What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-04-29 · 444 added, 150 removed, 1901 unchanged (24% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

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

10 unchanged sentences

Insurance and other expenses (1)

799 881 1,629 1,712

Interest expense 55 62 112 124

12 unchanged sentences

Cash dividends per share $ .40 $ .33 $ .80 $ .66

(1) Includes expense of $ 48 in the three- and six-month periods ended June 30, 2021 for the early extinguishment of debt.

See the accompanying Notes to the Consolidated Financial Statements.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions - Unaudited) 2022 2021 2022 2021

18 unchanged sentences

Consolidated Balance Sheets

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

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

(Unaudited) December 31,

54 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 1,388 0 0 1,388

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 807 ) 0 ( 807 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 ( 2,857 ) 0 ( 2,857 )

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 3 0 3

Dividends to shareholders (1)

($ .40 per share)

0 0 ( 254 ) 0 0 ( 254 )

Exercise of stock options 0 1 0 0 0 1

Share-based compensation 0 19 0 0 0 19

Purchases of treasury stock 0 0 0 0 ( 650 ) ( 650 )

Treasury stock reissued 0 9 0 0 8 17

Balance at June 30, 2022 $ 135 $ 2,589 $ 43,547 $ ( 548 ) $ ( 19,336 ) $ 26,387

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

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'

18 unchanged sentences

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

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 (1)

($ .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

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

2 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions - Unaudited) 2022 2021

14 unchanged sentences

Equity securities 398 124

Held-to-maturity fixed maturity securities 2 2

Commercial mortgage and other loans 1,270 1,679

11 unchanged sentences

Proceeds from borrowings 0 1,153

Principal payments under debt obligations 0 ( 700 )

Dividends paid to shareholders ( 498 ) ( 430 )

31 unchanged sentences

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

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

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

With the exception of dental and vision products administered by Aflac Benefits Solutions, Inc.

(ABS), formerly known as Argus Dental & Vision, Inc., and certain group life insurance products, Aflac U.S.

markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance.

1 unchanged sentence

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 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.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 69 % of the Company's total revenues in both of the six-month periods ended June 30, 2022 and 2021.

The percentage of the Company's total assets attributable to Aflac Japan was 79 % at June 30, 2022, compared with 82 % at December 31, 2021.

Basis of Presentation

12 unchanged sentences

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 June 30, 2022 and December 31, 2021, the consolidated statements of earnings and comprehensive income (loss) for the three- and six-month periods ended June 30, 2022 and 2021, the consolidated statement of shareholders' equity for the three-month periods ended March 31, 2022 and 2021 and June 30, 2022 and 2021, and the consolidated statement of cash flows for the six-month periods ended June 30, 2022 and 2021.

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

2 unchanged sentences

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.

For example, economic conditions have acted as headwinds to sales in the first six months of 2022, particularly in Japan and most notably in the first quarter with a gradually decreasing impact in the second quarter, 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.

Additionally,

continued widening of the differential between U.S.

and Japan interest rates has 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 :

29 unchanged sentences

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.

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 $ 19 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.

24 unchanged sentences

for health products issued by Aflac U.S., the constant level basis used will be the number of policies in force.

• The Company has made a preliminary entity-wide election to use locked-in claim expense assumptions determined for each issue-year cohort as a percentage of incurred claims;

• The Company has made a preliminary entity-wide election to use locked-in claim expense assumptions determined for each issue-year cohort as a percentage of paid claims;

these assumptions would remain unchanged over the term of the insurance policy.

1 unchanged sentence

As part of its implementation plan, the Company has also advanced the modernization of its actuarial technology platform to enhance its modeling, data management, experience study and analytical capabilities, increase the end-to-end automation of key reporting and analytical processes and optimize its control framework.

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

19 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

1 unchanged sentence

Adjusted net investment income (1),(2)

723 792 1,402 1,497

Other income 9 10 18 22

2 unchanged sentences

Adjusted net investment income (3)

193 189 377 366

Other income 41 30 83 58

Total adjusted revenue Aflac U.S.

1,628 1,627 3,267 3,254

Corporate and other (4),(5)

42 50 116 133

Total adjusted revenues 4,821 5,466 9,946 11,017

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

579 98 726 416

Total revenues $ 5,400 $ 5,564 $ 10,672 $ 11,433

(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.

(1) Amortized hedge costs of $ 30 and $ 17 for the three-month periods and $ 55 and $ 36 for the six-month periods ended June 30, 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 $( 2 ) and $( 9 ) for the three-month periods and $( 12 ) and $( 17 ) for the six-month periods ended June 30, 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 for the three-month period and $ 2 for the six-month period ended June 30, 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 $ 14 and $ 16 for the three-month periods and $ 25 and $ 33 for the six-month periods ended June 30, 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 $ 31 and $ 30 for the three-month periods and $ 42 and $ 30 for the six-month periods ended June 30, 2022, and 2021, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $ 28 and $ 12 for the three-month periods and $ 44 and $ 25 for the six-month periods ended June 30, 2022, and 2021, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.

See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

1 unchanged sentence

Aflac Japan (1),(2)

$ 860 $ 1,004 $ 1,722 $ 1,891

349 413 674 859

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

1 unchanged sentence

Pretax adjusted earnings (7)

1,134 1,341 2,276 2,648

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

567 85 701 388

Other income (loss) 0 ( 53 ) 0 ( 59 )

3 unchanged sentences

adjusted earnings ( 57 ) ( 6 ) ( 94 ) 7

(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.

(4) Amortized hedge income of $ 14 and $ 16 for the three-month periods and $ 25 and $ 33 for the six-month periods ended June 30, 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 $ 12 and $ 14 for the three-month periods and $ 25 and $ 27 for the six-month periods ended June 30, 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 $ 31 and $ 30 for the three-month periods and $ 42 and $ 30 for the six-month periods ended June 30, 2022, and 2021, respectively, is included as a reduction to net investment income.

See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

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

(7) Includes $ 41 and $ 45 for the three-month periods and $ 82 and $ 89 for the six-month periods ended June 30, 2022, and 2021, respectively, of interest expense on debt.

Assets were as follows:

(In millions) March 31,

(In millions) June 30,

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.

March 31, 2022

June 30, 2022

(In millions)

47 unchanged sentences

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

March 31, 2022

June 30, 2022

(In millions)

25 unchanged sentences

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

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

(In millions) June 30,

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 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.

During the first and second quarters of 2022 and 2021, 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 March 31, 2022, were as follows:

The contractual and economic maturities of the Company's investments in fixed maturity securities at June 30, 2022, were as follows:

(In millions) Amortized

24 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions) Credit

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

9 unchanged sentences

Equity securities ( 135 )

170 ( 291 ) 102

Credit losses:

11 unchanged sentences

Total net investment gains (losses) $ 564 $ 89 $ 686 $ 396

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.

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the three-month period ended June 30, 2022, that relate to equity securities still held at the June 30, 2022 reporting date, were $ 137 million.

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the six-month period ended June 30, 2022, that relate to equity securities still held at the June 30, 2022 reporting date, were $ 294 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) March 31, 2022 December 31,

(In millions) June 30,

2022 December 31,

Unrealized gains (losses) on securities available for sale $ 4,885 $ 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 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

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended June 30, 2022 and December 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

June 30, 2022

Total Less than 12 months 12 months or longer

20 unchanged sentences

dollar-denominated 31 12 5 2 26 10

Yen-denominated 71 2 35 2 36 0

Banks/financial institutions:

37 unchanged sentences

The unrealized losses on the Company's fixed maturity securities investments have been primarily related to general market changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal.

For any significant declines in fair value of its fixed maturity securities, the Company performs a more focused review of the related issuers' credit profile.

For any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent rise in interest rates, or due to credit-related factors.

Identifying the drivers of the declines in fair value helps to align and allocate the Company‘s resources to securities with real credit-related concerns that could impact ultimate collection of principal and interest.

For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers' specific credit profile.

For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data.

11 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) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Amortized Cost % of Total Amortized Cost % of Total

23 unchanged sentences

TREs are commercial mortgage loans that are typically relatively short-term floating rate instruments secured by a first lien on the property.

These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date.

These loans provide funding for properties undergoing a change in their physical characteristics and/or

economic profile and do not typically require any principal repayment prior to the maturity date.

This loan portfolio is generally considered to be investment grade.

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

As of June 30, 2022, the Company had $ 763 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 March 31, 2022, the Company had no outstanding commitments to fund CMLs.

As of June 30, 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 $ 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.

The carrying value for MMLs included $ 15 million and $ 11 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of June 30, 2022, and December 31, 2021, respectively.

As of June 30, 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.

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

As of June 30, 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 March 31, 2022 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator .

The following tables present as of June 30, 2022 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator .

Transitional Real Estate Loans

38 unchanged sentences

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 $ 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.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $ 17.6 billion amortized cost as of June 30, 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 may be impaired if the fair value falls below amortized cost.

The Company regularly reviews its fixed maturity security investments portfolio for declines in fair value.

6 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 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 granted certain loan modifications in its MML and TRE portfolios during the period ended June 30, 2022.

As of June 30, 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 six-month periods ended June 30, 2022 and June 30, 2021.

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

As of June 30, 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 March 31, 2022:

Three Months Ended June 30, 2022:

Balance at March 31, 2022 $ ( 52 ) $ ( 8 ) $ ( 98 ) $ ( 8 ) $ 0 $ ( 9 )

(Addition to) release of allowance for credit

losses ( 1 ) 0 ( 16 ) 0 0 0

Write-offs, net of recoveries 0 0 5 0 0 0

Change in foreign exchange 0 0 0 1 0 1

Balance at June 30, 2022

$ ( 53 ) $ ( 8 ) $ ( 109 ) $ ( 7 ) $ 0 $ ( 8 )

Three Months Ended June 30, 2021:

Balance at March 31, 2021

$ ( 47 ) $ ( 24 ) $ ( 83 ) $ ( 8 ) $ ( 27 ) $ ( 13 )

(Addition to) release of allowance for credit

losses 6 2 7 0 1 0

Balance at June 30, 2021

$ ( 41 ) $ ( 22 ) $ ( 76 ) $ ( 8 ) $ ( 26 ) $ ( 13 )

Six Months Ended June 30, 2022:

Balance at December 31, 2021

2 unchanged sentences

losses 15 2 ( 18 ) 0 0 2

Write-offs, net of recoveries 0 0 5 0 0 0

Change in foreign exchange 0 0 0 1 0 3

Balance at March 31, 2022

Balance at June 30, 2022

$ ( 53 ) $ ( 8 ) $ ( 109 ) $ ( 7 ) $ 0 $ ( 8 )

Three Months Ended March 31, 2021:

Six Months Ended June 30, 2021:

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

2 unchanged sentences

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

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

Balance at June 30, 2021

$ ( 41 ) $ ( 22 ) $ ( 76 ) $ ( 8 ) $ ( 26 ) $ ( 13 )

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

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

The estimate of credit losses for loan commitments as of June 30, 2022 was $ 30 million.

Other Investments

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

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

(In millions) June 30,

2022 December 31, 2021

Other investments:

8 unchanged sentences

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.

As of June 30, 2022, the Company had $ 1.6 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

1 unchanged sentence

For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature.

The Company has not, nor has it been, required to purchase any securities issued in the future by these VIEs.

The Company is not, nor has it been, required to purchase any securities issued in the future by these VIEs.

The Company's ownership interest in VIEs is limited to holding the obligations issued by them.

6 unchanged sentences

Investments in Consolidated Variable Interest Entities

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions) Amortized

27 unchanged sentences

Investments in Variable Interest Entities Not Consolidated

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions) Amortized

26 unchanged sentences

Remaining Contractual Maturity of the Agreements

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions) Overnight

10 unchanged sentences

Other corporate 864 0 864 1,112 0 1,112

Equity securities 48 0 48 0 0 0

Total borrowings $ 1,016 $ 2,245 $ 3,261 $ 1,242 $ 920 $ 2,162

4 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 $ 7.0 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.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 5.7 billion and $ 6.8 billion at June 30, 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 March 31, 2022, and December 31, 2021, respectively.

The Company did no t have any repurchase agreements or repurchase-to-maturity transactions outstanding as of June 30, 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.

57 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.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions) Asset

30 unchanged sentences

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).

The remaining maximum length of time for which these cash flows are hedged is approximately five years .

The remaining maximum length of time for which these cash flows are hedged is approximately four years .

The derivatives in the Company's consolidated VIEs that are not designated as accounting hedges are discussed in the "non-qualifying strategies" section of this note.

21 unchanged sentences

Net Investment Gains (Losses) Recognized for Fair Value Hedge

Three Months Ended March 31, 2022:

Three Months Ended June 30, 2022:

Foreign currency options Fixed maturity securities $ ( 11 ) $ ( 11 ) $ 0 $ 0 $ 0

Total gains (losses) $ ( 11 ) $ ( 11 ) $ 0 $ 0 $ 0

Three Months Ended March 31, 2021:

Six Months Ended June 30, 2022:

Foreign currency options Fixed maturity securities $ ( 26 ) $ ( 26 ) $ 0 $ 0 $ 0

Total gains (losses) $ ( 26 ) $ ( 26 ) $ 0 $ 0 $ 0

Three Months Ended June 30, 2021:

Foreign currency options Fixed maturity securities $ 49 $ ( 7 ) $ 56 $ ( 55 ) $ 1

Total gains (losses) $ 49 $ ( 7 ) $ 56 $ ( 55 ) $ 1

Six Months Ended June 30, 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 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.

For the three-month and six-month periods ended June 30, 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)

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

2022 December 31, 2021 June 30,

2022 December 31, 2021

Fixed maturity securities $ 2,352 $ 3,038 $ 195 $ 205

3 unchanged sentences

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.

The Company's net investment hedge was effective during the three- and six-month periods ended June 30, 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 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.

As of June 30, 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 March 31,

Three Months Ended June 30,

(In millions) Net Investment Income (1)

37 unchanged sentences

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 March 31, 2022, and an immaterial amount during the three-month period ended March 31, 2021.

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.

(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 June 30, 2022, and an immaterial amount during the three-month period ended June 30, 2021.

In addition, an immaterial amount of losses were reclassified from accumulated other comprehensive income (loss) into earnings during the three-month periods ended June 30, 2022 and 2021, 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) .

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.

Six Months Ended June 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 $ ( 2 ) $ 1 $ 0 $ ( 2 ) $ 1

Total cash flow hedges 0 ( 2 ) (3)

1 0 ( 2 ) (3)

Fair value hedges:

Foreign currency options (3)

Total fair value hedges 0 ( 26 ) 0 0 ( 7 ) 0

Net investment hedge:

Non-derivative hedging

instruments 0 523 0 196

Foreign currency forwards ( 101 ) 823 49 341

Foreign currency options ( 1 ) 0 ( 3 ) 0

Total net investment hedge ( 102 ) 1,346 46 537

Non-qualifying strategies:

Foreign currency swaps 135 99

Foreign currency swaps - VIE ( 16 ) ( 79 )

Foreign currency forwards ( 714 ) ( 443 )

Foreign currency options ( 13 ) 1

Interest rate swaps ( 266 ) 3

Forward bond purchase

commitment - VIE ( 20 ) ( 1 )

Total non-qualifying strategies ( 894 ) ( 420 )

Total $ 0 $ ( 1,024 ) $ 1,347 $ 0 $ ( 383 ) $ 538

(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).

(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 six-month period ended June 30, 2022, and $ 2 of losses during the six-month period ended June 30, 2021.

In addition, an immaterial amount of losses were reclassified from accumulated other comprehensive income (loss) into earnings during the six-month periods ended June 30, 2022 and 2021, 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).

As of June 30, 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

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

As of June 30, 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.

7 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 $ 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 aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $ 1.2 billion and $ 904 million as of June 30, 2022, and December 31, 2021, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on June 30, 2022, the Company estimates that it would be required to post a maximum of $ 270 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

March 31, 2022

June 30, 2022

Gross Amounts Not Offset

50 unchanged sentences

Offsetting of Financial Liabilities and Derivative Liabilities

March 31, 2022

June 30, 2022

Gross Amounts Not Offset

60 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.

March 31, 2022

June 30, 2022

(In millions) Quoted Prices in

60 unchanged sentences

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

March 31, 2022

June 30, 2022

(In millions) Carrying

70 unchanged sentences

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

March 31, 2022

June 30, 2022

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

14 unchanged sentences

Third party pricing vendor 0 1,636 0 1,636

Internal 0 3 0 3

Broker/other 0 2 311 313

25 unchanged sentences

Total equity securities $ 888 $ 71 $ 190 $ 1,149

March 31, 2022

June 30, 2022

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

159 unchanged sentences

Three Months Ended

March 31, 2022

June 30, 2022

Fixed Maturity Securities Equity

2 unchanged sentences

Securities Public

Utilities Sovereign and Supranational Banks/

Institutions Other

Corporate Foreign

Balance, beginning of period $ 318 $ 585 $ 41 $ 60 $ 290 $ 166 $ 0 $ 1,460

Net investment gains (losses) included in

earnings 0 1 0 0 0 ( 6 ) 0 ( 5 )

Unrealized gains (losses) included in other

comprehensive income (loss) ( 54 ) ( 44 ) ( 5 ) ( 2 ) ( 37 ) 0 0 ( 142 )

Purchases, issuances, sales and

Purchases 90 19 0 33 122 33 0 297

Issuances 0 0 0 0 0 0 0 0

Sales 0 0 0 0 0 0 0 0

Settlements ( 36 ) ( 24 ) 0 0 ( 1 ) 0 0 ( 61 )

Transfers into Level 3 0 0 0 0 258 0 0 258

Transfers out of Level 3 ( 7 ) 0 0 0 0 ( 3 ) 0 ( 10 )

Balance, end of period $ 311 $ 537 $ 36 $ 91 $ 632 $ 190 $ 0 $ 1,797

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 $ ( 6 ) $ 0 $ ( 6 )

Three Months Ended

June 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 $ 204 $ 479 $ 68 $ 28 $ 319 $ 122 $ ( 80 ) $ 1,140

Net investment gains (losses) included

in earnings 0 0 0 0 0 13 ( 120 ) ( 107 )

Unrealized gains (losses) included in

other comprehensive income (loss) 0 8 0 0 14 0 0 22

Purchases, issuances, sales and

Purchases 54 0 0 10 0 6 0 70

Issuances 0 0 0 0 0 17 0 17

Sales 0 0 ( 23 ) 0 0 0 0 ( 23 )

Settlements 0 ( 7 ) 0 0 ( 17 ) 0 0 ( 24 )

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

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

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

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 $ ( 120 ) $ ( 120 )

Six Months Ended

June 30, 2022

Fixed Maturity Securities Equity

Securities Derivatives

(In millions) Mortgage-

Securities Public

Utilities Sovereign

20 unchanged sentences

of the period included in earnings $ 0 $ 1 $ 0 $ 0 $ 0 $ ( 2 ) $ 0 $ ( 1 )

Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2021

Fixed Maturity Securities Equity

27 unchanged sentences

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

March 31, 2022

June 30, 2022

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

50 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

17 unchanged sentences

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

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 favorable claims development of $ 365 million for the six-month period ended June 30, 2022 comprises approximately $ 220 million from Japan and $ 145 million from the U.S., representing approximately 60 % and 40 % of the total, respectively.

Excluding the impact of foreign exchange of a loss of approximately $ 41 million from December 31, 2021 to June 30, 2022, the favorable claims development in Japan would have been approximately $ 261 million, representing approximately 72 % of the total.

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

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

During the first six months 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.

Although overall experience is favorable, during the first six months of 2022, there has been an increase in medical hospitalization claims related to COVID-19, mainly due to at-home sickness benefits being utilized in Japan.

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.

1 unchanged sentence

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.

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.

In the first six months 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.

Additionally, refinements to COVID-19 incurred estimates also contributed to the favorable development.

portion of the favorable claims development in the first six months of 2022 includes $ 54 million related to refinements in the estimates for COVID-19 and non-COVID-19 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 $ 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 remaining deferred profit liability of $ 697 million and $ 859 million as of June 30, 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 $ 792 million and $ 937 million as of June 30, 2022 and December 31, 2021, respectively.

The spot yen/dollar exchange rate weakened by approximately 15.9 % and ceded reserves decreased approximately 15.5 % from December 31, 2021 to June 30, 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

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

5 unchanged sentences

Retrocession activities 36 45 77 93

Other 40 30 81 57

Net earned premiums $ 3,849 $ 4,441 $ 8,028 $ 9,034

7 unchanged sentences

Eliminations ( 6 ) ( 8 ) ( 12 ) ( 16 )

Other 40 27 79 50

Benefits and claims, net $ 2,298 $ 2,653 $ 4,785 $ 5,387

1 unchanged sentence

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, with reserves of approximately ¥ 120 billion as of March 31, 2022.

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 June 30, 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 March 31, 2022, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

As of June 30, 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) March 31, 2022 December 31, 2021

(In millions) June 30,

2022 December 31, 2021

3.625 % senior notes due November 2024

36 unchanged sentences

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.

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

A summary of the Company's lines of credit as of June 30, 2022 follows:

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

3 unchanged sentences

None General corporate purposes

Aflac Incorporated unsecured revolving 5 years March 29,

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

¥ 100.0 billion

Aflac Incorporated unsecured revolving 5 years May 9,

2027, or the date commitments are terminated pursuant to an event of default ¥ 100.0 billion

¥ 0.0 billion

A rate per annum equal to (a) Tokyo interbank market rate (TIBOR) plus, the alternative applicable TIBOR margin during the availability period from the closing date to the commitment termination date or (b) the TIBOR rate offered by the agent to major banks in yen for the applicable period plus, the applicable alternative TIBOR margin during the term out period No later than

March 29, 2024 .30 % to .50 %, depending on the Parent Company's debt ratings as of the date of determination

May 10, 2027 .28 % to .45 %, depending on the Parent Company's debt ratings as of the date of determination

General corporate purposes, including a capital contingency plan for the operations of the Parent Company

24 unchanged sentences

Aflac New York (1)

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 April 10, 2023 $ 25 million

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

April 11, 2023 None General corporate purposes

uncommitted revolving 364 days March 21, 2023 $ 15 million

2 unchanged sentences

(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

14 unchanged sentences

Aflac GI Holdings LLC (1)

uncommitted revolving 364 days July 18, 2022 $ 30 million

uncommitted revolving 364 days July 18, 2022 (2)

USD three-month LIBOR plus 75 basis points per annum No later than July 18, 2022 None General corporate purposes

(1) Intercompany credit agreement

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.

(2) Renewed in July 2022 with an expiration date of July 17, 2023

The Company was in compliance with all of the covenants of its notes payable and lines of credit at June 30, 2022.

No events of default or defaults occurred during the six-month period ended June 30, 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 three-month periods ended March 31.

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

(In thousands of shares) 2022 2021

17 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands) 2022 2021 2022 2021

1 unchanged sentence

Share Repurchase Program

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.

During the first six months of 2022, the Company repurchased 19.2 million shares of its common stock for $ 1.2 billion as part of its share repurchase program.

During the first six months of 2021, the Company repurchased 22.6 million shares of its common stock for $ 1.2 billion as part of its share repurchase program.

As of June 30, 2022, a remaining balance of 36.6 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

March 31, 2022

June 30, 2022

(In millions) Unrealized Foreign

6 unchanged sentences

Adjustment Total

Balance at December 31, 2021 $ ( 2,013 ) $ 9,602 $ ( 30 ) $ ( 166 ) $ 7,393

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

Other comprehensive

8 unchanged sentences

income (loss) ( 807 ) ( 2,857 ) 0 3 ( 3,661 )

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

Balance at June 30, 2022 $ ( 3,289 ) $ 2,930 $ ( 29 ) $ ( 160 ) $ ( 548 )

All amounts in the table above are net of tax.

Three Months Ended

March 31, 2021

June 30, 2021

(In millions) Unrealized Foreign

5 unchanged sentences

on Derivatives Pension Liability Adjustment Total

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

Other comprehensive

income (loss) before

reclassification 13 1,202 ( 1 ) ( 6 ) 1,208

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 ( 4 ) 1 7 4

Net current-period other

comprehensive

income (loss) 13 1,198 0 1 1,212

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

All amounts in the table above are net of tax.

Six Months Ended

June 30, 2022

(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 December 31, 2021 $ ( 2,013 ) $ 9,602 $ ( 30 ) $ ( 166 ) $ 7,393

9 unchanged sentences

income (loss) ( 1,276 ) ( 6,672 ) 1 6 ( 7,941 )

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

Balance at June 30, 2022 $ ( 3,289 ) $ 2,930 $ ( 29 ) $ ( 160 ) $ ( 548 )

All amounts in the table above are net of tax.

Six Months Ended

June 30, 2021

(In millions) Unrealized Foreign

Currency Translation

Gains (Losses) Unrealized

Gains (Losses)

on Fixed Maturity Securities Unrealized

Gains (Losses)

on Derivatives Pension Liability Adjustment Total

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

Other comprehensive

income (loss) before

reclassification ( 552 ) ( 381 ) ( 1 ) ( 10 ) ( 944 )

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 12 2 15 29

Net current-period other

comprehensive

income (loss) ( 552 ) ( 369 ) 1 5 ( 915 )

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

All amounts in the table above are net of tax.

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

1 unchanged sentence

(In millions) Three Months Ended

March 31, 2022

June 30, 2022

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

16 unchanged sentences

(In millions) Three Months Ended

March 31, 2021

June 30, 2021

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

4 unchanged sentences

$ 4 Net of tax

Unrealized gains (losses) on derivatives $ ( 1 ) Net investment gains (losses)

0 Tax (expense) or benefit (1)

$ ( 1 ) Net of tax

Amortization of defined benefit pension items:

6 unchanged sentences

(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) Six Months Ended

June 30, 2022

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

Statements of Earnings

Unrealized gains (losses) on available-for-sale

securities $ 192 Net investment gains (losses)

( 40 ) Tax (expense) or benefit (1)

$ 152 Net of tax

Unrealized gains (losses) on derivatives $ ( 1 ) Net investment gains (losses)

0 Tax (expense) or benefit (1)

$ ( 1 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 11 ) Acquisition and operating expenses (2)

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

2 Tax (expense) or benefit (1)

$ ( 9 ) Net of tax

Total reclassifications for the period $ 142 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) Six Months Ended

June 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 $ ( 15 ) Net investment gains (losses)

3 Tax (expense) or benefit (1)

$ ( 12 ) Net of tax

Unrealized gains (losses) on derivatives $ ( 2 ) Net investment gains (losses)

0 Tax (expense) or benefit (1)

$ ( 2 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 19 ) Acquisition and operating expenses (2)

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

4 Tax (expense) or benefit (1)

$ ( 15 ) Net of tax

Total reclassifications for the period $ ( 29 ) 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).

SHARE-BASED COMPENSATION

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

As of June 30, 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.

The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors.

The Plan, as amended on February 14, 2017, allows for a maximum number of shares issuable over its term of 75 million shares including 38 million shares that may be awarded in respect of awards other than options or stock appreciation rights.

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

1 unchanged sentence

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

As of March 31, 2022, approximately 35.8 million shares were available for future grants under this plan.

As of June 30, 2022, approximately 35.7 million shares were available for future grants under this plan.

The ISOs and NQSOs have a term of 10 years, and the share-based awards generally vest upon time-based conditions or time and performance-based conditions.

1 unchanged sentence

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

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

As of June 30, 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.

2 unchanged sentences

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 March 31, 2022.

The following table provides information on stock options outstanding and exercisable at June 30, 2022.

Option Shares

6 unchanged sentences

Exercisable 1,792 3.1 43 31.61

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 received cash from the exercise of stock options in the amount of $ 9 million during the first six months of 2022, compared with $ 18 million in the first six months of 2021.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 17 million in the first six months of 2022, compared with $ 15 million in the first six months of 2021.

As of June 30, 2022, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 62 million, of which $ 34 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 1.7 years.

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

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

The following table summarizes restricted stock activity during the six-month period ended June 30, 2022.

(In thousands of shares) Shares Weighted-Average

6 unchanged sentences

( 1,117 ) 49.66

Restricted stock at March 31, 2022

Restricted stock at June 30, 2022

2,437 $ 56.00

23 unchanged sentences

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 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.

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 $ 2 million and $ 7 million for the three-month periods and $ 6 million and $ 14 million for the six-month periods ended June 30, 2022 and 2021, respectively.

Total net periodic benefit cost includes the following components:

Three Months Ended March 31,

Three Months Ended June 30,

Pension Benefits Other

8 unchanged sentences

Net periodic (benefit) cost $ 4 $ 5 $ 10 $ 13 $ 0 $ 2

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.

Six Months Ended June 30,

Pension Benefits Other

Postretirement Benefits

(In millions) 2022 2021 2022 2021 2022 2021

Components of net periodic

benefit cost:

Service cost $ 10 $ 12 $ 13 $ 14 $ 0 $ 0

Interest cost 3 2 17 16 0 1

Expected return on plan assets ( 4 ) ( 4 ) ( 21 ) ( 20 ) 0 0

Amortization of net actuarial loss 0 1 10 16 1 2

Net periodic (benefit) cost $ 9 $ 11 $ 19 $ 26 $ 1 $ 3

During the six months ended June 30, 2022, Aflac Japan contributed approximately $ 17 million (using the weighted-average yen/dollar exchange rate for the six-month period ended June 30, 2022) to the Japanese funded defined benefit plan, and Aflac U.S.

did not make a contribution to the U.S.

funded defined benefit plan.

2 unchanged sentences

COMMITMENTS AND CONTINGENT LIABILITIES

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).

Effective April 1, 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 June 30, 2022, the agreement has a remaining term of four years and an aggregate remaining cost of ¥ 7.3 billion ($ 54 million using the June 30, 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 March 31, 2022.

The Company paid a majority of these assessments by June 30, 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 three-month periods ended March 31, 2022 and 2021 were immaterial.

Guaranty fund assessments for the six-month periods ended June 30, 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