What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-10-28 · 254 added, 631 removed, 1797 unchanged (33% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions, except for share and per-share amounts - Unaudited) 2022 2021

Net premiums, principally supplemental health insurance $ 4,372 $ 4,623 $ 13,406 $ 13,969

Net earned premiums, principally supplemental health insurance $ 4,178 $ 4,593

Net investment income 903 925

8 unchanged sentences

Insurance and other expenses 831 832

869 847 2,582 2,382

Interest expense 56 62

12 unchanged sentences

Cash dividends per share $ .40 $ .33

(1) Includes expense of $ 48 and $ 15 for the nine-month periods ended September 30, 2021 and 2020, respectively, for the early extinguishment of debt.

See the accompanying Notes to the Consolidated Financial Statements.

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions - Unaudited) 2022 2021

18 unchanged sentences

Consolidated Balance Sheets

(In millions, except for share and per-share amounts) September 30,

(In millions, except for share and per-share amounts) March 31,

(Unaudited) December 31,

1 unchanged sentence

Fixed maturity securities available for sale, at fair value, ( no allowance for credit losses in

2021 and $ 38 in 2020, amortized cost $ 84,000 in 2021 and $ 88,143 in 2020)

2022 and 2021, amortized cost $ 78,241 in 2022 and $ 82,105 in 2021)

$ 85,795 $ 94,206

50 unchanged sentences

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'

(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'

Balance at December 31, 2021 $ 135 $ 2,529 $ 41,381 $ 7,393 $ ( 18,185 ) $ 33,253

17 unchanged sentences

Balance at March 31, 2022 $ 135 $ 2,560 $ 42,413 $ 3,113 $ ( 18,694 ) $ 29,527

Net earnings 0 0 1,105 0 0 1,105

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 13 0 13

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 1,198 0 1,198

Unrealized gains (losses) on derivatives

during period, net of income taxes 0 0 0 0 0 0

Pension liability adjustment during period,

net of income taxes 0 0 0 1 0 1

Dividends to shareholders

($ .33 per share)

0 0 ( 220 ) 0 0 ( 220 )

Exercise of stock options 0 2 0 0 0 2

Share-based compensation 0 20 0 0 0 20

Purchases of treasury stock 0 0 0 0 ( 500 ) ( 500 )

Treasury stock reissued 0 5 0 0 8 13

Balance at June 30, 2021 $ 135 $ 2,465 $ 40,162 $ 8,019 $ ( 17,046 ) $ 33,735

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)

(In millions, except for per share amounts - Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total

Shareholders'

Balance at June 30, 2021 $ 135 $ 2,465 $ 40,162 $ 8,019 $ ( 17,046 ) $ 33,735

Net earnings 0 0 888 0 0 888

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 99 ) 0 ( 99 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 ( 261 ) 0 ( 261 )

Unrealized gains (losses) on derivatives

during period, net of income taxes 0 0 0 2 0 2

Pension liability adjustment during period,

net of income taxes 0 0 0 1 0 1

Dividends to shareholders

($ .33 per share)

0 0 ( 220 ) 0 0 ( 220 )

Exercise of stock options 0 2 0 0 0 2

Share-based compensation 0 16 0 0 0 16

Purchases of treasury stock 0 0 0 0 ( 527 ) ( 527 )

Treasury stock reissued 0 8 0 0 7 15

Balance at September 30, 2021 $ 135 $ 2,491 $ 40,830 $ 7,662 $ ( 17,566 ) $ 33,552

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)

(In millions, except for per share amounts - Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders'

Balance at December 31, 2020 $ 135 $ 2,410 $ 37,984 $ 8,934 $ ( 15,904 ) $ 33,559

Cumulative effect of change in accounting

principle - Accounting Standards Update (ASU)

2016-13, net of income taxes (1)

0 0 ( 56 ) 0 0 ( 56 )

Cumulative effect of change in accounting

principle - ASU 2019-04, net of income taxes (1)

0 0 0 848 0 848

Balance at January 1, 2020 135 2,313 34,235 7,463 ( 14,395 ) 29,751

Net earnings 0 0 1,293 0 0 1,293

11 unchanged sentences

($ .00 per share)

0 0 ( 202 ) 0 0 ( 202 )

Exercise of stock options 0 9 0 0 0 9

3 unchanged sentences

Balance at March 31, 2021 $ 135 $ 2,438 $ 39,277 $ 6,807 $ ( 16,554 ) $ 32,103

Net earnings 0 0 805 0 0 805

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 74 0 74

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 2,489 0 2,489

Unrealized gains (losses) on derivatives

during period, net of income taxes 0 0 0 ( 1 ) 0 ( 1 )

Pension liability adjustment during period,

net of income taxes 0 0 0 0 0 0

Dividends to shareholders

($ .28 per share)

0 0 ( 200 ) 0 0 ( 200 )

Exercise of stock options 0 1 0 0 0 1

Share-based compensation 0 16 0 0 0 16

Purchases of treasury stock 0 0 0 0 ( 189 ) ( 189 )

Treasury stock reissued 0 7 0 0 16 23

Balance at June 30, 2020 $ 135 $ 2,358 $ 35,204 $ 6,750 $ ( 15,027 ) $ 29,420

(1) See Note 1 of the Notes to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)

(In millions, except for per share amounts - Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders'

Balance at June 30, 2020 $ 135 $ 2,358 $ 35,204 $ 6,750 $ ( 15,027 ) $ 29,420

Net earnings 0 0 2,456 0 0 2,456

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 179 0 179

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 988 0 988

Unrealized gains (losses) on derivatives

during period, net of income taxes 0 0 0 1 0 1

Pension liability adjustment during period,

net of income taxes 0 0 0 ( 1 ) 0 ( 1 )

Dividends to shareholders

($ .28 per share)

0 0 ( 200 ) 0 0 ( 200 )

Exercise of stock options 0 2 0 0 0 2

Share-based compensation 0 16 0 0 0 16

Purchases of treasury stock 0 0 0 0 ( 400 ) ( 400 )

Treasury stock reissued 0 7 0 0 11 18

Balance at September 30, 2020 $ 135 $ 2,383 $ 37,460 $ 7,917 $ ( 15,416 ) $ 32,479

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

See the accompanying Notes to the Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions - Unaudited) 2022 2021

14 unchanged sentences

Equity securities 102 123

Held-to-maturity fixed maturity securities 2 3

Commercial mortgage and other loans 638 725

11 unchanged sentences

Proceeds from borrowings 0 400

Principal payments under debt obligations ( 700 ) ( 350 )

Dividends paid to shareholders ( 250 ) ( 219 )

31 unchanged sentences

Most of Aflac's policies are individually underwritten and marketed through independent agents.

With the exception of group dental and vision products administered by Argus Dental & Vision, Inc.

With the exception of dental and vision products administered by Argus Dental & Vision, Inc.

(Argus) and certain group life insurance products, Aflac U.S.

2 unchanged sentences

and Japan service the two markets for the Company's insurance business.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 69 % and 68 % of the Company's total revenues in the nine-month periods ended September 30, 2021 and 2020, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 82 % at September 30, 2021, compared with 83 % at December 31, 2020.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 71 % and 70 % of the Company's total revenues in the three-month periods ended March 31, 2022 and 2021, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 81 % at March 31, 2022, compared with 82 % at December 31, 2021.

Basis of Presentation

8 unchanged sentences

These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, mortality, morbidity, commission and other acquisition expenses, and terminations by policyholders.

As additional information becomes available, or actual amounts are determinable, the recorded estimates will be revised and reflected in operating results.

As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised and reflected in operating results.

Although some variability is inherent in these estimates, the Company believes the amounts provided are reasonable and reflective of the best estimates of management.

1 unchanged sentence

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

Results of operations for interim periods are not necessarily indicative of results for the entire year.

As a result, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report).

The impact of the COVID-19 global pandemic on the Company continues to evolve, and its future effects remain uncertain.

The Company took prompt action at the beginning of the pandemic to strengthen its capital and liquidity position, and continues to monitor its investment portfolios to adjust to market conditions, including the continuing recovery and inflation expectations.

Both Aflac Japan and Aflac U.S.

have accelerated investments in digital initiatives to improve productivity, efficiency and customer service over the long term.

The Company continues to closely monitor the effects and risks of COVID-19, including its variants, to assess its impact on economic conditions in Japan and the U.S.

and on the Company's business, financial condition, results of operations, liquidity and capital position.

Market Conditions:

The impact of the Coronavirus Disease 2019 (COVID-19) global pandemic on the Company continues to evolve and the continued path of the global economic recovery remains uncertain given the potential longer term impacts of the pandemic.

For example, economic conditions have acted as headwinds to sales in the first quarter of 2022, particularly in Japan, pressuring premium growth rates.

Further, in the U.S., supply shortages, upward pressure on wages to attract employees and higher commodity prices have all driven near-term increases in inflation.

Central bank and government efforts to control inflation, as well the impacts of the Russia-Ukraine conflict, including volatility in energy prices and additional disruptions in the global supply chain, could lead to slower economic growth in Japan and the U.S.

Additionally, rising energy prices, along with increased widening of the differential between U.S.

and Japan interest rates, have contributed to a weakening of the yen, which has the effect of suppressing the Company's current period results in relation to the comparable prior period.

Reclassifications :

12 unchanged sentences

Issues addressed in the new guidance include:

1) a requirement to review and, if there is a change, update assumptions for the liability for future policy benefits at least annually, and to update the discount rate assumption quarterly, 2) accounting for market risk benefits at fair value, 3) simplified amortization for deferred acquisition costs, and 4) enhanced financial statement presentation and disclosures.

In November 2019, the FASB issued an amendment extending the effective date for public business entities that meet the definition of an SEC filer, excluding entities eligible to be small reporting companies as defined by the SEC, by one year.

1) a requirement to review and, if there is a change, update assumptions for the liability for future policy benefits (LFPB) at least annually, and to update the discount rate assumption quarterly, 2) accounting for market risk benefits at fair value, 3) simplified amortization for deferred acquisition costs, and 4) enhanced financial statement presentation and disclosures.

In November 2019, the FASB issued an amendment extending the effective date for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be small reporting companies as defined by the SEC, by one year.

In November 2020, the FASB issued an amendment providing an additional year deferral for all insurance entities due to the impact of COVID-19.

1 unchanged sentence

Early application of the amendments is permitted.

The Company continues to evaluate the impact of adoption and expects that the adoption will have a significant impact on the Company’s financial position, results of operations, and disclosures.

The Company anticipates that the requirement to update assumptions for liability for future policy benefits (LFPB) will have a significant impact on its results of operations, systems, processes and controls and that the requirement to update discount rates will have a significant impact on its equity.

The Company continues to evaluate the impact of adoption and has determined that the adoption will have a significant impact on the Company’s financial position, results of operations, and disclosures.

The requirement to update assumptions for LFPB will have a significant impact on the Company's results of operations, systems, processes and controls and the requirement to update discount rates will have a significant impact on its equity.

As part of working toward implementation of the updated standard, the Company has made progress on key accounting policy decisions, including processes to identify insurance policy groupings (cohorts) for LFPB measurement and DAC amortization purposes, applicable discount rates, development of liability cash flow and claim expense assumptions, and DAC amortization methodology.

The Company will not early adopt the updated standard and has selected the modified retrospective transition method.

Based upon this transition method, the Company currently estimates that the January 1, 2021 transition date (Transition Date) impact from adoption is likely to result in a decrease in accumulated other comprehensive income (AOCI) in a range between $ 18 billion and $ 20 billion.

This is due to updating the LFPB discount rate assumptions from the rates locked in for reserves held as of the Transition Date to rates 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).

The variability around the impact of adoption results from the Company making certain estimates, primarily related to the determination of Transition Date market level yields.

The Company will not early adopt the updated standard and has selected the modified retrospective transition method, which requires the amended guidance be applied as of the beginning of the earliest period presented beginning 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 calculates the ratio of expected benefits less existing carrying values to gross premiums (net premium ratio) using updated assumptions and the discount rate immediately before the Transition Date.

For any cohorts that have a net premium ratio greater than 100% on the Transition Date, the net premium ratio will be capped at 100%.

The Company uses the net premium ratio calculated on the Transition Date (and capped at 100% if required) to calculate the LFPB using 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 net premium ratio capped at 100% on the Transition Date, 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 is recorded as an adjustment (decrease) to opening retained earnings.

For all cohorts on the Transition Date, 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) is recorded in accumulated other comprehensive income (AOCI) net of tax at transition.

When the Company adopts the updated standard beginning January 1, 2023, opening equity will be adjusted for the Transition Date impacts to AOCI and retained earnings and prior periods presented (years 2021 and 2022) will be restated following the updated standard.

Based on the modified retrospective transition method, the Company currently estimates that the Transition Date impact from adoption is likely to result in a decrease in AOCI in a range between $ 18 billion and $ 20 billion and a decrease in retained earnings of approximately $ 0.3 billion.

The variability around the impact of adoption

results from the Company making certain estimates, primarily related to the determination of Transition Date market level yields.

The Company has advanced and continues to refine the design of its discount rate methodology for both the U.S.

5 unchanged sentences

Where only local ratings are available, the Company intends to select the fixed-income instruments with local ratings that are equivalent to a single-A rating based on international rating standards.

The methodology will be 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

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 will use various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to:

11 unchanged sentences

Locked-in discount rates on the policies held at Transition Date reflect the locked-in rates in existence immediately before the Transition Date.

• For DAC amortization, the Company has made a preliminary election to group insurance policies into cohorts that are consistent with the groupings used in estimating the associated LFPB.

• For DAC amortization, the Company has made a preliminary policy election to group insurance policies into cohorts that are consistent with the groupings used in estimating the associated LFPB.

DAC will be amortized on a constant-level basis for the grouped contracts over the expected remaining term of the related contracts.

7 unchanged sentences

The Company has also put in place internal controls related to the new processes created as part of implementing the updated standard and will continue to refine and maturate these internal controls until the formal implementation in the first quarter of 2023.

The Company has recently begun testing its reporting and disclosure capabilities under the new ASU for post-Transition Date accounting periods.

The Company continues testing its reporting and disclosure capabilities under the new ASU for post-Transition Date accounting periods.

The Company currently has no products with market risk benefits.

14 unchanged sentences

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 Aflac’s underlying business performance.

The Company excludes income taxes related to operations to arrive at pretax adjusted earnings.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021

1 unchanged sentence

Adjusted net investment income (1),(2)

763 663 2,260 1,939

Other income 9 13

2 unchanged sentences

Adjusted net investment income (3)

191 175 557 523

Other income 42 30

Total adjusted revenue Aflac U.S.

1,616 1,606 4,870 4,949

Corporate and other (4),(5)

72 87 205 292

Total adjusted revenues 5,126 5,552

Net investment gains (losses) (1),(2),(3),(4)

( 158 ) 130 258 ( 454 )

Total revenues $ 5,272 $ 5,869

(1) Amortized hedge costs of $ 20 and $ 51 for the three-month periods and $ 55 and $ 155 for the nine-month periods ended September 30, 2021, and 2020, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(2) Net interest cash flows from derivatives associated with certain investment strategies of $( 7 ) and $ 6 for the three-month periods and $( 24 ) and $ 5 for the nine-month periods ended September 30, 2021 and 2020, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(3) Net interest cash flows from derivatives associated with certain investment strategies of $ 1 for both three-month periods and $ 1 and $ 2 for the nine-month periods ended September 30, 2021 and 2020, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

(4) Amortized hedge income of $ 13 and $ 22 for the three-month periods and $ 45 and $ 78 for the nine-month periods ended September 30, 2021, and 2020, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase to net investment income when analyzing operations.

(5) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 5 and $ 35 for the three- and nine-month periods ended September 30, 2021, respectively, are included as a reduction to net investment income.

Offsetting tax credits on these investments of $ 10 and $ 35 for the three- and nine-month periods ended September 30, 2021, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.

(1) Amortized hedge costs of $ 26 and $ 19 for the three-month periods ended March 31, 2022, and 2021, 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 $( 10 ) and $( 8 ) for the three-month periods ended March 31, 2022 and 2021, 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 $ 1 the three-month period ended March 31, 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 $ 11 and $ 17 for the three-month periods ended March 31, 2022, and 2021, 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 $ 12 for the three-month period ended March 31, 2022, is included as a reduction to net investment income.

Tax credits on these investments of $ 16 for the three-month period ended March 31, 2022, 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.

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021

1 unchanged sentence

Aflac Japan (1),(2)

$ 976 $ 747 $ 2,867 $ 2,442

358 329 1,217 1,082

Corporate and other (4),(5),(6)

1 unchanged sentence

Pretax adjusted earnings (7)

1,293 1,037 3,940 3,455

Net investment gains (losses) (1),(2),(3),(4),(5)

( 172 ) 117 216 ( 497 )

Other income (loss) ( 1 ) ( 7 )

3 unchanged sentences

adjusted earnings ( 37 ) 13

(4) Amortized hedge income of $ 13 and $ 22 for the three-month periods and $ 45 and $ 78 for the nine-month periods ended September 30, 2021, and 2020, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase in net investment income when analyzing operations.

(5) A gain of $ 14 and $ 13 for the three-month periods and $ 41 and $ 43 for the nine-month periods ended September 30, 2021, and 2020, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable has been reclassified from net investment gains (losses) and included in adjusted earnings when analyzing operations.

(6) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 5 and $ 35 for the three- and nine-month periods ended September 30, 2021, respectively, is included as a reduction to net investment income.

(3) Net interest cash flows from derivatives associated with certain investment strategies of $ 1 for the three-month period ended March 31, 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 $ 11 and $ 17 for the three-month periods ended March 31, 2022, and 2021, 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 $ 13 and $ 14 for the three-month periods ended March 31, 2022, and 2021, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable has been reclassified from net investment gains (losses) and included in adjusted earnings when analyzing operations.

(6) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 12 for the three-month period ended March 31, 2022, is included as a reduction to net investment income.

Tax credits on these investments of $ 16 for the three-month period ended March 31, 2022 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 $ 40 and $ 44 for the three-month periods and $ 130 and $ 122 for the nine-month periods ended September 30, 2021, and 2020, respectively, of interest expense on debt.

(7) Includes $ 41 and $ 45 for the three-month periods ended March 31, 2022, and 2021, respectively, of interest expense on debt.

Assets were as follows:

(In millions) September 30,

(In millions) March 31,

2022 December 31,

5 unchanged sentences

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

September 30, 2021

March 31, 2022

(In millions)

47 unchanged sentences

Total securities available for sale $ 85,369 $ 0 $ 13,566 $ 239 $ 98,696

September 30, 2021

March 31, 2022

(In millions)

25 unchanged sentences

Total securities held to maturity $ 22,008 $ 8 $ 22,000 $ 4,869 $ 0 $ 26,869

(In millions) September 30, 2021 December 31, 2020

(In millions) March 31, 2022 December 31, 2021

Equity securities, carried at fair value through net earnings:

6 unchanged sentences

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

During the first nine months of 2021, the Company did no t reclassify any investments from the held-to-maturity category to the available-for-sale category.

During the second and third quarter of 2020, the Company did no t reclassify any investments from the held-to-maturity category to the available-for-sale category.

During the first quarter of 2020, as a result of the adoption of ASU 2019-04, the Company reclassified $ 6.9 billion (at amortized cost) of pre-payable fixed-maturity securities from the held-to-maturity category to the available-for-sale category.

This reclassification resulted in recording in accumulated other comprehensive income a net unrealized gain of $ 848 million on an after-tax basis .

During the first quarter of 2022 and 2021, respectively, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

The contractual and economic maturities of the Company's investments in fixed maturity securities at September 30, 2021, were as follows:

The contractual and economic maturities of the Company's investments in fixed maturity securities at March 31, 2022, were as follows:

(In millions) Amortized

24 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions) Credit

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021

4 unchanged sentences

Gross losses from sales ( 3 ) ( 1 )

Foreign currency gains (losses) on sales and redemptions ( 2 ) ( 5 ) ( 21 ) ( 39 )

Foreign currency gains (losses) 10 ( 12 )

Other investments:

Gross gains from sales 9 0

Total sales and redemptions 86 ( 11 )

Equity securities ( 156 ) ( 68 )

12 ( 17 ) ( 106 )

Credit losses:

11 unchanged sentences

Total net investment gains (losses) $ 122 $ 307

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the three-month period ended September 30, 2021, that relate to equity securities still held at the September 30, 2021 reporting date, were $ 170 million.

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the nine-month period ended September 30, 2021, that relate to equity securities still held at the September 30, 2021 reporting date, were $ 33 million.

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the three-month period ended March 31, 2022, that relate to equity securities still held at the March 31, 2022 reporting date, were $ 157 million.

Unrealized Investment Gains and Losses

1 unchanged sentence

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

(In millions) September 30, 2021 December 31,

(In millions) March 31, 2022 December 31,

Unrealized gains (losses) on securities available for sale $ 8,501 $ 13,330

2 unchanged sentences

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended September 30, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

September 30, 2021

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended March 31, 2022 and December 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

March 31, 2022

Total Less than 12 months 12 months or longer

4 unchanged sentences

Fixed maturity securities available

government and

dollar-denominated $ 1 $ 3 $ 0 $ 3 $ 1 $ 0

Japan government and

5 unchanged sentences

backed securities:

dollar-denominated 549 23 533 23 16 0

Yen-denominated 79 3 49 0 30 3

18 unchanged sentences

Fixed maturity securities available

government and

dollar-denominated $ 1 $ 1 $ 0 $ 1 $ 1 $ 0

Japan government and

29 unchanged sentences

Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company, and the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

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

result, a credit allowance will be calculated.

Refer to the Allowance for Credit Losses section below for additional information.

3 unchanged sentences

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

(In millions) September 30, 2021 December 31, 2020

(In millions) March 31, 2022 December 31, 2021

Amortized Cost % of Total Amortized Cost % of Total

13 unchanged sentences

Industrial 521 4.2 525 4.4

Other 14 0.1 0 0.0

Total commercial mortgage loans 1,879 15.1 1,904 15.9

10 unchanged sentences

This loan portfolio is generally considered to be investment grade.

As of September 30, 2021, the Company had $ 645 million in outstanding commitments to fund TREs.

As of March 31, 2022, the Company had $ 693 million in outstanding commitments to fund TREs.

These commitments are contingent on the final underwriting and due diligence to be performed.

2 unchanged sentences

This loan portfolio is generally considered higher quality investment grade loans.

As of September 30, 2021, the Company had no outstanding commitments to fund CMLs.

As of March 31, 2022, the Company had no outstanding commitments to fund CMLs.

These commitments are contingent on the final underwriting and due diligence to be performed.

2 unchanged sentences

These loans are generally considered to be below investment grade.

The carrying value for MMLs included $ 25 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of September 30, 2021, and December 31, 2020.

As of September 30, 2021, the Company had commitments of approximately $ 1.7 billion to fund future MMLs.

The carrying value for MMLs included $ 16 million and $ 11 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of March 31, 2022, and December 31, 2021, respectively.

As of March 31, 2022, the Company had commitments of approximately $ 1.2 billion to fund future MMLs.

These commitments are contingent upon the availability of middle market loans that meet the Company's underwriting criteria.

11 unchanged sentences

The Company uses external credit ratings focused on the reinsurer’s financial strength and credit worthiness.

The Company's reinsurance counterparties are rated A+.

As of March 31, 2022, the Company's reinsurance counterparties were rated A+.

The Company monitors the credit ratings periodically, but not less frequently than quarterly.

The following tables present as of September 30, 2021 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator .

The following tables present as of March 31, 2022 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator .

Transitional Real Estate Loans

(In millions) 2021 2020 2019 2018 2017 Total

(In millions) 2022 2021 2020 2019 2018 Prior Total

Loan-to-Value Ratio:

10 unchanged sentences

70%-79.99% 0 0 0 0 0 25 25 1.78

80% or greater 0 0 0 0 0 0 0 0.00

Total 0 337 47 604 154 737 1,879 2.39

18 unchanged sentences

The Company’s methodology for estimating credit losses utilizes the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment (such as prepayment options, renewal options, call options, or extension options).

The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for

held-to-maturity fixed maturity securities and MMLs.

The Company applies reasonable and

supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for held-to-maturity fixed maturity securities and MMLs.

The Company reverts to historical loss information over one year, following the two-year forecast period.

1 unchanged sentence

The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in underwriting practices and significant events or conditions and makes adjustments as necessary.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $ 21.5 billion amortized cost as of September 30, 2021 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $ 19.7 billion amortized cost as of March 31, 2022 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement.

An investment in an available-for-sale fixed maturity security is impaired if the fair value falls below amortized cost.

7 unchanged sentences

In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.

The Company granted certain loan modifications in its MML and TRE portfolios during the period ended September 30, 2021.

As of September 30, 2021, these loan modifications did not have a material impact on the Company’s results of operations.

The Company had no troubled debt restructurings (TDRs) during the period ended September 30, 2021 and an immaterial amount due to COVID-19 during the year ended December 31, 2020.

The Company granted certain loan modifications in its MML and TRE portfolios during the three-month period ended March 31, 2022.

As of March 31, 2022, these loan modifications did not have a material impact on the Company’s results of operations.

The Company had no troubled debt restructurings (TDRs) during the three-month periods ended March 31, 2022 and March 31, 2021, respectively.

The Company designates nonaccrual status for a nonperforming debt security or a loan that is not generating its stated interest rate because of nonpayment of periodic interest by the borrower.

1 unchanged sentence

The Company resumes the accrual of interest on fixed maturity securities and loans that are currently making contractual payments or for those that are not current where the borrower has paid timely (less than 30 days outstanding).

As of September 30, 2021 and December 31, 2020, the Company had an immaterial amount of loans or fixed maturities on nonaccrual status.

As of March 31, 2022 and December 31, 2021, the Company had an immaterial amount of loans and fixed maturity securities on nonaccrual status.

The following table presents the roll forward of the allowance for credit losses by portfolio segment.

(in millions) Transitional Real Estate Loans Commercial Mortgage Loans Middle Market Loans Held to Maturity Securities Available for Sale Securities Reinsurance Recoverables

Three Months Ended September 30, 2021:

Balance at June 30, 2021 $ ( 41 ) $ ( 22 ) $ ( 76 ) $ ( 8 ) $ ( 26 ) $ ( 13 )

(Addition to) release of allowance for credit

losses ( 18 ) 5 ( 13 ) ( 1 ) 0 0

Write-offs, net of recoveries 0 0 0 0 26 0

Balance at September 30, 2021 $ ( 59 ) $ ( 17 ) $ ( 89 ) $ ( 9 ) $ 0 $ ( 13 )

Three Months Ended September 30, 2020:

Balance at June 30, 2020

$ ( 66 ) $ ( 42 ) $ ( 134 ) $ ( 9 ) $ ( 38 ) $ ( 11 )

(Addition to) release of allowance for credit

losses 13 14 59 0 ( 1 ) 0

Write-offs, net of recoveries 0 0 ( 9 ) 0 1 0

Balance at September 30, 2020 $ ( 53 ) $ ( 28 ) $ ( 84 ) $ ( 9 ) $ ( 38 ) $ ( 11 )

Nine Months Ended September 30, 2021:

Three Months Ended March 31, 2022:

Balance at December 31, 2021

$ ( 68 ) $ ( 10 ) $ ( 96 ) $ ( 8 ) $ 0 $ ( 13 )

(Addition to) release of allowance for credit

losses 16 2 ( 2 ) 0 0 2

Write-offs, net of recoveries 0 0 0 0 12 0

Balance at September 30, 2021 $ ( 59 ) $ ( 17 ) $ ( 89 ) $ ( 9 ) $ 0 $ ( 13 )

Nine Months Ended September 30, 2020:

Balance at December 31, 2019 (1)

Change in foreign exchange 0 0 0 0 0 2

Balance at March 31, 2022

$ ( 52 ) $ ( 8 ) $ ( 98 ) $ ( 8 ) $ 0 $ ( 9 )

Transition impact to retained earnings ( 2 ) ( 8 ) ( 33 ) ( 10 ) 0 ( 11 )

Three Months Ended March 31, 2021:

Balance at December 31, 2020 $ ( 63 ) $ ( 33 ) $ ( 85 ) $ ( 9 ) $ ( 38 ) $ ( 11 )

(Addition to) release of allowance for credit

1 unchanged sentence

Write-offs, net of recoveries 0 0 0 0 11 0

Balance at September 30, 2020 $ ( 53 ) $ ( 28 ) $ ( 84 ) $ ( 9 ) $ ( 38 ) $ ( 11 )

GAAP guidance adopted as of January 1, 2020 has superseded these losses, included for comparative purposes only.

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

For assets that are subject to the credit loss measurement, the change in credit loss allowance will be significantly impacted by purchases and sales in those assets during the period as well as entering into new non-cancelable loan commitments.

The estimate of credit losses for loan commitments as of September 30, 2021 was $ 32 million.

The estimate of credit losses for loan commitments as of March 31, 2022 was $ 24 million.

Other Investments

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

(In millions) September 30, 2021 December 31, 2020

(In millions) March 31, 2022 December 31, 2021

Other investments:

7 unchanged sentences

The change in value of each investment is recorded as a reduction to net investment income.

Offsetting tax credits generated by these investments are recorded as an income tax benefit in the consolidated statement of earnings.

As of September 30, 2021, the Company had $ 1.9 billion in outstanding commitments to fund alternative investments in limited partnerships.

Tax credits generated by these investments are recorded as an income tax benefit in the consolidated statement of earnings.

As of March 31, 2022, the Company had $ 1.7 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

10 unchanged sentences

Investments in Consolidated Variable Interest Entities

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions) Amortized

5 unchanged sentences

Other assets (3)

99 99 133 133

Total assets of consolidated VIEs $ 14,949 $ 15,951 $ 14,617 $ 16,013

20 unchanged sentences

Investments in Variable Interest Entities Not Consolidated

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions) Amortized

5 unchanged sentences

(1) Consists entirely of alternative investments in limited partnerships

The Company holds alternative investments in limited partnerships that have been determined to be VIEs.

These partnerships invest in private equity and structured investments.

The Company’s maximum exposure to loss on these investments is limited to the amount of its investment.

The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

The Company classifies these investments as Other investments in the consolidated balance sheets.

Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents or sponsors.

3 unchanged sentences

As such, the Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

The Company holds alternative investments in limited partnerships that have been determined to be VIEs.

These partnerships invest in private equity and structured investments.

The Company’s maximum exposure to loss on these investments is limited to the amount of its investment.

The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

The Company classifies these investments as Other investments in the consolidated balance sheets.

Securities Lending and Pledged Securities

9 unchanged sentences

Remaining Contractual Maturity of the Agreements

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions) Overnight

16 unchanged sentences

therefore, they are classified as Overnight and Continuous.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 7,969 million and $ 6,654 million at September 30, 2021 and December 31, 2020, respectively, which may not be sold or re-pledged, unless the counterparty is in default.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 7.0 billion and $ 6.8 billion at March 31, 2022 and December 31, 2021, respectively, which may not be sold or re-pledged, unless the counterparty is in default.

Such securities collateral is not reflected on the consolidated financial statements.

The Company did no t have any repurchase agreements or repurchase-to-maturity transactions outstanding as of September 30, 2021, and December 31, 2020, respectively.

The Company did no t have any repurchase agreements or repurchase-to-maturity transactions outstanding as of March 31, 2022, and December 31, 2021, respectively.

Certain fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements on certain investment programs.

6 unchanged sentences

• 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 VIE bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary

• 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

11 unchanged sentences

dollars at a specified future date.

Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options.

The Company also 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 executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options.

In the purchased put transactions, Aflac Japan obtains the option to buy a fixed amount of yen and sell a corresponding amount of U.S.

4 unchanged sentences

a costless or zero-cost collar).

The Company also 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.

In 2021, the Company moved to a strategy that contains one-sided put options, fewer foreign currency forwards and no collars.

From time to time, the Company may also enter into foreign currency forwards and options to hedge the currency risk associated with the net investment in Aflac Japan.

25 unchanged sentences

The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of exposure or credit risk.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions) Asset

23 unchanged sentences

Interest rate swaps 3,500 0 216 3,500 0 54

Forward bond purchase commitment - VIE 45 0 1 0 0 0

Total non-qualifying strategies 23,695 635 1,458 27,600 590 1,612

2 unchanged sentences

For certain variable-rate U.S.

dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the USD variable rate interest and principal payments to fixed rate JPY interest and principal payments.

dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the U.S.

Dollar (USD) variable rate interest and principal payments to fixed rate Japanese Yen (JPY) interest and principal payments.

The Company has designated foreign currency swaps as a hedge of the variability in cash flows of a forecasted transaction or of amounts to be received or paid related to a recognized asset (“cash flow” hedge).

23 unchanged sentences

Net Investment Gains (Losses) Recognized for Fair Value Hedge

Three Months Ended September 30, 2021:

Foreign currency

forwards Fixed maturity securities $ ( 1 ) $ 0 $ ( 1 ) $ 1 $ 0

Foreign currency options Fixed maturity securities ( 5 ) ( 5 ) 0 0 0

Total gains (losses) $ ( 6 ) $ ( 5 ) $ ( 1 ) $ 1 $ 0

Nine Months Ended September 30, 2021:

Foreign currency forwards Fixed maturity securities $ ( 5 ) $ 0 $ ( 5 ) $ 5 $ 0

Foreign currency options Fixed maturity securities ( 16 ) ( 15 ) ( 1 ) 4 3

Total gains (losses) $ ( 21 ) $ ( 15 ) $ ( 6 ) $ 9 $ 3

Three Months Ended September 30, 2020:

Foreign currency forwards Fixed maturity securities $ 1 $ 0 $ 1 $ ( 1 ) $ 0

Three Months Ended March 31, 2022:

Foreign currency options Fixed maturity securities $ ( 15 ) $ ( 15 ) $ 0 $ 0 $ 0

Total gains (losses) $ ( 15 ) $ ( 15 ) $ 0 $ 0 $ 0

Nine Months Ended September 30, 2020:

Three Months Ended March 31, 2021:

Foreign currency forwards Fixed maturity securities $ ( 4 ) $ 0 $ ( 4 ) $ 4 $ 0

6 unchanged sentences

The time value gains and losses for interest rate swaptions when the related hedged items are redeemed are reported in net investment gains and losses consistent with the impact of the hedged item.

For the three-month and nine-month periods ended September 30, 2021 and 2020, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

For the three-month periods ended March 31, 2022 and 2021, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

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

1 unchanged sentence

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets/(Liabilities)

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Fixed maturity securities $ 2,843 $ 3,038 $ 202 $ 205

2 unchanged sentences

The Company's investment in Aflac Japan is affected by changes in the yen/dollar exchange rate.

To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 8) have been designated as non-derivative hedges and certain foreign currency forwards and options have designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.

The Company's net investment hedge was effective during the three- and nine-month periods ended September 30, 2021 and 2020, respectively.

To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 8) have been designated as non-derivative hedges and certain foreign currency forwards and options have been designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.

The Company's net investment hedge was effective during the three-month periods ended March 31, 2022 and 2021, respectively.

Non-qualifying Strategies

2 unchanged sentences

While the change in value of the swaps is recorded through current period earnings, the change in value of the available-for-sale fixed maturity securities associated with these swaps is recorded through other comprehensive income.

As of September 30, 2021, the Parent Company had $ 2.3 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S.

As of March 31, 2022, the Parent Company had $ 1.9 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S.

dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S dollar to Japanese yen.

9 unchanged sentences

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

Three Months Ended September 30,

(In millions) Net Investment Income (1)

Net Investment

Gains (Losses) Other

Comprehensive

Income (Loss) (2)

Net Investment Income (1)

Net Investment

Gains (Losses) Other

Comprehensive

Income (Loss) (2)

Qualifying hedges:

Cash flow hedges:

Foreign currency swaps - VIE $ 0 $ ( 1 ) $ 1 $ 0 $ 0 $ 2

Total cash flow hedges 0 ( 1 ) (3)

Fair value hedges:

Foreign currency forwards (3)

Foreign currency options (3)

Interest rate swaptions (3)

( 1 ) ( 1 ) 1 0 0 0

Total fair value hedges ( 1 ) ( 6 ) 1 0 ( 2 ) 0

Net investment hedge:

Non-derivative hedging

instruments 0 41 0 ( 51 )

Foreign currency forwards ( 42 ) 55 ( 16 ) ( 91 )

Foreign currency options ( 1 ) 0 ( 2 ) 0

Total net investment hedge ( 43 ) 96 ( 18 ) ( 142 )

Non-qualifying strategies:

Foreign currency swaps 6 ( 27 )

Foreign currency swaps - VIE ( 36 ) 40

Foreign currency forwards ( 84 ) 139

Foreign currency options 0 4

Interest rate swaps ( 9 ) 0

Forward bond purchase

commitment- VIE ( 1 ) 2

Total non- qualifying strategies ( 124 ) 158

Total $ ( 1 ) $ ( 174 ) $ 98 $ 0 $ 138 $ ( 140 )

(1) Interest expense/income on cash flow hedges are recorded in net investment income.

For interest rate swaptions classified as fair value hedges, the change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into net investment income over its legal term.

If the swaption is early terminated but the hedge item is still outstanding, the amortization of disposal amount of the swaptions is recorded in net investment income over the remaining life of the hedged items.

(2) Gains and losses on cash flow hedges and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses).

Gains and losses on net investment hedges related to changes in foreign currency spot rates are recorded in the unrealized foreign currency translation gains (losses) line in the consolidated statement of comprehensive income (loss).

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $ 1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended September 30, 2021.

In addition, $ 1 of losses and an immaterial amount were reclassified from accumulated other comprehensive income (loss) into earnings during the three-month periods ended September 30, 2021 and 2020, respectively, related to fair value hedges excluded component .

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

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) Net Investment Income (1)

14 unchanged sentences

Fair value hedges:

Foreign currency forwards (3)

Foreign currency options (3)

Interest rate swaptions (3)

( 1 ) ( 1 ) 1 ( 1 ) 0 1

Total fair value hedges 0 ( 15 ) 0 0 ( 1 ) 0

20 unchanged sentences

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $ 3 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the nine-month period ended September 30, 2021.

In addition, $ 1 of losses and an immaterial amount were reclassified from accumulated other comprehensive income (loss) into earnings during the nine-month periods ended September 30, 2021 and 2020, respectively, related to fair value hedges excluded component.

In addition, an immaterial amount of losses were reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended March 31, 2022, and an immaterial amount during the three-month period ended March 31, 2021, related to fair value hedges excluded component.

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

As of September 30, 2021, $ 5 million of deferred losses on derivative instruments recorded in accumulated other comprehensive income are expected to be reclassified to earnings during the next twelve months.

As of March 31, 2022, $ 5 million of deferred losses on derivative instruments recorded in accumulated other comprehensive income are expected to be reclassified into earnings during the next twelve months.

Credit Risk Assumed through Derivatives

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

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

The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of its senior notes and subordinated debentures;

2 unchanged sentences

The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet.

As of September 30, 2021, all of the Company's derivative agreement counterparties were investment grade.

As of March 31, 2022, all of the Company's derivative agreement counterparties were investment grade.

The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties under International Swaps and Derivatives Association, Inc.

2 unchanged sentences

The Company mitigates the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally requiring that collateral be posted at the outset of the transaction.

In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of Aflac’s financial strength rating.

In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of the Company's financial strength rating.

The actual amount of payments that the Company could be required to make depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after the time of the downgrade.

2 unchanged sentences

Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the counterparties.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $ 694 million and $ 268 million as of September 30, 2021, and December 31, 2020, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on September 30, 2021, the Company estimates that it would be required to post a maximum of $ 169 million of additional collateral to these derivative counterparties.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $ 713 million and $ 904 million as of March 31, 2022, and December 31, 2021, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on March 31, 2022, the Company estimates that it would be required to post a maximum of $ 264 million of additional collateral to these derivative counterparties.

The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights.

9 unchanged sentences

Offsetting of Financial Assets and Derivative Assets

September 30, 2021

March 31, 2022

Gross Amounts Not Offset

1 unchanged sentence

(In millions) Gross Amount of Recognized Assets Gross Amount

Balance Sheet Net Amount of Assets Presented

Sheet Net Amount of Assets Presented

in Balance Sheet Financial Instruments Securities

23 unchanged sentences

(In millions) Gross Amount of Recognized Assets Gross Amount

Balance Sheet Net Amount of Assets Presented

Sheet Net Amount of Assets Presented

in Balance Sheet Financial Instruments Securities

20 unchanged sentences

Offsetting of Financial Liabilities and Derivative Liabilities

September 30, 2021

March 31, 2022

Gross Amounts Not Offset

1 unchanged sentence

(In millions) Gross Amount of Recognized Liabilities Gross Amount

Balance Sheet Net Amount of Liabilities Presented

Sheet Net Amount of Liabilities Presented

in Balance Sheet Financial Instruments Securities

24 unchanged sentences

(In millions) Gross Amount of Recognized Liabilities Gross Amount

Balance Sheet Net Amount of Liabilities Presented

Sheet Net Amount of Liabilities Presented

in Balance Sheet Financial Instruments Securities

3 unchanged sentences

OTC - bilateral $ 1,151 $ 0 $ 1,151 $ ( 471 ) $ ( 662 ) $ ( 14 ) $ 4

OTC - cleared 54 0 54 0 0 ( 35 ) 19

Total derivative

23 unchanged sentences

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

September 30, 2021

March 31, 2022

(In millions) Quoted Prices in

27 unchanged sentences

Interest rate swaps 0 216 0 216

Forward bond purchase commitment 0 1 0 1

Total liabilities $ 0 $ 1,460 $ 0 $ 1,460

28 unchanged sentences

Foreign currency forwards 0 1,138 0 1,138

Interest rate swaps 0 54 0 54

Total liabilities $ 0 $ 1,619 $ 0 $ 1,619

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

September 30, 2021

March 31, 2022

(In millions) Carrying

54 unchanged sentences

A third party pricing vendor has developed valuation models to determine fair values of privately issued securities.

Starting in June 2021, these models and associated processes and controls were substantially transitioned to and executed by company personnel.

Starting in June 2021, these models and associated processes and controls were transitioned to and executed by Company personnel.

These models are discounted cash flow (DCF) valuation models, but also use information from related markets, specifically the credit default swap (CDS) market to estimate expected cash flows.

9 unchanged sentences

Additionally, the Company may compare the inputs to relevant market indices and other performance measurements.

Based on management's analysis, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data.

Beginning in the third quarter of 2020, the Company refined these valuation models to explicitly incorporate currency

basis swap adjustments (market observable data) to assumed interest rate curves where appropriate.

Based on management's analysis, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market

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

1 unchanged sentence

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

September 30, 2021

March 31, 2022

(In millions) Quoted Prices in Active Markets for Identical Assets

41 unchanged sentences

Total equity securities $ 1,166 $ 83 $ 166 $ 1,415

September 30, 2021

March 31, 2022

(In millions) Quoted Prices in Active Markets for Identical Assets

31 unchanged sentences

Third party pricing vendor $ 32,532 $ 808 $ 0 $ 33,340

Internal 0 480 0 480

Total government and agencies 32,532 1,288 0 33,820

1 unchanged sentence

Third party pricing vendor 0 2,222 0 2,222

Internal 0 814 0 814

Total municipalities 0 3,036 0 3,036

5 unchanged sentences

Third party pricing vendor 0 4,527 0 4,527

Internal 0 5,031 0 5,031

Broker/other 0 0 493 493

2 unchanged sentences

Third party pricing vendor 0 273 0 273

Internal 0 799 0 799

Broker/other 0 0 43 43

2 unchanged sentences

Third party pricing vendor 0 5,237 0 5,237

Internal 0 6,309 0 6,309

Broker/other 0 0 45 45

2 unchanged sentences

Third party pricing vendor 0 29,495 0 29,495

Internal 0 7,916 0 7,916

Broker/other 0 0 426 426

24 unchanged sentences

Third party pricing vendor 0 313 0 313

Broker/other 0 337 0 337

Total sovereign and supranational 0 650 0 650

11 unchanged sentences

Key inputs are as follows:

Instrument Type Level 2 Level 3

Instrument Type Level 2

Interest rate derivatives Swap yield curves

Interest rate volatility (1)

Not applicable

Foreign currency exchange rate derivatives - Non-VIES (forwards, swaps and options) Foreign currency forward rates

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Foreign currency volatility (1)

Not applicable

Foreign currency exchange rate derivatives - VIEs (swaps) Foreign currency spot rates Swap yield curves (2)

Foreign currency exchange rate derivatives - VIEs (swaps) Foreign currency spot rates

Swap yield curves

Credit default swap curves

Basis curves (2)

Recovery rates

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(1) Option-based only

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

The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are classified as Level 2.

The Parent Company has cross-currency swap agreements related to certain of its U.S.

dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S dollar to Japanese yen.

Their fair values are based on observable market inputs, therefore they are classified as Level 2.

To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data.

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For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct counterparty to the swap contracts.

As a result, the fair value measurements incorporate the credit risk of the collateral associated with the VIE.

Based on an analysis of these derivatives and a review of the methodology employed by the pricing vendor, the Company determined that due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data.

As a result, the derivatives associated with the Company's consolidated VIEs are classified as Level 3 of the fair value hierarchy.

Nevertheless, the Company has full transparency into the contracts to properly value the swaps for reporting purposes.

Prior to October 1, 2021, these derivatives were classified as Level 3 because certain significant inputs were determined to be unobservable, primarily due to the long duration of the swaps which required extrapolation beyond the observable limits of the curve(s).

However, due to the natural aging of the swap portfolio and the continued evolution of capital market inputs, especially the availability of long-term interest rates with tenors beyond 30 years, the Company has concluded that all significant inputs are now observable.

As a result, effective October 1, 2021, the Company transferred the derivatives associated with its consolidated VIEs to Level 2 of the fair value hierarchy.

For forward bond purchase commitments with VIEs, the fair value of the derivative is based on the difference in the fixed purchase price and the current market value of the related bond prior to the settlement date.

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Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S.

Treasury or London Interbank Offered Rate (LIBOR) yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk.

Treasury or floating-rate benchmark yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk.

The spreads are a significant component of the pricing inputs and are generally considered unobservable.

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This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

Effective October 1, 2021, the foreign exchange swaps discussed above were transferred from Level 3 to Level 2 because the significant inputs used for their valuation that were previously unobservable are now observable.

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

1 unchanged sentence

Three Months Ended

September 30, 2021

Fixed Maturity Securities Equity

Securities Derivatives

(In millions) Mortgage-

Securities Public

Utilities Sovereign and Supranational Banks/

Institutions Other

Corporate Foreign

Balance, beginning of period $ 258 $ 480 $ 45 $ 38 $ 316 $ 158 $ ( 200 ) $ 1,095

Net investment gains (losses) included in

earnings 0 0 0 0 2 ( 1 ) ( 57 ) ( 56 )

Unrealized gains (losses) included in other

comprehensive income (loss) ( 4 ) ( 3 ) 0 0 ( 7 ) 0 0 ( 14 )

Purchases, issuances, sales and

Purchases 35 54 0 8 0 12 0 109

Issuances 0 0 0 0 0 0 0 0

Sales 0 0 0 0 0 ( 8 ) 0 ( 8 )

Settlements 0 ( 8 ) 0 0 0 0 0 ( 8 )

Transfers into Level 3 0 0 0 0 0 0 0 0

Transfers out of Level 3 ( 39 ) 0 0 0 ( 5 ) 0 0 ( 44 )

Balance, end of period $ 250 $ 523 $ 45 $ 46 $ 306 $ 161 $ ( 257 ) $ 1,074

Changes in unrealized gains (losses)

relating to Level 3 assets and liabilities

still held at the end of the period

included in earnings $ ( 4 ) $ ( 3 ) $ 0 $ 0 $ ( 7 ) $ ( 1 ) $ ( 57 ) $ ( 72 )

Three Months Ended

September 30, 2020

Fixed Maturity Securities Equity

Securities Derivatives

(In millions) Mortgage-

Securities Public

Utilities Banks/

Institutions Other

Corporate Foreign

Balance, beginning of period $ 188 $ 322 $ 24 $ 243 $ 86 $ ( 168 ) $ 695

Net investment gains (losses) included

in earnings 0 0 0 0 0 23 23

Unrealized gains (losses) included in

other comprehensive income (loss) 3 15 0 24 0 2 44

Purchases, issuances, sales and settlements:

Purchases 0 33 0 1 5 0 39

Issuances 0 0 0 0 0 0 0

Sales 0 0 0 0 ( 5 ) 0 ( 5 )

Settlements 0 ( 2 ) 0 0 0 0 ( 2 )

Transfers into Level 3 0 0 0 0 0 0 0

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

Balance, end of period $ 191 $ 368 $ 24 $ 268 $ 86 $ ( 143 ) $ 794

Changes in unrealized gains (losses)

relating to Level 3 assets and liabilities

still held at the end of the period

included in earnings $ 0 $ 0 $ 0 $ 0 $ 0 $ 23 $ 23

Nine Months Ended

September 30, 2021

March 31, 2022

Fixed Maturity Securities Equity

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of the period included in earnings $ 0 $ 0 $ 0 $ 0 $ 0 $ 4 $ 0 $ 4

Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2021

Fixed Maturity Securities Equity

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Securities Public

Utilities Banks/

Utilities Sovereign

Supranational Banks/

Institutions Other

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in earnings 0 0 0 0 0 9 19 28

Unrealized gains (losses) included in other

comprehensive income (loss) 5 6 0 8 0 ( 2 ) 17

Purchases, issuances, sales and settlements:

Unrealized gains (losses) included in

other comprehensive income (loss) ( 15 ) ( 18 ) ( 3 ) ( 1 ) ( 12 ) 0 ( 1 ) ( 50 )

Purchases, issuances, sales and

Purchases 10 78 0 5 0 11 0 104

5 unchanged sentences

Balance, end of period $ 204 $ 479 $ 68 $ 28 $ 319 $ 122 $ ( 80 ) $ 1,140

Changes in unrealized gains (losses) relating

to Level 3 assets and liabilities still held at

the end of the period included in earnings $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 184 ) $ ( 184 )

Changes in unrealized gains

(losses) relating to Level 3 assets

and liabilities still held at the end

of the period included in earnings $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 19 $ 19

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments and derivatives carried at fair value.

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments carried at fair value.

Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

September 30, 2021

March 31, 2022

(In millions) Fair Value Valuation Technique(s) Unobservable Input Range

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Equity securities 166 Net asset value Offered quotes N/A (a)

Other assets:

Foreign currency swaps 34 Discounted cash flow Interest rates (USD) 1.51 % - 1.79 % (b)

Interest rates (JPY) .11 % - .53 % (c)

CDS spreads 23 bps - 124 bps

65 Discounted cash flow Interest rates (USD) 1.51 % - 1.79 % (b)

Interest rates (JPY) .11 % - .53 % (c)

Total assets $ 1,460

Other liabilities:

Foreign currency swaps $ 167 Discounted cash flow Interest rates (USD) 1.51 % - 1.79 % (b)

Interest rates (JPY) .11 % - .53 % (c)

CDS spreads 23 bps - 182 bps

189 Discounted cash flow Interest rates (USD) 1.51 % - 1.79 % (b)

Interest rates (JPY) .11 % - .53 % (c)

Total liabilities $ 356

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

(b) Inputs derived from U.S.

long-term rates to accommodate long maturity nature of the Company's swaps

December 31, 2021

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Equity securities 173 Net asset value Offered quotes N/A (a)

Other assets:

Foreign currency swaps 69 Discounted cash flow Interest rates (USD) .93 % - 1.40 % (b)

Interest rates (JPY) .05 % - .43 % (c)

CDS spreads 22 bps - 128 bps

64 Discounted cash flow Interest rates (USD) .93 % - 1.40 % (b)

Interest rates (JPY) .05 % - .43 % (c)

Total assets $ 1,471

Other liabilities:

Foreign currency swaps $ 160 Discounted cash flow Interest rates (USD) .93 % - 1.12 % (b)

Interest rates (JPY) .05 % - .35 % (c)

CDS spreads 41 bps - 140 bps

71 Discounted cash flow Interest rates (USD) .93 % - 1.12 % (b)

Interest rates (JPY) .05 % - .35 % (c)

Total liabilities $ 231

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

(b) Inputs derived from U.S.

long-term rates to accommodate long maturity nature of the Company's swaps

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

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For extinguisher swaps with positive values, an increase in CDS spreads decreases the likelihood of receiving the final exchange payments and reduces the value of the swap.

Effective October 1, 2021, the foreign exchange swaps mentioned above were transferred from Level 3 to Level 2 because the significant inputs used for their valuation that were previously unobservable are now observable.

For additional information on the Company's investments and financial instruments, see the accompanying Notes 1, 3 and 4 and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report.

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Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021

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The incurred claims development related to prior years reflects favorable claims experience compared to previous estimates.

The favorable claims development of $ 739 million for the nine-month period ended September 30, 2021 comprises approximately $ 369 million from Japan and $ 370 million from the U.S., representing 49.9 % and 50.1 % of the total, respectively.

Excluding the impact of foreign exchange of a loss of approximately $ 11 million from December 31, 2020 to September 30, 2021, the favorable claims development in Japan would have been approximately $ 380 million, representing approximately 51 % of the total.

The favorable claims development of $ 208 million for the three-month period ended March 31, 2022 comprises approximately $ 114 million from Japan and $ 94 million from the U.S., representing approximately 55 % and 45 % of the total, respectively.

Excluding the impact of foreign exchange of a loss of approximately $ 7 million from December 31, 2021 to March 31, 2022, the favorable claims development in Japan would have been approximately $ 122 million, representing approximately 59 % of the total.

The Company has experienced continued favorable claim trends in 2022 for its core health products in Japan.

During the first nine months of 2021, there were impacts from lower utilization of healthcare services, due to the COVID-19 pandemic.

During the first quarter of 2022, there were impacts from lower utilization of healthcare services, due to the COVID-19 pandemic.

This impacted both cancer and medical products, as the Japan population was avoiding doctor and hospital visits and staying home more.

This resulted in lower sickness, accident, and cancer incurred claims.

In addition, cancer treatment patterns in Japan are continuing to be influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams.

In addition, dating back to before the pandemic, cancer treatment patterns in Japan are continuing to be influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams.

Additionally, follow-up radiation and chemotherapy treatments are occurring more often on an outpatient basis.

Such changes in treatment not only increase the quality of life and initial outcomes for the patients, but also decrease the average length of each hospital stay, resulting in favorable claims development.

For the majority of the Company's major U.S.

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

portion of the favorable claims development includes $ 143 million related to refinements in estimates for COVID and non-COVID claims as experience emerged.

Even though overall experience is favorable, during the first quarter of 2022, there has been an increase in medical hospitalization claims related to COVID-19, due to the Omicron variant surge in Japan.

The Company is monitoring the experience of this benefit, and will additionally adjust claim reserves as needed.

In the first quarter of 2022, as experienced in 2021 and 2020, the incurred claims development related to prior years reflects favorable claims experience compared to previous estimates.

The favorable claims trend continued for the majority of the Company's major U.S.

accident and health lines of business, including accident, hospital indemnity, cancer, critical illness and short-term disability.

Refinements to COVID-19 incurred estimates also contributed to the favorable development.

portion of the favorable claims development includes $ 32 million related to refinements in the estimates for COVID and non-COVID claims as experience emerges.

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.

Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in

accounting for the original policies issued and the terms of the reinsurance contracts.

Premiums and benefits are reported net of insurance ceded.

The Company has recorded a deferred profit liability related to reinsurance transactions.

The remaining deferred profit liability of $ 900 million and $ 1.0 billion as of September 30, 2021 and December 31, 2020, respectively, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies.

The Company has also recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $ 962 million and $ 1.0 billion as of September 30, 2021 and December 31, 2020, respectively.

The spot yen/dollar exchange rate weakened by approximately 7.5 % and ceded reserves decreased approximately 7.2 % from December 31, 2020 to September 30, 2021.

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

The remaining deferred profit liability of $ 793 million and $ 859 million as of March 31, 2022 and December 31, 2021, 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 $ 883 million and $ 937 million as of March 31, 2022 and December 31, 2021, respectively.

The spot yen/dollar exchange rate weakened by approximately 6.0 % and ceded reserves decreased approximately 5.7 % from December 31, 2021 to March 31, 2022.

The following table reconciles direct 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

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021

Direct premium income $ 4,426 $ 4,711 $ 13,567 $ 14,236

Direct earned premiums $ 4,214 $ 4,652

Ceded to other companies:

3 unchanged sentences

Retrocession activities 41 48

Other 27 1 84 5

Net premium income $ 4,372 $ 4,623 $ 13,406 $ 13,969

Net earned premiums $ 4,178 $ 4,593

Direct benefits and claims $ 2,505 $ 2,776

6 unchanged sentences

Eliminations ( 6 ) ( 8 )

Other 21 0 71 3

Benefits and claims, net $ 2,487 $ 2,735

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In the event that the reinsurer is unable to meet their obligations, the Company remains liable for the reinsured claims.

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015 in the amount of approximately ¥ 120 billion of reserves.

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015, with reserves of approximately ¥ 120 billion as of March 31, 2022.

This reinsurance facility agreement was renewed in 2021 and is effective until December 31, 2022.

1 unchanged sentence

The reinsurer can withdraw from the committed facility if Aflac's Standard and Poor's (S&P) rating drops below BBB-.

As of September 30, 2021, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

As of March 31, 2022, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations follows:

(In millions) September 30, 2021 December 31, 2020

3.625 % senior notes paid May 2021

(In millions) March 31, 2022 December 31, 2021

3.625 % senior notes due November 2024

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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 April 2021, the Parent Company issued five series of senior notes totaling ¥ 82.0 billion through a public debt offering under its then existing U.S.

shelf registration statement.

The first series, which totaled ¥ 30.0 billion, bears interest at a fixed rate of .633 % per annum, payable semi-annually, and will mature in April 2031.

The second series, which totaled ¥ 12.0 billion, bears interest at a fixed rate of .844 % per annum, payable semi-annually, and will mature in April 2033.

The third series, which totaled ¥ 10.0 billion, bears interest at a fixed rate of 1.039 % per annum, payable semi-annually, and will mature in April 2036.

The fourth series, which totaled ¥ 10.0 billion, bears interest at a fixed rate of 1.264 % per annum, payable semi-annually, and will mature in April 2041.

The fifth series, which totaled ¥ 20.0 billion, bears interest at a fixed rate of 1.560 % per annum, payable semi-annually, and will mature in April 2051.

The notes are redeemable at the Parent Company’s option (i) at any time, 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 or (ii) on or after the date that is six months prior to the

stated maturity date of the series, in whole or in part, at a redemption price equal to the aggregate principal amount to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In May 2021, the Parent Company used a portion of the net proceeds from the April 2021 issuance of its various series of senior notes to redeem $ 700 million of the Parent Company's 3.625 % senior notes due June 2023.

In March 2021, the Parent Company issued $ 400 million of senior sustainability notes through a U.S.

public debt offering.

The notes bear interest at a fixed rate of 1.125 % per annum, payable semi-annually, and will mature in March 2026.

The Company intends, but is not contractually committed, to allocate an amount at least equivalent to the net proceeds from this issuance exclusively to existing or future investments in, or financing of, assets, businesses or projects that meet the eligibility criteria of the Company's sustainability bond framework described in the offering documentation in connection with such notes.

These notes are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of:

(i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S.

Treasury security with a maturity comparable to the remaining term of the notes, plus 10 basis points, plus in each case, accrued and unpaid interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.

A summary of the Company's lines of credit as of September 30, 2021 follows:

A summary of the Company's lines of credit as of March 31, 2022 follows:

Borrower(s) Type Term Expiration Date Capacity Amount Outstanding Interest Rate on Borrowed Amount Maturity Period Commitment Fee Business Purpose

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$ 0.0 billion

A rate per annum equal to, at the Company's option, either, (a) London Interbank Offered Rate (LIBOR) for U.S.

A rate per annum equal to, at the Company's option, either, (a) USD London Interbank Offered Rate (LIBOR) 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 Mizuho Bank, Ltd.

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and Aflac uncommitted bilateral None specified None specified $ 50 million

A rate per annum equal to, at the Company's option, either (a) a rate determined by reference to 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 U.S.

dollar short-term commercial loan rate, (b) the federal funds rate plus 1/2 of 1% and (c) one-month LIBOR plus 1%.

LIBOR is subject to replacement with Secured Overnight Financing Rate (SOFR) under certain circumstances Up to 3 months

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 U.S.

dollar 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 Secured Overnight Financing Rate (SOFR) under certain circumstances Up to 3 months

None General corporate purposes

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Aflac Incorporated (1)

uncommitted revolving 364 days April 4, 2022 ¥ 50.0 billion

uncommitted revolving 364 days November 25, 2022 ¥ 50.0 billion

¥ 0.0 billion

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Aflac New York (1)

uncommitted revolving 364 days April 8, 2022 $ 25 million

uncommitted revolving 364 days April 8, 2022 (2)

USD three-month LIBOR plus 75 basis points per annum 3 months None General corporate purposes

uncommitted revolving 364 days March 21, 2023 $ 15 million

USD three-month LIBOR plus 75 basis points per annum 3 months None General corporate purposes

USD three-month LIBOR plus 75 basis points per annum No later than

March 22, 2023 None General corporate purposes

(1) Intercompany credit agreement

(2) Renewed in April 2022 with an expiration date of April 10, 2023

Borrower(s) Type Term Expiration Date Capacity Amount Outstanding Interest Rate on Borrowed Amount Maturity Period Commitment Fee Business Purpose

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uncommitted revolving 364 days March 21, 2023 $ 0.3 million

USD three-month LIBOR plus 75 basis points per annum 3 months None General corporate purposes

AGV Management Services Japan K.K.

USD three-month LIBOR plus 75 basis points per annum No later than March 22, 2023 None General corporate purposes

Aflac Ventures Japan K.K.

uncommitted revolving 364 days May 2, 2022 ¥ 500 million

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(1) Intercompany credit agreement

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

No events of default or defaults occurred during the nine-month period ended September 30, 2021.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at March 31, 2022.

No events of default or defaults occurred during the three-month period ended March 31, 2022.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report.

SHAREHOLDERS’ EQUITY

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

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

(In thousands of shares) 2022 2021

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Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic earnings per share (EPS).

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

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2022 2021

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Share Repurchase Program

During the first nine months of 2021, the Company repurchased 32.2 million shares of its common stock for $ 1.7 billion as part of its share repurchase program.

During the first nine months of 2020, the Company repurchased 26.1 million shares of its common stock for $ 1.0 billion as part of its share repurchase program.

As of September 30, 2021, a remaining balance of 67.0 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

During the first three months of 2022, the Company repurchased 8.0 million shares of its common stock for $ 500 million as part of its share repurchase program.

During the first three months of 2021, the Company repurchased 13.4 million shares of its common stock for $ 650 million as part of its share repurchase program.

As of March 31, 2022, a remaining balance of 47.8 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

2 unchanged sentences

Three Months Ended

September 30, 2021

(In millions) Unrealized Foreign

Currency Translation

Gains (Losses) Unrealized

Gains (Losses)

on Fixed Maturity Securities Unrealized

Gains (Losses)

on Derivatives Pension

Adjustment Total

Balance at June 30, 2021 $ ( 1,661 ) $ 9,992 $ ( 33 ) $ ( 279 ) $ 8,019

Other comprehensive

income (loss) before

reclassification ( 99 ) ( 251 ) 0 ( 5 ) ( 355 )

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 ( 10 ) 2 6 ( 2 )

Net current-period other

comprehensive

income (loss) ( 99 ) ( 261 ) 2 1 ( 357 )

Balance at September 30, 2021 $ ( 1,760 ) $ 9,731 $ ( 31 ) $ ( 278 ) $ 7,662

All amounts in the table above are net of tax.

Three Months Ended

September 30, 2020

(In millions) Unrealized Foreign

Currency Translation

Gains (Losses) Unrealized

Gains (Losses)

on Fixed Maturity Securities Unrealized

Gains (Losses)

on Derivatives Pension Liability Adjustment Total

Balance at June 30, 2020 $ ( 1,469 ) $ 8,532 $ ( 36 ) $ ( 277 ) $ 6,750

Other comprehensive

income (loss) before

reclassification 179 995 1 ( 5 ) 1,170

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 ( 7 ) 0 4 ( 3 )

Net current-period other

comprehensive

income (loss) 179 988 1 ( 1 ) 1,167

Balance at September 30, 2020 $ ( 1,290 ) $ 9,520 $ ( 35 ) $ ( 278 ) $ 7,917

All amounts in the table above are net of tax.

Nine Months Ended

September 30, 2021

March 31, 2022

(In millions) Unrealized Foreign

17 unchanged sentences

income (loss) ( 469 ) ( 3,815 ) 1 3 ( 4,280 )

Balance at September 30, 2021 $ ( 1,760 ) $ 9,731 $ ( 31 ) $ ( 278 ) $ 7,662

Balance at March 31, 2022 $ ( 2,482 ) $ 5,787 $ ( 29 ) $ ( 163 ) $ 3,113

All amounts in the table above are net of tax.

Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2021

(In millions) Unrealized Foreign

6 unchanged sentences

Balance at December 31, 2020 $ ( 1,109 ) $ 10,361 $ ( 34 ) $ ( 284 ) $ 8,934

Cumulative effect of change

in accounting principle -

ASU 2019-04 0 848 0 0 848

Balance at January 1, 2020 $ ( 1,623 ) $ 9,396 $ ( 33 ) $ ( 277 ) $ 7,463

Other comprehensive

8 unchanged sentences

income (loss) ( 565 ) ( 1,567 ) 1 4 ( 2,127 )

Balance at September 30, 2020 $ ( 1,290 ) $ 9,520 $ ( 35 ) $ ( 278 ) $ 7,917

Balance at March 31, 2021 $ ( 1,674 ) $ 8,794 $ ( 33 ) $ ( 280 ) $ 6,807

All amounts in the table above are net of tax.

2 unchanged sentences

(In millions) Three Months Ended

September 30, 2021

March 31, 2022

Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the

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(In millions) Three Months Ended

September 30, 2020

Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the

Statements of Earnings

Unrealized gains (losses) on available-for-sale

securities $ 13 Net investment gains (losses)

( 6 ) Tax (expense) or benefit (1)

$ 7 Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 7 ) Acquisition and operating expenses (2)

Prior service (cost) credit 0 Acquisition and operating expenses (2)

3 Tax (expense) or benefit (1)

$ ( 4 ) Net of tax

Total reclassifications for the period $ 3 Net of tax

(1) Based on 21 % tax rate, with a cumulative adjustment to the first six months of 2020 due to the effects of Final and Proposed Regulations released on September 29, 2020 by the U.S.

Treasury and Internal Revenue Service and addressing, among other items, the allocation of insurance expenses in the calculation of the foreign tax credit limitation.

See Note 10 of the Notes to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.

(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, 2021

Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the

Statements of Earnings

Unrealized gains (losses) on available-for-sale

securities $ ( 2 ) Net investment gains (losses)

0 Tax (expense) or benefit (1)

$ ( 2 ) Net of tax

Unrealized gains (losses) on derivatives $ ( 4 ) Net investment gains (losses)

1 Tax (expense) or benefit (1)

$ ( 3 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 27 ) Acquisition and operating expenses (2)

Prior service (cost) credit 0 Acquisition and operating expenses (2)

6 Tax (expense) or benefit (1)

$ ( 21 ) Net of tax

Total reclassifications for the period $ ( 26 ) Net of tax

(1) Based on 21 % tax rate

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

(In millions) Nine Months Ended

September 30, 2020

March 31, 2021

Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the

13 unchanged sentences

SHARE-BASED COMPENSATION

As of September 30, 2021, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (the Plan).

As of March 31, 2022, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (the 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.

4 unchanged sentences

Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights.

As of September 30, 2021, approximately 36.7 million shares were available for future grants under this plan.

As of March 31, 2022, approximately 35.8 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.

1 unchanged sentence

Performance-based vesting conditions generally include the attainment of goals related to Company financial performance.

As of September 30, 2021, the only performance-based awards issued and outstanding were restricted stock awards and units.

As of March 31, 2022, the only performance-based awards issued and outstanding were restricted stock awards and units.

Stock options and stock appreciation rights granted under the amended Plan have an exercise price of at least 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 years cliff basis.

The Compensation Committee of the Board of Directors has the discretion to determine vesting schedules.

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

The following table provides information on stock options outstanding and exercisable at September 30, 2021.

The following table provides information on stock options outstanding and exercisable at March 31, 2022.

Option Shares

6 unchanged sentences

Exercisable 1,843 3.3 61 31.48

The Company received cash from the exercise of stock options in the amount of $ 20 million during the first nine months of 2021, compared with $ 9 million in the first nine months of 2020.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 16 million in the first nine months of 2021, compared with $ 19 million in the first nine months of 2020.

As of September 30, 2021, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 45 million, of which $ 19 million ( 1.7 million shares) was related to restricted stock awards and units with a performance-based vesting condition.

The Company received cash from the exercise of stock options in the amount of $ 8 million during the first three months of 2022, compared with $ 15 million in the first three months of 2021.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 16 million in the first three months of 2022, compared with $ 14 million in the first three months of 2021.

As of March 31, 2022, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 76 million, of which $ 43 million ( 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 1.9 years.

There are no other contractual terms covering restricted stock awards once vested.

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

The following table summarizes restricted stock activity during the three-month period ended March 31, 2022.

(In thousands of shares) Shares Weighted-Average

1 unchanged sentence

Restricted stock at December 31, 2021

2,557 $ 49.38

Granted in 2022

1 unchanged sentence

Vested in 2022

Restricted stock at September 30, 2021 2,615 $ 49.20

In February 2021, the Company granted 474 thousand performance-based stock awards, which are contingent on the achievement of the Company's financial performance metrics and its market-based conditions.

On the date of grant, the Company estimated the fair value of restricted stock awards with market-based conditions using a Monte Carlo simulation model.

( 1,064 ) 49.49

Restricted stock at March 31, 2022

2,451 $ 55.91

In February 2022, the Company granted 390 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.

10 unchanged sentences

employees who are not participants in the defined benefit plan receive a nonelective 401(k) employer contribution.

Effective January 1, 2021, the Company increased this nonelective contribution to 4 % of an employee's annual cash compensation.

The Company provides certain health care benefits for eligible U.S.

4 unchanged sentences

(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 5 years;

(4) active employees who were age 55 or older and who would meet the 15 years of service requirement within the next 5 years;

(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 of earnings, which includes other components of net periodic pension cost and postretirement costs (other than service costs) $ 4 million and $ 6 million for the three-month periods ended September 30, 2021 and 2020, respectively and $ 18 million for the nine-month periods ended September 30, 2021 and 2020.

Total net periodic cost includes the following components:

Three Months Ended September 30,

Pension Benefits Other

Postretirement Benefits

(In millions) 2021 2020 2021 2020 2021 2020

Components of net periodic

benefit cost:

Service cost $ 6 $ 6 $ 7 $ 7 $ 0 $ 0

Interest cost 1 1 8 9 0 0

Expected return on plan assets ( 2 ) ( 2 ) ( 11 ) ( 9 ) 0 0

Amortization of net actuarial loss 1 1 7 6 0 0

Net periodic (benefit) cost $ 6 $ 6 $ 11 $ 13 $ 0 $ 0

Nine Months Ended September 30,

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statements of earnings, which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $ 4 million and $ 7 million for the three-month periods ended March 31, 2022 and 2021, respectively.

Total net periodic benefit cost includes the following components:

Three Months Ended March 31,

Pension Benefits Other

8 unchanged sentences

Net periodic (benefit) cost $ 5 $ 6 $ 9 $ 13 $ 1 $ 1

During the nine months ended September 30, 2021, Aflac Japan contributed approximately $ 29 million (using the weighted-average yen/dollar exchange rate for the nine-month period ended September 30, 2021) to the Japanese funded defined benefit plan, and Aflac U.S.

During the three months ended March 31, 2022, Aflac Japan contributed approximately $ 9 million (using the weighted-average yen/dollar exchange rate for the three-month period ended March 31, 2022) to the Japanese funded defined benefit plan, and Aflac U.S.

did no t make a contribution to the U.S.

3 unchanged sentences

COMMITMENTS AND CONTINGENT LIABILITIES

Effective for 2021, the Company entered into an outsourcing agreement with a technology and consulting company to provide mainframe computer operations for Aflac Japan.

As of September 30, 2021, the agreement has a remaining term of four years and an aggregate remaining cost of ¥ 29.3 billion ($ 262 million using the September 30, 2021 exchange rate).

Effective for 2021, the Company entered into an outsourcing agreement with a management consulting and technology services company to provide application maintenance and development services for Aflac Japan.

As of September 30, 2021, the agreement has a remaining term of six years and an aggregate remaining cost of ¥ 16.9 billion ($ 151 million using the September 30, 2021 exchange rate).

Effective for 2021, the Company entered into an enterprise agreement with an information technology and data services company to license software for Aflac Japan.

As of September 30, 2021, the agreement has a remaining term of three years and an aggregate remaining cost of ¥ 1.8 billion ($ 16 million using the September 30, 2021 exchange rate).

Effective for 2022, the Company renewed an outsourcing agreement with an information technology and data services company to provide application maintenance and development services for Aflac Japan.

As of March 31, 2022, the agreement has a remaining term of four years and an aggregate remaining cost of ¥ 8.0 billion ($ 65 million using the March 31, 2022 exchange rate).

The Company is a defendant in various lawsuits considered to be in the normal course of business.

12 unchanged sentences

The Company recognized a discounted liability for the assessments of $ 62 million (undiscounted $ 94 million), offset by discounted premium tax credits of $ 48 million (undiscounted $ 74 million), for a net $ 14 million impact to net income in the quarter ended March 31, 2017.

The Company paid a majority of these assessments by September 30, 2021.

The Company paid a majority of these assessments by March 31, 2022.

The Company used the cost estimate provided as of the liquidation date by the National Organization of Life and Health Guaranty Associations (NOLHGA) to calculate its estimated assessments and tax credits.

Guaranty fund assessments for the nine-month periods ended September 30, 2021 and 2020 were immaterial.

Guaranty fund assessments for the three-month periods ended March 31, 2022 and 2021 were immaterial.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements