What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 409 added, 965 removed, 1985 unchanged (41% of the section changed)

2 unchanged sentences

Consolidated Statements of Earnings

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

Three Months Ended March 31,

(In millions, except for share and per-share amounts - Unaudited) 2024 2023

Net earned premiums, principally supplemental health insurance $ 3,456 $ 3,688

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

Net investment income 1,000 943

24 unchanged sentences

Cash dividends per share $ .50 $ .42

(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.

See the accompanying Notes to the Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Comprehensive Income (Loss)

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

Three Months Ended March 31,

(In millions - Unaudited) 2024 2023

16 unchanged sentences

Total comprehensive income (loss) $ 2,297 $ 339

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.

1 unchanged sentence

Consolidated Balance Sheets

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

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

Investments and cash:

51 unchanged sentences

Total liabilities and shareholders’ equity $ 124,742 $ 126,724

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.

24 unchanged sentences

Balance at March 31, 2024 $ 136 $ 2,806 $ 49,872 $ ( 5,102 ) $ ( 24,175 ) $ 23,537

Net earnings 0 0 1,634 0 0 1,634

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 631 ) 0 ( 631 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

taxes and reclassification adjustments 0 0 0 689 0 689

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 ( 165 ) 0 ( 165 )

Pension liability adjustment during period,

net of income taxes 0 0 0 46 0 46

Dividends to shareholders (1)

($ .42 per share)

0 0 ( 252 ) 0 0 ( 252 )

Exercise of stock options 0 5 0 0 0 5

Share-based compensation 1 17 0 0 0 18

Purchases of treasury stock 0 0 0 0 ( 708 ) ( 708 )

Treasury stock reissued 0 10 0 0 8 18

Balance at June 30, 2023 $ 136 $ 2,697 $ 46,937 $ ( 7,338 ) $ ( 21,993 ) $ 20,439

(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 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, 2022

20 unchanged sentences

Balance at March 31, 2023 $ 135 $ 2,665 $ 45,555 $ ( 7,278 ) $ ( 21,293 ) $ 19,784

Net earnings 0 0 1,394 0 0 1,394

Unrealized foreign currency translation

gains (losses) during period, net of

income taxes 0 0 0 ( 780 ) 0 ( 780 )

Unrealized gains (losses) on fixed maturity

securities during period, net of income

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

Unrealized gains (losses) on derivatives

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

Effect of changes in discount rate assumptions

during period, net of income taxes 0 0 0 5,105 0 5,105

Pension liability adjustment during period,

net of income taxes 0 0 0 3 0 3

Dividends to shareholders (1)

($ .40 per share)

0 0 ( 254 ) 0 0 ( 254 )

Exercise of stock options 0 1 0 0 0 1

Share-based compensation 0 19 0 0 0 19

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

Treasury stock reissued 0 9 0 0 8 17

Balance at June 30, 2022 $ 135 $ 2,589 $ 43,150 $ ( 6,980 ) $ ( 19,336 ) $ 19,558

(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 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

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions - Unaudited) 2024 2023

14 unchanged sentences

Equity securities 267 126

Held-to-maturity fixed maturity securities 2 2

Commercial mortgage and other loans 379 418

11 unchanged sentences

Proceeds from borrowings 823 0

Principal payments under debt obligations 0 ( 966 )

Dividends paid to shareholders ( 278 ) ( 248 )

18 unchanged sentences

Share-based compensation grants 6 5

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

See the accompanying Notes to the Consolidated Financial Statements.

1 unchanged sentence

Notes to the Consolidated Financial Statements

(Interim period data - Unaudited)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States (U.S.) and Japan.

The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the U.S.

and through Aflac Life Insurance Japan Ltd.

(ALIJ) in Japan.

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in Japan and the United States (U.S.).

The Company's insurance business is marketed and administered through Aflac Life Insurance Japan Ltd.

(ALIJ) in Japan and through American Family Life Assurance Company of Columbus (Aflac), American Family Life Assurance Company of New York (Aflac New York), Continental American Insurance Company (CAIC), Tier One Insurance Company (TOIC) and Aflac Benefits Solutions, Inc.

(ABS) in the U.S.

The Company’s operations consist of two reportable business segments:

Aflac U.S., which includes Aflac, and Aflac Japan, which includes ALIJ.

American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac.

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

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

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

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

Aflac Japan, which includes ALIJ, and Aflac U.S., which includes Aflac, Aflac New York, CAIC, TOIC and ABS.

Aflac New York is a wholly owned subsidiary of Aflac.

Most of the Aflac U.S.

policies are individually underwritten and marketed through independent agents.

With the exception of dental and vision products administered by ABS, and certain group life insurance products, Aflac U.S.

markets and administers group products through CAIC, branded as Aflac Group Insurance.

Additionally, Aflac U.S.

markets its consumer markets products through Tier One Insurance Company (TOIC).

markets its consumer markets products through TOIC.

The Company's insurance operations in the U.S.

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

The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S.

are included in Corporate and other.

Aflac Japan's revenues, including 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.

(Aflac Re), a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ.

Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices.

Financial results from Aflac Re are included in Corporate and other.

The Parent Company, other operating business units that are not individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re Bermuda Ltd.

(Aflac Re), and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and other.

Basis of Presentation

12 unchanged sentences

All material intercompany accounts and transactions have been eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of 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).

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 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 statements of earnings.

This reclassification had no impact on net earnings.

The change in presentation has been made for all comparative periods presented.

All other categories of significant accounting policies remain unchanged from the 2022 Annual Report.

Insurance Revenue and Expense Recognition:

Substantially all of the supplemental health and life insurance policies the Company issues are classified as long-duration contracts.

The contract provisions generally cannot be changed or canceled during the contract period;

however, the Company may adjust premiums for supplemental health policies issued in the U.S.

within prescribed guidelines and with the approval of state insurance regulatory authorities.

Insurance premiums for most of the Company's health and life policies, including cancer, accident, hospital, critical illness, supplemental dental and vision, term life, whole life, long-term care and disability, are recognized as earned premiums over the premium-paying periods of the contracts when due from policyholders.

When earned premiums are reported, the related amounts of benefits and expenses are charged against such revenues.

This association is accomplished by means of annual increases or decreases to the liability for future policy benefits (LFPB) and the deferral and subsequent amortization of policy acquisition costs.

Premiums from the Company's products with limited-pay features, including cancer, medical and nursing care, term life, whole life, WAYS, and child endowment, are collected over a significantly shorter period than the contract term (i.e., the period during which benefits are provided).

Premiums for these products are recognized as earned premiums over the premium-paying periods when due from policyholders.

Any gross premium in excess of the net premium is deferred and recorded as a deferred profit liability, which is subsequently amortized in net earned premiums such that profits are recognized in a constant relationship with insurance in force.

Benefits are recorded as an expense when they are incurred.

An LFPB is recorded when premiums are recognized using the net premium method.

Policyholders also have an option to pay discounted advanced premiums for certain of the Company's products.

Advanced premiums are deferred and recognized when due from policyholders over the otherwise required contractual premium payment period.

Benefit expense is bifurcated between benefits and claims and reserve remeasurement (gains) losses.

The net premium ratio (NPR) is used to measure benefit expense and is calculated as the ratio of the present value of actual and future expected benefits and expenses to the present value of actual and future expected gross premiums.

A revised NPR is calculated as of the beginning of each reporting period using updated future cash flow expectations.

Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the beginning of the current reporting period using the same locked-in discount rates.

One reserve measure uses the NPR as of the end of the prior reporting period, and the second uses the revised NPR.

Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates.

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

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

Deferred Policy Acquisition Costs :

Certain direct and incremental costs of acquiring insurance contracts are deferred and amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level basis.

For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount, and insurance in force, respectively.

For life and health products issued in the U.S., the constant-level basis used is face amount and number of policies in force, respectively.

Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination assumptions that are used in computing the LFPB, and these assumptions are reviewed and updated at least annually.

The effects of changes in assumptions are recognized

prospectively over the remaining contract term as a revision of the future amortization pattern, while current period amortization is calculated based on the actual experience during the quarter.

Deferred costs include the excess of current-year commissions over ultimate renewal-year commissions and certain incremental direct policy issue, underwriting and sales expenses directly related to successful policy acquisition.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.

These transactions are known as internal replacements.

The Company performs a two-stage analysis of the internal replacements to determine if the modification is substantive to the base policy.

The stages of evaluation are as follows:

1) determine if the modification is integrated with the base policy, and 2) if it is integrated, determine if the resulting contract is substantially changed.

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

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

Riders can be considered internal replacements that are either integrated or non-integrated resulting in either substantially changed or substantially unchanged treatment.

Riders are evaluated based on the specific facts and circumstances of the rider and are considered an expansion of the existing benefits with additional premium required.

Non-integrated riders to existing contracts do not change the Company's profit expectations for the related products and are treated as a new policy establishment for incremental coverage.

Policy Liabilities :

For long-duration insurance contracts, the Company calculates an integrated reserve that represents all payments under the contract including future expected claims and unpaid policy claims and related expenses.

The liability for future policy benefits is measured using the net level premium method.

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

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

The LFPB is determined as the present value of 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.

The assumptions and estimates that the Company uses depend on its judgment regarding the likelihood of future events and are inherently uncertain.

Cash flow assumptions (mortality, morbidity, and termination) are established at policy inception and are evaluated each quarter to determine if an update is needed.

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

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

and Japan insurance business.

The methodology incorporates constructing a discount rate curve separately for discounting cash flows used to calculate the U.S.

and Japan LFPBs, reflective of the characteristics of the insurance liabilities, such as currency and tenor.

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

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

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

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

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

(i) for tenors where there is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-specific single-A credit spreads and applying them to risk-free government rates; (ii) for tenors where there is very limited or no observable single-A or similar market data, interpolation and extrapolation techniques.

The locked-in discount rate used for the computation of interest accretion on LFPBs is determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income instrument forward curves in the calendar year, determined using the methodology described above and weighted using issued annualized premiums for each issue month.

The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent net premium ratio to the forward curve and will remain unchanged after the calendar year of issue.

Unearned premiums consist primarily of discounted advance premiums on deposit from policyholders in conjunction with their purchase of certain Aflac Japan limited-pay insurance products.

These advanced premiums are deferred upon collection and recognized as earned premiums over the contractual premium payment period.

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

For internal replacements that are determined to be substantially changed, policy liabilities related to the original policy that was replaced are immediately released, and policy liabilities are established for the new insurance contract.

The policy reserves are evaluated based on the new policy features, and changes are recognized at the date of contract change/modification.

For internal replacements that are substantially unchanged, no changes to the reserves are recognized.

For modifications that are not integrated with the base policy, new coverage is recognized as a separately issued contract within the current cohort.

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, 2023 (2023 Annual Report).

Reclassifications :

1 unchanged sentence

These reclassifications had no impact on net earnings or total shareholders' equity.

For the three-month period ended March 31, 2023, immaterial reclassifications were made to the consolidated statement of cash flows related to investments in limited partnerships and the impact of foreign currency on policy liabilities.

The impact of the reclassification related to investments in limited partnerships resulted in an increase to net cash flows provided by operating activities of $ 182 million with a corresponding decrease to net cash flows provided by investing activities.

There was no impact to net cash flows provided by operating activities as a result of the reclassification related

to the impact of foreign currency on policy liabilities between the increase in policy liabilities and other, net line items within operating activities.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

ASU 2018-12 Financial Services - Insurance:

Targeted Improvements to the Accounting for Long-Duration Contracts , as clarified and amended by:

ASU 2019-09 Financial Services - Insurance:

Effective Date

ASU 2020-11 Financial Services - Insurance:

Effective Date and Early Application

In August 2018, the FASB issued amendments that significantly changed how insurers account for long-duration contracts.

The Company adopted the standard on January 1, 2023 using a modified retrospective transition method which resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021 transition date (Transition Date).

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

On the Transition Date, the Company calculated the ratio of the present value of 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 %.

The Company calculated the LFPB using the Transition Date NPR (capped at 100 % if required) and two different discount rates:

(i) the discount rate used immediately before the Transition Date, and (ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit

risk) fixed income instruments (as of December 31, 2020).

For cohorts with their Transition Date NPR capped at 100 %, the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the Transition Date.

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

Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods presented (years 2021 and 2022) following the updated standard.

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

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

Transition Impact to Shareholder's Equity

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

(In millions - Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders'

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

Cumulative effect of change in accounting

principle, ASU 2018-12, net of income taxes 0 0 ( 324 ) ( 18,570 ) 0 ( 18,894 )

Balance at January 1, 2021 $ 135 $ 2,410 $ 37,660 $ ( 9,636 ) $ ( 15,904 ) $ 14,665

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

(In millions - Unaudited) Impact to Retained

Earnings Impact to

Transition impacts:

Cancer $ 0 $ 14,529

Medical and other health 1 2,382

Life insurance 0 3,314

Accident 0 92

Disability 0 149

Critical care 4 2,258

Hospital indemnity 0 223

Dental/vision 0 65

Life insurance 5 149

Reinsurance 0 ( 305 )

Transition impact before income taxes 410 23,507

income taxes 86 4,937

Total transition impact, net of income taxes $ 324 $ 18,570

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

Transition Impact on the Liability for Future Policy Benefits

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

The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present value of expected 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 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 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 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

Aflac Japan Aflac U.S.

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

Present value of expected future 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

Impact to retained earnings from capping Transition Date NPR 0 ( 1 ) 0 ( 398 ) 0 0 ( 4 ) 0 0 ( 5 ) ( 2 )

Impact of deferred profit liability 15 7 36 26 0 0 0 0 0 0 0

Beginning balance at original discount rate 25,616 21,276 12,476 1,708 3,350 1,921 5,894 1,376 281 705 152

Effect of change in discount rate assumptions 3,982 2,598 908 148 479 197 1,048 154 41 78 27

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

The following table presents the changes in the present value of expected 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

Aflac Japan Aflac U.S.

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

Present value of expected future 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

Beginning balance at original discount rate (1)

25,616 21,276 12,476 1,708 3,350 1,921 5,894 1,376 281 705 152

Effect of changes in cash flow assumptions 32 88 40 1 ( 163 ) ( 129 ) ( 302 ) 0 ( 26 ) 31 0

Effect of actual variances from expected

experience ( 134 ) ( 449 ) ( 135 ) ( 11 ) ( 109 ) ( 38 ) ( 290 ) ( 32 ) ( 14 ) 34 ( 3 )

Adjusted beginning of period balance 25,514 20,915 12,381 1,698 3,078 1,754 5,302 1,344 241 770 149

Issuances 1,116 1,132 284 55 365 345 552 263 39 112 0

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

Net premiums collected (2)

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

Foreign currency translation ( 2,539 ) ( 2,111 ) ( 1,194 ) ( 167 ) 0 0 0 0 0 0 0

Other ( 1 ) ( 2 ) 0 ( 1 ) ( 8 ) ( 7 ) ( 8 ) ( 4 ) ( 2 ) ( 3 ) ( 1 )

Ending balance at original discount rate 22,470 18,681 10,064 1,461 2,999 1,760 5,391 1,380 241 780 135

Effect of changes in discount rate assumptions 3,423 2,493 783 125 284 102 632 87 23 54 18

Balance at December 31, 2021 $ 25,893 $ 21,174 $ 10,847 $ 1,586 $ 3,283 $ 1,862 $ 6,023 $ 1,467 $ 264 $ 834 $ 153

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

(2) Net premiums 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.

Transition Impact at January 1, 2021

Aflac Japan Aflac U.S.

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

Present value of expected future policy benefits:

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

Effect of change in discount rate assumptions 18,511 4,980 4,222 581 571 346 3,306 377 106 227 245

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

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

December 31, 2021

Aflac Japan Aflac U.S.

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

Present value of expected future policy benefits:

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

Beginning balance at original discount rate 64,056 34,638 43,729 7,620 3,818 2,919 13,427 2,258 599 1,562 661

Effect of changes in cash flow assumptions 24 85 31 ( 11 ) ( 178 ) ( 143 ) ( 326 ) ( 3 ) ( 29 ) 31 0

Effect of actual variances from expected

experience ( 149 ) ( 458 ) ( 139 ) ( 15 ) ( 115 ) ( 41 ) ( 304 ) ( 36 ) ( 15 ) 34 ( 3 )

Adjusted beginning of period balance 63,931 34,265 43,621 7,594 3,525 2,735 12,797 2,219 555 1,627 658

Issuances 1,133 1,155 287 62 372 355 563 271 40 115 0

Interest accrual 2,014 769 833 129 137 100 553 85 23 58 33

Benefit payments ( 3,894 ) ( 1,313 ) ( 1,373 ) ( 238 ) ( 439 ) ( 520 ) ( 834 ) ( 275 ) ( 69 ) ( 107 ) ( 46 )

Foreign currency translation ( 6,377 ) ( 3,478 ) ( 4,366 ) ( 760 ) 0 0 0 0 0 0 0

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

Ending balance at original discount rate 56,807 31,398 39,002 6,787 3,594 2,670 13,079 2,300 549 1,694 645

Effect of changes in discount rate assumptions 15,940 4,623 3,718 535 355 201 2,309 252 67 149 192

Balance at December 31, 2021 72,747 36,021 42,720 7,322 3,949 2,871 15,388 2,552 616 1,843 837

Net liability for future policy benefits 46,854 14,847 31,873 5,736 666 1,009 9,365 1,085 352 1,009 684

reinsurance recoverable 0 2,150 0 0 0 0 0 0 0 10 0

Net liability for future policy benefits after

reinsurance recoverable $ 46,854 $ 12,697 $ 31,873 $ 5,736 $ 666 $ 1,009 $ 9,365 $ 1,085 $ 352 $ 999 $ 684

The following table presents a reconciliation of the rollforwards by reporting segment and disaggregated by product type for the year ended December 31, 2021 to the liability for future policy benefits as of December 31, 2021 under the amended guidance.

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

(In millions) December 31,

Balances included in future policy benefits rollforward:

Cancer $ 46,854

Medical and other health 14,847

Life insurance 31,873

Disability 1,009

Critical care 9,365

Hospital indemnity 1,085

Dental/vision 352

Life insurance 1,009

Corporate and other 30

Deferred profit liability - limited-payment contracts 1,595

Deferred profit liability - reinsurance 859

Total $ 115,964

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

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

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

In March 2023, the FASB issued amendments to permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

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 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.

Accounting Standards Update (ASU) 2023-09 Income Taxes (Topic 740) – Improvements to Income Tax Disclosures

In December 2023, the FASB issued amendments that require enhanced income tax disclosures including (1) disclosure of specific categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The adoption of this guidance has no impact on the Company’s financial position or results of operations.

The Company is evaluating the impact of adoption on its disclosures.

ASU 2023-07 Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued amendments that will add certain segment disclosures related to significant segment expenses and require that a public entity disclose the title and position of the Chief Operating Decision Maker (CODM) and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The adoption of this guidance has no impact on the Company’s financial position or results of operations.

The Company is evaluating the impact of adoption on its disclosures.

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

3 unchanged sentences

Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance.

In addition, the Parent Company, other operating business units that are not individually reportable and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S.

are included in Corporate and other.

In addition, the Parent Company, other operating business units that are not individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re, and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and other.

The Company does not allocate corporate overhead expenses to business segments.

1 unchanged sentence

GAAP accounting guidance for segment reporting, the Company evaluates and manages its business segments using a financial performance measure called pretax adjusted earnings.

Adjusted earnings are adjusted revenues less benefits and adjusted expenses.

The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control.

• Pretax adjusted earnings are adjusted revenues less benefits and adjusted expenses.

The adjustments to both revenues and expenses account for certain items that are outside management’s control because they tend to be driven by general economic conditions and events or are related to infrequent activities not directly associated with insurance operations.

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

◦ Adjusted revenues are U.S.

GAAP total revenues excluding net investment gains and losses, except for amortized hedge costs/income related to foreign currency exposure management strategies and net interest income/expense from derivatives associated with certain investment strategies, which are reclassified from net investment gains (losses) and included in adjusted earnings as a component of adjusted net investment income when analyzing operations.

◦ 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 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.

GAAP total acquisition and operating expenses including the impact of interest 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.

Aflac Japan's adjusted revenues accounted for 56 % and 61 % of the Company's total adjusted revenues in the three-month periods ended March 31, 2024 and 2023, respectively.

The percentage of the Company's total assets attributable to Aflac Japan was 79 % at March 31, 2024, compared with 80 % at December 31, 2023.

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

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

Three Months Ended March 31,

(In millions) 2024 2023

Net earned premiums $ 1,816 $ 2,170

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

Adjusted net investment income 648 611

679 663 1,927 2,066

Other income 9 9

2 unchanged sentences

Adjusted net investment income 206 197

209 185 609 563

Other income 18 35

Total adjusted revenue Aflac U.S.

1,661 1,598 4,983 4,865

Corporate and other (1)

115 73 384 189

Total adjusted revenues 4,419 4,579

Net investment gains (losses) 951 123

514 236 1,396 962

Reconciling items:

Amortized hedge costs 6 58

Amortized hedge income ( 28 ) ( 29 )

Net interest (income) expense from derivatives

associated with certain investment strategies 88 69

Total revenues $ 5,436 $ 4,800

(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.

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $ 32 and $ 51 for the three-month periods ended March 31, 2024, and 2023, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $ 33 and $ 52 for the three-month periods ended March 31, 2024, and 2023, 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

1 unchanged sentence

Aflac Japan $ 810 $ 788

$ 869 $ 817 $ 2,479 $ 2,560

478 345 1,199 1,020

Corporate and other (1)

( 49 ) ( 56 ) ( 107 ) ( 173 )

Pretax adjusted earnings 1,163 1,133

1,298 1,106 3,571 3,407

Net investment gains (losses) (2),(3),(4),(5),(6)

504 222 1,363 923

Other income (loss) ( 2 ) 0

Net investment gains (losses) 951 123

Reconciling items:

Amortized hedge costs 6 58

Amortized hedge income ( 28 ) ( 29 )

Net interest (income) expense from derivatives

associated with certain investment strategies 88 69

Impact of interest from derivatives associated

with notes payable

Total earnings before income taxes $ 2,170 $ 1,342

2 unchanged sentences

adjusted earnings ( 44 ) ( 41 )

(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) September 30,

(In millions) March 31,

2024 December 31,

3 unchanged sentences

Total assets $ 124,742 $ 126,724

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

Investment Holdings

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

March 31, 2024

(In millions)

47 unchanged sentences

Total securities available-for-sale $ 70,689 $ 0 $ 6,050 $ 3,449 $ 73,290

September 30, 2023

March 31, 2024

(In millions)

25 unchanged sentences

Total securities held-to-maturity $ 17,824 $ 5 $ 17,819 $ 1,838 $ 0 $ 19,657

(In millions) September 30,

2024 December 31, 2023

(In millions) Fair Value Fair Value

Equity securities, carried at fair value through net earnings:

Fair Value Fair Value

Equity securities:

4 unchanged sentences

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

During the first nine months of 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 three months of 2024 and 2023, respectively, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

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

The contractual and economic maturities of the Company's investments in fixed maturity securities at March 31, 2024, were as follows:

(In millions) Amortized

11 unchanged sentences

Due after 10 years 7,753 8,495

Mortgage- and asset-backed securities 0 0

Total fixed maturity securities held-to-maturity $ 16,689 $ 18,245

10 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In millions) Credit

6 unchanged sentences

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

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

Three Months Ended March 31,

(In millions) 2024 2023

7 unchanged sentences

Gross gains (losses) from sales and redemptions 5 0

Commercial mortgage and other loans:

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

Total sales and redemptions 173 57

Equity securities 76 ( 3 )

( 22 ) 35 ( 313 )

Credit losses:

10 unchanged sentences

Total net investment gains (losses) $ 951 $ 123

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.

The unrealized holding gains, net of losses, recorded as a component of net investment gains and losses for the three-month period ended March 31, 2024 that relate to equity securities held at the March 31, 2024 reporting date were $ 71 million.

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the three-month period ended March 31, 2023 that relate to equity securities held at the March 31, 2023 reporting date were $ 5 million.

Unrealized Investment Gains and Losses

1 unchanged sentence

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

(In millions) September 30,

(In millions) March 31,

2024 December 31,

3 unchanged sentences

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended 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

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

March 31, 2024

Total Less than 12 months 12 months or longer

60 unchanged sentences

Analysis of Securities in Unrealized Loss Positions

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

For any 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.

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

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

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

5 unchanged sentences

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

Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity.

Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company.

Assuming no credit-related factors develop, unrealized gains and losses on available-for-sale securities are expected to diminish as investments near maturity.

Based on its credit analysis, the Company believes that the issuers of its available-for-sale investments in the sectors shown in the table above have the ability to service their obligations to the Company.

Further, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

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

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 .

However, from time to time the Company identifies certain available-for-sale 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 loss allowance will be estimated.

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 March 31, 2024 .

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

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

As of March 31, 2024 and December 31, 2023, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

Commercial Mortgage and Other Loans

The Company classifies its transitional real estate loans (TREs), commercial mortgage loans (CMLs) and middle market loans (MMLs) as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets.

The Company classifies its transitional real estate loans (TREs), commercial mortgage loans (CMLs), middle market loans (MMLs), and other loans as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets.

The Company carries them on the balance sheet at amortized cost less an estimated allowance for credit losses.

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

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

(In millions) March 31, 2024 December 31, 2023

Amortized Cost % of Total Amortized Cost % of Total

13 unchanged sentences

Industrial 445 3.5 463 3.6

Other 15 .1 0 0.0

Total commercial mortgage loans 1,653 13.0 1,709 13.4

Middle market loans 4,586 36.4 4,677 36.5

Other loans 275 2.2 301 2.3

Total commercial mortgage and other loans $ 12,592 100.0 % $ 12,801 100.0 %

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

As of March 31, 2024, the Company had $ 442 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 $ 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.

The carrying value for MMLs included $ 24 million for a short-term credit facility that is reflected in other liabilities on the consolidated balance sheets at both March 31, 2024 and December 31, 2023.

As of March 31, 2024, the Company had commitments of approximately $ 787 million to fund future MMLs.

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

Other loans are primarily infrastructure loans.

Infrastructure loans are typically senior secured, financing operating portfolios of contracted solar and wind assets generating cash flow for loan repayment.

The infrastructure loan portfolio weighted average rating is investment grade.

As of March 31, 2024, the Company had commitments of approximately $ 5 million to fund future other loans.

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

Credit Quality Indicators

For TREs, the Company’s key credit quality indicator is loan-to-value (LTV), which is calculated by dividing the current outstanding loan balance by the estimated property value at origination.

For TREs, the Company’s key credit quality indicators include performance of the loan and loan-to-value (LTV), which is calculated by dividing the current outstanding loan balance by the estimated property value, primarily using values at origination.

Given that TREs involve properties undergoing a repositioning of their commercial profile, LTV provides the most insight into the credit risk of the loan.

2 unchanged sentences

For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR).

DSCR is the most recently available operating income of the underlying property compared to the required debt service of the loan.

DSCR is the most recently available net operating income of the underlying property compared to the required debt service of the loan.

For MMLs and held-to-maturity fixed maturity securities, the Company’s key credit quality indicator is credit ratings.

1 unchanged sentence

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

For the Company’s reinsurance recoverable balance, the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty.

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

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

For other loans, the Company's key credit quality indicator is credit ratings.

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

The following tables present as of March 31, 2024 the amortized cost basis of TREs, CMLs, MMLs, and other loans by year of origination and credit quality indicator.

Transitional Real Estate Loans

6 unchanged sentences

Total $ 165 $ 226 $ 2,206 $ 2,295 $ 217 $ 969 $ 6,078

Current-period gross

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Commercial Mortgage Loans

7 unchanged sentences

Weighted Average DSCR 0.00 2.58 0.00 2.92 2.26 2.14

Current-period gross

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Middle Market Loans

8 unchanged sentences

Total $ 66 $ 130 $ 591 $ 1,128 $ 658 $ 1,136 $ 877 $ 4,586

Loan Modifications

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.

Current-period gross

$ 0 $ 0 $ 0 $ 27 $ 0 $ 23 $ 0 $ 50

(In millions) 2024 2023 2022 2021 2020 Prior Revolving Loans Total

Credit Ratings:

A $ 0 $ 22 $ 94 $ 0 $ 0 $ 0 $ 0 $ 116

AA 0 0 5 5 0 0 0 10

BBB 5 68 0 0 0 0 0 73

BB 0 0 76 0 0 0 0 76

Total $ 5 $ 90 $ 175 $ 5 $ 0 $ 0 $ 0 $ 275

Current-period gross writeoffs:

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Loan Modifications to Borrowers Experiencing Financial Difficulties

The Company granted certain loan modifications to borrowers experiencing financial difficulty during the first three months of 2024 and 2023.

The amount, timing, and extent of modifications granted are considered in determining any credit loss allowance recorded.

For the three-month period ended March 31, 2024, 3 % of TREs with an amortized cost of $ 210 million were modified in the form of interest rate reductions and other-than-insignificant payment delays.

The modifications resulted in a reduction in the weighted-average contractual interest rate from 8.3 % to 6.9 %.

Loan modifications for the three-month period ended March 31, 2023 were immaterial.

Past Due and Nonaccrual Loans

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.

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

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.

September 30, 2023

The following tables present an aging of past due and nonaccrual loans at amortized cost, before allowance for credit losses, as of the periods presented.

March 31, 2024

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

4 unchanged sentences

Middle market loans 4,560 0 26 26 4,586 26

Other loans 275 0 0 0 275 0

Total $ 11,585 $ 97 $ 910 $ 1,007 $ 12,592 $ 910

(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.

(1) As of March 31, 2024, there were no loans that were 90 days or more past due that continued to accrue interest.

December 31, 2023

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

Total Past Due Total

Loans Nonaccrual Status

Transitional real estate loans $ 5,481 $ 108 $ 525 $ 633 $ 6,114 $ 633

Commercial mortgage loans 1,676 33 0 33 1,709 0

Middle market loans 4,592 0 85 85 4,677 85

Other loans 301 0 0 0 301 0

Total $ 12,050 $ 141 $ 610 $ 751 $ 12,801 $ 718

(1) As of December 31, 2023, there were no loans that were 90 days or more past due that continued to accrue interest.

For the three-month periods ended March 31, 2024 and March 31, 2023, the Company recognized no interest income for TREs, CMLs, MMLs, or other loans on nonaccrual status.

Of these loans, TREs with an amortized cost of $ 383 million had no credit loss allowance as of March 31, 2024 because these loans are collateral dependent assets for which the estimated fair values of the collateral are in excess of amortized cost.

As of March 31, 2024 and December 31, 2023, there were no MMLs on nonaccrual status without an allowance for credit losses.

Allowance for Credit Losses

The Company calculates its allowance for credit losses for held-to-maturity fixed maturity securities, loan receivables, loan commitments and reinsurance recoverable by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset.

For held-to-maturity fixed maturity securities, MMLs, and MML commitments, the Company groups assets by credit ratings, industry, and country.

The Company calculates its allowance for credit losses for held-to-maturity securities, loan receivables, loan commitments and reinsurance recoverable by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset.

For held-to-maturity securities, MMLs, and MML commitments, the Company groups assets by credit ratings, industry, and country.

The Company groups CMLs and TREs and respective loan commitments by property type, property location and the property’s LTV and DSCR.

On a quarterly basis, CMLs and TREs within a portfolio segment that share similar risk characteristics are pooled for calculation of credit loss allowance.

On an ongoing basis, TREs and CMLs with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss.

On an ongoing basis, TREs, CMLs and other loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss.

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 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.

The credit allowance for held-to-maturity fixed maturity securities and loan receivables is estimated using a PD / LGD method, discounted for the time value of money.

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 as a component of net investment gains (losses) in the consolidated statements of earnings.

The credit allowance for held-to-maturity fixed maturity securities and loan receivables is estimated using a probability-of-default (PD) / loss-given-default (LGD) method, discounted for the time value of money.

For held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities and loan receivables, the Company includes the change in present value due to the passage of time in the change in the allowance for credit losses.

4 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 $ 16.1 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.

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

The Company's debt impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost.

The Company’s held-to-maturity portfolio includes Japan Government and Agency securities of $ 15.9 billion amortized cost as of March 31, 2024 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 security may be impaired if the fair value falls below amortized cost.

The Company regularly reviews its available-for-sale portfolio for declines in fair value.

The Company's available-for-sale impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost.

The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective securities.

2 unchanged sentences

The Company performs ongoing analyses of its liquidity needs, which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow and liquidity needs.

The Company’s methodology for estimating credit losses for available-for-sale fixed maturity securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the fixed maturity securities.

The Company’s methodology for estimating credit losses for available-for-sale securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the securities.

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 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 September 30, 2023:

Balance at June 30, 2023

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

(Addition to) release of allowance for credit

( 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 September 30, 2023 (2)

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

Three Months Ended September 30, 2022:

Balance at June 30, 2022

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

(Addition to) release of allowance for credit

losses ( 2 ) ( 2 ) ( 6 ) 0 0 0

Write-offs, net of recoveries 0 0 ( 2 ) 0 0 0

Change in foreign exchange 0 0 0 1 0 0

Balance at September 30, 2022 (2)

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

Nine Months Ended September 30, 2023:

(In millions) Transitional Real Estate Loans Commercial Mortgage Loans Middle Market Loans Other Loans and Loan Commitments Held-to-Maturity Securities Available-for-Sale Securities Total

Three Months Ended March 31, 2024:

Balance at December 31, 2023

$ ( 112 ) $ ( 16 ) $ ( 146 ) $ ( 16 ) $ ( 5 ) $ 0 $ ( 295 )

(Addition to) release of allowance for credit

(Addition to) release of allowance for credit losses

( 2 ) ( 3 ) ( 3 ) 1 0 0 ( 7 )

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

Writeoffs, net of recoveries 0 0 50 0 0 0 50

Change in foreign exchange 0 0 0 0 0 0 0

Balance at September 30, 2023 (2)

Balance at March 31, 2024

$ ( 114 ) $ ( 19 ) $ ( 99 ) $ ( 15 ) $ ( 5 ) $ 0 $ ( 252 )

Nine Months Ended September 30, 2022:

Three Months Ended March 31, 2023:

Balance at December 31, 2022

$ ( 54 ) $ ( 9 ) $ ( 129 ) $ ( 24 ) $ ( 7 ) $ 0 $ ( 223 )

(Addition to) release of allowance for credit

losses 13 0 ( 24 ) 0 0 2

Write-offs, net of recoveries 0 0 3 0 0 0

(Addition to) release of allowance for credit losses ( 11 ) 0 ( 20 ) 3 1 0 ( 27 )

Writeoffs, net of recoveries 0 0 0 0 0 0 0

Change in foreign exchange 0 0 0 0 0 0 0

Balance at September 30, 2022 (2)

Balance at March 31, 2023

$ ( 65 ) $ ( 9 ) $ ( 149 ) $ ( 21 ) $ ( 6 ) $ 0 $ ( 250 )

(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.

For the three-month period ended March 31, 2024, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real estate properties with an amortized cost of $ 31 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 gain of $ 4 million for the three-month period ended March 31, 2024 in net investment gains (losses).

The Company did not complete any foreclosure or deed in lieu of foreclosure transactions in the three-month period ended March 31, 2023.

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.

As of March 31, 2024, the Company identified additional TREs with an amortized cost of $ 601 million in anticipation of potential foreclosure or deed in lieu of foreclosure transactions.

As of March 31, 2024, the Company established a credit allowance of $ 60 million for $ 598 million of loans for which the fair value of the collateral was below the amortized cost of the loans.

Other Investments

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

(In millions) September 30,

(In millions) March 31,

2024 December 31, 2023

6 unchanged sentences

(1) Includes securities lending collateral

(2) Includes tax credit investments and asset classes such as private equity and real estate funds

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.

2 unchanged sentences

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.

Real estate owned (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 March 31, 2024, all REO was classified as held-and-used for the production of income and is carried at cost less accumulated depreciation.

As of December 31, 2023, $ 210 million of REO was classified as held-and-used with the remaining $ 17 million 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.

Depreciation expense was $ 1 million for the three-month period ended March 31, 2024.

Additionally, as of March 31, 2024 and December 31, 2023, accumulated depreciation was $ 2 million and an immaterial amount, respectively.

As of March 31, 2024, the Company had $ 2.2 billion in outstanding commitments to fund investments in limited partnerships.

Variable Interest Entities (VIEs)

As a condition of its involvement or investment in a VIE, the Company enters into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of the Company's investment or its beneficial interest in the VIE.

In the normal course of its activities, the Company invests in legal entities that are VIEs.

The Company's debt or ownership interest in VIEs is limited to holding the equity interests and obligations issued by them.

With the exception of commitments to limited partnerships and to certain loan investments made in the normal course of business, the Company has not provided any direct or contingent obligations to fund the limited activities of these VIEs or support related to the limited activities of these VIE and does not have any intention to do so in the future, nor does it have any direct or indirect financial guarantees.

The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related investments, and in certain cases, to any unfunded commitments held in the VIE.

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

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

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

The Company has no direct or contingent obligations to fund the limited activities of these VIEs, nor does it have any direct or indirect financial guarantees related to the limited activities of these VIEs.

The Company has not provided any assistance or any other type of financing support to any of the VIEs it invests in, nor does it have any intention to do so in the future.

For those VIEs in which the Company holds debt obligations, the weighted-average lives of the Company's notes are very similar to the underlying collateral held by these VIEs where applicable.

The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related investments held in the VIE.

VIEs - Consolidated

The following table presents the cost or amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

The Company is the primary beneficiary of a VIE if it has

• the power to direct the activities of the VIE that most significantly impact the economic performance of the entity

• the obligation to absorb losses of or the right to receive benefits from the entity that could be potentially significant to the VIE.

If the Company determines that it is the VIE’s primary beneficiary, it consolidates the VIE.

Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company except to the extent of the unfunded commitments referenced above, as the Company’s obligation to each VIE is limited to the amount of its committed investment.

The following table presents carrying value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities

September 30, 2023 December 31, 2022

(In millions) Amortized

Value Amortized

(In millions) March 31,

2024 December 31,

Fixed maturity securities, available-for-sale $ 3,678 $ 3,712

1 unchanged sentence

Other investments (1)

2,278 2,278 1,909 1,909

Other assets (2)

1 unchanged sentence

Other liabilities (2)

$ 442 $ 442 $ 390 $ 390

Total liabilities of consolidated VIEs $ 583 $ 507

(1) Net of allowance for credit losses

(1) Consists entirely of alternative investments in limited partnerships

(2) Consists entirely of derivatives

The Company is substantively the only investor in the consolidated VIEs listed in the table above.

As the sole investor in these VIEs, the Company has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and is therefore considered to be the primary beneficiary of the VIEs that it consolidates.

The Company also participates in substantially all of the variability created by these VIEs.

The activities of these VIEs are limited to holding invested assets and foreign currency swaps, as appropriate, and utilizing the cash flows from these securities to service its investment.

Neither the Company nor any of its creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event.

For those VIEs that contain a swap, the Company is not a direct counterparty to the swap contracts and has no control over them.

The Company is the sole investor in the consolidated VIEs listed in the table above.

The Company invests in fixed maturity securities issued by VIEs that in turn hold U.S.

dollar-denominated fixed maturity securities coupled with foreign currency swap agreements.

The weighted-average lives of the Company's investments in these VIEs are very similar to the underlying collateral held by these VIEs.

The activities of these VIEs are limited to holding invested assets and foreign currency swaps and utilizing the cash flows from these securities to service the VIEs' debt.

Neither the Company nor any of its creditors are able to obtain the underlying collateral of these VIEs unless there is an event of default or other specified event.

The Company is not a direct counterparty to the foreign currency swap contracts and has no control over them.

The Company's loss exposure to these VIEs is limited to its original investment.

The Company's consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable.

With the exception of its investment in unit trust structures, the underlying collateral assets and funding of the Company's consolidated VIEs are generally static in nature.

Investments in Unit Trust Structures

The Company also utilizes unit trust structures in its Aflac Japan segment to invest in various asset classes.

As the sole investor of these VIEs, the Company is required to consolidate these trusts under U.S.

These consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and foreign currency swap contracts, if applicable.

The underlying collateral assets and funding of these consolidated VIEs are generally static in nature.

The Company also utilizes unit trust structures in its Aflac Japan segment to invest in various asset classes, which include CMLs, MMLs, TREs, other loans and limited partnerships.

The limited partnership investments are comprised of private equity and real estate funds.

The Company’s loss exposure to these VIEs is limited to its original investments, together with any unfunded portion of the Company’s commitments made in the normal course of business to fund certain loan investments and limited partnership investments, as described in the Commercial Mortgage and Other Loans and Other Investments sections of this note.

Excluding these commitments, the Company does not provide financial or other support to consolidated VIEs.

VIEs - Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which the Company's investment in VIEs not consolidated are reported.

The table below reflects the carrying value and balance sheet caption in which the Company's investments in VIEs that are not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated

September 30, 2023 December 31, 2022

(In millions) Amortized

Value Amortized

(In millions) March 31,

2024 December 31,

Fixed maturity securities, available-for-sale $ 6,486 $ 6,424

Other investments (1)

351 351 381 381

Total investments in VIEs not consolidated $ 6,881 $ 6,793

(1) Consists entirely of alternative investments in limited partnerships

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

These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets.

Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt obligations issued by the VIEs.

These fixed maturity securities include structured securities, primarily asset-backed securities.

The Company's involvement in the related VIEs is limited to that of a passive investor in asset-backed securities issued by the VIEs.

The Company also invests in VIEs that are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets.

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.

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

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.

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

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 VIE entity or the right to receive benefits from the entity that could be significant to the entity.

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

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

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

These partnerships primarily invest in private equity and real estate funds.

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

As described in the Other Investments section of this note, the Company makes commitments to fund partnership investments in the normal course of business.

Excluding these commitments, the Company did not provide financial or other support to unconsolidated VIEs.

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

1 unchanged sentence

Securities Lending and Pledged Securities

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 lends fixed maturity securities and, from time to time, 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.

6 unchanged sentences

Remaining Contractual Maturity of the Agreements

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In millions) Overnight

Continuous (1)

days 30-90 days Total Overnight

days Total Overnight

Continuous (1)

2 unchanged sentences

Fixed maturity securities:

Japan government and

agencies $ 0 $ 3,684 $ 251 $ 3,935 $ 0 $ 1,087 $ 1,087

Japan government and agencies $ 0 $ 2,542 $ 2,542 $ 0 $ 737 $ 737

Public utilities 33 0 33 19 0 19

7 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 $ 5.1 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.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $ 4.5 billion and $ 4.3 billion at March 31, 2024 and December 31, 2023, 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 September 30, 2023, and December 31, 2022, respectively.

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of March 31, 2024, and December 31, 2023, 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.

1 unchanged sentence

DERIVATIVE INSTRUMENTS

The Company's freestanding derivative financial instruments have historically consisted of:

The Company's freestanding derivative financial instruments include:

• foreign currency forwards and options used in hedging foreign exchange risk on U.S.

52 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In millions) Asset

43 unchanged sentences

The following table presents the gains and losses on derivatives and the related hedged items in fair value hedges.

The Company had no fair value hedges during the three-month period ending March 31, 2024.

Fair Value Hedging Relationships

7 unchanged sentences

Net Investment Gains (Losses) Recognized for Fair Value Hedge

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

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 September 30, 2022:

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

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

Nine Months Ended September 30, 2022:

Three Months Ended March 31, 2023:

Foreign currency options Fixed maturity securities $ ( 39 ) $ ( 39 ) $ 0 $ 0 $ 0

5 unchanged sentences

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

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.

For the three-month period ended March 31, 2023, 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 September 30, 2023 and December 31, 2022;

The Company had no fair value hedges of interest rate risk as of March 31, 2024 and December 31, 2023;

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)

September 30,

2023 December 31, 2022 September 30,

2024 December 31, 2023 March 31,

2024 December 31, 2023

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 nine-month periods ended September 30, 2023 and 2022, respectively.

The Company's net investment hedge was effective during the three-month periods ended March 31, 2024 and 2023, respectively.

Non-qualifying Strategies

2 unchanged sentences

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.

As of March 31, 2024, 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.

dollar to Japanese yen.

Changes in the values of these swaps are recorded through current period earnings.

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

Changes in the values of these swaps are recorded in current period earnings.

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.

dollar-denominated loan receivables and U.S.

government fixed maturity securities 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 currency forwards within net investment gains (losses).

4 unchanged sentences

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

Three Months Ended September 30,

(In millions) Net Investment Income (1)

Net Investment

Gains (Losses) Other

Comprehensive

Income (Loss) (2)

Net Investment Income (1)

Net Investment

Gains (Losses) Other

Comprehensive

Income (Loss) (2)

Qualifying hedges:

Cash flow hedges:

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

Total cash flow hedges ( 1 ) ( 1 ) (3)

1 0 ( 1 ) (3)

Fair value hedges:

Foreign currency options ( 1 ) ( 15 )

Total fair value hedges ( 1 ) ( 15 )

Net investment hedge:

Non-derivative hedging

instruments 0 112 0 181

Foreign currency forwards 71 32 28 236

Foreign currency options 0 0 ( 1 ) 0

Total net investment hedge 71 144 27 417

Non-qualifying strategies:

Foreign currency swaps 1 27

Foreign currency swaps - VIE ( 22 ) ( 19 )

Foreign currency forwards 32 ( 252 )

Foreign currency options ( 9 ) 0

Interest rate swaps ( 124 ) ( 257 )

Forward bond purchase

commitment - VIE 0 ( 1 )

Total non- qualifying strategies ( 122 ) ( 502 )

Total $ ( 1 ) $ ( 53 ) $ 145 $ 0 $ ( 491 ) $ 418

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

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

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

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

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) Net Investment Income (1)

15 unchanged sentences

Foreign currency options 0 ( 39 )

Interest rate swaptions (4)

( 1 ) 0 1 0 0 0

Total fair value hedges 0 ( 39 )

20 unchanged sentences

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

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $ 1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended March 31, 2024, and $ 1 of losses during the three-month period ended March 31, 2023.

As of March 31, 2024, $ 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 September 30, 2023, all of the Company's derivative agreement counterparties were investment grade.

As of March 31, 2024, 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 $ 1.3 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 aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $ 1.0 billion and $ 1.2 billion as of March 31, 2024, and December 31, 2023, respectively.

If the credit-risk-related contingent features underlying these agreements had been triggered on March 31, 2024, the Company estimates that it would be required to post a maximum of $ 447 million of additional collateral to these derivative counterparties.

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

9 unchanged sentences

Offsetting of Financial Assets and Derivative Assets

September 30, 2023

March 31, 2024

Gross Amounts Not Offset

7 unchanged sentences

OTC - bilateral $ 264 $ 0 $ 264 $ ( 38 ) $ ( 78 ) $ ( 148 ) $ 0

OTC - cleared 0 0 0 0 0 0 0

Total derivative

42 unchanged sentences

Offsetting of Financial Liabilities and Derivative Liabilities

September 30, 2023

March 31, 2024

Gross Amounts Not Offset

55 unchanged sentences

GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

These two types of inputs create three valuation hierarchy levels.

These two types of inputs create three valuation hierarchy levels, as follows:

• Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets.

2 unchanged sentences

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

September 30, 2023

March 31, 2024

(In millions) Quoted Prices in

25 unchanged sentences

Foreign currency swaps $ 0 $ 583 $ 0 $ 583

Foreign currency forwards 0 588 0 588

Foreign currency options 0 69 0 69

Interest rate swaps 0 483 0 483

33 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.

September 30, 2023

March 31, 2024

(In millions) Carrying

48 unchanged sentences

Total liabilities $ 13,409 $ 0 $ 6,178 $ 6,832 $ 13,010

(1) Excludes policy loans of $ 214 and equity method investments of $ 2,290 , at carrying value

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

(1) Excludes policy loans of $ 214 , equity method investments of $ 2,750 , and REO of $ 227 , at carrying value.

Fair Value of Financial Instruments

Fixed maturity and equity securities

The Company determines the fair values of fixed maturity securities and public equity securities using the following approaches or techniques:

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

The fair values of the Company’s public fixed maturity securities are generally based on prices provided by third-party pricing vendors.

The Company utilizes internally generated valuations or broker quotes for privately issued fixed maturity securities or fixed maturity securities where there is no price available from a third-party pricing vendor.

The fair values of the Company's public equity securities are generally based on price quotes, including quoted market prices readily available from independent public exchange markets or established security dealer associations.

The Company determines the fair values of privately issued equity securities using the following approaches or techniques:

price quotes and valuations from third-party pricing vendors, in-house valuations and non-binding price quotes the Company obtains from outside brokers.

The pricing data and market quotes the Company obtains from outside sources, including third-party pricing services, are reviewed internally for reasonableness.

If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the provider.

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

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

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

For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor.

9 unchanged sentences

• bond indices that are comparative in rating, industry, maturity, and region.

Prices for public equity securities are readily available and are acquired from independent market data providers or established security dealer associations.

The pricing data and market quotes the Company obtains from outside sources, including third party pricing services, are reviewed internally for reasonableness.

If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the provider.

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

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

For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

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

September 30, 2023

March 31, 2024

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

42 unchanged sentences

Total equity securities $ 603 $ 0 $ 159 $ 762

September 30, 2023

March 31, 2024

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

32 unchanged sentences

Internal 0 60 0 60

Broker/other 8 32 0 40

Total government and agencies 21,700 900 0 22,600

2 unchanged sentences

Internal 0 256 0 256

Broker/other 0 616 0 616

Total municipalities 0 2,298 0 2,298

27 unchanged sentences

Third-party pricing vendor $ 800 $ 0 $ 0 $ 800

Internal 0 0 216 216

Broker/other 40 0 32 72

19 unchanged sentences

Third-party pricing vendor 0 226 0 226

Broker/other 0 258 0 258

Internal 0 236 0 236

Total sovereign and supranational 0 462 0 462

44 unchanged sentences

Commercial mortgage and other loans

Commercial mortgage and other loans include TREs, CMLs and MMLs.

Commercial mortgage and other loans include TREs, CMLs, MMLs and other loans.

The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity.

22 unchanged sentences

Three Months Ended

September 30, 2023

Fixed Maturity Securities Equity

(In millions) Mortgage-

Securities Public

Utilities Sovereign and Supranational Banks/

Institutions Other

Corporate Total

Balance, beginning of period $ 652 $ 302 $ 32 $ 69 $ 572 $ 213 $ 1,840

Net investment gains (losses) included

in earnings 0 0 0 0 0 ( 7 ) ( 7 )

Unrealized gains (losses) included in

other comprehensive income (loss) ( 13 ) ( 12 ) ( 1 ) ( 2 ) ( 41 ) 0 ( 69 )

Purchases, issuances, sales and

Purchases 55 36 0 0 36 0 127

Issuances 0 0 0 0 0 0 0

Sales 0 0 0 0 0 0 0

Settlements ( 11 ) ( 6 ) 0 0 0 0 ( 17 )

Transfers into Level 3 0 0 0 3 39 0 42

Transfers out of Level 3 ( 3 ) ( 61 ) 0 0 ( 42 ) ( 3 ) ( 109 )

Balance, end of period $ 680 $ 259 $ 31 $ 70 $ 564 $ 203 $ 1,807

Changes in unrealized gains (losses)

relating to Level 3 assets and liabilities

still held at the end of the period

included in earnings $ 0 $ 0 $ 0 $ 0 $ 0 $ ( 3 ) $ ( 3 )

Three Months Ended

September 30, 2022

Fixed Maturity Securities Equity

(In millions) Mortgage-

Securities Public

Utilities Sovereign and Supranational Banks/

Institutions Other

Corporate Total

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

Net investment gains (losses) included

in earnings 0 1 0 1 0 ( 3 ) ( 1 )

Unrealized gains (losses) included in

other comprehensive income (loss) ( 12 ) ( 30 ) ( 2 ) ( 12 ) ( 41 ) 0 ( 97 )

Purchases, issuances, sales and

Purchases 56 7 0 88 145 10 306

Issuances 0 0 0 0 0 0 0

Sales 0 0 0 0 0 0 0

Settlements ( 21 ) ( 8 ) 0 ( 20 ) ( 183 ) 0 ( 232 )

Transfers into Level 3 0 0 0 0 68 0 68

Transfers out of Level 3 ( 24 ) 0 0 0 0 0 ( 24 )

Balance, end of period $ 310 $ 507 $ 34 $ 148 $ 621 $ 197 $ 1,817

Changes in unrealized gains (losses)

relating to Level 3 assets and liabilities

still held at the end of the period

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

Nine Months Ended

September 30, 2023

March 31, 2024

Fixed Maturity Securities Equity

23 unchanged sentences

of the period included in earnings $ 1 $ 0 $ 0 $ 0 $ 0 $ ( 3 ) $ ( 2 )

Nine Months Ended

September 30, 2022

Three Months Ended

March 31, 2023

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.

September 30, 2023

March 31, 2024

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

2 unchanged sentences

Mortgage- and asset-backed securities $ 859 Consensus pricing Offered quotes 85.28 - 105.35 (a)

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

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

Banks/financial institutions 70 Discounted cash flow Credit spreads N/A (c)

Other corporate 564 Discounted cash flow Credit spreads 68 bps - 512 bps (b)

Public utilities 507 Discounted cash flow Credit spreads 175 bps - 225 bps (c)

Sovereign and supranational 28 Consensus pricing Offered quotes N/A (b)

Banks/financial institutions 74 Discounted cash flow Credit spreads N/A (b)

Other corporate 450 Discounted cash flow Credit spreads 69 bps - 388 bps (c)

Equity securities 159 Adjusted cost Private financials N/A (d)

1 unchanged sentence

(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques.

(b) Actual or equivalent credit spreads in basis points.

(b) Category represents a single security;

range not applicable.

(d) Prices do not utilize credit spreads;

5 unchanged sentences

Mortgage- and asset-backed securities $ 772 Consensus pricing Offered quotes 84.81 - 105.89 (a)

Public utilities 497 Discounted cash flow Credit spreads 128 bps - 286 bps (b)

Sovereign and supranational 37 Consensus pricing Offered quotes N/A (c)

Banks/financial institutions 159 Discounted cash flow Credit spreads 67 bps - 188 bps (b)

Other corporate 742 Discounted cash flow Credit spreads 66 bps - 647 bps (b)

Public utilities 253 Consensus pricing Offered quotes 94.34 - 102.99 (a)

Sovereign and supranational 30 Consensus pricing Offered quotes N/A (b)

Banks/financial institutions 78 Discounted cash flow Credit spreads N/A (b)

Other corporate 648 Discounted cash flow Credit spreads 69 bps - 423 bps (c)

Equity securities 248 Adjusted cost Private financials N/A (d)

1 unchanged sentence

(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques.

(b) Actual or equivalent credit spreads in basis points.

(b) Category represents a single security;

range not applicable.

(d) Prices do not utilize credit spreads;

22 unchanged sentences

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

September 30, 2023

March 31, 2024

Aflac Japan Aflac U.S.

7 unchanged sentences

other ( 189 ) ( 129 ) ( 32 ) ( 2 ) 0 0 0 0 0 0 0 ( 352 )

Balance at September 30, 2023

Balance at March 31, 2024

$ 2,805 $ 1,916 $ 460 $ 53 $ 913 $ 625 $ 1,337 $ 437 $ 86 $ 184 $ 3 $ 8,819

19 unchanged sentences

Future DAC amortization is impacted by persistency.

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.

There were no changes to the inputs, judgments, assumptions and methods used to determine amortization amounts during the three-month periods ended March 31, 2024 and 2023.

For additional information on deferred policy acquisition costs, see Notes 1 and 6 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

POLICY LIABILITIES

Future Policy Benefits

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 liability for future policy benefits 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.

Future net premiums receivable are future gross premiums receivable under the contract multiplied by the net premium ratio (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

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

March 31, 2024

Aflac Japan Aflac U.S.

16 unchanged sentences

Effect of changes in discount rate assumptions 895 535 194 14 ( 173 ) ( 99 ) ( 412 ) ( 99 ) ( 14 ) ( 66 ) 6

Balance at September 30, 2023

Balance at March 31, 2024

$ 16,217 $ 13,525 $ 5,901 $ 995 $ 2,459 $ 1,666 $ 4,081 $ 1,127 $ 208 $ 874 $ 421

14 unchanged sentences

Effect of changes in discount rate assumptions 5,689 ( 52 ) ( 767 ) ( 294 ) ( 233 ) ( 141 ) ( 1,092 ) ( 163 ) ( 35 ) ( 246 ) 15

Balance at September 30, 2023

Balance at March 31, 2024

46,389 23,331 27,249 4,772 3,070 2,423 11,102 1,938 474 1,775 930

48 unchanged sentences

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.

September 30, 2023

March 31, 2024

Aflac Japan Aflac U.S.

18 unchanged sentences

The following table presents a reconciliation of the disaggregated rollforwards above to the ending future policy benefits presented in the consolidated balance sheets.

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

(In millions) September 30,

The deferred profit liability for limited-payment contracts and the deferred reinsurance gain liability are presented together with the liability for future policy benefits in the consolidated balance sheets and have been included as reconciling items in the table below.

(In millions) March 31,

2024 December 31, 2023

12 unchanged sentences

Corporate and other 3,842 4,225

Deferred profit liability - limited-payment contracts 1,669 1,740

Deferred profit liability - reinsurance 590 692

Deferred profit liability 1,734 1,806

Deferred reinsurance gain liability 910 1,012

Intercompany eliminations (1)

1 unchanged sentence

Total $ 77,867 $ 83,718

(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.

(1) Elimination entry necessary due to the internal reinsurance transactions 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.

Locked-in discount rates are determined as a weighted average of monthly upper-medium grade (low-credit-risk) fixed-income instrument forward curves, where the weights are the annualized premiums issued for each month of the cohort.

Locked-in discount rates are determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low-credit-risk) fixed-income instrument forward curves in the calendar year, where the weights are the annualized premiums issued for each month of the cohort.

The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent NPR to the forward curve and will remain unchanged after the calendar year of issue.

Discount rates are updated each reporting period and require estimation techniques (e.g., interpolation, extrapolation) for determination of points on the curve for which there is limited or no observable market data.

More specifically, the Company constructs a discount rate curve separately for discounting cash flows used to calculate each of the Japan and U.S.

The Company constructs a current discount rate curve separately for discounting cash flows used to calculate each of the Japan and U.S.

liabilities for future policy benefits, reflective of the characteristics of the corresponding insurance liabilities, such as currency and tenor.

5 unchanged sentences

For the discount rates applicable to tenors for which the Japan single-A debt market is not liquid but there is sufficient observable market data and/or the observable market data is available for similar instruments (between 10 and 30 years), the Company estimates tenor-specific single-A credit spreads and applies them to risk-free government rates.

Lastly, for the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30 years), the discount curve is derived by extrapolation of risk free rates beyond their last liquid point following the Smith-Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate.

forward rate is based on the economic value-based solvency regime, which is consistent with the International Association of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (which is expected to be introduced in Japan in 2025), and is adjusted for credit and inflation components.

Lastly, for the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30

years), the discount curve is derived by extrapolation of risk free rates beyond their last liquid point following the Smith-Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate.

The ultimate forward rate is based on the economic value-based solvency regime, which is consistent with the International Association of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (which is expected to be introduced in Japan in 2025), and is adjusted for credit and inflation components.

For the Aflac U.S.

6 unchanged sentences

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

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.

For the three-month periods ended March 31, 2024 and 2023, the Company recognized $ 1.1 billion and $( 2.8 ) 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 three-month periods ended March 31, 2024 and 2023.

For the year ended December 31, 2023, the Company recognized approximately $( 460 ) million in other comprehensive income (loss) net of tax, due to changes in the future policy benefits estimate from updating the discount rate assumptions.

There were no changes to the methods used to determine the discount rates during the year ended December 31, 2023.

Mortality rate assumptions are based on industry tables and adjusted for the Company's actual or expected experience where credible or appropriate.

These assumptions typically will vary by age, gender, and other demographic characteristics such as smoking status.

These assumptions typically vary by age, gender, and other demographic characteristics such as smoking status.

Morbidity assumptions are based on the Company's internal data and consider emerging experience.

2 unchanged sentences

In Japan, separate lapse assumptions are set based on actual or expected experience.

These lapse and total termination rate assumptions will vary by line of business and with policyholder characteristics such as duration.

These lapse and total termination rate assumptions vary by line of business and with policyholder characteristics such as duration.

In the U.S., the majority of the future cash flows are modeled using total termination rates (which include both lapse and mortality) and are adjusted for actual experience.

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

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.

During the three-month periods ended March 31, 2024 and 2023, 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 three-month periods ended March 31, 2024 and 2023.

In 2023, the Company's annual assumption 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.

This, together with the variance of actual experience from expected experience, resulted in reserve remeasurement gains of $ 215 million in the consolidated statement of earnings for the year ended December 31, 2022.

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

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

Three Months Ended March 31,

(In millions) 2024 2023

3 unchanged sentences

Life insurance 339 399

Other 38 39 113 124

Accident 325 329

4 unchanged sentences

Life insurance 138 115

Other 13 9 31 29

Corporate and other 165 90

2 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2024 2023

3 unchanged sentences

Life insurance 118 133

Other 19 18 61 63

Accident 6 6 18 18

Disability 8 8

3 unchanged sentences

Life insurance 10 9

Other 7 7 20 20

Total $ 576 $ 641

The following tables summarize the amount of undiscounted expected future gross premiums and expected future benefits and expenses and discounted (discounted at the current period discount rate) expected future gross premiums and expected future benefits and expenses by reporting segment and disaggregated by product type.

The following tables summarize the amount of undiscounted expected future gross premiums and expected future policy benefits and expenses and discounted (discounted at the current period discount rate) expected future gross premiums and expected future policy benefits and expenses by reporting segment and disaggregated by product type.

These tables are presented gross of internal and external ceded reinsurance.

Future gross premiums represent the expected amount of future premiums to be received.

3 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.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In millions) Gross

1 unchanged sentence

Undiscounted expected future gross premiums

and expected future benefits and expenses:

and expected future policy benefits and expenses:

Cancer $ 55,096 $ 61,876 $ 59,169 $ 66,427

10 unchanged sentences

Total $ 149,085 $ 182,776 $ 156,494 $ 193,058

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

Discounted expected future gross premiums

and expected future benefits and expenses:

and expected future policy benefits and expenses:

Cancer $ 44,795 $ 46,389 $ 48,363 $ 50,161

10 unchanged sentences

Total $ 114,691 $ 123,453 $ 121,753 $ 132,131

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.

Loss expense as a result of NPR capping for the three-month periods ended March 31, 2024 and 2023 was immaterial.

Other Policyholders' Funds

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.

As of March 31, 2024 and December 31, 2023, 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) September 30,

(In millions) March 31,

2024 December 31, 2023

13 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(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 September 30, 2023 and December 31, 2022.

(2) Weighted-average crediting rate of 1.5 % at March 31, 2024 and December 31, 2023.

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 for additional information on policy liabilities.

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

For additional information on policy liabilities, see Notes 1 and 7 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business, primarily to provide additional capacity for future growth, optimize capital, limit losses, and minimize exposure to significant risks.

For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards.

Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

Premiums and benefits are reported net of insurance ceded.

In January 2023, ALIJ entered into a coinsurance transaction whereby it ceded 28 % of the liabilities associated with certain cancer insurance policies and riders to Aflac Re.

This transaction transferred approximately $ 2.1 billion of reserves associated with these policies.

Approximately $ 1.9 billion of assets were transferred from ALIJ to Aflac Re as consideration for assuming the reinsurance risk.

This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

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

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

The remaining deferred profit liability of $ 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 September 30, Nine Months Ended September 30,

For additional information on reinsurance, see Notes 1 and 8 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

The following table reconciles direct earned premiums, direct benefits and claims, excluding reserve remeasurement gains and losses, and reserve remeasurement gains and losses to net amounts after the effect of reinsurance.

Three Months Ended March 31,

(In millions) 2024 2023

5 unchanged sentences

Retrocession activities 29 34

Other 18 34 65 116

Net earned premiums $ 3,456 $ 3,688

Direct benefits and claims, excluding reserve remeasurement $ 2,082 $ 2,256

Reserve remeasurement (gains) losses ( 219 ) ( 73 ) ( 327 ) ( 132 )

Total direct benefits and claims 1,887 2,105 6,218 6,897

Ceded benefits and change in reserves for future benefits:

Ceded Aflac Japan closed blocks ( 18 ) ( 77 )

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

Eliminations 42 2 125 11

Other ( 15 ) ( 27 )

1 unchanged sentence

Retrocession activities 13 41

Eliminations ( 44 ) ( 3 ) ( 120 ) ( 20 )

Other 52 25 156 104

Benefits and claims, excluding reserve remeasurement $ 2,066 $ 2,203

Direct reserve remeasurement (gains) losses $ ( 57 ) $ ( 53 )

Ceded reserve remeasurement gains (losses) 1 0

Assumed reserve remeasurement (gains) losses 0 0

Reserve remeasurement (gains) losses $ ( 56 ) $ ( 53 )

Total benefits and claims, net $ 2,010 $ 2,150

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

The Company has recorded a deferred reinsurance gain liability related to reinsurance transactions which represents ceded reserves in excess of consideration paid, or consideration received in excess of assumed reserves.

The remaining deferred reinsurance gain liability of $ 161 million and $ 175 million as of March 31, 2024 and December 31, 2023, 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.

The reinsurance recoverable, which is included in other assets in the consolidated balance sheets, is reported net of allowance for credit losses and had a remaining balance of $ 178 million and $ 183 million as of March 31, 2024 and December 31, 2023, respectively.

The allowance for credit losses related to the Company's reinsurance recoverable balance was $ 4 million and $ 10 million as of March 31, 2024 and December 31, 2023, respectively.

The credit allowance for the reinsurance recoverable balance is estimated using a PD / LGD method and the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty.

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

As of March 31, 2024, the Company's reinsurance counterparties were rated A+.

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

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders.

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

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015, 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.

There are also additional commitment periods of a one-year duration, each of which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration.

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

As of September 30, 2023, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

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

Internal Reinsurance Transactions

Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ.

The inter-segment amounts associated with these internal reinsurance transactions are eliminated in consolidation.

NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations follows:

(In millions) September 30,

(In millions) March 31,

2024 December 31,

9 unchanged sentences

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

1.048 % senior notes due March 2029 (principal amount ¥ 13.0 billion)

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

2 unchanged sentences

1.159 % senior notes due October 2030 (principal amount ¥ 29.3 billion)

1.412 % senior notes due March 2031 (principal amount ¥ 27.9 billion)

.633 % senior notes due April 2031 (principal amount ¥ 30.0 billion)

4 unchanged sentences

1.488 % senior notes due October 2033 (principal amount ¥ 15.2 billion)

1.682 % senior notes due March 2034 (principal amount ¥ 7.7 billion)

1.600 % senior notes due March 2034 (principal amount ¥ 18.3 billion)

.934 % senior notes due December 2034 (principal amount ¥ 9.8 billion)

.830 % senior notes due March 2035 (principal amount ¥ 10.6 billion)

1.740 % senior notes due March 2036 (principal amount ¥ 15.0 billion)

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

1 unchanged sentence

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

1.920 % senior notes due March 2039 (principal amount ¥ 16.5 billion)

1.122 % senior notes due December 2039 (principal amount ¥ 6.3 billion)

1.264 % senior notes due April 2041 (principal amount ¥ 10.0 billion)

2.160 % senior notes due March 2044 (principal amount ¥ 5.7 billion)

2.108 % subordinated debentures due October 2047 (principal amount ¥ 60.0 billion)

2 unchanged sentences

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

1.958 % subordinated bonds due December 2053 (principal amount ¥ 30.0 billion)

2.400 % senior notes due March 2054 (principal amount ¥ 19.5 billion)

Yen-denominated loans:

8 unchanged sentences

Total notes payable and lease obligations $ 7,912 $ 7,364

(1) Redeemed in April 2024

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 September 30, 2023 follows:

I n March 2024, the Parent Company issued five series of senior notes totaling ¥ 75.0 billion through a private placement.

The first series, which totaled ¥ 18.3 billion, bears interest at a fixed rate of 1.600 % per annum, payable semi-annually, and will mature in March 2034.

The second series, which totaled ¥ 15.0 billion, bears interest at a fixed rate of 1.740 % per annum, payable semi-annually, and will mature in March 2036.

The third series, which totaled ¥ 16.5 billion, bears interest at a fixed rate of 1.920 % per annum, payable semi-annually, and will mature in March 2039.

The fourth series, which totaled ¥ 5.7 billion, bears interest at a fixed rate of 2.160 % per annum, payable semi-annually, and will mature in March 2044.

The fifth series, which totaled ¥ 19.5 billion, bears interest at a fixed rate of 2.400 % per annum, payable semi-annually, and will mature in March 2054.

These notes are redeemable at the Parent Company's option (i) in whole at any time or (ii) in part from time to time in an amount not less than 5% of the aggregate principal amount then outstanding of the notes to be redeemed.

In March 2024, the Parent Company issued three series of senior notes totaling ¥ 48.6 billion through a public debt offering under its U.S.

shelf registration statement.

The first series, which totaled ¥ 13.0 billion, bears interest at a fixed rate of 1.048 % per annum, payable semi-annually, and will mature in March 2029.

The second series, which totaled ¥ 27.9 billion, bears interest at a fixed rate of 1.412 % per annum, payable semi-annually, and will mature in March 2031.

The third series, which totaled ¥ 7.7 billion, bears interest at a fixed rate of 1.682 % per annum, payable semi-annually, and will mature in March 2034.

These notes are redeemable at the Parent Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S.

taxation, as specified in the indenture governing the terms of the issuance.

In addition, the notes maturing in March 2029, March 2031 and March 2034 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after December 21, 2028, December 31, 2030 and September 21, 2033, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

Interest expense related to the Company's notes payable, which is included in interest expense in the consolidated statements of earnings, was $ 46 million and $ 47 million for the three-month periods ended March 31, 2024 and 2023, respectively.

A summary of the Company's lines of credit as of March 31, 2024 follows:

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

20 unchanged sentences

None General corporate purposes

uncommitted revolving 364 days November 30, 2023 $ 250 million

uncommitted revolving 364 days December 2, 2024 $ 250 million

Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum No later than December 3, 2024 None General corporate purposes

17 unchanged sentences

(1) Intercompany credit agreement

(2) Renewed in April 2024 with an expiration date of April 8, 2025

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

Tier One Insurance Company (1)

uncommitted revolving 364 days March 21,

2 unchanged sentences

March 24, 2025 None General corporate purposes

Hatch Healthcare K.K.

Hatch Healthcare

uncommitted revolving 364 days January 2,

2 unchanged sentences

Aflac Digital Services Co., Ltd.

(formerly known as Hatch Insight K.K.) (1)

uncommitted revolving 364 days January 2,

11 unchanged sentences

dollar-denominated borrowings or three-month TIBOR plus 97 basis points per annum for Japanese yen-denominated borrowings No later than January 3, 2025 None General corporate purposes

Aflac Re Bermuda Ltd.

uncommitted revolving 364 days January 2,

3 unchanged sentences

(1) Intercompany credit agreement

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

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

The Company was in compliance with all of the covenants of its notes payable and lines of credit at March 31, 2024.

No events of default or defaults occurred during the three-month period ended March 31, 2024.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

SHAREHOLDERS’ EQUITY

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

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

(In thousands of shares) 2024 2023

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2024 2023

1 unchanged sentence

Share Repurchase Program

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.

During the first three months of 2024, the Company repurchased 9.3 million shares of its common stock for $ 750 million as part of its share repurchase program.

During the first three months of 2023, the Company repurchased 10.3 million shares of its common stock for $ 700 million as part of its share repurchase program.

As of March 31, 2024, a remaining balance of 68.5 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Reclassifications from Accumulated Other Comprehensive Income

2 unchanged sentences

Three Months Ended

September 30, 2023

(In millions) Unrealized Foreign

Currency Translation

Gains (Losses) Unrealized

Gains (Losses)

on Fixed Maturity Securities Unrealized

Gains (Losses)

on Derivatives Effect of Changes in Discount Rate Assumptions Pension

Adjustment Total

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

Other comprehensive

income (loss) before

reclassification ( 235 ) ( 2,349 ) 0 4,193 0 1,609

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 ( 32 ) 1 0 0 ( 31 )

Net current-period other

comprehensive

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

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

September 30, 2022

(In millions) Unrealized Foreign

Currency Translation

Gains (Losses) Unrealized

Gains (Losses)

on Fixed Maturity Securities Unrealized

Gains (Losses)

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

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

Other comprehensive

income (loss) before

reclassification ( 1,156 ) ( 1,753 ) ( 1 ) 2,428 ( 4 ) ( 486 )

Amounts reclassified from

accumulated other

comprehensive income

(loss) 0 ( 46 ) 1 0 6 ( 39 )

Net current-period other

comprehensive

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

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.

Nine Months Ended

September 30, 2023

March 31, 2024

(In millions) Unrealized Foreign

17 unchanged sentences

income (loss) ( 597 ) ( 47 ) ( 4 ) 1,065 1 418

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

Balance at March 31, 2024 $ ( 4,666 ) $ 1,092 $ ( 26 ) $ ( 1,495 ) $ ( 7 ) $ ( 5,102 )

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.

Nine Months Ended

September 30, 2022

Three Months Ended

March 31, 2023

(In millions) Unrealized Foreign

16 unchanged sentences

income (loss) ( 54 ) 1,991 1 ( 2,794 ) 7 ( 849 )

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

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

All amounts in the table above are net of tax.

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

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

Reclassifications Out of Accumulated Other Comprehensive Income

(In millions) Three Months Ended

September 30, 2023

(In millions) Three Months Ended March 31, 2024

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

7 unchanged sentences

$ ( 1 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ 0 Acquisition and operating expenses (2)

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

0 Tax (expense) or benefit (1)

$ 0 Net of tax

Total reclassifications for the period $ 132 Net of tax

(1) Based on 21 % tax rate

(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) Three Months Ended

September 30, 2022

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

Statements of Earnings

Unrealized gains (losses) on available-for-sale

securities $ 58 Net investment gains (losses)

( 12 ) Tax (expense) or benefit (1)

$ 46 Net of tax

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

0 Tax (expense) or benefit (1)

$ ( 1 ) Net of tax

Amortization of defined benefit pension items:

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

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

1 Tax (expense) or benefit (1)

$ ( 6 ) Net of tax

Total reclassifications for the period $ 39 Net of tax

(1) Based on 21 % tax rate

(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) 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

Statements of Earnings

Unrealized gains (losses) on available-for-sale

securities $ 125 Net investment gains (losses)

( 26 ) Tax (expense) or benefit (1)

$ 99 Net of tax

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

( 1 ) Net investment income

( 4 ) Total before tax

1 Tax (expense) or benefit (1)

$ ( 3 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 1 ) Acquisition and operating expenses (2)

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

0 Tax (expense) or benefit (1)

$ ( 1 ) Net of tax

Total reclassifications for the period $ 95 Net of tax

(1) Based on 21 % tax rate

(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) Nine Months Ended

September 30, 2022

March 31, 2023

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

7 unchanged sentences

$ ( 1 ) Net of tax

Amortization of defined benefit pension items:

Actuarial gains (losses) $ ( 18 ) Acquisition and operating expenses (2)

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

4 Tax (expense) or benefit (1)

$ ( 14 ) Net of tax

Total reclassifications for the period $ 44 Net of tax

(1) Based on 21 % tax rate

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

SHARE-BASED COMPENSATION

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).

As of March 31, 2024, 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.

4 unchanged sentences

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

As of September 30, 2023, approximately 34.7 million shares were available for future grants under this plan.

As of March 31, 2024, approximately 33.6 million shares were available for future grants under this plan.

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

1 unchanged sentence

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

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

As of March 31, 2024, the only performance-based awards issued and outstanding were restricted stock awards and units.

Stock options and stock appreciation rights granted under the amended Plan have an exercise price of at least the fair market value of the underlying stock on the grant date and have an expiration date no later than 10 years from the grant date.

Time-based restricted stock awards, restricted stock units and stock options granted after January 1, 2017 generally vest on a ratable basis over three years , and awards granted prior to the amendment vest on a cliff basis over three years .

Time-based restricted stock awards, restricted stock units and stock options generally vest on a ratable basis over three years .

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

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

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

The following table provides information on stock options outstanding and exercisable at March 31, 2024.

Option Shares

6 unchanged sentences

Exercisable 856 2.2 45 33.37

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 received cash from the exercise of stock options in the amount of $ 5 million and $ 4 million during the first three months of 2024 and 2023, respectively.

The tax benefit realized as a result of stock option exercises and restricted stock releases was $ 24 million in the first three months of 2024, compared with $ 17 million in the first three months of 2023.

As of March 31, 2024, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $ 74 million, of which $ 40 million ( 1.8 million shares) was related to restricted stock awards and units with a performance-based vesting condition.

The Company expects to recognize these amounts over a weighted-average period of approximately 1.9 years.

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

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

The following table summarizes restricted stock activity during the three-month period ended March 31, 2024.

(In thousands of shares) Shares Weighted-Average

6 unchanged sentences

( 1,337 ) 49.24

Restricted stock at September 30, 2023

Restricted stock at March 31, 2024

2,177 $ 72.33

7 unchanged sentences

BENEFIT PLANS

The Company has funded defined benefit plans in Japan and the U.S., however the U.S.

plan was frozen to new participants effective October 1, 2013.

On June 9, 2023, the Company amended the U.S.

defined benefit plan to freeze future benefits under the plan for all participants effective January 1, 2024, which resulted in the Company recognizing a curtailment gain of $ 49 million in the second quarter of 2023.

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

Effective January 1, 2024, the nonelective 401(k) employer contribution will be extended to U.S.

employees who are current participants in the defined benefit plan.

The Company has funded defined benefit plans in Japan and the U.S.;

however, future benefits under the U.S.

plan were frozen effective January 1, 2024.

employees, including those that participated in the U.S.

plan prior to the freeze, currently receive a nonelective 401(k) employer contribution.

The Company also maintains non-qualified, unfunded supplemental retirement plans that provide defined pension benefits in excess of limits imposed by federal tax law for certain Japanese, U.S.

and former employees, however the Company's Supplemental Executive Retirement Plan was frozen to new participants effective January 1, 2015.

On June 9, 2023, the Company amended the Supplemental Executive Retirement Plan and the Retirement Plan for Senior Officers to freeze future benefits under these plans for all participants effective January 1, 2024.

and former employees.

However, future benefits under the Company's Supplemental Executive Retirement Plan and Retirement Plan for Senior Officers were frozen effective January 1, 2024, provided that actively employed participants may continue to accrue service toward eligibility for early retirement benefits or delayed early retirement benefits.

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

8 unchanged sentences

For certain employees and former employees, additional coverage is provided for all medical expenses for life.

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statements of earnings, which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $ 2 million and $ 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.

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 for both the three-month periods ended March 31, 2024 and 2023.

Total net periodic benefit cost includes the following components:

Three Months Ended September 30,

Pension Benefits Other

Postretirement Benefits

(In millions) 2023 2022 2023 2022 2023 2022

Components of net periodic

benefit cost:

Service cost $ 4 $ 5 $ 0 $ 6 $ 0 $ 0

Interest cost 2 1 10 9 0 1

Expected return on plan assets ( 2 ) ( 2 ) ( 8 ) ( 11 ) 0 0

Amortization of net actuarial loss 0 0 0 6 0 1

Curtailment (gain) loss 0 0 0 0 0 0

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

Nine Months Ended September 30,

Three Months Ended March 31,

Pension Benefits Other

7 unchanged sentences

Amortization of net actuarial loss 0 0 0 0 0 0

Curtailment (gain) loss 0 0 ( 49 ) 0 0 0

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

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.

During the three months ended March 31, 2024, Aflac Japan contributed approximately $ 6 million (using the weighted-average yen/dollar exchange rate for the three-month period ended March 31, 2024) to the Japanese funded defined benefit plan, and Aflac U.S.

did not make a contribution to the U.S.

3 unchanged sentences

COMMITMENTS AND CONTINGENT LIABILITIES

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 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.

8 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 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.

Guaranty fund assessments for the three-month periods ended March 31, 2024 and 2023 were immaterial.

For additional information regarding commitments and contingent liabilities, see Note 15 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

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