1), (2)}
3.02
% 2.22
% 1.79
% 1.96
%
Return on average invested assets ⁽³⁾
2.29
2.38
2.31
2.55

Portfolio book yield, including U.S. dollar-denominated investments,
   end of period ⁽¹⁾
2.55
% 2.71
% 2.55
% 2.71
%

⁽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~~decrease in the Aflac Japan new money yield in the three-month period ended ~~September 30, 2017~~March 31, 2021 was primarily due to ~~increases in U.S. and Japan interest rates, compared with the same period in 2016, and increased~~higher 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~~Investments 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 March 31,
(In millions)		2021			2020
Net premium income		$	1,422		$	1,483
Adjusted net investment income		176			177
Other income		30			27
Total adjusted revenues		1,628			1,687
Benefits and claims		556			713
Adjusted expenses:
Amortization of deferred policy acquisition costs		139			160
Insurance commissions		139			151
Insurance and other expenses		347			337
Total adjusted expenses		626			648
Total benefits and adjusted expenses		1,182			1,361
Pretax adjusted earnings		$	445		$	326
Percentage change over previous period:
Net premium income		(4.1)		%	1.5		%
Adjusted net investment income		(.6)			.0
Total adjusted revenues		(3.5)			2.9
Pretax adjusted earnings		36.5			.9

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

⁽¹⁾In the three-month period ended March 31, 2021, net premium income for Aflac ~~defines pretax operating~~U.S. decreased primarily due to constrained sales as a result of the COVID-19 pandemic. Total revenues decreased in the three month-period ended March 31, 2021, mainly due to the decline in net premium income from reduced sales activity. Pretax adjusted earnings ~~(a non-U.S. GAAP financial measure) as operating earnings before~~increased in the ~~application of income taxes. See the Results of Operations section of this MD&A for the Company's definition of operating earnings.~~three-month period ended March 31, 2021, driven primarily by lower-than-expected benefit ratios due to lower incurred claims related to pandemic conditions.

Annualized premiums in force ~~increased 2.6%~~decreased 3.2% to ~~$5.9~~$6.0 billion at ~~September 30, 2017,~~March 31, 2021, compared with ~~$5.8~~$6.2 billion at ~~September 30, 2016, reflecting improving sales and persistency.~~March 31, 2020.

The following table presents a summary of operating ratios for Aflac U.S.


	Three Months Ended March 31,
Ratios to total adjusted revenues:		2021		2020
Benefits and claims		34.2	%	42.3	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		8.5		9.5
Insurance commissions		8.5		9.0
Insurance and other expenses		21.3		20.0
Total adjusted expenses		38.5		38.4
Pretax adjusted earnings		27.3		19.3
Ratios to total premiums:
Benefits and claims		39.1	%	48.1	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		9.8		10.8

Three Months Ended
September 30, Nine Months Ended
September 30,
Ratios to total revenues: 2017 2016 2017 2016
Benefits and claims 46.4 % 46.4 % 45.7 % 46.5 %
Operating expenses:
Amortization of deferred policy acquisition costs 7.4 7.5 7.9 8.1
Insurance commissions 9.3 9.4 9.2 9.5
Insurance and other expenses 16.9 15.8 16.9 15.4
Total operating expenses 33.5 32.7 34.0 33.0
Pretax operating earnings⁽¹⁾
20.1 20.9 20.3 20.5

~~The benefit ratio in~~For the three-month period ended ~~September 30, 2017 was consistent with~~March 31, 2021, 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~~2020, reflecting reduced estimates of both COVID-19-related and non-COVID-19-related incurred claims since the ~~three- and nine-month periods ended September 30, 2017,~~advent of the ~~operating~~pandemic. The adjusted expense ratio ~~was somewhat elevated compared to 2016, reflecting larger investment~~increased slightly 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 slightly for the three- and nine-month periodsthree-month period ended ~~September 30, 2017,~~March 31, 2021, when compared with the same ~~periods~~period in ~~2016.~~2020, primarily due to the decline in total revenues, partially offset by lower acquisition costs and lower DAC amortization, due to the decline in sales and impacted by higher persistency. The pretax adjusted profit margin increased in the three-month period, when compared with the same period in 2020, due to lower benefit

ratios. For the full year of ~~2017,~~2021, the Company ~~expects~~will continue to monitor the ~~Aflac U.S.~~situation with respect to COVID-19, and potential impacts on the pretax adjusted profit margin and benefit ratio to be slightly lower than full year 2016, while expense ratios are expected to increase marginally as Aflac U.S. continues to invest in its platform and shift some of its costs from commissions to insurance expenses.ratio.

Aflac U.S. Sales

The following table presents Aflac's U.S. new annualized premium sales for the periods ended ~~September 30~~.March 31.


	Three Months
(In millions)		2021			2020
New annualized premium sales		$	251		$	323
Increase (decrease) over prior period		(22.1)		%	(5.2)		%

Three Months Nine Months
(In millions) 2017 2016
2017 2016

New annualized premium sales $ 348
$ 324
$ 1,037
$ 999

Increase (decrease) over prior period 7.5
% (1.8 ) % 3.8
% .9
%

~~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~~.March 31.


	Three Months
		2021		2020
Accident		26.3	%	27.3	%
Disability		23.1		22.6
Critical care(1)		22.6		21.1
Hospital indemnity		16.7		16.9
Dental/vision		4.6		4.4
Life		6.7		7.7
Total		100.0	%	100.0	%

Three Months Nine Months
2017 2016 2017 2016
Income-loss protection:
Short-term disability 23.6 % 25.0 % 24.1 % 23.9 %
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
Supplemental medical:
Hospital indemnity 14.1 14.1 14.0 14.1
Dental/vision 5.1 5.7 5.7 5.6
Total 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 24.7%; ~~short-term~~ disability sales ~~increased 1.2%~~decreased 20.5%; critical care insurance sales (including cancer insurance) ~~increased 17.1%~~decreased 16.7%; and hospital indemnity insurance sales ~~increased 7.3%~~decreased 23.0% in the ~~third~~first quarter of ~~2017,~~2021, compared with the same period in ~~2016.~~

2020. The ~~addition of group products has expanded~~decline in sales for Aflac U.S.~~'s reach and enabled Aflac U.S.~~ in the first quarter of 2021 is primarily attributable to ~~generate more~~the ongoing effects of the COVID-19 pandemic, which limited face-to-face sales opportunities ~~with larger employers and through broker and traditional sales agent channels. The Company anticipates that~~beginning in mid-March 2020. See the ~~appeal~~Executive Summary section entitled COVID-19 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.this MD&A for additional information.

In the ~~third~~first quarter of ~~2017,~~2021, the Aflac U.S. sales force included an average of approximately ~~8,500~~5,600 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 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.

~~U.S. Regulatory Environment~~

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. 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, provided for penalties on certain employers for failing to provide adequate coverage, created health insurance exchanges, and addressed coverage and exclusionsneeds, as well as ~~medical loss ratios. It also imposed an excise tax on certain high cost plans, known~~serve as the “Cadillac tax,” that is currently scheduled to begin in 2020. The ACA also included changes in government reimbursements and tax credits for individuals and employers and altered federal and state regulationa leading indicator 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 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 asfuture production capacity.

In response to the ~~ultimate timing~~COVID-19 pandemic, Aflac U.S. remains focused on supporting its agency channel, most of which are small businesses, by offering financial support and an extended value proposition. The Aflac U.S. sales team has pivoted to accommodate preferred enrollment conditions which include realizing sales at the worksite through in-person enrollment, an enrollment call center, video enrollment through co-browsing and self-enrollment. The traditional agent sales team is also using virtual recruiting and training through video conferencing in order to maintain or ~~provisions of any such legislation, nor as~~increase the recruiting pipeline. The Aflac U.S. broker sales team is focused on product enhancements due to ~~the effect of any such legislation on the design or marketability of the Company's insurance products.~~

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 proposed modifications will not be known until further action by the agencies, the Company anticipates that the Executive Order will not have a significant impact on the availability or marketability of its products.

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,COVID-19 as well as ~~similar regulations in Europe, became effective on March 1, 2017. Full compliance with respect~~leveraging technology based solutions 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. 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.drive enrollment.

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. 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 and Congress have stated proposals to reform or repeal certain provisions of the Dodd-Frank Act. The Company cannot predict with any degree of certainty what impact, if any, such proposals will have on Aflac's business, financial condition, or results of operations.

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 March 31,
(In millions)		2021		2020
Fixed maturity securities:
Other fixed maturity securities		$	246	$	182
Infrastructure debt		0		16
Collateralized loan obligations		11		0
Equity securities		0		4
Commercial mortgage and other loans:
Transitional real estate loans		24		38
Commercial mortgage loans		34		27
Middle market loans		58		38
Other investments		6		6
Total Aflac U.S. Purchases		$	379	$	311

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
  Fixed maturities:
     Other fixed maturities $ 284
$ 145
$ 770
$ 502

     Infrastructure debt 10
0
25
0

  Equities 16
7
54
110

  Other investments:
     Middle market loans 67
14
161
158

     Commercial mortgage loans 48
⁽¹⁾
50
89
⁽¹⁾
73

     Limited partnerships 3
0
13
0

        Total Aflac U.S. Purchases $ 428
$ 216
$ 1,112
$ 843

⁽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~~2020 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.~~March 31.


	Three Months
		2021			2020
Total purchases for period (in millions) (1)		$	373		$	305
New money yield (1), (2)		3.22		%	3.73		%
Return on average invested assets (3)		4.69			5.01
Portfolio book yield, end of period (1)		5.12		%	5.34		%

Three Months Nine Months

2017 2016 2017 2016
Total purchases for period (in millions) ⁽¹⁾
$ 425
$ 216
$ 1,099
$ 843

New money yield ^{(1), (2)}
4.40
% 3.28
% 4.40
% 3.93
%
Return on average invested assets ⁽³⁾
5.05
5.06
5.03
5.04

Portfolio book yield, end of period⁽¹⁾
5.50
% 5.65
% 5.50
% 5.65
%

⁽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~~three-month period ended ~~September 30, 2017~~March 31, 2021 was primarily due to ~~increases~~lower yields in ~~U.S. interest rates, compared with~~ the ~~same respective periods in 2016.~~investment grade portfolio. 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.

~~ANALYSIS OF FINANCIAL CONDITION~~CORPORATE AND OTHER

~~The Company's financial condition has remained strong~~

Changes in the ~~functional currencies~~pretax adjusted earnings 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~~Corporate and other are primarily affected by investment philosophy is to fulfill its fiduciary responsibility to invest assets in a prudent manner to meet the present and future needs of its policyholders’ contractual obligations while maximizing the long-term financial return on assets consistent with the Company's goals of maximizing long-term shareholder value within defined risk appetites and limits, and maintaining adequate liquidity.

income. The following table ~~details investments~~presents a summary of results for Corporate and other.

Corporate and Other Summary of Operating Results


	Three Months Ended March 31,
(In millions)		2021		2020
Premium income		$	48	$	49
Net investment income		16		24
Amortized hedge income related to certain foreign currency management strategies		17		29
Adjusted net investment income		33		53
Other income		2		2
Total adjusted revenues		83		104
Benefits and claims, net		43		40
Adjusted expenses:
Interest expense		44		33
Other adjusted expenses		22		29
Total adjusted expenses		66		62
Total benefits and adjusted expenses		109		102
Pretax adjusted earnings		$	(26)	$	2

In the three-month period ended March 31, 2021, the decrease in total adjusted revenues was primarily driven by ~~segment.~~the decline in net investment income due to lower hedge income and short-term interest rates. The decrease in pretax adjusted earnings in the three-month period ended March 31, 2021, was primarily driven by higher interest expense associated with debt issuances and lower adjusted net investment income. Beginning in 2020, net investment income also includes the Company's portion of earnings from its strategic equity investment in an asset management company.

~~Investments by Segment~~

INVESTMENTS

Aflac Japan Aflac U.S.
(In millions) September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
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

Equity securities 804
1,185
84
124

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 loans 1,002
⁽¹⁾
745
197
⁽¹⁾
110

Middle market loans 467
74
331
245

Policy loans 195
174
11
10

Short-term investments 57
88
0
0

Other 67
0
27
0

Total other investments 1,788
1,081
566
365

     Total investments 102,103
97,096
14,715
13,795

Cash and cash equivalents 1,835
1,313
1,291
1,428

            Total investments and cash ⁽²⁾
$ 103,938
$ 98,409
$ 16,006
$ 15,223

⁽¹⁾~~Includes $231~~The Company’s investment strategy utilizes disciplined asset and ~~$71~~liability management while seeking long-term risk-adjusted investment returns and the delivery of ~~TRE loans for~~stable income within regulatory and capital objectives, and preserving shareholder value. In attempting to optimally balance these objectives, the Company seeks to maintain on behalf of Aflac Japan a diversified portfolio of yen-denominated investment assets, U.S. dollar-denominated investment portfolio hedged back to yen and a portfolio of unhedged U.S. dollar-denominated assets. As part of the Company's portfolio management and asset allocation process, Aflac U.S.~~, respectively, as of September 30, 2017.~~

⁽²⁾ ~~Excludes~~ invests in fixed maturity investments and ~~cash held by the Parent Company~~growth assets, including public equity securities and ~~other business segments of $2,545~~alternative investments in ~~2017 and $2,729 in 2016.~~

~~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 billion, or 4.0% of total investments and cash, as of September 30, 2017, compared with $4.9 billion, or 4.2%, at December 31, 2016. 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,~~limited partnerships. 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~~invests in both publicly traded 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~~privately originated investment-grade and below-investment-grade fixed maturity securities and loans.

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 following tables detail investments by segment.

Investment Securities by Segment


	March 31, 2021
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	84,319	$	14,446	$	1,979	$	100,744
Held to maturity, fixed maturity securities, at amortized cost (1)	22,868		0		0		22,868
Equity securities	702		66		406		1,174
Commercial mortgage and other loans:
Transitional real estate loans (1)	4,080		880		0		4,960
Commercial mortgage loans (1)	1,256		455		5		1,716
Middle market loans (1)	3,874		297		0		4,171
Other investments:
Policy loans	224		18		0		242
Short-term investments (2)	457		234		604		1,295
Limited partnerships	905		100		105		1,110
Other	0		19		0		19
Total investments	118,685		16,515		3,099		138,299
Cash and cash equivalents	1,706		904		2,380		4,990
Total investments and cash	$	120,391	$	17,419	$	5,479	$	143,289

(1) Net of allowance for credit losses

(2) Includes securities lending collateral


	December 31, 2020
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	88,757	$	15,133	$	1,992	$	105,882
Held to maturity, fixed maturity securities, at amortized cost (1)	24,464		0		0		24,464
Equity securities	674		66		543		1,283
Commercial mortgage and other loans:
Transitional real estate loans (1)	4,331		900		0		5,231
Commercial mortgage loans (1)	1,268		420		0		1,688
Middle market loans (1)	3,365		270		0		3,635
Other investments:
Policy loans	242		18		0		260
Short-term investments (2)	449		242		448		1,139
Limited partnerships	828		91		85		1,004
Other	0		26		0		26
Total investments	124,378		17,166		3,068		144,612
Cash and cash equivalents	2,001		785		2,355		5,141
Total investments and cash	$	126,379	$	17,951	$	5,423	$	149,753

(1) Net of allowance for credit losses

(2) Includes securities lending collateral

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~~rating organizations such as Moody's, Standard & Poor's and ~~Fitch)~~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


		March 31, 2021						December 31, 2020
	Amortized Cost			Fair Value			Amortized Cost			Fair Value
AAA		1.0	%		1.0	%		1.0	%		.9	%
AA		4.7	%		4.8	%		4.5			4.6
A		68.9	%		68.9	%		69.3			69.5
BBB		22.2	%		22.1	%		21.9			21.9
BB or lower		3.2	%		3.2	%		3.3			3.1
Total		100.0	%		100.0	%		100.0	%		100.0	%

September 30, 2017 December 31, 2016
Amortized
Cost   Fair
  Value     Amortized
Cost   Fair
  Value
AAA 1.0 % .9 % 2.0 % 1.9 %
AA 4.1
4.2
5.0
5.0

A 65.3
66.4
63.1
65.2

BBB 24.3
23.6
24.6
23.2

BB or lower 5.3
4.9
5.3
4.7

Total 100.0 % 100.0 % 100.0 % 100.0 %

As of ~~September 30, 2017,~~March 31, 2021, 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.~~March 31, 2021.


(In millions)	Credit Rating		Amortized Cost			Fair Value			Unrealized Loss
Transocean Inc.		CCC		$	49		$	23		$	(26)
Grenke Finance PLC		BBB		63			45			(18)
KLM Royal Dutch Airlines		B		145			129			(16)
Intesa Sanpaolo Spa		BBB		141			132			(9)
National Football League		A		145			136			(9)
Alphabet Inc.		AA		175			167			(8)
Kommunal Landspensjonskasse (KLP)		BBB		136			128			(8)
Lloyds Banking Group PLC		A		207			200			(7)
Nippon Prologis REIT Inc.		A		90			84			(6)
National Oilwell Varco Inc.		BBB		56			50			(6)

(In millions) Credit
Rating Amortized
Cost Fair
Value Unrealized
Loss
Diamond Offshore Drilling Inc. BB $ 142
$ 101
$ (41 )
Noble Holdings International Ltd.
B 99
65
(34 )
AXA-UAP
BBB 290
276
(14 )
National Oilwell Varco Inc. BBB 98
85
(13 )
Tyco Electronics Group SA A 102
91
(11 )
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 )

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~~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.~~interest. 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


	March 31, 2021
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	384	$	384	$	396	$	12
Commerzbank	361		247		404		157
Pemex Project Funding Master Trust	271		271		274		3
Autostrade Per Litalia Spa	181		179		202		23
KLM Royal Dutch Airlines	181		145		129		(16)
Telecom Italia SpA	181		181		238		57
Barclays Bank PLC	181		120		202		82
Apache Corporation	138		124		152		28
Ovintiv Inc.	134		132		163		31
IKB Deutsche Industriebank AG	117		53		106		53
Other Issuers	926		781		912		131
Subtotal (2)	3,055		2,617		3,178		561
Senior secured bank loans	200		205		194		(11)
High yield corporate bonds	762		746		788		42
Middle market loans	4,295		4,171		4,186		15
Grand Total	$	8,312	$	7,739	$	8,346	$	607

(1) Net of allowance for credit losses

(2) Securities initially purchased as investment grade, but have subsequently been downgraded to below investment grade

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 in this program must have a minimum rating at purchase 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.


	March 31, 2021
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	54,162	$	8,548	$	(80)	$	62,630	48.8	%
Municipalities	2,778		593		(10)		3,361		2.5
Mortgage- and asset-backed securities	1,134		52		(2)		1,184		1.0
Public utilities	8,527		1,743		(14)		10,256		7.7
Electric	6,916		1,431		(10)		8,337		6.2
Natural Gas	297		53		0		350		.3
Other	583		117		(2)		697		.5
Utility/Energy	731		142		(2)		872		.7
Sovereign and Supranational	1,662		286		(3)		1,945		1.5
Banks/financial institutions	10,179		1,505		(109)		11,575		9.1
Banking	6,034		1,015		(38)		7,010		5.4
Insurance	1,912		344		(32)		2,224		1.7
Other	2,233		146		(39)		2,341		2.0
Other corporate	32,864		5,176		(191)		37,849		29.4
Basic Industry	3,182		627		(17)		3,792		2.9
Capital Goods	3,320		438		(14)		3,744		2.9
Communications	3,975		801		(17)		4,761		3.6
Consumer Cyclical	2,786		469		(7)		3,248		2.5
Consumer Non-Cyclical	7,018		984		(39)		7,964		6.3
Energy	3,833		625		(14)		4,443		3.4
Other	1,496		204		(9)		1,691		1.3
Technology	3,637		280		(41)		3,875		3.3
Transportation	3,617		748		(33)		4,331		3.2
Total fixed maturity securities	$	111,306	$	17,903	$	(409)	$	128,800	100.0	%

(1) Net of allowance for credit losses

Below-Investment-Grade Securities

Below-Investment-Grade Investments


	March 31, 2021
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	384	$	384	$	396	$	12
Commerzbank	361		247		404		157
Pemex Project Funding Master Trust	271		271		274		3
Autostrade Per Litalia Spa	181		179		202		23
KLM Royal Dutch Airlines	181		145		129		(16)
Telecom Italia SpA	181		181		238		57
Barclays Bank PLC	181		120		202		82
Apache Corporation	138		124		152		28
Ovintiv Inc.	134		132		163		31
IKB Deutsche Industriebank AG	117		53		106		53
Other Issuers	926		781		912		131
Subtotal (2)	3,055		2,617		3,178		561
Senior secured bank loans	200		205		194		(11)
High yield corporate bonds	762		746		788		42
Middle market loans	4,295		4,171		4,186		15
Grand Total	$	8,312	$	7,739	$	8,346	$	607

(1) Net of allowance for credit losses

(2)Securities ~~by Type of Issuance~~initially purchased as investment grade, but have subsequently been downgraded to below investment grade

The Company ~~has~~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 in ~~both publicly~~this program must have a minimum rating at purchase of low BB using the Company's above described rating methodology and ~~privately issued securities.~~ are managed by the Company's internal credit portfolio management team.

Fixed Maturity Securities by Sector

The ~~Company's ability~~Company maintains diversification in investments by sector 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.

avoid concentrations to any one sector, thus managing exposure risk. The following table ~~details investment securities~~shows the distribution of fixed maturities by ~~type~~sector classification.


	March 31, 2021
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	54,162	$	8,548	$	(80)	$	62,630	48.8	%
Municipalities	2,778		593		(10)		3,361		2.5
Mortgage- and asset-backed securities	1,134		52		(2)		1,184		1.0
Public utilities	8,527		1,743		(14)		10,256		7.7
Electric	6,916		1,431		(10)		8,337		6.2
Natural Gas	297		53		0		350		.3
Other	583		117		(2)		697		.5
Utility/Energy	731		142		(2)		872		.7
Sovereign and Supranational	1,662		286		(3)		1,945		1.5
Banks/financial institutions	10,179		1,505		(109)		11,575		9.1
Banking	6,034		1,015		(38)		7,010		5.4
Insurance	1,912		344		(32)		2,224		1.7
Other	2,233		146		(39)		2,341		2.0
Other corporate	32,864		5,176		(191)		37,849		29.4
Basic Industry	3,182		627		(17)		3,792		2.9
Capital Goods	3,320		438		(14)		3,744		2.9
Communications	3,975		801		(17)		4,761		3.6
Consumer Cyclical	2,786		469		(7)		3,248		2.5
Consumer Non-Cyclical	7,018		984		(39)		7,964		6.3
Energy	3,833		625		(14)		4,443		3.4
Other	1,496		204		(9)		1,691		1.3
Technology	3,637		280		(41)		3,875		3.3
Transportation	3,617		748		(33)		4,331		3.2
Total fixed maturity securities	$	111,306	$	17,903	$	(409)	$	128,800	100.0	%

(1) Net of ~~issuance.~~allowance for credit losses

~~Investment Securities by Type of Issuance~~

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

⁽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


	March 31, 2021
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	384	$	384	$	396	$	12
Commerzbank	361		247		404		157
Pemex Project Funding Master Trust	271		271		274		3
Autostrade Per Litalia Spa	181		179		202		23
KLM Royal Dutch Airlines	181		145		129		(16)
Telecom Italia SpA	181		181		238		57
Barclays Bank PLC	181		120		202		82
Apache Corporation	138		124		152		28
Ovintiv Inc.	134		132		163		31
IKB Deutsche Industriebank AG	117		53		106		53
Other Issuers	926		781		912		131
Subtotal (2)	3,055		2,617		3,178		561
Senior secured bank loans	200		205		194		(11)
High yield corporate bonds	762		746		788		42
Middle market loans	4,295		4,171		4,186		15
Grand Total	$	8,312	$	7,739	$	8,346	$	607

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

(1) Net of allowance for credit losses

* Investment grade at respective reporting date

⁽¹⁾(2) 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.~~

~~Hedging Activities~~

Fixed Maturity Securities by Sector


	March 31, 2021
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	54,162	$	8,548	$	(80)	$	62,630	48.8	%
Municipalities	2,778		593		(10)		3,361		2.5
Mortgage- and asset-backed securities	1,134		52		(2)		1,184		1.0
Public utilities	8,527		1,743		(14)		10,256		7.7
Electric	6,916		1,431		(10)		8,337		6.2
Natural Gas	297		53		0		350		.3
Other	583		117		(2)		697		.5
Utility/Energy	731		142		(2)		872		.7
Sovereign and Supranational	1,662		286		(3)		1,945		1.5
Banks/financial institutions	10,179		1,505		(109)		11,575		9.1
Banking	6,034		1,015		(38)		7,010		5.4
Insurance	1,912		344		(32)		2,224		1.7
Other	2,233		146		(39)		2,341		2.0
Other corporate	32,864		5,176		(191)		37,849		29.4
Basic Industry	3,182		627		(17)		3,792		2.9
Capital Goods	3,320		438		(14)		3,744		2.9
Communications	3,975		801		(17)		4,761		3.6
Consumer Cyclical	2,786		469		(7)		3,248		2.5
Consumer Non-Cyclical	7,018		984		(39)		7,964		6.3
Energy	3,833		625		(14)		4,443		3.4
Other	1,496		204		(9)		1,691		1.3
Technology	3,637		280		(41)		3,875		3.3
Transportation	3,617		748		(33)		4,331		3.2
Total fixed maturity securities	$	111,306	$	17,903	$	(409)	$	128,800	100.0	%

(1) Net of allowance for credit losses

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


		March 31, 2021						December 31, 2020
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Publicly issued securities:
Fixed maturity securities		$	91,910		$	105,538		$	95,545		$	111,479
Equity securities		775			775			740			740
Total publicly issued		92,685			106,313			96,285			112,219
Privately issued securities: (2)
Fixed maturity securities (3)		19,397			23,262			20,511			24,802
Equity securities		399			399			543			543
Total privately issued		19,796			23,661			21,054			25,345
Total investment securities		$	112,481		$	129,974		$	117,339		$	137,564

(1) Net of allowance for credit losses

(2) Primarily consists of securities owned by Aflac Japan

(3) Excludes Rule 144A securities

The following table details the Company's reverse-dual currency securities.

Reverse-Dual Currency Securities(1)


(Amortized cost, in millions)	March 31, 2021				December 31, 2020
Privately issued reverse-dual currency securities		$	4,959			$	5,300
Publicly issued collateral structured as reverse-dual currency securities		1,659				1,775
Total reverse-dual currency securities		$	6,618			$	7,075
Reverse-dual currency securities as a percentage of total investment securities		5.9		%		6.0		%

(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. The Company uses various strategies, including derivatives, to manage these risks. See item “7A. Quantitative and Qualitative Disclosures About Market Risk” in the 2020 Annual Report for more information about market risk and the Company’s use of derivatives.

Derivatives are designed to reduce risk on an economic basis while minimizing the impact on financial results. The Company’s derivatives programs vary depending on the type of risk being hedged. See Note 4 of the Notes to the Consolidated Financial Statements for:

•A description of the Company's derivatives, hedging strategies and underlying risk exposure.

•Information about the notional amount and fair market value of the Company's derivatives.

•The unrealized and realized gains and losses impact on adjusted earnings of derivatives in cash flow, fair value, net investments in foreign operations, or non-qualifying hedging relationships.

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 ~~Investments~~Hedge Program below).

Most of Aflac Japan's cash, investments, and liabilities are yen-denominated. However, Aflac Japan also owns U.S. dollar-denominated investments, a portion of which Aflac Japan hedges with foreign currency forwards and options. As of September��30, 2017, the cost or amortized cost of yen-denominated investments and U.S. dollar-denominated investments in Aflac Japan was $71.8 billion and $23.0 billion, respectively. As September 30, 2017, the Company had outstanding notional amounts of foreign currency forwards of $11.4 billion and foreign currency collars of $5.7 billion hedging the U.S. dollar-denominated investments.

~~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 Company has taken several courses of action. First,~~ •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. Second, the~~Japan (see Aflac Japan’s U.S. Dollar-Denominated Hedge Program below).

•The Parent Company ~~has designated the majority of the Parent Company’s~~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~~Company’s net investment in Aflac Japan (see Enterprise Corporate Hedging 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 Enterprise Corporate Hedging Program below).

Aflac Japan’s U.S. Dollar-Denominated Hedge Program

Aflac Japan buys U.S. dollar-denominated investments, typically corporate bonds, and hedges them back to yen with foreign currency forwards and options to hedge foreign currency exchange rate risk. This economically creates yen assets that match yen liabilities during the life of the derivative and provides capital relief. The currency risk being hedged is generally based on fair value of hedged investments. The following table summarizes the U.S. dollar-denominated investments held by Aflac Japan.


	March 31, 2021				December 31, 2020
(In millions)	Amortized Cost (1)		Fair Value		Amortized Cost (1)		Fair Value
Available-for-sale securities:
Fixed maturity securities (excluding bank loans)	$	18,309	$	20,172	$	19,249	$	21,108
Fixed maturity securities - bank loans (floating rate)	267		254		319		283
Equity securities	15		15		20		20
Commercial mortgage and other loans:
Transitional real estate loans (floating rate)	4,080		4,046		4,331		4,298
Commercial mortgage loans	1,256		1,306		1,268		1,365
Middle market loans (floating rate)	3,874		3,895		3,365		3,377
Other investments	905		905		828		828
Total U.S. Dollar Program	28,706		30,593		29,380		31,279
Available-for-sale securities:
Fixed maturity securities - economically converted to yen	2,010		2,956		2,085		3,094
Total U.S. dollar-denominated investments in Aflac Japan	$	30,716	$	33,549	$	31,465	$	34,373

(1) Net of allowance for credit losses

U.S. Dollar Program includes all U.S. dollar-denominated investments in Aflac Japan 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 VIE. Aflac Japan maintains a collar program on a portion of its US dollar program to mitigate against more extreme moves in foreign exchange and therefore support SMR. Depending on further developments, including the possibility of further market volatility, there may be additional costs associated with maintaining the collar program. The Company is continually evaluating other adjustments, including the possibility of changing the level of hedging employed with the U.S dollar-denominated investments.

As of March 31, 2021, Aflac Japan had $6.4 billion outstanding notional amounts of foreign currency forwards and $11.5 billion outstanding notional amounts of foreign currency options, of which none were in-the-money, hedging its U.S. dollar-denominated investments. The fair value of Aflac Japan's unhedged U.S. dollar-denominated portfolio was $10.4 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).

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 $108 million and net cash outflows of $33 million for the three-month periods ended March 31, 2021 and 2020, respectively, associated with the currency derivatives used for hedging Aflac Japan’s U.S. dollar-denominated investments.

Enterprise Corporate Hedging Program

The Company has designated certain yen-denominated liabilities and foreign currency forwards and options of the Parent Company as accounting hedges of its net investment in Aflac Japan. The Company's consolidated yen-denominated net asset position was partially hedged at $9.6 billion as of March 31, 2021, compared with $9.9 billion as of December 31, 2020.

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~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. For 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 $17 million and $29 million for the three-month periods ended March 31, 2021 and 2020, 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 ~~yen~~following table presents metrics related to Aflac Japan amortized hedge costs and the Parent Company amortized hedge income for the periods ended March 31.

Hedge Cost/Income Metrics(1)


	Three Months
	2021	2020
Aflac Japan:
FX Forwards
FX forward (sell USD, buy yen) notional at end of period (in billions)(2)	$6.4	$9.1
Weighted average remaining tenor (in months)(3)	9.7	11.0
Amortized hedge income (cost) for period (in millions)	$(17)	$(53)
FX Options
FX option notional at the end of period (in billions) (2)	$11.5	12.0
Weighted average remaining tenor (in months) (3)	4.6	1.6
Amortized hedge income (cost) for period (in millions)	$(3)	$(2)
Corporate and Other (Parent Company):
FX Forwards
FX forward (buy USD, sell yen) notional at end of period (in billions)(2)	$5.0	$5.0
Weighted average remaining tenor (in months)(3)	11.5	12.8
Amortized hedge income (cost) for period (in millions)	$18	$30
FX Options
FX option notional at the end of period (in billions) (2)	$1.9	$2.0
Weighted average remaining tenor (in months) (3)	7.6	8.4
Amortized hedge income (cost) for period (in millions)	$(1)	$(1)

(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 ~~asset figure calculated~~of any offsetting positions within Aflac Japan or the Parent Company, respectively.

(3) Tenor based on period reporting date to settlement date

Amortized hedge 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 ~~hedging purposes differs~~dollar funding. Amortized hedge costs and income have fluctuated in recent periods due to changes in the previously mentioned factors.

Interest Rate Risk Hedge Program

Aflac Japan and Aflac U.S. use interest rate swaps from time to time to mitigate the ~~yen-denominated net asset position as discussed in~~risk of investment income volatility for certain variable-rate investments. Additionally, to manage interest rate risk associated with its U.S. dollar-denominated investments held by Aflac Japan, from time to time the Company utilizes interest rate swaptions.

For additional discussion of the risks associated with the foreign currency exposure refer to the Currency Risk section ofin Item 7A., Quantitative and Qualitative Disclosures about Market Risk, inand Item 1A, specifically to the ~~2016 Annual Report. As disclosed in that section, the consolidation of the underlying assets in certain VIEs requires that the~~Risk Factor titled “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~~is exposed to foreign currency fluctuations in the ~~combination~~yen/dollar exchange rate" and “Lack of ~~the U.S. dollar-denominated investment and the cross-currency swap economically creates a~~availability of acceptable yen-denominated ~~investment that qualifies for inclusion as a component of~~investments could adversely affect the Company's ~~investment in Aflac Japan. Similarly, the combination~~results of ~~the U.S. corporate bonds and the foreign currency forwards and options that the Company has entered into, as discussed~~operations, financial position or liquidity" 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.~~2020 Annual Report.

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 the Company's net investment in 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

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.

~~Deferred Policy Acquisition Costs~~

DEFERRED POLICY ACQUISITION COSTS

The following table presents deferred policy acquisition costs by segment.


(In millions)	March 31, 2021			December 31, 2020			% Change
Aflac Japan		$	6,514		$	6,991		(6.8)	%	(1)
Aflac U.S.		3,320			3,450			(3.8)
Total		$	9,835		$	10,441		(5.8)	%

(In millions) September 30, 2017 December 31, 2016 % Change
Aflac Japan $ 6,104
$ 5,765
5.9 %
⁽¹⁾
Aflac U.S. 3,309
3,228
2.5

Total $ 9,413
$ 8,993
4.7 %

⁽¹⁾Aflac Japan’s deferred policy acquisition costs ~~increased 2.5%~~decreased .3% in yen during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021.

See Note 6 of the Notes to the Consolidated Financial Statements in the ~~2016~~2020 Annual Report for additional information on the Company's deferred policy acquisition costs.

~~Policy Liabilities~~

POLICY LIABILITIES

The following table presents policy liabilities by segment.


(In millions)	March 31, 2021			December 31, 2020			% Change
Aflac Japan		$	96,599		$	103,128		(6.3)	%	(1)
Aflac U.S.		11,808			11,810			.0
Other		265			274			(3.3)
Intercompany eliminations(2)		(767)			(821)			(6.6)
Total		$	107,905		$	114,391		(5.7)	%

(In millions) September 30, 2017 December 31, 2016 % Change
Aflac Japan $ 88,829
$ 84,141
5.6 %
⁽¹⁾
Aflac U.S. 10,503
10,212
2.8

Other 131
91
44.0

Intercompany eliminations⁽²⁾
(750 ) (718 ) 4.5

Total $ 98,713
$ 93,726
5.3 %

⁽¹⁾Aflac Japan’s policy liabilities increased ~~2.2%~~.2% in yen during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021.

⁽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~~

BENEFIT PLANS

~~Notes payable totaled $5.2 billion at September 30, 2017, compared with $5.4 billion as at December 31, 2016.~~

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.~~

~~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~~2020 Annual Report.

~~Policyholder Protection~~

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~~In 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 ¥.9 billion ~~yen.~~and ¥1.0 billion for the three-month periods ended March 31, 2021 and 2020, 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.

~~As of September 30, 2017, the Company has estimated and recognized the impact of its share of guaranty~~ Guaranty fund assessments ~~resulting from~~for the ~~liquidation of a long-term care insurer.~~ three-month periods ended March 31, 2021 and 2020, were immaterial.

OFF-BALANCE SHEET ARRANGEMENTS

See Note 123 of the Notes to the Consolidated Financial Statements for ~~further information~~details on ~~the assessment.~~certain investment commitments.

~~Off-Balance Sheet Arrangements~~

As of ~~September 30, 2017,~~March 31, 2021, 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~~2020 Annual Report for information on material unconditional purchase obligations that are not recorded on the Company's balance sheet.

LIQUIDITY AND CAPITAL RESOURCES ~~AND LIQUIDITY~~

Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to the long-term financial resources available to support the operations of the businesses, fund business growth and provide for an ability to withstand adverse circumstances. Financial leverage (leverage) refers to an investment strategy of using debt to increase the potential return on equity. The Company targets and actively manages liquidity, capital and leverage in the context of a number of considerations, including:

•business investment and growth needs

•strategic growth objectives

•financial flexibility and obligations

•capital support for hedging activity

•a constantly evolving business and economic environment

•a balanced approach to capital allocation and shareholder deployment.

The governance framework supporting liquidity, capital and leverage includes global senior management and board committees that review and approve all significant capital related decisions.

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. The target minimum amount for the Parent Company’s cash and cash equivalents is approximately $2.0 billion to provide a capital buffer and liquidity support at the holding company. This amount excludes $400 million of proceeds from the issuance of senior sustainability notes discussed below, which proceeds contribute to the capital buffer but are not intended to support holding company liquidity. Amid the COVID-19 pandemic, the Company remains committed to prudent liquidity and capital management. At March 31, 2021, the Company held $5.0 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $2.0 billion. For additional information on the Company’s liquidity and capital resources in response to COVID-19, see the Executive Summary section of this MD&A.

Aflac ~~provides~~Japan and Aflac U.S. provide the primary sources of liquidity to the Parent Company through management fees and dividends, ~~and management fees. The following table presents~~with Aflac Japan being the ~~amounts provided for the nine-month periods ending September 30.~~

~~Liquidity Provided by Aflac to Parent Company~~

(In millions) 2017 2016
Dividends declared or paid by Aflac $ 1,400
$ 1,311

Management fees paid by Aflac 219
192

largest contributor. 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.

The following table presents the amounts provided to the Parent ~~Company's sources~~Company for the three-month periods ended March 31.

Liquidity Provided by Subsidiaries to Parent Company


(In millions)	2021		2020
Dividends declared or paid by subsidiaries	$	427	$	501
Management fees paid by subsidiaries	32		35

The following table details Aflac Japan remittances for the three-month periods ended March 31.

Aflac Japan Remittances


(In millions of dollars and billions of yen)	2021		2020
Aflac Japan management fees paid to Parent Company	$	15	$	22

Aflac Japan dividends declared or paid to Parent Company (in dollars)	377		351
Aflac Japan dividends declared or paid to Parent Company (in yen)	¥	41.0	¥	38.9

The Company intends to maintain higher than historical levels of liquidity and ~~uses~~capital at the Parent Company for stress conditions and with the goals of ~~cash are reasonably predictable~~addressing the Company’s hedge costs and ~~are not expected~~related potential need for collateral and mitigating against long-term weakening of the Japanese yen. Further, the Company plans to ~~change materially~~continue to maintain a

portfolio of unhedged U.S. dollar based investments at Aflac Japan and to consider whether the amount of such investments should be increased or decreased relative to the Company’s view of economic equity surplus in Aflac Japan in light of potentially rising hedge costs and other factors. See the ~~future. For additional information, see the Financing Activities~~Hedging Activity subsection of this MD~~&A.~~&A for more information.

~~The Parent~~In addition to cash and equivalents, the Company also ~~accesses debt security markets~~maintains credit facilities, both intercompany and with external partners, and a number of other available tools to ~~provide additional sources of capital.~~support liquidity needs on a global basis. In ~~August 2016,~~September 2018, the Company filed a shelf registration statement with Japanese regulatory authorities that allows the Company to conduct public offerings of bonds in Japan, including yen-denominated Samurai notes, up to 200 billion yen or its equivalent

through August 2018. 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. TheParent 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 securities, in one or more series, from time to time until ~~May 2018.~~September 2021. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available. Additionally, as of March 31, 2021, the Parent Company and Aflac had four lines of credit with third parties as well as nine intercompany lines of credit. 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 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 on the commitments ranging between .085% and .225%, also based on the Parent Company’s debt ratings as of the date 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 revolving credit agreement.

The Company's consolidated 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.~~March 31, 2021. 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~~2020 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 2020 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~~is not ~~have a known~~aware of any trend, demand, commitment, event or uncertainty that would reasonably result in its liquidity increasing or decreasing by a material amount. 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~~three-month periods ended ~~September 30.~~March 31.


(In millions)	2021		2020
Operating activities	$	1,366	$	1,414
Investing activities	(969)		(1,716)
Financing activities	(470)		(446)
Exchange effect on cash and cash equivalents	(78)		0
Net change in cash and cash equivalents	$	(151)	$	(748)

(In millions) 2017 2016
Operating activities $ 4,596
$ 4,120

Investing activities (2,887 ) (2,638 )
Financing activities (1,613 ) (835 )
Exchange effect on cash and cash equivalents (28 ) 273

Net change in cash and cash equivalents $ 68
$ 920

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. 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 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.~~ benefits and expenses.

(In millions) 2017 2016
Aflac Japan $ 3,657
$ 3,081

Aflac U.S. and other operations 939
1,039

Total $ 4,596
$ 4,120

Investing Activities

~~Operating cash flow is~~

The Company's investment objectives provide for liquidity primarily ~~used to~~through the purchase of publicly traded investment-grade 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 )

securities. 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 has committed $400 million to Aflac Ventures, LLC (Aflac Ventures), as opportunities emerge. Aflac Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures) which is reported in the Corporate and 1%Other segment. The central mission of Aflac Global 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. Investments are included in equity securities or the other investments line in the consolidated balance sheets.

As part of an arrangement with FHLB, Aflac U.S. obtains low-cost funding from FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In the first three months of 2021, Aflac U.S. borrowed and repaid $28 million under this program. As of March 31, 2021, Aflac U.S. had outstanding borrowings of $273 million reported in its balance sheet.

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 billion~~$470 million in the first ~~nine~~three months of ~~2017,~~2021, compared with consolidated cash used by financing activities of ~~$835~~$446 million for the same period of ~~2016.~~2020.

In ~~January 2017,~~March 2021, the Parent Company issued ~~60.0 billion yen~~$400 million of senior sustainability notes through a U.S. public debt ~~offering under its U.S. shelf registration statement.~~offering. The notes bear interest at a fixed rate of ~~.932%~~1.125% per annum, payable semi-annually, and ~~have a 10-year maturity.~~will mature in March 2026. The Company intends, but is not contractually committed, to allocate an amount at least equivalent to the net proceeds from this issuance exclusively to existing or future investments in, or financing of, assets, businesses or projects that meet the eligibility criteria of the Company's sustainability bond framework described in the offering documentation in connection with such notes. These notes ~~may only~~are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed ~~before maturity, in whole but not in part, upon~~or (ii) the ~~occurrence of certain changes affecting U.S. taxation, as specified in~~amount equal to the ~~indenture governing the terms~~sum of the ~~issuance.~~present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining term of the notes, plus 10 basis points, plus in each case, accrued and unpaid interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.

~~In February 2017,~~See Note 8 of the ~~Parent Company extinguished $650 million of 2.65% senior notes upon their maturity.~~Notes to the Consolidated Financial Statements for further information on the debt issuance discussed above.

Cash returned to shareholders through dividends and treasury stock purchases was $1.5 billion during the nine-month period ended September 30, 2017, compared with $1.7 billion during the nine-month period ended September 30, 2016.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at ~~September 30, 2017.~~March 31, 2021.

Cash returned to shareholders through treasury stock purchases and dividends was $869 million during the three-month period ended March 31, 2021, compared with $644 million during the three-month period ended March 31, 2020.

The following tables present a summary of treasury stock activity during the ~~nine-month~~three-month periods ended ~~September 30.~~March 31.

Treasury Stock Purchased


(In millions of dollars and thousands of shares)	2021		2020
Treasury stock purchases	$	650	$	449
Number of shares purchased:
Share repurchase program	13,440		9,984
Other	378		508
Total shares purchased	13,818		10,492

(In millions of dollars and thousands of shares) 2017 2016
Treasury stock purchases $ 1,053
$ 1,222

Number of shares purchased:
Open market 13,898
18,774

Other 435
329

Total shares purchased 14,333
19,103

Treasury Stock Issued


(In millions of dollars and thousands of shares)	2021		2020
Stock issued from treasury:
Cash financing	$	9	$	9
Noncash financing	19		17
Total stock issued from treasury	$	28	$	26
Number of shares issued	810		740

(In millions of dollars and thousands of shares) 2017 2016
Stock issued from treasury:
   Cash financing $ 23
$ 37

   Noncash financing 45
47

   Total stock issued from treasury $ 68
$ 84

Number of shares issued 978
1,483

During the first ~~nine~~three months of ~~2017,~~2021, the Company repurchased ~~13.9~~13.4 million shares of its common stock for ~~$1.0 billion~~$650 million as part of its share repurchase program. As of ~~September 30, 2017,~~March 31, 2021, a remaining balance of ~~52.9~~85.7 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~~For information on the impact of COVID-19 on the Company's share repurchase ~~a total~~program, see the Executive Summary section of ~~$1.3 billion to $1.5 billion of its common stock in 2017, assuming stable capital conditions and absent compelling alternatives.~~this MD&A.

Cash dividends paid to shareholders were ~~$.43~~$.33 per share in the ~~third~~first quarter of ~~2017,~~2021, compared with ~~$.41~~$.28 per share in the ~~third~~first quarter of ~~2016.~~2020. The following table presents the dividend activity for the ~~nine-month~~three-month periods ended ~~September 30.~~March 31.


(In millions)	2021		2020
Dividends paid in cash	$	219	$	195
Dividends through issuance of treasury shares	8		7
Total dividends to shareholders	$	227	$	202

(In millions) 2017 2016
Dividends paid in cash $ 491
$ 492

Dividends through issuance of treasury shares 22
19

Total dividends to shareholders $ 513
$ 511

In ~~October 2017,~~April 2021, the board of directors declared the ~~fourth~~second quarter cash dividend of ~~$.45~~$.33 per share, an increase of ~~4.7%~~17.9% compared with the same period in ~~2016.~~2020. The dividend is payable on ~~December~~June 1, ~~2017,~~2021 to shareholders of record at the close of business on ~~November 15, 2017.~~May 19, 2021.

Regulatory Restrictions

Aflac Japan

Aflac Japan 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 SMR. Japan's FSA maintains its own solvency standard which is quantified through the SMR. Aflac Japan's SMR is sensitive to interest rate, credit spread, and ~~CAIC~~foreign exchange rate changes, therefore the Company continues to evaluate alternatives for reducing this sensitivity, including the reduction of subsidiary dividends paid to the Parent Company and Parent Company capital contributions. In the event of a rapid change in market risk conditions causing SMR to decline, the Company has one senior unsecured revolving credit facility in the amount of ¥100 billion and a committed reinsurance facility in the amount of approximately ¥120 billion 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 ~~domiciled~~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 criterion relates to maintaining the duration of designated assets and liabilities 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 ~~Nebraska~~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 ~~are subject~~8 of the Notes to ~~its regulations.~~ the Consolidated Financial Statements in the 2020 Annual Report for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively.

As of March 31, 2021, Aflac Japan's SMR remains high and reflects a strong capital and surplus position. The Company is committed to maintaining strong capital levels throughout the pandemic, consistent with maintaining current insurance financial strength and credit ratings. For additional information see the Executive Summary COVID-19 section of this MD&A.

Aflac U.S.

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 insurance subsidiary, Aflac New York.~~ 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~~The Company's insurance operations may secure additional statutory capital through various sources, such as internally generated statutory earnings, ~~equity~~reduced dividends paid to the Parent Company, capital contributions by the Parent Company from funds generated through debt or equity offerings, or reinsurance transactions. The NAIC’s ~~risk-based capital (RBC)~~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,~~March 31, 2021, Aflac’s RBC ratio remains high and reflects a strong capital and surplus position.

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its regulations. The maximum amount of dividends that can be paid to the Parent Company by Aflac, CAIC and TOIC 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~~2021 in excess of ~~$2.8 billion~~$872 million would be considered extraordinary and require such approval. Similar laws apply in New York, the domiciliary jurisdiction of Aflac New York.

~~In addition~~Privacy and Cybersecurity Governance

The Company’s Board of Directors has adopted an information security policy directing management to ~~limitations~~establish and ~~restrictions imposed by U.S. insurance regulators, Japan’s Financial Services Agency (FSA) may not allow profit repatriations~~operate a global information security program with the goals of monitoring existing and emerging threats and ensuring that the Company’s information assets and data, and the data of its customers, are appropriately protected from ~~Aflac Japan if~~loss or theft. The Board has delegated oversight of the ~~transfers would cause Aflac Japan~~Company’s information security program to ~~lack sufficient financial strength~~the Audit and Risk Committee. The Company’s senior officers, including its Global Security and Chief Information Security Officer, are responsible for the protection of policyholders. The FSA maintains its own solvency standard which is quantified through the solvency margin ratio (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 8operation of the ~~Notes~~global information security program and communicates quarterly with the Audit and Risk Committee on the program, including with respect to the ~~Consolidated Financial Statements~~state of the program, compliance with applicable regulations, current and evolving threats, and recommendations for changes in the ~~2016 Annual Report~~information security program. The global information security program also includes a cybersecurity incident response plan that is designed to provide a management framework across Company functions for ~~additional information on the Company's investment strategies, hedging activities,~~a coordinated assessment and ~~reinsurance, respectively.) In the event of~~response to potential security incidents. This framework establishes a ~~rapid change in market risk conditions causing SMR~~protocol to decline, the Company has two senior unsecured revolving credit facilities in the amounts of 100 billion yen and 55 billion yen, respectively, and a committed reinsurance facility in the amount of approximately 110 billion yen as a capital contingency

~~plan. (See Notes 8 and 9 of the Notes~~report certain incidents to the ~~Consolidated Financial Statements in the 2016 Annual Report for additional information on the Company's capital contingency plan.)~~

~~As of September 30, 2017, Aflac Japan's SMR remains high~~Global Security and ~~reflects a strong capital position. The FSA has been conducting field testing~~Chief Information Security Officer and other senior officers, with the ~~insurance industry concerning~~goal of timely assessing such incidents, determining applicable disclosure requirements and communicating with the ~~introduction of an economic value-based solvency regime.~~Audit and Risk Committee. The ~~field testing will assist~~incident response plan directs the ~~FSA in determining if an economic value-based solvency regime in Japan will be appropriate for the insurance industry.~~

~~Payments are made from Aflac Japan~~executive officers to report certain incidents immediately and directly to the Parent Company for management fees and to Aflac U.S. for allocated expenses and remittances of earnings. The following table details Aflac Japan remittances for the nine-month periods ended September 30.Lead Non-Management Director.

~~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.

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 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~~

CRITICAL ACCOUNTING ESTIMATES

The Company prepares its financial statements in accordance with U.S. GAAP. These principles are established primarily by the 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, 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 94% of the Company's assets and 81% of its liabilities are reported as of March 31, 2021, 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 the Company has identified as critical accounting estimates during the three months ended March 31, 2021. For additional information, see the Critical Accounting Estimates section of MD&A included in the 2020 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.

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~~2020 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~~2020 Annual ~~Report.~~Report except as outlined below.


~~Item 4.~~	~~Controls and Procedures~~

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~~first fiscal quarter of ~~2017~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION


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

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

Issuer Purchases of Equity Securities

During the first ~~nine~~three months of ~~2017,~~2021, 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
January 1 - January 31	2,850,664		$	45.60	2,850,664	96,304,954
February 1 - February 28	5,034,979		47.30		4,661,812	91,643,142
March 1 - March 31	5,932,047		50.55		5,927,500	85,715,642






Total	13,817,690	(1)	$	48.34	13,439,976	85,715,642

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
January 1 - January 31 3,819,299
$ 69.94
3,819,299
22,934,155

February 1 - February 28 1,988,420
70.03
1,853,000
21,081,155

March 1 - March 31 2,825,614
72.12
2,821,009
18,260,146

April 1 - April 30 1,764,523
73.70
1,764,523
16,495,623

May 1 - May 31 501
74.84
0
16,495,623

June 1 - June 30 902,308
78.08
896,795
15,598,828

July 1 - July 31 1,066,100
77.88
1,066,100
14,532,728

August 1 - August 31 1,356,142
80.95
1,356,000
53,176,728

September 1 - September 30 325,741
82.04
321,200
52,855,528

Total 14,048,648
⁽²⁾
$ 73.33
13,897,926
52,855,528
⁽¹⁾

⁽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~~three months of ~~2017, 150,722~~2021, 377,714 shares were purchased in connection with income tax withholding obligations related to the vesting of restricted-share-based awards during the period.

Item 5. Other Information

On April 29, 2021, the Company entered into an amendment of the employment agreement it entered with Frederick J. Crawford on June 23, 2015. The amendment reflects Mr. Crawford’s previously announced title as President and Chief Operating Officer of Aflac Incorporated. The amendment also provides for an initial three-year term beginning on May 1, 2021 with automatic one-year extensions absent notice from either party to not extend. Mr. Crawford’s initial base salary under the agreement will be $950,000, and he will be eligible for a target annual bonus of 200% of his base salary (400% at maximum). The amendment also provides nondisclosure provisions and other customary covenants. To the extent not modified by the amendment, the other provisions of Mr. Crawford’s employment agreement remain in effect.

On April 29, 2021, the Company entered into an employment agreement with Max K. Brodén, Executive Vice President, Chief Financial Officer and Treasurer of the Company. The agreement provides for an initial three-year term beginning on May 1, 2021 with automatic one-year extensions absent notice from either party to not extend. Mr. Brodén’s initial base salary under the agreement will be $620,000, and he will be eligible for a target annual bonus of 125% of his base salary (250% at maximum). He also will be eligible for grants of equity in the form of restricted stock awards, stock options or other equity awards pursuant to the Company’s Long-Term Incentive Plan and for annual contributions to the Company's Executive Deferred Compensation Plan in an amount equal to 15% of his salary and bonus. Upon a qualifying severance (a termination by the Company without cause or by Mr. Brodén for good reason), he would be entitled to continuation of salary, bonus and welfare benefits through the remaining term of the employment agreement, and any unvested equity awards would vest subject to attainment of any applicable Company performance goals. In connection with the agreement, on April 29, 2021, Mr. Brodén received an equity grant with a grant-date value of approximately $1,000,000 in the form of restricted stock units that will vest on the third anniversary of the grant date. The equity award is generally subject to Mr. Brodén’s continued employment with the Company through the vesting date.

Item 6. Exhibits


~~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,~~April 6, 2020, 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

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~~Twenty-Eighth Supplemental Indenture, dated as of ~~December 17, 2009,~~March 8, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~6.900%~~1.125% Senior Sustainability Note due ~~2039)~~2026) – incorporated by reference from Form 8-K dated ~~December 14, 2009,~~March 8, 2021, Exhibit 4.1 (File No. 001-07434).

~~4.3~~4.2

~~Third~~Twenty-Ninth Supplemental Indenture, dated as of ~~August 9, 2010,~~April 15, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~6.45%~~0.633% Senior Note due ~~2040) -~~2031) – incorporated by reference from Form 8-K dated ~~August 4, 2010,~~April 15, 2021, Exhibit 4.1 (File No. 001-07434).

~~4.4~~4.3

~~Fifth~~Thirtieth Supplemental Indenture, dated as of ~~February 10, 2012,~~April 15, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~2.65%~~0.844% Senior Note due ~~2017) -~~2033) – incorporated by reference from Form 8-K dated ~~February 8, 2012,~~April 15, 2021, Exhibit ~~4.1~~4.2 (File No. 001-07434).

~~4.5~~4.4

~~Sixth~~Thirty-First Supplemental Indenture, dated as of ~~February 10, 2012,~~April 15, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~4.00%~~1.039% Senior Note due ~~2022) -~~2036) – incorporated by reference from Form 8-K dated ~~February 8, 2012,~~April 15, 2021, Exhibit ~~4.2~~4.3 (File No. 001-07434).

~~4.6~~4.5

~~Seventh~~Thirty-Second Supplemental Indenture, dated as of ~~July 31, 2012,~~April 15, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~2.65%~~1.264% Senior Note due ~~2017) -~~2041) – incorporated by reference from Form 8-K dated ~~July 27, 2012,~~April 15, 2021, Exhibit ~~4.1~~4.4 (File No. 001-07434).

~~4.7~~4.6

~~Eighth~~Thirty-Third Supplemental Indenture, dated as of ~~June 10, 2013,~~April 15, 2021, between Aflac Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of ~~3.625%~~1.560% 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)2051) – incorporated by reference from Form 8-K dated ~~January 25, 2017,~~April 15, 2021, Exhibit ~~4.1~~4.5 (File No. 001-07434).


		10.1		-		1999 Aflac Associate Stock Bonus Plan, amended and restated as of February 1, 2021.
		~~4.14~~10.2		-	~~Subordinated Indenture, dated as of September 26, 2012, between~~Amendment to Aflac Incorporated ~~and The Bank of New York Mellon Trust Company, N.A., as trustee - incorporated by reference from Form 8-K~~Employment Agreement with Frederick J. Crawford, dated ~~September 26, 2012, Exhibit 4.1 (File No. 001-07434).~~April 29, 2021.
		~~4.15~~10.3		-	~~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~~Employment Agreement with Max K. Brodén, dated ~~September 26, 2012, Exhibit 4.2 (File No. 001-07434).~~April 29, 2021.
		~~4.16~~31.1		-	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,~~April 29, 2021, 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,~~April 29, 2021, 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,~~April 29, 2021, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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₍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)

Glossary of Selected Terms

Throughout this Quarterly Report on Form 10-Q, the Company may use certain performance metrics and other terms which are defined below.

Adjusted Net Investment Income - Net Investment Income adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity and ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are reclassified from net investment gains and (losses) to net investment income. The Company considers adjusted net investment income important because it provides a more comprehensive understanding of the costs and income associated with the Company's investments and related hedging strategies. The metric is used in segment reporting as a component of segment profitability.

Affiliated Corporate Agency – Agency in Japan directly affiliated with a specific corporation that sells insurance policies primarily to its employees.

Annualized Premiums in Force– the amount of gross premium 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.

Average Weekly Producer– The total number of writing associates who have produced greater than $0.00 during the production week - excluding any manual adjustments divided by the number of weeks in the time period. The Company believes this metric allows sales management to monitor progress and needs, as well as serve as a leading indicator of future production capacity.

Capital Buffer– Established dollar amount of liquidity at the Parent Company reserved for injecting capital into the insurance entities or general liquidity support for general expenses at the Parent Company. Currently, the capital buffer is $1.0 billion and is part of $2.0 billion minimum balance at the Parent Company.

Earnings Per Basic Share – Net earnings divided by weighted-average number of shares outstanding for the period.

Earnings Per Diluted Share – Net earnings divided by the weighted-average number of shares outstanding for the period plus the weighted-average shares for the dilutive effect of share-based awards outstanding.

Group Insurance– Insurance issued to a group, such as an employer or trade association, that covers

employees or association members and their dependents through certificates of coverage.

Individual Insurance – Insurance issued to an individual with the policy designed to cover that person and his or her dependents.

In-force Policies– A count of policies that are active contracts at the end of a period.

Liquidity Support – Internally defined and established dollar amount of liquidity reserved for supporting potential collateral and settlements of derivatives at the Parent Company. Currently, the liquidity support is $1.0 billion and is part of the $2.0 billion minimum balance at the Parent Company.

Net Investment Income – The income derived from interest and dividends on invested assets, after deducting investment expenses.

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

New Annualized Premium Sales – (sometimes referred to as new sales or sales) An operating measure that is not reflected on the Company's financial statements. New annualized premium sales generally represent annual premiums on policies the Company sold and incremental increases from policy conversions that would be collected over a 12-month period assuming the policies remain in 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. Policy conversions are defined as the positive difference in the annualized premium when a policy upgrades in the current reporting period.

New Money Yield– Gross yields earned on purchases of fixed maturities, loan receivables, and equities. Purchases exclude capitalized interest, securities lending/repurchase agreements, short-term/cash activity, and alternatives. New money yield for equities is based on the assumed dividend yield at the time of purchase. The new money yield for Aflac Japan excludes the impact of any derivatives and associated amortized hedge costs associated with USD-denominated investments. Management uses this metric as a leading indicator of future investment earning potential.

Operating Ratios– Used to evaluate the Company's financial condition and profitability. Examples include: (1) Ratios to total adjusted revenues, which present expenses as a percentage of total revenues and (2) Ratios to total premium, including benefit ratio.

Persistency – Percentage of premiums remaining in force at the end of a period, usually one year. For example, 95% persistency would mean that 95% of the premiums in force at the beginning of the period were still in force at the end of the period.

Pretax Adjusted Earnings – Earnings as adjusted earnings before the application of income taxes. This measure is used in the Company's segment reporting.

Pretax Adjusted Profit Margin – Adjusted earnings divided by adjusted revenues, before taxes are applied. This measure is used in the Company's segment reporting.

Return on Average Invested Assets – Net investment income as a percentage of average invested assets during the period. Management uses this metric to demonstrate how our actual net investment income results represent an overall return on the portfolio to provide a more comparative metric as the size of our investment portfolio changes over time.

Risk-based Capital (RBC) Ratio – Statutory adjusted capital divided by statutory required capital. This insurance ratio is based on rules prescribed by the National Association of Insurance Commissioners (NAIC) and provides an indication of the amount of statutory capital the insurance company maintains, relative to the inherent risks in the insurer’s operations.

Solvency Margin Ratio (SMR) – Solvency margin total divided by one half of the risk total. This insurance ratio is prescribed by the Japan Financial Services Agency (FSA) and is used for all life insurance companies in Japan to measure the adequacy of the company’s ability to pay policyholder claims in the event actual risks exceed expected levels.

Statutory Earnings– Earnings determined according to accounting rules prescribed by the National Association of Insurance Commissioners (NAIC), as modified by the insurance department in the insurance company’s state of domicile. These statutory accounting rules are different from U.S. GAAP and are intended to emphasize policyholder protection and company solvency.

Weighted-Average Foreign Currency Exchange Rate – Japan segment operating earnings for the period (excluding hedge costs) in yen divided by Japan segment operating earnings for the period (excluding hedge costs) in dollars. Management uses this metric to evaluate and determine consolidated results on foreign currency effective basis.

Defined Terms

Throughout this Quarterly Report on Form 10-Q, the Company may use abbreviations, acronyms and defined terms which are defined below.


AFS	Available-for-Sale
ALM	Asset-Liability Matching
AOCI	Accumulated Other 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~~
ARP		American Rescue Plan
*ASC	~~Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 6~~Accounting Standards Codification
ASU	Accounting Standards Update
CAA	The Consolidated Appropriations Act
CARES	Coronavirus Aid, Relief, and Economic Security
CDSs	Credit Default Swaps
CMLs	Commercial Mortgage Loans
CSAs	Credit Support Annexes
DAC	Deferred Policy Acquisition Costs
DSCR	Debt Service Coverage Ratios
EPS	Earnings Per Share
FASB	Financial Accounting Standard Boards
FHLB	Federal Home Loan Bank of ~~this report~~Atlanta
FSA	Japanese Financial Services Agency
HTM	Held-to-Maturity
ISDA	International Swaps and Derivatives Association, Inc.
ISOs	Incentive Stock Options
JGB	Japan Government Bond
LGD	Loss-Given-Default
LIBOR	London Interbank Offered Rate
LIPPC	Life Insurance Policyholder Protection Corporation
LTV	Loan-to-Value
MD&A	Management's Discussion and Analysis of Financial Condition and Results of Operations
MMLs	Middle Market Loans
NAIC	National Association of Insurance Commissioners
NOLHGA	National Organization of Life and Health Guaranty Associations
NQSOs	Non-qualifying Stock Options
NRSROs	Nationally Recognized Statistical Rating Organizations
OTC	Over-the-Counter
PD	Probability-of-Default
PRM	Policy Reserve Matching
RBC	Risk-Based Capital
ROE	Return on Equity
S&P	Standard & Poor's
SEC	Securities and Exchange Commission
SMR	Solvency Margin Ratio
The Plan	Aflac Incorporated Long-Term Incentive Plan
TIBOR	Tokyo Interbank Market Rate
TDRs	Trouble Debt Restructurings
TREs	Transitional Real Estate Loans
TTM	Telegraphic Transfer Middle Rate
U.S. GAAP	U.S. Generally Accepted Accounting Principles
VIEs	Variable Interest Entities

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

April 29, 2021		~~Aflac Incorporated~~

~~November 2, 2017~~	/s/ ~~Frederick J. Crawford~~Max K. Brodén
		(~~Frederick J. Crawford)~~Max K. Brodén)
		Executive Vice ~~President,~~ President; Chief Financial Officer

April 29, 2021		/s/ June Howard
		(June Howard)
~~November 2, 2017~~		~~/s/~~ ~~June Howard~~
	~~(June Howard)~~
	Senior Vice President, Financial Services; Chief Accounting Officer



(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)	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



	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, 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



Nine 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	$	198		$	16	$	25	$	0		$	3		$	(21	)	$	2		$	223
Realized investment gains (losses) included in earnings	0			0		0		0			0			36			(1		)	35
Unrealized gains (losses) included in other comprehensive income (loss)	4			0		0		3			0			0			0			7
Purchases, issuances, sales and settlements:
Purchases	0			61		0		100			16			0			0			177
Issuances	0			0		0		0			0			0			0			0
Sales	0			0		0		(1		)	(1		)	0			0			(2		)
Settlements	(24		)	0		0		0			0			0			0			(24		)
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		$	36		$	(1	)	$	35



Nine 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	$	220		$	0	$	26	$	0	$	3	$	(192	)	$	1	$	58
Realized investment gains (losses) included in earnings	0			0		0		0		0		250			2		252
Unrealized gains (losses) included in other comprehensive income (loss)	48			0		0		0		0		(16		)	0		32
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	(28		)	0		0		0		0		(1		)	0		(29		)
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	$	250		$	2	$	252



	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	)



	Three Months Ended September 30,				Nine Months Ended September 30,
Ratios to total revenues:	2017		2016		2017		2016
Benefits and claims, net	60.9	%	61.9	%	60.5	%	61.1	%
Operating expenses:
Amortization of deferred policy acquisition costs	4.1		3.9		4.2		4.0
Insurance commissions	4.9		4.9		4.9		4.9
Insurance and other expenses	10.1		9.7		9.9		9.7
Total operating expenses	19.2		18.5		19.0		18.6
Pretax operating earnings⁽¹⁾	19.9		19.6		20.4		20.3