What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-02 · 350 added, 272 removed, 2600 unchanged (19% of the section changed)

2 unchanged sentences

Consolidated Statements of Earnings

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except for share and per-share amounts - Unaudited) 2023 2022 2023 2022

Net earned premiums, principally supplemental health insurance (1)

$ 3,476 $ 3,535 $ 10,737 $ 11,379

Net investment income 1,004 920 2,946 2,760

24 unchanged sentences

Cash dividends per share $ .42 $ .40 $ 1.26 $ 1.20

(1) Includes a gain (loss) of $ 22 and $( 41 ) for the three-month periods and $ 22 and $( 42 ) for the nine-month periods ended September 30, 2023 and 2022, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

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

2 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions - Unaudited) 2023 2022 2023 2022

20 unchanged sentences

Consolidated Balance Sheets

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

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

Investments and cash:

105 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, 2023 $ 136 $ 2,697 $ 46,937 $ ( 7,338 ) $ ( 21,993 ) $ 20,439

Net earnings 0 0 1,569 0 0 1,569

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 235 ) 0 ( 235 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 ( 2,381 ) 0 ( 2,381 )

Unrealized gains (losses) on derivatives

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

Effect of changes in discount rate assumptions

during period, net of income taxes 0 0 0 4,193 0 4,193

Pension liability adjustment during period,

net of income taxes 0 0 0 0 0 0

Dividends to shareholders (1)

($ .42 per share)

0 0 ( 249 ) 0 0 ( 249 )

Exercise of stock options 0 2 0 0 0 2

Share-based compensation 0 20 0 0 0 20

Purchases of treasury stock 0 0 0 0 ( 707 ) ( 707 )

Treasury stock reissued 0 10 0 0 7 17

Balance at September 30, 2023 $ 136 $ 2,729 $ 48,257 $ ( 5,760 ) $ ( 22,693 ) $ 22,669

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

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

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of 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, 2021

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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, 2022 $ 135 $ 2,589 $ 43,150 $ ( 6,980 ) $ ( 19,336 ) $ 19,558

Net earnings 0 0 1,781 0 0 1,781

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 1,156 ) 0 ( 1,156 )

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

Effect of changes in discount rate assumptions

during period, net of income taxes 0 0 0 2,428 0 2,428

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 $ 44,680 $ ( 7,505 ) $ ( 19,979 ) $ 19,946

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

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

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions - Unaudited) 2023 2022

27 unchanged sentences

Purchases of treasury stock ( 2,100 ) ( 1,801 )

Proceeds from borrowings 0 1,277

Principal payments under debt obligations 0 ( 966 )

Dividends paid to shareholders ( 730 ) ( 740 )

1 unchanged sentence

Treasury stock reissued 9 15

Other, net ( 1 )

Net cash provided (used) by financing activities ( 2,936 ) ( 2,256 )

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Noncash interest 16 17

Noncash real estate acquired in satisfaction of debt 90 0

Noncash financing activities:

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are included in Corporate and other.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 64 % and 69 % of the Company's total revenues in the six-month periods ended June 30, 2023 and 2022, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 80 % at June 30, 2023, compared with 80 % at December 31, 2022.

Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 63 % and 72 % of the Company's total revenues in the nine-month periods ended September 30, 2023 and 2022, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 79 % at September 30, 2023, compared with 80 % at December 31, 2022.

In 2022, the Company established Aflac Re Bermuda Ltd.

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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, 2023 and December 31, 2022, the consolidated statements of earnings and comprehensive income (loss) for the three- and six-month periods ended June 30, 2023 and 2022, the consolidated statements of shareholders' equity for the three-month periods ended March 31, 2023 and 2022 and June 30, 2023 and 2022, and the consolidated statements of cash flows for the six-month periods ended June 30, 2023 and 2022.

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, 2023 and December 31, 2022, the consolidated statements of earnings and comprehensive income (loss) for the three- and nine-month periods ended September 30, 2023 and 2022, the consolidated statements of shareholders' equity for the three-month periods ended March 31, 2023 and 2022, June 30, 2023 and 2022, and September 30, 2023 and 2022, and the consolidated statements of cash flows for the nine-month periods ended September 30, 2023 and 2022.

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

As a result, these financial statements should be read

in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report).

As a result, these financial statements should be read in conjunction with the financial statements and notes

thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report).

Significant Accounting Policies

The Company revised the following accounting policies as a result of the adoption of amended accounting guidance effective January 1, 2023 and certain reclassifications.

Refer to Recently Adopted Accounting Pronouncements below for details of the adoption of Accounting Standards Update (ASU) 2018-12 Financial Services - Insurance:

Refer to the Recently Adopted Accounting Pronouncements section below for details of the adoption of Accounting Standards Update (ASU) 2018-12 Financial Services - Insurance:

Targeted Improvements to the Accounting for Long-Duration Contracts.

In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the deferred profit liability on products with limited payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statement of earnings.

This reclassification had no impact on net earnings.

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The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original discount rate used at contract issue date.

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

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

Deferred Policy Acquisition Costs :

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Limited-pay contracts are grouped into separate cohorts from other traditional products in the same manner and are further separated based on their premium payment structures.

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

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

Future policy benefits are calculated using assumptions and estimates including mortality, morbidity, termination (also referred to as lapses), expense and discount rates.

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To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third quarter.

Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the beginning of the reporting period and are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings.

Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of paid claims.

These expense assumptions are locked-in and remain unchanged over the term of the insurance policy.

Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings.

Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense in the consolidated statement of earnings.

Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheet are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI).

Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense in the consolidated statements of earnings.

Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheets are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI).

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

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The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date.

On the Transition Date, the Company calculated the ratio of the present value of future expected benefits and expenses less existing carrying values to the present value of future expected gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date.

On the Transition Date, the Company calculated the ratio of the present value of expected future benefits and expenses less existing carrying values to the present value of expected future gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date.

The Company capped the Transition Date NPR at 100 % for any cohorts with a Transition Date NPR greater than 100 %.

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Based upon the modified retrospective transition method, the Transition Date impact from adoption resulted in a decrease in AOCI of approximately $ 18.6 billion and a decrease in retained earnings (RE) of approximately $ 0.3 billion.

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

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

Transition Impact to Shareholder's Equity

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The Company adopted ASU 2018-12 using the modified retrospective transition method.

The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present value of expected net premiums and the present value of expected future policy benefits as of the Transition Date and the LFPB rollforward for the year ended December 31, 2021.

The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present value of expected future net premiums and the present value of expected future policy benefits as of the Transition Date and the LFPB rollforward for the year ended December 31, 2021.

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

See Note 7 of the Notes to the Consolidated Financial Statements for additional information.

See Note 7 for additional information.

Under the modified retrospective transition method, the NPR for future policy benefits existing as of the Transition Date considers the carryover basis of those liabilities, which equals the future policy benefits and unpaid policy claims balance as of December 31, 2020.

If the revised Transition Date NPR for a cohort is greater than 100 %, the Company capped the Transition Date NPR at 100 % and increased the LFPB with an offsetting decrease to opening retained earnings.

The LFPB recorded in the consolidated balance sheet includes the deferred profit liability for limited-payment contracts.

The LFPB recorded in the consolidated balance sheets includes the deferred profit liability for limited-payment contracts.

This deferred profit liability is not included in the Transition Date and LFPB rollforwards.

For products with limited-payment features, to the extent the transition date adjustment related to updating cash flow assumptions is favorable, the Company increased the deferred profit liability.

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

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

Transition Impact at January 1, 2021

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(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected premiums:

Present value of expected future net premiums:

Balance at December 31, 2020 $ 25,601 $ 21,270 $ 12,440 $ 2,080 $ 3,350 $ 1,921 $ 5,898 $ 1,376 $ 281 $ 710 $ 154

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Balance at January 1, 2021 $ 29,598 $ 23,874 $ 13,384 $ 1,856 $ 3,829 $ 2,118 $ 6,942 $ 1,530 $ 322 $ 783 $ 179

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

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

December 31, 2021

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(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected premiums:

Present value of expected future net premiums:

Balance at January 1, 2021 $ 29,598 $ 23,874 $ 13,384 $ 1,856 $ 3,829 $ 2,118 $ 6,942 $ 1,530 $ 322 $ 783 $ 179

7 unchanged sentences

Interest accrual 586 439 202 27 116 61 210 45 10 25 6

Net premium earned (2)

Net premiums collected (2)

( 2,206 ) ( 1,692 ) ( 1,609 ) ( 151 ) ( 552 ) ( 393 ) ( 665 ) ( 268 ) ( 47 ) ( 124 ) ( 19 )

5 unchanged sentences

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

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

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

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

2 unchanged sentences

(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected future policy

Present value of expected future policy benefits:

Balance at December 31, 2020 $ 64,056 $ 34,638 $ 43,729 $ 7,620 $ 3,818 $ 2,919 $ 13,427 $ 2,258 $ 599 $ 1,562 $ 661

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(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected future policy

Present value of expected future policy benefits:

Balance at January 1, 2021 $ 82,567 $ 39,618 $ 47,951 $ 8,201 $ 4,389 $ 3,265 $ 16,733 $ 2,635 $ 705 $ 1,789 $ 906

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The adoption of ASU 2018-12 did not have an impact on the Company's balance for deferred policy acquisition costs upon adoption.

Accounting Pronouncements Pending Adoption

ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323):

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Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).

The amendments are effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted and if an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period.

The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations or disclosures.

The Company early adopted this guidance on July 1, 2023.

The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations or disclosures.

Accounting Pronouncements Pending Adoption

There are no accounting pronouncements pending adoption that are relevant to or have an impact on the Company's financial statements.

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.

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Adjusted expenses are U.S.

GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance.

GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any non-recurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance.

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

Information regarding operations by reportable segment and Corporate and other, follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

Net earned premiums (1)

$ 1,973 $ 2,125 $ 6,207 $ 7,084

Adjusted net investment income (2),(3)

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Total revenues $ 4,950 $ 4,704 $ 14,923 $ 15,192

(1) Amortized hedge costs of $ 63 and $ 30 for the three-month periods and $ 122 and $ 55 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(2) Net interest cash flows from derivatives associated with certain investment strategies of $( 73 ) and $( 2 ) for the three-month periods and $( 135 ) and $( 12 ) for the six-month periods ended June 30, 2023, and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(3) Net interest cash flows from derivatives associated with certain investment strategies of $( 8 ) and $ 1 for the three-month periods and $( 15 ) and $ 2 for the six-month periods ended June 30, 2023, and 2022, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(4) Amortized hedge income of $ 38 and $ 14 for the three-month periods and $ 67 and $ 25 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase to net investment income when analyzing operations.

(5) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 53 and $ 31 for the three-month periods and $ 105 and $ 42 for the six-month periods ended June 30, 2023, and 2022, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $ 56 and $ 28 for the three-month periods and $ 108 and $ 44 for the six-month periods ended June 30, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.

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

(2) Amortized hedge costs of $ 26 and $ 28 for the three-month periods and $ 148 and $ 84 for the nine-month periods ended September 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(3) Net interest cash flows from derivatives associated with certain investment strategies of $( 79 ) and $( 25 ) for the three-month periods and $( 214 ) and $( 37 ) for the nine-month periods ended September 30, 2023, and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(4) Net interest cash flows from derivatives associated with certain investment strategies of $( 9 ) and $( 1 ) for the three-month periods and $( 24 ) and $ 1 for the nine-month periods ended September 30, 2023, and 2022, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(5) Amortized hedge income of $ 25 and $ 19 for the three-month periods and $ 92 and $ 44 for the nine-month periods ended September 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase to net investment income when analyzing operations.

(6) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 64 and $ 19 for the three-month periods and $ 169 and $ 61 for the nine-month periods ended September 30, 2023, and 2022, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $ 63 and $ 19 for the three-month periods and $ 171 and $ 63 for the nine-month periods ended September 30, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statements of earnings.

See Note 3 for additional information on these investments.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

14 unchanged sentences

adjusted earnings ( 33 ) ( 97 ) ( 100 ) ( 192 )

(4) Amortized hedge income of $ 38 and $ 14 for the three-month periods and $ 67 and $ 25 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase in net investment income when analyzing operations.

(5) A gain of $ 12 and $ 12 for the three-month periods and $ 24 and $ 25 for the six-month periods ended June 30, 2023, and 2022, 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 $ 53 and $ 31 for the three-month periods and $ 105 and $ 42 for the six-month periods ended June 30, 2023, and 2022, 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 $ 36 and $ 41 for the three-month periods and $ 70 and $ 82 for the six-month periods ended June 30, 2023, and 2022, respectively, of interest expense on debt.

(5) Amortized hedge income of $ 25 and $ 19 for the three-month periods and $ 92 and $ 44 for the nine-month periods ended September 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase in net investment income when analyzing operations.

(6) A gain of $ 8 and $ 13 for the three-month periods and $ 32 and $ 38 for the nine-month periods ended September 30, 2023, and 2022, 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.

(7) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 64 and $ 19 for the three-month periods and $ 169 and $ 61 for the nine-month periods ended September 30, 2023, and 2022, respectively, is included as a reduction to net investment income.

See Note 3 for additional information on these investments.

(8) Includes $ 39 and $ 45 for the three-month periods and $ 109 and $ 127 for the nine-month periods ended September 30, 2023, and 2022, respectively, of interest expense on debt.

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

Assets were as follows:

(In millions) June 30,

(In millions) September 30,

2023 December 31,

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Investment Holdings

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, 2023

The amortized cost and allowance for credit losses for the Company's investments in fixed maturity securities and the fair values of these investments as well as the fair value of the Company's investments in equity securities are shown in the following tables.

September 30, 2023

(In millions)

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Total securities available-for-sale $ 75,469 $ 0 $ 4,800 $ 4,528 $ 75,741

June 30, 2023

September 30, 2023

(In millions)

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Total securities held-to-maturity $ 19,063 $ 7 $ 19,056 $ 2,154 $ 0 $ 21,210

(In millions) June 30,

(In millions) September 30,

2023 December 31, 2022

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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 six months of 2023 and 2022, respectively, 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 2023 and 2022, 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, 2023, were as follows:

The contractual and economic maturities of the Company's investments in fixed maturity securities at September 30, 2023, were as follows:

(In millions) Amortized

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Credit

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

6 unchanged sentences

Other investments:

Gross gains (losses) from sales ( 3 ) 0 ( 3 ) 9

Gross gains (losses) from sales and redemptions 36 1 33 10

Commercial mortgage and other loans:

Gross gains (losses) from sales and redemptions ( 53 ) 0 ( 53 ) 0

Total sales and redemptions 24 59 105 260

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Total net investment gains (losses) $ 423 $ 199 $ 1,101 $ 885

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, 2023, that relate to equity securities still held at the June 30, 2023 reporting date, were $ 16 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, 2023, that relate to equity securities still held at the June 30, 2023 reporting date, were $ 21 million.

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the three-month period ended September 30, 2023 that relate to equity securities held at the September 30, 2023 reporting date were $ 47 million.

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the nine-month period ended September 30, 2023 that relate to equity securities held at the September 30, 2023 reporting date were $ 13 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,

2023 December 31,

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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, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

June 30, 2023

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, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

September 30, 2023

Total Less than 12 months 12 months or longer

61 unchanged sentences

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

In the first six months of 2023, the decrease in unrealized losses has been driven by improvements in credit spreads, which have been partially offset by interest rates which have increased along all durations in both the U.S.

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

4 unchanged sentences

The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly.

The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other

relevant features.

From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal.

3 unchanged sentences

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

Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities had not incurred a credit loss and therefore, should not have a credit loss allowance as of June 30, 2023 .

Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities should not have a credit loss allowance as of September 30, 2023 .

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

As of June 30, 2023 and December 31, 2022, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

As of September 30, 2023 and December 31, 2022, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

Commercial Mortgage and Other Loans

2 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, 2023 December 31, 2022

(In millions) September 30, 2023 December 31, 2022

Amortized Cost % of Total Amortized Cost % of Total

24 unchanged sentences

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

As of June 30, 2023, the Company had $ 792 million in outstanding commitments to fund TREs.

As of September 30, 2023, the Company had $ 661 million in outstanding commitments to fund TREs.

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

5 unchanged sentences

These loans are generally considered to be below investment grade.

The carrying value for MMLs included $ 26 million and $ 28 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of June 30, 2023, and December 31, 2022, respectively.

As of June 30, 2023, the Company had commitments of approximately $ 726 million to fund future MMLs.

The carrying value for MMLs included $ 19 million and $ 28 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of September 30, 2023, and December 31, 2022, respectively.

As of September 30, 2023, the Company had commitments of approximately $ 745 million to fund future MMLs.

These commitments are contingent upon the availability of MMLs 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, 2023, the Company's reinsurance counterparties were rated A+.

As of September 30, 2023, 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, 2023 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, 2023 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator.

Transitional Real Estate Loans

26 unchanged sentences

Loan Modifications

The Company granted certain loan modifications in its MML and TRE portfolios during the first six months of 2023.

As of June 30, 2023, these loan modifications did not have a material impact on the Company’s results of operations.

The Company granted certain loan modifications in its MML and TRE portfolios during the first nine months of 2023.

As of September 30, 2023, these loan modifications did not have a material impact on the Company’s results of operations.

Past Due and Nonaccrual Loans

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

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

The Company applies the cash basis method to record any payments received on nonaccrual assets.

1 unchanged sentence

The following table presents an aging of past due and nonaccrual loans at amortized cost, before allowance for credit losses, as of the period presented.

June 30, 2023

September 30, 2023

(In millions) Current Less Than 90 Days Past Due 90 Days

5 unchanged sentences

Total $ 12,513 $ 54 $ 566 $ 620 $ 13,133 $ 620

(1) As of June 30, 2023, there were no loans that were 90 days or more past due that continued to accrue interest

For the three-month and six-month periods ended June 30, 2023, the Company recognized no interest income for TREs, CMLs, or MMLs on nonaccrual status.

Of these loans, TREs with an amortized cost of $ 218 million had no credit loss allowance as of June 30, 2023, because these loans are collateral dependent assets for which the estimated fair values are in excess of amortized cost.

As of June 30, 2023, there were no MMLs on nonaccrual status without an allowance for credit losses.

(1) As of September 30, 2023, there were no loans that were 90 days or more past due that continued to accrue interest

For the three- and nine-month periods ended September 30, 2023, the Company recognized no interest income for TREs, CMLs, or MMLs on nonaccrual status.

Of these loans, TREs with an amortized cost of $ 65 million had no credit loss allowance as of September 30, 2023 because these loans are collateral dependent assets for which the estimated fair values of the collateral are in excess of amortized cost.

As of September 30, 2023, there were no MMLs on nonaccrual status without an allowance for credit losses.

As of December 31, 2022, the Company had an immaterial amount of loans on nonaccrual status.

6 unchanged sentences

For example, the credit loss allowance for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable.

Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the credit loss allowance which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).

Accordingly, the change in the estimated fair value of the collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the credit loss allowance which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).

The credit allowance for the reinsurance recoverable balance is estimated using a probability-of-default (PD) / loss-given-default (LGD) method.

6 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 $ 16.6 billion amortized cost as of June 30, 2023 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 $ 16.1 billion amortized cost as of September 30, 2023 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 following table presents the roll forward of the allowance for credit losses by portfolio segment.

The following table presents the roll forward of the allowance for credit losses by portfolio segment for loans and by accounting classification for securities.

(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, 2023:

Balance at March 31, 2023

Three Months Ended September 30, 2023:

Balance at June 30, 2023

$ ( 76 ) $ ( 9 ) $ ( 140 ) $ ( 5 ) $ 0 $ ( 10 )

(Addition to) release of allowance for credit

losses ( 11 ) 0 9 0 0 0

( 35 ) ( 3 ) 3 1 0 0

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

Change in foreign exchange 0 0 0 ( 1 ) 0 1

Balance at June 30, 2023

Balance at September 30, 2023 (2)

$ ( 111 ) $ ( 12 ) $ ( 137 ) $ ( 5 ) $ 0 $ ( 9 )

Three Months Ended June 30, 2022:

Balance at March 31, 2022

Three Months Ended September 30, 2022:

Balance at June 30, 2022

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

3 unchanged sentences

Change in foreign exchange 0 0 0 1 0 0

Balance at June 30, 2022

Balance at September 30, 2022 (2)

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

Six Months Ended June 30, 2023:

Nine Months Ended September 30, 2023:

Balance at December 31, 2022

1 unchanged sentence

(Addition to) release of allowance for credit

losses ( 22 ) 0 ( 11 ) 1 0 ( 2 )

( 57 ) ( 3 ) ( 8 ) 1 0 ( 2 )

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

Change in foreign exchange 0 0 0 1 0 1

Balance at June 30, 2023

Balance at September 30, 2023 (2)

$ ( 111 ) $ ( 12 ) $ ( 137 ) $ ( 5 ) $ 0 $ ( 9 )

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 (2)

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

During the first six months of 2023, the Company identified certain TREs collateralized with commercial real estate properties with an amortized cost of $ 626 million in anticipation of potential foreclosure or deed-in lieu foreclosure transactions.

As of June 30, 2023, the Company established a credit allowance of $ 21 million for those amortized loans of $ 365 million for which the fair value of the collateral was below the amortized cost of the loans.

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, 2023 was $ 20 million.

(1) Includes an allowance for credit losses of $ 4 recognized on financial assets accounted for as purchased financial assets with credit deterioration that is not recorded in earnings upon recognition.

(2) Excludes allowance on firm loan commitments of $ 19 and $ 26 as of September 30, 2023 and 2022, respectively.

For the period ended September 30, 2023, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real estate properties with an amortized cost of $ 142 million.

As a result of the excess of amortized cost over the estimated fair value of the collateral of the TREs, upon consummating the foreclosures or deed in lieu of foreclosure transactions, the Company recognized a net loss of $ 53 million for the three- and nine-month periods ended September 30, 2023, in net investment gains (losses).

Real estate obtained via foreclosure or deed in lieu of foreclosure is reported as real estate owned (REO) and included in other investments in the consolidated balance sheet.

Refer to the Other Investments section below for additional information.

As of September 30, 2023, the Company identified additional TREs with an amortized cost of $ 546 million in anticipation of potential foreclosure or deed in lieu of foreclosure transactions.

As of September 30, 2023, the Company established a credit allowance of $ 35 million for $ 481 million of loans for which the fair value of the collateral was below the amortized cost of the loans.

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

The estimate of credit losses for loan commitments as of September 30, 2023 was $ 19 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,

2023 December 31, 2022

3 unchanged sentences

Limited partnerships 2,629 2,290

Real estate owned 89 0

Total other investments $ 5,241 $ 4,070

1 unchanged sentence

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

These investments are classified as limited partnerships and included in other investments in the consolidated balance sheet.

These investments are classified as limited partnerships and included in other investments in the consolidated balance sheets.

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

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

As of June 30, 2023, the Company had $ 2.3 billion in outstanding commitments to fund alternative investments in limited partnerships.

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

REO consists of office buildings or other commercial properties obtained through foreclosure or deed in lieu of foreclosure of certain of the Company’s TREs.

As of September 30, 2023, $ 16 million of REO was classified as held-for-sale, which is carried at the lower of depreciated cost or fair value less cost to sell and is not further depreciated once classified as such.

The remaining $ 73 million classified as held-and-used is held for the production of income and is carried at cost less accumulated depreciation.

Depreciation expense was immaterial for the three- and nine-month periods ended September 30, 2023.

Additionally, as of September 30, 2023, accumulated depreciation was immaterial.

Net operating income earned on REO is reported as a component of net investment income in the consolidated statement of earnings.

As of December 31, 2022, the Company did not have REO.

As of September 30, 2023, the Company had $ 2.4 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, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Amortized

27 unchanged sentences

Investments in Variable Interest Entities Not Consolidated

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Amortized

8 unchanged sentences

The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them.

The Company does not have the power to direct the activities that most significantly impact the entity's economic performance,

nor does it have the obligation to absorb losses of the entity or the right to receive benefits from the entity.

The Company does not have the power to direct the activities that most significantly impact the entity's economic performance, nor does it have the obligation to absorb losses of the entity or the right to receive benefits from the entity.

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

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

The Company holds debt and equity investments in limited partnerships that have been determined to be VIEs.

These partnerships invest in private equity and structured investments.

3 unchanged sentences

Securities Lending and Pledged Securities

The Company lends fixed maturity and public equity securities to financial institutions in short-term security-lending transactions.

These short-term security-lending arrangements increase investment income with minimal risk.

The Company lends fixed maturity and public equity securities to financial institutions in short-term securities lending transactions.

These short-term securities lending arrangements increase investment income with minimal risk.

The Company receives cash or other securities as collateral for such loans.

The Company's security lending policy requires that the fair value of the securities received as collateral be 102 % or more of the fair value of the loaned securities and that unrestricted cash received as collateral be 100 % or more of the fair value of the loaned securities.

The Company's securities lending policy requires that the fair value of the securities received as collateral be 102 % or more of the fair value of the loaned securities and that unrestricted cash received as collateral be 100 % or more of the fair value of the loaned securities.

The securities loaned continue to be carried as investment assets on the Company's balance sheet during the terms of the loans and are not reported as sales.

4 unchanged sentences

Remaining Contractual Maturity of the Agreements

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Overnight

16 unchanged sentences

therefore, they are classified as Overnight and Continuous.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 5.0 billion and $ 6.8 billion at June 30, 2023 and December 31, 2022, respectively, which may not be sold or re-pledged, unless the counterparty is in default.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 5.1 billion and $ 6.8 billion at September 30, 2023 and December 31, 2022, 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 not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of June 30, 2023, and December 31, 2022, respectively.

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of September 30, 2023, and December 31, 2022, 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.

56 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, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Asset

52 unchanged sentences

Net Investment Gains (Losses) Recognized for Fair Value Hedge

Three Months Ended June 30, 2023:

Three Months Ended September 30, 2023:

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

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

Six Months Ended June 30, 2023:

Nine Months Ended September 30, 2023:

Foreign currency options Fixed maturity securities $ ( 65 ) $ ( 65 ) $ 0 $ 0 $ 0

Total gains (losses) $ ( 65 ) $ ( 65 ) $ 0 $ 0 $ 0

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

(1) Gains (losses) excluded from effectiveness testing includes the forward point on foreign currency forwards and time value change on foreign currency options which are reported in the consolidated statement of earnings as net investment gains (losses).

It also includes the change in the fair value of the interest rate swaptions related to the time value of the swaptions which is recognized as a component of other comprehensive income (loss).

(2) Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statement of earnings as net investment gains (losses).

(2) Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statements of earnings as net investment gains (losses).

For interest rate swaptions and related hedged items, gains and losses included in the hedge assessment, premium amortization and time value amortization while the hedge items are still outstanding are reported within net investment income.

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

For the three- and six-month periods ended June 30, 2023 and 2022, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

For the three- and nine-month periods ended September 30, 2023 and 2022, 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.

The Company had no fair value hedges of interest rate risk as of June 30, 2023 and December 31, 2022;

The Company had no fair value hedges of interest rate risk as of September 30, 2023 and December 31, 2022;

therefore, the amounts presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.

1 unchanged sentence

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

2023 December 31, 2022 June 30,

September 30,

2023 December 31, 2022 September 30,

2023 December 31, 2022

4 unchanged sentences

To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 9) 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, 2023 and 2022, respectively.

The Company's net investment hedge was effective during the three- and nine-month periods ended September 30, 2023 and 2022, respectively.

Non-qualifying Strategies

1 unchanged sentence

The amount of gain or loss recognized in earnings for the Company's VIEs is attributable to the derivatives in those investment structures.

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

As of June 30, 2023, the Parent Company had $ 1.2 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S.

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

As of September 30, 2023, the Parent Company had $ 1.2 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.

2 unchanged sentences

For additional information regarding these swaps, see Note 9 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

The Company uses foreign exchange forwards and options to economically mitigate the currency risk of some of its U.S.

The Company uses foreign currency forwards and options to economically mitigate the currency risk of some of its U.S.

dollar-denominated loan receivables held within the Aflac Japan segment.

These arrangements are not designated as accounting hedges, as the foreign currency remeasurement of the loan receivables impacts current period earnings, and substantially offsets gains and losses from foreign exchange forwards within net investment gains (losses).

The Company also has certain foreign exchange forwards on U.S.

These arrangements are not designated as accounting hedges, as the foreign currency remeasurement of the loan receivables impacts current period earnings, and substantially offsets gains and losses from foreign currency forwards within net investment gains (losses).

The Company also has certain foreign currency forwards on U.S.

dollar-denominated available-for-sale securities where hedge accounting is not being applied.

2 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)

36 unchanged sentences

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

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

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $ 1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended June 30, 2023, and $ 1 of losses during the three-month period ended June 30, 2022 .

Six Months Ended June 30,

(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, 2023, and $ 1 of losses during the three-month period ended September 30, 2022 .

Nine Months Ended September 30,

(In millions) Net Investment Income (1)

15 unchanged sentences

Foreign currency options ( 65 ) ( 41 )

Interest rate swaptions (4)

( 1 ) 0 1 0 0 0

Total fair value hedges ( 1 ) ( 65 ) 1 0 ( 41 ) 0

19 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, 2023, and $ 1 of losses during the six-month period ended June 30, 2022 .

As of June 30, 2023, $ 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.

(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, 2023, and $ 3 of losses during the nine-month period ended September 30, 2022.

(4) Includes $ 1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the nine-month period ended September 30, 2023 and $ 1 of losses during the nine-month period ended September 30, 2022 related to fair value hedges excluded component.

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

As of September 30, 2023, $ 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, 2023, all of the Company's derivative agreement counterparties were investment grade.

As of September 30, 2023, 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 $ 1.3 billion as of June 30, 2023, and December 31, 2022, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on June 30, 2023, the Company estimates that it would be required to post a maximum of $ 162 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 $ 1.3 billion as of September 30, 2023, and December 31, 2022, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on September 30, 2023, the Company estimates that it would be required to post a maximum of $ 227 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, 2023

September 30, 2023

Gross Amounts Not Offset

52 unchanged sentences

Offsetting of Financial Liabilities and Derivative Liabilities

June 30, 2023

September 30, 2023

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, 2023

September 30, 2023

(In millions) Quoted Prices in

21 unchanged sentences

Foreign currency options 0 1 0 1

Interest rate swaps 0 9 0 9

Total other assets 0 578 0 578

38 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, 2023

September 30, 2023

(In millions) Carrying

22 unchanged sentences

Total liabilities $ 12,708 $ 0 $ 5,555 $ 6,508 $ 12,063

(1) Excludes policy loans of $ 202 and equity method investments of $ 2,551 , at carrying value

(1) Excludes policy loans of $ 201 , equity method investments of $ 2,629 and REO of $ 89 , at carrying valu e

December 31, 2022

50 unchanged sentences

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

June 30, 2023

September 30, 2023

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

42 unchanged sentences

Total equity securities $ 787 $ 0 $ 203 $ 990

June 30, 2023

September 30, 2023

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

158 unchanged sentences

Three Months Ended

June 30, 2023

September 30, 2023

Fixed Maturity Securities Equity

22 unchanged sentences

Three Months Ended

June 30, 2022

September 30, 2022

Fixed Maturity Securities Equity

21 unchanged sentences

included in earnings $ 0 $ 1 $ 0 $ 0 $ 0 $ ( 2 ) $ ( 1 )

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

Fixed Maturity Securities Equity

23 unchanged sentences

of the period included in earnings $ 1 $ 1 $ 0 $ 0 $ 0 $ ( 9 ) $ ( 7 )

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Fixed Maturity Securities Equity

26 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, 2023

September 30, 2023

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

2 unchanged sentences

Mortgage- and asset-backed securities $ 680 Consensus pricing Offered quotes 80.10 - 105.93 (a)

Public utilities 302 Discounted cash flow Credit spreads 160 bps - 298 bps (b)

Public utilities 259 Consensus pricing Offered quotes 93.16 - 98.77 (a)

Sovereign and supranational 31 Consensus pricing Offered quotes N/A (c)

48 unchanged sentences

The following tables present a rollforward of deferred policy acquisition costs by reporting segment and disaggregated by product type.

June 30, 2023

September 30, 2023

Aflac Japan Aflac U.S.

7 unchanged sentences

other ( 352 ) ( 244 ) ( 58 ) ( 7 ) 0 0 0 0 0 0 ( 3 ) ( 664 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 2,791 $ 1,930 $ 467 $ 53 $ 910 $ 619 $ 1,324 $ 430 $ 86 $ 160 $ 1 $ 8,771

19 unchanged sentences

Future DAC amortization is impacted by persistency.

There were no changes to the inputs, judgements, assumptions and methods used to determine amortization amounts during the six-month periods ended June 30, 2023 and 2022.

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

There were no changes to the inputs or methods used to determine amortization amounts during the nine-month periods ended September 30, 2023 and 2022.

The Company updated the assumptions used to determine amortization using the same assumptions as those used for measuring the liability for future policy benefits during the nine-month periods ended September 30, 2023 and 2022.

The Company recognizes the effects of changes in assumptions prospectively over the remaining contract term as a revision of the future amortization pattern.

See Note 1 for more information on deferred policy acquisition costs.

POLICY LIABILITIES

Future Policy Benefits

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

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

June 30, 2023

The liability for future policy benefits is determined as the present value of expected future benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of expected future net premiums receivable under the Company's insurance contracts.

Future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

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

The present value of expected future net premiums and the present value of expected future policy benefits are presented gross of internal and external reinsurance.

September 30, 2023

Aflac Japan Aflac U.S.

(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected premiums:

Present value of expected future net premiums:

Balance at December 31, 2022

7 unchanged sentences

Interest accrual 312 255 94 15 77 46 137 34 6 23 4

Net premiums earned (1)

Net premiums collected (1)

( 1,182 ) ( 959 ) ( 778 ) ( 85 ) ( 356 ) ( 292 ) ( 440 ) ( 187 ) ( 30 ) ( 101 ) ( 12 )

3 unchanged sentences

Effect of changes in discount rate assumptions 823 449 171 9 ( 283 ) ( 162 ) ( 630 ) ( 150 ) ( 23 ) ( 105 ) ( 15 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 16,493 $ 13,894 $ 6,250 $ 1,042 $ 2,389 $ 1,597 $ 3,861 $ 1,072 $ 194 $ 806 $ 172

14 unchanged sentences

Effect of changes in discount rate assumptions 5,663 ( 170 ) ( 868 ) ( 332 ) ( 375 ) ( 233 ) ( 1,743 ) ( 259 ) ( 58 ) ( 344 ) ( 35 )

Balance at June 30, 2023

Balance at September 30, 2023

47,209 23,593 27,928 4,856 2,964 2,351 10,460 1,847 450 1,608 652

3 unchanged sentences

reinsurance recoverable $ 28,764 $ 8,277 $ 21,678 $ 3,814 $ 575 $ 754 $ 6,599 $ 775 $ 256 $ 791 $ 480

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

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

December 31, 2022

1 unchanged sentence

(In millions) Cancer Medical and Other Health Life Insurance Other Accident Disability Critical Care Hospital Indemnity Dental/Vision Life Insurance Other

Present value of expected premiums:

Present value of expected future net premiums:

Balance at December 31, 2021

7 unchanged sentences

Interest accrual 459 364 146 22 105 57 193 45 9 27 5

Net premiums earned (1)

Net premiums collected (1)

( 1,734 ) ( 1,376 ) ( 1,229 ) ( 123 ) ( 496 ) ( 382 ) ( 612 ) ( 261 ) ( 42 ) ( 131 ) ( 17 )

26 unchanged sentences

reinsurance recoverable $ 35,468 $ 9,126 $ 24,469 $ 4,326 $ 564 $ 810 $ 7,003 $ 854 $ 277 $ 793 $ 512

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

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

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

June 30, 2023

September 30, 2023

Aflac Japan Aflac U.S.

19 unchanged sentences

The deferred profit liability for limited-payment contracts and the deferred profit liability for reinsurance is presented together with the liability for future policy benefits in the consolidated balance sheets and has been included as a reconciling item in the table below.

(In millions) June 30,

(In millions) September 30,

2023 December 31, 2022

17 unchanged sentences

Total $ 78,448 $ 88,241

(1) Elimination entry necessary due to the internal reinsurance transaction with Aflac Re and to recapture of a portion of policy liabilities ceded externally as a result of the reinsurance retrocession transaction.

See Note 8 of the Notes to the Consolidated Financial Statements.

(1) Elimination entry necessary due to the internal reinsurance transaction with Aflac Re and to recapture a portion of policy liabilities ceded externally as a result of the reinsurance retrocession transaction.

See Note 8 for additional details.

Discount rates are determined using upper-medium grade (low-credit-risk) fixed-income instrument yields that reflect the duration characteristics of the liability.

19 unchanged sentences

and Japan segments is based on the assumption of long-term global economic convergence.

For the three-month periods ended June 30, 2023 and 2022, the Company recognized $( 165 ) million and $ 5.1 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

For the six-month periods ended June 30, 2023 and 2022, the Company recognized $( 3.0 ) billion and $ 9.3 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

There were no changes to the methods used to determine the discount rates during the six-month periods ended June 30, 2023 and 2022.

For the three-month periods ended September 30, 2023 and 2022, the Company recognized $ 4.2 billion and $ 2.4 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

For the nine-month periods ended September 30, 2023 and 2022, the Company recognized $ 1.2 billion and $ 11.8 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

There were no changes to the methods used to determine the discount rates during the nine-month periods ended September 30, 2023 and 2022.

For the year ended December 31, 2022, the Company recognized $ 13.7 billion in other comprehensive income (loss) net of tax, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

9 unchanged sentences

Policy provisions, such as reaching premium paid-up status, are taken into account when setting assumptions.

During the three-month periods ended June 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $ 54 million and $ 25 million in the consolidated statement of earnings, respectively.

During the six-month periods ended June 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $ 107 million and $ 59 million in the consolidated statement of earnings, respectively.

For the three- and six-month periods ended June 30, 2023 and 2022, the variance of actual experience from expected experience was primarily due to favorable variances in morbidity assumptions as compared to actual experience.

There were no changes to the inputs, judgments, assumptions and methods used in measuring the liability for future policy benefits during the six-month periods ended June 30, 2023 and 2022.

For the three- and nine-month periods ended September 30, 2023 and 2022, the variance of actual experience from expected experience was primarily due to favorable variances in morbidity assumptions as compared to actual experience.

During the three-month periods ended September 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $ 54 million and $ 18 million in the consolidated statements of earnings, respectively.

During the nine-month periods ended September 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $ 161 million and $ 77 million in the consolidated statements of earnings, respectively.

There were no changes to the inputs or methods used in measuring the liability for future policy benefits during the nine-month periods ended September 30, 2023 and 2022.

The Company performs an annual review of its assumptions during the third quarter.

In 2023, the Company's annual review process resulted in favorable changes to its morbidity and termination assumptions, largely due to reflecting more recent favorable U.S.

morbidity experience.

These assumption updates, together with the variance of actual from expected experience, resulted in reserve remeasurement gains of $ 312 million in the consolidated statement of earnings for the nine-month period ended September 30, 2023.

In 2022, the Company's annual review process resulted in favorable changes to its morbidity assumptions due to favorable claims experience, primarily.

1 unchanged sentence

The following table summarizes the amount of net earned premiums recognized in the consolidated statements of earnings by reporting segment and disaggregated by product type.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

15 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

18 unchanged sentences

These are the primary factors that result in future gross premiums lower than future benefit and expense payments for certain lines of business of the Company.

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Gross

14 unchanged sentences

Total $ 183,998 $ 230,333 $ 191,005 $ 235,775

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Gross Premiums Benefits and Expenses Gross Premiums Benefits and Expenses

13 unchanged sentences

Total $ 115,301 $ 123,918 $ 132,451 $ 141,463

Loss expense as a result of net premium ratio capping for the three- and six-month periods ended June 30, 2023 and 2022 was immaterial.

Loss expense as a result of net premium ratio capping for the three- and nine-month periods ended September 30, 2023 and 2022 was immaterial.

Other Policyholders' Funds

As of June 30, 2023 and December 31, 2022, the largest component of the other policyholders' funds liability was the Company's annuity line of business in Aflac Japan.

As of September 30, 2023 and December 31, 2022, the largest component of the other policyholders' funds liability was the Company's annuity line of business in Aflac Japan.

The Company's annuities have fixed benefits and premiums.

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

(In millions) June 30,

(In millions) September 30,

2023 December 31, 2022

13 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions) Range of Guaranteed Minimum Crediting Rates (2)

6 unchanged sentences

(1) Aflac Japan fixed annuities

(2) Weighted-average crediting rate of 1.5 % at June 30, 2023 and December 31, 2022.

(2) Weighted-average crediting rate of 1.5 % at September 30, 2023 and December 31, 2022.

Aflac Japan’s fixed annuities have guaranteed fixed crediting rates which results in the policyholders' funds balances being able to cover all guaranteed benefit amounts.

The reserves are adequate to fully fund future benefits at any given time.

See Note 1 of the Notes to the Consolidated Financial Statements for additional information on policy liabilities.

See Note 1 for additional information on policy liabilities.

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business.

8 unchanged sentences

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

The remaining deferred profit liability of $ 620 million and $ 692 million as of June 30, 2023 and December 31, 2022, respectively, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies.

The Company has also recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $ 998 million and $ 912 million as of June 30, 2023 and December 31, 2022, respectively.

The remaining deferred profit liability of $ 590 million and $ 692 million as of September 30, 2023 and December 31, 2022, respectively, is included in future policy benefits in the consolidated balance sheets 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 sheets and had a remaining balance of $ 895 million and $ 912 million as of September 30, 2023 and December 31, 2022, respectively.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2023 2022 2023 2022

12 unchanged sentences

Ceded Aflac Japan closed blocks ( 71 ) ( 72 ) ( 222 ) ( 237 )

Reserve remeasurement (gains) losses 14 ( 20 ) 15 ( 20 )

Eliminations 42 2 125 11

8 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, 2023.

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, 2023.

This reinsurance facility agreement was renewed in 2022 and is effective until December 31, 2023.

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, 2023, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

As of September 30, 2023, 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,

2023 December 31,

41 unchanged sentences

Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the life of the notes.

A summary of the Company's lines of credit as of June 30, 2023 follows:

A summary of the Company's lines of credit as of September 30, 2023 follows:

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

12 unchanged sentences

$ 0.0 billion

A rate per annum equal to, at the

Company's option, either, (a) Secured

Overnight Financing Rate (SOFR) for U.S.

dollar denominated borrowings or TIBOR

for Japanese yen denominated borrowings,

in either case adjusted for certain costs, or

(b) a base rate determined by reference to

the highest of (1) the federal funds rate

plus 1/2 of 1%, (2) the rate of interest for

such day announced by the agent as its

prime rate, or (3) SOFR for an interest

period of one month plus 1.00%, in each

case plus an applicable margin No later than November 15, 2027 .08 % to

A rate per annum equal to, at the Company's option, either, (a) Secured Overnight Financing Rate (SOFR) for U.S.

dollar denominated borrowings or TIBOR for Japanese yen denominated borrowings, in either case adjusted for certain costs, or (b) a base rate determined by reference to the highest of (1) the federal funds rate plus 1/2 of 1%, (2) the rate of interest for such day announced by the agent as its prime rate, or (3) SOFR for an interest period of one month plus 1.00%, in each case plus an applicable margin No later than November 15, 2027 .08 % to

.20 %, depending on the Parent Company's debt ratings as of the date of determination

2 unchanged sentences

and Aflac uncommitted bilateral None specified None specified $ 50 million

A rate per annum equal to, at the Parent

Company's option, either (a) a rate

determined by reference to SOFR for

the interest period relevant to such

borrowing or (b) the base rate determined

by reference to the highest of (1) the

lender's USD short-term commercial loan

rate and (2) the federal funds rate plus 1/2 of 1% Up to 3 months

A rate per annum equal to, at the Parent Company's option, either (a) a rate determined by reference to SOFR for the interest period relevant to such borrowing or (b) the base rate determined by reference to the highest of (1) the lender's USD short-term commercial loan rate and (2) the federal funds rate plus 1/2 of 1% Up to 3 months

None General corporate purposes

50 unchanged sentences

(1) Intercompany credit agreement

(2) Renewed in July 2023 with an expiration date of July 16, 2024

The Company was in compliance with all of the covenants of its notes payable and lines of credit at June 30, 2023.

No events of default or defaults occurred during the six-month period ended June 30, 2023.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at September 30, 2023.

No events of default or defaults occurred during the nine-month period ended September 30, 2023.

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

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) 2023 2022

16 unchanged sentences

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 June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2023 2022 2023 2022

1 unchanged sentence

Share Repurchase Program

During the first six months of 2023, the Company repurchased 20.8 million shares of its common stock for $ 1.4 billion as part of its 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.

As of June 30, 2023, a remaining balance of 95.8 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

During the first nine months of 2023, the Company repurchased 30.2 million shares of its common stock for $ 2.1 billion as part of its share repurchase program.

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.

As of September 30, 2023, a remaining balance of 86.4 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Reclassifications from Accumulated Other Comprehensive Income

2 unchanged sentences

Three Months Ended

June 30, 2023

September 30, 2023

(In millions) Unrealized Foreign

6 unchanged sentences

Adjustment Total

Balance at March 31, 2023 $ ( 3,618 ) $ 1,289 $ ( 26 ) $ ( 4,894 ) $ ( 29 ) $ ( 7,278 )

Balance at June 30, 2023 $ ( 4,249 ) $ 1,978 $ ( 25 ) $ ( 5,059 ) $ 17 $ ( 7,338 )

Other comprehensive

8 unchanged sentences

income (loss) ( 235 ) ( 2,381 ) 1 4,193 0 1,578

Balance at June 30, 2023 $ ( 4,249 ) $ 1,978 $ ( 25 ) $ ( 5,059 ) $ 17 $ ( 7,338 )

Balance at September 30, 2023 $ ( 4,484 ) $ ( 403 ) $ ( 24 ) $ ( 866 ) $ 17 $ ( 5,760 )

All amounts in the table above are net of tax.

Three Months Ended

June 30, 2022

September 30, 2022

(In millions) Unrealized Foreign

5 unchanged sentences

on Derivatives Effect of Changes in Discount Rate Assumptions Pension Liability Adjustment Total

Balance at March 31, 2022 $ ( 2,438 ) $ 5,787 $ ( 29 ) $ ( 11,608 ) $ ( 163 ) $ ( 8,451 )

Balance at June 30, 2022 $ ( 3,218 ) $ 2,930 $ ( 29 ) $ ( 6,503 ) $ ( 160 ) $ ( 6,980 )

Other comprehensive

8 unchanged sentences

income (loss) ( 1,156 ) ( 1,799 ) 0 2,428 2 ( 525 )

Balance at June 30, 2022 $ ( 3,218 ) $ 2,930 $ ( 29 ) $ ( 6,503 ) $ ( 160 ) $ ( 6,980 )

Balance at September 30, 2022 $ ( 4,374 ) $ 1,131 $ ( 29 ) $ ( 4,075 ) $ ( 158 ) $ ( 7,505 )

All amounts in the table above are net of tax.

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

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

(In millions) Unrealized Foreign

17 unchanged sentences

income (loss) ( 920 ) 299 3 1,234 53 669

Balance at June 30, 2023 $ ( 4,249 ) $ 1,978 $ ( 25 ) $ ( 5,059 ) $ 17 $ ( 7,338 )

Balance at September 30, 2023 $ ( 4,484 ) $ ( 403 ) $ ( 24 ) $ ( 866 ) $ 17 $ ( 5,760 )

All amounts in the table above are net of tax.

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

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

(In millions) Unrealized Foreign

16 unchanged sentences

income (loss) ( 2,389 ) ( 8,471 ) 1 11,757 8 906

Balance at June 30, 2022 $ ( 3,218 ) $ 2,930 $ ( 29 ) $ ( 6,503 ) $ ( 160 ) $ ( 6,980 )

Balance at September 30, 2022 $ ( 4,374 ) $ 1,131 $ ( 29 ) $ ( 4,075 ) $ ( 158 ) $ ( 7,505 )

All amounts in the table above are net of tax.

3 unchanged sentences

(In millions) Three Months Ended

June 30, 2023

September 30, 2023

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, 2022

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 benefit cost (see Note 12 for additional details).

(In millions) Six Months Ended

June 30, 2023

(In millions) Nine Months Ended

September 30, 2023

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

5 unchanged sentences

Unrealized gains (losses) on derivatives $ ( 3 ) Net investment gains (losses)

( 1 ) Net investment income

( 4 ) Total before tax

1 Tax (expense) or benefit (1)

8 unchanged sentences

(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit 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

16 unchanged sentences

SHARE-BASED COMPENSATION

As of June 30, 2023, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (As Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan).

As of September 30, 2023, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (As Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan).

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.

1 unchanged sentence

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.

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, 2023, approximately 34.7 million shares were available for future grants under this plan.

As of September 30, 2023, approximately 34.7 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, 2023, the only performance-based awards issued and outstanding were restricted stock awards and units.

As of September 30, 2023, 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, 2023.

The following table provides information on stock options outstanding and exercisable at September 30, 2023.

Option Shares

6 unchanged sentences

Exercisable 1,131 2.4 50 32.88

The Company received cash from the exercise of stock options in the amount of $ 10 million during the first six months of 2023, compared with $ 9 million in the first six months of 2022.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 19 million in the first six months of 2023, compared with $ 17 million in the first six months of 2022.

As of June 30, 2023, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 61 million, of which $ 33 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 2023 and 2022.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 20 million in the first nine months of 2023, compared with $ 18 million in the first nine months of 2022.

As of September 30, 2023, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 47 million, of which $ 25 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 1.6 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, 2023.

The following table summarizes restricted stock activity during the nine-month period ended September 30, 2023.

(In thousands of shares) Shares Weighted-Average

6 unchanged sentences

( 1,151 ) 52.80

Restricted stock at June 30, 2023

Restricted stock at September 30, 2023

2,326 $ 62.77

2 unchanged sentences

The model discounts the value of the stock at the assumed vesting date based on the risk-free interest rate.

Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter.

Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage payout estimate will be updated each quarter.

The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, a Monte Carlo simulation model.

22 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 $( 45 ) million and $ 2 million for the three-month periods and $( 43 ) million and $ 6 million for the six-month periods ended June 30, 2023 and 2022, respectively.

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statements of earnings, which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $ 2 million and $ 5 million for the three-month periods and $( 41 ) million and $ 11 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

Total net periodic benefit cost includes the following components:

Three Months Ended June 30,

Three Months Ended September 30,

Pension Benefits Other

9 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Pension Benefits Other

9 unchanged sentences

Net periodic (benefit) cost $ 12 $ 13 $ ( 37 ) $ 29 $ 2 $ 3

During the six months ended June 30, 2023, Aflac Japan contributed approximately $ 12 million (using the weighted-average yen/dollar exchange rate for the six-month period ended June 30, 2023) to the Japanese funded defined benefit plan, and Aflac U.S.

During the nine months ended September 30, 2023, Aflac Japan contributed approximately $ 19 million (using the weighted-average yen/dollar exchange rate for the nine-month period ended September 30, 2023) to the Japanese funded defined benefit plan, and Aflac U.S.

did not make a contribution to the U.S.

4 unchanged sentences

In February 2023, the Company renewed an outsourcing agreement with a management consulting and technology services company to provide application maintenance and development services for Aflac Japan.

As of June 30, 2023, the agreement has a remaining term of five years and an aggregate remaining cost of ¥ 20.1 billion ($ 138 million using the June 30, 2023 exchange rate).

As of September 30, 2023, the agreement has a remaining term of five years and an aggregate remaining cost of ¥ 19.2 billion ($ 128 million using the September 30, 2023 exchange rate).

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

2 unchanged sentences

Although some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will not have a material adverse effect on its financial position, results of operations, or cash flows.

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

See Note 3 for details on certain investment commitments.

Guaranty Fund Assessments

3 unchanged sentences

Under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business.

Guaranty fund assessments for the three- and six-month periods ended June 30, 2023 and 2022 were immaterial.

Guaranty fund assessments for the three- and nine-month periods ended September 30, 2023 and 2022 were immaterial.

SUBSEQUENT EVENTS

In October 2023, the Company received BMA approval for Aflac Re and ALIJ to enter into a coinsurance transaction whereby ALIJ will cede 30 % of the liabilities associated with certain cancer insurance policies and riders to Aflac Re.

The Company intends to execute this transaction in the fourth quarter of 2023.

This transaction is expected to transfer approximately ¥ 286 billion of reserves associated with these policies and is expected to also involve the transfer of assets by ALIJ to Aflac Re to support these reserves.

This internal reinsurance transaction will have no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

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