What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-02 compared with 2022-08-02 · 424 added, 200 removed, 2145 unchanged (23% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

25 unchanged sentences

Cash dividends per share $ .40 $ .33 $ 1.20 $ .99

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

(1) Includes expense of $ 48 in the nine-month period ended September 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

September 30, Nine Months Ended

September 30,

(In millions - Unaudited) 2022 2021 2022 2021

18 unchanged sentences

Consolidated Balance Sheets

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

(Unaudited) December 31,

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

Investments and cash:

53 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

41 unchanged sentences

(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, 2022 $ 135 $ 2,589 $ 43,547 $ ( 548 ) $ ( 19,336 ) $ 26,387

Net earnings 0 0 1,596 0 0 1,596

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 1,166 ) 0 ( 1,166 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 ( 1,799 ) 0 ( 1,799 )

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 2 0 2

Dividends to shareholders (1)

($ .40 per share)

0 0 ( 251 ) 0 0 ( 251 )

Exercise of stock options 0 3 0 0 0 3

Share-based compensation 0 14 0 0 0 14

Purchases of treasury stock 0 0 0 0 ( 651 ) ( 651 )

Treasury stock reissued 0 9 0 0 8 17

Balance at September 30, 2022 $ 135 $ 2,615 $ 44,892 $ ( 3,511 ) $ ( 19,979 ) $ 24,152

(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'

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

39 unchanged sentences

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 (1)

($ .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

(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 Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions - Unaudited) 2022 2021

67 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 % 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.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 72 % and 69 % of the Company's total revenues in the nine-month periods ended September 30, 2022 and 2021, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 79 % at September 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.

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

For example, economic conditions have acted as headwinds to sales in the first nine months of 2022, particularly in Japan and most notably in the first quarter with a gradually decreasing impact in the second and third quarters, pressuring net earned premiums.

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,

continued widening of the differential between U.S.

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, have led to slower economic growth in Japan and the U.S.

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.

20 unchanged sentences

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.

As part of working toward implementation of the updated standard, the Company has made 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, 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).

1 unchanged sentence

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%.

For any cohorts that have a net premium ratio greater than 100% on the Transition Date, the net premium ratio is 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:

3 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 $ 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.

Based on the modified retrospective transition method, the Transition Date impact from adoption will result in a decrease in AOCI of approximately $ 18.6 billion and a decrease in retained earnings of approximately $ 0.3 billion.

The Company has designed its discount rate methodology for both the U.S.

and Japan insurance business.

1 unchanged sentence

and Japan LFPB, with each curve intended to be reflective of the currency, tenor and characteristics of the insurance liabilities.

Discount rates comprising each curve will be determined by reference to upper-medium grade (low credit risk) fixed-income instrument yields that are intended to reflect the duration characteristics of the corresponding insurance liabilities.

The Company intends to use for these yields single-A rated fixed income instruments with credit ratings based on international rating standards.

Where only local ratings are available, the Company 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 denominated.

For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company will use various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to:

Discount rates comprising each curve will be determined by reference to upper-medium grade (low credit risk) fixed-income instrument yields that reflect the duration characteristics of the corresponding insurance liabilities.

The Company uses for these yields single-A rated fixed income instruments with credit ratings based on international rating standards.

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

The methodology is designed to prioritize observable inputs based on market data available in the local debt markets where the respective policies were issued in the currency in which the policies are denominated.

For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company uses various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to:

(i) for tenors where there is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-specific single-A credit spreads and applying them to risk-free government rates;

(ii) for tenors where there is very limited or no observable single-A or similar market data, interpolation and extrapolation techniques.

Discount rates will be updated each reporting period.

Discount rates are updated each reporting period.

Long duration insurance contracts issued by the Company will be grouped into annual calendar-year cohorts based on the contract issue date, reportable segment, legal entity and product type.

1 unchanged sentence

Riders will be combined with base policies with similar insurance coverage types and the same contract issue years.

In addition to the preliminary policy elections related to cohorts and LFPB discount rates directly impacting Transition Date AOCI, the Company has also advanced the following accounting policies relevant to the post-Transition Date accounting:

In addition to the policy elections related to cohorts and LFPB discount rates directly impacting Transition Date AOCI, the Company has also made the following accounting policy elections relevant to the post-Transition Date accounting:

• All payments under an insurance contract including future expected claims and already incurred claims (i.e., claim liabilities) and related expenses will be measured together as an integrated reserve.

This will result in the following presentation changes in the consolidated balance sheet:

(i) unpaid policy claims on long-duration insurance contracts and accrued claim adjustment expenses presented separately pre-adoption will be presented as part of LFPB;

and (ii) liabilities for fixed annuity benefits will be excluded from the integrated reserve, as they are outside the scope of the amended standard, and will be presented in other policyholders' funds.

• Cash flow assumptions underlying insurance liabilities will be evaluated as to whether an update is needed at least annually in the same fiscal quarter each year.

3 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 policy 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 elected 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.

2 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 paid claims;

• The Company has made an 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.

Under the amended guidance, certain insurance commissions and expenses must be excluded from the expense assumption, which will result in an increase in the deferred profit liability on limited-payment products compared to current guidance.

In conjunction with the adoption of the updated standard effective January 1, 2023, the Company will change its practice of recording the change in the deferred profit liability on products with limited-payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statement of earnings.

This reclassification will have no impact on net earnings.

The change in presentation will be made for all comparative periods presented.

The Company has created a governance framework and a plan to support implementation of the updated standard.

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.

As part of its implementation plan, the Company continues to advance 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 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.

Impacts on Previously Reported Results

Impacts from the adoption of ASU 2018-12 to the Company's previously reported results are expected to be as follows:

Consolidated Statement of Earnings

Year Ended December 31, 2021

(In millions) As

Reported Adoption

(Unaudited) As

Net earned premiums, principally supplemental health insurance (1)

$ 17,647 $ ( 552 ) $ 17,095

Net investment income 3,818 0 3,818

Net investment gains (losses) 468 0 468

Other income (loss) 173 0 173

Total revenues 22,106 ( 552 ) 21,554

Benefits and expenses:

Benefits and claims, excluding reserve remeasurement (1)(2)

10,576 47 10,623

Reserve remeasurement (gains) losses (3)

0 ( 147 ) ( 147 )

Total benefits and claims, net 10,576 ( 100 ) 10,476

Acquisition and operating expenses:

Amortization of deferred policy acquisition costs (4)

1,170 ( 335 ) 835

Insurance commissions 1,256 0 1,256

Insurance and other expenses (5)

3,544 ( 3 ) 3,541

Interest expense 238 0 238

Total acquisition and operating expenses 6,208 ( 338 ) 5,870

Total benefits and expenses 16,784 ( 438 ) 16,346

Earnings before income taxes 5,322 ( 114 ) 5,208

Income taxes (6)

997 ( 20 ) 977

Net earnings $ 4,325 $ ( 94 ) $ 4,231

(1) Adjustment reflects a $ 489 increase in the deferred profit liability on limited-payment products under the updated standard combined with the reclassification of a $ 63 increase in deferred profit liability previously reported in benefits and claims and reclassified to net earned premiums in conjunction with adoption of the updated standard.

(2) Adjustment reflects 2021 activity for the effect of calculating benefits using revised net premium ratios and best estimate future cash flow projections, excluding reserve remeasurement impacts.

(3) Adjustment reflects the reserve remeasurement on the liability for future policy benefits due to applying revised net premium ratios based on updated historical actuals and revised assumptions to past periods each quarter under the updated standard.

(4) Adjustment reflects a decrease in DAC amortization due to DAC assets being amortized over the expected life of a contract and no interest accretion recorded under the updated standard.

(5) Adjustment reflects 2021 activity for the change in accrued claim adjustment expenses that are included in benefits and claims as a component of the integrated reserve under the updated standard.

(6) Adjustment reflects a decrease in income tax expense associated with the decrease in pretax earnings.

Consolidated Balance Sheet

December 31, 2021

(In millions) As

Reported Adoption

(Unaudited) As

Investments and cash:

Fixed maturity securities available for sale, at fair value $ 94,206 $ 0 $ 94,206

Fixed maturity securities available for sale - consolidated variable interest entities, at fair value

4,490 0 4,490

Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses

22,000 0 22,000

Equity securities, at fair value 1,603 0 1,603

Commercial mortgage and other loans, net of allowance for credit losses 11,786 0 11,786

Other investments 3,842 0 3,842

Cash and cash equivalents 5,051 0 5,051

Total investments and cash 142,978 0 142,978

Receivables (1)

Accrued investment income 737 0 737

Deferred policy acquisition costs (2)

9,525 323 9,848

Property and equipment 538 0 538

3,071 275 3,346

Total assets $ 157,542 $ 608 $ 158,150

Liabilities and shareholders’ equity:

Policy liabilities:

Future policy benefits (1),(4),(5),(6)

$ 90,588 $ 25,376 $ 115,964

Unpaid policy claims (4),(7)

4,836 ( 4,685 ) 151

Unearned premiums 2,576 0 2,576

Other policyholders’ funds (7)

7,072 568 7,640

Total policy liabilities 105,072 21,259 126,331

Income taxes (8)

4,339 ( 4,309 ) 30

Payables for return of cash collateral on loaned securities 2,162 0 2,162

Notes payable and lease obligations 7,956 0 7,956

4,760 ( 120 ) 4,640

Total liabilities 124,289 16,830 141,119

Commitments and contingent liabilities

Shareholders’ equity:

Common stock 135 0 135

Additional paid-in capital 2,529 0 2,529

Retained earnings (9)

41,381 ( 418 ) 40,963

Accumulated other comprehensive income (loss):

Unrealized foreign currency translation gains (losses) (10)

( 2,013 ) 28 ( 1,985 )

Unrealized gains (losses) on fixed maturity securities 9,602 0 9,602

Unrealized gains (losses) on derivatives ( 30 ) 0 ( 30 )

Effect of changes in discount rate assumptions (11)

0 ( 15,832 ) ( 15,832 )

Pension liability adjustment ( 166 ) 0 ( 166 )

Treasury stock ( 18,185 ) 0 ( 18,185 )

Total shareholders’ equity 33,253 ( 16,222 ) 17,031

Total liabilities and shareholders’ equity $ 157,542 $ 608 $ 158,150

(1) Adjustment for the reclassification of ceded reserves from future policy benefits to receivables in conjunction with adoption of the updated standard.

(2) Adjustment reflects an increase in DAC assets as a result of DAC being amortized over the expected life of a contract and no interest accretion recorded under the updated standard.

(3) Adjustment reflects the discounting of reinsurance recoverables for retrocession activities under the updated standard.

(4) Adjustment for the reclassification of unpaid policy claims for long-duration contracts to future policy benefits as a component of the integrated reserve.

(5) Adjustment for the reclassification of accrued claim adjustment expenses from other liabilities to future policy benefits as a component of the integrated reserve.

(6) Adjustment reflects the impacts of adoption and 2021 activity under the updated standard, including a $ 490 increase in the deferred profit liability on limited-payment products under the updated standard as discussed above.

(7) Adjustment for the reclassification of the claims liability for certain fixed annuity benefits from unpaid policy claims to other policyholders' funds.

(8) Adjustment reflects the tax effects from adoption and 2021 activity under the updated standard.

(9) Adjustment reflects the impacts from adoption of ($ 324 ) as a result of capping the net premium ratio at 100% for cohorts that are in a loss position at transition, and the decrease in current year net earnings of $( 94 ) under the updated standard.

(10) Adjustment reflects foreign currency translation related to the updated standard, as applicable.

(11) Adjustment reflects the impacts from adoption of ($ 18,570 ) and 2021 activity of $ 2,738 due to changes in the discount rate assumptions under the updated standard.

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

17 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

16 unchanged sentences

Total revenues $ 4,820 $ 5,237 $ 15,492 $ 16,670

(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.

(1) Amortized hedge costs of $ 28 and $ 20 for the three-month periods and $ 84 and $ 55 for the nine-month periods ended September 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 $( 25 ) and $( 7 ) for the three-month periods and $( 37 ) and $( 24 ) for the nine-month periods ended September 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 ) and $ 1 for the three-month periods and $ 1 and $ 1 for the nine-month periods ended September 30, 2022, and 2021, 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 $ 19 and $ 13 for the three-month periods and $ 44 and $ 45 for the nine-month periods ended September 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 $ 19 and $ 5 for the three-month periods and $ 61 and $ 35 for the nine-month periods ended September 30, 2022, and 2021, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $ 19 and $ 10 for the three-month periods and $ 63 and $ 35 for the nine-month periods ended September 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

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

14 unchanged sentences

adjusted earnings ( 53 ) ( 14 ) ( 147 ) ( 8 )

(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.

(4) Amortized hedge income of $ 19 and $ 13 for the three-month periods and $ 44 and $ 45 for the nine-month periods ended September 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 $ 13 and $ 14 for the three-month periods and $ 38 and $ 41 for the nine-month periods ended September 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 $ 19 and $ 5 for the three-month periods and $ 61 and $ 35 for the nine-month periods ended September 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 and $ 82 and $ 89 for the six-month periods ended June 30, 2022, and 2021, respectively, of interest expense on debt.

(7) Includes $ 45 and $ 40 for the three-month periods and $ 127 and $ 130 for the nine-month periods ended September 30, 2022, and 2021, respectively, of interest expense on debt.

Assets were as follows:

(In millions) June 30,

(In millions) September 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.

June 30, 2022

September 30, 2022

(In millions)

47 unchanged sentences

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

June 30, 2022

September 30, 2022

(In millions)

25 unchanged sentences

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

(In millions) June 30,

(In millions) September 30,

2022 December 31, 2021

7 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 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.

During the first nine months 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 June 30, 2022, were as follows:

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

(In millions) Amortized

24 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions) Credit

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

23 unchanged sentences

Total net investment gains (losses) $ 199 $ ( 171 ) $ 885 $ 224

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.

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the three-month period ended September 30, 2022, that relate to equity securities still held at the September 30, 2022 reporting date, were $ 21 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, 2022, that relate to equity securities still held at the September 30, 2022 reporting date, were $ 313 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) June 30,

(In millions) September 30,

2022 December 31,

3 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 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

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, 2022 and December 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

September 30, 2022

Total Less than 12 months 12 months or longer

76 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) June 30, 2022 December 31, 2021

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

Amortized Cost % of Total Amortized Cost % of Total

26 unchanged sentences

This loan portfolio is generally considered to be investment grade.

As of June 30, 2022, the Company had $ 763 million in outstanding commitments to fund TREs.

As of September 30, 2022, the Company had $ 982 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 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.

Middle Market Loans

1 unchanged sentence

These loans are generally considered to be below investment grade.

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.

The carrying value for MMLs included $ 14 million and $ 11 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of September 30, 2022, and December 31, 2021, respectively.

As of September 30, 2022, the Company had commitments of approximately $ 442 million 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 June 30, 2022, the Company's reinsurance counterparties were rated A+.

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

The following tables present as of September 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 $ 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.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $ 16.6 billion amortized cost as of September 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.

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 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 granted certain loan modifications in its MML and TRE portfolios during the nine-month period ended September 30, 2022.

As of September 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 nine-month periods ended September 30, 2022 and 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 June 30, 2022 and December 31, 2021, the Company had an immaterial amount of loans and fixed maturity securities on nonaccrual status.

As of September 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 June 30, 2022:

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

Three Months Ended September 30, 2022:

Balance at June 30, 2022 $ ( 53 ) $ ( 8 ) $ ( 109 ) $ ( 7 ) $ 0 $ ( 8 )

(Addition to) release of allowance for credit

2 unchanged sentences

Change in foreign exchange 0 0 0 1 0 0

Balance at June 30, 2022

Balance at September 30, 2022

$ ( 55 ) $ ( 10 ) $ ( 117 ) $ ( 6 ) $ 0 $ ( 8 )

Three Months Ended June 30, 2021:

Balance at March 31, 2021

Three Months Ended September 30, 2021:

Balance at June 30, 2021

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

1 unchanged sentence

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

Balance at June 30, 2021

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

Balance at September 30, 2021

$ ( 59 ) $ ( 17 ) $ ( 89 ) $ ( 9 ) $ 0 $ ( 13 )

Six Months Ended June 30, 2022:

Nine Months Ended September 30, 2022:

Balance at December 31, 2021

4 unchanged sentences

Change in foreign exchange 0 0 0 2 0 3

Balance at June 30, 2022

Balance at September 30, 2022

$ ( 55 ) $ ( 10 ) $ ( 117 ) $ ( 6 ) $ 0 $ ( 8 )

Six Months Ended June 30, 2021:

Nine Months Ended September 30, 2021:

Balance at December 31, 2020 $ ( 63 ) $ ( 32 ) $ ( 85 ) $ ( 10 ) $ ( 38 ) $ ( 12 )

2 unchanged sentences

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

Balance at June 30, 2021

Balance at September 30, 2021

$ ( 59 ) $ ( 17 ) $ ( 89 ) $ ( 9 ) $ 0 $ ( 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 June 30, 2022 was $ 30 million.

The estimate of credit losses for loan commitments as of September 30, 2022 was $ 26 million.

Other Investments

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

(In millions) June 30,

(In millions) September 30,

2022 December 31, 2021

9 unchanged sentences

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

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

As of September 30, 2022, the Company had $ 2.1 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

10 unchanged sentences

Investments in Consolidated Variable Interest Entities

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions) Amortized

27 unchanged sentences

Investments in Variable Interest Entities Not Consolidated

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions) Amortized

26 unchanged sentences

Remaining Contractual Maturity of the Agreements

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions) Overnight

17 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 $ 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.

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 September 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 June 30, 2022, and December 31, 2021, respectively.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions) Asset

23 unchanged sentences

Interest rate swaps 11,130 0 590 3,500 0 54

Forward bond purchase commitment - VIE 14 0 1 0 0 0

Total non-qualifying strategies 28,018 308 2,084 27,600 590 1,612

16 unchanged sentences

dollar-denominated available-for-sale securities held in Aflac Japan.

For these hedging relationships, the Company excludes time value from the assessment of hedge

effectiveness and recognizes changes in the intrinsic value of the swaptions in current earnings within net investment income.

For these hedging relationships, the Company excludes time value from the assessment of hedge effectiveness and recognizes changes in the intrinsic value of the swaptions in current earnings within net investment income.

The change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into earnings (net investment income) over its legal term.

9 unchanged sentences

Net Investment Gains (Losses) Recognized for Fair Value Hedge

Three Months Ended June 30, 2022:

Three Months Ended September 30, 2022:

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

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

Six Months Ended June 30, 2022:

Nine Months Ended September 30, 2022:

Foreign currency options Fixed maturity securities $ ( 41 ) $ ( 41 ) $ 0 $ 0 $ 0

Total gains (losses) $ ( 41 ) $ ( 41 ) $ 0 $ 0 $ 0

Three Months Ended June 30, 2021:

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

Six Months Ended June 30, 2021:

Nine Months Ended September 30, 2021:

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

For the three-month and nine-month periods ended September 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)

2022 December 31, 2021 June 30,

September 30,

2022 December 31, 2021 September 30,

2022 December 31, 2021

4 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- and six-month periods ended June 30, 2022 and 2021, respectively.

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

As of September 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 June 30,

Three Months Ended September 30,

(In millions) Net Investment Income (1)

15 unchanged sentences

Foreign currency options (3)

Interest rate swaptions (3)

0 0 0 ( 1 ) ( 1 ) 1

Total fair value hedges 0 ( 15 ) 0 ( 1 ) ( 6 ) 1

9 unchanged sentences

Foreign currency forwards ( 252 ) ( 84 )

Foreign currency options ( 3 ) ( 15 )

Interest rate swaps ( 257 ) ( 9 )

8 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 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.

(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, 2022, and $ 1 of losses during the three-month period ended September 30, 2021.

In addition, an immaterial amount of losses were reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended September 30, 2022, and $ 1 of losses during the three-month period ended September 30, 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) .

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) Net Investment Income (1)

15 unchanged sentences

Foreign currency options (3)

( 41 ) ( 12 )

Interest rate swaptions (3)

0 0 0 ( 1 ) ( 1 ) 1

Total fair value hedges 0 ( 41 ) 0 ( 1 ) ( 13 ) 1

20 unchanged sentences

(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.

(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, 2022, and $ 3 of losses during the nine-month period ended September 30, 2021.

In addition, $ 1 of losses were reclassified from accumulated other comprehensive income (loss) into earnings during the nine-month period ended September 30, 2022, and $ 1 of losses during the nine-month period ended September 30, 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 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.

As of September 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 June 30, 2022, all of the Company's derivative agreement counterparties were investment grade.

As of September 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 $ 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 aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $ 1.5 billion and $ 904 million as of September 30, 2022, and December 31, 2021, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on September 30, 2022, the Company estimates that it would be required to post a maximum of $ 77 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

June 30, 2022

September 30, 2022

Gross Amounts Not Offset

50 unchanged sentences

Offsetting of Financial Liabilities and Derivative Liabilities

June 30, 2022

September 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.

June 30, 2022

September 30, 2022

(In millions) Quoted Prices in

27 unchanged sentences

Interest rate swaps 0 590 0 590

Forward bond purchase commitment 0 1 0 1

Total liabilities $ 0 $ 2,088 $ 0 $ 2,088

31 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.

June 30, 2022

September 30, 2022

(In millions) Carrying

53 unchanged sentences

price quotes and valuations from third party pricing vendors (including quoted market prices readily available from public exchange markets), in-house valuations and non-binding price quotes the Company obtains from outside brokers.

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

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

A third party pricing vendor has developed valuation models to determine fair values of privately issued securities and derivatives associated with VIEs.

Starting in June 2021 and July 2022, respectively, 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.

These models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve.

This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the security by discounting those loss adjusted cash flows.

These models take into consideration any unique characteristics of the securities or derivatives and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve.

In cases where a credit curve cannot be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including:

10 unchanged sentences

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

June 30, 2022

September 30, 2022

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

42 unchanged sentences

Total equity securities $ 801 $ 66 $ 197 $ 1,064

June 30, 2022

September 30, 2022

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

159 unchanged sentences

Three Months Ended

June 30, 2022

September 30, 2022

Fixed Maturity Securities Equity

23 unchanged sentences

Three Months Ended

June 30, 2021

September 30, 2021

Fixed Maturity Securities Equity

22 unchanged sentences

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

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Fixed Maturity Securities Equity

24 unchanged sentences

of the period included in earnings $ 0 $ 1 $ 0 $ 0 $ 0 $ ( 4 ) $ 0 $ ( 3 )

Six Months Ended

June 30, 2021

Nine Months Ended

September 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.

June 30, 2022

September 30, 2022

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

50 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(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 $ 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 favorable claims development of $ 512 million for the nine-month period ended September 30, 2022 comprises approximately $ 321 million from Japan and $ 191 million from the U.S., representing approximately 63 % and 37 % of the total, respectively.

Excluding the impact of foreign exchange of a loss of approximately $ 83 million from December 31, 2021 to September 30, 2022, the favorable claims development in Japan would have been approximately $ 404 million, representing approximately 79 % of the total.

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

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

During the first nine 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.

Although overall experience is favorable, during the first nine months of 2022, there has been an increase in medical hospitalization claims related to COVID-19, mainly due to a wider scope of "deemed hospitalization" 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.

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.

In the first nine 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.

1 unchanged sentence

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.

portion of the favorable claims development in the first nine months of 2022 includes $ 63 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 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.

2 unchanged sentences

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

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 remaining deferred profit liability of $ 646 million and $ 859 million as of September 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 $ 761 million and $ 937 million as of September 30, 2022 and December 31, 2021, respectively.

The spot yen/dollar exchange rate weakened by approximately 20.6 % and ceded reserves decreased approximately 19.1 % from December 31, 2021 to September 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

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

19 unchanged sentences

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

As of September 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) June 30,

(In millions) September 30,

2022 December 31,

3.625 % senior notes due November 2024

3.625 % senior notes paid September 2022

3.25 % senior notes due March 2025 (1)

9 unchanged sentences

.932 % senior notes due January 2027 (principal amount ¥ 60.0 billion)

1.075 % senior notes due September 2029 (principal amount ¥ 33.4 billion)

.500 % senior notes due December 2029 (principal amount ¥ 12.6 billion)

4 unchanged sentences

.750 % senior notes due March 2032 (principal amount ¥ 20.7 billion)

1.320 % senior notes due December 2032 (principal amount ¥ 21.1 billion)

.844 % senior notes due April 2033 (principal amount ¥ 12.0 billion)

3 unchanged sentences

1.039 % senior notes due April 2036 (principal amount ¥ 10.0 billion)

1.594 % senior notes due September 2037 (principal amount ¥ 6.5 billion)

1.750 % senior notes due October 2038 (principal amount ¥ 8.9 billion)

4 unchanged sentences

1.560 % senior notes due April 2051 (principal amount ¥ 20.0 billion)

2.144 % senior notes due September 2052 (principal amount ¥ 12.0 billion)

Yen-denominated loans:

Variable interest rate loan due September 2026 ( .42 % in 2022 and .41 % in 2021,

principal amount ¥ 5.0 billion)

Variable interest rate loan due September 2029 ( .57 % in 2022 and .56 % in 2021,

principal amount ¥ 25.0 billion)

Variable interest rate loan due August 2027 ( .34 % in 2022, principal amount

¥ 11.7 billion)

Variable interest rate loan due August 2029 ( .44 % in 2022 and .41 % in 2021,

principal amount ¥ 25.3 billion in 2022 and ¥ 5.0 billion in 2021)

Variable interest rate loan due August 2032 ( .59 % in 2022 and .56 % in 2021,

principal amount ¥ 70.0 billion in 2022 and ¥ 25.0 billion in 2021)

Finance lease obligations payable through 2028 8 12

1 unchanged sentence

Total notes payable and lease obligations $ 7,518 $ 7,956

(1) Redeemed in October 2022

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 June 30, 2022 follows:

In September 2022, the Parent Company issued four series of senior notes totaling ¥ 73.0 billion through a public debt offering under its U.S.

shelf registration statement.

The first series, which totaled ¥ 33.4 billion, bears interest at a fixed rate of 1.075 % per annum, payable semi-annually, and will mature in September 2029.

The second series, which totaled ¥ 21.1 billion, bears interest at a fixed rate of 1.320 % per annum, payable semi-annually, and will mature in December 2032.

The third series, which totaled ¥ 6.5 billion, bears interest at a fixed rate of 1.594 % per annum, payable semi-annually, and will mature in September 2037.

The fourth series, which totaled ¥ 12.0 billion, bears interest at a fixed rate of 2.144 % per annum, payable semi-annually, and will mature in September 2052.

These notes are redeemable at the Parent Company’s option 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.

In addition, the notes maturing in September 2029, December 2032 and September 2037 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after June 14, 2029, June 14, 2032 and March 14, 2037, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In August 2022, the Parent Company renewed a senior term loan facility with a commitment amount totaling ¥ 107.0 billion.

The first tranche of the facility, which totaled ¥ 11.7 billion, bears interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR), or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2027.

The applicable margin ranges between .225 % and .625 %, depending on the Parent Company's debt ratings as of the date of determination.

The second tranche, which totaled ¥ 25.3 billion, bears interest at a rate per annum equal to TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2029.

The applicable margin ranges between .325 % and .725 %, depending on the Parent Company's debt ratings as of the date of determination.

The third tranche, which totaled ¥ 70.0 billion, bears interest at a rate per annum equal to TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2032.

The applicable margin ranges between .475 % and 1.025 %, depending on the Parent Company's debt ratings as of the date of determination.

In September 2022, the Parent Company used a portion of the net proceeds from its September 2022 issuance of various series of senior notes and the August 2022 senior term loan facility to redeem $ 750 million of its 3.625 % senior notes due November 2024.

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

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

6 unchanged sentences

¥ 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

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

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

48 unchanged sentences

Aflac GI Holdings LLC (1)

uncommitted revolving 364 days July 18, 2022 (2)

uncommitted revolving 364 days July 17, 2023 $ 30 million

USD three-month LIBOR plus 75 basis points per annum No later than July 18, 2023 None General corporate purposes

(1) Intercompany credit agreement

(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.

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

No events of default or defaults occurred during the nine-month period ended September 30, 2022.

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

The Company uses a full year estimated annual effective tax rate to calculate total income tax expense on interim quarters.

In addition, the Company discretely recognizes certain other items in the period in which they occur.

The estimated annual effective tax rate is calculated as the ratio of projected total income tax expense divided by projected earnings before income taxes for the year.

The interim period tax expense (or benefit) is the difference between the year-to-date income tax provision and the amounts reported for the previous interim periods of the year.

The Company’s consolidated effective income tax rate on pretax earnings was ( 44.7 )% and 20.2 % for the three-month periods and 1.6 % and 19.7 % for the nine-month periods ended September 30, 2022 and 2021, respectively.

This combined effective tax rate differs from the U.S.

statutory rate primarily due to the impact of the tax accounting method change discussed below, as well as solar, historic and foreign tax credits.

Aflac Japan holds certain U.S.

dollar-denominated assets in a Delaware Statutory Trust (DST).

These assets are mostly comprised of various U.S.

dollar-denominated commercial mortgage loans.

The functional currency of the DST for U.S.

tax purposes was historically the Japanese yen.

In the third quarter of 2022, the Company requested a change in tax accounting method through the Internal Revenue Service's automatic consent procedures to change its functional currency on the DST for U.S.

tax purposes to the U.S.

As a result, foreign currency translation gains or losses on assets held in the DST will no longer be recognized for U.S.

tax purposes.

The Company historically recorded a deferred tax liability for foreign currency translation gains on the DST assets, which was released in the third quarter of 2022 as a result of the functional currency change.

The release of the deferred tax liability resulted in the Company recognizing an income tax benefit of $ 695 million ($ 1.10 per basic and diluted share, respectively) in the third quarter of 2022.

The Company has determined that the change in tax accounting method will impact its combined effective tax rate in future periods as a function of changes in the foreign exchange rate between the Japanese yen and U.S.

In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into U.S.

Effective January 1, 2023, the law will impose a 15 % alternative minimum corporate tax rate and imposes a 1 % excise tax on the Company’s repurchases of its common stock.

The Company does not anticipate any impacts from the new corporate minimum tax rate since its current tax rate is above the 15 % minimum rate.

Further, the Company expects the charges associated with the excise tax to be recognized in equity consistent with other costs related to treasury stock.

SHAREHOLDERS’ EQUITY

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.

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

(In thousands of shares) 2022 2021

15 unchanged sentences

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 EPS for the following periods.

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 EPS for the following periods.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2022 2021 2022 2021

1 unchanged sentence

Share Repurchase Program

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.

During the first nine months of 2022, the Company repurchased 30.2 million shares of its common stock for $ 1.8 billion as part of its 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.

As of September 30, 2022, a remaining balance of 25.6 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into U.S.

Effective January 1, 2023, the law will impose a 1 % excise tax on the Company’s repurchases of its common stock.

Reclassifications from Accumulated Other Comprehensive Income

2 unchanged sentences

Three Months Ended

June 30, 2022

September 30, 2022

(In millions) Unrealized Foreign

6 unchanged sentences

Adjustment Total

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 )

Other comprehensive

8 unchanged sentences

income (loss) ( 1,166 ) ( 1,799 ) 0 2 ( 2,963 )

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

Balance at September 30, 2022 $ ( 4,455 ) $ 1,131 $ ( 29 ) $ ( 158 ) $ ( 3,511 )

All amounts in the table above are net of tax.

Three Months Ended

June 30, 2021

September 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

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

Other comprehensive

8 unchanged sentences

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

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

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

All amounts in the table above are net of tax.

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

(In millions) Unrealized Foreign

17 unchanged sentences

income (loss) ( 2,442 ) ( 8,471 ) 1 8 ( 10,904 )

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

Balance at September 30, 2022 $ ( 4,455 ) $ 1,131 $ ( 29 ) $ ( 158 ) $ ( 3,511 )

All amounts in the table above are net of tax.

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

(In millions) Unrealized Foreign

16 unchanged sentences

income (loss) ( 651 ) ( 630 ) 3 6 ( 1,272 )

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

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

All amounts in the table above are net of tax.

2 unchanged sentences

(In millions) Three Months Ended

June 30, 2022

September 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

June 30, 2021

September 30, 2021

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

15 unchanged sentences

(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 12 for additional details).

(In millions) Six Months Ended

June 30, 2022

(In millions) Nine Months Ended

September 30, 2022

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

15 unchanged sentences

(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 12 for additional details).

(In millions) Six Months Ended

June 30, 2021

(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

16 unchanged sentences

SHARE-BASED COMPENSATION

As of June 30, 2022, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (the Plan).

As of September 30, 2022, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (As Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan).

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

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

The Plan, allows 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.

The Plan allows awards to Company employees for incentive stock options (ISOs), non-qualifying stock options (NQSOs), restricted stock, restricted stock units, and stock appreciation rights.

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

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

As of September 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 June 30, 2022, the only performance-based awards issued and outstanding were restricted stock awards and units.

As of September 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 June 30, 2022.

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

Option Shares

6 unchanged sentences

Exercisable 1,657 3.0 40 31.88

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 received cash from the exercise of stock options in the amount of $ 13 million during the first nine months of 2022, compared with $ 20 million in the first nine months of 2021.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 18 million in the first nine months of 2022, compared with $ 16 million in the first nine months of 2021.

As of September 30, 2022, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 46 million, of which $ 23 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 six-month period ended June 30, 2022.

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

(In thousands of shares) Shares Weighted-Average

6 unchanged sentences

( 1,127 ) 49.58

Restricted stock at June 30, 2022

Restricted stock at September 30, 2022

2,475 $ 56.09

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 $ 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.

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 $ 5 million and $ 4 million for the three-month periods and $ 11 million and $ 18 million for the nine-month periods ended September 30, 2022 and 2021, respectively.

Total net periodic benefit cost includes the following components:

Three Months Ended June 30,

Three Months Ended September 30,

Pension Benefits Other

8 unchanged sentences

Net periodic (benefit) cost $ 4 $ 6 $ 10 $ 11 $ 2 $ 0

Six Months Ended June 30,

Nine Months Ended September 30,

Pension Benefits Other

8 unchanged sentences

Net periodic (benefit) cost $ 13 $ 17 $ 29 $ 37 $ 3 $ 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.

During the nine months ended September 30, 2022, Aflac Japan contributed approximately $ 25 million (using the weighted-average yen/dollar exchange rate for the nine-month period ended September 30, 2022) to the Japanese funded defined benefit plan, and Aflac U.S.

did not make a contribution to the U.S.

4 unchanged sentences

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).

As of September 30, 2022, the agreement has a remaining term of four years and an aggregate remaining cost of ¥ 6.7 billion ($ 46 million using the September 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 June 30, 2022.

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

Guaranty fund assessments for the nine-month periods ended September 30, 2022 and 2021 were immaterial.

SUBSEQUENT EVENTS

In October 2022, the Parent Company used a portion of the net proceeds from its September 2022 issuance of various series of senior notes to redeem $ 450 million of its 3.25 % senior notes due March 2025.

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