~~(continued)~~

Aflac Incorporated and Subsidiaries

Consolidated Balance Sheets ~~(continued)~~


(In millions, except for share and per-share amounts - Unaudited)	March 31, 2023			December 31, 2022
Assets:
Investments and cash:
Fixed maturity securities available for sale, at fair value, (no allowance for credit losses in 2023 and 2022, amortized cost $72,084 in 2023 and $72,246 in 2022)		$	74,174		$	71,936
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value (amortized cost $3,222 in 2023 and $3,223 in 2022)		3,925			3,805
Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses of $6 in 2023 and $7 in 2022 (fair value $21,616 in 2023 and $21,210 in 2022)		18,936			19,056
Equity securities, at fair value		1,087			1,091
Commercial mortgage and other loans, net of allowance for credit losses of $223 in 2023 and $192 in 2022 (includes $10,684 in 2023 and $10,832 in 2022 of consolidated variable interest entities)		13,328			13,496
Other investments (includes $2,049 in 2023 and $1,909 in 2022 of consolidated variable interest entities)		5,241			4,070
Cash and cash equivalents		3,809			3,943
Total investments and cash		120,500			117,397
Receivables		789			647
Accrued investment income		701			745
Deferred policy acquisition costs		9,267			9,239
Property and equipment, at cost less accumulated depreciation		528			530
Other		3,181			3,180
Total assets		$	134,966		$	131,738
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	91,293		$	88,241
Unpaid policy claims		229			201
Unearned premiums		1,743			1,825
Other policyholders’ funds		6,668			6,643
Total policy liabilities		99,933			96,910
Income taxes		647			698
Payables for return of cash collateral on loaned securities		3,460			1,809
Notes payable and lease obligations		7,420			7,442
Other		3,722			4,739
Total liabilities		115,182			111,598
Commitments and contingent liabilities (Note 13)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2023 and 2022; issued 1,355,012 shares in 2023 and 1,354,079 shares in 2022		135			135
Additional paid-in capital		2,665			2,641
Retained earnings		45,555			44,367
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)		(3,618)			(3,564)
Unrealized gains (losses) on fixed maturity securities		1,289			(702)
Unrealized gains (losses) on derivatives		(26)			(27)
Effect of changes in discount rate assumptions		(4,894)			(2,100)
Pension liability adjustment		(29)			(36)
Treasury stock, at average cost		(21,293)			(20,574)
Total shareholders’ equity		19,784			20,140
Total liabilities and shareholders’ equity		$	134,966		$	131,738

(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~~Prior-year amounts have been adjusted for the adoption of ~~derivatives from consolidated variable interest entities~~accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity


(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2022	$	135	$	2,641	$	44,367	$	(6,429)	$	(20,574)	$	20,140
Net earnings	0		0		1,188		0		0		1,188
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(54)		0		(54)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		1,991		0		1,991
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		(2,794)		0		(2,794)
Pension liability adjustment during period, net of income taxes	0		0		0		7		0		7
Dividends to shareholders (1) ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		3		0		0		0		3
Share-based compensation	0		14		0		0		0		14
Purchases of treasury stock	0		0		0		0		(732)		(732)
Treasury stock reissued	0		7		0		0		13		20
Balance at March 31, 2023	$	135	$	2,665	$	45,555	$	(7,278)	$	(21,293)	$	19,784

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, 2021	$	135	$	2,529	$	40,963	$	(8,411)	$	(18,185)	$	17,031
Net earnings	0		0		1,047		0		0		1,047
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(453)		0		(453)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		(3,815)		0		(3,815)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		4,224		0		4,224
Pension liability adjustment during period, net of income taxes	0		0		0		3		0		3
Dividends to shareholders (1) ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		6		0		0		0		6
Share-based compensation	0		13		0		0		0		13
Purchases of treasury stock	0		0		0		0		(523)		(523)
Treasury stock reissued	0		12		0		0		14		26
Balance at March 31, 2022	$	135	$	2,560	$	42,010	$	(8,451)	$	(18,694)	$	17,560

(1) Dividends to shareholders are recorded in the period in which they are declared.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Cash Flows


	Three Months Ended March 31,
(In millions - Unaudited)	2023			2022
Cash flows from operating activities:
Net earnings		$	1,188		$	1,047
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Change in receivables and advance premiums		(34)			(29)
Capitalization of deferred policy acquisition costs		(270)			(255)
Amortization of deferred policy acquisition costs		205			207
Increase in policy liabilities		(361)			143
Change in income tax liabilities		154			325
Net investment (gains) losses		(123)			(122)
Other, net		(51)			(56)
Net cash provided (used) by operating activities		708			1,260
Cash flows from investing activities:
Proceeds from investments sold or matured:
Available-for-sale fixed maturity securities		949			545
Equity securities		126			102

Commercial mortgage and other loans		418			638
Costs of investments acquired:
Available-for-sale fixed maturity securities		(1,090)			(707)
Equity securities		(134)			(114)
Commercial mortgage and other loans		(315)			(1,161)
Other investments, net		(1,074)			(138)
Settlement of derivatives, net		(480)			(558)
Cash received (pledged or returned) as collateral, net		1,756			142
Other, net		(51)			41
Net cash provided (used) by investing activities		105			(1,210)
Cash flows from financing activities:
Purchases of treasury stock		(700)			(500)


Dividends paid to shareholders		(248)			(250)
Change in investment-type contracts, net		(28)			(21)
Treasury stock reissued		2			9
Other, net		41			25
Net cash provided (used) by financing activities		(933)			(737)
Effect of exchange rate changes on cash and cash equivalents		(14)			(89)
Net change in cash and cash equivalents		(134)			(776)
Cash and cash equivalents, beginning of period		3,943			5,051
Cash and cash equivalents, end of period		$	3,809		$	4,275
Supplemental disclosures of cash flow information:
Income taxes paid		$	0		$	(77)
Interest paid		37			37
Noncash interest		11			19
Noncash financing activities:
Lease obligations		18			73
Treasury stock issued for:
Associate stock bonus		4			3
Shareholder dividend reinvestment		9			9
Share-based compensation grants		5			5

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

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

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

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

Other, net 210
35

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

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

Fixed maturities matured or called 740
774

Perpetual securities matured or called 9
234

Equity securities sold 755
173

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

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

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

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

Treasury stock reissued 23
37

Other, net 5

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

Net change in cash and cash equivalents 68
920

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

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

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

Interest paid 144
155

Noncash interest 38
41

Impairment losses included in realized investment losses 27
71

Noncash financing activities:
Capital lease obligations 7
2

Treasury stock issued for:
   Associate stock bonus 22
24

   Shareholder dividend reinvestment 22
19

   Share-based compensation grants 1
4

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Notes to the Consolidated Financial Statements

~~(Interim period data – Unaudited)~~(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 two 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 dental and vision products administered by Aflac Benefits Solutions, Inc. (ABS) 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. Additionally, Aflac U.S. markets its consumer markets products through Tier One Insurance Company (TOIC). 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. The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. Aflac Japan's revenues, including ~~realized~~net gains and losses on its investment portfolio, accounted for ~~69%~~62% and ~~74%~~70% of the Company's total revenues in the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. The percentage of the Company's total assets attributable to Aflac Japan was ~~83%~~81% at ~~both September 30, 2017, and~~March 31, 2023, compared with 80% at December 31, ~~2016.~~2022.

In 2022, the Company established Aflac Re Bermuda Ltd. (Aflac Re), a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices. Financial results from Aflac Re are included in Corporate and other.

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, interest rates, 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~~are revised and reflected in operating results. Although some variability is inherent in these estimates, the Company believes the amounts provided are ~~adequate.~~reasonable and reflective of the best estimates of management.

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, 2023 and December 31, ~~2016,~~2022, 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, 2023 and ~~2016.~~2022. 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~~2022 (2022 Annual Report).

~~Reclassifications~~

Significant Accounting Policies

The Company revised the following accounting policies as a result of the adoption of amended accounting guidance effective January 1, 2023 and certain reclassifications. Refer to Recently Adopted Accounting Pronouncements below for details of the adoption of ASU 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts. In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the deferred profit liability on products with limited payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statement of earnings. This reclassification had no impact on net earnings. The change in presentation has been made for all comparative periods presented. All other categories of significant accounting policies remain unchanged from the 2022 Annual Report.

Insurance Revenue and Expense Recognition: Substantially all of the supplemental health and life insurance policies the Company issues are classified as long-duration contracts. The contract provisions generally cannot be changed or canceled during the contract period; however, the Company may adjust premiums for supplemental health policies issued in the U.S. within prescribed guidelines and with the approval of state insurance regulatory authorities.

Insurance premiums for most of the Company's health and life policies, including cancer, accident, hospital, critical illness, supplemental dental and vision, term life, whole life, long-term care and disability, are recognized as earned premiums over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the related amounts of benefits and expenses are charged against such revenues. This association is accomplished by means of annual increases or decreases to the liability for future policy benefits (LFPB) and the deferral and subsequent amortization of policy acquisition costs.

Premiums from the Company's products with limited-pay features, including cancer, medical and nursing care, term life, whole life, WAYS, and child endowment, are collected over a significantly shorter period than the contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net premium is deferred and recorded as a deferred profit liability, which is subsequently amortized in net earned premiums such that profits are recognized in a constant relationship with insurance in force. Benefits are recorded as an expense when they are incurred. An LFPB is recorded when premiums are recognized using the net premium method.

Policyholders also have an option to pay discounted advanced premiums for certain of the Company's products. Advanced premiums are deferred and recognized when due from policyholders over the otherwise required contractual premium payment period.

Benefit expense is bifurcated between benefits and claims and reserve remeasurement (gains) losses. The net premium ratio (NPR) is used to measure benefit expense and is calculated as the ratio of the present value of actual and future expected benefits and expenses to the present value of actual and future expected gross premiums. A revised NPR is calculated as of the beginning of each reporting period using updated future cash flow expectations.

Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the beginning of the current reporting period using the same locked-in discount rates. One reserve measure uses the NPR as of the end of the prior reporting period, and the second uses the revised NPR. Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates. The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original discount rate used at contract issue date.

Advertising expense is reported as incurred in insurance and other expenses in the consolidated statement of earnings.

Deferred Policy Acquisition Costs: Certain direct and incremental costs of acquiring insurance contracts are deferred and amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level basis. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount, and insurance in force, respectively. For life and health products issued in the U.S., the constant-level basis used is face amount and number of policies in force, respectively. Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination assumptions that are used in computing the LFPB, and these assumptions are reviewed and updated at least annually. The effects of changes in assumptions are recognized prospectively over the remaining contract term as a revision of the future amortization pattern, while current period amortization is calculated based on the actual experience during the quarter. Deferred costs include the excess of current-year commissions over ultimate renewal-year commissions and certain incremental direct policy issue, underwriting and sales expenses directly related to successful policy acquisition.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. The Company performs a two-stage analysis of the internal replacements to determine if the modification is substantive to the base policy. The stages of evaluation are as follows: 1) determine if the modification is integrated with the base policy, and 2) if it is integrated, determine if the resulting contract is substantially changed.

For internal replacement transactions where the resulting contract is substantially unchanged, unamortized deferred acquisition costs from the original policy continue to be amortized over the expected life of the cohort, and the costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred.

For an internal replacement transaction that results in a policy that is substantially changed, the policy is treated as lapsed for amortization purposes, and the costs of acquiring the new policy are capitalized and amortized in accordance with the Company's accounting policies for deferred acquisition costs.

Riders can be considered internal replacements that are either integrated or non-integrated resulting in either substantially changed or substantially unchanged treatment. Riders are evaluated based on the specific facts and circumstances of the rider and are considered an expansion of the existing benefits with additional premium required. Non-integrated riders to existing contracts do not change the Company's profit expectations for the related products and are treated as a new policy establishment for incremental coverage.

Policy Liabilities: For long-duration insurance contracts, the Company calculates an integrated reserve that represents all payments under the contract including future expected claims and unpaid policy claims and related expenses. The liability for future policy benefits is measured using the net level premium method.

Long-duration insurance contracts issued by the Company are grouped into annual calendar-year cohorts based on the contract issue date, reportable segment, legal entity and product type. Limited-pay contracts are grouped into separate cohorts from other traditional products in the same manner and are further separated based on their premium payment structures.

The LFPB is determined as the present value of future policy benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of future net premiums receivable under the Company’s insurance contracts, where future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

Future policy benefits are calculated using assumptions and estimates including mortality, morbidity, termination (also referred to as lapses), expense, and discount rates. The assumptions and estimates that the Company uses depend on its judgment regarding the likelihood of future events and are inherently uncertain.

Cash flow assumptions (mortality, morbidity, and termination) are established at policy inception and are evaluated each quarter to determine if an update is needed. To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the beginning of the reporting period and are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings. Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of paid claims. These expense assumptions are locked-in and remain unchanged over the term of the insurance policy. Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings.

The Company has designed its discount rate methodology for the U.S. and Japan insurance business. The methodology incorporates constructing a discount rate curve separately for discounting cash flows used to calculate the U.S. and Japan LFPBs, reflective of the characteristics of the insurance liabilities, such as currency and tenor. Discount rates comprising each curve are determined by reference to upper-medium grade (low credit risk) fixed-income instrument yields that

reflect the duration characteristics of the corresponding insurance liabilities. The Company uses for these yields single-A rated fixed income instruments with credit ratings based on international rating standards. Where only local ratings are available, the Company selects the fixed-income instruments with local ratings that are equivalent to a single-A rating based on international rating standards. The methodology is designed to prioritize observable inputs based on market data available in the local debt markets where the respective policies were issued in the currency in which the policies are denominated. For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company uses various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to: (i) for tenors where there is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-specific single-A credit spreads and applying them to risk-free government rates; (ii) for tenors where there is very limited or no observable single-A or similar market data, interpolation and extrapolation techniques.

The locked-in discount rate used for the computation of interest accretion on LFPBs is determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income instrument forward curves in the calendar year, determined using the methodology described above and weighted using issued annualized premiums for each issue month. The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent net premium ratio to the forward curve and will remain unchanged after the calendar year of issue.

Unearned premiums consist primarily of discounted advance premiums on deposit from policyholders in conjunction with their purchase of certain Aflac Japan limited-pay insurance products. These advanced premiums are deferred upon collection and recognized as earned premiums over the contractual premium payment period.

The other policyholders’ funds liability consists primarily of the fixed annuity line of business in Aflac Japan which has fixed benefits and premiums.

For internal replacements that are determined to be substantially changed, policy liabilities related to the original policy that was replaced are immediately released, and policy liabilities are established for the new insurance contract. The policy reserves are evaluated based on the new policy features, and changes are recognized at the date of contract change/modification. For internal replacements that are substantially unchanged, no changes to the reserves are recognized. For modifications that are not integrated with the base policy, new coverage is recognized as a separately issued contract within the current cohort.

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

~~Consolidation~~ASU 2018-12 Financial Services - ~~Interests Held through Related Parties That Are under Common Control:~~ Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by:

ASU 2019-09 Financial Services - Insurance: Effective Date

ASU 2020-11 Financial Services - Insurance: Effective Date and Early Application

In ~~October 2016,~~August 2018, the FASB issued amendments ~~which clarify the consolidation guidance on~~that significantly changed 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.insurers account for long-duration contracts. The Company adopted ~~this~~the standard on January 1, 2023 using a modified retrospective transition method which resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021 transition date (Transition Date). The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date. On the Transition Date, the Company calculated the ratio of the present value of future expected benefits and expenses less existing carrying values to the present value of future expected gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date. The Company capped the Transition Date NPR at 100% for any cohorts with a Transition Date NPR greater than 100%. The Company calculated the LFPB using the Transition Date NPR (capped at 100% if required) and two different discount rates: (i) the discount rate used immediately before the Transition Date, and (ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit risk) fixed income instruments (as of December 31, 2020). For cohorts with their Transition Date NPR capped at 100%, the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the Transition Date. For all cohorts on the Transition Date, the Company recorded in accumulated other comprehensive

income (AOCI) net of tax, the difference in the LFPB calculated using the two different discount rates (i.e., the discount rate used immediately before the Transition Date and the updated discount rate as of the Transition Date).

Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods presented (years 2021 and 2022) following the updated standard. Based upon the modified retrospective transition method, the Transition Date impact from adoption resulted in a decrease in AOCI of approximately $18.6 billion and a decrease in retained earnings (RE) of approximately $0.3 billion.

See Note 6 and Note 7 of the Notes to the Consolidated Financial Statements for expanded disclosures for DAC and future policy benefits, respectively, required as a result of the amended guidance.

Transition Impact to Shareholder's Equity

The following table presents the cumulative transition impact as of January 1, ~~2017.~~ 2021 to the Company’s Shareholder’s Equity as a result of the adoption of ASU 2018-12, using the modified retrospective transition method.


(In millions - 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
Cumulative effect of change in accounting principle, ASU 2018-12, net of income taxes	0		0		(324)		(18,570)		0		(18,894)
Balance at January 1, 2021	$	135	$	2,410	$	37,660	$	(9,636)	$	(15,904)	$	14,665

The following table presents the transition impacts as of January 1, 2021 to the Company's AOCI and RE as a result of the adoption of ASU 2018-12 by reporting segment and disaggregated by product type, using the modified retrospective transition method.


(In millions - Unaudited)	Impact to Retained Earnings			Impact to AOCI
Transition impacts:
Aflac Japan
Cancer		$	0		$	14,529
Medical and other health		1			2,382
Life insurance		0			3,314
Other (1)		398			433
Aflac U.S.
Accident		0			92
Disability		0			149
Critical care		4			2,258
Hospital indemnity		0			223
Dental/vision		0			65
Life insurance		5			149
Other		2			218
Reinsurance		0			(305)
Transition impact before income taxes		410			23,507
Less: income taxes		86			4,937
Total transition impact, net of income taxes		$	324		$	18,570

(1) Impact to retained earnings is driven primarily by capping the Transition Date NPR on Care products.

Transition Impact on the Liability for Future Policy Benefits

The Company adopted ASU 2018-12 using the modified retrospective transition method. The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present

value of expected net premiums and the present value of expected future policy benefits as of the Transition Date and the LFPB rollforward for the year ended December 31, 2021. The locked-in discount rates on the policies held at the Transition Date reflect the locked-in rates in existence immediately before the Transition Date. See Note 7 of the Notes to the Consolidated Financial Statements for additional information.

Under the modified retrospective transition method, the NPR for future policy benefits existing as of the Transition Date considers the carryover basis of those liabilities, which equals the future policy benefits and unpaid policy claims balance as of December 31, 2020. If the revised Transition Date NPR for a cohort is greater than 100%, the Company capped the Transition Date NPR at 100% and increased the LFPB with an offsetting decrease to opening retained earnings.

The LFPB recorded in the consolidated balance sheet includes the deferred profit liability for limited-payment contracts. This deferred profit liability is not included in the Transition Date and LFPB rollforwards. For products with limited-payment features, to the extent the transition date adjustment related to updating cash flow assumptions is favorable, the Company increased the deferred profit liability.

The following table presents the transition impacts to the present value of expected net premiums by reporting segment and disaggregated by product type due to the cumulative effect of the change in accounting principle as a result of the adoption of ASU 2018-12 using the modified retrospective transition method.


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2020	$	25,601	$	21,270	$	12,440	$	2,080	$	3,350	$	1,921	$	5,898	$	1,376	$	281	$	710	$	154
Impact to retained earnings from capping Transition Date NPR	0		(1)		0		(398)		0		0		(4)		0		0		(5)		(2)
Impact of deferred profit liability	15		7		36		26		0		0		0		0		0		0		0
Beginning balance at original discount rate	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of change in discount rate assumptions	3,982		2,598		908		148		479		197		1,048		154		41		78		27
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179

The following table presents the changes in the present value of expected net premiums by reporting segment and disaggregated by product type for the year ended December 31, 2021.


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179
Beginning balance at original discount rate (1)	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of changes in cash flow assumptions	32		88		40		1		(163)		(129)		(302)		0		(26)		31		0
Effect of actual variances from expected experience	(134)		(449)		(135)		(11)		(109)		(38)		(290)		(32)		(14)		34		(3)
Adjusted beginning of period balance	25,514		20,915		12,381		1,698		3,078		1,754		5,302		1,344		241		770		149
Issuances	1,116		1,132		284		55		365		345		552		263		39		112		0
Interest accrual	586		439		202		27		116		61		210		45		10		25		6
Net premium earned (2)	(2,206)		(1,692)		(1,609)		(151)		(552)		(393)		(665)		(268)		(47)		(124)		(19)
Foreign currency translation	(2,539)		(2,111)		(1,194)		(167)		0		0		0		0		0		0		0
Other	(1)		(2)		0		(1)		(8)		(7)		(8)		(4)		(2)		(3)		(1)
Ending balance at original discount rate	22,470		18,681		10,064		1,461		2,999		1,760		5,391		1,380		241		780		135
Effect of changes in discount rate assumptions	3,423		2,493		783		125		284		102		632		87		23		54		18
Balance at December 31, 2021	$	25,893	$	21,174	$	10,847	$	1,586	$	3,283	$	1,862	$	6,023	$	1,467	$	264	$	834	$	153

(1) Includes the adjustment for capping the Transition Date NPR.

(2) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

The following table presents the transition impacts to the present value of expected future policy benefits by reporting segment and disaggregated by product type due to the cumulative effect of the change in accounting principle as a result of the adoption of ASU 2018-12 using the modified retrospective transition method.


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at December 31, 2020	$	64,056	$	34,638	$	43,729	$	7,620	$	3,818	$	2,919	$	13,427	$	2,258	$	599	$	1,562	$	661
Effect of change in discount rate assumptions	18,511		4,980		4,222		581		571		346		3,306		377		106		227		245
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906

The following table presents the changes in the present value of expected future policy benefits by reporting segment and disaggregated by product type for the year ended December 31, 2021.


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906
Beginning balance at original discount rate	64,056		34,638		43,729		7,620		3,818		2,919		13,427		2,258		599		1,562		661
Effect of changes in cash flow assumptions	24		85		31		(11)		(178)		(143)		(326)		(3)		(29)		31		0
Effect of actual variances from expected experience	(149)		(458)		(139)		(15)		(115)		(41)		(304)		(36)		(15)		34		(3)
Adjusted beginning of period balance	63,931		34,265		43,621		7,594		3,525		2,735		12,797		2,219		555		1,627		658
Issuances	1,133		1,155		287		62		372		355		563		271		40		115		0
Interest accrual	2,014		769		833		129		137		100		553		85		23		58		33
Benefit payments	(3,894)		(1,313)		(1,373)		(238)		(439)		(520)		(834)		(275)		(69)		(107)		(46)
Foreign currency translation	(6,377)		(3,478)		(4,366)		(760)		0		0		0		0		0		0		0
Other	0		0		0		0		(1)		0		0		0		0		1		0
Ending balance at original discount rate	56,807		31,398		39,002		6,787		3,594		2,670		13,079		2,300		549		1,694		645
Effect of changes in discount rate assumptions	15,940		4,623		3,718		535		355		201		2,309		252		67		149		192
Balance at December 31, 2021	72,747		36,021		42,720		7,322		3,949		2,871		15,388		2,552		616		1,843		837
Net liability for future policy benefits	46,854		14,847		31,873		5,736		666		1,009		9,365		1,085		352		1,009		684
Less: reinsurance recoverable	0		2,150		0		0		0		0		0		0		0		10		0
Net liability for future policy benefits after reinsurance recoverable	$	46,854	$	12,697	$	31,873	$	5,736	$	666	$	1,009	$	9,365	$	1,085	$	352	$	999	$	684

The following table presents a reconciliation of the rollforwards by reporting segment and disaggregated by product type for the year ended December 31, 2021 to the liability for future policy benefits as of December 31, 2021 under the amended guidance. The deferred profit liability for limited-payment contracts and reinsurance is presented together with the LFPB in the Consolidated Balance Sheets and has been included as a reconciling item in the table below.


(In millions)	December 31, 2021
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer		$	46,854
Medical and other health		14,847
Life insurance		31,873
Other		5,736
Aflac U.S.
Accident		666
Disability		1,009
Critical care		9,365
Hospital indemnity		1,085
Dental/vision		352
Life insurance		1,009
Other		684
Corporate and other		30
Deferred profit liability - limited-payment contracts		1,595
Deferred profit liability - reinsurance		859
Total		$	115,964

The adoption of ~~this guidance~~ASU 2018-12 did not have ~~a significant~~an impact on the Company's ~~financial position, results of operations, or disclosures.~~balance for deferred policy acquisition costs upon adoption.

~~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.Accounting Pronouncements Pending Adoption

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.~~

ASU 2023-02 Investments - Equity Method and Joint Ventures ~~- Simplifying~~(Topic 323): Accounting for Investments in Tax Credit Structures Using the ~~Transition to the Equity~~Proportional Amortization Method ~~of Accounting:~~

In March ~~2016,~~2023, the FASB issued amendments ~~whicheliminate the requirement that when an investment qualifies~~to permit reporting entities to elect to account for ~~use~~their tax equity investments, regardless of the ~~equity~~tax credit program from which the income tax credits are received, using the proportional amortization method ~~as a result of~~if certain conditions are met. Under the proportional amortization method, an ~~increase in~~entity amortizes 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 adjustmentinitial cost 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~~proportion to the ~~economic characteristics~~income tax credits and ~~risks of their debt hosts, which is one of~~other income tax benefits received and recognizes 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~~net amortization and ~~Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships:~~ ~~In March 2016, the FASB issued amendments which clarify that a change~~income tax credits and other income tax benefits in the ~~counterparty to~~income statement as a ~~derivative instrument that has been designated as the hedging instrument does not, in and~~component 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.income tax expense (benefit).

~~Accounting Pronouncements Pending Adoption~~

~~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~~2023, including interim periods within those fiscal years. Early ~~application~~adoption is permitted and if an entity adopts the amendments in ~~any~~an interim period, ~~after issuance~~it shall adopt them as of the ~~guidance.~~ beginning of the fiscal year that includes that 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-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~~2022 Annual Report.


2.	~~BUSINESS SEGMENT INFORMATION~~

2. BUSINESS SEGMENT INFORMATION

The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. ~~Operating~~In addition, the Parent Company, other 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~~the Company'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 March 31,
(In millions)		2023		2022
Revenues:
Aflac Japan:
Net earned premiums		$	2,170	$	2,625



Adjusted net investment income (1),(2)		611		680
Other income		9		9
Total adjusted revenue Aflac Japan		2,790		3,314
Aflac U.S.:
Net earned premiums		1,428		1,413







Adjusted net investment income (3)		197		184
Other income		35		42
Total adjusted revenue Aflac U.S.		1,660		1,639
Corporate and other (4),(5)		129		74
Total adjusted revenues		4,579		5,027
Net investment gains (losses) (1),(2),(3),(4)		221		146
Total revenues		$	4,800	$	5,173

Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2017 2016 2017 2016
Revenues:
Aflac Japan:
   Net earned premiums $ 3,200
$ 3,596
$ 9,616
$ 10,177

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

   Other income 11
10
31
29

               Total Aflac Japan 3,772
4,213
11,323
12,008

Aflac U.S.:
   Net earned premiums 1,393
1,365
4,172
4,093

   Net investment income 181
176
539
526

   Other income 1
1
3
5

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

⁽¹⁾Amortized hedge costs ~~related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60~~of $58 and ~~$54~~$26 for the three-month periods ended March 31, 2023, and ~~$168 and $123 for the nine-month periods ended September 30, 2017, and 2016,~~2022, 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 ~~$19~~$(62) and ~~$20~~$(10) for the three-month periods ended March 31, 2023, and ~~$60~~2022, 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) Net interest cash flows from derivatives associated with certain investment strategies of $(7) and $1 for the ~~nine-month~~three-month periods ended ~~September 30, 2017,~~March 31, 2023, and ~~2016,~~2022, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(4) Amortized hedge income of $29and $11 for the three-month periods ended March 31, 2023, and 2022, 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.

(5) The change in value of federal historic rehabilitation and solar investments in partnerships of $51 and $12 for the three-month periods ended March 31, 2023, and 2022, respectively, is included as a reduction to net investment income. Tax credits on these investments of $52 and $16 for the three-month periods ended March 31, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.


	Three Months Ended March 31,
(In millions)		2023		2022
Pretax earnings:
Aflac Japan (1),(2)		$	788	$	870
Aflac U.S. (3)		352		333
Corporate and other (4),(5),(6)		(7)		(42)
Pretax adjusted earnings (7)		1,133		1,161
Net investment gains (losses) (1),(2),(3),(4),(5)		209		134
Other income (loss)		0		(1)
Total earnings before income taxes		$	1,342	$	1,294
Income taxes applicable to pretax adjusted earnings		$	180	$	219
Effect of foreign currency translation on after-tax adjusted earnings		(41)		(35)

(1) Amortizedhedge costs of $58 and $26 for the three-month periods ended March 31, 2023, and 2022, 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 $(62) and $(10) for the three-month periods ended March 31, 2023, and 2022, 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) Net interest cash flows from derivatives associated with certain investment strategies of $(7) and $1 for the three-month periods ended March 31, 2023, and 2022, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(4) Amortized hedge income of $29 and $11 for the three-month periods ended March 31, 2023, and 2022, 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.

(5) A gain of $12 and $13 for the three-month periods ended March 31, 2023, and 2022, 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~~(6) The change in value of federal historic rehabilitation and solar investments ~~held~~ in ~~Aflac Japan were $60~~partnerships of $51 and ~~$54~~$12 for the three-month periods ended March 31, 2023, and ~~$168 and $123 for the nine-month periods ended September 30, 2017, and 2016,~~2022, respectively, ~~and have been reclassified from realized investment gains (losses) and reported~~is included as a ~~deduction from pretax operating earnings when analyzing segment operations~~reduction to ~~conform to current year reporting.~~

⁽²⁾~~Excluding a gain~~net investment income. Tax credits on these investments of ~~$19~~$52 and ~~$20~~$16 for the three-month periods ended March 31, 2023, and ~~$60~~2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

(7) Includes $34 and ~~$64~~$41 for the ~~nine-month~~three-month periods ended ~~September 30, 2017,~~March 31, 2023, and ~~2016,~~2022, respectively, of interest expense on debt.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 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~~accounting for long-duration insurance contracts.

⁽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, 2023			December 31, 2022
Assets:
Aflac Japan		$	108,762		$	105,734
Aflac U.S.		21,385			21,002
Corporate and other		4,819			5,002
Total assets		$	134,966		$	131,738

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

(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, 2023
(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	$	25,264	$	0	$	1,534	$	1,079	$	25,719
Municipalities	1,028		0		152		42		1,138
Mortgage- and asset-backed securities	238		0		9		8		239
Public utilities	3,979		0		351		63		4,267
Sovereign and supranational	543		0		31		3		571
Banks/financial institutions	6,313		0		337		427		6,223
Other corporate	6,402		0		705		309		6,798
Total yen-denominated	43,767		0		3,119		1,931		44,955
U.S. dollar-denominated:
U.S. government and agencies	179		0		0		5		174
Municipalities	1,280		0		53		55		1,278
Mortgage- and asset-backed securities	2,307		0		90		69		2,328
Public utilities	3,479		0		315		128		3,666
Sovereign and supranational	132		0		36		11		157
Banks/financial institutions	2,966		0		316		85		3,197
Other corporate	21,196		0		1,946		798		22,344
Total U.S. dollar-denominated	31,539		0		2,756		1,151		33,144
Total securities available for sale	$	75,306	$	0	$	5,875	$	3,082	$	78,099


	September 30, 2017													December 31, 2022
(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	$	25,418	$	0	$	1,259	$	1,724	$	24,953
Municipalities		315			26			15			326		Municipalities	1,034		0		124		61		1,097
Mortgage- and asset-backed securities		248			29			0			277		Mortgage- and asset-backed securities	241		0		8		12		237
Public utilities		1,643			369			7			2,005		Public utilities	3,932		0		301		108		4,125
Sovereign and supranational		1,428			190			3			1,615		Sovereign and supranational	659		0		24		5		678
Banks/financial institutions		3,307			494			59			3,742		Banks/financial institutions	6,348		0		324		531		6,141
Other corporate		3,811			771			25			4,557		Other corporate	6,288		0		555		408		6,435
Total yen-denominated		37,779			5,151			532			42,398		Total yen-denominated	43,920		0		2,595		2,849		43,666
U.S. dollar-denominated:													U.S. dollar-denominated:
U.S. government and agencies		150			12			0			162		U.S. government and agencies	169		0		0		8		161
Municipalities		818			148			0			966		Municipalities	1,269		0		43		89		1,223
Mortgage- and asset-backed securities		166			13			0			179		Mortgage- and asset-backed securities	1,926		0		67		84		1,909
Public utilities		5,231			813			34			6,010		Public utilities	3,481		0		240		180		3,541
Sovereign and supranational		325			89			0			414		Sovereign and supranational	133		0		35		12		156
Banks/financial institutions		2,683			592			7			3,268		Banks/financial institutions	2,992		0		271		105		3,158
Other corporate		25,092			2,388			462			27,018		Other corporate	21,579		0		1,549		1,201		21,927
Total U.S. dollar-denominated		34,465			4,055			503			38,017		Total U.S. dollar-denominated	31,549		0		2,205		1,679		32,075
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	$	75,469	$	0	$	4,800	$	4,528	$	75,741


6.Policy Type	~~POLICY LIABILITIES~~	Constant-level Basis
Life Products (U.S.)		Face Value
Health Products (U.S.)		Policy Count
Health & Life Products (Japan)		Units in Force

~~Changes~~

Face value is the stated dollar amount that the policy’s beneficiaries receive upon the death of the insured. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount and insurance in force, respectively. Future DAC amortization is impacted by persistency.

There were no changes to the inputs, judgements, assumptions and methods used to determine amortization amounts during the three-month periods ended March 31, 2023 and 2022.

See Note 1 of the Notes to the Consolidated Financial Statements for more information on deferred policy acquisition costs.

7. POLICY LIABILITIES

Future Policy Benefits

The liability for future policy benefits is determined as the present value of future benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of future net premiums receivable under the Company's insurance contracts, where future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

The following tables present the changes in the present value of expected net premiums and the present value of expected future policy benefits by reporting segment and disaggregated by product type.


	March 31, 2023
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2022	$	19,298	$	16,714	$	7,485	$	1,256	$	2,534	$	1,635	$	4,486	$	1,220	$	211	$	724	$	110
Beginning balance at original discount rate	18,221		16,195		7,284		1,242		2,760		1,775		5,050		1,365		231		799		118
Effect of changes in cash flow assumptions	0		0		0		0		0		0		0		0		0		0		0
Effect of actual variances from expected experience	(120)		(25)		(14)		(2)		(48)		(20)		(104)		(39)		(7)		(4)		(1)
Adjusted beginning of period balance	18,101		16,170		7,270		1,240		2,712		1,755		4,946		1,326		224		795		117
Issuances	229		104		111		8		117		120		192		103		10		49		14
Interest accrual	111		92		33		5		25		15		46		11		2		7		1
Net premiums earned (1)	(420)		(344)		(286)		(31)		(118)		(95)		(147)		(62)		(10)		(33)		(4)
Foreign currency translation	(109)		(100)		(44)		(8)		0		0		0		0		0		0		0
Other	0		0		0		0		0		0		0		0		2		4		9
Ending balance at original discount rate	17,912		15,922		7,084		1,214		2,736		1,795		5,037		1,378		228		822		137
Effect of changes in discount rate assumptions	1,542		1,045		319		42		(173)		(112)		(444)		(117)		(15)		(60)		(6)
Balance at March 31, 2023	$	19,454	$	16,967	$	7,403	$	1,256	$	2,563	$	1,683	$	4,593	$	1,261	$	213	$	762	$	131
Present value of expected future policy benefits:
Balance at December 31, 2022	$	54,766	$	27,419	$	31,954	$	5,582	$	3,098	$	2,445	$	11,489	$	2,074	$	488	$	1,526	$	622
Beginning balance at original discount rate	47,677		27,566		32,800		5,940		3,391		2,636		12,846		2,300		532		1,778		624
Effect of changes in cash flow assumptions	0		0		0		0		0		0		0		0		0		0		0
Effect of actual variances from expected experience	(136)		(24)		(14)		0		(55)		(24)		(120)		(48)		(9)		(6)		(2)
Adjusted beginning of period balance	47,541		27,542		32,786		5,940		3,336		2,612		12,726		2,252		523		1,772		622
Issuances	232		108		112		9		124		127		201		111		12		53		13
Interest accrual	396		163		166		27		31		23		133		21		5		16		8
Benefit payments	(825)		(367)		(493)		(61)		(115)		(118)		(224)		(69)		(15)		(29)		(11)
Foreign currency translation	(295)		(171)		(201)		(35)		0		0		0		0		0		0		0
Other	0		0		0		0		0		0		0		0		2		4		9
Ending balance at original discount rate	47,049		27,275		32,370		5,880		3,376		2,644		12,836		2,315		527		1,816		641
Effect of changes in discount rate assumptions	8,750		1,164		344		(110)		(227)		(149)		(1,019)		(176)		(33)		(210)		15
Balance at March 31, 2023	55,799		28,439		32,714		5,770		3,149		2,495		11,817		2,139		494		1,606		656
Net liability for future policy benefits	36,345		11,472		25,311		4,514		586		812		7,224		878		281		844		525
Less: reinsurance recoverable	0		1,643		0		0		0		0		0		0		0		10		0
Net liability for future policy benefits after reinsurance recoverable	$	36,345	$	9,829	$	25,311	$	4,514	$	586	$	812	$	7,224	$	878	$	281	$	834	$	525

(1) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.


	December 31, 2022
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2021	$	25,893	$	21,174	$	10,847	$	1,586	$	3,283	$	1,862	$	6,023	$	1,467	$	264	$	834	$	153
Beginning balance at original discount rate	22,470		18,681		10,064		1,461		2,999		1,760		5,391		1,380		241		780		135
Effect of changes in cash flow assumptions	(639)		317		(494)		25		(52)		5		(38)		42		10		(1)		(12)
Effect of actual variances from expected experience	(284)		61		(81)		(10)		(152)		(43)		(421)		(111)		(20)		(16)		6
Adjusted beginning of period balance	21,547		19,059		9,489		1,476		2,795		1,722		4,932		1,311		231		763		129
Issuances	947		639		221		62		355		384		537		273		33		146		0
Interest accrual	459		364		146		22		105		57		193		45		9		27		5
Net premiums earned (1)	(1,734)		(1,376)		(1,229)		(123)		(496)		(382)		(612)		(261)		(42)		(131)		(17)
Foreign currency translation	(2,997)		(2,488)		(1,343)		(195)		0		0		0		0		0		0		0
Other	(1)		(3)		0		0		1		(6)		0		(3)		0		(6)		1
Ending balance at original discount rate	18,221		16,195		7,284		1,242		2,760		1,775		5,050		1,365		231		799		118
Effect of changes in discount rate assumptions	1,077		519		201		14		(226)		(140)		(564)		(145)		(20)		(75)		(8)
Balance at December 31, 2022	$	19,298	$	16,714	$	7,485	$	1,256	$	2,534	$	1,635	$	4,486	$	1,220	$	211	$	724	$	110
Present value of expected future policy benefits:
Balance at December 31, 2021	$	72,747	$	36,021	$	42,720	$	7,322	$	3,949	$	2,871	$	15,388	$	2,552	$	616	$	1,843	$	837
Beginning balance at original discount rate	56,807		31,398		39,002		6,787		3,594		2,670		13,079		2,300		549		1,694		645
Effect of changes in cash flow assumptions	(721)		352		(550)		96		(70)		5		(43)		40		13		(1)		(15)
Effect of actual variances from expected experience	(333)		83		(91)		(10)		(177)		(48)		(465)		(130)		(23)		(21)		7
Adjusted beginning of period balance	55,753		31,833		38,361		6,873		3,347		2,627		12,571		2,210		539		1,672		637
Issuances	960		646		222		68		364		397		550		282		34		149		0
Interest accrual	1,599		642		670		106		128		94		539		85		21		62		32
Benefit payments	(3,050)		(1,375)		(1,248)		(202)		(456)		(483)		(823)		(277)		(62)		(103)		(45)
Foreign currency translation	(7,585)		(4,180)		(5,205)		(905)		0		0		0		0		0		0		0
Other	0		0		0		0		8		1		9		0		0		(2)		0
Ending balance at original discount rate	47,677		27,566		32,800		5,940		3,391		2,636		12,846		2,300		532		1,778		624
Effect of changes in discount rate assumptions	7,089		(147)		(846)		(358)		(293)		(191)		(1,357)		(226)		(44)		(252)		(2)
Balance at December 31, 2022	54,766		27,419		31,954		5,582		3,098		2,445		11,489		2,074		488		1,526		622
Net liability for future policy benefits	35,468		10,705		24,469		4,326		564		810		7,003		854		277		802		512
Less: reinsurance recoverable	0		1,579		0		0		0		0		0		0		0		9		0
Net liability for future policy benefits after reinsurance recoverable	$	35,468	$	9,126	$	24,469	$	4,326	$	564	$	810	$	7,003	$	854	$	277	$	793	$	512

(1) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

The following tables present the weighted-average interest rates and weighted-average liability duration (calculated using the original discount rate) by reporting segment and disaggregated by product type.


	March 31, 2023
	Aflac Japan				Aflac U.S.
	Cancer	Medical and Other Health	Life Insurance	Other	Accident	Disability	Critical Care	Hospital Indemnity	Dental/Vision	Life Insurance	Other
Weighted-average interest, original discount rate (1)	3.9 %	2.6 %	2.1 %	1.8 %	3.9 %	4.2 %	4.6 %	4.4 %	4.3 %	3.7 %	5.4 %
Weighted-average interest, current discount rate (1)	1.7 %	2.2 %	1.7 %	2.0 %	5.0 %	5.0 %	5.1 %	5.1 %	5.0 %	5.0 %	5.1 %
Weighted-average liability duration (years)	13.7	26.7	17.3	18.0	8.5	5.6	11.8	9.6	8.0	12.9	9.5

(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.


	December 31, 2022
	Aflac Japan				Aflac U.S.
	Cancer	Medical and Other Health	Life Insurance	Other	Accident	Disability	Critical Care	Hospital Indemnity	Dental/Vision	Life Insurance	Other
Weighted-average interest, original discount rate (1)	4.1 %	2.6 %	2.1 %	1.8 %	3.8 %	4.2 %	4.6 %	4.4 %	4.3 %	3.7 %	5.4 %
Weighted-average interest, current discount rate (1)	1.6 %	2.2 %	1.6 %	1.9 %	4.8 %	4.7 %	4.8 %	4.8 %	4.8 %	4.8 %	4.8 %
Weighted-average liability duration (years)	13.7	26.9	17.3	18.2	8.5	5.6	12.0	9.4	8.1	13.1	9.6

(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.

The following table presents a reconciliation of the disaggregated rollforwards above to the ending future policy benefits presented in the Consolidated Balance Sheets. The deferred profit liability for limited-payment contracts and the deferred profit liability for reinsurance is presented together with the liability for ~~unpaid~~future policy ~~claims~~benefits in the Consolidated Balance Sheets and has been included as a reconciling item in the table below.


(In millions)	March 31, 2023			December 31, 2022
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer		$	36,345		$	35,468
Medical and other health		11,472			10,705
Life insurance		25,311			24,469
Other		4,514			4,326
Aflac U.S.
Accident		586			564
Disability		812			810
Critical care		7,224			7,003
Hospital indemnity		878			854
Dental/vision		281			277
Life insurance		844			802
Other		525			512
Corporate and other		31			19
Deferred profit liability - limited-payment contracts		1,788			1,740
Deferred profit liability - reinsurance		682			692
Total		$	91,293		$	88,241

Discount rates are determined using upper-medium grade (low-credit-risk) fixed-income instrument yields that reflect the duration characteristics of the liability. Locked-in discount rates are determined as a weighted average of monthly upper-medium grade (low-credit-risk) fixed-income instrument forward curves, where the weights are the annualized premiums issued for each month of the cohort. Discount rates are updated each reporting period and require estimation techniques (e.g., interpolation, extrapolation) for determination of points on the curve for which there is limited or no observable market data.

More specifically, the Company constructs a discount rate curve separately for discounting cash flows used to calculate each of the Japan and U.S. liabilities for future policy benefits, reflective of the characteristics of the corresponding insurance liabilities, such as currency and tenor.

In the Aflac Japan segment, all long-duration insurance policies are denominated in yen. A significant portion of policies are characterized by tenors exceeding the availability of liquid market data in Japan for single-A rated (as a proxy for upper-medium grade) corporate yen-denominated debt. The discount rate curve is designed to prioritize the observable inputs where available, while past the last liquid point, the data is derived based on estimation techniques consistent with the fair value guidance in ASC 820. The Aflac Japan segment curve utilizes liquid market indices tracking publicly traded yen-denominated single-A corporate debt for the initial 10-year tenor. For the bonds within these market indices where only local ratings are available, the Company prioritizes the bonds with local ratings that are equivalent to a single-A rating based on international rating standards.

For the discount rates applicable to tenors for which the Japan single-A debt market is not liquid but there is sufficient observable market data and/or the observable market data is available for similar instruments (between 10 and 30 years), the Company estimates tenor-specific single-A credit spreads and applies them to risk-free government rates. Lastly, for the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30 years), the discount curve is derived by extrapolation of risk free rates beyond their last liquid point following the Smith-Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate. The ultimate forward rate is based on the economic value-based solvency regime, which is consistent with the International Association of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (which is expected to be introduced in Japan in 2025), and is adjusted for credit and inflation components.

For the Aflac U.S. segment where all long-duration insurance policies are denominated in U.S. dollar and substantially all have cash flow duration within 30 years, for which the U.S. upper-medium grade fixed-income market is liquid and observable, the Company uses data from a liquid fixed-income market index tracking single-A U.S. corporate debt. For the insignificant portion of the policies with cash flow tenors exceeding 30 years, the discount curve beyond that tenor is extrapolated following the Smith-Wilson method from year 30 to the same ultimate forward rate calculated for the Japan discount curve at year 60 and held constant thereafter. The use of the same ultimate rate for U.S. and Japan segments is based on the assumption of long-term global economic convergence.

For the three-month periods ended March 31, 2023 and 2022, the Company recognized $(2.8) billion and $4.2 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions. There were no changes to the methods used to determine the discount rates during the three-month periods ended March 31, 2023 and 2022.

For the year ended December 31, 2022, the Company recognized $13.7 billion in other comprehensive income (loss) net of tax, due to changes in the future policy benefits estimate from updating the discount rate assumptions. There were no changes to the methods used to determine the discount rates during the year ended December 31, 2022.

Mortality rate assumptions are based on industry tables and adjusted for the Company's actual or expected experience where credible or appropriate. These assumptions typically will vary by age, gender, and other demographic characteristics such as ~~follows:~~smoking status.

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

Morbidity assumptions are based on the Company's internal data and consider emerging experience. These assumptions are reflective of the coverage and benefits provided and generally vary by age, gender, duration, and any other material policyholder characteristics. In cases where a calendar-year trend is significant, future cash flow projections may include a trend adjustment.

In Japan, separate lapse assumptions are set based on actual or expected experience. These lapse and total termination rate assumptions will vary by line of business and with policyholder characteristics such as duration. In the U.S., the majority of the future cash flows are modeled using total termination rates (which include both lapse and mortality) and are adjusted for actual experience. Policy provisions, such as reaching premium paid-up status, are taken into account when setting assumptions.

During the three-month periods ended March 31, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $53 million and $34 million in the consolidated statement of earnings, respectively. The ~~incurred claims development related~~variance of actual experience from expected experience was primarily due to ~~prior years reflects~~favorable variances in morbidity assumptions as compared to actual experience. There were no changes to the inputs, judgments, assumptions and methods used in measuring the liability for future policy benefits during the three-month periods ended March 31, 2023 and 2022.

In 2022, the Company's annual review process resulted in favorable changes to its morbidityassumptions due to favorable claims experience, ~~compared~~primarily. This, together with ~~previous estimates, primarily~~the variance of actual experience from expected experience, resulted in reserve remeasurement gains of $215 million in the ~~Company's~~consolidated statement of earnings for the year ended December 31, 2022.

The following table summarizes the amount of net earned premiums recognized in the Consolidated Statements of Earnings by reporting segment and disaggregated by product type.


	Three Months Ended March 31,
(In millions)		2023		2022
Net earned premiums:
Aflac Japan
Cancer		$	1,132	$	1,336
Medical and other health		689		828
Life insurance		399		524
Other		39		44
Aflac U.S.
Accident		329		337
Disability		309		296
Critical care		443		446
Hospital indemnity		184		185
Dental/vision		53		49
Life insurance		115		99
Other		10		10
Corporate and other		90		42
Reinsurance ceded		(104)		(117)
Total		$	3,688	$	4,079

The following table summarizes the amount of interest expense related to insurance contracts recognized in total benefits and claims, net in the Consolidated Statements of Earnings by reporting segment and disaggregated by product type.


	Three Months Ended March 31,
(In millions)		2023		2022
Interest expense:
Aflac Japan
Cancer		$	285	$	329
Medical and other health		71		80
Life insurance		133		149
Other		22		24
Aflac U.S.
Accident		6		5
Disability		8		9
Critical care		87		86
Hospital indemnity		10		10
Dental/vision		3		3
Life insurance		9		8
Other		7		7
Corporate and other		0		0
Total		$	641	$	710

The following tables summarize the amount of undiscounted expected future gross premiums and expected future benefits and expenses and discounted (discounted at the current period discount rate) expected future gross premiums and expected future benefits and expenses by reporting segment and disaggregated by product type. Future gross premiums represent the expected amount of future premiums to be received. For limited-payment policies, the premiums are collected over a shorter period than the policy term over which benefits are provided. As a result, once the policy reaches premium paid-up status, the future gross premiums can be significantly less than the future benefit payments. Further, benefits and expenses are generally greater in the later years of a policy. These are the primary factors that result in future gross premiums lower than future benefit and expense payments for certain lines of business ~~in Japan. The favorable claims development~~ of ~~$386 million~~the Company.


	March 31, 2023						December 31, 2022
(In millions)	Gross Premiums			Benefits and Expenses			Gross Premiums			Benefits and Expenses
Undiscounted expected future gross premiums and expected future benefits and expenses:
Aflac Japan
Cancer		$	74,863		$	83,549		$	75,529		$	84,246
Medical and other health		50,153			50,573			50,720			50,778
Life insurance		16,690			52,993			16,946			53,271
Other		2,309			9,379			2,322			9,433
Aflac U.S.
Accident		9,467			4,621			9,481			4,636
Disability		5,889			3,286			5,858			3,267
Critical care		21,134			22,085			21,069			22,113
Hospital indemnity		5,213			3,360			5,164			3,338
Dental/vision		1,194			754			1,208			759
Life insurance		2,466			2,871			2,375			2,787
Other		359			1,165			333			1,147
Total		$	189,737		$	234,636		$	191,005		$	235,775


	March 31, 2023						December 31, 2022
(In millions)	Gross Premiums			Benefits and Expenses			Gross Premiums			Benefits and Expenses
Discounted expected future gross premiums and expected future benefits and expenses:
Aflac Japan
Cancer		$	53,806		$	55,799		$	53,278		$	54,766
Medical and other health		35,030			28,439			34,693			27,419
Life insurance		12,875			32,714			12,951			31,954
Other		1,712			5,770			1,697			5,582
Aflac U.S.
Accident		6,625			3,149			6,510			3,098
Disability		4,554			2,495			4,468			2,445
Critical care		13,013			11,817			12,659			11,489
Hospital indemnity		3,592			2,139			3,483			2,074
Dental/vision		826			494			821			488
Life insurance		1,756			1,606			1,663			1,526
Other		252			656			228			622
Total		$	134,041		$	145,078		$	132,451		$	141,463

Loss expense as a result of net premium ratio capping for the ~~nine-month period~~three-month periods ended ~~September 30, 2017 comprises approximately $301 million from Japan, which represents approximately 78%~~March 31, 2023 and 2022 was immaterial.

Other Policyholders' Funds

As of March 31, 2023 and December 31, 2022, the largest component of the ~~total. Excluding~~other policyholders' funds liability was the ~~impact~~Company's annuity line of ~~foreign exchange of a loss of approximately $13 million from December 31, 2016 to September 30, 2017, the favorable claims development~~business in ~~Japan would have been approximately $315 million, representing approximately 82% of the total.~~

~~The Company has experienced continued favorable claim trends in 2017 for its core health products in~~Aflac Japan. The Company's ~~experience~~annuities have fixed benefits and premiums.

The following table presents the changes in other policyholders’ funds.


(In millions)	March 31, 2023		December 31, 2022
Other policyholders' funds:
Fixed annuities account balance, beginning of period (1)	$	6,423	$	7,410
Premiums received	39		150
Transfers from WAYS conversions	58		214
Surrenders and withdrawals	(14)		(52)
Benefit payments	(104)		(367)
Interest credited	14		57
Foreign currency translation and other	(40)		(989)
Fixed annuities account balance, end of period	6,376		6,423
Other deposit type reserves	292		220
Total	$	6,668	$	6,643

(1) Aflac Japan ~~related~~fixed annuities

The following table presents other policyholders’ funds balances by range of guaranteed crediting rates.

March 31, 2023

December 31, 2022

(In millions)

Range of Guaranteed Minimum Crediting Rates (2)

At Guaranteed Minimum

Cash Surrender Value

Range of Guaranteed Minimum Crediting Rates (2)

At Guaranteed Minimum

Cash Surrender Value

Fixed annuities (1)

0.5% - 2.3%

$6,376

$6,281

0.5% - 2.3%

$6,423

$6,326

(1) Aflac Japan fixed annuities

(2) Weighted-average crediting rate of 1.5% at March 31, 2023 and December 31, 2022, respectively.

Aflac Japan’s fixed annuities have guaranteed fixed crediting rates which results in the policyholders' funds balances being able to cover all guaranteed benefit amounts. The reserves are adequate to fully fund future benefits at any given time.

See Note 1 of the Notes to the ~~average length of stay in the hospital~~Consolidated Financial Statements for cancer treatment has shown continued decline in the current period. In addition, cancer treatment patterns in Japan are continuing to be influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams. Additionally, follow-up radiation and chemotherapy treatments are occurring more oftenadditional information 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.policy liabilities.


7.	~~REINSURANCE~~

8. 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.

In January 2023, ALIJ entered into a coinsurance transaction whereby it ceded 28% of the liabilities associated with certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $2.1 billion of reserves associated with these policies. Approximately $1.9 billion of assets were transferred from ALIJ to Aflac Re as preliminary consideration for assuming the reinsurance risk, and final settlement is expected in the second quarter of 2023. This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

In January 2023, ALIJ also entered into an external coinsurance transaction to cede 1.5% of the liabilities associated with the same cancer insurance policies and riders, in connection with which ALIJ transferred cash consideration to the reinsurer.

The Company has recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of ~~$942~~$682 million and $692 million as of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, 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 million~~$1.1 billion and ~~$860~~$912 million as of ~~September 30, 2017,~~March 31, 2023 and December 31, ~~2016,~~2022, respectively. The increase in the reinsurance recoverable balance was driven by two aggregating factors: yen strengthening and the growth in reserves related to the business that has been reinsured as the policies age. The spot yen/dollar exchange rate strengthened by approximately 3%~~and ceded reserves increased approximately 2% from December 31, 2016, to September 30, 2017.~~

The following table reconciles direct ~~premium income~~premiums 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)		2023	2022
Direct earned premiums				$	3,738	$	4,115
Ceded to other companies:
Ceded Aflac Japan closed blocks				(82)		(98)
Other				(25)		(19)
Assumed from other companies:
Retrocession activities				34		41
Other				23		40
Net earned premiums				$	3,688	$	4,079

Direct benefits and claims, excluding reserve remeasurement				$	2,256	$	2,334
Reserve remeasurement (gains) losses				(53)		(34)
Total direct benefits and claims				2,203		2,300
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks				(100)		(88)
Eliminations				14		5
Other				(18)		(5)
Assumed from other companies:
Retrocession activities				5		37
Eliminations				10		(5)
Other				36		239
Total benefits and claims, net				$	2,150	$	2,483

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

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

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~~with reserves of approximately ~~110~~¥120 billion ~~yen.~~as of March 31, 2023. This reinsurance facility agreement was renewed in ~~2016~~2022 and is effective until December 31, ~~2017.~~2023. 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, 2023, the Company has not executed a reinsurance treaty under this committed reinsurance facility.


8.	~~NOTES PAYABLE~~

9. 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, 2023			December 31, 2022
1.125% senior sustainability notes due March 2026		$	398		$	397
2.875% senior notes due October 2026		298			298
3.60% senior notes due April 2030		992			992
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		542			541
Yen-denominated senior notes and subordinated debentures:
.300% senior notes due September 2025 (principal amount ¥12.4 billion)		93			93
.932% senior notes due January 2027 (principal amount ¥60.0 billion)		448			450
1.075% senior notes due September 2029 (principal amount ¥33.4 billion)		249			250
.500% senior notes due December 2029 (principal amount ¥12.6 billion)		94			95
.550% senior notes due March 2030 (principal amount ¥13.3 billion)		99			99
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)		218			220
.633% senior notes due April 2031 (principal amount ¥30.0 billion)		224			225
.843% senior notes due December 2031 (principal amount ¥9.3 billion)		69			70
.750% senior notes due March 2032 (principal amount ¥20.7 billion)		154			155
1.320% senior notes due December 2032 (principal amount ¥21.1 billion)		157			158
.844% senior notes due April 2033 (principal amount ¥12.0 billion)		89			90
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)		113			114
.934% senior notes due December 2034 (principal amount ¥9.8 billion)		73			73
.830% senior notes due March 2035 (principal amount ¥10.6 billion)		79			79
1.039% senior notes due April 2036 (principal amount ¥10.0 billion)		74			75
1.594% senior notes due September 2037 (principal amount ¥6.5 billion)		48			49
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)		66			66
1.122% senior notes due December 2039 (principal amount ¥6.3 billion)		47			47
1.264% senior notes due April 2041 (principal amount ¥10.0 billion)		74			75
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)		445			448
.963% subordinated bonds due April 2049 (principal amount ¥30.0 billion)		224			226
1.560% senior notes due April 2051 (principal amount ¥20.0 billion)		148			149
2.144% senior notes due September 2052 (principal amount ¥12.0 billion)		89			90
Yen-denominated loans:
Variable interest rate loan due August 2027 (.35% in 2023 and .33% in 2022, principal amount ¥11.7 billion)		87			88
Variable interest rate loan due August 2029 (.45% in 2023 and .43% in 2022, principal amount ¥25.3 billion)		188			190
Variable interest rate loan due August 2032 (.60% in 2023 and .58% in 2022, principal amount ¥70.0 billion)		522			524
Finance lease obligations payable through 2030		8			8
Operating lease obligations payable through 2049		142			139
Total notes payable and lease obligations		$	7,420		$	7,442

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, the Parent Company issued 60.0 billion yen of senior notes through a U.S. public debt offering. 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

A summary 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~~Company's lines of credit ~~with a third party that provides for borrowings in the amount~~as 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 thisMarch 31, 2023 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 28, 2023

$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

May 9,
2027, 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
May 10, 2027

.28% to .45%, 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 15, 2027, 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) Secured
Overnight Financing Rate (SOFR) for U.S.
dollar denominated borrowings or TIBOR
for Japanese yen denominated borrowings,
in either case 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 the agent as its
prime rate, or (3) SOFR for an interest
period of one month plus 1.00%, in each
case plus an applicable margin

No later than November 15, 2027

.08% to

.20%, 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 rate
determined by reference to USD LIBOR for
the interest period relevant to such
borrowing or (b) the base rate determined
by reference to the highest of (a) the
lender's USD short-term commercial loan
rate, (b) the federal funds rate plus 1/2 of
1% and (c) USD one-month LIBOR plus
1%. USD LIBOR is subject to replacement
with SOFR under certain circumstances

Up to 3 months

None

General corporate purposes

Aflac(1)

uncommitted revolving

364 days

November 30, 2023

$250 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

No later than December 1, 2023

None

General corporate purposes

Aflac Incorporated(1)

(Tranche 1)

uncommitted revolving

364 days

November 27, 2023

¥50.0 billion

¥0.0 billion

Three-month yen TIBOR plus 45 basis points per annum

No later than November 28, 2023

None

General corporate purposes

Aflac Incorporated(1)

(Tranche 2)

uncommitted revolving

364 days

November 27, 2023

¥50.0 billion

¥0.0 billion

Three-month yen TIBOR plus 45 basis points per annum

No later than November 28, 2023

None

General corporate purposes

Aflac New York(1)

uncommitted revolving

364 days

April 10, 2023(2)

$25 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

No later than
April 11, 2023

None

General corporate purposes

CAIC(1)

uncommitted revolving

364 days

March 21,
2024

$15 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

No later than
March 22, 2024

None

General corporate purposes

(1) Intercompany 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~~

(2) Renewed in April 2023 with an expiration date of ~~October 14, 2017. As of September 30, 2017, the Company did not have any borrowings outstanding under its $100~~April 8, 2024

(continued)

Borrower(s)

Type

Term

Expiration Date

Capacity

Amount Outstanding

Interest Rate on Borrowed Amount

Maturity Period

Commitment Fee

Business Purpose

Tier One Insurance Company(1)

uncommitted revolving

364 days

March 21,
2024

$0.3 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

No later than March 22, 2024

None

General corporate purposes

Aflac Ventures Japan K.K.(1)

uncommitted revolving

364 days

May 2,
2023

¥500 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
May 3, 2023

None

General corporate purposes

Hatch Healthcare K.K.(1)

uncommitted revolving

364 days

January 3,
2024

¥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 4, 2024

None

General corporate purposes

Hatch Insight K.K.(1)

uncommitted revolving

364 days

January 3,
2024

¥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 4, 2024

None

General corporate purposes

Aflac GI Holdings LLC(1)

uncommitted revolving

364 days

July 17,
2023

$30 million

$0 million

USD three-month LIBOR plus 75 basis points per annum

No later than July 18, 2023

None

General corporate purposes

Aflac Incorporated(1)

uncommitted revolving

364 days

January 2,
2024

$400 million

$0 million

A rate per annum equal to three-month term SOFR plus 10 basis points for U.S. dollar denominated borrowings or three-month TIBOR for Japanese yen denominated borrowings

No later than January 3, 2024

None

General corporate purposes

Aflac Re Bermuda Ltd.(1)

uncommitted revolving

364 days

January 2,
2024

$400 million

$0 million

A rate per annum equal to three-month term SOFR plus 10 basis points for U.S. dollar denominated borrowings or three-month TIBOR for Japanese yen denominated borrowings

No later than January 3, 2024

None

General corporate purposes

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

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 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 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.~~March 31, 2023. No events of default or defaults occurred during the ~~nine-month~~three-month period ended ~~September 30, 2017.~~March 31, 2023.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the ~~2016~~2022 Annual Report.


9.	~~SHAREHOLDERS’ EQUITY~~

10. 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)	2023	2022
Common stock - issued:
Balance, beginning of period	1,354,079	1,352,739
Exercise of stock options and issuance of restricted shares	933	1,041
Balance, end of period	1,355,012	1,353,780
Treasury stock:
Balance, beginning of period	738,823	700,607
Purchases of treasury stock:
Share repurchase program	10,348	8,007
Other	347	343
Dispositions of treasury stock:
Shares issued to AFL Stock Plan	(239)	(259)
Exercise of stock options	(48)	(58)
Other	(171)	(209)
Balance, end of period	749,060	708,431
Shares outstanding, end of period	605,952	645,349

(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~~EPS for the following periods.


	Three Months Ended March 31,
(In thousands)		2023	2022
Anti-dilutive share-based awards				164	249

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,~~2023, the Company repurchased ~~13.9~~10.3 million shares of its common stock ~~in the open market~~ for ~~$1.0 billion~~$700 million as part of its share repurchase program. During the first ~~nine~~three months of ~~2016,~~2022, the Company repurchased ~~18.8~~8.0 million shares of its common stock ~~in the open market~~ for ~~$1.2 billion~~$500 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, 2023, a remaining balance of ~~52.9~~106.3 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Reclassifications from Accumulated Other Comprehensive Income

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

Changes in Accumulated Other Comprehensive Income

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

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

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

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


Three Months Ended March 31, 2023
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at December 31, 2022		$	(3,564)		$	(702)		$	(27)		$	(2,100)		$	(36)		$	(6,429)


Other comprehensive income (loss) before reclassification		(54)			2,036			0			(2,794)			7			(805)
Amounts reclassified from accumulated other comprehensive income (loss)		0			(45)			1			0			0			(44)
Net current-period other comprehensive income (loss)		(54)			1,991			1			(2,794)			7			(849)
Balance at March 31, 2023		$	(3,618)		$	1,289		$	(26)		$	(4,894)		$	(29)		$	(7,278)

All amounts in the table above are net of tax.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.


Three Months Ended March 31, 2022
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at December 31, 2021		$	(1,985)		$	9,602		$	(30)		$	(15,832)		$	(166)		$	(8,411)


Other comprehensive income (loss) before reclassification		(453)			(3,754)			0			4,224			(2)			15
Amounts reclassified from accumulated other comprehensive income (loss)		0			(61)			1			0			5			(55)
Net current-period other comprehensive income (loss)		(453)			(3,815)			1			4,224			3			(40)
Balance at March 31, 2022		$	(2,438)		$	5,787		$	(29)		$	(11,608)		$	(163)		$	(8,451)

All amounts in the table above are net of tax.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

Three 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 $ (847 ) $ 6,441
$ (19 ) $ (143 ) $ 5,432

Other comprehensive
income (loss) before
reclassification 253
(342 ) 0
(1 ) (90 )
Amounts reclassified from
accumulated other
comprehensive income
(loss) 0
21
0
1
22

Net current-period other
comprehensive
income (loss) 253
(321 ) 0
0
(68 )
Balance, end of period $ (594 ) $ 6,120
$ (19 ) $ (143 ) $ 5,364

~~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
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


(In millions)	Three Months Ended March 31, 2023
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		$	57	Net investment gains (losses)
		(12)		Tax (expense) or benefit(1)
		$	45	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	0	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		0		Tax (expense) or benefit(1)
		$	0	Net of tax
Total reclassifications for the period		$	44	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~~benefit cost (see Note 1112 for additional details).


(In millions)	Three Months Ended March 31, 2022
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		$	77	Net investment gains (losses)
		(16)		Tax (expense) or benefit(1)
		$	61	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(6)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		1		Tax (expense) or benefit(1)
		$	(5)	Net of tax
Total reclassifications for the period		$	55	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% tax rate

⁽²⁾These accumulated other comprehensive income components are included in the computation of net periodic ~~pension~~benefit cost (see Note 1112 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.~~11. SHARE-BASED COMPENSATION

As of ~~September 30, 2017,~~March 31, 2023, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (As Amended and Restated February 14, 2017), as further amended on August 9, 2022 (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, 2023, approximately ~~20.6~~34.8 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, 2023, 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~~ cliff ~~basis.~~basis over three years. The Compensation Committee of the Board of Directors has the discretion to determine vesting ~~schedules~~.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, 2023.


	Stock Option Shares (in thousands)		Weighted-Average Remaining Term (in years)		Aggregate Intrinsic Value (in millions)			Weighted-Average Exercise Price Per Share
Outstanding		1,414		2.8		$	45		$	32.56
Exercisable		1,414		2.8		45			32.56

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~~$4 million during the first ~~nine~~three months of ~~2017,~~2023, compared with ~~$59~~$8 million in the first ~~nine~~three months of ~~2016.~~2022. The tax benefit realized as a result of stock option exercises and restricted stock releases was ~~$37~~$17 million in the first ~~nine~~three months of ~~2017,~~2023, compared with ~~$29~~$16 million in the first ~~nine~~three months of ~~2016.~~2022.

As of ~~September 30, 2017,~~March 31, 2023, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was ~~$43~~$75 million, of which ~~$17~~$43 million ~~(968 thousand~~(1.8 million shares) was related to restricted stock awards and units with a performance-based vesting condition. The Company expects to recognize these amounts over a weighted-average period of approximately ~~1.1~~1.9 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, 2023.

(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 thousands of shares)	Shares	Weighted-Average Grant-Date Fair Value Per Share
Restricted stock at December 31, 2022	2,414		$	56.21
Granted in 2023	1,066		70.52
Canceled in 2023	(41)		57.33
Vested in 2023	(1,080)		52.66
Restricted stock at March 31, 2023	2,359		$	62.34

In February ~~2017,~~2023, the Company granted ~~253~~454 thousand performance-based stock awards and units, 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 and units 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~~2022 Annual Report.


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

12. 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.

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 years; (4) active employees who were age 55 or older and who would meet the 15 years of service requirement within the next five 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~~statements of earnings, ~~included~~which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $2 million and $4 million for the three-month periods ended March 31, 2023 and 2022, respectively. Total net periodic benefit 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)	2023			2022			2023			2022			2023			2022
Components of net periodic benefit cost:
Service cost		$	4		$	5		$	4		$	6		$	0		$	0
Interest cost		2			2			11			9			0			0
Expected return on plan assets		(2)			(2)			(9)			(11)			0			0
Amortization of net actuarial loss		0			0			0			5			0			1

Net periodic (benefit) cost		$	4		$	5		$	6		$	9		$	0		$	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, 2023, Aflac Japan contributed approximately ~~$18~~$6 million (using the weighted-average yen/dollar exchange rate for the ~~nine-month~~three-month period ~~ending September 30, 2017)~~ended March 31, 2023) to the Japanese funded defined benefit plan, and Aflac U.S. ~~contributed $40 million~~did not 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~~2022 Annual Report.


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

~~Effective for 2017,~~13. COMMITMENTS AND CONTINGENT LIABILITIES

In February 2023, the Company ~~entered into~~renewed an outsourcing agreement with ~~an information~~a management consulting and technology ~~and data~~ services company to provide application maintenance and development services for ~~its Japanese operation.~~Aflac Japan. As of ~~September 30, 2017,~~March 31, 2023, the agreement has a remaining term of five years and an aggregate remaining cost of ~~7.8~~¥20.9 billion ~~yen~~ ($69157 million using the ~~September 30, 2017,~~March 31, 2023 exchange rate).

The Company is a defendant in various lawsuits and receives various regulatory inquiries considered to be in the normal course of business. Members of the Company's senior legal and financial management teams review litigation and regulatory inquiries on a quarterly and annual basis. The final results of any litigation or regulatory inquiries 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 guarantyGuaranty 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~~three-month periods ended March 31, ~~2017. The~~

~~Company expects a majority of these assessments to be paid over the next year~~2023 and a majority of the tax credits to be realized over the next five years. The Company uses the most current cost estimate provided 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 in the second and third quarters of 20172022 were immaterial.


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

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (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 inflation and the continued effects caused by COVID-19

•defaults and credit downgrades of investments

•global fluctuations in interest rates and 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 interpretations 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

•major public health issues, including COVID-19 and any resulting or coincidental economic effects, on the Company's business and financial results

•the Company's 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 and on successful execution of revenue growth and expense management initiatives

~~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

•operational risks of third party vendors

•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 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, 2023 and ~~2016,~~2022, 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~~2022 (2022 Annual Report). In this MD&A, amounts may not foot due to rounding.

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 millions of policyholders and customers in Japan and the U.S. 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 ~~Business~~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 Aflac Benefits Solutions, Inc. (ABS), which provides a platform for Aflac Dental and Vision in the U.S. (collectively, Aflac U.S.). The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other.

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~~$4.8 billion in the first ~~nine~~three months of ~~2017,~~2023, compared with ~~$16.6~~$5.2 billion in the first ~~nine~~three months of ~~2016. The decline in revenues was primarily driven by the change in the yen/dollar exchange rate as noted.~~2022. Net earnings were ~~$2.0~~$1.2 billion, or ~~$5.05~~$1.94 per diluted share in the first ~~nine~~three months of ~~2017,~~2023, compared with ~~$1.9~~$1.0 billion, or ~~$4.59~~$1.60 per diluted share, ~~for~~in the first ~~nine~~three months of ~~2016.~~

2022.

Results in the ~~third~~first quarter of ~~2017~~2023 included pretax net ~~realized~~ investment gains of ~~$30~~$123 million, compared with pretax net ~~realized~~ investment ~~losses~~gains of ~~$164~~$122 million in the ~~third quarter~~first three months of ~~2016.~~2022. Net investment gains in the ~~third quarter~~first three months of ~~2017~~2023 included ~~$8 million~~an increase in credit loss allowances of ~~other-than-temporary impairment losses; $61~~$30 million; $99 million of net gains from ~~the sale~~certain derivative and foreign currency gains or ~~redemption of securities; and $23~~losses; $3 million of net losses ~~from derivatives~~on equity securities; and ~~foreign currency gains (losses).~~

Results in the first nine months of 2017 included pretax net realized investment losses of $166 million, compared with net realized investment losses of $358 million in the first nine months of 2016. Net investment losses in the first nine months of 2017 included $27 million of other-than-temporary impairment losses; $60$57 million of net gains from sales and redemptions.

The average yen/dollar exchange rate(1) for the ~~sale~~three-month period ended March 31, 2023 was 132.30, or ~~redemption~~12.2% weaker than the average yen/dollar exchange rate(1) of ~~securities;~~116.18 for the same period in 2022.

Adjusted earnings(2) in the first quarter of 2023 were $1.0 billion, or $1.55 per diluted share, compared with $942 million, or $1.44 per diluted share, in the first quarter of 2022. The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.07.

Total investments and ~~$199~~cash at March 31, 2023 were $120.5 billion, compared with $117.4 billion at December 31, 2022. In the first quarter of 2023, Aflac Incorporated repurchased $700 million, or 10.3 million of its common shares. At March 31, 2023, the Company had 106.3 million remaining shares authorized for repurchase.

Shareholders’ equity was $19.8 billion, or $32.65 per share, at March 31, 2023, compared with $20.1 billion, or $32.73 per share, at December 31, 2022. Shareholders’ equity at March 31, 2023 included a cumulative decrease of $4.9 billion from the effect of changes in discount rate assumptions on insurance contracts, driven by the adoption of the new accounting guidance for long-duration insurance contracts, compared with a corresponding cumulative decrease of $2.1 billion at December 31, 2022, and a net ~~losses from~~unrealized gain on investment securities and derivatives ~~and~~of $1.3 billion, compared with a net unrealized loss of $729 million at December 31, 2022. Shareholders’ equity at March 31, 2023 also included an unrealized foreign currency ~~gains (losses)~~translation lossof $3.6 billion, compared with an unrealized foreign currency translation loss of $3.6 billion at December 31, 2022. The annualized return on average shareholders’ equity in the first quarter of 2023 was 23.8%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI)(2) (adjusted book value) was $27.1 billion, or $44.66 per share at March 31, 2023, compared with $26.6 billion, or $43.18 per share, at December 31, 2022. The annualized adjusted return on equity (ROE) excluding foreign currencyimpact(2) in the first quarter of 2023 was 14.8%.

~~In January 2017,~~(1) Yen/U.S. dollar exchange rates are based on the ~~Parent Company issued 60.0 billion yen~~published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

(2) See the Results 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 of 2017, the Company repurchased 13.9 million shares of its common stock in the open market for $1.0 billion under its share repurchase program.~~

~~CRITICAL ACCOUNTING ESTIMATES~~

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In this MD&A, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards Codification^™ (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The estimates that the Company deems to be most critical to an understanding of Aflac’s results of operations and financial condition are those related to the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits and unpaid policy claims, and income taxes. The preparation and evaluation of these critical accounting estimates involve the use of various assumptions developed from management’s analyses and judgments. The application of these critical accounting estimates determines the values at which 93% 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 Company earns its revenues principally from insurance premiums and investments. The Company’s operating expenses primarily consist of 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 depends principally on its ability to price its insurance products at a level that enables the 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.

~~The following discussion~~

This document includes references to the ~~Company's~~Company’s financial performance measures ~~operating earnings, operating earnings per diluted share, and amortized hedge costs,~~ which are not calculated in accordance with ~~U.S. GAAP. These~~United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in ~~the Company's~~ insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with ~~its~~ insurance operations. ~~The~~

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 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, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's ~~management uses operating earnings and operating earnings per diluted share to evaluate the~~ financial performance both including and excluding the impact of ~~its insurance operations on a consolidated basis,~~foreign currency translation to monitor, respectively, cumulative currency impacts and the ~~Company believes that a presentation of these measures~~currency-neutral operating performance over time. The average yen/dollar exchange rate is ~~vitally important to an understanding of its underlying profitability drivers and trends of its insurance business.~~ based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

The Company ~~believes that amortized hedge costs, which are a component of operating earnings, measure~~defines the ~~periodic currency risk management costs associated with hedging a portion of Aflac Japan’s U.S. dollar-denominated investments and are an important component of net investment income.~~

~~Aflac defines operating earnings (a~~ non-U.S. GAAP financial ~~measure)~~measures included in this document as ~~the profits derived from operations. Operating~~follows:

•Adjusted earnings ~~includes interest cash flows associated with notes payable~~ are adjusted revenues less benefits and amortized hedge costs related to foreign currency denominated investments, but excludes certain items that cannot be predicted or that 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 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 the normal course of the Company’s insurance operations and do not reflect Aflac’s underlying business performance. The Company defines operatingadjusted expenses. Adjusted earnings per share (basic or ~~dilutive) to be operating~~diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or ~~dilutive)~~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 underlying business performance. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of these financial measures is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The most comparable U.S. GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively.

~~Because~~•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 for adjusted net investment gains and losses 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 Corporate and other. 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/income measure the periodic currency risk management costs/

income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/ income.

•Adjusted earnings excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding diluted shares for the period presented. 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. Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value and adjusted book value per common share important as they exclude AOCI, which fluctuates due to market movements that are outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.

•Adjusted return on equity excluding foreign currency impact is adjusted earnings excluding the 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 for adjusted return on equity excluding foreign currency impact is ROE as determined using net earnings and average total shareholders’ equity.

•U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income 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,
			2023		2022		2023		2022
Net earnings			$	1,188	$	1,047	$	1.94	$	1.60
Items impacting net earnings:
Adjusted net investment (gains) losses (1)			(209)		(134)		(.34)		(.21)
Other and non-recurring (income) loss			0		1		.00		.00
Income tax (benefit) expense on items excluded from adjusted earning			(26)		28		(.04)		.04

Adjusted earnings			953		942		1.55		1.44
Current period foreign currency impact (2)			41		N/A		.07		N/A
Adjusted earnings excluding current period foreign currency impact			$	994	$	942	$	1.62	$	1.44

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) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.

⁽¹⁾ ~~Amounts may not foot due to rounding.~~

⁽²⁾Excludes amortized hedge costs 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 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 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~~Prior-year amounts have been adjusted for the ~~comparable prior-year period, which eliminates dollar-based fluctuations driven solely from currency rate changes.~~adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

~~Realized~~Reconciling Items

Net Investment Gains and Losses

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


	Three Months Ended March 31,
(In millions)		2023		2022
Net investment (gains) losses		$	(123)	$	(122)
Items impacting net investment (gains) losses:
Amortized hedge costs		(58)		(26)
Amortized hedge income		29		11
Net interest cash flows from derivatives associated with certain investment strategies		(69)		(9)
Interest rate component of the change in fair value of foreign currency swaps on notes payable		12		13
Adjusted net investment (gains) losses		$	(209)	$	(134)

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, with options used on a standalone basis and/or in a collar strategy;

•foreign currency forwards and options ~~that~~used to economically hedge certain portions of forecasted cash flows denominated in 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~~

•foreign currency swaps that are associated with variable interest entity (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; and

•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~~does not remove the Japan policyholder protection expenses from adjusted earnings.

The Company considers the costs associated with the early redemption of its debt to be unrelated to the underlying fundamentals and ~~recognized a discounted liability~~trends in its insurance operations. Additionally, these costs are driven by changes in interest rates subsequent to the issuance of the debt, and the Company considers these interest rate changes to represent economic conditions not directly associated with its insurance operations.

Income Taxes

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 11.5% 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 in~~ the ~~quarter~~three-month period ended March 31, ~~2017. Guaranty fund assessments~~2023, compared with 19.1% for the same period in 2022. The combined effective tax rate differs from the U.S. statutory rate primarily due to historic and solar tax credits and the exclusion of foreign currency translation gains and losses held in the ~~second and third quarters of 2017 were immaterial.~~Delaware Statutory Trust. For additional information, ~~regarding guaranty fund assessments,~~ see ~~Note 12~~the Critical Accounting Estimates - Income Taxes section of Item 7. MD&A in the 2022 Annual Report.

The Company expects that its effective tax rate on adjusted earnings 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 the risk factor entitled "Tax rates applicable to the Company may change" in Item 1A. Risk Factors of the ~~Notes to the Consolidated Financial Statements.~~2022 Annual Report for more information.

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

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 weighted average Japanese yen/U.S. dollar foreign exchange rate for the reporting period, except realized gains and losses on securities transactions which are translated at the ~~Company translates its yen-denominated~~exchange rate on the trade date of each transaction. Yen-denominated balance sheet accounts are translated to U.S. dollars using the spot Japanese yen/U.S. dollar foreign exchange rate at the end of the reporting period.

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

~~Income Taxes~~RESULTS OF OPERATIONS BY SEGMENT

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.

~~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. In addition, the Parent Company, other business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. See Item 1. Business in the 2022 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

•Premium Persistency

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)		2023		2022
Net earned premiums		$	2,170	$	2,625
Net investment income: (1)
Yen-denominated investment income		263		299
U.S. dollar-denominated investment income		407		406
Net investment income		669		705
Amortized hedge costs related to certain foreign currency exposure management strategies		(58)		26
Adjusted net investment income		611		680
Other income (loss)		9		9
Total adjusted revenues		2,790		3,314
Benefits and claims:
Benefits and claims, excluding reserve remeasurement		1,466		1,793
Reserve remeasurement (gains) losses		(13)		(14)
Total benefits and claims, net		1,453		1,779
Adjusted expenses:
Amortization of deferred policy acquisition costs		85		94
Insurance commissions		138		161
Insurance and other expenses		326		409
Total adjusted expenses		549		664
Total benefits and adjusted expenses		2,002		2,443
Pretax adjusted earnings		$	788	$	870
Weighted-average yen/dollar exchange rate		132.30		116.18

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,
		2023		2022			2023		2022
Net earned premiums		(17.3)	%	(11.5)	%		(5.9)	%	(2.8)	%
Adjusted net investment income		(10.1)		(3.6)			2.4		5.9
Total adjusted revenues		(15.8)		(10.0)			(4.1)		(1.2)
Pretax adjusted earnings		(9.4)		(5.0)			3.2		4.7

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~~$(62) and $(10) for the ~~Company's definition~~three-month periods ended March 31, 2023 and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of ~~operating earnings.~~net investment income.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

In ~~yen terms, Aflac Japan's net premium income decreased in~~ the three-month period ended ~~September 30, 2017, with growth~~March 31, 2023, Aflac Japan's net earned premiums decreased, in ~~third sector premium more than offset by an anticipated reduction in first sector premium~~yen terms, mainly due to ~~savings~~limited-pay products reaching premium paid-up status inand the ~~period. Net~~implementation of the Aflac Re global reinsurance strategy. Adjusted net investment income, ~~net of amortized hedge costs,~~in yen terms, increased in the three-month period ended ~~September 30, 2017,~~March 31, 2023, primarily due to the ~~foreign currency~~ impact of foreign exchange on U.S. dollar-denominated ~~investments. The increases in net investment income from the strengthening U.S. dollar were partially~~investments offset by ~~lower re-investment rates~~higher hedge costs. The increase in pretax adjusted earnings in yen for the three-month period ended March 31, 2023 was primarily due to a decrease in total benefits and ~~increased amortized hedge costs.~~adjusted expenses.

Annualized premiums in force decreased ~~3.7%~~4.8% to ~~1.56~~¥1.28 trillion ~~yen~~ as of ~~September 30, 2017,~~March 31, 2023, compared with ~~1.62~~¥1.35 trillion ~~yen~~ as of ~~September 30, 2016.~~March 31, 2022. The decrease in annualized premiums in force in yen was driven primarily by limited-pay products

~~limited-pay policies becoming~~reaching premium paid-up ~~during the year.~~status and lower sales. Annualized premiums in force, translated into dollars at respective period-end exchange rates, were ~~$13.8~~$9.6 billion at ~~September 30, 2017,~~March 31, 2023, compared with ~~$16.0~~$11.0 billion ~~a year ago, reflecting the weaker yen to U.S. dollar exchange rate.~~at March 31, 2022. As of March 31, 2023, Aflac Japan exceeded 23 million individual policies in force in Japan, with more than 14 million cancer policies in force in Japan.

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
	Three Months					Three Months
		2023		2022				2023		2022
Adjusted net investment income		2.4	%	5.9	%			(5.9)	%	.3	%
Total adjusted revenues		(4.1)		(1.2)				(5.8)		(2.3)
Pretax adjusted earnings		3.2		4.7				(3.0)		.5

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~~Prior-year amounts have been adjusted for the ~~Company's definition~~adoption of ~~operating earnings.~~accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

⁽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.

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:		2023		2022
Total benefits and claims, net		52.1	%	53.7	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		3.1		2.8
Insurance commissions		4.9		4.8
Insurance and other expenses		11.7		12.4
Total adjusted expenses		19.7		20.0
Pretax adjusted earnings		28.2		26.2
Ratios to total premiums:
Total benefits and claims, net		67.0	%	67.9	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		3.9		3.6

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-~~three-month period ended March 31, 2023, the total benefits and ~~nine-month periods ended September 30, 2017, the benefit~~claims ratio to total premiums decreased, compared with the same ~~respective periods~~period in the prior year, primarily due to a decrease in the third sector benefit ratio due to favorable experience and the continued change in the mix of first and third sector ~~business as first sector products become paid-up~~business. In the three-month period ended March 31, 2023, the total adjusted expense ratio decreased slightly, compared with the same period in the prior year, reflecting the decrease in total adjusted revenues and ~~a de-emphasis on first sector savings products,~~an offsetting decrease in total adjusted expenses due to expense control efforts as well as ~~continued favorable claims experience.~~In the three- and nine-month periods ended September 30, 2017, the operating expense ratio increased primarily due to lower premium income impacted by first sector products becoming paid-up, however expenses incurred remained consistent.reinsurance transaction with Aflac Re. In total, the pretax ~~operating~~adjusted profit margin

increased in the ~~three-~~three-month period ended March 31, 2023 primarily due to a lower benefit ratio and ~~nine-month periods ended September 30, 2017, reflecting the~~a lower expense ratio and an offsetting decrease in ~~the benefit ratio partially offset by~~total adjusted revenues.

The following table presents Aflac Japan's premium persistency on a ~~smaller increase in the expense~~12-month rolling basis as of March 31.


	2023		2022
Premium persistency	93.9	%	94.3	%

ratio. For the full year of 2017, the Company anticipates the Aflac Japan pretax operating profit margin (calculated by dividing operating earnings by operating revenues) to be comparable to 2016 levels.

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
	Three Months							Three Months
(In millions of dollars and billions of yen)		2023			2022				2023			2022
New annualized premium sales		$	100		$	103			¥	13.2		¥	11.9
Increase (decrease) over prior period		(3.2)		%	(22.4)		%		10.8		%	(14.8)		%

In Dollars In Yen
Three Months Nine Months Three Months Nine Months
(In millions of dollars and billions of yen) 2017 2016 2017 2016 2017 2016 2017 2016
New annualized premium sales $ 214
$ 259
$ 637
$ 809
23.7
26.5
71.2
87.9

Increase (decrease) over prior period (17.3 )% (.1 )% (21.3 )% 9.8 % (10.5 )% (16.2 )% (19.0 )% (1.4 )%

In 2023, the new annualized premium sales on a yen basis increased, compared with 2022, due primarily to sales of Aflac Japan's new cancer insurance product and updated first sector products, all of which were launched in the second half of 2022. Further, these products were launched at Dai-ichi Life and other financial institutions in January 2023.

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
		2023		2022
Cancer		59.9	%	53.0	%
Medical and other health:
Medical		20.8		31.4
Income support		.6		1.1
Life insurance:
Traditional life (1)		7.3		9.0
WAYS		8.9		.7
Child endowment		.6		.3
Other		1.9		4.5
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, income support, and ~~Income Support~~nursing care 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 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 of the interest rate policy~~ Moreover, in ~~Japan,~~November 2022, Aflac Japan ~~has taken significant actions~~refreshed its first sector savings-type products WAYS and Child Endowment and began to ~~limit its~~actively promote sales of ~~certain~~these products after having curtailed sales of both products beginning in 2013. The refreshment of these first sector products ~~including WAYS and child endowment. Those actions gained traction in mid-2016, and~~position Aflac Japan for potential future long-term sales opportunities by marketing these products to a younger demographic as ~~a result first sector product sales were down 66.7% in the third quarter~~well as potential cross-selling opportunities of ~~2017, compared with the same period in the prior year. The Company expects that for the remainder of 2017, this deliberate trend will continue, and~~ Aflac Japan's ~~focus will remain on less interest-sensitive~~ third sector products.

~~Independent corporate agencies~~

Sales of Aflac Japan cancer insurance products in the Japan Post Group channel experienced a material decline beginning in August 2019. Japan Post Group resumed proactive sales of cancer insurance policies in April 2021 and ~~individual agencies contributed 39.9%~~Aflac Japan continues to strengthen the strategic alliance. In April 2023, Japan Post Group began selling Aflac Japan's new cancer insurance product that was launched in August 2022. For additional information, see the risk factor entitled "Sales of ~~total~~the Company's products and services are dependent on its ability to attract, retain and support a network of qualified sales associates, brokers and employees in the U.S. and sales associates and other distribution partners in Japan," in Item 1A. Risk Factors in the 2022 Annual Report.

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 following table details the contributions to Aflac Japan's 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~~three-month periods ended March 31.


	2023		2022
Independent corporate and individual	50.9	%	48.9	%
Affiliated corporate (1)	45.4		46.5
Bank	3.7		4.6
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 hasGroup, Dai-ichi Life and ~~will further benefit its cancer insurance sales.~~ Daido Life

During the three-month period ended ~~September 30, 2017,~~March 31, 2023, Aflac Japan recruited 384 new sales agencies. At ~~September 30, 2017,~~March 31, 2023, Aflac Japan was represented by ~~more than 11,200~~approximately 7,300 sales agencies, ~~and more than 107,000~~with approximately 110,000 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, 2023, Aflac Japan had agreements to sell its products at ~~374~~359 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~~publicly traded and privately originated U.S. dollar-denominated investment-grade and below-investment-grade ~~fixed-maturity~~fixed maturity securities and ~~loans,~~loan receivables, and has entered into foreign currency forwards and options to hedge the currency risk on the fair value of a portion of the U.S. dollar investments.

The following table details the investment purchases for Aflac Japan.

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

     Other fixed maturities 359
128
1,268
279

  Equities ⁽¹⁾
21
65
173
257

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

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

     Infrastructure debt 40
0
134
0

     Bank loans ⁽²⁾
0
0
0
535

  Equities ⁽¹⁾
2
0
153
504

  Other investments:
     Middle market loans 186
8
437
8

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

     Limited partnerships 24
0
65
0

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

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


	Three Months Ended March 31,
(In millions)		2023		2022
Yen-denominated:
Fixed maturity securities:
Japan government and agencies		$	151	$	0
Private placements		273		307
Other fixed maturity securities		77		17
Equity securities		123		91
Other investments		6		3
Total yen-denominated		$	630	$	418

U.S. dollar-denominated:
Fixed maturity securities:
Other fixed maturity securities		$	376	$	85


Collateralized loan obligations		0		67

Commercial mortgage and other loans:
Transitional real estate loans		53		507

Middle market loans		150		311
Other investments		137		48
Total U.S. dollar-denominated		$	716	$	1,018
Total Aflac Japan purchases		$	1,346	$	1,436

⁽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~~2022 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
		2023			2022
Total purchases for the period (in millions) (1)		$	1,203		$	1,385
New money yield (1),(2)		5.18		%	3.90		%
Return on average invested assets (3)		2.57			2.54
Portfolio book yield, including U.S. dollar-denominated investments, end of period (1),(2)		3.13		%	2.62		%

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 in the Aflac Japan new money yield in the three-month period ended ~~September 30, 2017~~March 31, 2023 was primarily due to increases in U.S. ~~and Japan~~ interest rates, compared with the same period in 2016, and increased allocations to higher-yielding U.S. dollar-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.

rates. See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the ~~Analysis of Financial Condition section~~Investments and Hedging Activities sections 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)		2023			2022
Net earned premiums		$	1,428		$	1,413
Adjusted net investment income (1)		197			184
Other income		35			42
Total adjusted revenues		1,660			1,639
Benefits and claims:
Benefits and claims, excluding reserve remeasurement		691			686
Reserve remeasurement (gains) losses		(40)			(20)
Total benefits and claims		651			666
Adjusted expenses:
Amortization of deferred policy acquisition costs		119			114
Insurance commissions		142			140
Insurance and other expenses		395			387
Total adjusted expenses		657			640
Total benefits and adjusted expenses		1,308			1,306
Pretax adjusted earnings		$	352		$	333
Percentage change over previous period:
Net earned premiums		1.1		%	(.6)		%
Adjusted net investment income		7.1			4.5
Total adjusted revenues		1.3			.7
Pretax adjusted earnings		5.7			.6

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⁾~~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~~$(7) and $1 for the ~~Company's definition~~three-month periods ended March 31, 2023 and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of ~~operating earnings.~~net investment income.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

In the three-month period ended March 31, 2023, net earned premiums for Aflac U.S. increased primarily driven by continued investments in growth initiatives. Adjusted net investment income increased in the three-month period ended March 31, 2023 primarily due to higher floating rate income due to higher volumes and rates. The increase in pretax adjusted earnings in the three-month period ended March 31, 2023 was driven primarily by lower benefits and higher revenues, partially offset by higher expenses.

Annualized premiums in force increased ~~2.6%~~1.4% to $6.0 billion at March 31, 2023, compared with $5.9 billion at ~~September 30, 2017, compared with $5.8 billion at September 30, 2016, reflecting improving sales and persistency.~~March 31, 2022.

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


	Three Months Ended March 31,
Ratios to total adjusted revenues:		2023		2022
Total benefits and claims		39.2	%	40.7	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		7.2		7.0
Insurance commissions		8.6		8.5
Insurance and other expenses		23.8		23.5
Total adjusted expenses		39.6		39.0
Pretax adjusted earnings		21.2		20.3
Ratios to total premiums:
Total benefits and claims		45.6	%	47.1	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		8.3		8.1

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, 2023, the ~~same period in 2016. The benefit~~total benefits and claims ratio ~~in the nine-month period ended September 30, 2017~~to total premiums decreased ~~slightly,~~ compared with the same period in ~~2016. For~~2022, reflecting assumption updates in the ~~three-~~third quarter of 2022 and ~~nine-month periods ended September 30, 2017, the operating~~reserve remeasurement gains related to experience. The total adjusted expense ratio ~~was somewhat elevated compared to 2016, reflecting larger investment~~increased 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, 2023, when compared with the same ~~periods~~period in ~~2016. For~~2022, primarily due to higher planned spending, reflecting ongoing investments in the ~~full year of 2017,~~U.S. platform and higher DAC amortization associated with lower persistency. The pretax adjusted profit margin increased in the ~~Company expects~~three-month period ended March 31, 2023, compared with the same period in 2022, primarily due to the lower benefit ratio.

The following table presents premium persistency for Aflac U.S. ~~benefit ratio to be slightly lower than full year 2016, while expense ratios are expected to increase marginally~~on a 12-month rolling basis as ~~Aflac U.S. continues to invest in its platform and shift some~~ of ~~its costs from commissions to insurance expenses.~~March 31.


	2023		2022
Premium persistency	77.9	%	78.7	%

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)		2023			2022
New annualized premium sales		$	315		$	299
Increase (decrease) over prior period		5.3		%	19.0		%

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
%

New annualized premium sales for accident insurance decreased 1.8%; disability sales increased 13.8%; critical care insurance sales (including cancer insurance) increased 1.8%; hospital indemnity insurance sales increased .2%; dental/vision sales increased 22.7%; and life sales increased 10.3% in the first quarter of 2023, compared with the first quarter of 2022. The increase in sales for Aflac U.S. in the ~~three-month and nine-month periods ended September 30, 2017, was driven by increases~~first quarter of 2023 reflects continued improvement from investment in ~~both career and broker channels.~~growth initiatives as well as productivity gains.

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
		2023		2022
Accident		23.5	%	25.3	%
Disability		25.2		23.3
Critical care(1)		20.5		21.2
Hospital indemnity		15.9		16.7
Dental/vision		6.6		5.6
Life		8.3		7.9
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 Aflac U.S. leading product category, increased 7.5%; short-term disability sales increased 1.2%; critical care insurance sales (including cancer insurance) increased 17.1%; and hospital indemnity insurance sales increased 7.3% in the third quarter of 2017, compared with the same period in 2016.

The addition of group products has expanded Aflac U.S.'s reach and enabled Aflac U.S. to generate more sales opportunities with larger employers and through broker and traditional sales agent channels. The Company anticipates that the appeal of Aflac U.S. group products will continue to enhance opportunities to connect with larger businesses and their employees. The Aflac U.S. portfolio of group and individual products offers businesses the opportunity to give their employees a more valuable and comprehensive selection of benefit options.

In the ~~third~~first quarter of ~~2017,~~2023, the Aflac U.S. sales force included an average of approximately ~~8,500~~6,100 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 as to the ultimate timing or provisions of any such legislation, nor as to the effect of any such legislation on the design or marketability of the Company's insurance products.future production capacity.

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, as well as similar regulations in Europe, became effective on March 1, 2017. Full compliance with respect to all counterparties was required by September 1, 2017. The requirements of such rules with respect to IM are currently being phased in and will be fully implemented by September 1, 2020. In October of 2017, the CFTC and the European Commission each finalized comparability determinations that permit certain swap dealers who are subject to both regulatory margin regimes to take advantage of substituted compliance by complying with one set of margin requirements. The margin requirements are expected to result in more stringent collateral requirements and to affect other aspects of Aflac's derivatives activity.

The Dodd-Frank Act also established a Federal Insurance Office (FIO) under the U.S. Treasury Department to monitor all aspects of the insurance industry and of lines of business other than certain health insurance, certain long-term care insurance and crop insurance. Traditionally, U.S. insurance companies have been regulated primarily by state insurance departments. 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)		2023		2022
Fixed maturity securities:
Other fixed maturity securities		$	209	$	232
Infrastructure debt		0		9

Equity securities		0		9
Commercial mortgage and other loans:
Transitional real estate loans		14		107

Middle market loans		19		166
Other investments		15		5
Total Aflac U.S. Purchases		$	257	$	528

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~~2022 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
		2023			2022
Total purchases for period (in millions) (1)		$	242		$	523
New money yield (1),(2)		7.01		%	4.60		%
Return on average invested assets (3)		4.74			4.61
Portfolio book yield, end of period (1),(2)		5.46		%	4.95		%

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 in the Aflac U.S. new money yield ~~for~~in the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017~~March 31, 2023 was primarily due to increases in U.S. interest ~~rates, compared with the same respective periods in 2016.~~rates. See Notes 3

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.

~~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~~presents a summary of results for Corporate and other.

Corporate and Other Summary of Operating Results


	Three Months Ended March 31,
(In millions)		2023		2022
Net earned premiums		$	91	$	41
Net investment income (loss) (1)		7		4
Amortized hedge income related to certain foreign currency management strategies		29		11
Adjusted net investment income		36		15
Other income		2		18
Total adjusted revenues		129		74
Total benefits and claims, net		46		37
Adjusted expenses:
Interest expense		33		40
Other adjusted expenses		57		40
Total adjusted expenses		90		80
Total benefits and adjusted expenses		136		116
Pretax adjusted earnings		$	(7)	$	(42)

(1) The change in value of federal historic rehabilitation and solar investments ~~by segment.~~

~~Investments by Segment~~

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~~in partnerships of $51 and ~~$71~~$12 for the three-month periods ended March 31, 2023, and 2022, respectively, is included as a reduction to net investment income. Tax credits on these investments of ~~TRE loans~~$52 and $16 for ~~Aflac Japan~~the three-month periods ended March 31, 2023, and ~~Aflac U.S.,~~2022, respectively, have been recorded as an income tax benefit in the consolidated statement of ~~September 30, 2017.~~

⁽²⁾ ~~Excludes investments and cash held by the Parent Company and other business segments of $2,545 in 2017 and $2,729 in 2016.~~

earnings. See ~~the Loans and Loan Receivables section in~~ Note 3 of the Notes to the Consolidated Financial Statements for ~~further discussion~~additional information on these investments.

Prior-year amounts have been adjusted for the adoption of ~~these investments.~~accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

~~Cash~~In the three-month period ended March 31, 2023, total adjusted revenues increased compared to the same period in 2022 primarily due to higher total premiums associated with the Aflac Re global reinsurance strategy and ~~cash equivalents totaled $4.9 billion,~~an increase in adjusted net investment income. Total adjusted expenses increased compared to the same period in 2022 primarily due to expenses associated with the Aflac Re global reinsurance strategy. These results also reflect the impact of foreign currency on total net earned premiums and the corresponding benefits. Pretax adjusted earnings increased in the three-month period ended March 31, 2023 when compared to the same period in 2022 reflecting the increase in total adjusted revenue, partially offset by higher other adjusted expenses, net benefits and claims.

The Parent Company invests in partnerships that specialize in rehabilitating historic structures or ~~4.0%~~the installation of ~~total~~solar equipment in order to receive federal historic rehabilitation and solar tax credits. These 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, Aflac U.S. became a member of the Federal Home Loan Bank of Atlanta (FHLB). As a member, Aflac U.S. can obtain access to low-cost funding and also receive dividends on FHLB stock. Additional FHLB stock purchases are ~~required based upon the amount of funds borrowed from the FHLB. Aflac U.S. will be required to post~~

acceptable forms of collateral for any borrowings it makes from the FHLB. As of September 30, 2017, Aflac U.S. had not yet obtained any advances from the FHLB. The FHLB stock purchased by the Company is classified as ~~a restricted investment~~

limited partnerships and is included in other investments in the consolidated balance ~~sheets.~~sheet. The change in value of each investment is recorded as a reduction to net investment income. Tax credits generated by these investments are recorded as an income tax benefit in the consolidated statement of earnings.

INVESTMENTS

The Company’s investment strategy utilizes disciplined asset and liability management while seeking long-term risk-adjusted investment returns and the delivery of stable income within regulatory and capital objectives, and preserving shareholder value. In attempting to 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. invests in fixed maturity investments and growth assets, including public equity securities and alternative investments in limited partnerships. Aflac U.S. invests in both publicly traded and privately originated investment-grade and below-investment-grade fixed maturity securities and loans. The Company is also a signatory to the Principles for Responsible Investment, a global framework for incorporating environmental, social and governance (ESG) considerations into investment and ownership decisions.

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, 2023
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	61,628	$	12,661	$	3,810	$	78,099
Held to maturity, fixed maturity securities, at amortized cost (1)	18,936		0		0		18,936
Equity securities	655		51		381		1,087
Commercial mortgage and other loans:
Transitional real estate loans (1)	5,277		1,158		200		6,635
Commercial mortgage loans (1)	1,134		624		0		1,758
Middle market loans (1)	4,474		461		0		4,935
Other investments:
Policy loans	189		25		0		214
Short-term investments (2)	1,334		172		1,055		2,561
Limited partnerships	2,034		222		176		2,432
Other	0		34		0		34
Investment in affiliate (3)	0		119		(119)		0
Total investments	95,661		15,527		5,503		116,691
Cash and cash equivalents	1,517		701		1,591		3,809
Total investments and cash	$	97,178	$	16,228	$	7,094	$	120,500

(1) Net of allowance for credit losses

(2) Includes securities lending collateral

(3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other


	December 31, 2022
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	61,615	$	12,231	$	1,895	$	75,741
Held to maturity, fixed maturity securities, at amortized cost (1)	19,056		0		0		19,056
Equity securities	650		51		390		1,091
Commercial mortgage and other loans:
Transitional real estate loans (1)	5,133		1,140		182		6,455
Commercial mortgage loans (1)	1,269		729		15		2,013
Middle market loans (1)	4,557		471		0		5,028
Other investments:
Policy loans	190		24		0		214
Short-term investments (2)	319		184		1,029		1,532
Limited partnerships	1,900		208		182		2,290
Other	0		34		0		34
Investment in affiliate (3)	0		195		(195)		0
Total investments	94,689		15,267		3,498		113,454
Cash and cash equivalents	1,601		720		1,622		3,943
Total investments and cash	$	96,290	$	15,987	$	5,120	$	117,397

(1) Net of allowance for credit losses

(2) Includes securities lending collateral

(3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other

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, 2023						December 31, 2022
	Amortized Cost			Fair Value			Amortized Cost			Fair Value
AAA		1.7	%		1.6	%		1.6	%		1.5	%
AA		5.3			5.4			5.2			5.3
A		67.9			68.0			68.0			68.1
BBB		23.0			22.8			23.0			22.9
BB or lower		2.1			2.2			2.2			2.2
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, 2023, 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, 2023.


(In millions)	Credit Rating		Amortized Cost			Fair Value			Unrealized Loss
KLM Royal Dutch Airlines		B		$	136		$	103		$	(33)
GLP Pte Ltd.		BBB		112			80			(32)
Autostrade Per Litalia Spa		BBB		148			116			(32)
Prologis LP		A		171			141			(30)
JP Morgan Chase and Co.		A		200			171			(29)
Banco de Chile		A		150			122			(28)
Investcorp Capital Limited		BB		327			306			(21)
Credit Suisse Group AG		BBB		75			55			(20)
Grand City Properties SA		BBB		56			37			(19)
Urban Renaissance Agency		A		183			164			(19)

(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, 2023
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	327	$	327	$	306	$	(21)
Pemex Project Funding Master Trust	225		225		228		3
Commerzbank	187		145		205		60
Telecom Italia SpA	150		150		183		33
KLM Royal Dutch Airlines	150		136		103		(33)
Apache Corporation	138		110		130		20
Howmet Aerospace Inc.	100		70		101		31
IKB Deutsche Industriebank AG	97		48		77		29
Generalitat de Catalunya	60		25		60		35
National Gas Co. Trinidad & Tobago	52		50		46		(4)
Other Issuers	63		64		51		(13)
Subtotal (2)	1,549		1,350		1,490		140

High yield corporate bonds	736		622		668		46
Middle market loans	4,642		4,454		4,456		2
Grand Total	$	6,927	$	6,426	$	6,614	$	188

(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 middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The objectives of this program 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, 2023
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	43,595	$	4,082	$	(1,084)	$	46,593	46.3	%
Municipalities	2,593		261		(97)		2,757		2.8
Mortgage- and asset-backed securities	2,545		99		(77)		2,567		2.7
Public utilities	7,495		671		(191)		7,975		7.9
Electric	6,074		551		(134)		6,489		6.4
Natural Gas	844		69		(32)		882		.9
Other	577		51		(25)		604		.6
Sovereign and supranational	1,118		134		(14)		1,238		1.2
Banks/financial institutions	9,279		653		(512)		9,420		9.8
Banking	5,571		455		(295)		5,732		5.9
Insurance	1,716		143		(67)		1,791		1.8
Other	1,992		55		(150)		1,897		2.1
Other corporate	27,617		2,655		(1,107)		29,165		29.3
Basic Industry	2,444		307		(83)		2,669		2.6
Capital Goods	3,275		231		(147)		3,359		3.5
Communications	2,906		375		(66)		3,214		3.1
Consumer Cyclical	2,136		219		(50)		2,305		2.3
Consumer Non-Cyclical	6,148		522		(240)		6,429		6.5
Energy	2,556		359		(60)		2,855		2.7
Other	1,343		95		(113)		1,325		1.4
Technology	3,701		185		(171)		3,716		3.9
Transportation	3,108		362		(177)		3,293		3.3
Total fixed maturity securities	$	94,242	$	8,555	$	(3,082)	$	99,715	100.0	%

(1) Net of allowance for credit losses

Below-Investment-Grade Securities

Below-Investment-Grade Investments


	March 31, 2023
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	327	$	327	$	306	$	(21)
Pemex Project Funding Master Trust	225		225		228		3
Commerzbank	187		145		205		60
Telecom Italia SpA	150		150		183		33
KLM Royal Dutch Airlines	150		136		103		(33)
Apache Corporation	138		110		130		20
Howmet Aerospace Inc.	100		70		101		31
IKB Deutsche Industriebank AG	97		48		77		29
Generalitat de Catalunya	60		25		60		35
National Gas Co. Trinidad & Tobago	52		50		46		(4)
Other Issuers	63		64		51		(13)
Subtotal (2)	1,549		1,350		1,490		140

High yield corporate bonds	736		622		668		46
Middle market loans	4,642		4,454		4,456		2
Grand Total	$	6,927	$	6,426	$	6,614	$	188

(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 middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The objectives of this program 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, 2023
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	43,595	$	4,082	$	(1,084)	$	46,593	46.3	%
Municipalities	2,593		261		(97)		2,757		2.8
Mortgage- and asset-backed securities	2,545		99		(77)		2,567		2.7
Public utilities	7,495		671		(191)		7,975		7.9
Electric	6,074		551		(134)		6,489		6.4
Natural Gas	844		69		(32)		882		.9
Other	577		51		(25)		604		.6
Sovereign and supranational	1,118		134		(14)		1,238		1.2
Banks/financial institutions	9,279		653		(512)		9,420		9.8
Banking	5,571		455		(295)		5,732		5.9
Insurance	1,716		143		(67)		1,791		1.8
Other	1,992		55		(150)		1,897		2.1
Other corporate	27,617		2,655		(1,107)		29,165		29.3
Basic Industry	2,444		307		(83)		2,669		2.6
Capital Goods	3,275		231		(147)		3,359		3.5
Communications	2,906		375		(66)		3,214		3.1
Consumer Cyclical	2,136		219		(50)		2,305		2.3
Consumer Non-Cyclical	6,148		522		(240)		6,429		6.5
Energy	2,556		359		(60)		2,855		2.7
Other	1,343		95		(113)		1,325		1.4
Technology	3,701		185		(171)		3,716		3.9
Transportation	3,108		362		(177)		3,293		3.3
Total fixed maturity securities	$	94,242	$	8,555	$	(3,082)	$	99,715	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, 2023
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	327	$	327	$	306	$	(21)
Pemex Project Funding Master Trust	225		225		228		3
Commerzbank	187		145		205		60
Telecom Italia SpA	150		150		183		33
KLM Royal Dutch Airlines	150		136		103		(33)
Apache Corporation	138		110		130		20
Howmet Aerospace Inc.	100		70		101		31
IKB Deutsche Industriebank AG	97		48		77		29
Generalitat de Catalunya	60		25		60		35
National Gas Co. Trinidad & Tobago	52		50		46		(4)
Other Issuers	63		64		51		(13)
Subtotal (2)	1,549		1,350		1,490		140

High yield corporate bonds	736		622		668		46
Middle market loans	4,642		4,454		4,456		2
Grand Total	$	6,927	$	6,426	$	6,614	$	188

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~~this program 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, 2023
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	43,595	$	4,082	$	(1,084)	$	46,593	46.3	%
Municipalities	2,593		261		(97)		2,757		2.8
Mortgage- and asset-backed securities	2,545		99		(77)		2,567		2.7
Public utilities	7,495		671		(191)		7,975		7.9
Electric	6,074		551		(134)		6,489		6.4
Natural Gas	844		69		(32)		882		.9
Other	577		51		(25)		604		.6
Sovereign and supranational	1,118		134		(14)		1,238		1.2
Banks/financial institutions	9,279		653		(512)		9,420		9.8
Banking	5,571		455		(295)		5,732		5.9
Insurance	1,716		143		(67)		1,791		1.8
Other	1,992		55		(150)		1,897		2.1
Other corporate	27,617		2,655		(1,107)		29,165		29.3
Basic Industry	2,444		307		(83)		2,669		2.6
Capital Goods	3,275		231		(147)		3,359		3.5
Communications	2,906		375		(66)		3,214		3.1
Consumer Cyclical	2,136		219		(50)		2,305		2.3
Consumer Non-Cyclical	6,148		522		(240)		6,429		6.5
Energy	2,556		359		(60)		2,855		2.7
Other	1,343		95		(113)		1,325		1.4
Technology	3,701		185		(171)		3,716		3.9
Transportation	3,108		362		(177)		3,293		3.3
Total fixed maturity securities	$	94,242	$	8,555	$	(3,082)	$	99,715	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, 2023						December 31, 2022
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Publicly issued securities:
Fixed maturity securities		$	76,825		$	81,310		$	77,176		$	79,090
Equity securities		866			866			882			882
Total publicly issued		77,691			82,176			78,058			79,972
Privately issued securities: (2)
Fixed maturity securities (3)		17,417			18,405			17,349			17,861
Equity securities		221			221			209			209
Total privately issued		17,638			18,626			17,558			18,070
Total investment securities		$	95,329		$	100,802		$	95,616		$	98,042

(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, 2023				December 31, 2022
Privately issued reverse-dual currency securities		$	4,028			$	4,049
Publicly issued collateral structured as reverse-dual currency securities		1,374				1,383
Total reverse-dual currency securities		$	5,402			$	5,432
Reverse-dual currency securities as a percentage of total investment securities		5.7		%		5.7		%

(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 2022 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 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).

The following table presents metrics related to Aflac Japan's U.S. dollar-denominated hedge program and the Parent Company's enterprise corporate hedging program, including associated amortized hedge costs/income, for the periods ended March 31. See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income.


	Three Months
		2023	2022
Aflac Japan:
FX Forwards
FX forward (sell USD, buy yen) notional at end of period (in billions) (1)		$3.7	$4.5
Weighted average remaining tenor (in months) (2)		9.8	9.9
Amortized hedge income (cost) for period (in millions)		$(39)	$(13)
FX Options
FX option notional at the end of period (in billions) (1)		$13.5	$13.5
Weighted average remaining tenor (in months) (2)		7.4	6.6
Amortized hedge income (cost) for period (in millions)		$(19)	$(13)
Corporate and other (Parent Company):
FX Forwards
FX forward (buy USD, sell yen) notional at end of period (in billions) (1)		$5.0	$5.0
Weighted average remaining tenor (in months) (2)		10.4	10.9
Amortized hedge income (cost) for period (in millions)		$31	$12
FX Options
FX option notional at the end of period (in billions) (1)		$2.2	$1.9
Weighted average remaining tenor (in months) (2)		7.4	7.6
Amortized hedge income (cost) for period (in millions)		$(2)	$(1)

(1) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.

(2) 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 dollar funding. Amortized hedge costs/income have fluctuated in recent periods due to changes in the previously mentioned factors.

Aflac Japan’s U.S. Dollar-Denominated Hedge Program (U.S. Dollar 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 favorable capital treatment under the Japan solvency margin ratio (SMR) calculations. 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, 2023				December 31, 2022
(In millions)	Amortized Cost (1)		Fair Value		Amortized Cost (1)		Fair Value
Available-for-sale securities:
Fixed maturity securities	$	12,817	$	14,176	$	14,321	$	15,191

Equity securities	33		33		33		33
Commercial mortgage and other loans:
Transitional real estate loans (floating rate)	5,277		5,207		5,133		5,088
Commercial mortgage and other loans	1,134		1,013		1,269		1,129
Middle market loans (floating rate)	4,474		4,468		4,557		4,545
Other investments	2,033		2,033		1,899		1,899
Total U.S. Dollar Program	25,768		26,930		27,212		27,885
Available-for-sale securities:
Fixed maturity securities - economically converted to yen	2,236		2,928		2,209		2,795
Total U.S. dollar-denominated investments in Aflac Japan	$	28,004	$	29,858	$	29,421	$	30,680

(1) Net of allowance for credit losses

The 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. The Company uses one-sided foreign currency put options to mitigate the settlement risk on U.S. dollar-denominated assets related to extreme foreign currency rate changes. From time to time, Aflac Japan also maintains a collar program on a portion of its U.S. Dollar Program to mitigate against more extreme moves in foreign exchange and therefore support SMR. As of March 31, 2023, there were no collars in Aflac Japan, and none of the Company's foreign currency options hedging Aflac Japan's U.S. dollar-denominated assets were in-the-money.

As of March 31, 2023, the fair value of Aflac Japan's unhedged U.S. dollar-denominated portfolio was $9.7 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 following table presents the settlements associated with the Company's currency derivatives used for hedging Aflac Japan’s U.S. dollar-denominated investments.


	Three Months Ended March 31,
(In millions)		2023	2022
Net cash inflows (outflows)				$	(579)	$	(619)

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 $11.1 billion as of March 31, 2023, with hedging instruments comprised of $3.9 billion of yen-denominated debt and $7.2 billion of foreign currency forwards and options, compared with $11.6 billion as of December 31, 2022, with hedging instruments comprised of $4.0 billion of yen-denominated debt and $7.6 billion of foreign currency forwards and options.

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, 2023 and ~~2016,~~2022, 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 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. This activity is reported in Corporate and other. The Company continually evaluates the program’s efficacy.

As part of the Company’s internal reinsurance platform, Aflac Re enters into foreign currency forwards with the Parent Company to economically manage the currency mismatch between Aflac Re's assets, which are mostly denominated in U.S. dollars, and liabilities, which are mostly denominated in yen, ~~net asset figure calculated~~in order to support and optimize BMA capital requirements. For additional information on the Company's internal reinsurance platform, see Note 8 of the Notes to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A.

Interest Rate Risk Hedge Program

Aflac Japan and Aflac U.S. use interest rate swaps from time to time to mitigate the risk of investment income volatility for ~~hedging purposes differs~~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 ~~yen-denominated net asset position as discussed in~~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 Factors 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.~~2022 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

The following table presents deferred policy acquisition costs by segment.


(In millions)	March 31, 2023			December 31, 2022			% Change
Aflac Japan		$	5,776		$	5,776		.0	%	(1)
Aflac U.S.		3,491			3,463			.8

Total		$	9,267		$	9,239		.3	%

(1) Aflac Japan’s deferred policy acquisition costs increased .6% in yen during the three months ended March 31, 2023.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See Note 6 of the Notes to the Consolidated Financial Statements for additional information on the Company's deferred policy acquisition costs.

POLICY LIABILITIES

The following table presents policy liabilities by segment.


(In millions)	March 31, 2023			December 31, 2022			% Change
Aflac Japan		$	88,944		$	86,088		3.3	%	(1)
Aflac U.S.		11,542			11,187			3.2
Corporate and other		1,874			302			100.0
Intercompany eliminations(2)		(2,427)			(667)			100.0
Total		$	99,933		$	96,910		3.1	%

(1) Aflac Japan’s policy liabilities increased 4.0% in yen during the three months ended March 31, 2023.

(2) Elimination entry necessary due to the internal reinsurance transaction with Aflac Re and to recapture of a portion of policy liabilities ceded externally as a result of the reinsurance retrocession transaction. See Note 8 of the Notes to the Consolidated Financial Statements.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See Note 7 of the Notes to the Consolidated Financial Statements for additional information on the Company's policy liabilities.

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 12 of the accompanying Notes to the Consolidated Financial Statements and Note 14 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

POLICYHOLDER PROTECTION

Policyholder Protection Corporation

The Japanese insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. Legislation enacted regarding the framework of the Life Insurance Policyholder Protection Corporation (LIPPC) included government fiscal measures supporting the LIPPC. In March 2022, Japan's Diet passed legislation that extended the government's fiscal support of the LIPPC through March 2027. In March 2022, the LIPPC reached the required balance for the total life industry of ¥400 billion as specified by its Articles of Incorporation. As a result, additional contributions are not expected to be required unless the balance is reduced due to payments made by the LIPPC to the policyholders of insolvent insurers. Accordingly, Aflac Japan did not recognize an expense for LIPPC assessments for the three-month period ended March 31, 2023. Aflac Japan recognized an expense for LIPPC assessments of ¥.9 billion for the three-month period ended March 31, 2022.

Guaranty Fund Assessments

Under U.S. state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business. The amount of the guaranty fund assessment that an insurer is assessed is based on its proportionate share of premiums in that state. Guaranty fund assessments for the three-month periods ended March 31, 2023 and 2022 were immaterial.

LIQUIDITY AND CAPITAL RESOURCES

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 ROE. 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

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•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 have minimal market, settlement or other risk exposure. The target minimum amount for the Parent Company’s cash and cash equivalents is approximately $1.8 billion to provide a capital buffer and liquidity support at the holding company. The Company remains committed to prudent liquidity and capital management. At March 31, 2023, the Company held $3.8 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.

Aflac Japan and Aflac U.S. generate cash flows from their operations and provide the primary sources of liquidity to the Parent Company through management fees and dividends, with Aflac Japan being the largest contributor. The primary uses of cash by the Parent Company are shareholder dividends, the repurchase of its common stock, interest on its outstanding indebtedness and operating expenses.

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

Liquidity Provided by Subsidiaries to Parent Company


(In millions)	2023		2022
Management fees paid by subsidiaries	$	38	$	33
Dividends declared or paid by subsidiaries	780		514

The following table details Aflac Japan remittances, which are included in the totals above, for the three-month periods ended March 31.

Aflac Japan Remittances


(In millions of dollars and billions of yen)	2023		2022
Aflac Japan management fees paid to Parent Company	$	16	$	15

Aflac Japan dividends declared or paid to Parent Company (in dollars)	505		339
Aflac Japan dividends declared or paid to Parent Company (in yen)	¥	67.3	¥	41.1

The Company intends to maintain higher than historical levels of liquidity and capital at the Parent Company for stress conditions and with the goals of addressing the Company’s hedge costs and related potential need for collateral and mitigating against long-term weakening of the Japanese yen. Further, the Company plans to continue to maintain a portfolio of unhedged U.S. dollar-denominated 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 Hedging Activity subsection of this MD&A for more information.

The Company believes that its balance of cash and cash equivalents and cash generated by operations will be sufficient to satisfy both its short-term and long-term cash requirements and plans for cash, including material cash requirements from known contractual obligations and returning capital to shareholders through share repurchases and dividends. For additional information, see the Liquidity and Capital Resources section of Item 7. MD&A in the 2022 Annual Report.

In addition to cash and cash equivalents, the Company also maintains credit facilities, both intercompany and with external partners, and a number of other available tools to support liquidity needs on a global basis. In September 2021, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2024. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available. Additionally, as of March 31, 2023, the Parent Company and Aflac had four lines of credit with third parties and twelve intercompany lines of credit. The Company was in compliance with all of the covenants of its notes payable and lines of credit at March 31, 2023. For additional information, see Note 9 of the Notes to the Consolidated Financial Statements.

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As part of enterprise-wide capital management and optimization, the Company also utilizes the newly-created intercompany reinsurance platform to execute internal reinsurance transactions with Aflac Re. For additional information, see Note 8 of the Notes to the Consolidated Financial Statements.

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 or disclosed therein. As of March 31, 2023, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations. 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 2022 Annual Report for more information on the Company's securities lending and derivative activities. See Note 15 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report for information on material unconditional purchase obligations that are not recorded on the Company's balance sheet. With the exception of disclosed activities in those referenced footnotes and the Risk Factors in the 2022 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 is not aware of any trend, demand, commitment, event or uncertainty that would reasonably result in its liquidity increasing or decreasing by a material amount.

Consolidated Cash Flows

The Company consistently generates positive cash flows from operations, and has the ability to adjust cash flow management from other sources of liquidity including reinvestment cash flows and selling investments in order to meet short-term cash needs.

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 three-month periods ended March 31.


(In millions)	2023		2022
Operating activities	$	708	$	1,260
Investing activities	105		(1,210)
Financing activities	(933)		(737)
Exchange effect on cash and cash equivalents	(14)		(89)
Net change in cash and cash equivalents	$	(134)	$	(776)

Operating Activities

The 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 from premiums and investment portfolios to be sufficient to meet its cash needs for benefits and expenses.

Investing Activities

The Company's investment objectives provide for liquidity primarily through the purchase of publicly traded investment-grade debt 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 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 securities that are available for

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sale to improve the duration matching of 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.

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 Corporate and other. 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 an 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 Federal Home Loan Bank of Atlanta (FHLB), Aflac U.S. obtains low-cost funding from FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In the first three months of 2023, Aflac U.S. borrowed and repaid $37 million under this program. As of March 31, 2023, Aflac U.S. had outstanding borrowings of $591 million reported in its balance sheet.

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

Financing Activities

Cash flows from financing activities consist primarily of share repurchases, dividends to shareholders and from time to time debt issuances and redemptions.

Cash returned to shareholders through treasury stock purchases and dividends was $948 million during the three-month period ended March 31, 2023, compared with $750 million during the three-month period ended March 31, 2022.

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

Treasury Stock Purchased


(In millions of dollars and thousands of shares)	2023		2022
Treasury stock purchases	$	700	$	500
Number of shares purchased:
Share repurchase program	10,348		8,007
Other	347		343
Total shares purchased	10,695		8,350

Treasury Stock Issued


(In millions of dollars and thousands of shares)	2023		2022
Stock issued from treasury:
Cash financing	$	2	$	9
Noncash financing	18		17
Total stock issued from treasury	$	20	$	26
Number of shares issued	458		526

As of March 31, 2023, a remaining balance of 106.3 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Cash dividends paid to shareholders were $.42 per share in the first quarter of 2023, compared with $.40 per share in the first quarter of 2022. The following table presents the dividend activity for the three-month periods ended March 31.


(In millions)	2023		2022
Dividends paid in cash	$	248	$	250
Dividends through issuance of treasury shares	9		9
Total dividends to shareholders	$	257	$	259

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In April 2023, the board of directors declared the second quarter cash dividend of $.42 per share, an increase of 5.0% compared with the same period in 2022. The dividend is payable on June 1, 2023 to shareholders of record at the close of business on May 17, 2023.

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 and 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 Financial Services Agency (FSA) maintains its own solvency standard which is quantified through the 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, 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, subject to market conditions, the Company expects that it could take action to enter into derivatives on unhedged U.S. dollar-denominated investments with foreign currency options or forwards or execute additional internal reinsurance transactions with Aflac Re. See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for additional information.

The Company has already undertaken various measures to mitigate the sensitivity of Aflac Japan's SMR. For example, the Company employs policy reserve matching (PRM) investment strategies, which is a Japan-specific accounting treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost consistent with corresponding liabilities. In order for a PRM-designated asset to be held at amortized cost, there are certain criteria that must be maintained. The primary 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 surplus. To rebalance, assets may need to be sold in order to maintain the duration with the specified range, resulting in realizing a gain or loss from the sale. For U.S. GAAP, PRM investments are categorized as available for sale. The Company also uses foreign currency derivatives to hedge a portion of its U.S. dollar-denominated investments. See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively.

As of March 31, 2023, Aflac Japan's SMR remains high and reflects a strong capital and surplus position. The Company is committed to maintaining strong capital levels, consistent with maintaining current insurance financial strength and credit ratings.

The FSA is considering the introduction of an economic value-based solvency regime based on the Insurance Capital Standards (ICS) for insurance companies in Japan. The FSA continues to conduct field testing with insurance companies in Japan for the purpose of investigating the impact of the introduction of such regulations. Final specifications are expected to be decided in 2024, and a new capital regime to replace the current solvency regime is expected to be introduced in 2025.

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. The continued long-term growth of the Company's business may require increases in the statutory capital and surplus of its insurance operations. The Company's insurance operations may secure additional statutory capital through various sources, such as internally generated statutory earnings, 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) formula is used by insurance regulators to help identify inadequately capitalized insurance companies. The RBC formula quantifies insurance risk, business risk, asset risk and

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interest rate risk by weighing the types and mixtures of risks inherent in the insurer’s operations. As of March 31, 2023, Aflac U.S.'s combined 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 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 2023 in excess of $1.1 billion would be considered extraordinary and require such approval. Similar laws apply in New York, the domiciliary jurisdiction of Aflac New York.

Privacy and Cybersecurity Governance

The Company’s Board of Directors has adopted an information security policy directing management to establish and 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 loss or theft. The Board has delegated oversight of the Company’s information security program to the Audit and Risk Committee. The Company’s senior officers, including its Global Chief Information Security Officer, are responsible for the operation of the global information security program and communicate quarterly with the Audit and Risk Committee on the program, including with respect to the state of the program, compliance with applicable regulations, current and evolving threats, and recommendations for changes in the 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 a coordinated assessment and response to potential security incidents. This framework establishes a protocol to report certain incidents to the Global Chief Information Security Officer and other senior officers, with the goal of timely assessing such incidents, determining applicable disclosure requirements and communicating with the Audit and Risk Committee. The incident response plan directs the executive officers to report certain incidents immediately and directly to the Lead Non-Management Director.

Other

For information regarding commitments and contingent liabilities, see Note 13 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.

CRITICAL ACCOUNTING ESTIMATES

The Company prepares its financial statements in accordance with U.S. GAAP. These principles are established primarily by the Financial Accounting Standards Board (FASB). In this MD&A, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards Codification™ (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The estimates that the Company deems to be most critical to an understanding of its results of operations and financial condition are those related to the valuation of investments and derivatives, DAC, liabilities for future policy benefits, 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. Calculations of DAC and the liability for future policy benefits require the use of estimates based on actuarial valuation techniques. 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 March 31, 2023, and thus has a direct effect on net earnings and shareholders’ equity. Subsequent experience or use of other assumptions could produce significantly different results.

On January 1, 2023, the Company adopted Accounting Standards Update (ASU) 2018-12, Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). The update significantly changes how insurers account for long-duration contracts and amends existing recognition, measurement, presentation, and disclosure requirements applicable to the Company related to liabilities for future policy benefits and DAC. As part of this adoption,

105

the Company measures together all payments under an insurance contract including future expected claims and unpaid policy claims and related expenses, as an integrated reserve. This resulted in unpaid policy claims on long-duration insurance contracts and accrued claim adjustment expenses that were presented separately in the Company’s consolidated balance sheet pre-adoption to now be presented as part of liabilities for future policy benefits.

For additional information, see Note 1 of the Notes to the Consolidated Financial Statements in this document and in the 2022 Annual Report.

Guaranty Fund Assessments

The 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.

Guaranty fund assessments for the three-month periods ended March 31, 2023 and 2022 were immaterial.

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 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. Aflac Incorporated (the Parent Company) and its subsidiaries (collectively with the Parent Company, 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 the ones listed below or similar words, as well as specific projections of future results, generally qualify as forward-looking. 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

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

•defaults and credit downgrades of investments

•global fluctuations in interest rates and 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

•differing interpretations applied to 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 debt ratings

•decline in creditworthiness of other financial institutions

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

•major public health issues, including COVID-19 and any resulting or coincidental economic effects, on the Company's business and financial results

•the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners

•deviations in actual experience from pricing and reserving assumptions

•ability to continue to develop and implement improvements in information technology systems and on successful execution of revenue growth and expense management initiatives

•subsidiaries' ability to pay dividends to the Parent Company

•inherent limitations to risk management policies and procedures

•operational risks of third party vendors

•tax rates applicable to the Company may change

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

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

•competitive environment and ability to anticipate and respond to market trends

•ability to protect the Aflac brand and the Company's reputation

•ability to effectively manage key executive succession

•changes in accounting standards

•level and outcome of litigation

•allegations or determinations of worker misclassification in the United States

MD&A OVERVIEW

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-month periods ended March 31, 2023 and 2022, 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, 2022 (2022 Annual Report). In this MD&A, amounts may not foot due to rounding.

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 millions of policyholders and customers in Japan and the U.S. 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 Aflac Benefits Solutions, Inc. (ABS), which provides a platform for Aflac Dental and Vision in the U.S. (collectively, Aflac U.S.). The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other.

Performance Highlights

Total revenues were $4.8 billion in the first three months of 2023, compared with $5.2 billion in the first three months of 2022. Net earnings were $1.2 billion, or $1.94 per diluted share in the first three months of 2023, compared with $1.0 billion, or $1.60 per diluted share, in the first three months of 2022.

Results in the first quarter of 2023 included pretax net investment gains of $123 million, compared with pretax net investment gains of $122 million in the first three months of 2022. Net investment gains in the first three months of 2023 included an increase in credit loss allowances of $30 million; $99 million of net gains from certain derivative and foreign currency gains or losses; $3 million of net losses on equity securities; and $57 million of net gains from sales and redemptions.

The average yen/dollar exchange rate(1) for the three-month period ended March 31, 2023 was 132.30, or 12.2% weaker than the average yen/dollar exchange rate(1) of 116.18 for the same period in 2022.

Total investments and cash at March 31, 2023 were $120.5 billion, compared with $117.4 billion at December 31, 2022. In the first quarter of 2023, Aflac Incorporated repurchased $700 million, or 10.3 million of its common shares. At March 31, 2023, the Company had 106.3 million remaining shares authorized for repurchase.

Shareholders’ equity was $19.8 billion, or $32.65 per share, at March 31, 2023, compared with $20.1 billion, or $32.73 per share, at December 31, 2022. Shareholders’ equity at March 31, 2023 included a cumulative decrease of $4.9 billion from the effect of changes in discount rate assumptions on insurance contracts, driven by the adoption of the new accounting guidance for long-duration insurance contracts, compared with a corresponding cumulative decrease of $2.1 billion at December 31, 2022, and a net unrealized gain on investment securities and derivatives of $1.3 billion, compared with a net unrealized loss of $729 million at December 31, 2022. Shareholders’ equity at March 31, 2023 also included an unrealized foreign currency translation lossof $3.6 billion, compared with an unrealized foreign currency translation loss of $3.6 billion at December 31, 2022. The annualized return on average shareholders’ equity in the first quarter of 2023 was 23.8%.

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

RESULTS OF OPERATIONS

This document includes references to the Company’s financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with 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 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, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts 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 the 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 underlying business performance. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of these financial measures is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The most comparable U.S. GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are 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 for adjusted net investment gains and losses is net investment gains and losses.

•Adjusted earnings excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding diluted shares for the period presented. 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 management’s control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact are net earnings and net earnings per share, respectively.

•U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign currency exchange rate for the comparable prior year 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.

The following table is a reconciliation of items impacting adjusted earnings and 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 Adjusted Earnings


		In Millions	Per Diluted Share
	Three Months Ended March 31,
			2023		2022		2023		2022
Net earnings			$	1,188	$	1,047	$	1.94	$	1.60
Items impacting net earnings:
Adjusted net investment (gains) losses (1)			(209)		(134)		(.34)		(.21)
Other and non-recurring (income) loss			0		1		.00		.00
Income tax (benefit) expense on items excluded from adjusted earning			(26)		28		(.04)		.04

Adjusted earnings			953		942		1.55		1.44
Current period foreign currency impact (2)			41		N/A		.07		N/A
Adjusted earnings excluding current period foreign currency impact			$	994	$	942	$	1.62	$	1.44

(1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.

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

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

Reconciling Items

Net Investment Gains and Losses

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


	Three Months Ended March 31,
(In millions)		2023		2022
Net investment (gains) losses		$	(123)	$	(122)
Items impacting net investment (gains) losses:
Amortized hedge costs		(58)		(26)
Amortized hedge income		29		11
Net interest cash flows from derivatives associated with certain investment strategies		(69)		(9)
Interest rate component of the change in fair value of foreign currency swaps on notes payable		12		13
Adjusted net investment (gains) losses		$	(209)	$	(134)

The Company's investment strategy is to invest primarily in fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s 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 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 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. Credit losses include losses for held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities, loan receivables, loan commitments and reinsurance recoverables. Changes in the fair value of equity securities are the result of gains or losses driven by fluctuations in market prices.

Certain Derivative and Foreign Currency Activities

The Company's derivative activities include:

•foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio, with options used on a standalone basis and/or in a collar strategy;

•foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in 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;

•foreign currency swaps that are associated with variable interest entity (VIE) bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary;

•interest rate swaps 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; and

•bond purchase commitments at the inception of investments in consolidated VIEs.

Gains and losses are recognized as a result of valuing these derivatives, net of the effects of hedge accounting. The Company also excludes from adjusted earnings the accounting impacts of remeasurement associated with changes in the foreign currency exchange rate.

For additional information regarding 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 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. The Company excludes any charges associated with U.S. guaranty fund assessments and the corresponding tax benefit or expense from adjusted earnings.

In Japan, the government also requires the insurance industry to contribute to a policyholder protection corporation that provides funds for the policyholders of insolvent insurers; however, these costs are calculated and administered differently than in 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 does not remove the Japan policyholder protection expenses from adjusted earnings.

The Company considers the costs associated with the early redemption of its debt to be unrelated to the underlying fundamentals and trends in its insurance operations. Additionally, these costs are driven by changes in interest rates subsequent to the issuance of the debt, and the Company considers these interest rate changes to represent economic conditions not directly associated with its insurance operations.

Income Taxes

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 11.5% for the three-month period ended March 31, 2023, compared with 19.1% for the same period in 2022. The combined effective tax rate differs from the U.S. statutory rate primarily due to historic and solar tax credits and the exclusion of foreign currency translation gains and losses held in the Delaware Statutory Trust. For additional information, see the Critical Accounting Estimates - Income Taxes section of Item 7. MD&A in the 2022 Annual Report.

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. Yen-denominated income statement accounts are translated to U.S. dollars using the weighted average Japanese yen/U.S. dollar foreign exchange rate for the reporting period, except realized gains and losses on securities transactions which are translated at the exchange rate on the trade date of each transaction. Yen-denominated balance sheet accounts are translated to U.S. dollars using the spot Japanese yen/U.S. dollar foreign exchange rate at the end of the reporting period.

RESULTS OF OPERATIONS BY SEGMENT

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. In addition, the Parent Company, other business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. See Item 1. Business in the 2022 Annual Report for a summary of each segment's products and distribution channels.

Consistent 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 segments are listed below.

•Operating Ratios

•New Annualized Premium Sales

•New Money Yield

•Return on Average Invested Assets

•Average Weekly Producer

•Premium Persistency

AFLAC JAPAN SEGMENT

Aflac Japan Pretax Adjusted Earnings

Changes in Aflac Japan’s pretax 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)		2023		2022
Net earned premiums		$	2,170	$	2,625
Net investment income: (1)
Yen-denominated investment income		263		299
U.S. dollar-denominated investment income		407		406
Net investment income		669		705
Amortized hedge costs related to certain foreign currency exposure management strategies		(58)		26
Adjusted net investment income		611		680
Other income (loss)		9		9
Total adjusted revenues		2,790		3,314
Benefits and claims:
Benefits and claims, excluding reserve remeasurement		1,466		1,793
Reserve remeasurement (gains) losses		(13)		(14)
Total benefits and claims, net		1,453		1,779
Adjusted expenses:
Amortization of deferred policy acquisition costs		85		94
Insurance commissions		138		161
Insurance and other expenses		326		409
Total adjusted expenses		549		664
Total benefits and adjusted expenses		2,002		2,443
Pretax adjusted earnings		$	788	$	870
Weighted-average yen/dollar exchange rate		132.30		116.18


		In Dollars					In Yen
Percentage change over previous period:	Three Months Ended March 31,					Three Months Ended March 31,
		2023		2022			2023		2022
Net earned premiums		(17.3)	%	(11.5)	%		(5.9)	%	(2.8)	%
Adjusted net investment income		(10.1)		(3.6)			2.4		5.9
Total adjusted revenues		(15.8)		(10.0)			(4.1)		(1.2)
Pretax adjusted earnings		(9.4)		(5.0)			3.2		4.7

(1) Net interest cash flows from derivatives associated with certain investment strategies of $(62) and $(10) for the three-month periods ended March 31, 2023 and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

In the three-month period ended March 31, 2023, Aflac Japan's net earned premiums decreased, in yen terms, mainly due to limited-pay products reaching premium paid-up status and the implementation of the Aflac Re global reinsurance strategy. Adjusted net investment income, in yen terms, increased in the three-month period ended March 31, 2023, primarily due to the impact of foreign exchange on U.S. dollar-denominated investments offset by higher hedge costs. The increase in pretax adjusted earnings in yen for the three-month period ended March 31, 2023 was primarily due to a decrease in total benefits and adjusted expenses.

Annualized premiums in force decreased 4.8% to ¥1.28 trillion as of March 31, 2023, compared with ¥1.35 trillion as of March 31, 2022. The decrease in annualized premiums in force in yen was driven primarily by limited-pay products

reaching premium paid-up status and lower sales. Annualized premiums in force, translated into dollars at respective period-end exchange rates, were $9.6 billion at March 31, 2023, compared with $11.0 billion at March 31, 2022. As of March 31, 2023, Aflac Japan exceeded 23 million individual policies in force in Japan, with more than 14 million cancer policies in force in Japan.

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 adjusted revenues, and pretax 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 adjusted revenues, and pretax 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 foreign currency exchange rates remained unchanged from the comparable period in the prior year. Amounts excluding foreign currency impact on U.S. dollar-denominated investment income were determined using the average foreign currency exchange rate for the comparable prior 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 March 31,


		Including Foreign Currency Changes					Excluding Foreign Currency Changes
	Three Months					Three Months
		2023		2022				2023		2022
Adjusted net investment income		2.4	%	5.9	%			(5.9)	%	.3	%
Total adjusted revenues		(4.1)		(1.2)				(5.8)		(2.3)
Pretax adjusted earnings		3.2		4.7				(3.0)		.5

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

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:		2023		2022
Total benefits and claims, net		52.1	%	53.7	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		3.1		2.8
Insurance commissions		4.9		4.8
Insurance and other expenses		11.7		12.4
Total adjusted expenses		19.7		20.0
Pretax adjusted earnings		28.2		26.2
Ratios to total premiums:
Total benefits and claims, net		67.0	%	67.9	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		3.9		3.6

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

In the three-month period ended March 31, 2023, the total benefits and claims ratio to total premiums decreased, compared with the same period in the prior year, primarily due to a decrease in the third sector benefit ratio due to favorable experience and the continued change in the mix of first and third sector business. In the three-month period ended March 31, 2023, the total adjusted expense ratio decreased slightly, compared with the same period in the prior year, reflecting the decrease in total adjusted revenues and an offsetting decrease in total adjusted expenses due to expense control efforts as well as the reinsurance transaction with Aflac Re. In total, the pretax adjusted profit margin

increased in the three-month period ended March 31, 2023 primarily due to a lower benefit ratio and a lower expense ratio and an offsetting decrease in total adjusted revenues.

The following table presents Aflac Japan's premium persistency on a 12-month rolling basis as of March 31.


	2023		2022
Premium persistency	93.9	%	94.3	%

Aflac Japan Sales

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


		In Dollars							In Yen
	Three Months							Three Months
(In millions of dollars and billions of yen)		2023			2022				2023			2022
New annualized premium sales		$	100		$	103			¥	13.2		¥	11.9
Increase (decrease) over prior period		(3.2)		%	(22.4)		%		10.8		%	(14.8)		%

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


	Three Months
		2023		2022
Cancer		59.9	%	53.0	%
Medical and other health:
Medical		20.8		31.4
Income support		.6		1.1
Life insurance:
Traditional life (1)		7.3		9.0
WAYS		8.9		.7
Child endowment		.6		.3
Other		1.9		4.5
Total		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, income support, and nursing care insurance 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. Moreover, in November 2022, Aflac Japan refreshed its first sector savings-type products WAYS and Child Endowment and began to actively promote sales of these products after having curtailed sales of both products beginning in 2013. The refreshment of these first sector products position Aflac Japan for potential future long-term sales opportunities by marketing these products to a younger demographic as well as potential cross-selling opportunities of Aflac Japan's third sector products.

Sales of Aflac Japan cancer insurance products in the Japan Post Group channel experienced a material decline beginning in August 2019. Japan Post Group resumed proactive sales of cancer insurance policies in April 2021 and Aflac Japan continues to strengthen the strategic alliance. In April 2023, Japan Post Group began selling Aflac Japan's new cancer insurance product that was launched in August 2022. For additional information, see the risk factor entitled "Sales of the Company's products and services are dependent on its ability to attract, retain and support a network of qualified sales associates, brokers and employees in the U.S. and sales associates and other distribution partners in Japan," in Item 1A. Risk Factors in the 2022 Annual Report.

The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the three-month periods ended March 31.


	2023		2022
Independent corporate and individual	50.9	%	48.9	%
Affiliated corporate (1)	45.4		46.5
Bank	3.7		4.6
Total	100.0	%	100.0	%

(1) Includes Japan Post Group, Dai-ichi Life and Daido Life

During the three-month period ended March 31, 2023, Aflac Japan recruited 4 new sales agencies. At March 31, 2023, Aflac Japan was represented by approximately 7,300 sales agencies, with approximately 110,000 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 March 31, 2023, Aflac Japan had agreements to sell its products at 359 banks, approximately 90% of the total number of banks in Japan.

Aflac Japan Investments

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 include fixed maturity investments and growth assets, including 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 securities and 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 March 31,
(In millions)		2023		2022
Yen-denominated:
Fixed maturity securities:
Japan government and agencies		$	151	$	0
Private placements		273		307
Other fixed maturity securities		77		17
Equity securities		123		91
Other investments		6		3
Total yen-denominated		$	630	$	418

U.S. dollar-denominated:
Fixed maturity securities:
Other fixed maturity securities		$	376	$	85


Collateralized loan obligations		0		67

Commercial mortgage and other loans:
Transitional real estate loans		53		507

Middle market loans		150		311
Other investments		137		48
Total U.S. dollar-denominated		$	716	$	1,018
Total Aflac Japan purchases		$	1,346	$	1,436

See the 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 2022 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 March 31.


	Three Months
		2023			2022
Total purchases for the period (in millions) (1)		$	1,203		$	1,385
New money yield (1),(2)		5.18		%	3.90		%
Return on average invested assets (3)		2.57			2.54
Portfolio book yield, including U.S. dollar-denominated investments, end of period (1),(2)		3.13		%	2.62		%

(1) Includes fixed maturity securities, commercial mortgage and other loans, equity securities, 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

The increase in the Aflac Japan new money yield in the three-month period ended March 31, 2023 was primarily due to increases in U.S. interest rates. See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the Investments and Hedging Activities sections of this MD&A for additional information on the Company's investments and hedging strategies.

AFLAC U.S. SEGMENT

Aflac U.S. Pretax Adjusted Earnings

Changes in Aflac U.S. pretax 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)		2023			2022
Net earned premiums		$	1,428		$	1,413
Adjusted net investment income (1)		197			184
Other income		35			42
Total adjusted revenues		1,660			1,639
Benefits and claims:
Benefits and claims, excluding reserve remeasurement		691			686
Reserve remeasurement (gains) losses		(40)			(20)
Total benefits and claims		651			666
Adjusted expenses:
Amortization of deferred policy acquisition costs		119			114
Insurance commissions		142			140
Insurance and other expenses		395			387
Total adjusted expenses		657			640
Total benefits and adjusted expenses		1,308			1,306
Pretax adjusted earnings		$	352		$	333
Percentage change over previous period:
Net earned premiums		1.1		%	(.6)		%
Adjusted net investment income		7.1			4.5
Total adjusted revenues		1.3			.7
Pretax adjusted earnings		5.7			.6

(1) Net interest cash flows from derivatives associated with certain investment strategies of $(7) and $1 for the three-month periods ended March 31, 2023 and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

Annualized premiums in force increased 1.4% to $6.0 billion at March 31, 2023, compared with $5.9 billion at March 31, 2022.

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


	Three Months Ended March 31,
Ratios to total adjusted revenues:		2023		2022
Total benefits and claims		39.2	%	40.7	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		7.2		7.0
Insurance commissions		8.6		8.5
Insurance and other expenses		23.8		23.5
Total adjusted expenses		39.6		39.0
Pretax adjusted earnings		21.2		20.3
Ratios to total premiums:
Total benefits and claims		45.6	%	47.1	%
Adjusted expenses:
Amortization of deferred policy acquisition costs		8.3		8.1

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

For the three-month period ended March 31, 2023, the total benefits and claims ratio to total premiums decreased compared with the same period in 2022, reflecting assumption updates in the third quarter of 2022 and reserve remeasurement gains related to experience. The total adjusted expense ratio increased in the three-month period ended March 31, 2023, when compared with the same period in 2022, primarily due to higher planned spending, reflecting ongoing investments in the U.S. platform and higher DAC amortization associated with lower persistency. The pretax adjusted profit margin increased in the three-month period ended March 31, 2023, compared with the same period in 2022, primarily due to the lower benefit ratio.

The following table presents premium persistency for Aflac U.S. on a 12-month rolling basis as of March 31.


	2023		2022
Premium persistency	77.9	%	78.7	%

Aflac U.S. Sales

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


	Three Months
(In millions)		2023			2022
New annualized premium sales		$	315		$	299
Increase (decrease) over prior period		5.3		%	19.0		%

New annualized premium sales for accident insurance decreased 1.8%; disability sales increased 13.8%; critical care insurance sales (including cancer insurance) increased 1.8%; hospital indemnity insurance sales increased .2%; dental/vision sales increased 22.7%; and life sales increased 10.3% in the first quarter of 2023, compared with the first quarter of 2022. The increase in sales for Aflac U.S. in the first quarter of 2023 reflects continued improvement from investment in growth initiatives as well as productivity gains.

The following table details the contributions to Aflac's U.S. new annualized premium sales by major insurance product category for the periods ended March 31.


	Three Months
		2023		2022
Accident		23.5	%	25.3	%
Disability		25.2		23.3
Critical care(1)		20.5		21.2
Hospital indemnity		15.9		16.7
Dental/vision		6.6		5.6
Life		8.3		7.9
Total		100.0	%	100.0	%

(1) Includes cancer, critical illness, and hospital intensive care products

In the first quarter of 2023, the Aflac U.S. sales force included an average of approximately 6,100 U.S. agents, including brokers, who were actively producing business on a weekly basis. The Company believes that this average weekly producer equivalent metric allows sales management to monitor progress and needs, as well as serve as a leading indicator of future production capacity.

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 investments and growth assets, including public 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 securities and loan receivables.

The following table details the investment purchases for Aflac U.S.


	Three Months Ended March 31,
(In millions)		2023		2022
Fixed maturity securities:
Other fixed maturity securities		$	209	$	232
Infrastructure debt		0		9

Equity securities		0		9
Commercial mortgage and other loans:
Transitional real estate loans		14		107

Middle market loans		19		166
Other investments		15		5
Total Aflac U.S. Purchases		$	257	$	528

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 2022 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 March 31.


	Three Months
		2023			2022
Total purchases for period (in millions) (1)		$	242		$	523
New money yield (1),(2)		7.01		%	4.60		%
Return on average invested assets (3)		4.74			4.61
Portfolio book yield, end of period (1),(2)		5.46		%	4.95		%

(1) Includes fixed maturity securities, commercial mortgage and other loans, equity securities, and excludes alternative investments in limited partnerships

(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 in the Aflac U.S. new money yield in the three-month period ended March 31, 2023 was primarily due to increases in U.S. interest rates. See Notes 3 and 5 of the Notes to the Consolidated Financial Statements and the Investments section of this MD&A for additional information on the Company's investments.

CORPORATE AND OTHER

Changes in the pretax adjusted earnings of Corporate and other are primarily affected by investment income. The following table presents a summary of results for Corporate and other.

Corporate and Other Summary of Operating Results


	Three Months Ended March 31,
(In millions)		2023		2022
Net earned premiums		$	91	$	41
Net investment income (loss) (1)		7		4
Amortized hedge income related to certain foreign currency management strategies		29		11
Adjusted net investment income		36		15
Other income		2		18
Total adjusted revenues		129		74
Total benefits and claims, net		46		37
Adjusted expenses:
Interest expense		33		40
Other adjusted expenses		57		40
Total adjusted expenses		90		80
Total benefits and adjusted expenses		136		116
Pretax adjusted earnings		$	(7)	$	(42)

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $51 and $12 for the three-month periods ended March 31, 2023, and 2022, respectively, is included as a reduction to net investment income. Tax credits on these investments of $52 and $16 for the three-month periods ended March 31, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

In the three-month period ended March 31, 2023, total adjusted revenues increased compared to the same period in 2022 primarily due to higher total premiums associated with the Aflac Re global reinsurance strategy and an increase in adjusted net investment income. Total adjusted expenses increased compared to the same period in 2022 primarily due to expenses associated with the Aflac Re global reinsurance strategy. These results also reflect the impact of foreign currency on total net earned premiums and the corresponding benefits. Pretax adjusted earnings increased in the three-month period ended March 31, 2023 when compared to the same period in 2022 reflecting the increase in total adjusted revenue, partially offset by higher other adjusted expenses, net benefits and claims.

The Parent Company invests in partnerships that specialize in rehabilitating historic structures or the installation of solar equipment in order to receive federal historic rehabilitation and solar tax credits. These investments are classified as

limited partnerships and included in other investments in the consolidated balance sheet. The change in value of each investment is recorded as a reduction to net investment income. Tax credits generated by these investments are recorded as an income tax benefit in the consolidated statement of earnings.

INVESTMENTS

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, 2023
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	61,628	$	12,661	$	3,810	$	78,099
Held to maturity, fixed maturity securities, at amortized cost (1)	18,936		0		0		18,936
Equity securities	655		51		381		1,087
Commercial mortgage and other loans:
Transitional real estate loans (1)	5,277		1,158		200		6,635
Commercial mortgage loans (1)	1,134		624		0		1,758
Middle market loans (1)	4,474		461		0		4,935
Other investments:
Policy loans	189		25		0		214
Short-term investments (2)	1,334		172		1,055		2,561
Limited partnerships	2,034		222		176		2,432
Other	0		34		0		34
Investment in affiliate (3)	0		119		(119)		0
Total investments	95,661		15,527		5,503		116,691
Cash and cash equivalents	1,517		701		1,591		3,809
Total investments and cash	$	97,178	$	16,228	$	7,094	$	120,500

(1) Net of allowance for credit losses

(2) Includes securities lending collateral

(3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other


	December 31, 2022
(In millions)	Aflac Japan		Aflac U.S.		Corporate and Other		Total
Available for sale, fixed maturity securities, at fair value	$	61,615	$	12,231	$	1,895	$	75,741
Held to maturity, fixed maturity securities, at amortized cost (1)	19,056		0		0		19,056
Equity securities	650		51		390		1,091
Commercial mortgage and other loans:
Transitional real estate loans (1)	5,133		1,140		182		6,455
Commercial mortgage loans (1)	1,269		729		15		2,013
Middle market loans (1)	4,557		471		0		5,028
Other investments:
Policy loans	190		24		0		214
Short-term investments (2)	319		184		1,029		1,532
Limited partnerships	1,900		208		182		2,290
Other	0		34		0		34
Investment in affiliate (3)	0		195		(195)		0
Total investments	94,689		15,267		3,498		113,454
Cash and cash equivalents	1,601		720		1,622		3,943
Total investments and cash	$	96,290	$	15,987	$	5,120	$	117,397

(1) Net of allowance for credit losses

(2) Includes securities lending collateral

(3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other

The ratings of the Company's securities referenced in the table below are based on the ratings designations provided by major rating organizations such as Moody's, Standard & Poor's and Fitch or, if not rated, are determined based on the Company's internal analysis of such securities. When the ratings issued by the rating agencies differ, the Company utilizes the second lowest rating when three or more rating agency ratings are available or the lowest rating when only two rating agency ratings are available.

The distributions of fixed maturity securities the Company owns, by credit rating, were as follows:

Composition of Fixed Maturity Securities by Credit Rating


		March 31, 2023						December 31, 2022
	Amortized Cost			Fair Value			Amortized Cost			Fair Value
AAA		1.7	%		1.6	%		1.6	%		1.5	%
AA		5.3			5.4			5.2			5.3
A		67.9			68.0			68.0			68.1
BBB		23.0			22.8			23.0			22.9
BB or lower		2.1			2.2			2.2			2.2
Total		100.0	%		100.0	%		100.0	%		100.0	%

As of March 31, 2023, 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 March 31, 2023.


(In millions)	Credit Rating		Amortized Cost			Fair Value			Unrealized Loss
KLM Royal Dutch Airlines		B		$	136		$	103		$	(33)
GLP Pte Ltd.		BBB		112			80			(32)
Autostrade Per Litalia Spa		BBB		148			116			(32)
Prologis LP		A		171			141			(30)
JP Morgan Chase and Co.		A		200			171			(29)
Banco de Chile		A		150			122			(28)
Investcorp Capital Limited		BB		327			306			(21)
Credit Suisse Group AG		BBB		75			55			(20)
Grand City Properties SA		BBB		56			37			(19)
Urban Renaissance Agency		A		183			164			(19)

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. The Company believes these issuers have the ability to continue making timely payments of principal and 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 and other corporate investments.

Below-Investment-Grade Securities

Below-Investment-Grade Investments


	March 31, 2023
(In millions)	Par Value		Amortized Cost (1)		Fair Value		Unrealized Gain (Loss)
Investcorp Capital Limited	$	327	$	327	$	306	$	(21)
Pemex Project Funding Master Trust	225		225		228		3
Commerzbank	187		145		205		60
Telecom Italia SpA	150		150		183		33
KLM Royal Dutch Airlines	150		136		103		(33)
Apache Corporation	138		110		130		20
Howmet Aerospace Inc.	100		70		101		31
IKB Deutsche Industriebank AG	97		48		77		29
Generalitat de Catalunya	60		25		60		35
National Gas Co. Trinidad & Tobago	52		50		46		(4)
Other Issuers	63		64		51		(13)
Subtotal (2)	1,549		1,350		1,490		140

High yield corporate bonds	736		622		668		46
Middle market loans	4,642		4,454		4,456		2
Grand Total	$	6,927	$	6,426	$	6,614	$	188

(1) Net of allowance for credit losses

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

Fixed Maturity Securities by Sector


	March 31, 2023
(In millions)	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		% of Total
Government and agencies	$	43,595	$	4,082	$	(1,084)	$	46,593	46.3	%
Municipalities	2,593		261		(97)		2,757		2.8
Mortgage- and asset-backed securities	2,545		99		(77)		2,567		2.7
Public utilities	7,495		671		(191)		7,975		7.9
Electric	6,074		551		(134)		6,489		6.4
Natural Gas	844		69		(32)		882		.9
Other	577		51		(25)		604		.6
Sovereign and supranational	1,118		134		(14)		1,238		1.2
Banks/financial institutions	9,279		653		(512)		9,420		9.8
Banking	5,571		455		(295)		5,732		5.9
Insurance	1,716		143		(67)		1,791		1.8
Other	1,992		55		(150)		1,897		2.1
Other corporate	27,617		2,655		(1,107)		29,165		29.3
Basic Industry	2,444		307		(83)		2,669		2.6
Capital Goods	3,275		231		(147)		3,359		3.5
Communications	2,906		375		(66)		3,214		3.1
Consumer Cyclical	2,136		219		(50)		2,305		2.3
Consumer Non-Cyclical	6,148		522		(240)		6,429		6.5
Energy	2,556		359		(60)		2,855		2.7
Other	1,343		95		(113)		1,325		1.4
Technology	3,701		185		(171)		3,716		3.9
Transportation	3,108		362		(177)		3,293		3.3
Total fixed maturity securities	$	94,242	$	8,555	$	(3,082)	$	99,715	100.0	%

(1) Net of allowance for credit losses

Securities by Type of Issuance

The following table details investment securities by type of issuance.

Investment Securities by Type of Issuance


		March 31, 2023						December 31, 2022
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Publicly issued securities:
Fixed maturity securities		$	76,825		$	81,310		$	77,176		$	79,090
Equity securities		866			866			882			882
Total publicly issued		77,691			82,176			78,058			79,972
Privately issued securities: (2)
Fixed maturity securities (3)		17,417			18,405			17,349			17,861
Equity securities		221			221			209			209
Total privately issued		17,638			18,626			17,558			18,070
Total investment securities		$	95,329		$	100,802		$	95,616		$	98,042

(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, 2023				December 31, 2022
Privately issued reverse-dual currency securities		$	4,028			$	4,049
Publicly issued collateral structured as reverse-dual currency securities		1,374				1,383
Total reverse-dual currency securities		$	5,402			$	5,432
Reverse-dual currency securities as a percentage of total investment securities		5.7		%		5.7		%

(1) Principal payments in yen and interest payments in dollars

HEDGING ACTIVITIES

•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 Hedge Program below).

•Aflac Japan maintains certain unhedged U.S. dollar-denominated securities, which serve as an economic currency hedge of a portion of the Company's investment in Aflac Japan (see Aflac Japan’s U.S. Dollar-Denominated Hedge Program below).

•The Parent Company designates yen-denominated liabilities (notes payable and loans) as non-derivative hedging instruments and designates certain foreign currency forwards and options as derivative hedges of the Company’s net investment in Aflac Japan (see Enterprise Corporate Hedging Program below).


	Three Months
		2023	2022
Aflac Japan:
FX Forwards
FX forward (sell USD, buy yen) notional at end of period (in billions) (1)		$3.7	$4.5
Weighted average remaining tenor (in months) (2)		9.8	9.9
Amortized hedge income (cost) for period (in millions)		$(39)	$(13)
FX Options
FX option notional at the end of period (in billions) (1)		$13.5	$13.5
Weighted average remaining tenor (in months) (2)		7.4	6.6
Amortized hedge income (cost) for period (in millions)		$(19)	$(13)
Corporate and other (Parent Company):
FX Forwards
FX forward (buy USD, sell yen) notional at end of period (in billions) (1)		$5.0	$5.0
Weighted average remaining tenor (in months) (2)		10.4	10.9
Amortized hedge income (cost) for period (in millions)		$31	$12
FX Options
FX option notional at the end of period (in billions) (1)		$2.2	$1.9
Weighted average remaining tenor (in months) (2)		7.4	7.6
Amortized hedge income (cost) for period (in millions)		$(2)	$(1)

(1) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.

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

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


	March 31, 2023				December 31, 2022
(In millions)	Amortized Cost (1)		Fair Value		Amortized Cost (1)		Fair Value
Available-for-sale securities:
Fixed maturity securities	$	12,817	$	14,176	$	14,321	$	15,191

Equity securities	33		33		33		33
Commercial mortgage and other loans:
Transitional real estate loans (floating rate)	5,277		5,207		5,133		5,088
Commercial mortgage and other loans	1,134		1,013		1,269		1,129
Middle market loans (floating rate)	4,474		4,468		4,557		4,545
Other investments	2,033		2,033		1,899		1,899
Total U.S. Dollar Program	25,768		26,930		27,212		27,885
Available-for-sale securities:
Fixed maturity securities - economically converted to yen	2,236		2,928		2,209		2,795
Total U.S. dollar-denominated investments in Aflac Japan	$	28,004	$	29,858	$	29,421	$	30,680

(1) Net of allowance for credit losses


	Three Months Ended March 31,
(In millions)		2023	2022
Net cash inflows (outflows)				$	(579)	$	(619)

Enterprise Corporate Hedging Program

The Company makes its accounting designation of net investment hedge at the beginning of each quarter. If the total of the designated Parent Company non-derivative and 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's net investment hedge was effective during the three-month periods ended March 31, 2023 and 2022, respectively. For additional information on the Company's net investment hedging strategy, see Note 4 of the Notes to the Consolidated Financial Statements.

As part of the Company’s internal reinsurance platform, Aflac Re enters into foreign currency forwards with the Parent Company to economically manage the currency mismatch between Aflac Re's assets, which are mostly denominated in U.S. dollars, and liabilities, which are mostly denominated in yen, in order to support and optimize BMA capital requirements. For additional information on the Company's internal reinsurance platform, see Note 8 of the Notes to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A.

Interest Rate Risk Hedge Program

Aflac Japan and Aflac U.S. use interest rate swaps from time to time to mitigate the 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 in Item 7A., Quantitative and Qualitative Disclosures about Market Risk, and Item 1A, specifically to the Risk Factors titled “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" in the 2022 Annual Report.

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's hedging activities.

DEFERRED POLICY ACQUISITION COSTS

The following table presents deferred policy acquisition costs by segment.


(In millions)	March 31, 2023			December 31, 2022			% Change
Aflac Japan		$	5,776		$	5,776		.0	%	(1)
Aflac U.S.		3,491			3,463			.8

Total		$	9,267		$	9,239		.3	%

(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%~~.6% in yen during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See Note 6 of the Notes to the Consolidated Financial Statements ~~in the 2016 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, 2023			December 31, 2022			% Change
Aflac Japan		$	88,944		$	86,088		3.3	%	(1)
Aflac U.S.		11,542			11,187			3.2
Corporate and other		1,874			302			100.0
Intercompany eliminations(2)		(2,427)			(667)			100.0
Total		$	99,933		$	96,910		3.1	%

(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%~~4.0% in yen during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023.

⁽²⁾ Elimination entry necessary due to the internal reinsurance transaction with Aflac Re and to recapture of a portion of policy liabilities ceded externally as a result of the reinsurance retrocession ~~transaction as described in~~transaction. See Note 78 of the Notes to the Consolidated Financial Statements.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

~~Notes Payable~~

~~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 87 of the ~~accompanying~~ Notes to the Consolidated Financial Statements for additional information on the Company's ~~notes payable.~~policy liabilities.

~~Benefit Plans~~

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 1112 of the accompanying Notes to the Consolidated Financial Statements and Note 14 of the Notes to the Consolidated Financial Statements in the ~~2016~~2022 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. OnIn March ~~30, 2012, the~~2022, Japan's Diet ~~approved~~passed legislation ~~to enhance the stability of the LIPPC by extending~~that extended the government's fiscal support of the LIPPC through March ~~2017. On November 25, 2016, Japan's Diet passed legislation that again extends the government's fiscal support of~~2027. In March 2022, the LIPPC ~~through March 2022. Effective April 2014,~~reached the ~~annual LIPPC contribution amount~~required balance for the total life industry of ¥400 billion as specified by its Articles of Incorporation. As a result, additional contributions are not expected to be required unless the balance is reduced due to payments made by the LIPPC to the policyholders of insolvent insurers. Accordingly, Aflac Japan did not recognize an expense for LIPPC assessments for the three-month period ended March 31, 2023. Aflac Japan recognized an expense for LIPPC assessments of ¥.9 billion for the three-month period ended March 31, 2022.

Guaranty Fund Assessments

LIQUIDITY AND CAPITAL RESOURCES

•business investment and growth needs

•strategic growth objectives

•financial flexibility and obligations

100

•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 following table presents the amounts provided to the Parent Company for the three-month periods ended March 31.

Liquidity Provided by Subsidiaries to Parent Company


(In millions)	2023		2022
Management fees paid by subsidiaries	$	38	$	33
Dividends declared or paid by subsidiaries	780		514

The following table details Aflac Japan remittances, which are included in the totals above, for the three-month periods ended March 31.

Aflac Japan Remittances


(In millions of dollars and billions of yen)	2023		2022
Aflac Japan management fees paid to Parent Company	$	16	$	15

Aflac Japan dividends declared or paid to Parent Company (in dollars)	505		339
Aflac Japan dividends declared or paid to Parent Company (in yen)	¥	67.3	¥	41.1

In addition to cash and cash equivalents, the Company also maintains credit facilities, both intercompany and with external partners, and a number of other available tools to support liquidity needs on a global basis. In September 2021, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2024. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available. Additionally, as of March 31, 2023, the Parent Company and Aflac had four lines of credit with third parties and twelve intercompany lines of credit. The Company was ~~lowered~~in compliance with all of the covenants of its notes payable and lines of credit at March 31, 2023. For additional information, see Note 9 of the Notes to the Consolidated Financial Statements.

101

Consolidated Cash Flows

The Company consistently generates positive cash flows from 40operations, and has the ability to adjust cash flow management from other sources of liquidity including reinvestment cash flows and selling investments in order to meet short-term cash needs.

The following table summarizes consolidated cash flows by activity for the three-month periods ended March 31.


(In millions)	2023		2022
Operating activities	$	708	$	1,260
Investing activities	105		(1,210)
Financing activities	(933)		(737)
Exchange effect on cash and cash equivalents	(14)		(89)
Net change in cash and cash equivalents	$	(134)	$	(776)

Operating Activities

The Company expects its future cash flows from premiums and investment portfolios to be sufficient to meet its cash needs for benefits and expenses.

Investing Activities

102

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

Financing Activities

Cash flows from financing activities consist primarily of share repurchases, dividends to shareholders and from time to time debt issuances and redemptions.

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

Treasury Stock Purchased


(In millions of dollars and thousands of shares)	2023		2022
Treasury stock purchases	$	700	$	500
Number of shares purchased:
Share repurchase program	10,348		8,007
Other	347		343
Total shares purchased	10,695		8,350

Treasury Stock Issued


(In millions of dollars and thousands of shares)	2023		2022
Stock issued from treasury:
Cash financing	$	2	$	9
Noncash financing	18		17
Total stock issued from treasury	$	20	$	26
Number of shares issued	458		526

As of March 31, 2023, a remaining balance of 106.3 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.


(In millions)	2023		2022
Dividends paid in cash	$	248	$	250
Dividends through issuance of treasury shares	9		9
Total dividends to shareholders	$	257	$	259

103

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 and 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 Financial Services Agency (FSA) maintains its own solvency standard which is quantified through the 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, 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 ~~yen~~and a committed reinsurance facility in the amount of approximately ¥120 billion as a capital contingency plan. Additionally, subject to 33market conditions, the Company expects that it could take action to enter into derivatives on unhedged U.S. dollar-denominated investments with foreign currency options or forwards or execute additional internal reinsurance transactions with Aflac Re. See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for additional information.

Aflac U.S.

104

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 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 2023 in excess of $1.1 billion ~~yen.~~would be considered extraordinary and require such approval. Similar laws apply in New York, the domiciliary jurisdiction of Aflac New York.