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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-01 · 215 added, 303 removed, 1011 unchanged (34% 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 nine-month periods ended September 30, 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 three-month periods ended March 31, 2025 and 2024, respectively.

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

27 unchanged sentences

Performance Highlights

Total revenues were $2.9 billion in the third quarter of 2024, compared with $5.0 billion in the third quarter of 2023.

Net earnings were $(93) million, or $(.17) per diluted share, in the third quarter of 2024, compared with $1.6 billion, or $2.64 per diluted share, in the third quarter of 2023, primarily due to increased foreign exchange-related losses from the yen strengthening by 12.9% during the quarter.

Total revenues were $13.5 billion in the first nine months of 2024, compared with $14.9 billion in the first nine months of 2023.

Net earnings were $3.5 billion, or $6.23 per diluted share, in the first nine months of 2024, compared with $4.4 billion, or $7.28 per diluted share, in the first nine months of 2023.

Results in the third quarter of 2024 included pretax net investment losses of $1.4 billion, compared with pretax net investment gains of $423 million in the third quarter of 2023.

Net investment losses in the third quarter of 2024 included an increase in credit loss allowances of $141 million;

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

$13 million of net gains on equity securities;

and $105 million of net gains from sales and redemptions.

Results in the first nine months of 2024 included pretax net investment gains of $239 million, compared with pretax net investment gains of $1.1 billion in the first nine months of 2023.

Net investment gains in the first nine months of 2024 included an increase in credit loss allowances of $161 million;

$33 million of net losses from certain derivative and foreign currency gains or losses;

$100 million of net gains on equity securities;

Total revenues were $3.4 billion in the first quarter of 2025, compared with $5.4 billion in the first quarter of 2024, primarily due to net investment losses of $963 million in the first quarter of 2025 compared with net investment gains of $951 million in the first quarter of 2024.

Net earnings were $29 million, or $.05 per diluted share, in the first quarter of 2025, compared with $1.9 billion, or $3.25 per diluted share, in the first quarter of 2024.

Net earnings in the first quarter of 2025 included net investment losses of $963 million, compared with net investment gains of $951 million in the first quarter of 2024.

Net investment losses in the first quarter of 2025 included $888 million of net losses from certain derivative and foreign currency gains or losses;

$61 million of net losses on equity securities;

an increase in credit loss allowances of $55 million;

and $41 million of net gains from sales and redemptions.

The average yen/dollar exchange rate (1) for the three-month period ended September 30, 2024 was 147.95, or 2.0% weaker than the average yen/dollar exchange rate (1) of 144.97 for the same period in 2023.

The average yen/dollar exchange rate (1) for the nine-month period ended September 30, 2024 was 150.60, or 8.1% weaker than the average yen/dollar exchange rate (1) of 138.38 for the same period in 2023.

Adjusted earnings (2) in the third quarter of 2024 were $1.2 billion, or $2.16 per diluted share, compared with $1.1 billion, or $1.84 per diluted share, in the third quarter of 2023.

The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.03.

Adjusted earnings (2) in the first nine months of 2024 were $3.2 billion, or $5.64 per diluted share, compared with $3.0 billion, or $4.97 per diluted share, in the first nine months of 2023.

The average yen/dollar exchange rate (1) for the three-month period ended March 31, 2025 was 152.40, or 2.4% weaker than the average yen/dollar exchange rate (1) of 148.67 for the same period in 2024.

Adjusted earnings (2) in the first quarter of 2025 were $906 million, or $1.66 per diluted share, compared with $961 million, or $1.66 per diluted share, in the first quarter of 2024.

The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.01.

In the first nine months of 2024, Aflac Incorporated repurchased $2.1 billion, or 23.4 million of its common shares as part of its share repurchase program.

At September 30, 2024, the Company had 54.3 million remaining shares authorized for repurchase.

Shareholders’ equity was $24.8 billion, or $44.60 per share, at September 30, 2024, compared with $22.0 billion, or $38.00 per share, at December 31, 2023.

Shareholders’ equity at September 30, 2024 included a cumulative decrease of $67 million 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 $537 million, compared with a net unrealized gain of $1.1 billion at December 31, 2023.

Shareholders’ equity at September 30, 2024 also included an unrealized foreign currency translation loss of $4.1 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 third quarter of 2024 was (1.5)%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $28.5 billion, or $51.21 per share, at September 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 third quarter of 2024 was 17.0%.

In the first three months of 2025, Aflac Incorporated repurchased $900 million, or 8.5 million of its common shares.

At March 31, 2025, the Company had 38.8 million remaining shares authorized for repurchase.

Shareholders’ equity was $26.3 billion, or $48.55 per share, at March 31, 2025, compared with $26.1 billion, or $47.45 per share, at December 31, 2024.

Shareholders’ equity at March 31, 2025 included a cumulative increase of $3.9 billion from the effect of changes in discount rate assumptions on insurance reserves, compared with a corresponding cumulative increase of $2.0 billion at December 31, 2024, and a net unrealized loss on investment securities and derivatives of $1.3 billion, compared with a net unrealized gain of $4 million at December 31, 2024.

Shareholders’ equity at March 31, 2025 also included an unrealized foreign currency translation loss of $4.5 billion, compared with an unrealized foreign currency translation loss of $5.0 billion at December 31, 2024.

The annualized return on average shareholders’ equity in the first quarter of 2025 was .4%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $28.2 billion, or $51.98 per share, at March 31, 2025, compared with $29.1 billion, or $52.87 per share, at December 31, 2024.

Adjusted book value excluding foreign currency remeasurement (2) was $23.1 billion, or $42.61 per share, at March 31, 2025, compared with $23.4 billion, or $42.46 per share, at December 31, 2024.

The annualized adjusted return on equity (ROE) excluding foreign currency remeasurement (2) in the first quarter of 2025 was 15.6%.

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.

GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses.

• 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.

9 unchanged sentences

• Adjusted book value is the U.S.

GAAP book value (representing total shareholders’ equity), less AOCI as recorded on the U.S.

GAAP book value (representing total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S.

GAAP balance sheet.

Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented.

The Company considers adjusted book value and adjusted book value per common share important as they exclude AOCI, which fluctuates due to market movements that are outside management’s control.

The Company considers adjusted book value and adjusted book value per common share important as they exclude accumulated other comprehensive income, which fluctuates due to market movements that are outside management’s control.

The most comparable U.S.

GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.

• Adjusted return on equity excluding foreign currency impact is adjusted earnings excluding the current period foreign currency impact divided by average shareholders’ equity, excluding AOCI.

The Company considers adjusted return on equity excluding foreign currency impact important as it excludes changes in foreign currency and components of AOCI, which fluctuate due to market movements that are outside management's control.

• Adjusted book value excluding foreign currency remeasurement is the U.S.

GAAP book value (representing total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S.

GAAP balance sheet and excluding the cumulative [beginning January 1, 2021] foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets.

Adjusted book value excluding foreign currency remeasurement per common share is adjusted book value excluding foreign currency remeasurement at the period end divided by the ending outstanding common shares for the period presented.

The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share important as they exclude both accumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control.

The most comparable U.S.

GAAP financial measure for adjusted return on equity excluding foreign currency impact is return on average equity (ROE) as determined using net earnings and average total shareholders’ equity.

GAAP financial measures for adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share are total book value and total book value per common share, respectively.

• Adjusted return on equity is annualized adjusted earnings divided by average shareholders’ equity, excluding AOCI.

Management uses adjusted return on equity to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business.

The Company considers adjusted return on equity important as it excludes components of AOCI, which fluctuate due to market movements that are outside management's control.

The most comparable U.S.

GAAP financial measure for adjusted return on equity is return on average equity as determined using annualized net earnings and average total shareholders’ equity.

• Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings divided by average shareholders’ equity, excluding both AOCI and the cumulative [beginning January 1, 2021] foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets.

The Company considers adjusted return on equity excluding foreign currency remeasurement important because it excludes both AOCI and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control.

The most comparable U.S.

GAAP financial measure for adjusted return on equity excluding foreign currency remeasurement is ROE as determined using annualized net earnings and average total shareholders’ equity.

dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S.

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Reconciliation of Net Earnings to Adjusted Earnings

In Millions Per Diluted Share In Millions Per Diluted Share

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

In Millions Per Diluted Share

Three Months Ended March 31,

2025 2024 2025 2024

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Other and non-recurring (income) loss 53 2 .10 .00

Income tax (benefit) expense on items excluded from adjusted earning (43) 33 (.08) .06 76 12 .13 .02

Income tax (benefit) expense on items excluded from adjusted earnings (100) 89 (.18) .15

Adjusted earnings 906 961 1.66 1.66

Current period foreign currency impact (2)

16 N/A .03 N/A 97 N/A .17 N/A

8 N/A .01 N/A

Adjusted earnings excluding current period foreign currency impact $ 914 $ 961 $ 1.67 $ 1.66

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Net Investment Gains and Losses

The following table is a reconciliation of items impacting adjusted net investment (gains) losses to the most directly comparable U.S.

GAAP financial measure of net investment (gains) losses.

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

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

Three Months Ended March 31,

(In millions) 2025 2024

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

(88) (90) (265) (239)

Impact of interest from derivatives associated with notes payable 4 8

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• foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in yen and hedge the Company's long term exposure to a weakening yen;

• cross-currency interest rate swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures;

• cross-currency swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures;

• foreign currency swaps that are associated with variable interest entity (VIE) bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary;

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Gains and losses are recognized as a result of valuing these derivatives, net of the effects of hedge accounting.

The Company also excludes from adjusted earnings the accounting impacts of remeasurement associated with changes in the foreign currency exchange rate.

The Company also excludes from adjusted earnings the accounting impacts of foreign currency remeasurement associated with changes in the foreign currency exchange rate.

For additional information regarding net investment gains and losses, including details of reported amounts for the periods presented, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements.

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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.

In June 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 201.8% for the three-month period ended September 30, 2024, compared with 13.1% for the same period in 2023.

The Company's combined U.S.

and Japanese effective income tax rate on pretax earnings was 17.3% for the nine-month period ended September 30, 2024, compared with 11.7% for the same period in 2023.

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

statutory rate primarily due to historic and solar tax credits and the exclusion of foreign currency translation gains and losses held in the Delaware Statutory Trust.

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

MD&A in the 2023 Annual Report.

The Company expects that its effective tax rate on adjusted earnings for future periods will be approximately 20%.

The effective tax rate continues to be subject to future tax law changes both in the U.S.

and in foreign jurisdictions.

See the risk factor entitled "Tax rates applicable to the Company may change" in Item 1A.

Risk Factors of the 2023 Annual Report for more information.

In 2025, as part of the U.S.

defined benefit plan freeze, the Company purchased a nonparticipating single premium group annuity contract from an external insurer to settle its obligations under the plan and paid to the insurer the related annuity premium.

As a result, the Company recognized a settlement charge of $55 million in the first quarter of 2025.

The settlement charge was both unusual and non-recurring;

therefore, the Company excluded the settlement charge from adjusted earnings.

Foreign Currency Translation

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In recent periods, the Japanese yen has weakened against the U.S.

however, the yen strengthened against the U.S.

dollar during the first quarter of 2025.

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

2 unchanged sentences

Risk Factors of the 2024 Annual Report for more information.

The Company's combined U.S.

and Japanese effective income tax rate on pretax earnings was 80.3% for the three-month period ended March 31, 2025, compared with 13.4% for the same period in 2024.

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

statutory rate primarily due to the exclusion of foreign currency translation gains and losses on certain Aflac Japan U.S.

dollar-denominated investments held in the Delaware Statutory Trust and the impact of historic and solar tax credits.

For additional information, see Note 10 of the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates - Income Taxes section of Item 7.

MD&A in the 2024 Annual Report.

The effective tax rate continues to be subject to future tax law changes both in the U.S.

and in foreign jurisdictions.

See the risk factor entitled "Tax rates applicable to the Company may change" in Item 1A.

Risk Factors of the 2024 Annual Report for more information.

Reconciliation of Book Value to Adjusted Book Value

The following table is a reconciliation of items impacting adjusted book value and adjusted book value per diluted share to the most directly comparable U.S.

(Excluding Foreign Currency Remeasurement)

The following table is a reconciliation of items impacting adjusted book value and adjusted book value per diluted share excluding foreign currency remeasurement to the most directly comparable U.S.

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

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

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

2025 December 31,

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Adjusted book value 28,197 29,076

Foreign currency remeasurement gains (losses) 5,083 5,725

Adjusted book value excluding foreign currency remeasurement 23,114 23,351

Number of shares outstanding at end of period 542,493 549,964

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Adjusted book value per common share 51.98 52.87

Foreign currency remeasurement gains (losses) per common share 9.37 10.41

Adjusted book value excluding foreign currency remeasurement per

common share 42.61 42.46

Reconciliation of Return on Equity to Adjusted Return on Equity

(Excluding the Impact of Foreign Currency)

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.

(Excluding Foreign Currency Remeasurement)

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

GAAP financial measure of return on equity.

Three Months Ended September 30,

Three Months Ended March 31,

GAAP return on equity - net earnings (1)

(1.5) % 29.1 %

Impact of excluding unrealized foreign currency translation gains (losses) .0 (5.1)

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Adjusted return on equity - reported 12.7 13.7

Impact of foreign currency (3)

Adjusted return on equity, excluding impact of foreign currency 17.0 15.6

Impact of excluding gains (losses) associated with foreign currency remeasurement (3)

Adjusted return on equity excluding foreign currency remeasurement 15.6 16.2

GAAP return on equity is calculated by dividing net earnings (annualized) by average shareholders' equity.

(2) See separate reconciliation of net earnings to adjusted earnings above.

(3) Impact of foreign currency is calculated by restating all foreign currency components of the income statement to the weighted average foreign currency exchange rate for the comparable prior year period.

The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings.

For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period.

This allows for equal comparison of this financial measure.

(3) Impact of gains/losses associated with foreign currency remeasurement is calculated by excluding the cumulative [beginning January 1, 2021] foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets.

The impact is the difference of adjusted return on equity - reported compared with adjusted return on equity, excluding from shareholders' equity, gains/losses associated with foreign currency remeasurement.

RESULTS OF OPERATIONS BY SEGMENT

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In Dollars In Yen

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

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

(In millions of dollars and billions of yen) 2025 2024 2025 2024

28 unchanged sentences

Pretax adjusted earnings (10.9) 2.8 (8.7) 15.6

(1) Includes a gain (loss) of $(75) and $22 for the three-month periods and $(80) and $22 for the nine-month periods ended September 30, 2024 and 2023, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

(2) Net interest income/expense from derivatives associated with certain investment strategies of $(79) and $(79) for the three-month periods and $(237) and $(214) for the nine-month periods ended September 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 September 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 ¥11 billion related to the remeasurement of the deferred profit liability for limited-pay contracts in the third quarter of 2024, approximately ¥7 billion related to the internal cancer reinsurance transaction with Aflac Re established in the fourth quarter of 2023 and approximately ¥5 billion from limited-pay products reaching premium paid-up status.

• Adjusted net investment income was essentially flat.

• Total adjusted revenues decreased primarily due to the decrease in net earned premiums.

• Total benefits and claims decreased primarily due to ¥50 billion of reserve remeasurement gains related to assumption updates in the third quarter of 2024 as well as internal reinsurance activity.

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

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

For the nine-month period ended September 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 ¥22 billion related to the internal cancer reinsurance transaction with Aflac Re established in the fourth quarter of 2023, approximately ¥16 billion from limited-pay products reaching premium paid-up status and approximately ¥11 billion related to the remeasurement of the deferred profit liability for limited-pay contracts in the third quarter of 2024.

• Adjusted net investment income increased primarily due to lower amortized hedge costs of ¥17 billion, the weakening of the yen on U.S.

dollar investments of ¥15 billion and higher variable investment income of ¥10 billion.

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

• Total adjusted expenses decreased primarily due to internal reinsurance activity 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, partially offset by the decrease in net earned premiums.

Annualized premiums in force decreased 3.2% to ¥1.22 trillion as of September 30, 2024, compared with ¥1.26 trillion as of September 30, 2023.

(1) Includes a gain (loss) of an immaterial amount and $(3) for the three-month periods ended March 31, 2025 and 2024, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

(2) Net interest income/expense from derivatives associated with certain investment strategies of $(58) and $(79) for the three-month periods ended March 31, 2025 and 2024, 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, 2025, 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 cancer reinsurance transaction with Aflac Re established in the fourth quarter of 2024 and approximately ¥4 billion from limited-pay products reaching premium paid-up status.

• Adjusted net investment income decreased primarily due to lower floating rate income and fixed-rate yen-denominated income.

• Total adjusted revenues decreased primarily due to the decreases in net earned premiums and 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 2024 and the impact of assumption updates performed in the third quarter of 2024.

• Total adjusted expenses increased primarily due to an increase in technology expenses, partially offset by the impact of the internal reinsurance transaction with Aflac Re established in the fourth quarter of 2024.

• Pretax adjusted earnings decreased primarily due to the decrease in total adjusted revenue, partially offset by the decrease in total benefits and claims.

Annualized premiums in force decreased 2.7% to ¥1.20 trillion as of March 31, 2025, compared with ¥1.23 trillion as of March 31, 2024.

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 $8.5 billion at September 30, 2024, compared with $8.4 billion at September 30, 2023.

As of September 30, 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 $8.0 billion at March 31, 2025, compared with $8.1 billion at March 31, 2024.

As of March 31, 2025, Aflac Japan exceeded 22 million individual policies in force in Japan, with approximately 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 September 30,

For the Periods Ended March 31,

Including Foreign

1 unchanged sentence

Currency Changes

Three Months Nine Months

2025 2024 2025 2024

2 unchanged sentences

Pretax adjusted earnings (8.7) 15.6 (9.8) 9.3

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 periods in the previous year.

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

Three Months Ended March 31,

Ratios to total adjusted revenues:

2024 2023 2024 2023

Total benefits and claims, net 48.7 % 49.2 %

9 unchanged sentences

Amortization of deferred policy acquisition costs 4.7 4.6

• For the three- and nine-month periods ended September 30, 2024, the total benefits and claims to total premiums ratio decreased primarily due to a decrease in total benefits and claims resulting from reserve remeasurement gains related to assumption updates in the third quarter of 2024, partially offset by the decline in net earned premiums resulting from reinsurance activity, limited-pay products reaching premium paid-up status, and a deferred profit liability remeasurement loss.

For the full year of 2024, the Company expects Aflac Japan to generate a benefit ratio in the range of 62% to 63% as a result of the impact from assumption updates in the third quarter of 2024.

• For the three-month period ended September 30, 2024, the total adjusted expense ratio increased primarily due to the decrease in total adjusted revenues.

The total adjusted expense ratio decreased in the nine-month period ended September 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 nine-month periods ended September 30, 2024 primarily due to a decrease in total benefits and claims.

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

• For the three-month period ended March 31, 2025, the total benefits and claims to total premiums ratio decreased primarily due to a decrease in total benefits and claims related to reinsurance activity and the impact of assumption updates performed in the third quarter of 2024, partially offset by the decline in net earned premiums resulting from reinsurance activity and limited-pay products reaching premium paid-up status.

• For the three-month period ended March 31, 2025, the total adjusted expense ratio increased primarily due to an increase in technology expenses.

• In total, the pretax adjusted profit margin decreased in the three-month period ended March 31, 2025 primarily due to the decrease in total adjusted revenues, partially offset by the decrease in total benefits and claims.

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

Premium persistency 93.8 % 93.4 %

Aflac Japan Sales

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

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

In Dollars In Yen

Three Months Nine Months

(In millions of dollars and billions of yen) 2025 2024 2025 2024

1 unchanged sentence

Increase (decrease) over prior period 10.1 % (15.5) % 12.6 % (5.1) %

The increase in new annualized premium sales on a yen basis in the third quarter and first nine months 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 September 30.

Three Months Nine Months

2024 2023 2024 2023

The increase in new annualized premium sales on a yen basis in the first quarter of 2025 was driven primarily by strong sales of Tsumitasu as well as initial sales of a new cancer insurance product, Miraito , that was launched in certain sales channels in mid-March 2025 and available in all sales channels starting in the second quarter of 2025.

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

Cancer 59.7 % 63.2 %

Medical and other health 15.3 21.4

Medical 12.2 20.0 15.9 19.3

Income support .2 .4 .3 .5

Life insurance:

Traditional life (1)

30.8 6.1 21.5 6.4

WAYS .8 6.0 2.5 7.1

Child endowment .1 .3

Other .8 1.5 1.0 1.6

Total 100.0 % 100.0 %

(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.

(1) Includes term life, 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 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.

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.

Additionally, the Company believes that sales of first sector products, including Tsumitasu, WAYS and Child Endowment, 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 September 30.

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.

Independent corporate and individual 52.8 % 48.9 %

2 unchanged sentences

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

During the three-month period ended September 30, 2024, Aflac Japan recruited 19 new sales agencies.

At September 30, 2024, Aflac Japan was represented by approximately 6,600 sales agencies, with approximately 114,000

licensed sales associates employed by those agencies.

During the three-month period ended March 31, 2025, Aflac Japan recruited 18 new sales agencies.

At March 31, 2025, Aflac Japan was represented by approximately 6,500 sales agencies, with approximately 113,000 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 September 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.

At March 31, 2025, Aflac Japan had agreements to sell its products at 358 banks, approximately 90% of the total number of banks in Japan.

Aflac Japan Investments

7 unchanged sentences

Aflac Japan invests in both publicly traded and privately originated U.S.

dollar-denominated investment-grade and below-investment-grade fixed maturity securities and loan receivables, and has entered into foreign currency forwards and options to hedge the currency risk on the fair value of a portion of the U.S.

denominated investment-grade and below-investment-grade fixed maturity securities and loan receivables, and has entered into foreign currency derivatives to hedge the currency risk on the fair value of a portion of the U.S.

dollar investments.

The following table details the investment purchases for Aflac Japan.

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

Three Months Ended March 31,

(In millions) 2025 2024

6 unchanged sentences

Commercial mortgage and other loans:

Other loans 0 0 0 77

Other investments 10 7

20 unchanged sentences

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 2024 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 September 30.

Three Months Nine Months

2024 2023 2024 2023

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

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

3 unchanged sentences

Return on average invested assets (3)

3.16 3.07 3.31 2.80

Portfolio book yield, including U.S.

5 unchanged sentences

(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- and nine-month periods ended September 30, 2024 was primarily due to higher allocations to higher yielding asset classes.

The decrease in the Aflac Japan new money yield in the three-month period ended March 31, 2025 was primarily due to lower 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2025 2024

1 unchanged sentence

Adjusted net investment income (1)

210 209 634 609

Other income 17 18

18 unchanged sentences

Pretax adjusted earnings .6 1.1

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(9) and $(9) for the three-month periods and $(28) and $(24) for the nine-month periods ended September 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 September 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 was essentially flat.

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(6) and $(9) for the three-month periods ended March 31, 2025 and 2024, 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, 2025, 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.

• Adjusted net investment income decreased primarily due to lower floating rate income.

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

• Total benefits and claims increased primarily due to a decrease of approximately $139 million in reserve remeasurement gains related to assumption updates in the third quarter of 2024 and higher incurred claims.

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

• Pretax adjusted earnings decreased primarily due to the increase in total benefits and claims, partially offset by the increase in total adjusted revenues and the decrease in total adjusted expenses.

For the nine-month period ended September 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 both net earned premiums and adjusted net investment income.

• Total benefits and claims increased primarily due to higher incurred claims and lower reserve remeasurement gains reflecting actual experience.

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

Annualized premiums in force increased 3.3% to $6.3 billion at September 30, 2024, compared with $6.1 billion at September 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 periods in the previous year.

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

• Pretax adjusted earnings increased slightly primarily due to the increase in total adjusted revenues and the decrease in total adjusted expenses, mostly offset by the increase in total benefits and claims.

Annualized premiums in force increased 4.7% to $6.5 billion at March 31, 2025, compared with $6.2 billion at March 31, 2024.

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,

Ratios to total adjusted revenues:

2024 2023 2024 2023

Total benefits and claims 41.6 % 40.4 %

9 unchanged sentences

Amortization of deferred policy acquisition costs 9.1 8.9

• For the three- and nine-month periods ended September 30, 2024, the total benefits and claims to total premiums ratio increased primarily due to the decrease in reserve remeasurement gains related to assumption updates in the third quarter of 2024 as well as higher incurred claims.

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

• In total, the pretax adjusted profit margin decreased in the three- and nine-month periods ended September 30, 2024 primarily due to the increase in total benefits and claims partially offset by higher total adjusted revenues and lower total adjusted expenses.

• For the three-month period ended March 31, 2025, the total benefits and claims ratio to total premiums ratio increased primarily due to higher incurred claims and lower reserve remeasurement gains reflecting actual experience.

• The total adjusted expense ratio decreased in the three-month period ended March 31, 2025 primarily due to expense efficiency efforts.

• In total, the pretax adjusted profit margin decreased slightly in the three-month period ended March 31, 2025, primarily due to the increase in the benefit ratio.

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

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

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

Premium persistency 79.3 % 78.7 %

The following table presents Aflac's U.S.

new annualized premium sales for the periods ended September 30.

Three Months Nine Months

new annualized premium sales for the periods ended March 31.

(In millions) 2025 2024

2 unchanged sentences

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

in the third quarter and first nine months of 2024 was primarily driven by group life, absence management and disability products, as well as cancer insurance.

in the first quarter of 2025 was primarily driven by sales of group products.

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

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

Three Months Nine Months

2024 2023 2024 2023

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

Accident 21.1 % 22.5 %

1 unchanged sentence

Critical care (1)

18.6 18.6 20.5 19.8

Hospital indemnity 15.0 15.1

3 unchanged sentences

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

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

In the first quarter of 2025, the Aflac U.S.

sales force included an average of approximately 5,100 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, in July 2023, the U.S.

Department of Labor, U.S.

Department of the Treasury and U.S.

Department of Health and Human Services (the tri-agencies) issued a proposed joint rule that, as written, could have potentially imposed significant limitations on the structure of benefits for hospital indemnity and other fixed indemnity plans, including those sold by Aflac U.S.

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 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.

The level of investment income is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, and other factors.

3 unchanged sentences

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

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

Three Months Ended March 31,

(In millions) 2025 2024

6 unchanged sentences

Transitional real estate loans 2 7

Commercial mortgage loans 0 19 13 19

Middle market loans 40 72

5 unchanged sentences

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

investment yields for the periods ended September 30.

Three Months Nine Months

2024 2023 2024 2023

investment yields for the periods ended March 31.

Total purchases for period (in millions) (1)

$ 158 $ 217 $ 886 $ 748

New money yield (1),(2)

1 unchanged sentence

Return on average invested assets (3)

4.94 5.04 5.00 4.84

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

5 unchanged sentences

The decrease in the Aflac U.S.

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

new money yield in the three-month period ended March 31, 2025 was primarily due to lower allocations to higher 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2025 2024

22 unchanged sentences

Pretax adjusted earnings 1,533.3 57.1

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $57 and $64 for the three-month periods and $119 and $169 for the nine-month periods ended September 30, 2024, and 2023, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $78 and $63 for the three-month periods and $142 and $171 for the nine-month periods ended September 30, 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 $8 and $32 for the three-month periods ended March 31, 2025 and 2024, respectively, is included as a reduction to net investment income.

Tax credits on these investments of $7 and $33 for the three-month periods ended March 31, 2025 and 2024, 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 September 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.

• Adjusted net investment income increased primarily 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 $7 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 primarily due to higher net earned premiums and higher adjusted net investment income.

• Total adjusted expenses increased primarily due to the higher reinsurance activity.

For the three-month period ended March 31, 2025, 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 the agreement established in the fourth quarter of 2024.

• Adjusted net investment income increased primarily due to $24 million from a lower volume of federal historic rehabilitation and solar tax credit investments, with offsetting tax benefits recognized as a corresponding lower income tax expense, and higher Aflac Re consolidated investment income of $12 million from a higher volume of assets as part of the reinsurance agreement established in the fourth quarter of 2024.

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

• Total adjusted expenses increased primarily due to reinsurance activity and higher interest expense.

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

For the nine-month period ended September 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.

• Adjusted net investment income increased primarily due to higher Aflac Re consolidated investment income of $53 million primarily due to a higher volume of assets as part of the reinsurance agreements established in the fourth quarter of 2023 and $50 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 primarily due to higher net earned premiums and higher adjusted net investment income.

• Total adjusted expenses increased primarily due to the higher reinsurance activity of $108 million as well as an increase in other general operating expenses.

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

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.

12 unchanged sentences

Investment Securities by Segment

September 30, 2024

March 31, 2025

(In millions) Aflac Japan Aflac U.S.

39 unchanged sentences

Middle market loans 3,847 436 0 4,283

Other loans 185 101 15 301

284 61 15 360

Other investments:

4 unchanged sentences

Real estate owned

570 112 0 682

Other 0 39 0 39

16 unchanged sentences

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 nine-month period ended September 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 $407 million.

As a result of the amortized cost of the TREs exceeding the estimated fair value of the collateral upon consummating the foreclosures or deed in lieu of foreclosure transactions, the Company recognized a net loss of $27 million in net investment gains (losses) for the nine-month period ended September 30, 2024.

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

In the three-month period ended March 31, 2025, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real estate properties with an amortized cost of $87 million.

As a result of the amortized cost of the TREs exceeding the estimated fair value of the collateral upon consummating the foreclosures or deed in lieu of foreclosure transactions, the Company recognized a net loss of $16 million in net investment gains (losses) for the three-month period ended March 31, 2025.

In 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 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 $4 million in net investment gains (losses) for the three-month period ended March 31, 2024.

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Value Amortized

5 unchanged sentences

Total 100.0 % 100.0 % 100.0 % 100.0 %

As of September 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 September 30, 2024.

As of March 31, 2025, 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, 2025.

(In millions) Credit

4 unchanged sentences

KLM Royal Dutch Airlines B+ 133 96 (37)

Thames Water Utility CCC+ 140 112 (28)

JP Morgan Chase and Co.

1 unchanged sentence

Prologis LP A 151 121 (30)

BASF A- 70 47 (23)

SNCF Reseau AA 75 54 (21)

Anglian Water Services Financing A- 98 78 (20)

Mitsui Fudosan Co.

Tokyo Gas Co Ltd A+ 100 74 (26)

Banco de Chile A 134 108 (26)

Mitsubishi Estate Co Ltd.

A 133 108 (25)

SNCF Reseau AA- 72 48 (24)

West Japan Railway Company A+ 79 55 (24)

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.

The Company believes these issuers have the ability to continue making timely payments of principal and interest.

See the Unrealized Investment Gains and Losses section in Note 3 of the Notes to the Consolidated Financial Statements for further discussions of unrealized losses related to financial institutions and other corporate investments.

See the Unrealized Investment Gains and Losses section in Note 3 of the Notes to the Consolidated Financial Statements for further discussions of unrealized losses related to the Company's investments.

Below-Investment-Grade Securities

The Company's portfolio of below-investment-grade securities includes debt securities purchased while the issuer was rated investment grade plus other loans and bonds purchased as part of an allocation to that segment of the market.

The Company's portfolio of below-investment-grade securities includes debt securities purchased while the issuer was rated investment grade plus other loans and bonds invested in as part of an allocation to that segment of the market.

The following is the Company's below-investment-grade exposure.

Below-Investment-Grade Investments

September 30, 2024

March 31, 2025

(In millions) Par

2 unchanged sentences

Investcorp Capital Limited $ 231 $ 230 $ 209 $ (21)

Hella KG Hueck and Co.

147 147 139 (8)

Thames Water Utility 135 134 118 (16)

Telecom Italia SpA 134 134 175 41

KLM Royal Dutch Airlines 134 133 96 (37)

Thames Water Utility 140 140 112 (28)

IKB Deutsche Industriebank AG 87 47 78 31

2 unchanged sentences

CPI Property Group SA 20 20 19 (1)

Transalta Corporation 10 11 11 0

Other Issuers 24 26 23 (3)

15 unchanged sentences

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

September 30, 2024

(In millions) Amortized Cost (1)

Gross Unrealized Gains Gross Unrealized Losses Fair Value % of

March 31, 2025

(In millions) Amortized

Government and agencies $ 36,473 $ 515 $ (2,765) $ 34,223 43.2 %

27 unchanged sentences

Investment Securities by Type of Issuance

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

(In millions) Amortized

15 unchanged sentences

Reverse Dual-Currency Securities (1)

(Amortized cost, in millions) September 30,

(Amortized cost, in millions) March 31,

2025 December 31,

19 unchanged sentences

• Information about the notional amount and fair market value of the Company's derivatives.

• The unrealized and realized gains and losses impact on adjusted earnings of derivatives in cash flow, fair value, net investments in foreign operations, or non-qualifying hedging relationships.

• Impact on earnings and other comprehensive income (loss) from various qualifying and non-qualifying hedging relationships.

Foreign Currency Exchange Rate Risk Hedge Program

4 unchanged sentences

• Aflac Japan maintains certain unhedged U.S.

dollar-denominated securities, which serve as an economic currency hedge of a portion of the Company's investment in Aflac Japan (see Aflac Japan’s U.S.

dollar-denominated securities, which serve as an economic currency hedge of a portion of the Company's investment in Aflac Japan, while utilizing foreign currency options to mitigate against significant movements in the yen/U.S.

dollar exchange rate (see Aflac Japan’s U.S.

Dollar-Denominated Hedge Program below).

2 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 September 30.

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.

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

Three Months Nine Months

2024 2023 2024 2023

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

$0.0 $0.0 $0.0 $0.0

Amortized hedge income (cost) for period (in millions) $0 $2

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

$24.7 $24.4 $24.7 $24.4

Amortized hedge income (cost) for period (in millions) $(7) $(8)

1 unchanged sentence

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

$1.9 $2.4 $1.9 $2.4

Amortized hedge income (cost) for period (in millions) $30 $28

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

$0.0 $0.9 $0.0 $0.9

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

12 unchanged sentences

dollar-denominated investments held by Aflac Japan.

September 30,

2025 December 31,

17 unchanged sentences

dollar-denominated investments in Aflac Japan other than the investments in certain consolidated VIEs where the instrument is economically converted to yen as a result of a derivative in the consolidated VIE.

The Company uses one-sided foreign currency put options to mitigate the settlement risk on U.S.

The Company uses foreign currency forwards to hedge foreign exchange risk on certain U.S.

dollar-denominated investments in Aflac Japan's portfolio, and one-sided foreign currency put options to mitigate the settlement risk on U.S.

dollar-denominated assets related to extreme foreign currency rate changes.

1 unchanged sentence

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

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

As of March 31, 2025, none of the Company's foreign currency options hedging Aflac Japan's U.S.

dollar-denominated assets were in-the-money.

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

dollar-denominated portfolio was $648 million (excluding certain U.S.

dollar-denominated assets shown in the table above as a result of consolidation that have been economically converted to yen using derivatives).

Foreign exchange derivatives used for hedging are periodically settled, which results in cash receipt or payment at maturity or early termination.

1 unchanged sentence

dollar-denominated investments.

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

Three Months Ended March 31,

(In millions) 2025 2024

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 $6.5 billion as of September 30, 2024, with hedging instruments comprised of $4.6 billion of yen-denominated debt and $1.9 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's consolidated yen-denominated net asset position was partially hedged at $7.0 billion as of March 31, 2025, with hedging instruments comprised of $4.3 billion of yen-denominated debt and $2.7 billion of foreign currency forwards, compared with $5.9 billion as of December 31, 2024, with hedging instruments comprised of $4.1 billion of yen-denominated debt and $1.8 billion of foreign currency forwards .

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- and nine-month periods ended September 30, 2024 and 2023, respectively.

The Company's net investment hedge was effective during the three-month periods ended March 31, 2025 and 2024, respectively.

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

1 unchanged sentence

By buying U.S.

dollars and selling yen, the Parent Company is effectively lowering its overall economic exposure to the yen, while Aflac Japan's U.S.

dollar exposure remains reduced as a result of Aflac Japan's U.S.

Dollar Program that economically creates yen assets.

Among other objectives, this strategy is intended to offset the enterprise-wide amortized hedge costs by generating amortized hedge income.

selling yen, the Parent Company is effectively lowering its overall economic exposure to the yen.

In addition to reducing yen exposure from dividend payments by Aflac Japan to the Parent Company, this strategy also reduces enterprise-wide hedge costs.

This activity is reported in Corporate and other.

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dollars, and liabilities, which are mostly denominated in yen, in order to support and optimize Bermuda Monetary Authority (BMA) capital requirements.

For additional information on the Company's internal reinsurance platform, see Note 8 of the Notes to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A and Note 8 of the Notes to Consolidated Financial Statements in the 2023 Annual Report.

For additional information on the Company's internal reinsurance platform, see Note 8 of the Notes to the Consolidated Financial Statements and the Liquidity and Capital Resources section of this MD&A and Note 8 of the Notes to the Consolidated Financial Statements in the 2024 Annual Report.

Interest Rate Risk Hedge Program

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

(In millions) September 30,

(In millions) March 31,

2025 December 31, 2024 % Change

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Total $ 9,083 $ 8,758 3.7 %

(1) Aflac Japan’s deferred policy acquisition costs increased 1.7% in yen during the nine months ended September 30, 2024.

(1) Aflac Japan’s deferred policy acquisition costs increased .4% in yen during the three months ended March 31, 2025.

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

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The following table presents policy liabilities by segment.

(In millions) September 30,

(In millions) March 31,

2025 December 31, 2024 % Change

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Total $ 78,828 $ 77,508 1.7 %

(1) Aflac Japan’s policy liabilities decreased 4.6% in yen during the nine months ended September 30, 2024.

(1) Aflac Japan’s policy liabilities decreased 3.7% in yen during the three months ended March 31, 2025.

(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.

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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 nine-month periods ended September 30, 2024 and 2023.

Accordingly, Aflac Japan did not recognize an expense for LIPPC assessments for the three-month periods ended March 31, 2025 and March 31, 2024.

Guaranty Fund Assessments

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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- and nine-month periods ended September 30, 2024 and 2023 were immaterial.

Guaranty fund assessments for the three-month periods ended March 31, 2025 and 2024 were immaterial.

LIQUIDITY AND CAPITAL RESOURCES

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Capital refers to the long-term financial resources available to support the operations of the businesses, fund business growth and provide for an ability to withstand adverse circumstances.

Financial leverage (leverage) refers to an investment strategy of using debt to increase the potential ROE.

Financial leverage (leverage) refers to a strategy of utilizing debt in managing the Company's capital structure and cost of capital.

The Company targets and actively manages liquidity, capital and leverage in the context of a number of considerations, including:

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The Company remains committed to prudent liquidity and capital management.

At September 30, 2024, the Company held $5.6 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.

At March 31, 2025, the Company held $5.2 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.

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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 nine-month periods ended September 30.

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

Liquidity Provided by Subsidiaries to Parent Company

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Dividends declared or paid by subsidiaries 1,154 658

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

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

Aflac Japan Remittances

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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 September 30, 2024.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at March 31, 2025.

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

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

As of March 31, 2025, 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.

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 on the Company's securities lending and derivative activities.

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 2024 Annual Report for additional information on the Company's securities lending and derivative activities.

See Note 15 of the Notes to the Consolidated Financial Statements in the 2024 Annual Report for information on material unconditional purchase obligations that are not recorded on the Company's balance sheet.

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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 nine-month periods ended September 30.

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

(In millions) 2025 2024

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As a result, dispositions before maturity can vary significantly from year to year.

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

As of September 30, 2024, of the $400 million committed, approximately $283 million has been deployed.

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

As of March 31, 2025, of the $400 million committed, approximately $290 million has been deployed.

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

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As part of an arrangement with Federal Home Loan Bank of Atlanta (FHLB), Aflac U.S.

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

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

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

In the first three months of 2025, Aflac U.S.

borrowed and repaid $165 million under this program.

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

As of March 31, 2025, Aflac U.S.

had outstanding borrowings of $531 million reported in its balance sheet.

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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.

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.

Cash returned to shareholders through treasury stock purchases and dividends was $2.9 billion during the nine-month period ended September 30, 2024, compared with $2.8 billion during the nine-month period ended September 30, 2023.

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

Cash returned to shareholders through treasury stock purchases and dividends was $1.2 billion during the three-month period ended March 31, 2025, compared with $1.0 billion during the three-month period ended March 31, 2024.

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

Treasury Stock Purchased

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Number of shares issued 435 450

As of September 30, 2024, a remaining balance of 54.3 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 third quarter of 2024, compared with $.42 per share in the third quarter of 2023.

The following table presents the dividend activity for the nine-month periods ended September 30.

As of March 31, 2025, a remaining balance of 38.8 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 $.58 per share in the first quarter of 2025, compared with $.50 per share in the first quarter of 2024.

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

(In millions) 2025 2024

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Total dividends to shareholders $ 317 $ 288

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

The dividend is payable on December 2, 2024 to shareholders of record at the close of business on November 20, 2024.

In April 2025, the board of directors declared the second quarter cash dividend of $.58 per share, an increase of 16.0% compared with the same period in 2024.

The dividend is payable on June 2, 2025 to shareholders of record at the close of business on May 21, 2025.

Regulatory Restrictions

Aflac Japan is required to meet certain financial criteria as governed by Japanese corporate law in order to provide dividends to the Parent Company.

Under these criteria, dividend capacity at the Japan subsidiary is basically defined as total equity excluding common stock and capital reserves (representing statutorily required amounts in Japan) but reduced for net after-tax unrealized losses on available-for-sale securities.

Aflac Japan is required to meet certain financial criteria as governed by the Companies Act of Japan in order to provide dividends to the Parent Company.

Under these criteria, dividend capacity at Aflac Japan is defined as total equity excluding common stock and capital reserves (representing statutorily required amounts in Japan) but reduced for net after-tax unrealized losses on available-for-sale securities.

These dividend capacity requirements are generally aligned with the SMR.

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Additionally, subject to market conditions, the Company expects that it could take action to enter into derivatives on unhedged U.S.

dollar-denominated investments with foreign currency options or forwards or execute additional internal reinsurance transactions with Aflac Re.

dollar-denominated investments with foreign currency options or forwards or execute additional reinsurance transactions.

See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for additional information.

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See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements in the 2024 Annual Report for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively.

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

As of March 31, 2025, 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 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.

The initial report on the Economic Solvency Ratio (ESR) will be issued as of March 31, 2026, which is Aflac Japan's 2025 fiscal year-end.

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.

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

As of March 31, 2025, 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.

The maximum amount of dividends that can be paid to the Parent Company by Aflac, CAIC and TOIC without prior approval of Nebraska's director of insurance is the greater of the net income from operations, which excludes net investment gains, for the previous year determined under statutory accounting principles, or 10% of statutory capital and surplus as of the previous year-end.

Dividends declared by Aflac during 2024 in excess of $1.1 billion would be considered extraordinary and require such approval.

Dividends declared by Aflac during 2025 in excess of $912 million would be considered extraordinary and require such approval.

Similar laws apply in New York, the domiciliary jurisdiction of Aflac New York.

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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 September 30, 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 93% of the Company's assets and 77% of its liabilities are reported as of March 31, 2025, 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 nine-month period ended September 30, 2024.

There have been no changes in the items the Company has identified as critical accounting estimates during the three-month period ended March 31, 2025.

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

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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