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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 238 added, 146 removed, 1079 unchanged (26% of the section changed)

40 unchanged sentences

MD&A OVERVIEW

MD&A is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the three-month periods ended March 31, 2024 and 2023, respectively.

MD&A is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the six-month periods ended June 30, 2024 and 2023, respectively.

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

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Performance Highlights

Total revenues were $5.4 billion in the first three months of 2024, compared with $4.8 billion in the first three months of 2023, reflecting net investment gains.

Net earnings were $1.9 billion, or $3.25 per diluted share, in the first three months of 2024, compared with $1.2 billion, or $1.94 per diluted share, in the first three months of 2023.

Results in the first three months of 2024 included pretax net investment gains of $951 million, compared with pretax net investment gains of $123 million in the first three months of 2023.

Net investment gains in the first three months of 2024 included an increase in credit loss allowances of $1 million;

Total revenues were $5.1 billion in the second quarter of 2024, compared with $5.2 billion in the second quarter of 2023.

Net earnings were $1.8 billion, or $3.10 per diluted share, in the second quarter of 2024, compared with $1.6 billion, or $2.71 per diluted share, in the second quarter of 2023.

Total revenues were $10.6 billion in the first six months of 2024, compared with $10.0 billion in the first six months of 2023.

Net earnings were $3.6 billion, or $6.35 per diluted share, in the first six months of 2024, compared with $2.8 billion, or $4.64 per diluted share, in the first six months of 2023.

Results in the second quarter of 2024 included pretax net investment gains of $696 million, compared with pretax net investment gains of $555 million in the second quarter of 2023.

Net investment gains in the second quarter of 2024 included an increase in credit loss allowances of $19 million;

$649 million of net gains from certain derivative and foreign currency gains or losses;

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and $55 million of net gains from sales and redemptions.

The average yen/dollar exchange rate (1) for the three-month period ended March 31, 2024 was 148.67, or 11.0% weaker than the average yen/dollar exchange rate (1) of 132.30 for the same period in 2023.

Adjusted earnings (2) in the first three months of 2024 were $961 million, or $1.66 per diluted share, compared with $953 million, or $1.55 per diluted share, in the first three months of 2023.

Results in the first six months of 2024 included pretax net investment gains of $1.6 billion, compared with pretax net investment gains of $678 million in the first six months of 2023.

Net investment gains in the first six months of 2024 included an increase in credit loss allowances of $20 million;

$1.4 billion of net gains from certain derivative and foreign currency gains or losses;

$87 million of net gains on equity securities;

and $228 million of net gains from sales and redemptions.

The average yen/dollar exchange rate (1) for the three-month period ended June 30, 2024 was 155.70, or 11.7% weaker than the average yen/dollar exchange rate (1) of 137.53 for the same period in 2023.

The average yen/dollar exchange rate (1) for the six-month period ended June 30, 2024 was 152.30, or 11.4% weaker than the average yen/dollar exchange rate (1) of 134.97 for the same period in 2023.

Adjusted earnings (2) in the second quarter of 2024 were $1.0 billion, or $1.83 per diluted share, compared with $954 million, or $1.58 per diluted share, in the second quarter of 2023.

The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.07.

In the first three months of 2024, Aflac Incorporated repurchased $750 million, or 9.3 million of its common shares.

At March 31, 2024, the Company had 68.5 million remaining shares authorized for repurchase.

Shareholders’ equity was $23.5 billion, or $41.27 per share, at March 31, 2024, compared with $22.0 billion, or $38.00 per share, at December 31, 2023.

Shareholders’ equity at March 31, 2024 included a cumulative decrease of $1.5 billion from the effect of changes in discount rate assumptions on insurance contracts, compared with a corresponding cumulative decrease of $2.6 billion at December 31, 2023, and a net unrealized gain on investment securities and derivatives of $1.1 billion, compared with a net unrealized gain of $1.1 billion at December 31, 2023.

Shareholders’ equity at March 31, 2024 also included an unrealized foreign currency translation loss of $4.7 billion, compared with an unrealized foreign currency translation loss of $4.1 billion at December 31, 2023.

The annualized return on average shareholders’ equity in the first quarter of 2024 was 33.0%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $28.6 billion, or $50.22 per share at March 31, 2024, compared with $27.5 billion, or $47.55 per share, at December 31, 2023.

The annualized adjusted return on equity (ROE) excluding foreign currency impact (2) in the first quarter of 2024 was 14.3%.

Adjusted earnings (2) in the first six months of 2024 were $2.0 billion, or $3.49 per diluted share, compared with $1.9 billion, or $3.13 per diluted share, in the first six months of 2023.

The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.14.

In the first six months of 2024, Aflac Incorporated repurchased $1.6 billion, or 18.6 million of its common shares.

At June 30, 2024, the Company had 59.2 million remaining shares authorized for repurchase.

Shareholders’ equity was $26.0 billion, or $46.40 per share, at June 30, 2024, compared with $22.0 billion, or $38.00 per share, at December 31, 2023.

Shareholders’ equity at June 30, 2024 included a cumulative increase of $1.4 billion from the effect of changes in discount rate assumptions on insurance contracts, compared with a corresponding cumulative decrease of $2.6 billion at December 31, 2023, and a net unrealized gain on investment securities and derivatives of $379 million, compared with a net unrealized gain of $1.1 billion at December 31, 2023.

Shareholders’ equity at June 30, 2024 also included an unrealized foreign currency translation loss of $5.1 billion, compared with an unrealized foreign currency translation loss of $4.1 billion at December 31, 2023.

The annualized return on average shareholders’ equity in the second quarter of 2024 was 28.3%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $29.3 billion, or $52.26 per share, at June 30, 2024, compared with $27.5 billion, or $47.55 per share, at December 31, 2023.

The annualized adjusted return on equity (ROE) excluding foreign currency impact (2) in the second quarter of 2024 was 14.8%.

dollar exchange rates are based on the published MUFG Bank, Ltd.

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• Adjusted net investment gains and losses are net investment gains and losses adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, ii) net interest income/expense from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses.

The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense.

The Company considers adjusted net investment gains and losses important as it represents the

remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense.

The most comparable U.S.

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• Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign exchange risks in the Company's Japan segment or in Corporate and other.

These amortized hedge costs/income are estimated at the inception of the derivatives based on the

specific terms of each contract and are recognized on a straight-line basis over the contractual term of the derivative.

These amortized hedge costs/income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the contractual term of the derivative.

The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income.

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Reconciliation of Net Earnings to Adjusted Earnings

In Millions Per Diluted Share

Three Months Ended March 31,

In Millions Per Diluted Share In Millions Per Diluted Share

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

2024 2023 2024 2023 2024 2023 2024 2023

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Current period foreign currency impact (2)

44 N/A .08 N/A

37 N/A .07 N/A 81 N/A .14 N/A

Adjusted earnings excluding current period foreign currency impact $ 1,072 $ 954 $ 1.89 $ 1.58 $ 2,077 $ 1,907 $ 3.63 $ 3.13

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Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

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Net interest income (expense) from derivatives associated with certain investment strategies

(89) (79) (177) (148)

Impact of interest from derivatives associated with notes payable 9 8 17 22

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Additionally, these costs are driven by changes in interest rates subsequent to the issuance of the debt, and the Company considers these interest rate changes to represent economic conditions not directly associated with its insurance operations.

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 approximately $49 million in the second quarter of 2023.

The curtailment gain was both unusual and non-recurring and unrelated to other recurring benefit costs associated with the plan;

therefore, the Company excluded the curtailment gain from adjusted earnings.

Other items excluded from adjusted earnings also included an impairment for certain finite-lived intangible assets of approximately $11 million in the second quarter of 2023 as a result of the Company exiting the third-party administration business acquired in connection with the purchase of Aflac Benefits Solutions, Inc.

(formerly known as Argus Dental & Vision, Inc.) in 2019.

The impairment of these intangible assets was not related to the ongoing operations of the business and occurs infrequently;

therefore, the Company excluded the impairment from adjusted earnings.

The Company's combined U.S.

and Japanese effective income tax rate on pretax earnings was 13.4% for the three-month period ended March 31, 2024, compared with 11.5% for the same period in 2023.

and Japanese effective income tax rate on pretax earnings was 13.1% for the three-month period ended June 30, 2024, compared with 10.4% for the same period in 2023.

The Company's combined U.S.

and Japanese effective income tax rate on pretax earnings was 13.3% for the six-month period ended June 30, 2024, compared with 10.9% for the same period in 2023.

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

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dollar foreign exchange rate at the end of the reporting period.

In recent periods, the Japanese yen has continued to weaken against the U.S.

Although the Company is unable to predict the timing or extent of future movements of the Japanese yen/U.S.

dollar foreign exchange rate, the Company maintains hedging strategies (see the Hedging Activities section of this MD&A) that are intended to mitigate the impacts of yen fluctuation on the Company’s financial position and results of operations.

See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate” in Item 1A.

Risk Factors of the 2023 Annual Report for more information.

Reconciliation of Book Value to Adjusted Book Value

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GAAP financial measures of book value and book value per diluted share, respectively.

(In millions, except for share and per-share amounts) March 31, 2024 December 31, 2023

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

2024 December 31,

GAAP book value $ 26,047 $ 21,985

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The following table is a reconciliation of items impacting adjusted return on equity excluding the impact of foreign currency to the most directly comparable U.S.

GAAP financial measure of return on equity for the three-month periods ended March 31.

GAAP financial measure of return on equity.

Three Months Ended June 30,

GAAP return on equity - net earnings (1)

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In Dollars In Yen

Three Months Ended March 31, Three Months Ended March 31,

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

(In millions of dollars and billions of yen) 2024 2023 2024 2023 2024 2023 2024 2023

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Benefits and claims:

Benefits and claims, excluding reserve remeasurement 1,243 1,466 185 194

Benefits and claims, excluding reserve

remeasurement 1,174 1,379 2,417 2,845 183 189 368 383

Reserve remeasurement (gains) losses (26) (22) (52) (34) (4) (3) (8) (4)

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Total benefits and claims, net (15.5) (14.2) (15.9) (16.4) (4.0) (9.0) (5.0) (8.0)

Adjusted expenses (18.9) (17.3) (8.9) (5.8)

Total adjusted expenses (17.9) (13.1) (18.4) (15.2) (6.9) (7.9) (7.9) (6.8)

Pretax adjusted earnings 5.1 (5.8) 4.0 (7.6) 18.6 (.1) 17.2 1.5

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(79) and $(62) for the three-month periods ended March 31, 2024 and 2023, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended March 31, 2024, operating results in yen terms compared to the same period in the previous year were as follows:

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(79) and $(73) for the three-month periods and $(158) and $(135) for the six-month periods ended June 30, 2024 and 2023, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended June 30, 2024, operating results in yen terms compared to the same period in the previous year were as follows:

• Net earned premiums decreased primarily due to approximately ¥7 billion related to the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2023 and approximately ¥5 billion in limited-pay products reaching premium paid-up status.

• Adjusted net investment income increased primarily due to lower hedge costs of ¥7 billion, the weakening of the yen of ¥6 billion, higher variable net investment income of ¥5 billion and higher fixed rate income of ¥3 billion, partially offset by lower floating rate income due to the increase in loans on nonaccrual status.

• Total adjusted revenues decreased slightly primarily due to the decrease in net earned premiums mostly offset by the increase in adjusted net investment income.

• Total benefits and claims decreased primarily due to the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2023.

• Total adjusted expenses decreased primarily due to the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2023 as well as expense control efforts.

• Pretax adjusted earnings increased primarily due to the decrease in both total benefits and claims and total adjusted expenses.

Annualized premiums in force decreased 3.8% to ¥1.23 trillion as of March 31, 2024, compared with ¥1.28 trillion as of March 31, 2023.

• Adjusted net investment income increased primarily due to the weakening of the yen on U.S.

dollar investments of ¥8 billion, lower hedge costs of ¥7 billion, higher variable investment income of ¥6 billion and higher call income of ¥4 billion.

• Total adjusted revenues increased primarily due to the increase in adjusted net investment income mostly offset by the decrease in net earned premiums.

• Total benefits and claims decreased primarily due to internal reinsurance activity.

• Total adjusted expenses decreased primarily due to internal reinsurance activity.

• Pretax adjusted earnings increased primarily due to the increase in adjusted net investment income and the decrease in both total benefits and claims and total adjusted expenses, partially offset by the decrease in net earned premiums.

For the six-month period ended June 30, 2024, operating results in yen terms compared to the same period in the previous year were as follows:

• Net earned premiums decreased primarily due to approximately ¥15 billion related to the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2023 and approximately ¥11 billion in limited-pay products reaching premium paid-up status.

• Adjusted net investment income increased primarily due to lower hedge costs of ¥14 billion, the weakening of the yen on U.S.

dollar investments of ¥13 billion, higher variable investment income of ¥10 billion and higher call income of ¥4 billion.

• Total adjusted revenues increased primarily due to the increase in adjusted net investment income mostly offset by the decrease in net earned premiums.

• Total benefits and claims decreased primarily due to internal reinsurance activity.

• Total adjusted expenses decreased primarily due to internal reinsurance activity as well as expense control efforts.

Annualized premiums in force decreased 3.6% to ¥1.22 trillion as of June 30, 2024, compared with ¥1.27 trillion as of June 30, 2023.

The decrease in annualized premiums in force in yen was driven primarily by limited-pay products reaching premium paid-up status.

Annualized premiums in force, translated into dollars at respective period-end exchange rates, were $8.1 billion at March 31, 2024, compared with $9.6 billion at March 31, 2023.

As of March 31, 2024, Aflac Japan exceeded 22 million individual policies in force in Japan, with more than 14 million cancer policies in force in Japan.

Annualized premiums in force, translated into dollars at respective period-end exchange rates, were $7.6 billion at June 30, 2024, compared with $8.7 billion at June 30, 2023.

As of June 30, 2024, Aflac Japan exceeded 22 million individual policies in force in Japan, with more than 14 million cancer policies in force in Japan.

Aflac Japan's investment portfolios include U.S.

11 unchanged sentences

(Yen Operating Results)

For the Periods Ended March 31,

For the Periods Ended June 30,

Including Foreign

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Currency Changes

Three Months Six Months

2024 2023 2024 2023 2024 2023 2024 2023

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Pretax adjusted earnings 18.6 (.1) 17.2 1.5 10.6 (3.5) 9.9 (3.3)

The following table presents a summary of operating ratios in yen terms for Aflac Japan followed by a discussion of the significant drivers of changes in operating ratios in yen compared to the same period in the previous year.

Three Months Ended March 31,

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

Ratios to total adjusted revenues:

2024 2023 2024 2023

Total benefits and claims, net 46.9 % 50.0 % 48.0 % 51.0 %

9 unchanged sentences

Amortization of deferred policy acquisition costs 4.5 4.0 4.5 4.0

For the three-month period ended March 31, 2024, the total benefits and claims to total premiums ratio was flat.

The total adjusted expense ratio decreased in the three-month period ended March 31, 2024 primarily due to the decrease in total adjusted expenses associated with the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2023 as well as expense control efforts.

In total, the pretax adjusted profit margin increased in the three-month period ended March 31, 2024 primarily due to the lower expense ratio and a slight offsetting decrease in total adjusted revenues.

The following table presents Aflac Japan's premium persistency on a 12-month rolling basis as of March 31.

• For the three- and six-month periods ended June 30, 2024, the total benefits and claims to total premiums ratio increased primarily due to reinsurance activity and limited-pay products reaching premium paid-up status.

• The total adjusted expense ratio decreased in the three- and six-month periods ended June 30, 2024 primarily due to the decrease in total adjusted expenses associated with reinsurance activity as well as expense control efforts.

• In total, the pretax adjusted profit margin increased in the three- and six-month periods ended June 30, 2024 primarily due to the lower expense ratio and lower total benefits and claims to total adjusted revenues ratio.

The following table presents Aflac Japan's premium persistency on a 12-month rolling basis as of June 30.

Premium persistency 93.3 % 93.8 %

Aflac Japan Sales

The following table presents Aflac Japan’s new annualized premium sales for the periods ended March 31.

The following table presents Aflac Japan’s new annualized premium sales for the periods ended June 30.

In Dollars In Yen

Three Months Six Months

(In millions of dollars and billions of yen) 2024 2023 2024 2023 2024 2023 2024 2023

1 unchanged sentence

Increase (decrease) over prior period (7.8) % 19.7 % (11.5) % 8.0 % 4.5 % 26.6 % .1 % 18.9 %

The decrease in new annualized premium sales on a yen basis in the first quarter of 2024 was primarily due to a decrease in the sales of first sector products.

The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the periods ended March 31.

The increase in new annualized premium sales on a yen basis in the second quarter and first six months of of 2024 was driven primarily by sales of Aflac Japan's new life insurance product, Tsumitasu, that offers an asset formation component and a nursing care option, which was launched in June 2024.

The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the periods ended June 30.

Three Months Six Months

2024 2023 2024 2023

Cancer 58.8 % 67.7 % 60.7 % 64.2 %

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Traditional life (1)

21.8 6.1 15.9 6.6

WAYS 2.3 6.6 3.6 7.6

Child endowment .2 .4 .2 .5

1 unchanged sentence

Total 100.0 % 100.0 % 100.0 % 100.0 %

(1) Includes term and whole life

(1) Includes term, whole life and Tsumitasu

The foundation of Aflac Japan's product portfolio has been, and continues to be, third sector products, which include cancer, medical, income support and other products.

With continued cost pressure on Japan’s health care system, the Company expects the need for third sector products will continue to rise in the future and that the medical and cancer insurance products Aflac Japan provides will continue to be an important part of its product portfolio.

Moreover, in November 2022, Aflac Japan refreshed its first sector savings-type products WAYS and Child Endowment and began to actively promote sales of these products after having curtailed sales of both products beginning in 2013.

The refreshment of these first sector products position Aflac Japan for potential future long-term sales opportunities by marketing these products to a younger demographic as well as potential cross-selling opportunities of Aflac Japan's third sector products.

Sales of Aflac Japan cancer insurance products in the Japan Post Group channel experienced a material decline beginning in August 2019.

Japan Post Group resumed proactive sales of cancer insurance policies in April 2021 and Aflac Japan continues to strengthen the strategic alliance.

In April 2023, Japan Post Group began selling Aflac Japan's new cancer insurance product that was first launched in other channels in August 2022.

Additionally, the Company believes that sales of first sector products, including WAYS, Child Endowment and Tsumitasu, position Aflac Japan for potential future long-term sales opportunities by marketing these products to a younger demographic as well as potential cross-selling opportunities of Aflac Japan's third sector products.

Aflac Japan continues to promote digital and web-based sales to groups and use of its system that enables smart device-based insurance application by allowing the customer and an Aflac Japan operator to see the same screen through their smart devices.

Further, Aflac Japan continues to utilize its virtual sales tool that enables online consultations and policy applications to be completed entirely online.

The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the three-month periods ended March 31.

The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the three-month periods ended June 30.

Independent corporate and individual 49.5 % 44.8 %

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(1) Includes Japan Post Group, Dai-ichi Life and Daido Life

During the three-month period ended March 31, 2024, Aflac Japan recruited 12 new sales agencies.

At March 31, 2024, Aflac Japan was represented by approximately 6,900 sales agencies, with approximately 113,000 licensed sales associates employed by those agencies.

During the three-month period ended June 30, 2024, Aflac Japan recruited 12 new sales agencies.

At June 30, 2024, Aflac Japan was represented by approximately 6,700 sales agencies, with approximately 114,000 licensed sales associates employed by those agencies.

The number of sales agencies has declined in recent years due to Aflac Japan's focus on supporting agencies with strong management frameworks, high productivity and more producing agents.

At March 31, 2024, Aflac Japan had agreements to sell its products at 360 banks, approximately 90% of the total number of banks in Japan.

At June 30, 2024, Aflac Japan had agreements to sell its products at 360 banks, approximately 90% of the total number of banks in Japan.

Strategic Alliance with Japan Post Holdings

On May 10, 2024, the Parent Company reported that the shares owned by the J&A Alliance Trust (Trust) represented, in aggregate, 20% of the voting power of the Parent Company's common stock.

The Shareholders Agreement, entered into on February 28, 2019, by the Parent Company, Japan Post Holdings Co., Ltd., J&A Alliance Holdings Corporation, solely in its capacity as trustee of the Trust and General Incorporated Association J&A Alliance, provides voting restrictions that require the Trust to vote (i) all shares representing voting rights in excess of 20% of the voting rights in the Parent Company and (ii) all of its shares in connection with a change in control transaction, in each case, in a manner proportionally equal to votes of shares not beneficially owned by the Trust.

Japan Post Holdings Co., Ltd.

does not have a board seat on the Parent Company’s board of directors and does not have rights to control, manage or intervene in the management of the Parent Company.

For additional information, see the Aflac Japan Segment subsection of Item 7.

MD&A in the 2023 Annual Report.

Aflac Japan Investments

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The following table details the investment purchases for Aflac Japan.

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

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dollar-denominated $ 743 $ 368 $ 2,603 $ 1,085

Other currencies:

Other investments $ 2 $ 0 $ 2 $ 0

Total Aflac Japan purchases $ 1,079 $ 710 $ 3,165 $ 2,056

See the Investments section of this MD&A for further discussion of these investment programs, and see Notes 3 and 4 of the Notes to the Consolidated Financial Statements and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report for more information regarding loans and loan receivables.

The following table presents the results of Aflac Japan’s investment yields for the periods ended March 31.

The following table presents the results of Aflac Japan’s investment yields for the periods ended June 30.

Three Months Six Months

2024 2023 2024 2023

Total purchases for the period (in millions) (1)

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Return on average invested assets (3)

3.59 2.77 3.37 2.67

Portfolio book yield, including U.S.

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(3) Net of investment expenses and amortized hedge costs, year-to-date number reflected on a quarterly average basis

The increase in the Aflac Japan new money yield in the three-month period ended March 31, 2024 was primarily due to higher allocations to higher yielding asset classes.

The increase in the Aflac Japan new money yield in the three- and six-month periods ended June 30, 2024 was primarily due to higher allocations to higher yielding asset classes.

See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the Investments and Hedging Activities sections of this MD&A for additional information on the Company's investments and hedging strategies.

4 unchanged sentences

Summary of Operating Results

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

1 unchanged sentence

Adjusted net investment income (1)

218 203 424 400

Other income 11 35 30 70

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Total benefits and claims, net 5.4 (2.0) 5.3 (2.1)

Adjusted expenses .2 2.7

Total adjusted expenses (4.2) 3.3 (2.0) 3.0

Pretax adjusted earnings 3.8 7.6 2.5 6.8

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(9) and $(7) for the three-month periods ended March 31, 2024 and 2023, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended March 31, 2024, operating results compared to the same period in the previous year were as follows:

• Net earned premiums increased primarily due to higher net earned premiums from growth initiatives including group life and disability, network dental and vision, and consumer markets businesses.

• Adjusted net investment income increased primarily due to higher variable income, higher short-term income and higher yielding asset classes.

• Total adjusted revenues increased primarily due to the increase in net earned premiums.

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(9) and $(8) for the three-month periods and $(19) and $(15) for the six-month periods ended June 30, 2024 and 2023, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended June 30, 2024, operating results compared to the same period in the previous year were as follows:

• Net earned premiums increased primarily due to higher net earned premiums from growth initiatives including group life and disability and consumer markets businesses and continued improvements in premium persistency.

• Adjusted net investment income increased primarily due to higher fixed rate income, higher variable income and higher short-term income.

• Total adjusted revenues increased primarily due to the increase in net earned premiums and the increase in adjusted net investment income.

• Total benefits and claims increased primarily due to growth of group life and disability and lower remeasurement gains reflecting actual experience.

• Total adjusted expenses increased slightly primarily due to higher deferred policy acquisition costs amortization and an offsetting decrease in insurance and other expenses.

• Pretax adjusted earnings increased primarily due to higher net earned premiums.

Annualized premiums in force increased 3.1% to $6.2 billion at March 31, 2024, compared with $6.0 billion at March 31, 2023.

• Total adjusted expenses decreased primarily due to improved expense efficiency.

• Pretax adjusted earnings increased primarily due to lower total adjusted expenses and higher total adjusted revenues offset by higher benefits.

For the six-month period ended June 30, 2024, operating results compared to the same period in the previous year were as follows:

• Adjusted net investment income increased primarily due to higher fixed rate income, higher variable income and higher short-term income.

• Total adjusted revenues increased primarily due to the increase in net earned premiums and the increase in adjusted net investment income.

• Total benefits and claims increased primarily due to growth of group life and disability and lower remeasurement gains reflecting actual experience.

• Total adjusted expenses decreased primarily due to improved expense efficiency.

• Pretax adjusted earnings increased primarily due to higher total adjusted revenues and lower total adjusted expenses offset by higher benefits.

Annualized premiums in force increased 2.9% to $6.2 billion at June 30, 2024, compared with $6.1 billion at June 30, 2023.

The following table presents a summary of operating ratios for Aflac U.S.

followed by a discussion of the significant drivers of changes in operating ratios compared to the same period in the previous year.

Three Months Ended March 31,

followed by a discussion of the significant drivers of changes in operating ratios compared to the same periods in the previous year.

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

Ratios to total adjusted revenues:

2024 2023 2024 2023

Total benefits and claims 40.4 % 38.8 % 40.3 % 39.0 %

9 unchanged sentences

Amortization of deferred policy acquisition costs 9.1 8.4 9.0 8.4

For the three-month period ended March 31, 2024, the total benefits and claims to total premiums ratio increased primarily due to lower remeasurement gains.

The total adjusted expense ratio decreased in the three-month period ended March 31, 2024 primarily due to higher total adjusted revenues.

In total, the pretax adjusted profit margin decreased slightly in the three-month period ended March 31, 2024 primarily due to the higher total benefits and claims to total adjusted revenues ratio.

• For the three- and six-month periods ended June 30, 2024, the total benefits and claims to total premiums ratio increased primarily due to growth of group life and disability and lower remeasurement gains reflecting actual experience.

• The total adjusted expense ratio decreased in the three- and six-month periods ended June 30, 2024 primarily due to expense efficiency efforts.

• In total, the pretax adjusted profit margin increased slightly in the three- and six-month periods ended June 30, 2024 primarily due to higher total adjusted revenues and lower total adjusted expenses.

The following table presents premium persistency for Aflac U.S.

on a 12-month rolling basis as of March 31.

on a 12-month rolling basis as of June 30.

Premium persistency 78.7 % 78.2 %

The following table presents Aflac's U.S.

new annualized premium sales for the periods ended March 31.

new annualized premium sales for the periods ended June 30.

Three Months Six Months

(In millions) 2024 2023 2024 2023

1 unchanged sentence

Increase (decrease) over prior period 2.0 % 6.4 % (1.6) % 5.8 %

The decrease in new annualized premium sales for Aflac U.S.

in the first quarter of 2024 reflects continued strong underwriting discipline.

The increase in new annualized premium sales for Aflac U.S.

in the second quarter of 2024 largely driven by group life, absence management and disability products as well as improved sales in individual voluntary benefits.

The decrease in the first six months of 2024 reflects continued strong underwriting discipline as the Company focuses on more profitable growth with an emphasis on persistency.

The following table details the contributions to Aflac's U.S.

new annualized premium sales by major insurance product category for the periods ended March 31.

new annualized premium sales by major insurance product category for the periods ended June 30.

Three Months Six Months

2024 2023 2024 2023

Accident 21.2 % 22.4 % 21.8 % 23.0 %

1 unchanged sentence

Critical care (1)

21.1 20.4 21.6 20.5

Hospital indemnity 13.7 14.3 14.4 15.1

3 unchanged sentences

(1) Includes cancer, critical illness, and hospital intensive care products

In the first quarter of 2024, the Aflac U.S.

In the second quarter of 2024, the Aflac U.S.

sales force included an average of approximately 6,100 U.S.

1 unchanged sentence

The Company believes that this average weekly producer equivalent metric allows sales management to monitor progress and needs, as well as serve as a leading indicator of future production capacity.

As previously reported in the 2023 Annual Report, i n July 2023, the U.S.

As previously reported in the 2023 Annual Report, in July 2023, the U.S.

Department of Labor, U.S.

2 unchanged sentences

However, on March 28, 2024, the tri-agencies released the final regulations requiring expanded disclosures to consumers for hospital and fixed indemnity insurance.

The final regulations, which become effective June 17, 2024, did not include the proposals relating to the regulation and tax treatment of hospital and fixed indemnity insurance.

The final regulations, which became effective June 17, 2024, did not include the proposals relating to the regulation and tax treatment of hospital and fixed indemnity insurance.

As such, the implementation of the final regulations is not anticipated to have a material impact on Aflac U.S.

4 unchanged sentences

The following table details the investment purchases for Aflac U.S.

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

6 unchanged sentences

Transitional real estate loans 5 40 12 54

Commercial mortgage loans 13 0 13 0

Middle market loans 14 30 86 48

Other loans 0 21 0 21

Other investments 6 8 14 24

3 unchanged sentences

The following table presents the results of Aflac's U.S.

investment yields for the periods ended March 31.

investment yields for the periods ended June 30.

Three Months Six Months

2024 2023 2024 2023

Total purchases for period (in millions) (1)

$ 209 $ 288 $ 727 $ 529

New money yield (1),(2)

1 unchanged sentence

Return on average invested assets (3)

5.13 4.91 5.01 4.77

Portfolio book yield, end of period (1),(2)

5 unchanged sentences

The decrease in the Aflac U.S.

new money yield in the three-month period ended March 31, 2024 was primarily due to higher allocations to lower yielding asset classes.

new money yield in the three- and six-month periods ended June 30, 2024 was primarily due to higher allocations to lower yielding asset classes.

See Notes 3 and 5 of the Notes to the Consolidated Financial Statements and the Investments section of this MD&A for additional information on the Company's investments.

3 unchanged sentences

Corporate and Other Summary of Operating Results

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

23 unchanged sentences

Pretax adjusted earnings 144.2 30.7 136.2 50.4

(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.

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $30 and $53 for the three-month periods and $62 and $105 for the six-month periods ended June 30, 2024, and 2023, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $31 and $56 for the three-month periods and $64 and $108 for the six-month periods ended June 30, 2024, and 2023, respectively, have been recorded as an income tax benefit in the consolidated statements of earnings.

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

For the three-month period ended March 31, 2024, operating results compared to the same period in the previous year were as follows:

For the three-month period ended June 30, 2024, operating results compared to the same period in the previous year were as follows:

• Net earned premiums increased primarily due to higher reinsurance activity resulting from agreements established in the fourth quarter of 2023.

• Adjusted net investment income increased due to higher Aflac Re consolidated investment income of $15 million primarily due to a higher volume of assets as part of the reinsurance agreements established in the fourth quarter of 2023 and $23 million due to a lower volume of federal historic rehabilitation and solar tax credit investments, with offsetting tax benefits recognized as a corresponding lower income tax expense.

• Total adjusted revenues increased due to higher net earned premiums and higher adjusted net investment income.

• Total adjusted expenses increased primarily due to the higher reinsurance activity of $35 million.

• Pretax adjusted earnings increased due to higher total adjusted revenues partially offset by higher total adjusted expenses.

For the six-month period ended June 30, 2024, operating results compared to the same period in the previous year were as follows:

• Net earned premiums and total benefits and claims increased primarily due to higher reinsurance activity resulting from agreements established in the fourth quarter of 2023.

17 unchanged sentences

Investment Securities by Segment

March 31, 2024

June 30, 2024

(In millions) Aflac Japan Aflac U.S.

63 unchanged sentences

(3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other

T he Company has invested in a variety of commercial mortgage loans (CMLs) and other loans including transitional real estate loans (TREs).

The Company has invested in a variety of commercial mortgage loans (CMLs) and other loans including transitional real estate loans (TREs).

The Company's TRE and CML investments are collateralized by commercial real estate, including some office properties.

3 unchanged sentences

The Company invested in certain TREs and CMLs that are currently in default of interest or maturity payments.

The Company works with the affected borrowers to resolve specific situations through loan continuance with potential modifications, or through the process of foreclosure or deed in lieu of foreclosure.

The Company works with the affected borrowers to resolve specific situations through loan continuance with potential modifications, through loan sales, or through the process of foreclosure or deed in lieu of foreclosure.

Since the third quarter of 2023, the Company has taken possession, through foreclosure or deed in lieu of foreclosure, of certain commercial real estate properties, which secured defaulted loans.

Properties acquired by the Company through foreclosure and deed in lieu of foreclosure are reported as real estate owned (REO) in other investments in the Company's consolidated balance sheets.

For the six-month period ended June 30, 2024, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real estate properties with an amortized cost of $282 million.

As a result of the estimated fair value of the collateral exceeding the amortized cost of the TREs upon consummating the foreclosures or deed in lieu of foreclosure transactions, the Company recognized a net gain of $13 million in net investment gains (losses) for the six-month period ended June 30, 2024.

The Company did not complete any foreclosure or deed in lieu of foreclosure transactions in the six-month period ended June 30, 2023.

The Company utilizes third-party asset managers to source, underwrite and manage each loan, as well as any resulting REO.

9 unchanged sentences

Composition of Fixed Maturity Securities by Credit Rating

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Value Amortized

5 unchanged sentences

Total 100.0 % 100.0 % 100.0 % 100.0 %

As of March 31, 2024, the Company's direct and indirect exposure to securities in its investment portfolio that were guaranteed by third parties was immaterial both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of March 31, 2024.

As of June 30, 2024, the Company's direct and indirect exposure to securities in its investment portfolio that were guaranteed by third parties was immaterial both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of June 30, 2024.

(In millions) Credit

1 unchanged sentence

Value Unrealized Loss

KLM Royal Dutch Airlines B $ 128 $ 99 $ (29)

Japan National Government A+ $ 34,111 $ 33,114 $ (997)

Urban Renaissance Agency A 151 115 (36)

KLM Royal Dutch Airlines B 123 92 (31)

JP Morgan Chase and Co.

1 unchanged sentence

Prologis LP A 143 120 (23)

Investcorp Capital Limited BB 217 197 (20)

Alphabet Inc.

AA 84 65 (19)

Salesforce Inc A 94 77 (17)

BASF A 66 49 (17)

Nippon Prologis REIT Inc.

Citigroup Inc A 145 126 (19)

Banco de Chile A 132 116 (16)

Salesforce Inc A 93 74 (19)

Tokyo Gas Co Ltd A 93 74 (19)

Generally, declines in fair values can be a result of changes in interest rates, yen/dollar exchange rate, and changes in net spreads driven by a broad market move or a change in the issuer's underlying credit quality.

5 unchanged sentences

Below-Investment-Grade Investments

March 31, 2024

June 30, 2024

(In millions) Par

6 unchanged sentences

IKB Deutsche Industriebank AG 81 42 68 26

Generalitat de Catalunya 53 22 52 30

National Gas Co.

Trinidad & Tobago 52 50 48 (2)

Generalitat de Catalunya 50 21 47 26

Hawaiian Electric Industries Inc 35 34 29 (5)

Commonwealth of the Bahamas 18 17 14 (3)

CPI Property Group SA 19 19 18 (1)

Other Issuers 41 42 38 (4)

15 unchanged sentences

The following table shows the distribution of fixed maturities by sector classification.

March 31, 2024

June 30, 2024

(In millions) Amortized Cost (1)

29 unchanged sentences

Investment Securities by Type of Issuance

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(In millions) Amortized

15 unchanged sentences

Reverse-Dual Currency Securities (1)

(Amortized cost, in millions) March 31,

(Amortized cost, in millions) June 30,

2024 December 31,

31 unchanged sentences

The following table presents metrics related to Aflac Japan's U.S.

dollar-denominated hedge program and the Parent Company's enterprise corporate hedging program, including associated amortized hedge costs/income, for the periods ended March 31.

dollar-denominated hedge program and the Parent Company's enterprise corporate hedging program, including associated amortized hedge costs/income, for the periods ended June 30.

See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income.

Three Months Six Months

2024 2023 2024 2023

FX forward (sell USD, buy yen) notional at end of period (in billions) (1)

$0.0 $3.7 $0.0 $3.7

Amortized hedge income (cost) for period (in millions) $0 $(45) $1 $(85)

FX option notional at the end of period (in billions) (1)

$24.7 $13.5 $24.7 $13.5

Amortized hedge income (cost) for period (in millions) $(7) $(18) $(14) $(37)

1 unchanged sentence

FX forward (buy USD, sell yen) notional at end of period (in billions) (1)

$2.0 $5.0 $2.0 $5.0

Amortized hedge income (cost) for period (in millions) $34 $39 $62 $70

FX option notional at the end of period (in billions) (1)

$0.0 $2.4 $0.0 $2.4

Amortized hedge income (cost) for period (in millions) $0 $(1) $0 $(3)

20 unchanged sentences

Transitional real estate loans (floating rate) 4,389 4,311 4,795 4,829

Commercial mortgage and other loans 1,015 881 1,075 948

Commercial mortgage loans 976 844 1,075 948

Middle market loans (floating rate) 3,916 3,870 4,095 4,065

12 unchanged sentences

Dollar Program to mitigate against more extreme moves in foreign exchange and therefore support SMR.

As of March 31, 2024, some of the Company's foreign currency options hedging Aflac Japan's U.S.

As of June 30, 2024, some of the Company's foreign currency options hedging Aflac Japan's U.S.

dollar-denominated assets were in-the-money.

As of March 31, 2024, the fair value of Aflac Japan's unhedged U.S.

As of June 30, 2024, the fair value of Aflac Japan's unhedged U.S.

dollar-denominated portfolio was $73 million (excluding certain U.S.

3 unchanged sentences

dollar-denominated investments.

Three Months Ended March 31,

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

(In millions) 2024 2023 2024 2023

2 unchanged sentences

The Company has designated certain yen-denominated liabilities and foreign currency forwards and options of the Parent Company as accounting hedges of its net investment in Aflac Japan.

The Company's consolidated yen-denominated net asset position was partially hedged at $6.6 billion as of March 31, 2024, with hedging instruments comprised of $4.3 billion of yen-denominated debt and $2.3 billion of foreign currency forwards and options, compared with $6.8 billion as of December 31, 2023, with hedging instruments comprised of $3.7 billion of yen-denominated debt and $3.1 billion of foreign currency forwards and options .

The Company's consolidated yen-denominated net asset position was partially hedged at $6.0 billion as of June 30, 2024, with hedging instruments comprised of $4.0 billion of yen-denominated debt and $2.0 billion of foreign currency forwards, compared with $6.8 billion as of December 31, 2023, with hedging instruments comprised of $3.7 billion of yen-denominated debt and $3.1 billion of foreign currency forwards and options .

The Company makes its accounting designation of net investment hedge at the beginning of each quarter.

If the total of the designated Parent Company non-derivative and derivative notional is equal to or less than the Company's net investment in Aflac Japan, the hedge is deemed to be effective, and the currency exchange effect on the yen-denominated liabilities and the change in estimated fair value of the derivatives are reported in the unrealized foreign currency component of other comprehensive income.

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

The Company's net investment hedge was effective during the three- and six-month periods ended June 30, 2024 and 2023, respectively.

For additional information on the Company's net investment hedging strategy, see Note 4 of the Notes to the Consolidated Financial Statements.

19 unchanged sentences

The following table presents deferred policy acquisition costs (DAC) by segment.

(In millions) March 31,

(In millions) June 30,

2024 December 31, 2023 % Change

2 unchanged sentences

Total $ 8,550 $ 9,132 (6.4) %

(1) Aflac Japan’s deferred policy acquisition costs increased .5% in yen during the three months ended March 31, 2024.

(1) Aflac Japan’s deferred policy acquisition costs increased 1.2% in yen during the six months ended June 30, 2024.

See Note 6 of the Notes to the Consolidated Financial Statements for additional information on the Company's deferred policy acquisition costs.

1 unchanged sentence

The following table presents policy liabilities by segment.

(In millions) March 31,

(In millions) June 30,

2024 December 31, 2023 % Change

5 unchanged sentences

Total $ 77,353 $ 91,599 (15.6) %

(1) Aflac Japan’s policy liabilities decreased 1.3% in yen during the three months ended March 31, 2024.

(1) Aflac Japan’s policy liabilities decreased 5.9% in yen during the six months ended June 30, 2024.

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

13 unchanged sentences

As a result, additional contributions are not expected to be required unless the balance is reduced due to payments made by the LIPPC to the policyholders of insolvent insurers.

Accordingly, Aflac Japan did not recognize an expense for LIPPC assessments for the three-month periods ended March 31, 2024 and 2023.

Accordingly, Aflac Japan did not recognize an expense for LIPPC assessments for the six-month periods ended June 30, 2024 and 2023.

Guaranty Fund Assessments

1 unchanged sentence

The amount of the guaranty fund assessment that an insurer is assessed is based on its proportionate share of premiums in that state.

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

Guaranty fund assessments for the three- and six-month periods ended June 30, 2024 and 2023 were immaterial.

LIQUIDITY AND CAPITAL RESOURCES

13 unchanged sentences

The Company remains committed to prudent liquidity and capital management.

At March 31, 2024, the Company held $5.1 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.

At June 30, 2024, the Company held $6.1 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.

Aflac Japan and Aflac U.S.

1 unchanged sentence

The primary uses of cash by the Parent Company are shareholder dividends, the repurchase of its common stock, interest on its outstanding indebtedness and operating expenses.

The following table presents the amounts provided to the Parent Company for the three-month periods ended March 31.

The following table presents the amounts provided to the Parent Company for the six-month periods ended June 30.

Liquidity Provided by Subsidiaries to Parent Company

2 unchanged sentences

Dividends declared or paid by subsidiaries 2,111 1,971

The following table details Aflac Japan remittances, which are included in the totals above, for the three-month periods ended March 31.

The following table details Aflac Japan remittances, which are included in the totals above, for the six-month periods ended June 30.

Aflac Japan Remittances

13 unchanged sentences

The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available.

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

The Company was in compliance with all of the covenants of its notes payable and lines of credit at June 30, 2024.

For additional information, see Note 9 of the Notes to the Consolidated Financial Statements.

3 unchanged sentences

The Company has not engaged in material intra-period short-term financings during the periods presented that are not otherwise reported in its balance sheet or disclosed therein.

As of March 31, 2024, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations.

As of June 30, 2024, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations.

The Company has not entered into transactions involving the transfer of financial assets with an obligation to repurchase financial assets that have been accounted for as a sale under applicable accounting standards, including securities lending transactions.

8 unchanged sentences

When the yen strengthens, translating yen into dollars causes more dollars to be reported.

The following table summarizes consolidated cash flows by activity for the three-month periods ended March 31.

The following table summarizes consolidated cash flows by activity for the six-month periods ended June 30.

(In millions) 2024 2023

18 unchanged sentences

As part of its overall corporate strategy, the Company has committed $400 million to Aflac Ventures, LLC (Aflac Ventures), as opportunities emerge.

As of March 31, 2024, of the $400 million committed, approximately $282 million has been deployed.

As of June 30, 2024, of the $400 million committed, approximately $280 million has been deployed.

Aflac Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures) which is reported in Corporate and other.

4 unchanged sentences

obtains low-cost funding from FHLB supported by acceptable forms of collateral pledged by Aflac U.S.

In the first three months of 2024, Aflac U.S.

In the first six months of 2024, Aflac U.S.

borrowed and repaid $204 million under this program.

As of March 31, 2024, Aflac U.S.

As of June 30, 2024, Aflac U.S.

had outstanding borrowings of $760 million reported in its balance sheet.

2 unchanged sentences

Cash flows from financing activities consist primarily of share repurchases, dividends to shareholders and, from time to time, debt issuances and redemptions.

In April 2024, ALIJ redeemed ¥30.0 billion of its .963% subordinated bonds due April 2049.

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

13 unchanged sentences

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.

Cash returned to shareholders through treasury stock purchases and dividends was $1.0 billion during the three-month period ended March 31, 2024, compared with $948 million during the three-month period ended March 31, 2023.

The following tables present a summary of treasury stock activity during the three-month periods ended March 31.

Cash returned to shareholders through treasury stock purchases and dividends was $2.1 billion during the six-month period ended June 30, 2024, compared with $1.9 billion during the six-month period ended June 30, 2023.

The following tables present a summary of treasury stock activity during the six-month periods ended June 30.

Treasury Stock Purchased

12 unchanged sentences

Number of shares issued 714 728

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.

Cash dividends paid to shareholders were $.50 per share in the first quarter of 2024, compared with $.42 per share in the first quarter of 2023.

The following table presents the dividend activity for the three-month periods ended March 31.

As of June 30, 2024, a remaining balance of 59.2 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Cash dividends paid to shareholders were $.50 per share in the second quarter of 2024, compared with $.42 per share in the second quarter of 2023.

The following table presents the dividend activity for the six-month periods ended June 30.

(In millions) 2024 2023

2 unchanged sentences

Total dividends to shareholders $ 571 $ 510

In April 2024, the board of directors declared the second quarter cash dividend of $.50 per share, an increase of 19.0% compared with the same period in 2023.

The dividend is payable on June 3, 2024 to shareholders of record at the close of business on May 22, 2024.

In July 2024, the board of directors declared the third quarter cash dividend of $.50 per share, an increase of 19.0% compared with the same period in 2023.

The dividend is payable on September 2, 2024 to shareholders of record at the close of business on August 21, 2024.

Regulatory Restrictions

12 unchanged sentences

In order for a PRM-designated asset to be held at amortized cost, there are certain criteria that must be maintained.

The primary criterion relates to maintaining the duration of designated assets and liabilities within a specified tolerance range.

The primary criterion relates to maintaining the duration of designated assets and

liabilities within a specified tolerance range.

If the duration difference is not maintained within the specified range without rebalancing, then a certain portion of the assets must be reclassified as available-for-sale and held at fair value with any associated unrealized gain or loss recorded in surplus.

4 unchanged sentences

See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively.

As of March 31, 2024, Aflac Japan's SMR remains high and reflects a strong capital and surplus position.

As of June 30, 2024, Aflac Japan's SMR remains high and reflects a strong capital and surplus position.

The Company is committed to maintaining strong capital levels, consistent with maintaining current insurance financial strength and credit ratings.

The FSA is considering the introduction of an economic value-based solvency regime based on the Insurance Capital Standards (ICS) for insurance companies in Japan.

The FSA continues to conduct field testing with insurance companies in Japan for the purpose of investigating the impact of the introduction of such regulations.

Final specifications are expected to be decided in 2024, and a new capital regime to replace the current solvency regime is expected to be introduced in Aflac Japan's 2025 fiscal year.

The FSA will introduce an economic value-based solvency regime based on the Insurance Capital Standards (ICS) for insurance companies in Japan.

The final specifications were published in May 2024 with the new capital regime and initial economic value-based solvency ratio report becoming effective for Aflac Japan's 2025 fiscal year.

A life insurance company’s statutory capital and surplus is determined according to rules prescribed by the National Association of Insurance Commissioners (NAIC), as modified by the insurance department in the insurance company’s state of domicile.

5 unchanged sentences

The RBC formula quantifies insurance risk, business risk, asset risk and interest rate risk by weighing the types and mixtures of risks inherent in the insurer’s operations.

As of March 31, 2024, Aflac U.S.'s combined RBC ratio remains high and reflects a strong capital and surplus position.

As of June 30, 2024, Aflac U.S.'s combined RBC ratio remains high and reflects a strong capital and surplus position.

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its regulations.

13 unchanged sentences

Investors should note that the Company announces material financial information in its SEC filings, press releases and public conference calls.

In accordance with SEC guidance, the Company may also use the Investor Relations section of the Company's website (http://investors.aflac.com) to communicate with investors about the Company.

In accordance with SEC guidance, the Company may also use the Investor Relations section of

the Company's website (http://investors.aflac.com) to communicate with investors about the Company.

It is possible that the financial and other information the Company posts there could be deemed to be material information.

11 unchanged sentences

Calculations of DAC and the liability for future policy benefits require the use of estimates based on actuarial valuation techniques.

The application of these critical accounting estimates determines the values at which 93% of the Company's assets and 78% of its liabilities are reported as of March 31, 2024, and thus has a direct effect on net earnings and shareholders’ equity.

The application of these critical accounting estimates determines the values at which 92% of the Company's assets and 76% of its liabilities are reported as of June 30, 2024, and thus has a direct effect on net earnings and shareholders’ equity.

Subsequent experience or use of other assumptions could produce significantly different results.

There have been no changes in the items the Company has identified as critical accounting estimates during the three-month period ended March 31, 2024.

There have been no changes in the items the Company has identified as critical accounting estimates during the six-month period ended June 30, 2024.

For additional information, see the Critical Accounting Estimates section of Item 7.

3 unchanged sentences

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 2. Management’s Discussion and Analysis