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Aflac

AflacAFLEarnings & Financial Report

NYSE · Financials · Insurance - Life

Aflac Incorporated is an American insurance company and is the largest provider of supplemental insurance in the United States. It was founded in 1955 and is based in Columbus, Georgia. In the U.S., it underwrites a wide range of insurance policies, but is perhaps more known for its payroll deduction insurance coverage, which pays cash benefits when a policyholder has a covered accident or illness. The company states it "provides financial protection to more than 50 million people worldwide".

What changed in Aflac's 10-K — 2023 vs 2024

Top changes in Aflac's 2024 10-K

657 paragraphs added · 819 removed · 561 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

52 edited+5 added−87 removed43 unchanged
Market volatility and recessionary pressures could result in significant realized or unrealized losses due to severe price declines driven by increases in interest rates or credit spreads, defaults in payment of principal or interest, or credit rating downgrades. Japan is the largest market for the Company's insurance products, and the Company owns substantial holdings in Japan Government Bonds (JGBs).
Market volatility and recessionary pressures could result in significant realized or unrealized losses due to severe price declines driven by high interest rates or increases in credit spreads, defaults in payment of principal or interest, or credit rating downgrades. Japan is the largest market for the Company's insurance products, and the Company owns substantial holdings in Japan Government Bonds (JGBs).
Certain federal regulations applicable to Aflac U.S. are outlined below. • Patient Protection and Affordable Care Act The Patient Protection and Affordable Care Act and the Heath Care and Education Reconciliation Act of 2010 (collectively, the ACA), federal health care reform legislation, gave the U.S. federal government direct regulatory authority over the business of health insurance.
Certain federal regulations applicable to Aflac U.S. are outlined below. • Patient Protection and Affordable Care Act The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), federal health care reform legislation, gave the U.S. federal government direct regulatory authority over the business of health insurance.
Higher interest rates and softer economic conditions could impact the creditworthiness and value of the Company's existing investment portfolio, influence opportunities for new investments and have a negative impact on the Company's results of operations and financial positions.
Continuing higher interest rates and softer economic conditions could impact the creditworthiness and value of the Company's existing investment portfolio, influence opportunities for new investments and have a negative impact on the Company's results of operations and financial positions.
For additional information on the Company's other operations, see the Corporate and other subsection of Item 7. MD&A and Note 8 of the Notes to the Consolidated Financial Statements.
Business For additional information on the Company's other operations, see the Corporate and other subsection of Item 7. MD&A and Note 8 of the Notes to the Consolidated Financial Statements.
Health and Wellness, a training and service program works to enhance organizational health, encourage healthy lifestyles among all U.S. employees, provide diverse wellness programs to meet a wide range of personal health needs, recognize employees for participating in healthier lifestyles activities, and support a positive corporate culture that is focused on celebrating and improving the quality of life for all U.S. employees.
Health and Wellness, a training and service program works to enhance organizational health, encourage healthy lifestyles among all U.S. employees, provide a variety of wellness programs to meet a wide range of personal health needs, recognize employees for participating in healthier lifestyles activities, and support a positive corporate culture that is focused on celebrating and improving the quality of life for all U.S. employees.
These investments are experiencing and may continue to experience higher credit losses, credit rating downgrades and/or defaults and a deterioration in the value of collateral in the case of secured investments. The Company has examined in each case whether a reduction in size of the holding is appropriate.
These investments are experiencing and may continue to experience higher credit losses, credit rating downgrades and/or defaults and a deterioration in the value of collateral in the case of secured investments. The Company has examined in each case whether a reduction in size of the holdings is appropriate.
Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices.
Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices. 9 Item 1.
Aflac Japan seeks diverse talent through annual recruitment of new university graduates as well as mid-career recruitment of those with specialty skills or expertise. For its employees, Aflac Japan implements standard and unified training and development programs focusing on a range of business skills.
Aflac Japan seeks top-tier talent through annual recruitment of new university graduates as well as mid-career recruitment of those with specialty skills or expertise. For its employees, Aflac Japan implements standard and unified training and development programs focusing on a range of business skills.
High rates of inflation globally from 2022 were reduced due to monetary tightening in many countries and normalization of certain trends after COVID-19, including supply chain recovery and phasing out of extraordinary fiscal support.
High rates of inflation globally from 2022 continued to be reduced due to monetary tightening in many countries and normalization of certain trends after COVID-19, including supply chain recovery and phasing out of extraordinary fiscal support.
This can include changes in the global economy, the issuer's assets, strategy, or management, shifts in the dynamics of the industries in which the issuer competes, the issuer's access to additional funding, and the overall health of the credit markets.
This can include changes in the global economy, the issuer's assets, strategy, or management, shifts in the dynamics of the industries in which the issuer competes, the issuer's access to additional funding, government trade policies and the overall health of the credit markets.
AAMJ is licensed as a discretionary asset manager under the Japan Financial Instruments and Exchange Act and is subject to rules of the Japan Investment Advisors Association, a self- 9 Item 1. Business regulatory organization with mandatory membership for Japan investment managers. AAM is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940.
AAMJ is licensed as a discretionary asset manager under the Japan Financial Instruments and Exchange Act and is subject to rules of the Japan Investment Advisors Association, a self-regulatory organization with mandatory membership for Japan investment managers. AAM is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940.
The Company has evaluated its holdings and identified investments in areas such as commercial real estate and highly leveraged companies as the most exposed to rising interest rates and an economic downturn.
The Company has evaluated its holdings and identified investments in areas such as commercial real estate and highly leveraged companies as the most exposed to continued high interest rates and an economic downturn.
Simard Senior Vice President, Chief Financial Officer, Aflac U.S., since 2023; Consultant, Gerson Lehrman Group, a financial services company, in 2023; Chief Financial Officer, North American Life and Health Division, General Electric Company, an industrial and financial services company, in 2022; Chief Financial Officer and Chief Actuary, Employee Benefits, The Guardian Life Insurance Company of America, a life insurance company, from 2018 until 2022 55 Audrey B.
Simard Executive Vice President, Aflac U.S., since 2025; Chief Operating Officer, Aflac U.S., since 2025; Chief Financial Officer, Aflac U.S., since 2023; Senior Vice President, Aflac U.S., from 2023 until 2025; Consultant, Gerson Lehrman Group, a financial services company, in 2023; Chief Financial Officer, North American Life and Health Division, General Electric Company, an industrial and financial services company, in 2022; Chief Financial Officer and Chief Actuary, Employee Benefits, The Guardian Life Insurance Company of America, a life insurance company, from 2018 until 2022 56 Audrey B.
In Nebraska, control is generally 7 Item 1. Business presumed to exist if any person, directly or indirectly, acquires 10% or more of an insurance company or of any other person or entity controlling the insurance company. The 10% presumption is not conclusive and control may be found to exist at less than 10%.
In Nebraska, control is generally presumed to exist if any person, directly or indirectly, acquires 10% or more of an insurance company or of any other person or entity controlling the insurance company. The 10% presumption is not conclusive and control may be found to exist at less than 10%.
The Company has identified assets impacted or expected to be impacted by rising interest rates and economic contraction, other investments not identified to date may also be impacted. The availability of new investments in certain private market asset classes has been and may continue to be limited.
The Company has identified assets impacted or expected to be impacted by continued high interest rates and economic contraction, but other investments not identified to date may also be impacted. The availability of new investments in certain private market asset classes has been and may continue to be limited.
Health and Wellness In 2023, Aflac Japan was certified, for the sixth consecutive year, as one of the top 500 Leading Companies in Health and Productivity Management under the Certified Health & Productivity Management Outstanding Organizations Recognition Program with Japan's Ministry of Economy, Trade and Industry.
Health and Wellness In 2024, Aflac Japan was certified, for the seventh consecutive year, as one of the top 500 Leading Companies in Health and Productivity Management under the Certified Health & Productivity Management Outstanding Organizations Recognition Program with Japan's Ministry of Economy, Trade and Industry.
AAM and AAMJ are reported in Corporate and other; however, the assets that they manage are reported in the respective Aflac Japan and Aflac U.S. segments. In 2022, the Company established Aflac Re, a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ.
AAM and AAMJ are reported in Corporate and other; however, the assets that they manage are reported in the respective Aflac Japan and Aflac U.S. segments. Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ.
Aflac Japan's current certification was in recognition of regular monitoring of key health indicators by members of Aflac Japan's management, strategic implementation of health management initiatives and disclosure of information, and efforts to promote and maintain employee health. Aflac U.S.
Aflac Japan's current certification was in recognition of regular monitoring of key health indicators by members of Aflac Japan's management, strategic implementation of health management initiatives and disclosure of information, and efforts to promote and maintain employee health. 10 Item 1. Business Aflac U.S.
HUMAN CAPITAL The Company’s overarching human capital philosophy is, “If you take care of your employees, your employees will take care of the business.” The Company's compensation and benefit expense totaled approximately $1.9 billion in both 2023 and 2022. The Company believes its employee relations are generally satisfactory.
HUMAN CAPITAL The Company’s overarching human capital philosophy is, “If you take care of your employees, your employees will take care of the business.” The Company's compensation and benefit expense totaled approximately $2.0 billion in 2024 and $1.9 billion in 2023. The Company believes its employee relations are generally satisfactory.
Dyslin Executive Vice President, Global Chief Investment Officer, Aflac, since 2023; President, Aflac Asset Management LLC, since 2023; Deputy Global Chief Investment Officer, Aflac, from 2021 until 2023; Senior Managing Director, Global Head of Credit and Strategic Investment Opportunities, Aflac, from 2017 until 2021 58 Masatoshi Koide President and Representative Director, Aflac Japan, since 2018 63 Charles D.
Dyslin Executive Vice President, Global Chief Investment Officer, Aflac, since 2023; President, Aflac Asset Management LLC, since 2023; Deputy Global Chief Investment Officer, Aflac, from 2021 until 2023; Senior Managing Director, Global Head of Credit and Strategic Investment Opportunities, Aflac, from 2017 until 2021 59 Masatoshi Koide President and Representative Director, Aflac Japan, since 2018 (2) 64 Charles D.
The increase in the difference between U.S. dollar and yen interest rates also contributes to increasing costs of hedging currency risk of U.S. dollar-denominated investments held by Aflac Japan. The Company is not able to predict the ultimate impact of inflation, interest rate increases, interest rate differences and other changing market conditions on the Company’s investments and hedging programs.
The continuing difference between U.S. dollar and yen interest rates also contributes to costs of hedging currency risk of U.S. dollar-denominated investments held by Aflac Japan. The Company is not able to predict the ultimate impact of inflation, interest rate changes, interest rate differences and other changing market conditions on the Company’s investments and hedging programs.
Aflac Japan has certain regulatory accounting requirements for realizing impairments that could be triggered by credit-related losses, which may be different from U.S. GAAP and statutory requirements. These impairment losses could negatively impact Aflac Japan's earnings, and the corresponding dividends and capital deployment.
Aflac Japan has certain regulatory accounting requirements for realizing impairments that could be triggered by credit-related losses, which may be different from U.S. GAAP and statutory requirements. These impairment losses could negatively impact Aflac Japan's earnings, and the 14
As consumers have grown more concerned about the protection of their data, as well as how their data is used by an organization, many jurisdictions within and outside of the U.S. have created legislation and issued regulations that apply or may in the future apply to aspects of Aflac U.S. operations and allow consumers the right to access, correct, delete and the right to opt out of sales or use of their data.
As consumers have grown more concerned about the protection of their data, as well as how their data is used by organizations, jurisdictions within and outside of the U.S. have created legislation and issued regulations that apply or may in the future apply to aspects of Aflac U.S. operations and allow consumers the right to access, correct, delete, or opt out of the sale, share, or use of their data.
Tillman Executive Vice President, General Counsel, Aflac Incorporated and Aflac, since 2014 59 (1) Unless specifically noted, the respective executive officer has held the occupation(s) set forth in the table for at least the last five years.
Tillman Senior Executive Vice President, Aflac Incorporated and Aflac, since 2025; General Counsel, Aflac Incorporated and Aflac, since 2014; Executive Vice President, Aflac Incorporated and Aflac, from 2014 until 2025 60 (1) Unless specifically noted, the respective executive officer has held the occupation(s) set forth in the table for at least the last five years.
Brodén Executive Vice President, Chief Financial Officer, Aflac Incorporated, since 2020; Executive Vice President, Aflac, since 2020; Treasurer, Aflac, since 2017; Treasurer, Aflac Incorporated from 2017 until 2021; Senior Vice President, Aflac Incorporated and Aflac, from 2017 until 2020 45 Bradley E.
Brodén Senior Executive Vice President, Aflac Incorporated and Aflac, since 2025; Chief Financial Officer, Aflac Incorporated, since 2020; Executive Vice President, Aflac Incorporated and Aflac, from 2020 until 2025; Treasurer, Aflac, from 2017 until 2024; Treasurer, Aflac Incorporated from 2017 until 2021; Senior Vice President, Aflac Incorporated and Aflac, from 2017 until 2020 46 Bradley E.
Lake II President, Aflac International, since 2014; Chairman and Representative Director, Aflac Japan, since 2018 62 Virgil R.
Lake II President, Aflac International, since 2014; Chairman and Representative Director, Aflac Japan, since 2018 (2) 63 Virgil R.
Human Resources divisions operate as centralized internal compensation functions to provide oversight and input to the respective management teams with the objective of providing compensation that is 10 Item 1. Business consistent with job scope, duties and responsibilities. The compensation function evaluates new-hire job offers, promotions and compensation adjustments with the goal of consistent and equitable compensation.
Compensation The Aflac Japan and Aflac U.S. Human Resources divisions operate as centralized internal compensation functions to provide oversight and input to the respective management teams with the objective of providing compensation that is consistent with job scope, duties and responsibilities. The compensation function evaluates new-hire job offers, promotions and compensation adjustments with the goal of consistent and equitable compensation.
Over the last several years, processes have developed to support the data subject request process required by CCPA, privacy impact assessments have been implemented as required by CPRA and a dedicated privacy and security center has been added to the Company website to provide consumers with information about the use of and protection of their data. • Tri-Agency Proposed Rule In July 2023, the U.S.
Over the last several years, processes have developed to support the data subject request process required by CCPA, privacy impact assessments have been implemented as required by CPRA and a dedicated privacy and security center has been added to the Company website to provide consumers with information about the use of and protection of their data.
Segment subsection of Item 7. MD&A and Notes 2 and 13 of the Notes to the Consolidated Financial Statements. CORPORATE AND OTHER The Company's other operations include the Parent Company, Aflac Global Ventures LLC and its subsidiaries, asset management subsidiaries, results of reinsurance activities including Aflac Re Bermuda Ltd. (Aflac Re), and a printing subsidiary.
For further information concerning Aflac U.S. operations, see the Aflac U.S. Segment subsection of Item 7. MD&A and Notes 2 and 13 of the Notes to the Consolidated Financial Statements. CORPORATE AND OTHER The Company's other operations include the Parent Company, Aflac Global Ventures LLC and its subsidiaries, asset management subsidiaries, results of reinsurance activities including Aflac Re Bermuda Ltd.
Women also occupied 51% of leadership roles located in the U.S. and 37% of senior management roles. In 2023, 57% of new hires located in the U.S. were people of color and 68% were women. • Established in 2009, Aflac Heartful Services Co., Ltd. (Aflac Heartful Services), a subsidiary of Aflac Japan, promotes the hiring of employees with disabilities.
Women also occupied 52% of leadership roles located in the U.S. and 36% of senior management roles. In 2024, 60% of new hires located in the U.S. were people of color and 69% were women. • Established in 2009, Aflac Heartful Services Co., Ltd. (Aflac Heartful Services), a subsidiary of Aflac Japan, promotes the hiring of employees with disabilities.
Amos Chairman, Aflac Incorporated and Aflac, since 2001; Chief Executive Officer, Aflac Incorporated and Aflac, since 1990; President, Aflac Incorporated, since 2024 and from 2018 until 2020 72 Steven K.
Amos Chairman, Aflac Incorporated and Aflac, since 2001; Chief Executive Officer, Aflac Incorporated and Aflac, since 1990; President, Aflac Incorporated, from 2024 until 2025 73 Steven K.
Beaver Executive Vice President, Chief Financial Officer, Aflac Japan, since 2024; First Senior Vice President, Deputy Chief Financial Officer, Aflac Japan, from 2023 until 2024; Senior Vice President, Chief Financial Officer, Aflac U.S., from 2019 until 2023; Senior Vice President, Financial Planning and Analysis, Aflac Incorporated, from 2018 until 2019 59 Robin L.
Beaver Executive Vice President, Chief Financial Officer, Aflac Japan, since 2024; First Senior Vice President, Deputy Chief Financial Officer, Aflac Japan, from 2023 until 2024; Senior Vice President, Chief Financial Officer, Aflac U.S., from 2019 until 2023 60 Robin L.
The following table details the number of full-time employees as of December 31. 2023 Aflac Japan 6,859 Aflac U.S. 4,968 Corporate and other 958 Total 12,785 Talent The Company uses internal and external resources to attract, retain and develop talent across a variety of backgrounds and demographics.
The following table details the number of full-time employees as of December 31. 2024 Aflac Japan 6,737 Aflac U.S. 5,041 Corporate and other 916 Total 12,694 Talent The Company uses internal and external resources to attract, retain and develop talent across a variety of backgrounds and demographics.
Blackmon Chief Accounting Officer, Aflac Incorporated, since 2024; Senior Vice President, Financial Services, Aflac Incorporated, since 2024; Vice President, Deputy Chief Accounting Officer, Aflac Incorporated, from 2023 until 2024; Vice President, Corporate Financial Planning and Analysis, Aflac Incorporated, from 2019 until 2023; Director, Corporate Financial Planning and Analysis, Aflac Incorporated, in 2019; Director, Corporate HR and Executive Compensation, Aflac Incorporated, from 2018 until 2019 60 Max K.
Blackmon Chief Accounting Officer, Aflac Incorporated, since 2024; Senior Vice President, Financial Services, Aflac Incorporated, since 2024; Vice President, Deputy Chief Accounting Officer, Aflac Incorporated, from 2023 until 2024; Vice President, Corporate Financial Planning and Analysis, Aflac Incorporated, from 2019 until 2023 61 Max K.
Miller President, Aflac U.S., since 2023; Deputy President, Aflac U.S., from 2022 until 2023; Executive Vice President, President of Group and Individual Benefits Division, Aflac U.S., from 2021 until 2022; Executive Vice President, Chief Operating Officer, Aflac U.S., from 2018 until 2021 55 Albert A.
Miller President, Aflac Incorporated, since 2025; President, Aflac U.S., since 2023; Deputy President, Aflac U.S., from 2022 until 2023; Executive Vice President, President of Group and Individual Benefits Division, Aflac U.S., from 2021 until 2022; Executive Vice President, Chief Operating Officer, Aflac U.S., from 2018 until 2021 56 Frederic J.
The Company has a cross-functional team that tracks and monitors new and emerging legislation and regulations to ensure privacy and cybersecurity programs are evaluated and comply with regulatory requirements. This includes a robust third-party risk management and assessment program.
Additionally, certain states are adopting the NAIC Model Bulletin on the Use of Artificial Intelligence Systems by Insurers. The Company has a cross-functional team that tracks and monitors new and emerging legislation and regulations to ensure privacy and cybersecurity programs are evaluated and comply with regulatory requirements. This includes a robust third-party risk management and assessment program.
Aflac U.S. also offers a variety of internships, co-operative opportunities and transitional programs to allow emerging talent to develop. Educational opportunities are available for self-development and growth to help employees further enhance their technical and professional skills. Compensation The Aflac Japan and Aflac U.S.
Aflac U.S. recruiting efforts include partnerships with colleges and universities and civic organizations to attract top-tier talent. Aflac U.S. also offers a variety of internships, co-operative opportunities and transitional programs to allow emerging talent to develop. Educational opportunities are available for self-development and growth to help employees further enhance their technical and professional skills.
Aflac Heartful Services has established a barrier-free work environment and provides, among other things, specialized training, specially-trained supervisors and development opportunities to support those with disabilities. Of Aflac Heartful Services’ 152 employees as of December 31, 2023, 120 have a disability.
Aflac Heartful Services has established a barrier-free work environment and provides, among other things, specialized training, specially-trained supervisors and development opportunities to support those with disabilities. Of Aflac Heartful Services’ 153 employees as of December 31, 2024, 119 have a disability. Aflac Heartful Services supports these employees with the assistance of advisors for long-term career support.
Each executive officer is appointed annually by the board of directors and serves until his or her successor is chosen and qualified, or until his or her death, resignation or removal. 12 Item 1A. Risk Factors ITEM 1A.
Each executive officer is appointed annually by the board of directors and serves until his or her successor is chosen and qualified, or until his or her death, resignation or removal. (2) In April 2018, Aflac Japan was converted to a Japan subsidiary from a branch of Aflac. 12 Item 1A. Risk Factors ITEM 1A.
For example, the National Institute of Standards and Technology (NIST) issued guidelines on managing risks associated with the use of artificial intelligence, the NAIC adopted a Model Bulletin on the Use of Artificial Intelligence Systems by Insurers and the Cybersecurity & Infrastructure Security Agency (CISA) published additional security guidelines related to ransomware.
For example, the National Institute of Standards and Technology (NIST) issued an updated version of the Cybersecurity Framework as well as guidelines on managing risks associated with the use of artificial intelligence and the Cybersecurity & Infrastructure Security Agency (CISA) published additional security guidelines related to ransomware and software security.
In addition, the increase in the difference between interest rates in the U.S. and Japan contributed to a weakening of the yen over 2023, which had the effect of suppressing the Company's current period results in relation to the comparable prior period.
The Company may need to adjust its investment strategy and/or be forced to liquidate investments to pay claims. In addition, the continuing difference between interest rates in the U.S. and Japan contributed to a weakening of the yen over 2024, which had the effect of suppressing the Company's current period results in relation to the comparable prior period.
Examples of these types of legislation include the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA), the UK General Data Protection Regulation (UK GDPR), the UK Data Protection Act of 2018 (UK DPA) and most recently, effective in 2023, the Connecticut Data Privacy Act (CDPA), the Utah Consumer Privacy Act (UCPA), the Virginia Consumer Data Protection Act (VCDPA) and the Colorado Privacy Act (CPA).
Although not all apply to Aflac U.S. operations, examples of these types of legislation include the California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA), UK General Data Protection Regulation (UK GDPR), UK Data Protection Act of 2018 (UK DPA), Connecticut Data Privacy Act (CDPA), Utah Consumer Privacy Act (UCPA), Virginia Consumer Data Protection Act (VCDPA), Colorado Privacy Act (CPA), Oregon Consumer Privacy Act (OCPA), Montana Consumer Data Privacy Act (MCDPA) and Nebraska Data Privacy Act (NDPA).
A person seeking to acquire control, directly or indirectly, of a domestic insurance company or of any person controlling a domestic insurance company (in the case of Aflac, CAIC and TOIC, the Parent Company) must generally file with the NDOI an application for change of control containing certain information required by statute and published regulations and provide a copy to the Company.
Item 1. Business Parent Company) must generally file with the NDOI an application for change of control containing certain information required by statute and published regulations and provide a copy to the Company.
The additional government debt from fiscal stimulus actions could adversely impact the Japan sovereign credit profile, which could in turn lead to volatility in Japanese capital and currency markets. Should investors become concerned with any of the Company's investment holdings, including the concentration in JGBs, its access to market sources of funding could be negatively impacted.
The additional government debt from fiscal stimulus actions could adversely impact the Japan sovereign credit profile, which could in turn lead to volatility in Japanese capital and currency markets.
Examinations are generally carried out in cooperation with the insurance departments of other states under guidelines promulgated by the National Association of Insurance Commissioners (NAIC). In 2024, the NDOI and the New York State Department of Financial Services (NYSDFS) will commence full-scope, risk-focused financial examinations on their respective state domiciled insurance entities.
Examinations are generally carried out in cooperation with the insurance departments of other states under guidelines promulgated by the National Association of Insurance Commissioners (NAIC).
Each year, Aflac Japan conducts a human capital engagement survey in which all employees answer questions about the company and their organization to measure engagement across the company and detect organizational issues. The results of the survey are reported to Aflac Japan's Human Capital Management Committee to identify issues, formulate enhancement/improvement measures and implement them.
The results of the survey are reported to Aflac Japan's Human Capital Management Policy Committee to identify issues, formulate enhancement/improvement measures and implement them.
The examinations will cover the reporting period January 1, 2020 – December 31, 2023. In 2023, the NYSDFS commenced a routine market conduct examination on Aflac New York covering the five-year period ended on December 31, 2022 that is currently ongoing.
Additionally, in 2023, the NYSDFS commenced a routine market conduct examination on Aflac New York covering the five-year period ended on December 31, 2022 that is currently ongoing. NAIC Risk-Based Capital The NAIC continually reviews regulatory matters, such as risk-based capital (RBC) modernization, group capital calculations and liquidity risk assessment.
For example, Aflac Japan’s Leadership Program allows select managers to participate in a comprehensive training program to learn about innovation and the global business environment. Aflac Japan implemented a human capital management system, beginning in January 2021 with managers and more senior leadership positions and in January 2022 with all other employees.
For example, Aflac Japan’s Leadership Program allows select managers to participate in a comprehensive training program to learn about innovation and the global business environment. In 2024, Aflac Japan launched Aflac Leadership Academy, a corporate learning initiative specializing in the development of Aflac Japan's next-generation management.
Under the system, employees have access to descriptions and necessary skills for all job positions across the Company and are able to more proactively design their careers. Aflac U.S. recruiting efforts include partnerships with colleges and universities, including historically black colleges and universities, and civic organizations to attract diverse talent.
Aflac Japan implemented a human capital management system, beginning in January 2021 with managers and more senior leadership positions and in January 2022 with all other employees. Under the system, employees have access to descriptions and necessary skills for all job positions across the Company and are able to more proactively design their careers.
Diversity, Equity & Inclusion The Company’s corporate culture reflects its commitment to diversity, equity and inclusion at all levels of the Company. For example: • As of December 31, 2023, women account for 54% of Aflac Japan employees and 33% of those in leadership roles. Women also held 20% of senior management roles.
Workforce Demographics • As of December 31, 2024, women account for 55% of Aflac Japan employees and 34% of those in leadership roles. Women also held 19% of senior management roles. • As of December 31, 2024, 48% of Aflac U.S. and the Parent Company employees located in the U.S. were people of color and 66% were women.
The councils are designed to create avenues in which employees can communicate and appreciate one another’s cultural differences. • Women and/or people of color comprise approximately 64% of the Parent Company’s board of directors. Employee Engagement and Culture The Company strives to have an engaged employee culture by developing programs including career development support and programs emphasizing work life balance.
Employee Engagement and Culture The Company strives to have an engaged employee culture by developing programs including career development support and programs emphasizing work life balance. Each year, Aflac Japan conducts an employee engagement survey in which all employees answer questions about the company and their organization to measure engagement across the company and detect organizational issues.
Although economies have proved resilient in the face of interest rate increases, tighter financial conditions for a prolonged period may result in continued weakening of economic conditions. Japan remains an exception to the major central bank tightening trend. Armed conflicts in Ukraine and the Middle East, as well as political polarization in the U.S., exacerbate uncertainty.
The Bank of Japan remains an exception to the major central bank loosening trends, ending a prolonged period of negative interest rates on bank reserves in March 2024. Continuing armed conflicts in Ukraine and the Middle East exacerbate uncertainty and have contributed to volatility in energy and other commodity prices.
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Business PART I FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a safe harbor to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements.
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In 2024, the NDOI and the New York State Department of Financial Services (NYSDFS) commenced full-scope, risk-focused financial examinations on their respective state domiciled insurance entities covering the reporting period January 1, 2020 – December 31, 2023 that are currently ongoing.
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Aflac Incorporated and its subsidiaries (the Company) desire to take advantage of these provisions.
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In the U.S. and other regions, inflation rates reduced to a level that supported monetary loosening by central banks, but the risk of a return to increasing inflation remains alongside risks of weakening economic conditions.
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This report contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by Company officials in communications with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC).
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Economic uncertainty is also driven by potential policy changes from a new presidential administration in the U.S. including proposals to impose trade tariffs and the potential for retaliatory tariffs from other countries, as well as increasing trade restrictions driven by security concerns.
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Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as the ones listed below or similar words, as well as specific projections of future results, generally qualify as forward-looking.
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The Bank of Japan ended its policy of negative interest rates in March 2024, and uncertainty about future Japan interest rate changes and the impact of increased rates on the Japanese economy could also contribute to volatility in Japanese markets.
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The Company undertakes no obligation to update such forward-looking statements. • expect • anticipate • believe • goal • objective • may • should • estimate • intends • projects • will • assumes • potential • target • outlook The Company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements: • difficult conditions in global capital markets and the economy, including inflation • defaults and credit downgrades of investments • global fluctuations in interest rates and exposure to significant interest rate risk • concentration of business in Japan • limited availability of acceptable yen-denominated investments • foreign currency fluctuations in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in the Company's financial strength or debt ratings • decline in creditworthiness of other financial institutions • the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners • deviations in actual experience from pricing and reserving assumptions • ability to continue to develop and implement improvements in information technology systems and on successful execution of revenue growth and expense management initiatives • interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality, integrity or privacy of sensitive data residing on such systems • subsidiaries' ability to pay dividends to the Parent Company • inherent limitations to risk management policies and procedures • operational risks of third-party vendors • tax rates applicable to the Company may change • failure to comply with restrictions on policyholder privacy and information security • extensive regulation and changes in law or regulation by governmental authorities • competitive environment and ability to anticipate and respond to market trends • catastrophic events, including, but not limited to, as a result of climate change, epidemics, pandemics, tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, major public health issues, terrorism or other acts of violence, and damage incidental to such events • ability to protect the Aflac brand and the Company's reputation • ability to effectively manage key executive succession • changes in accounting standards • level and outcome of litigation or regulatory inquiries • allegations or determinations of worker misclassification in the United States 1 Item 1.
Added
Should investors become concerned with any of the Company's investment holdings, including the concentration in JGBs, its access to market sources of funding could be negatively impacted.
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Business ITEM 1. BUSINESS OVERVIEW Aflac Incorporated (the Parent Company) was incorporated in 1973 under the laws of the state of Georgia. The Parent Company and its subsidiaries (collectively, the Company) provide financial protection to millions of policyholders and customers in Japan and the United States (U.S.).
Removed
The Company’s principal business is supplemental health and life insurance products with the goal to provide customers the best value in supplemental insurance products in Japan and the U.S. When a policyholder or insured gets sick or hurt, the Company pays cash benefits fairly and promptly for eligible claims.
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Throughout its 68-year history, the Company’s supplemental insurance policies have given policyholders the opportunity to focus on recovery, not financial stress. The Company has continued to develop and expand its product offerings over time. In Japan, the Company is cultivating an innovation-driven culture to meet the rapidly changing customer and societal needs.
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In the U.S., the Company continues to make broad-based investments in digital enhancements and innovation within the U.S. platform. In recent years, the Company invested in distribution opportunities through acquisitions and partnerships and pivoted to digital sales methods. For information on the reporting segments see the Result of Operations by Segment section of Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). The Company is authorized to conduct insurance business in all 50 states, the District of Columbia, several U.S. territories, and Japan. The Company’s website is: www.aflac.com. Information included on the Company’s website is not incorporated by reference into this filing.
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The Company makes available free of charge through its website, its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after they have been electronically filed with or furnished to the Securities and Exchange Commission (SEC).
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REVENUE-GENERATING ACTIVITIES The Company's strategy for growth in the U.S. and Japan has remained straightforward and consistent for many years. The Company develops relevant supplemental health insurance products offering financial protection from the rising out-of-pocket expenses associated with medical events that are not covered by the insureds' primary coverage.
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The Company also offers a complement of other voluntary health and life insurance products to fit the needs of its customers. Additionally, the Company aims to obtain more customers by selling where the customer prefers to purchase protection, whether through an agent or broker, a distribution partner or directly from the Company.
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To help promote its insurance products, the Company’s marketing campaigns feature the Aflac Duck. LONG-TERM GROWTH STRATEGY 2 Item 1. Business In 1999, the Company had been running commercials for nearly a decade, but its brand awareness was hovering at about 10%. An innovative marketing campaign with something unique and memorable that would build brand awareness was needed.
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The Aflac Duck’s first commercial in the U.S., “Park Bench,” aired on January 1, 2000 and taught consumers how to pronounce “Aflac.” The Aflac Duck made his international debut in Japan in 2003.
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In the time since his U.S. debut, the Aflac Duck has become one of the most familiar advertising icons in the world, appearing in many commercials and countless print ads in both the U.S. and Japan. Today, the Aflac Duck is a helpmate who increases brand knowledge and connection.
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The Company's insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. The primary insurance subsidiary in the Aflac Japan segment is Aflac Life Insurance Japan Ltd. (ALIJ).
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Aflac U.S. includes the insurance subsidiaries American Family Life Assurance Company of Columbus (Aflac); Continental American Insurance Company (CAIC), branded as Aflac Group Insurance (AGI); American Family Life Assurance Company of New York (Aflac New York); Tier One Insurance Company (TOIC); and Aflac Benefits Solutions (ABS), which provides a platform for Aflac Dental and Vision in the U.S.
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For information on the Company's results of operations and financial information by segment, see Item 7. MD&A and Note 2 of the Notes to the Consolidated Financial Statements.
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AFLAC JAPAN Aflac Japan is the principal contributor to the Parent Company's consolidated earnings and the largest insurer in Japan in terms of cancer and medical (third sector insurance products) policies in force. For information on Aflac Japan's operating results, see the Aflac Japan Segment section of Item 7. MD&A.
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Insurance Products Aflac Japan's third sector insurance products are supplemental products designed to help consumers pay for medical and nonmedical costs that are not reimbursed under Japan's national health insurance system. Changes in Japan's economy and an aging population have put increasing pressure on Japan's national health care system.
Removed
As a result, more costs have been shifted to Japanese consumers, who in turn have become increasingly interested in insurance products that help them manage those costs. Aflac Japan has responded to this consumer need by enhancing existing products and developing new products.
Removed
The focus at Aflac Japan remains on maintaining leadership in third sector insurance products that are less interest rate sensitive and have strong and stable margins. At the same time, Aflac Japan complements this core business with similarly profitable first sector protection products as outlined below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+5 added−6 removed170 unchanged
Risk Factors Operational-Related Risk Factors Sales of the Company's products and services are dependent on its ability to attract, retain and support a network of qualified sales associates, brokers and employees in the U.S. and sales associates and other distribution partners in Japan.
Operational-Related Risk Factors Sales of the Company's products and services are dependent on its ability to attract, retain and support a network of qualified sales associates, brokers and employees in the U.S. and sales associates and other distribution partners in Japan.
Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may materially increase the Company's direct and indirect compliance and other expenses of doing business, thus having a material adverse effect on the Company's financial condition and results of operations. For additional information, see the Government Regulation subsections of Item 1. Business.
Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may materially increase the Company's direct and indirect compliance and other expenses of doing business, thus having a material adverse effect on the Company's financial condition and results of operations. For additional information, see the Government Regulation subsections of Item 1.
In addition, under Japanese laws and regulations, including the APPI, if a leak or loss of personal information by Aflac Japan or its business associates should occur, depending on factors such as the volume of personal data involved and the likelihood of other secondary damage, Aflac Japan may be required to file reports to the FSA; issue public releases explaining such incident to the public; or become subject to an FSA business improvement order, which could pose a risk to the Company's reputation.
Under Japanese laws and regulations, including the APPI, if a leak or loss of personal information by Aflac Japan or its business associates should occur, depending on factors such as the volume of personal data involved and the likelihood of other secondary damage, Aflac Japan may be required to file reports to the FSA; issue public releases explaining such incident to the public; or become subject to an FSA business improvement order, which could pose a risk to the Company's reputation.
For example, at December 31, 2023, the Company had agreements with 360 banks to market Aflac's products in Japan. Sales through these banks represented 3.3% of Aflac Japan's new annualized premium sales in 2023. Any material adverse effect on these or other financial institutions could also have an adverse effect on the Company's sales.
For example, at December 31, 2024, the Company had agreements with 360 banks to market Aflac's products in Japan. Sales through these banks represented 3% of Aflac Japan's new annualized premium sales in 2024. Any material adverse effect on these or other financial institutions could also have an adverse effect on the Company's sales.
At the same time, the unhedged U.S. dollar-denominated investment portfolio creates an unmatched foreign currency exposure and subjects Aflac Japan to volatility in regulatory capital, including SMR, and earnings, which may adversely impact Aflac Japan’s ability to pay dividends to the Parent Company.
At the same time, the unhedged U.S. dollar-denominated investment portfolio creates an unmatched foreign currency exposure and subjects Aflac Japan to volatility in regulatory capital and earnings, which may adversely impact Aflac Japan’s ability to pay dividends to the Parent Company.
Negative events or developments affecting any one of these counterparties could have an adverse effect on the Company's financial position or results of operations. All of these risks related to exposure to other financial institutions could adversely impact the Company's consolidated results of operations and financial condition. 19 Item 1A.
Negative events or developments affecting any one of these counterparties could have an adverse effect on the Company's financial position or results of operations. 19 Item 1A. Risk Factors All of these risks related to exposure to other financial institutions could adversely impact the Company's consolidated results of operations and financial condition.
The loss of the services of one or more of the Company's senior executives could significantly undermine its management expertise, and the Company's business could be adversely affected. Changes in accounting standards issued by the Financial Accounting Standard Boards (FASB) or other standard-setting bodies may adversely affect the Company's financial statements.
The loss of the services of one or more of the Company's senior executives could significantly undermine its management expertise, and the Company's business could be adversely affected. Changes in accounting standards issued by the Financial Accounting Standards Board (FASB) or other standard-setting bodies may adversely affect the Company's financial statements.
Risk Factors If the Company's subsidiaries fail to meet the minimum capital or operational requirements established by its respective regulators, they could be subject to examination or corrective action, or the Company's financial strength ratings could be downgraded, or both.
If the Company's subsidiaries fail to meet the minimum capital or operational requirements established by its respective regulators, they could be subject to examination or corrective action, or the Company's financial strength ratings could be downgraded, or both.
These catastrophic events may cause changes to estimates of future earnings, capital deployment and other guidance the Company has provided to the markets in the 2024 Outlook section of Item 7. MD&A.
These catastrophic events may cause changes to estimates of future earnings, capital deployment and other guidance the Company has provided to the markets in the 2025 Outlook section of Item 7. MD&A.
The Company's insurance subsidiaries are subject to complex laws and regulations that are administered and enforced by a number of governmental authorities, that exercise a degree of interpretive latitude, including the FSA and Ministry of Finance (MOF) in Japan, state insurance regulators, the BMA in Bermuda, the SEC, the NAIC, the FIO, the U.S.
The Company and its insurance subsidiaries are subject to complex laws and regulations that are administered and enforced by a number of governmental authorities, that exercise a degree of interpretive latitude, including the FSA and Ministry of Finance (MOF) in Japan, state insurance regulators, the BMA in Bermuda, the SEC, the NAIC, the FIO, the U.S.
Further, unhedged U.S. dollar-denominated securities held by Aflac Japan are exposed to foreign exchange fluctuations, which also impact SMR. As a result, periods of unusually volatile currency exchange rates could result in limitations on dividends available to the Parent Company.
Further, unhedged U.S. dollar-denominated securities held by Aflac Japan are exposed to foreign exchange fluctuations, which also impact Aflac Japan regulatory capital. As a result, periods of unusually volatile currency exchange rates could result in limitations on dividends available to the Parent Company.
Risk Factors Any decrease in the Company's financial strength or debt ratings may have an adverse effect on its competitive position and access to liquidity and capital.
Any decrease in the Company's financial strength or debt ratings may have an adverse effect on its competitive position and access to liquidity and capital.
Rising interest rates also negatively impact capital ratios in certain jurisdictions because unrealized losses on the available-for-sale investment portfolio factor into the ratio. In addition to the unrealized losses negatively impacting capital ratios, significant unrealized losses could impact the amount of dividends that could be paid under local regulations, including in Japan.
Rising interest rates also negatively impact capital ratios in certain jurisdictions because unrealized losses on the available-for-sale investment portfolio factor into the ratio. In addition to the unrealized losses negatively impacting capital ratios, significant unrealized losses could impact the amount of dividends 15 Item 1A. Risk Factors that could be paid under local regulations, including in Japan.
This may necessitate changes to the Company's practices that may, in some cases, limit its ability to grow or otherwise negatively impact the profitability of the Company's business. 24 Item 1A.
This may necessitate changes to the Company's practices that may, in some cases, limit its ability to grow or otherwise negatively impact the profitability of the Company's business.
In addition, the weakening of the yen relative to the U.S. dollar will generally adversely affect the value of the Company's yen-denominated investments in U.S. dollar terms. When the yen strengthens in relation to the U.S. dollar, the yen value of Aflac Japan's unhedged U.S. dollar-denominated investments decreases, resulting in a decrease in SMR.
In addition, the weakening of the yen relative to the U.S. dollar will generally adversely affect the value of the Company's yen-denominated investments in U.S. dollar terms. When the yen strengthens in relation to the U.S. dollar, the yen value of Aflac Japan's unhedged U.S. dollar-denominated investments decreases, resulting in a decrease in Aflac Japan regulatory capital.
Quantitative and Qualitative Disclosures about Market Risk. The Company is exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and liquidity. The Company has substantial investment portfolios that support its policy liabilities.
The Company is exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and liquidity. The Company has substantial investment portfolios that support its policy liabilities.
HIPAA requires the Company to impose privacy and security requirements on its business associates (as such term is defined in the HIPAA regulations). Several states including California and New York, in which Aflac U.S. conducts significant portions of its business, have made changes to their privacy or cybersecurity laws or regulations in recent years. Further, the U.S.
HIPAA requires the Company to impose privacy and security requirements on its business associates (as such term is defined in the HIPAA regulations). Several states, including California and New York, have made changes to their privacy or cybersecurity laws or regulations in recent years. Additionally, the U.S.
Further, regulatory authorities periodically re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, could have a material adverse effect on the Company's financial condition and results of operations. In July 2023, new regulations were proposed by the U.S.
Further, regulatory authorities periodically re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, could have a material adverse effect on the Company's financial condition and results of operations.
However, the decrease in interest rates increases the liability for future policy benefits (LFPB), which could result in reductions to the Company’s overall equity. Conversely and concurrently, a rise in interest rates would improve the Company's ability to earn higher rates of return on future investments, as well as floating rate investments held in its investment portfolio.
Conversely and concurrently, a rise in interest rates would improve the Company's ability to earn higher rates of return on future investments, as well as floating rate investments held in its investment portfolio. A rise in interest rates also decreases the LFPB, which could result in increases to the Company's overall equity.
While interest rates have increased in the U.S. and other regions, interest rates in Japan remain lower than in the U.S., and the Company's overall level of investment income will continue to be negatively impacted from Japan’s low interest rates and from investments made prior to the start of recent rate increases.
In spite of recent decreases in interest rates in the U.S. and other regions and interest rate increases in Japan, interest rates in Japan remain lower than in the U.S., and the Company's overall level of investment income will continue to be negatively impacted from Japan’s low interest rates from investments made in prior periods at lower rates and from decreasing rates in the U.S.
See Note 2 of the Notes to the Consolidated Financial Statements for additional information. Any potential deterioration in Japan's credit quality or access to markets, the overall economy of Japan, or an increase in Japanese market volatility could adversely impact Aflac Japan's operations and its financial condition and thereby Aflac's overall financial performance.
Any potential deterioration in Japan's credit quality or access to markets, the overall economy of Japan, or an increase in Japanese market volatility could adversely impact Aflac Japan's operations and its financial condition and thereby Aflac's overall financial performance.
If the Company's competitors offer products that are more attractive, or pay higher commissions than the Company does, any or all of these distribution partners may concentrate their efforts on selling the Company's competitors' products instead of the Company's.
The Company's sales associates, brokers and other distribution partners are independent contractors and may sell products of its competitors. If the Company's competitors offer products that are more attractive, or pay higher commissions than the Company does, any or all of these distribution partners may concentrate their efforts on selling the Company's competitors' products instead of the Company's.
For Aflac Japan, rising interest rates and widening credit spreads, which go to reduce the fair value of Aflac Japan’s fixed-maturity investments, when combined with a strengthening yen, and the resulting decrease in the yen value of Aflac Japan’s U.S. dollar-denominated fixed-maturity 15 Item 1A. Risk Factors investments, have a negative impact to SMR.
For Aflac Japan, rising interest rates and widening credit spreads, which reduce the fair value of Aflac Japan’s fixed-maturity investments, when combined with a strengthening yen, and the resulting decrease in the yen value of Aflac Japan’s U.S. dollar-denominated fixed-maturity investments, have a negative impact on Aflac Japan's regulatory capital.
These higher losses would also negatively affect the Company's solvency ratios in the U.S. and Japan . For regulatory accounting purposes for Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, credit-related losses, or changes in foreign exchange, negatively impacting Aflac Japan's earnings and corresponding dividend and capital deployment. 18 Item 1A.
Risk Factors For regulatory accounting purposes for Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, credit-related losses, or changes in foreign exchange, negatively impacting Aflac Japan's earnings and corresponding dividend and capital deployment.
Cumulative net cash settlements on derivatives hedging currency exposure of Aflac Japan's U.S. dollar-denominated investments are associated with existing U.S. dollar-denominated investments that continue to be hedged, previously hedged investments that continue to be held but are no longer hedged, and investments previously hedged that have since been sold, matured or redeemed and may or may not have not been converted to yen.
Cumulative net cash settlements on derivatives hedging currency exposure of Aflac Japan's U.S. dollar-denominated investments are associated with existing U.S. dollar-denominated investments that continue to be hedged, previously hedged investments that continue to be held but are no longer hedged, and investments previously 16 Item 1A.
Additionally, the Company is exposed to currency risk when yen cash flows are converted into U.S. dollars, resulting in changes in the Company's U.S. dollar-denominated cash flows and earnings when exchange gains or losses, respectively, are realized.
Additionally, the Company is exposed to currency risk when yen cash flows are converted into U.S. dollars, resulting in changes in the Company's U.S. dollar-denominated cash flows and earnings when exchange gains or losses, respectively, are realized. This primarily occurs when Aflac Japan pays dividends in yen to the Parent Company, but it also 17 Item 1A.
The Company's concentration of business in Japan poses risks to its operations and financial condition. Aflac Japan's adjusted revenues accounted for 60% of the Company's total adjusted revenues in 2023, compared with 64% in 2022 and 68% in 2021. The percentage of the Company's total assets attributable to Aflac Japan was 80% at both December 31, 2023 and 2022.
The Company's concentration of business in Japan poses risks to its operations and financial condition. Aflac Japan's adjusted revenues accounted for 55% of the Company's total adjusted revenues in 2024, compared with 60% in 2023 and 64% in 2022.
A tightening of credit spreads could reduce the net investment income available to the Company on new credit investments. Increased market volatility also makes it difficult to value certain of the Company's investment holdings. For additional information, see the Critical Accounting Estimates section of Item 7. MD&A, and the Credit Risk subsection of Item 7A.
Increased market volatility also makes it difficult to value certain of the Company's investment holdings. For additional information, see the Critical Accounting Estimates section of Item 7. MD&A, and the Credit Risk subsection of Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
General Risk Factors Competition could adversely affect the Company's ability to increase or maintain its market share or profitability. The Company operates in a competitive environment and in an industry that is subject to ongoing changes from market pressures brought about by customer demands, legislative reform, marketing practices and changes to health care and health insurance delivery.
The Company operates in a competitive environment and in an industry that is subject to ongoing changes from market pressures brought about by customer demands, legislative reform, marketing practices and changes to health care and health insurance delivery.
The Company’s foreign exchange derivatives are typically shorter-dated than the underlying U.S. dollar-denominated investments being hedged, which creates roll-over risks within the hedging program that could increase the cost of such 16 Item 1A. Risk Factors derivatives.
Risk Factors hedged that have since been sold, matured or redeemed and may or may not have not been converted to yen. The Company’s foreign exchange derivatives are typically shorter-dated than the underlying U.S. dollar-denominated investments being hedged, which creates roll-over risks within the hedging program that could increase the cost of such derivatives.
The Company has entered into significant reinsurance transactions with large, highly rated counterparties, including affiliates. In addition, Aflac Japan has entered into reinsurance transactions with Aflac Re. Aflac Re is a newly formed entity with less capital than external counterparties with which the Company has conducted reinsurance transactions in the past.
The Company has entered into significant reinsurance transactions with large, highly rated counterparties as well as among the Company's subsidiaries. In addition, Aflac Japan has entered into reinsurance transactions with Aflac Re, which has less capital than external counterparties with which the Company has conducted reinsurance transactions in the past.
Further, low rates of unemployment, such as those currently reflected in the U.S. employment market, tend to make it more difficult for Aflac U.S. to maintain its network of sales associates. In Japan, the Company's sales results are dependent upon its relationship with sales associates and other distribution partners, including Japan Post Group.
Further, low rates of unemployment, such as those currently reflected in the U.S. employment market, tend to make it more difficult for Aflac U.S. to maintain its network of sales associates.
However, if the markets experience a significant strengthening of yen, this could cause cash strain at the Parent Company as a result of cash collateral and potentially cash settlement requirements. Based on the timing and severity of exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent Company could be significant.
Based on the timing and severity of exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent Company could be significant.
Item 1A. Risk Factors The Company is also exposed to the general movement in credit market spreads. A widening of credit spreads could reduce the value of the Company's existing portfolio, create unrealized losses on its investment portfolio, and reduce the Company's adjusted capital position and/or the dividend capacity of the Company's insurance subsidiaries.
A widening of credit spreads could reduce the value of the Company's existing portfolio, create unrealized losses on its investment portfolio, and reduce the Company's adjusted capital position and/or the dividend capacity of the Company's insurance subsidiaries. A tightening of credit spreads could reduce the net investment income available to the Company on new credit investments.
Portfolio management considerations, the availability of investments, as well as declines in fair value may constrain the ability of the Company to transition its investments to higher rate securities.
However, rising interest rates negatively impact the fair values of the Company's fixed maturity investments which could result in reductions to the Company's overall equity. Portfolio management considerations, the availability of investments, as well as declines in fair value may constrain the ability of the Company to transition its investments to higher rate securities.
A rise in interest rates also decreases the LFPB, which could result in increases to the Company's overall equity. However, rising interest rates negatively impact the fair values of the Company's fixed maturity investments which could result in reductions to the Company's overall equity.
Additionally, a decrease in interest rates increases the fair value of the Company’s fixed maturity investments, which could result in increases to the Company’s overall equity. However, the decrease in interest rates increases the liability for future policy benefits (LFPB), which could result in reductions to the Company’s overall equity.
Further, changes in U.S. or Japan tax laws or interpretations of such laws could increase the Company's corporate taxes and reduce earnings.
Further, changes in U.S. or Japan tax laws or interpretations of such laws could increase the Company's corporate taxes and reduce earnings. In addition, it remains difficult to predict the timing and effect that future tax law changes could have on the Company's earnings both in the U.S. and in foreign jurisdictions.
The exchange rates prevailing at the time of dividend payment may differ from the exchange rates prevailing at the time the yen profits were earned. The Parent Company utilizes forward contracts to accomplish a dual objective of hedging foreign currency exchange rate risk related to dividend payments by Aflac Japan, and reducing enterprise-wide 17 Item 1A. Risk Factors hedge costs.
The Parent Company utilizes forward contracts to accomplish a dual objective of hedging foreign currency exchange rate risk related to dividend payments by Aflac Japan, and reducing enterprise-wide hedge costs. However, if the markets experience a significant strengthening of yen, this could cause cash strain at the Parent Company as a result of cash collateral and potentially cash settlement requirements.
The Company competes with other insurers and financial institutions primarily on the basis of its products, compensation, support services and financial rating. The Company's sales associates, brokers and other distribution partners are independent contractors and may sell products of its competitors.
In Japan, the Company's sales results are dependent upon its relationship with sales associates and other distribution partners, including Japan Post Group, which in recent periods has accounted for a significant portion of Aflac Japan's total sales. The Company competes with other insurers and financial institutions primarily on the basis of its products, compensation, support services and financial rating.
This primarily occurs when Aflac Japan pays dividends in yen to the Parent Company, but it also has an impact when cash in the form of yen is converted to U.S. dollars for investment into U.S. dollar-denominated assets.
Risk Factors has an impact when cash in the form of yen is converted to U.S. dollars for investment into U.S. dollar-denominated assets. The exchange rates prevailing at the time of dividend payment may differ from the exchange rates prevailing at the time the yen profits were earned.
The continuing negative interest rate imposed by the Bank of Japan (BoJ) on excess bank reserves could continue to have a negative impact on the distribution and pricing of these products. Additionally, a decrease in interest rates increases the fair value of the Company’s fixed maturity investments, which could result in increases to the Company’s overall equity.
The Company's first sector products are more interest rate sensitive than third sector products. While the Bank of Japan ended its negative interest rate policy in March of 2024, low interest rates in Japan could continue to have a negative impact on the distribution and pricing of these products.
Removed
The Company's first sector products are more interest rate sensitive than third sector products. As discussed in Item 1. Business, beginning in November 2022, Aflac Japan refreshed its first sector savings-type products WAYS and Child Endowment and began to actively promote sales of those products, which had been curtailed since 2013 due to persistent low interest rates in Japan.
Added
Item 1A. Risk Factors corresponding dividends and capital deployment. The Company is also subject to the risk that any collateral providing credit enhancement to the Company's investments could deteriorate. The Company is also exposed to the general movement in credit market spreads.
Removed
Sales of Aflac Japan cancer products in the Japan Post Group channel experienced a material decline beginning in August 2019. While Japan Post Group resumed proactive sales of cancer insurance policies in April 2021, the Company can provide no assurance regarding the ultimate timing or extent of any recovery in such sales.
Added
The Company’s current interest rate hedging programs are primarily focused on addressing risks of floating rate investments and are not designed to fully protect against the impact of interest rate changes on the Company.
Removed
It is uncertain what long-term effect these developments will have on the Company’s results of operations or financial condition, but any such effects could be material. See the Aflac Japan Segment section of Item 7. MD&A for additional information.
Added
The percentage of the Company's total assets attributable to Aflac Japan was 77% at December 31, 2024, compared with 80% at December 31, 2023. See Note 2 of the Notes to the Consolidated Financial Statements for additional information.
Removed
In addition, it remains difficult to predict the timing and effect that future tax law changes could have on the Company's earnings both in the U.S. and in foreign jurisdictions, including in connection with the current presidential administration's continuing interest in raising revenue from the corporate sector in the U.S.
Added
These higher losses would also negatively affect the Company's solvency ratios in the U.S., Japan and Bermuda . 18 Item 1A.
Removed
Departments of Labor, Treasury and Health and Human Services related to (i) short-term, limited-duration insurance, (ii) fixed indemnity and hospital indemnity excepted benefits, (iii) specified disease or illness excepted benefits, and (iv) tax treatments of fixed amounts received through employment-based accident or health insurance.
Added
Business. 24 Item 1A. Risk Factors General Risk Factors Competition could adversely affect the Company's ability to increase or maintain its market share or profitability.
Removed
The timing and substance of the final regulations, if any, is not known, but if passed in the proposed form, these regulations could materially affect sales of Aflac U.S.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−0 removed7 unchanged
The incident response plan directs the executive officers to report certain incidents immediately and directly to the Lead Non-Management Director or the Chair of the Audit and Risk Committee.
The incident response plan directs the executive officers to report certain incidents immediately and directly to the Lead Non-Management Director and/or the Chair of the Audit and Risk Committee.
Specifically, the GSCISO has security experience in the public sector and private sector financial services industry holding positions in areas such as business continuity, information assurance, and technology risk management as well as being a Certified Information Systems Security Professional, Certified Information Security Manager and Certified Project 27
Specifically, the GSCISO has security experience in the public sector and private sector financial services industry holding positions in areas such as business continuity, information assurance, and technology risk management as well as being a Certified Information Systems Security Professional, Certified Information Security Manager and Certified Project Manager as well as being certified in Risk and Information 27
The Company also utilizes professionals from the Company’s legal team and GSCISO's leadership team, a majority of whom have specialized skills and knowledge in cybersecurity risk management based on their prior work experience and relevant industry certifications, such as Certified Information Systems Security Professional and Certified Information Security Manager, to assist in assessing cybersecurity risks, materiality of cybersecurity incidents and disclosures of the same.
The Company also utilizes professionals from the Company’s legal team and GSCISO's leadership team, a majority of whom have specialized skills and knowledge in cybersecurity risk management based on their prior work experience and relevant industry certifications, such as Certified Information Systems Security Professional and Certified Information Security Manager, to assist in employee awareness and training, as well as assessing cybersecurity risks, materiality of cybersecurity incidents and disclosures of the same.
This framework establishes a protocol to report certain incidents to the GSCISO and other senior officers, with the goal of timely assessing such incidents, determining applicable disclosure requirements and communicating with the Audit and Risk Committee.
This framework establishes a protocol to report certain incidents to the GSCISO and other senior officers, with the goal of timely assessing such incidents, determining applicable disclosure requirements and communicating with the Board of Directors.
CYBERSECURITY Due to the ever-changing cybersecurity landscape, the Company’s board of directors has adopted an information security policy directing management to establish and operate a global information security program with the goals of identifying, assessing and monitoring existing and emerging cybersecurity threats and ensuring that the Company’s information assets and data, and the data of its customers, are appropriately protected from loss or theft.
ITEM 1C. CYBERSECURITY The Company’s board of directors maintains an information security policy directing management to establish and operate a global information security program with the goals of identifying, assessing and monitoring existing and emerging cybersecurity threats and ensuring that the Company’s information assets and data, and the data of its customers, are appropriately protected from loss or theft.

Item 2. Properties

Properties — owned and leased real estate

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The Company leases other administrative office space throughout the U.S., Puerto Rico, the United Kingdom, and Bermuda. The Company believes its properties are adequate and suitable for its business as currently conducted and are adequately maintained.
The Company leases other administrative office space throughout the U.S., the United Kingdom, and Bermuda. The Company believes its properties are adequate and suitable for its business as currently conducted and are adequately maintained.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Holders As of February 15, 2024, there were 81,925 holders of record of the Company's common stock. Dividends For a summary of dividends paid to shareholders in 2023 and 2022 and potential restrictions on the Company's ability to pay future dividends, see the Liquidity and Capital Resources section of Item 7. MD&A. 29 Item 5.
Holders As of February 18, 2025, there were 78,663 holders of record of the Company's common stock. Dividends For a summary of dividends paid to shareholders in 2024 and 2023 and potential restrictions on the Company's ability to pay future dividends, see the Liquidity and Capital Resources section of Item 7. MD&A. 29 Item 5.
Performance Graphic Index December 31, 2018 2019 2020 2021 2022 2023 Aflac Incorporated 100.00 118.56 102.46 137.87 174.21 204.50 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Life & Health Insurance 100.00 123.18 111.51 152.41 168.18 176.00 Copyright © 2024 Standard & Poor’s, a division of S&P Global. All rights reserved. 30
Performance Graphic Index December 31, 2019 2020 2021 2022 2023 2024 Aflac Incorporated 100.00 86.42 116.29 146.94 172.49 220.92 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Life & Health Insurance 100.00 90.52 123.73 136.53 142.87 171.87 Copyright © 2025 Standard & Poor’s, a division of S&P Global. All rights reserved. 30

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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 foreign currency remeasurement associated with changes in the foreign currency exchange rate.
For important disclosures applicable to statements made in this 2024 Outlook, please see the statement on Forward-Looking Information at the beginning of Item 1. Business, the Risk Factors identified in Item 1A. and this Item 7. MD&A. RESULTS OF OPERATIONS The Company earns its revenues principally from insurance premiums and investments.
For important disclosures applicable to statements made in this 2025 Outlook, please see the statement on Forward-Looking Information at the beginning of Item 1. Business, the Risk Factors identified in Item 1A. and this Item 7. MD&A. RESULTS OF OPERATIONS The Company earns its revenues principally from insurance premiums and investments.
(2) The total remaining shares available for purchase at December 31, 2023, consisted of shares related to a 100,000,000 share repurchase authorization by the board of directors announced in November 2022. ITEM 6. [RESERVED] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ITEM 7.
(2) The total remaining shares available for purchase at December 31, 2024, consisted of shares related to a 100,000,000 share repurchase authorization by the board of directors announced in November 2022. ITEM 6. [RESERVED] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ITEM 7.
In 2023, other items excluded from adjusted earnings included an impairment for certain finite-lived intangible assets of approximately $11 million as a result of the Company exiting the third-party administration business acquired in connection with the purchase of Aflac Benefit Solutions, Inc. in 2019.
In 2023, other items excluded from adjusted earnings included an impairment for certain finite-lived intangible assets of approximately $11 million as a result of the Company exiting the third-party administration business acquired in connection with the purchase of Aflac Benefits Solutions, Inc. in 2019.
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. • U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign currency exchange rate for the comparable prior year period.
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. • U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign currency exchange rate for the comparable prior year period.
The Company believes that its strategy of positioning itself for future growth and efficiency while defending and leveraging its market-leading position, powerful brand recognition and diverse distribution in Japan and the U.S. will provide support toward these objectives.
The Company believes that its strategy of positioning itself for future growth and efficiency while defending and leveraging its market-leading position, powerful brand recognition and varied distribution in Japan and the U.S. will provide support toward these objectives.
Management's Discussion and Analysis of Financial Condition and Results of Operations 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Return on Equity to Adjusted Return on Equity (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.
Net investment gains and losses excluded from adjusted earnings include the following: • Securities Transactions • Credit Losses • Changes in the Fair Value of Equity Securities • Certain Derivative and Foreign Currency Activities. 37 Item 7.
Net investment gains and losses excluded from adjusted earnings include the following: • Securities Transactions • Credit Losses • Changes in the Fair Value of Equity Securities • Certain Derivative and Foreign Currency Activities. 38 Item 7.
GAAP return on equity - net earnings (1) 22.1 % 23.8 % Impact of excluding unrealized foreign currency translation gains (losses) (3.1) (2.5) Impact of excluding unrealized gains (losses) on securities and derivatives .2 4.1 Impact of excluding effect of changes in discount rate assumptions (1.9) (8.2) Impact of excluding pension liability adjustment .0 (.1) Impact of excluding accumulated other comprehensive income (4.9) (6.8) U.S.
GAAP return on equity - net earnings (1) 22.6 % 22.1 % Impact of excluding unrealized foreign currency translation gains (losses) (3.6) (3.1) Impact of excluding unrealized gains (losses) on securities and derivatives .4 .2 Impact of excluding effect of changes in discount rate assumptions (.2) (1.9) Impact of excluding pension liability adjustment .0 .0 Impact of excluding accumulated other comprehensive income (3.4) (4.9) U.S.
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 term of the hedge.
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.
GAAP financial measure for U.S. dollar-denominated investment income excluding foreign currency impact is the corresponding net investment income amount from the U.S. dollar denominated investments translated to yen. 36 Item 7.
GAAP financial measure for U.S. dollar-denominated investment income excluding foreign currency impact is the corresponding net investment income amount from the U.S. dollar denominated investments translated to yen. 37 Item 7.
See Note 2 of the Notes to the Consolidated Financial Statements for the reconciliation of segment results to the Company's consolidated U.S. GAAP results and additional information. 41
See Note 2 of the Notes to the Consolidated Financial Statements for the reconciliation of segment results to the Company's consolidated U.S. GAAP results and additional information. 42
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.
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. 39 Item 7.
GAAP financial measure of return on equity for the years ended December 31. 2023 2022 U.S.
GAAP financial measure of return on equity for the years ended December 31. 2024 2023 U.S.
The curtailment gain is both unusual and non-recurring and is unrelated to other recurring benefit costs associated with the plan; therefore, the Company has excluded the curtailment gain from adjusted earnings.
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.
GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance.
GAAP total acquisition and operating expenses including the impact of interest from derivatives associated with notes payable but excluding any non-recurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance.
Aflac Japan is the principal contributor to consolidated earnings. In addition, the Parent Company, other business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. See Item 1. Business for a summary of each segment's products and distribution channels. Consistent with U.S.
In addition, the Parent Company, other business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. See Item 1. Business for a summary of each segment's products and distribution channels. Consistent with U.S.
Amounts reported in this MD&A may not foot due to rounding. 32 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE SUMMARY Performance Highlights For the full year of 2023, total revenues were down 2.3% to $18.7 billion, compared with $19.1 billion for the full year of 2022.
Amounts reported in this MD&A may not foot due to rounding. 32 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE SUMMARY Performance Highlights For the full year of 2024, total revenues were up 1.2% to $18.9 billion, compared with $18.7 billion for the full year of 2023.
Shareholders’ equity at December 31, 2023 also included an unrealized foreign currency translation loss of $4.1 billion, compared with an unrealized foreign currency translation loss of $3.6 billion at December 31, 2022. The annualized return on average shareholders’ equity in 2023 was 22.1%.
Shareholders’ equity at December 31, 2024 also included an unrealized foreign currency translation loss of $5.0 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 2024 was 22.6%.
Shareholders’ equity at December 31, 2023 included a cumulative decrease of $2.6 billion from the effect of changes in discount rate assumptions on insurance contracts, compared with a corresponding cumulative decrease of $2.1 billion at December 31, 2022, and a net unrealized gain on investment securities and derivatives of $1.1 billion, compared with a net unrealized loss of $729 million at December 31, 2022.
Shareholders’ equity at December 31, 2024 included a cumulative increase of $2.0 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 $4 million, compared with a net unrealized gain of $1.1 billion at December 31, 2023.
GAAP financial measures of book value and book value per diluted share, respectively, for the years ended December 31. (In millions, except for share and per-share amounts) 2023 2022 U.S. GAAP book value $ 21,985 $ 20,140 Items impacting U.S.
GAAP financial measures of book value and book value per diluted share, respectively, for the years ended December 31. (In millions, except for share and per-share amounts) 2024 2023 U.S. GAAP book value $ 26,098 $ 21,985 Items impacting U.S.
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. The most comparable U.S.
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.
Management's Discussion and Analysis of Financial Condition and Results of 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 2023.
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 2023.
The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM). The Company defines the non-U.S. GAAP financial measures included in this document as follows: • Adjusted earnings are adjusted revenues less benefits and adjusted expenses.
The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM). 35 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company defines the non-U.S. GAAP financial measures included in this document as follows: • Adjusted earnings are adjusted revenues less benefits and adjusted expenses.
The average yen/dollar exchange rate (1) in 2023 was 140.57, or 7.4% weaker than the rate of 130.17 in 2022. Adjusted earnings (2) for the full year of 2023 were $3.7 billion, or $6.23 per diluted share, compared with $3.6 billion, or $5.67 per diluted share, in 2022.
The average yen/dollar exchange rate (1) in 2024 was 150.97, or 6.9% weaker than the rate of 140.57 in 2023. Adjusted earnings (2) for the full year of 2024 were $4.1 billion, or $7.21 per diluted share, compared with $3.7 billion, or $6.23 per diluted share, in 2023.
GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively. • 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 cash flows 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 cash flows from 35 Item 7.
GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively. • 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations located in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 , filed on February 24, 2023, for reference to discussions of the year ended December 31, 2021, the earliest of the three years presented, that have not been adjusted for the adoption of LDTI.
Management's Discussion and Analysis of Financial Condition and Results of Operations located in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 , filed on February 22, 2024, for reference to discussions of the year ended December 31, 2022, the earliest of the three years presented.
GAAP book value per common share $ 38.00 $ 32.73 Items impacting U.S.
GAAP book value per common share $ 47.45 $ 38.00 Items impacting U.S.
GAAP return on equity less accumulated other comprehensive income 17.2 17.0 Differences between adjusted earnings and net earnings (2) (3.4) (3.1) Adjusted return on equity - reported 13.8 13.9 Impact of foreign currency (3) (.4) N/A Adjusted return on equity, excluding impact of foreign currency 14.2 13.9 (1) U.S.
GAAP return on equity less accumulated other comprehensive income 19.2 17.2 Differences between adjusted earnings and net earnings (2) (4.8) (3.4) Adjusted return on equity - reported 14.4 13.8 Impact of excluding gains (losses) associated with foreign currency remeasurement (3) 2.9 1.8 Adjusted return on equity excluding foreign currency remeasurement 17.3 15.6 (1) U.S.
In November 2023, the board of directors announced a 19.0% increase in the quarterly cash dividend, effective with the first quarter of 2024.
In December 2024, the board of directors announced a 16.0% increase in the quarterly cash dividend, effective with the first quarter of 2025.
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.
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.
Aflac Japan Segment For Aflac Japan, the Company anticipates that favorable morbidity experience and the shift in premiums over the last several years from first sector savings products to third sector cancer and medical products and first sector protection products will result in stable benefit ratios in the Aflac Japan segment, while expense reduction efforts are expected to reduce expense ratios.
Aflac Japan Segment For Aflac Japan, the Company anticipates that favorable morbidity experience and the shift in premiums over the last several years from first sector savings products to third sector cancer and medical products and first sector protection products will result in stable benefit ratios in the Aflac Japan segment with a slightly higher expense ratio reflecting growth and strategic initiatives.
Net investment gains in 2023 included an increase in credit loss allowances of $139 million; $441 million of net gains from certain derivative and foreign currency gains or losses; $88 million of net gains on equity securities; and $200 million of net gains from sales and redemptions.
Net investment gains in 2024 included an increase in credit loss allowances of $256 million; $1.1 billion of net gains from certain derivative and foreign currency gains or losses; $140 million of net gains on equity securities; and $259 million of net gains from sales and redemptions.
Reconciling Items 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 measures of net investment (gains) losses for the years ended December 31.
(2) Prior period foreign currency impact reflected as “N/A” to isolate change for current period only. Reconciling Items 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 measures of net investment (gains) losses for the years ended December 31.
Aflac U.S. Segment For Aflac U.S., the Company expects growth in life and disability as well as dental and vision to increase benefit ratios and decrease expense ratios over time.
Segment For Aflac U.S., the Company expects growth in life and disability to increase benefit ratios. This growth as well as realized benefits from the buy to build initiatives are expected to decrease expense ratios over time.
GAAP book value: Unrealized foreign currency translation gains (losses) (4,069) (3,564) Unrealized gains (losses) on securities and derivatives 1,117 (729) Effect of changes in discount rate assumptions (2,560) (2,100) Pension liability adjustment (8) (36) Total accumulated other comprehensive income (5,520) (6,429) Adjusted book value 27,505 26,569 Number of shares outstanding at end of period 578,479 615,256 U.S.
GAAP book value: Unrealized foreign currency translation gains (losses) (4,998) (4,069) Unrealized gains (losses) on securities and derivatives 4 1,117 Effect of changes in discount rate assumptions 2,006 (2,560) Pension liability adjustment 10 (8) Total accumulated other comprehensive income (2,978) (5,520) Adjusted book value 29,076 27,505 Foreign currency remeasurement gains (losses) 5,725 3,700 Adjusted book value excluding foreign currency remeasurement 23,351 23,805 Number of shares outstanding at end of period 549,964 578,479 U.S.
The Company expects that benefit and expense ratios will continue to experience some level of revenue pressure due to the impact of paid up policies and internal reinsurance transactions. For 2024, the Company expects Aflac Japan to generate a benefit ratio in the range of 66% to 68% and an expense ratio in the range of 19% to 21%.
The Company also expects that benefit and expense ratios will continue to experience some level of revenue pressure due to the impact of paid up policies and internal reinsurance transactions.
GAAP financial reporting requires that a company report financial and descriptive information about operating segments in its annual and interim period financial statements. Furthermore, the Company is required to report a measure of segment profit or loss, certain revenue and expense items, and segment assets. The Company's insurance business consists of two segments: Aflac Japan and Aflac U.S.
Furthermore, the Company is required to report a measure of segment profit or loss, certain revenue and expense items, and segment assets. The Company's insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan is the principal contributor to consolidated earnings.
In 2023, the combined effective tax rate differed 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.
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 on certain Aflac Japan U.S. dollar-denominated assets held in the Delaware Statutory Trust (DST). Total income taxes were $974 million in 2024 and $603 million in 2023.
Reconciliation of Net Earnings to Adjusted Earnings In Millions Per Diluted Share 2023 2022 2021 2023 2022 2021 Net earnings $ 4,659 $ 4,418 $ 4,231 $ 7.78 $ 6.93 $ 6.25 Items impacting net earnings: Adjusted net investment (gains) losses (1) (914) (447) (462) (1.53) (.70) (.68) Other and non-recurring (income) loss (39) (1) 73 (.07) .00 .11 Income tax (benefit) expense on items excluded from adjusted earnings (2) 26 (357) 83 .04 (.56) .12 Adjusted earnings 3,733 3,614 3,925 6.23 5.67 5.80 Current period foreign currency impact (3) 113 N/A N/A .19 N/A N/A Adjusted earnings excluding current period foreign currency impact $ 3,847 $ 3,614 $ 3,925 $ 6.43 $ 5.67 $ 5.80 (1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.
Reconciliation of Net Earnings to Adjusted Earnings In Millions Per Diluted Share 2024 2023 2024 2023 Net earnings $ 5,443 $ 4,659 $ 9.63 $ 7.78 Items impacting net earnings: Adjusted net investment (gains) losses (1) (1,495) (914) (2.65) (1.53) Other and non-recurring (income) loss 23 (39) .04 (.07) Income tax (benefit) expense on items excluded from adjusted earnings 101 26 .18 .04 Adjusted earnings 4,072 3,733 7.21 6.23 Current period foreign currency impact (2) 103 N/A .18 N/A Adjusted earnings excluding current period foreign currency impact $ 4,175 $ 3,733 $ 7.39 $ 6.23 (1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.
GAAP book value per common share: Unrealized foreign currency translation gains (losses) per common share (7.03) (5.79) Unrealized gains (losses) on securities and derivatives per common share 1.93 (1.18) Effect of changes in discount rate assumptions per common share (4.43) (3.41) Pension liability adjustment per common share (.01) (.06) Total accumulated other comprehensive income per common share (9.54) (10.45) Adjusted book value per common share 47.55 43.18 Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts. 40 Item 7.
GAAP book value per common share: Unrealized foreign currency translation gains (losses) per common share (9.09) (7.03) Unrealized gains (losses) on securities and derivatives per common share .01 1.93 Effect of changes in discount rate assumptions per common share 3.65 (4.43) Pension liability adjustment per common share .02 (.01) Total accumulated other comprehensive income per common share (5.41) (9.54) Adjusted book value per common share 52.87 47.55 Foreign currency remeasurement gains (losses) per common share 10.41 6.40 Adjusted book value excluding foreign currency remeasurement per common share 42.46 41.15 41 Item 7.
Competitive Markets for a discussion of the competitive environment and the basis on which the Company competes in each of its segments. 2024 OUTLOOK The Company’s strategy to drive long-term shareholder value is to pursue growth through product development and distribution expansion and to achieve efficiencies by modernizing its technology and streamlining its operations.
Competitive Markets for a discussion of the competitive environment and the basis on which the Company competes in each of its segments. 2025 OUTLOOK The Company’s strategy to drive long-term shareholder value is to pursue growth and strong profit margins and to exercise tactical capital deployment.
Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $27.5 billion, or $47.55 per share at December 31, 2023, compared with $26.6 billion, or $43.18 per share, at December 31, 2022. The annualized adjusted return on equity excluding foreign currency impact (2) in 2023 was 14.2%.
Shareholders’ equity excluding accumulated other comprehensive income (AOCI) (2) (adjusted book value) was $29.1 billion, or $52.87 per share, at December 31, 2024, compared with $27.5 billion, or $47.55 per share, at December 31, 2023.
Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses (In millions) 2023 2022 2021 Net investment (gains) losses $ (590) $ (363) $ (468) Items impacting net investment (gains) losses: Amortized hedge costs (157) (112) (76) Amortized hedge income 121 68 57 Net interest cash flows from derivatives associated with certain investment strategies (328) (90) (30) Interest rate component of the change in fair value of foreign currency swaps on notes payable 41 50 55 Adjusted net investment (gains) losses $ (914) $ (447) $ (462) The Company's investment strategy is to invest primarily in fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s profitability.
Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses (In millions) 2024 2023 Net investment (gains) losses $ (1,271) $ (590) Items impacting net investment (gains) losses: Amortized hedge costs (26) (157) Amortized hedge income 113 121 Net interest income (expense) from derivatives associated with certain investment strategies (338) (328) Impact of interest from derivatives associated with notes payable 27 41 Adjusted net investment (gains) losses $ (1,495) $ (914) The Company's investment strategy is to invest primarily in fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s profitability.
Management's Discussion and Analysis of Financial Condition and Results of Operations Corporate and other The Company expects Corporate and other results to reflect stable net investment income in 2024, as compared with 2023, assuming that U.S. interest rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense.
Corporate and other The Company's objectives for Corporate and other in 2025 include maintaining strong pretax adjusted earnings as compared with 2024, assuming that U.S. interest rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense.
Net earnings were $4.7 billion, or $7.78 per diluted share, for the full year of 2023, compared with $4.4 billion, or $6.93 per diluted share, for the full year of 2022.
Net earnings were $5.4 billion, or $9.63 per diluted share, for the full year of 2024, compared with $4.7 billion, or $7.78 per diluted share, for the full year of 2023. Net earnings in 2024 included net investment gains of $1.3 billion, compared with net investment gains of $590 million in 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations Demographics Aflac Japan Segment With Japan’s aging population and the rise in healthcare costs, supplemental health care insurance products remain attractive. However, due to the aging population and decline in birthrate, new opportunities for customer demographics are not as readily available.
Management's Discussion and Analysis of Financial Condition and Results of Operations Demographics Aflac Japan Segment With Japan’s aging population and the rise in healthcare costs, supplemental health care insurance products remain attractive. Additionally, as Japan enters an era of 100-year lifespans, customers' needs for asset formation and retirement coverage, including nursing care, are increasing.
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.
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.
For 2024, the Company expects Aflac U.S. to generate a benefit ratio in the range of 45% to 47% and an expense ratio in the range of 38% to 40%. 34 Item 7.
For the 2025 through 2027 period, the Company expects Aflac U.S. to generate a benefit ratio in the range of 48% to 52% and an expense ratio in the range of 36% to 39%.
The Company intends to maintain a minimum SMR of 500% for Aflac Japan and a target combined RBC over time of approximately 400% for Aflac U.S., consistent with the Company's risk management practices.
The Company's economic solvency ratio (ESR) target range is 170% to 230% for Aflac Japan and a target combined RBC range of 350% to 450%, over time, for Aflac U.S., which is consistent with the Company's risk management practices.
Yen-denominated balance sheet accounts are translated to U.S. dollars using the spot Japanese yen/U.S. dollar foreign exchange rate at the end of the reporting period. 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.
Yen-denominated balance sheet accounts are translated to U.S. dollars using the spot Japanese yen/U.S. dollar foreign exchange rate at the end of the reporting period. In recent periods, the Japanese yen has weakened against the U.S. dollar.
Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S.
Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented.
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 39 Item 7.
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 Part I, Item 1A. Risk Factors for additional information. 40 Item 7.
Effective January 1, 2023, charges associated with the excise tax are recognized in equity consistent with other costs related to treasury stock. For additional information, see Note 10 of the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates - Income Taxes section of this MD&A.
Japanese income taxes on Aflac Japan's results account for most of the Company's consolidated income tax expense. For additional information, see Note 10 of the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates - Income Taxes section of this MD&A.
This MD&A is divided into the following sections: Page Executive Summary 33 Industry Trends 33 Outlook 34 Results of Operations 35 Investments 54 Hedging Activities 59 Policy Liabilities 62 Benefit Plans 63 Policyholder Protection 63 Liquidity and Capital Resources 63 Critical Accounting Estimates 71 All relevant prior-year amounts have been adjusted for the adoption of Accounting Standards Update (ASU) 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI) on January 1, 2023.
This MD&A is divided into the following sections: Page Executive Summary 33 Industry Trends 33 Outlook 34 Results of Operations 35 Investments 52 Hedging Activities 58 Policy Liabilities 61 Benefit Plans 61 Policyholder Protection 62 Liquidity and Capital Resources 62 Critical Accounting Estimates 69 The Company has elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented in Item 8.
In 2023, Aflac Incorporated repurchased $2.8 billion, or 38.9 million of its common shares. At December 31, 2023, the Company had 77.7 million remaining shares authorized for repurchase. Shareholders’ equity was $22.0 billion, or $38.00 per share, at December 31, 2023, compared with $20.1 billion, or $32.73 per share, at December 31, 2022.
The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.18. In 2024, Aflac Incorporated repurchased $2.8 billion, or 30.4 million of its common shares. At December 31, 2024, the Company had 47.3 million remaining shares authorized for repurchase.
Management's Discussion and Analysis of Financial Condition and Results of Operations risk factor entitled "Tax rates applicable to the Company may change" in Part I, Item 1A. Risk Factors for additional information. Foreign Currency Translation Aflac Japan’s premiums and a significant portion of its investment income are received in yen, and its claims and most expenses are paid in yen.
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. Foreign Currency Translation Aflac Japan’s premiums and a significant portion of its investment income are received in yen, and its claims and most expenses are paid in yen.
Income Taxes The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 11.5% in 2023, 9.3% in 2022 and 18.7% in 2021.
See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate” in Part I, Item 1A. Risk Factors for more information. Income Taxes The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 15.2% in 2024 and 11.5% in 2023.
The Company's objectives in 2024 are to maintain strong pretax margins with increased sales production through product refreshment in its Aflac Japan segment and to begin realizing benefits from its buy to build initiatives and other platform investments, manage expenses and strengthen the number of career agents for Aflac U.S.
For Aflac Japan, this includes continuing to focus on third sector products as well as introducing policies to new and younger customers. For Aflac U.S., this includes continuing to focus on realizing benefits from its buy to build initiatives and other platform investments, maintaining strong expense management discipline and strengthening the number of career agents for Aflac U.S.
Removed
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Issuer Purchases of Equity Securities During the year ended December 31, 2023, the Parent Company repurchased shares of its common stock as follows: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs January 1 - January 31 2,440,300 $ 72.15 2,440,300 114,201,523 February 1 - February 28 3,542,907 69.48 3,200,100 111,001,423 March 1 - March 31 4,711,768 64.20 4,707,900 106,293,523 April 1 - April 30 2,608,037 66.00 2,607,869 103,685,654 May 1 - May 31 4,322,919 66.50 4,321,165 99,364,489 June 1 - June 30 3,537,309 68.15 3,531,796 95,832,693 July 1 - July 31 2,478,733 71.10 2,478,733 93,353,960 August 1 - August 31 3,700,973 75.48 3,700,973 89,652,987 September 1 - September 30 3,215,602 76.19 3,209,947 86,443,040 October 1 - October 31 3,275,099 78.29 3,275,099 83,167,941 November 1 - November 30 2,833,510 81.54 2,832,717 80,335,224 December 1 - December 31 2,593,669 82.14 2,589,843 77,745,381 Total 39,260,826 (1) $ 71.99 38,896,442 77,745,381 (2) (1) During the year ended December 31, 2023, 364,384 shares were purchased in connection with income tax withholding obligations related to the vesting of restricted-share-based awards during the period.
Added
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Issuer Purchases of Equity Securities During the year ended December 31, 2024, the Parent Company repurchased shares of its common stock as follows: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs January 1 - January 31 0 $ 0.00 0 77,745,381 February 1 - February 29 5,308,570 78.58 4,859,803 72,885,578 March 1 - March 31 4,424,657 83.34 4,416,656 68,468,922 April 1 - April 30 2,674,130 83.18 2,665,236 65,803,686 May 1 - May 31 3,680,826 86.25 3,678,430 62,125,256 June 1 - June 30 2,956,250 88.72 2,944,026 59,181,230 July 1 - July 31 1,385,917 91.09 1,385,917 57,795,313 August 1 - August 31 1,684,841 104.59 1,684,841 56,110,472 September 1 - September 30 1,821,000 109.15 1,810,629 54,299,843 October 1 - October 31 1,710,909 112.02 1,710,909 52,588,934 November 1 - November 30 1,369,301 110.15 1,369,301 51,219,633 December 1 - December 31 3,905,910 104.46 3,902,079 47,317,554 Total 30,922,311 (1) $ 91.84 30,427,827 47,317,554 (2) (1) During the year ended December 31, 2024, 494,484 shares were purchased in connection with income tax withholding obligations related to the vesting of restricted-share-based awards during the period.
Removed
See Note 1 of the Notes to the Consolidated Financial Statements for additional information. The Company has elected to omit certain elements of discussion of the year ended December 31, 2021 in this MD&A. Readers should refer to Item 7.
Added
Financial Statements and Supplementary Data. Readers should refer to Item 7.
Removed
Net earnings for 2023 included an after-tax loss of $119 million, or $.20 per diluted share, related to novation of a reinsurance treaty with a third party that had been ceded back to the Company as of year end. Net earnings in 2023 included net investment gains of $590 million, compared with net investment gains of $363 million in 2022.
Added
Shareholders’ equity was $26.1 billion, or $47.45 per share, at December 31, 2024, compared with $22.0 billion, or $38.00 per share, at December 31, 2023.
Removed
The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.19. Adjusted earnings for 2023 included an after-tax loss of $119 million, or $.20 per diluted share, related to novation of a reinsurance treaty with a third party that had been ceded back to the Company as of year end.
Added
Adjusted book value excluding foreign currency remeasurement (2) was $23.4 billion, or $42.46 per share, at December 31, 2024, compared with $23.8 billion, or $41.15 per share, at December 31, 2023. The annualized adjusted return on equity excluding foreign currency remeasurement (2) in 2024 was 17.3%.
Removed
GAAP total revenues excluding adjusted net investment gains and losses. Adjusted expenses are U.S.
Added
The Company's approach to pursue growth is through product development and distribution expansion and to achieve efficiencies by modernizing its technology and streamlining its operations. The Company's objectives in 2025 include maintaining strong pretax margins with increased sales production through product refreshments and growth initiatives in both its Aflac Japan and Aflac U.S. segments.
Removed
Management's Discussion and Analysis of Financial Condition and Results of Operations derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses.
Added
For the 2025 through 2027 period, the Company expects Aflac Japan to generate a benefit ratio in the range of 64% to 66% and an expense ratio in the range of 20% to 23%.
Removed
(2) Includes release of $452 in deferred taxes in 2022. (3) Prior period foreign currency impact reflected as “N/A” to isolate change for current period only. Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.
Added
For 2025, the Company expects the benefit ratio to be toward the higher end of the 64% to 66% range and the expense ratio to be on the lower end of the 20% to 23% range. 34 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Aflac U.S.
Removed
In May 2021, the Parent Company used a portion of the net proceeds from its April 2021 issuance of various series of senior notes to redeem $700 million of its 3.625% senior notes due June 2023. The pretax expense due to the early redemption of these notes was $48 million. 38 Item 7.
Added
For 2025, the Company expects the benefit ratio to be at the lower end of the 48% to 52% range and the expense ratio to be at the higher end of the 36% to 39% range.
Removed
The impairment of these intangible assets are not related to the ongoing operations of the business and occur infrequently; therefore, the Company has excluded the impairment from adjusted earnings. In 2021, other items excluded from adjusted earnings included integration costs related to the Company's acquisition of Zurich North America's U.S.
Added
The adjustments to both revenues and expenses account for certain items that are outside of management’s control because they tend to be driven by general economic conditions and events or are related to infrequent activities not directly associated with insurance operations. Adjusted revenues are U.S. GAAP total revenues excluding adjusted net investment gains and losses. Adjusted expenses are U.S.
Removed
Corporate Life and Pensions business; these costs primarily consisted of expenditures for legal, accounting, consulting, integration of systems and processes and other similar services. These integration costs were excluded from adjusted earnings for one year following the acquisition and amounted to $26 million for the year ended December 31, 2021.
Added
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. 36 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations • Adjusted book value excluding foreign currency remeasurement is the U.S.
Removed
In 2022, the combined effective tax rate differed from the U.S. statutory rate primarily due to the impact of the tax accounting method change discussed below, as well as historic and solar tax credits. In 2021, the combined effective tax rate differed from the U.S. statutory rate primarily due to historic and solar tax credits.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. [Reserved] 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 74 Item 8. Financial Statements and Supplementary Data 81 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 187 Item 9A. Controls and Procedures 187 Item 9B.
Item 6. [Reserved] 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71 Item 8. Financial Statements and Supplementary Data 79 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 184 Item 9A. Controls and Procedures 184 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

154 edited+21 added−84 removed122 unchanged
Additionally, as discussed in detail in the Risk Factors section titled “Lack of availability of acceptable yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity,” there is a risk that losses realized on derivative settlements during periods of yen weakening may not be recouped through realization of the corresponding holding currency gains on the hedged U.S. dollar-denominated investments if these investments are not ultimately sold and converted to yen.
Additionally, as discussed in detail in the Risk Factors section titled “Lack of availability of acceptable yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity,” there is a risk that losses realized on derivative settlements during periods of yen weakening may not be recouped through realization of the corresponding holding currency gains on the hedged U.S. dollar-denominated investments if these investments are not ultimately sold and the U.S. dollar proceeds converted to yen.
On May 1, 2023, the Parent Company filed a registration statement on Form S-3 that registered the sale of its common stock from time to time by J&A Alliance Holdings Corporation in its capacity as trustee of the Trust. The filing was made strictly pursuant to a contractual requirement contained in the Shareholders Agreement.
On May 1, 2023, the Parent Company filed a registration statement on Form S-3 that registered the sale of its common stock from time to time by J&A Alliance Holdings Corporation in its capacity as trustee of the Trust. The filing was made pursuant to a contractual requirement contained in the Shareholders Agreement.
Discount rates used to measure the carrying value of LFPB in the consolidated balance sheets are updated each reporting period, and the differences between the liability balances calculated using the locked-in discount rates and the updated discount rates are recognized in accumulated other comprehensive income (loss) (AOCI).
Discount rates used to measure the carrying value of LFPB in the consolidated balance sheets are updated each reporting period, and the differences between the liability balances calculated using the locked-in discount rates and the updated discount rates are recognized in accumulated other comprehensive income (loss).
See Note 3 of the Notes to the Consolidated Financial Statements for further information concerning credit quality indicators, information on loans that are on nonaccrual status, and REO obtained through foreclosure or deed in lieu of foreclosure. See also Part I, Item 1A. Risk Factors for a discussion of risk factors associated with the Company's investments. 55 Item 7.
See Note 3 of the Notes to the Consolidated Financial Statements for further information concerning credit quality indicators, information on loans that are on nonaccrual status, and REO obtained through foreclosure or deed in lieu of foreclosure. See also Part I, Item 1A. Risk Factors for a discussion of risk factors associated with the Company's investments.
At December 31, 2023 and 2022, Aflac Re was in compliance with the ECR and MMS requirements. Under the Bermuda Insurance Act, Aflac Re is prohibited from paying dividends in an amount that exceeds 25% of the prior year's statutory capital and surplus without an affidavit stating that Aflac Re will continue to meet its solvency margin.
At December 31, 2024 and 2023, Aflac Re was in compliance with the ECR and MMS requirements. Under the Bermuda Insurance Act, Aflac Re is prohibited from paying dividends in an amount that exceeds 25% of the prior year's statutory capital and surplus without an affidavit stating that Aflac Re will continue to meet its solvency margin.
In September 2021, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2024. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available.
In September 2024, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2027. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available.
Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, and interest volatility. The Company estimates an expected lifetime credit loss on investments measured at amortized cost including held-to-maturity fixed maturity securities, loan receivables and loan commitments on a quarterly basis.
Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, foreign currency volatility, and interest rate volatility. The Company estimates an expected lifetime credit loss on investments measured at amortized cost including held-to-maturity fixed maturity securities, loan receivables and certain loan commitments on a quarterly basis.
Further, the Company plans to continue to maintain a portfolio of unhedged U.S. dollar-denominated investments at Aflac Japan and to consider whether the amount of such investments should be increased or decreased relative to the Company’s view of economic equity surplus in Aflac Japan in light of potentially rising hedge costs and other factors.
Further, the Company plans to continue to maintain a population of unhedged U.S. dollar-denominated investments at Aflac Japan and to consider whether the amount of such investments should be increased or decreased relative to the Company’s view of economic equity surplus in Aflac Japan in light of potentially rising hedge costs and other factors.
The Company's ability to sell either type of security is a function of overall market liquidity which is impacted by, among other things, the amount of outstanding securities of a particular issuer or issuance, trading history of the issue or issuer, overall market conditions, and idiosyncratic events affecting the specific issue or issuer. 58 Item 7.
The Company's ability to sell either type of security is a function of overall market liquidity which is impacted by, among other things, the amount of outstanding securities of a particular issuer or issuance, trading history of the issue or issuer, overall market conditions, and idiosyncratic events affecting the specific issue or issuer. 57 Item 7.
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 December 31, 2023, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations.
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 December 31, 2024, the Company had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations.
It is possible that the financial and other information the Company posts there could be deemed to be material information. The information on the Company's website is not part of this document. Further, the Company's references to website URLs are intended to be inactive textual references only. 70 Item 7.
It is possible that the financial and other information the Company posts there could be deemed to be material information. The information on the Company's website is not part of this document. Further, the Company's references to website URLs are intended to be inactive textual references only. 68 Item 7.
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. These dividend capacity requirements are generally aligned with the SMR. Japan's FSA maintains its own solvency standard which is quantified through the SMR.
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. Japan's FSA maintains its own solvency standard which is quantified through the SMR.
The foregoing is subject to and qualified in its entirety by reference to the full text of the Basic Agreement, a copy of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 19, 2018, and the Shareholders Agreement, a copy of which is attached as Exhibit 10.50 to the Company’s Quarterly Report on Form 10-Q filed April 26, 2019, the terms of which exhibits are incorporated herein by reference. 46 Item 7.
The foregoing is subject to and qualified in its entirety by reference to the full text of the Basic Agreement, a copy of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 19, 2018, and the Shareholders Agreement, a copy of which is attached as Exhibit 10.50 to the Company’s Quarterly Report on Form 10-Q filed April 26, 2019, the terms of which exhibits are incorporated herein by reference.
The Company's net investment hedge was effective during the years ended December 31, 2023 and 2022, respectively. For additional information on the Company's net investment hedging strategy, see Note 4 of the Notes to the Consolidated Financial Statements.
The Company's net investment hedge was effective during the years ended December 31, 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.
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. See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for additional information.
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 reinsurance transactions. See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for additional information.
The currency risk being hedged is generally based on fair value of hedged investments. The following table summarizes the U.S. dollar-denominated investments held by Aflac Japan as of December 31. 60 Item 7.
The currency risk being hedged is generally based on fair value of hedged investments. The following table summarizes the U.S. dollar-denominated investments held by Aflac Japan as of December 31. 59 Item 7.
From time to time or when market opportunities arise, the Company disposes of selected fixed maturity securities that are available-for-sale to improve the duration matching of assets and liabilities, improve future investment yields, and/or re-balance its portfolio. As a result, dispositions before maturity can vary significantly from year to year.
From time to time or when market opportunities arise, the Company disposes of selected fixed maturity securities that are available-for-sale to improve the duration matching of assets and liabilities, improve future investment yields, and/or rebalance its portfolio. As a result, dispositions before maturity can vary significantly from year to year.
The following table presents a summary of operating results for Aflac U.S. for the years ended December 31 followed by a discussion of the significant drivers of changes in operating results compared to the previous year. Aflac U.S.
The following table presents a summary of operating ratios for Aflac U.S. for the years ended December 31 followed by a discussion of the significant drivers of changes in operating ratios compared to the previous year.
Aflac Japan has been investing 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. dollar investments.
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. dollar investments.
The amount of the guaranty fund assessment that an insurer is assessed is based on its proportionate share of premiums in that state. See Note 15 of the Notes to the Consolidated Financial Statements for further information on guaranty fund assessments. Guaranty fund assessments for the years ended December 31, 2023, 2022 and 2021 were immaterial.
The amount of the guaranty fund assessment that an insurer is assessed is based on its proportionate share of premiums in that state. See Note 15 of the Notes to the Consolidated Financial Statements for further information on guaranty fund assessments. Guaranty fund assessments for the years ended December 31, 2024 and 2023 were immaterial.
The distributions of fixed maturity securities the Company owns, by credit rating, as of December 31 were as follows: Composition of Fixed Maturity Securities by Credit Rating 2023 2022 Amortized Cost Fair Value Amortized Cost Fair Value AAA 1.6 % 1.6 % 1.6 % 1.5 % AA 5.7 5.9 5.2 5.3 A 68.1 67.2 68.0 68.1 BBB 22.9 23.5 23.0 22.9 BB or lower 1.7 1.8 2.2 2.2 Total 100.0 % 100.0 % 100.0 % 100.0 % As of December 31, 2023, 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 distributions of fixed maturity securities the Company owns, by credit rating, as of December 31 were as follows: Composition of Fixed Maturity Securities by Credit Rating 2024 2023 Amortized Cost Fair Value Amortized Cost Fair Value AAA 1.5 % 1.5 % 1.6 % 1.6 % AA 6.0 6.3 5.7 5.9 A 68.0 66.1 68.1 67.2 BBB 22.9 24.4 22.9 23.5 BB or lower 1.6 1.7 1.7 1.8 Total 100.0 % 100.0 % 100.0 % 100.0 % As of December 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.
Strategic Alliance with Japan Post Holdings As previously reported, on December 19, 2018, the Parent Company and Aflac Japan entered into a Basic Agreement with Japan Post Holdings Co., Ltd., a Japanese corporation (Japan Post Holdings).
As previously reported, on December 19, 2018, the Parent Company and Aflac Japan entered into a Basic Agreement with Japan Post Holdings Co., Ltd., a Japanese corporation (Japan Post Holdings).
Purchases of securities from period to period are determined based on multiple objectives, including appropriate portfolio diversification, the relative value of a potential investment and availability of investment opportunities, liquidity, credit and other risk factors while adhering to the Company's investment policy guidelines.
Purchases of securities from period to period are determined based on multiple objectives, including appropriate portfolio diversification, the relative value of a potential investment and availability of investment opportunities, liquidity, credit and other risk factors while adhering to the Company's investment policy guidelines. 50 Item 7.
Corporate and Other Total Available-for-sale, fixed maturity securities, at fair value $ 54,983 $ 12,884 $ 5,423 $ 73,290 Held-to-maturity, fixed maturity securities, at amortized cost (1) 17,819 0 0 17,819 Equity securities 720 2 366 1,088 Commercial mortgage and other loans: Transitional real estate loans (1) 4,795 1,011 192 5,998 Commercial mortgage loans (1) 1,075 622 0 1,697 Middle market loans (1) 4,095 436 0 4,531 Other loans (1) 185 101 15 301 Other investments: Policy loans 186 28 0 214 Short-term investments (2) 347 204 753 1,304 Limited partnerships 2,360 258 132 2,750 Real estate owned 180 47 0 227 Other 0 35 0 35 Investment in affiliate (3) 0 439 (439) 0 Total investments 86,745 16,067 6,442 109,254 Cash and cash equivalents 1,861 651 1,794 4,306 Total investments and cash $ 88,606 $ 16,718 $ 8,236 $ 113,560 (1) Net of allowance for credit losses (2) Includes securities lending collateral (3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other 54 Item 7.
Corporate and Other Total Available-for-sale, fixed maturity securities, at fair value $ 54,983 $ 12,884 $ 5,423 $ 73,290 Held-to-maturity, fixed maturity securities, at amortized cost (1) 17,819 0 0 17,819 Equity securities 720 2 366 1,088 Commercial mortgage and other loans: (1) Transitional real estate loans 4,795 1,011 192 5,998 Commercial mortgage loans 1,075 622 0 1,697 Middle market loans 4,095 436 0 4,531 Other loans 185 101 15 301 Other investments: Policy loans 186 28 0 214 Short-term investments (2) 347 204 753 1,304 Limited partnerships 2,360 258 132 2,750 Real estate owned 180 47 0 227 Other 0 35 0 35 Investment in affiliate (3) 0 439 (439) 0 Total investments 86,745 16,067 6,442 109,254 Cash and cash equivalents 1,861 651 1,794 4,306 Total investments and cash $ 88,606 $ 16,718 $ 8,236 $ 113,560 (1) Net of allowance for credit losses (2) Includes securities lending collateral (3) For consolidated reporting, Aflac U.S.'s investment in Aflac Re is eliminated in Corporate and other The Company has invested in a variety of commercial mortgage loans (CMLs) and other loans including transitional real estate loans (TREs).
See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively. Aflac Japan's SMR remains high and reflects a strong capital and surplus position. As of December 31, 2023, Aflac Japan's SMR was 1,219%, compared with 878% at December 31, 2022.
See Notes 3, 4 and 8 of the Notes to the Consolidated Financial Statements for additional information on the Company's investment strategies, hedging activities, and reinsurance, respectively. Aflac Japan's SMR remains high and reflects a strong capital and surplus position. As of December 31, 2024, Aflac Japan's SMR was 1,221%, compared with 1,219% at December 31, 2023.
The estimates that the Company deems to be most critical to an understanding of its results of operations and financial condition are those related to the valuation of investments and derivatives, DAC, liabilities for future policy benefits, and income taxes.
The estimates that the Company deems to be most critical to an understanding of its results of operations and financial condition are those related to the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits, and income taxes.
At December 31, 2023, Aflac Japan had agreements to sell its products at 360 banks, approximately 90% of the total number of banks in Japan.
At December 31, 2024, Aflac Japan had agreements to sell its products at 360 banks, approximately 90% of the total number of banks in Japan.
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 year ended December 31, 2023.
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 years ended December 31, 2024 and 2023.
Investments are included in equity securities or the other investments line in the consolidated balance sheets. 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 2023, Aflac U.S. borrowed and repaid $223 million under this program.
Investments are included in equity securities or the other investments line in the consolidated balance sheets. As part of an arrangement with Federal Home Loan Bank of Atlanta (FHLB), Aflac U.S. obtains low-cost investment funding from FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In 2024, Aflac U.S. borrowed and repaid $466 million under this program.
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. The combined RBC ratio for Aflac U.S. as of December 31, 2023 was 710%, compared with 732% as of December 31, 2022.
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. The combined RBC ratio for Aflac U.S. as of December 31, 2024 was 677%, compared with 710% as of December 31, 2023.
In years when the yen weakens, translating U.S. dollar-denominated investment income into yen magnifies growth rates for net investment income, total adjusted revenues, and pretax adjusted earnings in yen terms. 43 Item 7.
In years when the yen weakens, translating U.S. dollar-denominated investment income into yen magnifies growth rates for net investment income, total adjusted revenues, and pretax adjusted earnings in yen terms.
From time to time, Aflac Japan also maintains a collar program on a portion of its U.S. Dollar Program to mitigate against more extreme moves in foreign exchange and therefore support SMR. As of December 31, 2023, there were no collars in Aflac Japan, and none of the Company's foreign currency options hedging Aflac Japan's U.S. dollar-denominated assets were in-the-money.
From time to time, Aflac Japan also maintains a collar program on a portion of its U.S. Dollar Program to mitigate against more extreme moves in foreign exchange and therefore support SMR. As of December 31, 2024, none of the Company's foreign currency options hedging Aflac Japan's U.S. dollar-denominated assets were in-the-money.
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 financial institutions and other corporate investments. 55 Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations 2022 (In millions) Aflac Japan Aflac U.S.
Management's Discussion and Analysis of Financial Condition and Results of Operations 2023 (In millions) Aflac Japan Aflac U.S.
A 71 54 (17) 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.
A- 126 107 (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. The Company believes these issuers have the ability to continue making timely payments of principal and interest.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table illustrates the effect of translating Aflac Japan's U.S. dollar-denominated investment income and related items into yen by comparing certain segment results with those that would have been reported had foreign currency exchange rates remained unchanged from the prior year.
The following table illustrates the effect of translating Aflac Japan's U.S. dollar-denominated investment income and related items into yen by comparing certain segment results with those that would have been reported had foreign currency exchange rates remained unchanged from the prior year.
According to a Form 13F filed by Japan Post Holdings with the SEC on January 5, 2024, Japan Post Holdings owned 52.3 million Aflac Incorporated common shares as of December 31, 2023.
According to a Form 13F filed by Japan Post Holdings with the SEC on January 16, 2025, Japan Post Holdings owned 52.3 million Aflac Incorporated common shares as of December 31, 2024.
The application of these critical accounting estimates determines the values at which 93% of the Company's assets and 80% of its liabilities are reported as of December 31, 2023, and thus has a direct effect on net earnings and shareholders' equity. Subsequent experience or use of other assumptions could produce significantly different results.
The application of these critical accounting estimates determines the values at which 92% of the Company's assets and 78% of its liabilities are reported as of December 31, 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.
Dividends declared by Aflac during 2024 in excess of $1.1 billion would be considered extraordinary and require such approval. Similar laws apply in New York, the domiciliary jurisdiction of Aflac New York. Corporate and Other Aflac Re is licensed by the BMA as a long-term insurer and is subject to the Bermuda Insurance Act of 1978 (Bermuda Insurance Act).
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. Corporate and Other Aflac Re is licensed by the BMA as a long-term insurer and is subject to the Bermuda Insurance Act of 1978 (Bermuda Insurance Act).
As part of the Company’s internal reinsurance platform, Aflac Re enters into foreign currency forwards with the Parent Company, and may enter into such forwards with third parties, to economically manage the currency mismatch between Aflac Re's assets, which are mostly denominated in U.S. dollars, and liabilities, which are mostly denominated in yen, in order to support and optimize BMA capital requirements.
Management's Discussion and Analysis of Financial Condition and Results of Operations As part of the Company’s internal reinsurance platform, Aflac Re enters into foreign currency forwards with the Parent Company, and may enter into such forwards with third parties, to economically manage the currency mismatch between Aflac Re's assets, which are mostly denominated in U.S. dollars, and liabilities, which are mostly denominated in yen, in order to support and optimize BMA capital requirements.
Further, Aflac Japan continues to utilize its virtual sales tool that enables online consultations and policy applications to be completed entirely online.
Further, Aflac Japan continues to utilize its virtual sales tool that enables online consultations and policy applications to be completed entirely online. 45 Item 7.
As part of its overall corporate strategy, the Company has committed $400 million to Aflac Ventures, LLC (Aflac Ventures), as opportunities emerge. As of December 31, 2023, of the $400 million committed, approximately $281 million has been deployed. Aflac Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures) which is reported in Corporate and other.
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 December 31, 2024, of the $400 million committed, approximately $285 million has been deployed. Aflac Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures) which is reported in Corporate and other.
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 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.
Reverse-Dual Currency Securities (1) (Amortized cost, in millions) 2023 2022 Privately issued reverse-dual currency securities $ 3,740 $ 4,049 Publicly issued collateral structured as reverse-dual currency securities 1,232 1,383 Total reverse-dual currency securities $ 4,972 $ 5,432 Reverse-dual currency securities as a percentage of total investment securities 5.5 % 5.7 % (1) Principal payments in yen and interest payments in dollars Aflac Japan has a portfolio of privately issued securities to better match liability characteristics and secure higher yields than those available on Japanese government or other public corporate bonds.
Reverse Dual-Currency Securities (1) (Amortized cost, in millions) 2024 2023 Privately issued reverse dual-currency securities $ 3,368 $ 3,740 Publicly issued collateral structured as reverse dual-currency securities 945 1,232 Total reverse dual-currency securities $ 4,313 $ 4,972 Reverse dual-currency securities as a percentage of total investment securities 5.3 % 5.5 % (1) Principal payments in yen and interest payments in dollars Aflac Japan has a portfolio of privately issued securities to better match liability characteristics and secure higher yields than those available on Japanese government or other public corporate bonds.
The following table presents premium persistency for Aflac U.S. on a 12-month rolling basis as of December 31. 2023 2022 2021 Premium persistency 78.6 % 77.3 % 79.7 % Aflac U.S. Sales The following table presents Aflac's U.S. new annualized premium sales for the years ended December 31.
The following table presents premium persistency for Aflac U.S. on a 12-month rolling basis as of December 31. 2024 2023 Premium persistency 79.3 % 78.6 % Aflac U.S. Sales The following table presents Aflac's U.S. new annualized premium sales for the years ended December 31.
Japan Post Holdings will not have a board seat on the Parent Company’s board of directors and will not have rights to control, manage or intervene in the management of the Parent Company.
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.
If interest rates decreased by 100 basis points, the Company's LFPB balance as of December 31, 2023 would increase by $12.7 billion, and if interest rates increased by 100 basis points the Company's LFPB balance as of December 31, 2023 would decrease by $9.9 billion.
If interest rates decreased by 100 basis points, the Company's LFPB balance as of December 31, 2024 would increase by $9.6 billion, and if interest rates increased by 100 basis points, the Company's LFPB balance as of December 31, 2024 would decrease by $7.6 billion.
The Company's consolidated yen-denominated net asset position was partially hedged at $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, compared with $11.6 billion as of December 31, 2022, with hedging instruments comprised of $4.0 billion of yen-denominated debt and $7.6 billion of foreign currency forwards and options.
The Company's consolidated yen-denominated net asset position was partially hedged at $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, 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations Regulatory Restrictions Aflac Japan Aflac Japan is required to meet certain financial criteria as governed by Japanese corporate law in order to provide dividends to the Parent Company.
Management's Discussion and Analysis of Financial Condition and Results of Operations Regulatory Restrictions Aflac Japan 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.
At December 31, 2023, Aflac Japan was represented by approximately 7,000 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 December 31, 2024, Aflac Japan was represented by approximately 6,600 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.
(In millions) 2023 2022 2021 Net cash inflows (outflows) $ (598) $ (757) $ 66 Enterprise Corporate Hedging Program 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.
(In millions) 2024 2023 Net cash inflows (outflows) $ (508) $ (598) Enterprise Corporate Hedging Program 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations Aflac Japan Investments The level of investment income in yen is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, the effect of yen/dollar exchange rates on U.S. dollar-denominated investment income, and other factors.
Aflac Japan Investments The level of investment income in yen is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, the effect of yen/dollar exchange rates on U.S. dollar-denominated investment income, and other factors.
Management's Discussion and Analysis of Financial Condition and Results of Operations The ratings of the Company's securities referenced in the table below are based on the ratings designations provided by major rating organizations such as Moody's, Standard & Poor's and Fitch or, if not rated, are determined based on the Company's internal analysis of such securities.
The ratings of the Company's securities referenced in the table below are based on the ratings designations provided by major rating organizations such as Moody's, Standard & Poor's and Fitch or, if not rated, are determined based on the Company's internal analysis of such securities.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table details the contributions to Aflac's U.S. new annualized premium sales by major insurance product category for the years ended December 31. 2023 2022 2021 Accident 20.9 % 22.8 % 25.1 % Disability 25.6 25.5 23.1 Critical care (1) 20.7 20.1 21.3 Hospital indemnity 14.5 15.3 16.4 Dental/vision 6.3 5.8 5.1 Life 12.0 10.5 9.0 Total 100.0 % 100.0 % 100.0 % (1) Includes cancer, critical illness and hospital intensive care products In 2023, the Aflac U.S. sales force included an average of approximately 6,200 U.S. agents, including brokers, who were actively producing business on a weekly basis.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table details the contributions to Aflac's U.S. new annualized premium sales by major insurance product category for the years ended December 31. 2024 2023 Accident 19.6 % 20.9 % Disability 26.3 25.6 Critical care (1) 20.9 20.7 Hospital indemnity 13.7 14.5 Dental/vision 5.3 6.3 Life 14.2 12.0 Total 100.0 % 100.0 % (1) Includes cancer, critical illness and hospital intensive care products In 2024, the Aflac U.S. sales force included an average of approximately 6,000 U.S. agents, including brokers, who were actively producing business on a weekly basis.
Aflac Japan Remittances (In millions of dollars and billions of yen) 2023 2022 2021 Aflac Japan management fees paid to Parent Company $ 67 $ 61 $ 59 Aflac Japan dividends declared or paid to Parent Company (in dollars) 2,623 2,412 2,138 Aflac Japan dividends declared or paid to Parent Company (in yen) ¥ 374.7 ¥ 324.2 ¥ 236.7 The Company intends to maintain higher than historical levels of liquidity and capital at the Parent Company for stress conditions and with the goals of addressing the Company’s hedge costs and related potential need for collateral and mitigating against long-term weakening of the Japanese yen.
Aflac Japan Remittances (In millions of dollars and billions of yen) 2024 2023 Aflac Japan management fees paid to Parent Company $ 69 $ 67 Aflac Japan dividends declared or paid to Parent Company (in dollars) 2,865 2,623 Aflac Japan dividends declared or paid to Parent Company (in yen) ¥ 441.6 ¥ 374.7 The Company intends to maintain higher than historical levels of liquidity and capital at the Parent Company for stress conditions and with the goals of addressing the Company’s hedge costs and related potential need for collateral and mitigating against long-term weakening of the Japanese yen.
At December 31, 2023, the Company held $4.3 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.
At December 31, 2024, the Company held $6.2 billion in cash and cash equivalents for stress conditions, which includes the Parent Company's target minimum amount of $1.8 billion.
The Company regularly monitors its market risks and uses a variety of strategies to manage its exposure to these market risks. Currency Risk Aflac Japan The functional currency of Aflac Japan's insurance operations is the Japanese yen.
The Company regularly monitors its market risks and uses a variety of strategies to manage its exposure to these market risks. 71 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Currency Risk Aflac Japan The functional currency of Aflac Japan's insurance operations is the Japanese yen.
For additional information on the Company's major contractual obligations, see the applicable Note in the Notes to the Consolidated Financial Statements as indicated in the line items in the table above. The Company's consolidated financial statements convey its financing arrangements during the periods presented.
Management's Discussion and Analysis of Financial Condition and Results of Operations For additional information on the Company's major contractual obligations, see the applicable Note in the Notes to the Consolidated Financial Statements as indicated in the line items in the table above. The Company's consolidated financial statements convey its financing arrangements during the periods presented.
Purchases $ 951 $ 1,745 $ 2,175 Funds available for investment include cash flows from operations, investment income, and funds generated from maturities, redemptions, and other securities transactions.
Purchases $ 973 $ 951 Funds available for investment include cash flows from operations, investment income, and funds generated from maturities, redemptions, and other securities transactions.
Annualized premiums in force, translated into dollars at respective year-end exchange rates, were $8.8 billion in 2023, $9.8 billion in 2022 and $11.8 billion in 2021. As of December 31, 2023, 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 year-end exchange rates, were $7.6 billion in 2024, compared with $8.8 billion in 2023. As of December 31, 2024, Aflac Japan exceeded 22 million individual policies in force in Japan, with more than 14 million cancer policies in force in Japan.
See Part I, Item 1A. Risk Factors for the risk factor titled "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" for additional information. The Parent Company The Company is exposed to currency risk as an economic event when yen funds are actually converted into U.S. dollars.
See Part I, Item 1A. Risk Factors for the risk factor titled "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" for additional information. Corporate and Other The Company is exposed to currency risk when yen funds are converted into U.S. dollars.
POLICYHOLDER PROTECTION Policyholder Protection Corporation The Japanese insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. Legislation enacted regarding the framework of the Life Insurance Policyholder Protection Corporation (LIPPC) included government fiscal measures supporting the LIPPC.
Management's Discussion and Analysis of Financial Condition and Results of Operations POLICYHOLDER PROTECTION Policyholder Protection Corporation The Japanese insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. Legislation enacted regarding the framework of the Life Insurance Policyholder Protection Corporation (LIPPC) included government fiscal measures supporting the LIPPC.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table presents the results of Aflac Japan's investment yields for the years ended and as of December 31 2023 2022 2021 Total purchases for the period (in millions) (1) $ 2,741 $ 5,640 $ 8,756 New money yield (1),(2) 5.18 % 4.48 % 3.50 % Return on average invested assets (3) 2.90 2.78 2.72 Portfolio book yield, including U.S. dollar-denominated investments, end of period (1),(2) 3.18 % 3.06 % 2.60 % (1) Includes fixed maturity securities, commercial mortgage and other loans, equity securities, and excludes alternative investments in limited partnerships (2) Reported on a gross yield basis; excludes investment expenses, external management fees, and amortized hedge costs (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 2023 was primarily due to increases in U.S. and Japan interest rates.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table presents the results of Aflac Japan's investment yields for the years ended and as of December 31 2024 2023 Total purchases for the period (in millions) (1) $ 4,894 $ 2,741 New money yield (1),(2) 6.11 % 5.18 % Return on average invested assets (3) 3.33 2.90 Portfolio book yield, including U.S. dollar-denominated investments, end of period (1),(2) 3.22 % 3.18 % (1) Includes fixed maturity securities, commercial mortgage and other loans, equity securities, and excludes alternative investments in limited partnerships (2) Reported on a gross yield basis; excludes investment expenses, external management fees, and amortized hedge costs (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 2024 was primarily due to higher allocations to higher yielding asset classes.
See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income. 2023 2022 2021 Aflac Japan: FX Forwards FX forward (sell USD, buy yen) notional at end of period (in billions) (1) $0.0 $4.1 $6.4 Amortized hedge income (cost) for period (in millions) $(88) $(44) $(55) FX Options FX option notional at the end of period (in billions) (1) $24.7 $13.5 $11.6 Amortized hedge income (cost) for period (in millions) $(69) $(68) $(22) Corporate and other (Parent Company): FX Forwards FX forward (buy USD, sell yen) notional at end of period (in billions) (1) $2.6 $5.0 $5.0 Amortized hedge income (cost) for period (in millions) $126 $71 $62 FX Options FX option notional at the end of period (in billions) (1) $0.5 $2.6 $1.9 Amortized hedge income (cost) for period (in millions) $(5) $(3) $(5) (1) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.
See the Results of Operations section of this MD&A for the Company's definition of amortized hedge costs/income. 2024 2023 Aflac Japan: FX Forwards FX forward (sell USD, buy yen) notional at end of period (in billions) (1) $0.0 $0.0 Amortized hedge income (cost) for period (in millions) $1 $(88) FX Options FX option notional at the end of period (in billions) (1) $24.2 $24.7 Amortized hedge income (cost) for period (in millions) $(27) $(69) Corporate and other (Parent Company): FX Forwards FX forward (buy USD, sell yen) notional at end of period (in billions) (1) $1.8 $2.6 Amortized hedge income (cost) for period (in millions) $113 $126 FX Options FX option notional at the end of period (in billions) (1) $0.0 $0.5 Amortized hedge income (cost) for period (in millions) $0 $(5) (1) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.
Tax credits on these investments of $334, $83 and $115 in 2023, 2022 and 2021, 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.
Tax credits on these investments of $164 and $334 in 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. 51 Item 7.
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 45 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations smart devices.
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.
In order to economically mitigate risks associated with the enterprise-wide exposure to the yen and the level and volatility of hedge costs, the Parent Company enters into foreign currency forward and option contracts. By buying U.S. dollars and 61 Item 7.
In order to economically mitigate risks associated with the enterprise-wide exposure to the yen and the level and volatility of hedge costs, the Parent Company enters into foreign currency forward and option contracts. By buying U.S. dollars and selling yen, the Parent Company is effectively lowering its overall economic exposure to the yen.
In addition, the notes maturing in September 2029, December 2032 and September 2037 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after June 14, 2029, June 14, 2032 and March 14, 2037, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.
In 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. 65 Item 7.
(2) Net interest cash flows from derivatives associated with certain investment strategies of $(294), $(86) and $(33) in 2023, 2022 and 2021, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.
(2) Net interest income/expense from derivatives associated with certain investment strategies of $(305) and $(294) in 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 additional information concerning the Company's investments, see Notes 3, 4, and 5 of the Notes to the Consolidated Financial Statements. The following tables detail investments by segment as of December 31. Investment Securities by Segment 2023 (In millions) Aflac Japan Aflac U.S.
For additional information concerning the Company's investments, see Notes 3, 4, and 5 of the Notes to the Consolidated Financial Statements. 52 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following tables detail investments by segment as of December 31. Investment Securities by Segment 2024 (In millions) Aflac Japan Aflac U.S.
Therefore, the sum of the cash outflows exceeds the corresponding liability amount. Due to the significance of the assumptions used, actual cash outflow amounts and timing will differ, possibly materially, from these estimates. (3) These cash outflows are undiscounted with respect to interest and, as a result, the sum of the cash outflows exceeds the corresponding liability amount.
Therefore, the sum of the cash outflows exceeds the corresponding liability amount. Due to the significance of the assumptions used, actual cash outflow amounts and timing will differ, possibly materially, from these estimates.
In September 2022, the Parent Company issued four series of senior notes totaling ¥73.0 billion through a public debt offering under its U.S. shelf registration statement. The first series, which totaled ¥33.4 billion, bears interest at a fixed rate of 1.075% per annum, payable semi-annually, and will mature in September 2029.
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.
As previously discussed, for certain of its U.S. dollar-denominated securities, the Company enters into foreign currency forward and option contracts to hedge the currency risk on the fair value of hedged investments.
This requires that the Company convert the yen cash flows to U.S. dollars before investing. As previously discussed, for certain of its U.S. dollar-denominated securities, the Company enters into foreign currency forward and option contracts to hedge the currency risk on the fair value of hedged 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 following is the Company's below-investment-grade exposure at December 31. 56 Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations 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 invested in as part of an allocation to that segment of the market. The following is the Company's below-investment-grade exposure at December 31.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations AFLAC JAPAN SEGMENT Aflac Japan Pretax Adjusted Earnings Changes in Aflac Japan's pretax adjusted earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency and investment yields.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations AFLAC JAPAN SEGMENT Aflac Japan Pretax Adjusted Earnings Changes in Aflac Japan's pretax adjusted earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency and investment yields. The following table presents a summary of operating results for Aflac Japan for the years ended December 31.
Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense in the consolidated statements of earnings.
Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense accreted on insurance reserves in benefits and claims, excluding reserve remeasurement in the consolidated statements of earnings.
The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the years ended December 31. 2023 2022 2021 Cancer 64.1 % 56.5 % 49.2 % Medical and other health: Medical 20.2 26.6 37.2 Income support .4 1.3 0.5 Life insurance: Traditional life (1) 6.5 8.1 9.0 WAYS 6.8 3.5 .8 Child endowment .4 .3 .3 Other 1.6 3.7 3.0 Total 100.0 % 100.0 % 100.0 % (1) Includes term and whole life 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 such as nursing care and work leave insurance.
The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the years ended December 31. 2024 2023 Cancer 57.5 % 64.1 % Medical and other health 16.1 20.6 Life insurance: Traditional life (1) 23.0 6.5 WAYS 2.2 6.8 Child endowment .2 .4 Other 1.0 1.6 Total 100.0 % 100.0 % (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.
In addition to a security, or an asset class, or an issuer-specific credit fundamentals, it considers past events, current economic conditions and forecasts of future economic conditions. The Company's estimates are revised as conditions change and new information becomes available. 71 Item 7.
In addition to a security, an asset class, or issuer-specific credit fundamentals, it considers past events, current economic conditions and forecasts of future economic conditions. The Company's estimates are revised as conditions change and new information becomes available. See the tabular disclosure entitled "Sensitivity of Fair Values of Financial Instruments to Interest Rate Change" in Item 7A.
Currently, when the Company's fixed maturity securities mature, the proceeds may be reinvested at a yield below that required for the accretion of policy benefit liabilities on policies issued in earlier years.
Prudent portfolio management dictates that the Company attempts to match the duration of its assets with the duration of its liabilities. Currently, when the Company's fixed maturity securities mature, the proceeds may be reinvested at a yield below that required for the accretion of policy benefit liabilities on policies issued in earlier years.
The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the years ended December 31. 2023 2022 2021 Independent corporate and individual 46.7 % 49.5 % 51.1 % Affiliated corporate (1) 50.0 46.5 43.7 Bank 3.3 4.0 5.2 Total 100.0 % 100.0 % 100.0 % (1) Includes Japan Post Group, Dai-ichi Life and Daido Life In 2023, Aflac Japan recruited 24 new sales agencies.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the years ended December 31. 2024 2023 Independent corporate and individual 48.2 % 46.7 % Affiliated corporate (1) 48.6 50.0 Bank 3.2 3.3 Total 100.0 % 100.0 % (1) Includes Japan Post Group, Dai-ichi Life and Daido Life In 2024, Aflac Japan recruited 50 new sales agencies.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

246 edited+42 added−65 removed249 unchanged
The Company's policy is to accrue assessments when the entity for which the insolvency relates has met its state of domicile's statutory definition of insolvency, the amount of the loss is reasonably estimable and the related premium upon which the assessment is based is written. See Note 15 for further discussion of the guaranty fund assessments charged to the Company.
The Company's policy is to accrue assessments when the entity to which the insolvency relates has met its state of domicile's statutory definition of insolvency, the amount of the loss is reasonably estimable and the related premium upon which the assessment is based is written. See Note 15 for further discussion of the guaranty fund assessments charged to the Company.
For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers' specific credit profile. For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data.
For any significant declines in fair value determined to be non-interest rate or market-related, the Company performs a more focused review of the related issuers' specific credit profile. For corporate issuers, the Company evaluates their assets and business profile, including industry dynamics and competitive positioning, financial statements and other available financial data.
(b) Actual or equivalent credit spreads in basis points. (c) Category represents a single security; range not applicable.
(b) Category represents a single security; range not applicable. (c) Actual or equivalent credit spreads in basis points.
Financial Statements and Supplementary Data 2023 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Securities available-for-sale, carried at fair value: Fixed maturity securities: Government and agencies: Third-party pricing vendor $ 21,692 $ 808 $ 0 $ 22,500 Internal 0 60 0 60 Broker/other 8 32 0 40 Total government and agencies 21,700 900 0 22,600 Municipalities: Third-party pricing vendor 0 1,426 0 1,426 Internal 0 256 0 256 Broker/other 0 616 0 616 Total municipalities 0 2,298 0 2,298 Mortgage- and asset-backed securities: Third-party pricing vendor 0 2,277 0 2,277 Internal 0 27 105 132 Broker/other 0 10 667 677 Total mortgage- and asset-backed securities 0 2,314 772 3,086 Public utilities: Third-party pricing vendor 0 4,570 0 4,570 Internal 0 2,677 0 2,677 Broker/other 0 92 253 345 Total public utilities 0 7,339 253 7,592 Sovereign and supranational: Third-party pricing vendor 0 118 0 118 Internal 0 330 0 330 Broker/other 0 59 30 89 Total sovereign and supranational 0 507 30 537 Banks/financial institutions: Third-party pricing vendor 0 5,085 0 5,085 Internal 0 3,008 69 3,077 Broker/other 0 664 9 673 Total banks/financial institutions 0 8,757 78 8,835 Other corporate: Third-party pricing vendor 0 18,088 4 18,092 Internal 0 4,210 230 4,440 Broker/other 0 5,396 414 5,810 Total other corporate 0 27,694 648 28,342 Total securities available-for-sale $ 21,700 $ 49,809 $ 1,781 $ 73,290 Equity securities, carried at fair value: Third-party pricing vendor $ 800 $ 0 $ 0 $ 800 Internal 0 0 216 216 Broker/other 40 0 32 72 Total equity securities $ 840 $ 0 $ 248 $ 1,088 141 Item 8.
Financial Statements and Supplementary Data 2023 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Securities available-for-sale, carried at fair value: Fixed maturity securities: Government and agencies: Third-party pricing vendor $ 21,692 $ 808 $ 0 $ 22,500 Internal 0 60 0 60 Broker/other 8 32 0 40 Total government and agencies 21,700 900 0 22,600 Municipalities: Third-party pricing vendor 0 1,426 0 1,426 Internal 0 256 0 256 Broker/other 0 616 0 616 Total municipalities 0 2,298 0 2,298 Mortgage- and asset-backed securities: Third-party pricing vendor 0 2,277 0 2,277 Internal 0 27 105 132 Broker/other 0 10 667 677 Total mortgage- and asset-backed securities 0 2,314 772 3,086 Public utilities: Third-party pricing vendor 0 4,570 0 4,570 Internal 0 2,677 0 2,677 Broker/other 0 92 253 345 Total public utilities 0 7,339 253 7,592 Sovereign and supranational: Third-party pricing vendor 0 118 0 118 Internal 0 330 0 330 Broker/other 0 59 30 89 Total sovereign and supranational 0 507 30 537 Banks/financial institutions: Third-party pricing vendor 0 5,085 0 5,085 Internal 0 3,008 69 3,077 Broker/other 0 664 9 673 Total banks/financial institutions 0 8,757 78 8,835 Other corporate: Third-party pricing vendor 0 18,088 4 18,092 Internal 0 4,210 230 4,440 Broker/other 0 5,396 414 5,810 Total other corporate 0 27,694 648 28,342 Total securities available-for-sale $ 21,700 $ 49,809 $ 1,781 $ 73,290 Equity securities, carried at fair value: Third-party pricing vendor $ 800 $ 0 $ 0 $ 800 Internal 0 0 216 216 Broker/other 40 0 32 72 Total equity securities $ 840 $ 0 $ 248 $ 1,088 139 Item 8.
Financial Statements and Supplementary Data 2023 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Assets: Securities available-for-sale, carried at fair value: Fixed maturity securities: Government and agencies $ 21,700 $ 900 $ 0 $ 22,600 Municipalities 0 2,298 0 2,298 Mortgage- and asset-backed securities 0 2,314 772 3,086 Public utilities 0 7,339 253 7,592 Sovereign and supranational 0 507 30 537 Banks/financial institutions 0 8,757 78 8,835 Other corporate 0 27,694 648 28,342 Total fixed maturity securities 21,700 49,809 1,781 73,290 Equity securities 840 0 248 1,088 Other investments 1,304 0 0 1,304 Cash and cash equivalents 4,306 0 0 4,306 Other assets: Foreign currency swaps 0 86 0 86 Foreign currency forwards 0 238 0 238 Foreign currency options 0 2 0 2 Interest rate swaps 0 11 0 11 Total other assets 0 337 0 337 Total assets $ 28,150 $ 50,146 $ 2,029 $ 80,325 Liabilities: Other liabilities: Foreign currency swaps $ 0 $ 507 $ 0 $ 507 Foreign currency forwards 0 504 0 504 Interest rate swaps 0 419 0 419 Total liabilities $ 0 $ 1,430 $ 0 $ 1,430 136 Item 8.
Financial Statements and Supplementary Data 2023 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Assets: Securities available-for-sale, carried at fair value: Fixed maturity securities: Government and agencies $ 21,700 $ 900 $ 0 $ 22,600 Municipalities 0 2,298 0 2,298 Mortgage- and asset-backed securities 0 2,314 772 3,086 Public utilities 0 7,339 253 7,592 Sovereign and supranational 0 507 30 537 Banks/financial institutions 0 8,757 78 8,835 Other corporate 0 27,694 648 28,342 Total fixed maturity securities 21,700 49,809 1,781 73,290 Equity securities 840 0 248 1,088 Other investments 1,304 0 0 1,304 Cash and cash equivalents 4,306 0 0 4,306 Other assets: Foreign currency swaps 0 86 0 86 Foreign currency forwards 0 238 0 238 Foreign currency options 0 2 0 2 Interest rate swaps 0 11 0 11 Total other assets 0 337 0 337 Total assets $ 28,150 $ 50,146 $ 2,029 $ 80,325 Liabilities: Other liabilities: Foreign currency swaps $ 0 $ 507 $ 0 $ 507 Foreign currency forwards 0 504 0 504 Interest rate swaps 0 419 0 419 Total liabilities $ 0 $ 1,430 $ 0 $ 1,430 133 Item 8.
Significant Accounting Policies Foreign Currency Translation: The functional currency of Aflac Japan is the Japanese yen. The Company translates its yen-denominated financial statement accounts into U.S. dollars as follows. Assets and liabilities are translated at end-of-period exchange rates. Realized gains and losses on security transactions are translated at the exchange rate on the trade date of each transaction.
Significant Accounting Policies Foreign Currency Translation and Remeasurement: The functional currency of Aflac Japan is the Japanese yen. The Company translates its yen-denominated financial statement accounts into U.S. dollars as follows. Assets and liabilities are translated at end-of-period exchange rates. Realized gains and losses on security transactions are translated at the exchange rate on the trade date of each transaction.
On an ongoing basis, TREs and CMLs with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss.
On an ongoing basis, TREs, CMLs and other loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss.
As of December 31, 2023, the Company had an immaterial amount of fixed maturity securities on nonaccrual status. Commercial Mortgage and Other Loans The Company classifies its TREs, CMLs, MMLs, and other loans as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets.
As of December 31, 2024 and 2023, the Company had an immaterial amount of fixed maturity securities on nonaccrual status. Commercial Mortgage and Other Loans The Company classifies its TREs, CMLs, MMLs, and other loans as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets.
The Company’s operations consist of two reportable business segments: Aflac Japan, which includes ALIJ, and Aflac U.S., which includes Aflac, Aflac New York, CAIC, TOIC and ABS. Aflac New York is a wholly owned subsidiary of Aflac. Most of Aflac's policies are individually underwritten and marketed through independent agents.
The Company’s operations consist of two reportable business segments: Aflac Japan, which includes ALIJ, and Aflac U.S., which includes Aflac, Aflac New York, CAIC, TOIC and ABS. Aflac New York is a wholly owned subsidiary of Aflac. Most of the Aflac U.S. policies are individually underwritten and marketed through independent agents.
For those entities where the Company is the primary beneficiary, the consolidated entity's assets are segregated on the balance sheet by the caption "consolidated variable interest entities," and consist of fixed maturity securities, equity securities, loan receivables, limited partnerships and derivative instruments.
For those entities where the Company is the primary beneficiary, the consolidated entity's assets are segregated on the balance sheet by the caption "consolidated variable interest entities," and consist of fixed maturity securities, loan receivables, limited partnerships and derivative instruments.
The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for held-to-maturity fixed maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period.
The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD / LGD over a two-year period for held-to-maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period.
Financial Statements and Supplementary Data Offsetting of Financial Assets and Derivative Assets 2023 Gross Amounts Not Offset in Balance Sheet (In millions) Gross Amount of Recognized Assets Gross Amount Offset in Balance Sheet Net Amount of Assets Presented in Balance Sheet Financial Instruments Securities Collateral Cash Collateral Received Net Amount Derivative assets: Derivative assets subject to a master netting agreement or offsetting arrangement OTC - bilateral $ 271 $ 0 $ 271 $ (85) $ (53) $ (130) $ 3 OTC - cleared 11 0 11 (11) 0 0 0 Total derivative assets subject to a master netting agreement or offsetting arrangement 282 0 282 (96) (53) (130) 3 Derivative assets not subject to a master netting agreement or offsetting arrangement OTC - bilateral 55 55 55 Total derivative assets not subject to a master netting agreement or offsetting arrangement 55 55 55 Total derivative assets 337 0 337 (96) (53) (130) 58 Securities lending and similar arrangements 1,480 0 1,480 0 0 (1,480) 0 Total $ 1,817 $ 0 $ 1,817 $ (96) $ (53) $ (1,610) $ 58 132 Item 8.
Financial Statements and Supplementary Data 2023 Gross Amounts Not Offset in Balance Sheet (In millions) Gross Amount of Recognized Assets Gross Amount Offset in Balance Sheet Net Amount of Assets Presented in Balance Sheet Financial Instruments Securities Collateral Cash Collateral Received Net Amount Derivative assets: Derivative assets subject to a master netting agreement or offsetting arrangement OTC - bilateral $ 271 $ 0 $ 271 $ (85) $ (53) $ (130) $ 3 OTC - cleared 11 0 11 (11) 0 0 0 Total derivative assets subject to a master netting agreement or offsetting arrangement 282 0 282 (96) (53) (130) 3 Derivative assets not subject to a master netting agreement or offsetting arrangement OTC - bilateral 55 55 55 Total derivative assets not subject to a master netting agreement or offsetting arrangement 55 55 55 Total derivative assets 337 0 337 (96) (53) (130) 58 Securities lending and similar arrangements 1,480 0 1,480 0 0 (1,480) 0 Total $ 1,817 $ 0 $ 1,817 $ (96) $ (53) $ (1,610) $ 58 129 Item 8.
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Aflac Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Aflac Incorporated and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2023, and the related notes and financial statement schedules II, III, and IV (collectively, the consolidated financial statements).
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Aflac Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Aflac Incorporated and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2024, and the related notes and financial statement schedules II, III, and IV (collectively, the consolidated financial statements).
Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods presented (years 2021 and 2022) following the updated standard.
Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods then presented (years 2021 and 2022) following the updated standard.
If the swaption is early terminated but the hedge item is still outstanding, the amortization of disposal amount of the swaptions is recorded in net investment income over the remaining life of the hedged items.
If the swaption is early terminated but the hedged item is still outstanding, the amortization of disposal amount of the swaptions is recorded in net investment income over the remaining life of the hedged items.
The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal. 116 Item 8.
The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal. 111 Item 8.
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Aflac Incorporated: Opinion on Internal Control Over Financial Reporting We have audited Aflac Incorporated and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Aflac Incorporated: Opinion on Internal Control Over Financial Reporting We have audited Aflac Incorporated and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
(In years) 2023 2022 U.S. dollar-denominated debt securities 7 7 Policy benefits and related expenses to be paid in future years 8 8 Premiums to be received in future years on policies in force 6 7 The following table shows a comparison of average required interest rates for future policy benefits and investment yields, based on amortized cost, for the years ended December 31.
(In years) 2024 2023 U.S. dollar-denominated debt securities 7 7 Policy benefits and related expenses to be paid in future years 8 8 Premiums to be received in future years on policies in force 6 6 The following table shows a comparison of average required interest rates for future policy benefits and investment yields, based on amortized cost, for the years ended December 31.
(2) Gains and losses on cash flow hedges and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses).
Gains and losses on cash flow hedges and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses).
The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of December 31, 2023 and 2022, respectively. Certain fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements on certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.
The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of December 31, 2024 and 2023, respectively. Certain fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements on certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.
The change in fair value of the foreign currency option related to the time value of the option is recognized in current earnings and is excluded from the assessment of hedge effectiveness. 127 Item 8. Financial Statements and Supplementary Data Interest rate swaptions hedge the interest rate exposure of certain U.S. dollar-denominated available-for-sale securities held in Aflac Japan.
The change in fair value of the foreign currency option related to the time value of the option is recognized in current earnings and is excluded from the assessment of hedge effectiveness. 123 Item 8. Financial Statements and Supplementary Data Interest rate swaptions hedge the interest rate exposure of certain U.S. dollar-denominated available-for-sale securities held in Aflac Japan.
At December 31, 2023, debt securities with a fair value of $20 million were on deposit with regulatory authorities in the U.S. (including U.S. territories). The Company retains ownership of all securities on deposit and receives the related investment income. For general information regarding the Company's investment accounting policies, see Note 1. 4.
At December 31, 2024, debt securities with a fair value of $20 million were on deposit with regulatory authorities in the U.S. (including U.S. territories). The Company retains ownership of all securities on deposit and receives the related investment income. For general information regarding the Company's investment accounting policies, see Note 1. 4.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses. For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor. The models and associated processes and controls are executed by Company personnel. 139 Item 8.
For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses. For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor. The models and associated processes and controls are executed by Company personnel. 135 Item 8.
Key inputs are as follows: Instrument Type Level 2 Interest rate derivatives Swap yield curves Basis curves Interest rate volatility (1) Foreign currency exchange rate derivatives - Non-VIEs (forwards, swaps and options) Foreign currency forward rates Swap yield curves Basis curves Foreign currency spot rates Cross foreign currency basis curves Foreign currency volatility (1) Foreign currency exchange rate derivatives - VIEs (swaps) Foreign currency spot rates Swap yield curves Credit default swap curves Basis curves Recovery rates Foreign currency forward rates Foreign cross-currency basis curves (1) Option-based only 144 Item 8.
Key inputs are as follows: Instrument Type Level 2 Interest rate derivatives Swap yield curves Basis curves Interest rate volatility (1) Foreign currency exchange rate derivatives - Non-VIEs (forwards, swaps and options) Foreign currency forward rates Swap yield curves Basis curves Foreign currency spot rates Foreign cross-currency basis curves Foreign currency volatility (1) Foreign currency exchange rate derivatives - VIEs (swaps) Foreign currency spot rates Swap yield curves Credit default swap curves Basis curves Recovery rates Foreign currency forward rates Foreign cross-currency basis curves (1) Option-based only 140 Item 8.
When the issuer is a special financing vehicle or a branch or subsidiary of a global company, then the Company considers any guarantees and/or legal, regulatory and corporate relationships of the issuer relative to its ultimate parent in determining the proper assignment of country risk. 79 Item 7A.
When the issuer is a special financing vehicle or a branch or subsidiary of a global company, then the Company considers any guarantees and/or legal, regulatory and corporate relationships of the issuer relative to its ultimate parent in determining the proper assignment of country risk. 77 Item 7A.
The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The Company classifies these investments as other investments in the consolidated balance sheets. Securities Lending and Pledged Securities The Company lends fixed maturity and public equity securities to financial institutions in short-term securities lending transactions.
The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The Company classifies these investments as other investments in the consolidated balance sheets. Securities Lending and Pledged Securities The Company lends fixed maturity securities and, from time to time, public equity securities to financial institutions in short-term securities lending transactions.
The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet. As of December 31, 2023, all of the Company's derivative agreement counterparties were investment grade.
The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet. As of December 31, 2024, all of the Company's derivative agreement counterparties were investment grade.
For discontinued cash flow hedges, including those where the derivative is sold, terminated or exercised, amounts previously deferred in other comprehensive income (loss) are reclassified into earnings when earnings are impacted by the cash flow of the hedged item. 96 Item 8.
For discontinued cash flow hedges, including those where the derivative is sold, terminated or exercised, amounts previously deferred in other comprehensive income (loss) are reclassified into earnings when earnings are impacted by the cash flow of the hedged item. 94 Item 8.
ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures In March 2022, the FASB issued amendments that eliminated the accounting guidance for troubled debt restructurings (TDRs) for creditors, required enhanced disclosures for creditors about loan modifications when a borrower is experiencing financial difficulty, and required public business entities to include current-period gross write-offs in the vintage disclosure tables.
Financial Statements and Supplementary Data ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures In March 2022, the FASB issued amendments that eliminated the accounting guidance for troubled debt restructurings (TDRs) for creditors, required enhanced disclosures for creditors about loan modifications when a borrower is experiencing financial difficulty, and required public business entities to include current-period gross write-offs in the vintage disclosure tables.
Since the Company has a commitment to purchase the underlying bond at a specified price, the agreement meets the definition of a derivative where the value is derived based on the current market value of the bond compared to the fixed purchase price to be paid on the settlement date. 126 Item 8.
Since the Company has a commitment to purchase the underlying bond at a specified price, the agreement meets the definition of a derivative where the value is derived based on the current market value of the bond compared to the fixed purchase price to be paid on the settlement date. 122 Item 8.
The remaining maximum length of time for which these cash flows are hedged is approximately three years. The derivatives in the Company's consolidated VIEs that are not designated as accounting hedges are discussed in the Non-qualifying Strategies section of this note.
The remaining maximum length of time for which these cash flows are hedged is approximately two years. The derivatives in the Company's consolidated VIEs that are not designated as accounting hedges are discussed in the Non-qualifying Strategies section of this note.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedules II, III, and IV (collectively, the consolidated financial statements), and our report dated February 22, 2024 expressed an unqualified opinion on those consolidated financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedules II, III, and IV (collectively, the consolidated financial statements), and our report dated February 26, 2025 expressed an unqualified opinion on those consolidated financial statements.
The Company uses the following constant level bases to amortize deferred policy acquisition costs: Policy Type Constant-level Basis Life Products (U.S.) Face Amount Health Products (U.S.) Number of Policies in Force Health & Life Products (Japan) Units in Force 149 Item 8.
The Company uses the following constant level bases to amortize deferred policy acquisition costs: Policy Type Constant-level Basis Life Products (U.S.) Face Amount Health Products (U.S.) Number of Policies in Force Health & Life Products (Japan) Units in Force 145 Item 8.
Diluted EPS is computed by dividing net earnings by the weighted-average number of shares outstanding for the period plus the shares representing the dilutive effect of share-based awards. Reclassifications: Certain reclassifications have been made to prior-year amounts to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity. 99 Item 8.
Diluted EPS is computed by dividing net earnings by the weighted-average number of shares outstanding for the period plus the shares representing the dilutive effect of share-based awards. Reclassifications: Certain reclassifications have been made to prior-year amounts to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity.
DERIVATIVE INSTRUMENTS The Company's freestanding derivative financial instruments have historically consisted of: • foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio, with options used on a standalone basis and/or in a collar strategy; • 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; • foreign currency swaps that are associated with VIE bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary; • interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments; • interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities; and • bond purchase commitments at the inception of investments in consolidated VIEs. 125 Item 8.
DERIVATIVE INSTRUMENTS The Company's freestanding derivative financial instruments include: • foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio, with options used on a standalone basis and/or in a collar strategy; • 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; • foreign currency swaps that are associated with VIE bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary; • interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments; • interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities; and • bond purchase commitments at the inception of investments in consolidated VIEs. 121 Item 8.
The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the year ended December 31, 2022, that relate to equity securities held at the December 31, 2022, reporting date was $340 million.
The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the year ended December 31, 2022, that relate to equity securities held at the December 31, 2022, reporting date were $340 million.
The Company had no fair value hedges of interest rate risk as of December 31, 2023 and 2022; therefore, the amounts presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.
The Company had no fair value hedges of interest rate risk as of December 31, 2024 and 2023; therefore, the amounts presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.
If equity prices experienced a hypothetical broad-based decline of 10%, the fair value of the Company's equity investments would decline by approximately $109 million. 80 Item 8. Financial Statements and Supplementary Data ITEM 8.
If equity prices experienced a hypothetical broad-based decline of 10%, the fair value of the Company's equity investments would decline by approximately $80 million. 78 Item 8. Financial Statements and Supplementary Data ITEM 8.
Identifying the drivers of the declines in fair value helps to align and allocate the Company‘s resources to securities with real credit-related concerns that could impact ultimate collection of principal and interest.
Identifying the drivers of the declines in fair value helps to align and allocate the Company's resources to the review and monitoring of securities with real credit-related concerns that could impact ultimate collection of principal and interest.
The Company records deferred tax assets for tax positions taken based on its assessment of whether the tax position is more likely than not to be sustained upon examination by taxing authorities. A valuation allowance is established for deferred tax assets when it is more likely than not that an amount will not be realized.
The Company records deferred tax assets for tax positions taken based on its assessment of whether the tax position is more likely than not to be sustained upon examination by taxing authorities. A valuation allowance is established for deferred tax assets when it is more likely than not that an amount will not be realized. 97 Item 8.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.
In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows. 117 Item 8.
(b) Actual or equivalent credit spreads in basis points. (c) Category represents a single security; range not applicable. (d) Prices do not utilize credit spreads; therefore, range is not applicable. 147 Item 8.
(b) Category represents a single security; range not applicable. (c) Actual or equivalent credit spreads in basis points. (d) Prices do not utilize credit spreads; therefore, range is not applicable. 143 Item 8.
Investment Concentrations The Company's 15 largest exposures from investments in fixed maturity securities were as follows: Largest Global Fixed Maturity Security Investment Positions (In millions) December 31, 2023 Total % of Total No.
Investment Concentrations The Company's 15 largest exposures from investments in fixed maturity securities were as follows: Largest Global Fixed Maturity Security Investment Positions (In millions) December 31, 2024 Total % of Total No.
GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company’s underlying business performance.
GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any non-recurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company’s underlying business performance.
When determining the Company's intention to sell a security prior to recovery of its fair value to amortized cost, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings.
When determining the Company's intention to sell a security prior to recovery of its amortized cost basis, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings.
These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date. As of December 31, 2023, the Company had $488 million in outstanding commitments to fund TREs. These commitments are contingent on the final underwriting and due diligence to be performed.
These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date. As of December 31, 2024, the Company had $273 million in outstanding commitments to fund TREs. These commitments are contingent on the final underwriting and due diligence to be performed.
If the credit-risk-related contingent features underlying these agreements had been triggered on December 31, 2023, the Company estimates that it would be required to post a maximum of $363 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights.
If the credit-risk-related contingent features underlying these agreements had been triggered on December 31, 2024, the Company estimates that it would be required to post a maximum of $475 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights.
Based on the Company's evaluation under this framework, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2023.
Based on the Company's evaluation under this framework, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2024.
Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities should not have a credit loss allowance as of December 31, 2023. Refer to the Allowance for Credit Losses section below for additional information.
Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities should not have an allowance for credit losses as of December 31, 2024. Refer to the Allowance for Credit Losses section below for additional information.
(4) Includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended December 31, 2023, compared with $1 and $2 of losses during the years ended December 31, 2022 and 2021, respectively, related to fair value hedges excluded component.
(2) Includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended December 31, 2024, compared with $1 of losses during the years ended December 31, 2023 and 2022, respectively, related to fair value hedges excluded component.
See the accompanying Notes to the Consolidated Financial Statements. 87 Item 8.
See the accompanying Notes to the Consolidated Financial Statements. (continued) 87 Item 8.
The tables below summarize the Company's derivatives and securities lending transactions as of December 31, and as reflected in the tables, in accordance with U.S. GAAP, the Company's policy is to not offset these financial instruments in the consolidated balance sheets. 131 Item 8.
The tables below summarize the Company's derivatives and securities lending transactions as of December 31, and as reflected in the tables, in accordance with U.S. GAAP, the Company's policy is to not offset these financial instruments in the consolidated balance sheets.
KPMG LLP (PCAOB Firm ID 185), an independent registered public accounting firm, has issued an attestation report from the firm's location in Atlanta, Georgia on the effectiveness of internal control over the Company's financial reporting as of December 31, 2023, which is included herein. 81 Item 8.
KPMG LLP (PCAOB Firm ID 185), an independent registered public accounting firm, has issued an attestation report from the firm's location in Atlanta, Georgia on the effectiveness of internal control over the Company's financial reporting as of December 31, 2024, which is included herein. 79 Item 8.
In addition, many of the Company's largest holdings are yen-denominated, therefore strengthening of the yen can increase its position in dollars, and weakening of the yen can decrease its position in dollars. The Company's global investment guidelines establish concentration limits for its investment portfolios.
In addition, many of the Company's largest holdings are yen-denominated, therefore strengthening of the yen can increase its position in dollars, and weakening of the yen can decrease its position in dollars. The Company's global investment guidelines establish concentration limits for its investment portfolios. 76 Item 7A.
There were no changes to the inputs or methods used to determine amortization amounts during 2023 and 2022. The Company updated the assumptions used to determine amortization using the same assumptions as those used for measuring the liability for future policy benefits during 2023 and 2022.
There were no changes to the inputs, judgments or methods used to determine amortization amounts during 2024 and 2023. The Company updated the assumptions used to determine amortization using the same assumptions as those used for measuring the liability for future policy benefits during 2024 and 2023.
If the fair value is higher than the amortized cost for debt securities, the excess is an unrealized gain, and if lower than cost, the difference is an unrealized loss. The net unrealized gains and losses on securities available-for-sale, less related deferred income taxes, are recorded through other comprehensive income and included in accumulated other comprehensive income. 93 Item 8.
If the fair value is higher than the amortized cost for debt securities, the excess is an unrealized gain, and if lower than cost, the difference is an unrealized loss. The net unrealized gains and losses on securities available-for-sale, less related deferred income taxes, are recorded in other comprehensive income and included in accumulated other comprehensive income.
The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on certain variable-rate investments. 129 Item 8.
The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on certain variable-rate investments. 125 Item 8.
The Company incorporates the assessment of the NRSROs in assigning credit ratings and incorporates the rating methodologies of its external managers in assigning loan ratings to portfolio holdings. The Company performs extensive internal assessments of the credit risks for all its portfolio holdings and potential new investments, which includes using analyses provided by the Company's specialist external managers.
The Company incorporates the assessment of the NRSROs in assigning credit ratings and incorporates the rating methodologies of its external managers in assigning loan ratings to portfolio holdings. The Company performs extensive internal assessments of the credit risks for all its portfolio holdings and potential new investments, which includes using analyses provided by the Company's 75 Item 7A.
The present value of expected future net premiums and the present value of expected future policy benefits are presented gross of internal and external ceded reinsurance. 150
The present value of expected future net premiums and the present value of expected future policy benefits are presented gross of internal and external ceded reinsurance. 146
The Company’s held-to-maturity portfolio includes Japan Government and Agency securities of $16.9 billion amortized cost as of December 31, 2023 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement. An investment in an available-for-sale security may be impaired if the fair value falls below amortized cost.
The Company’s held-to-maturity portfolio includes Japan Government and Agency securities of $15.2 billion amortized cost as of December 31, 2024 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement. An investment in an available-for-sale security may be impaired if the fair value falls below amortized cost.
Property and Equipment: The costs of buildings, furniture and equipment are depreciated principally on a straight-line basis over their estimated useful lives (maximum of 50 years for buildings and 20 years for furniture and equipment). Expenditures for maintenance and repairs are expensed as incurred; expenditures for betterments are capitalized and depreciated.
Financial Statements and Supplementary Data Property and Equipment: The costs of buildings, furniture and equipment are depreciated principally on a straight-line basis over their estimated useful lives (maximum of 50 years for buildings and 20 years for furniture and equipment). Expenditures for maintenance and repairs are expensed as incurred; expenditures for betterments are capitalized and depreciated.
In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $4.3 billion and $6.8 billion at December 31, 2023, and 2022, respectively, which may not be sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected on the consolidated financial statements.
In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $3.0 billion and $4.3 billion at December 31, 2024, and 2023, respectively, which may not be sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected on the consolidated financial statements.
The Company early adopted this guidance on July 1, 2023. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations or disclosures.
The Company early adopted this guidance on July 1, 2023. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations or disclosures. 98 Item 8.
Policyholder Protection Corporation and State Guaranty Association Assessments: In Japan, the government has required the insurance industry to contribute to a policyholder protection corporation. The Company recognizes a charge for its estimated share of the industry's obligation once it is determinable.
Financial Statements and Supplementary Data Policyholder Protection Corporation and State Guaranty Association Assessments: In Japan, the government has required the insurance industry to contribute to a policyholder protection corporation. The Company recognizes a charge for its estimated share of the industry's obligation once it is determinable.
Financial Statements and Supplementary Data Transfers of funds from Aflac Japan: Aflac Japan makes payments to the Parent Company for management fees and remittances of earnings. Information on transfers for each of the years ended December 31 is shown below. See Note 13 for information concerning restrictions on transfers from Aflac Japan.
Transfers of funds from Aflac Japan: Aflac Japan makes payments to the Parent Company for management fees and remittances of earnings. Information on transfers for each of the years ended December 31 is shown below. See Note 13 for information concerning restrictions on transfers from Aflac Japan.
Of these loans, TREs with an amortized cost of $160 million had no credit loss allowance as of December 31, 2023 because these loans are collateral dependent assets for which the estimated fair values of the collateral were in excess of amortized cost.
Of these loans, TREs with an amortized cost of $140 million and $160 million had no credit loss allowance as of December 31, 2024 and December 31, 2023, respectively, because these loans are collateral dependent assets for which the estimated fair values of the collateral were in excess of amortized cost.
The combination of a U.S. dollar-denominated investment and cross-currency swap economically creates a yen-denominated investment and has no impact on the Company's net investment hedge position.
The combination of a U.S. dollar-denominated investment and cross-currency swap economically creates a yen-denominated investment and has no impact on the Company's net investment hedge position. 73 Item 7A.
The Company monitors the credit ratings periodically, but not less frequently than quarterly. 118 Item 8. Financial Statements and Supplementary Data The following tables present as of December 31, 2023 the amortized cost basis of TREs, CMLs, MMLs, and other loans by year of origination and credit quality indicator .
The Company monitors these credit ratings periodically, but not less frequently than quarterly. 113 Item 8. Financial Statements and Supplementary Data The following tables present as of December 31, 2024 the amortized cost basis of TREs, CMLs, MMLs, and other loans by year of origination and credit quality indicator .
Financial Statements and Supplementary Data The Parent Company has designated a majority of its yen-denominated liabilities (notes payable and yen-denominated loans) as non-derivative hedges and foreign currency forwards and options as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.
The Parent Company has designated a majority of its yen-denominated liabilities (yen-denominated notes payable and yen-denominated loans) as non-derivative hedges and foreign currency forwards and options as derivative hedges of the foreign currency exposure of the Parent Company's net investment in Aflac Japan.
In cases where a credit curve cannot be developed from market information for the specific issuer, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable security(ies) of a guarantor and/or parent 2) CDS spreads of a guarantor and/or parent 3) bonds of comparable issuers with similar characteristics such as rating, geography, or sector 4) CDS spreads of an appropriate index or of comparable issuers with similar characteristics such as rating, geography, or sector 5) bond indices that are comparative in rating, industry, maturity, and region.
In cases where a credit curve cannot be developed from market information for the specific issuer, the valuation methodology takes into consideration other market observable inputs, including: • the most appropriate comparable security(ies) of a guarantor and/or parent • CDS spreads of a guarantor and/or parent • bonds of comparable issuers with similar characteristics such as rating, geography, or sector • CDS spreads of an appropriate index or of comparable issuers with similar characteristics such as rating, geography, or sector • bond indices that are comparative in rating, industry, maturity, and region. 136 Item 8.
Evaluating the underlying risks in the Company's credit portfolio involves a multitude of factors including but not limited to its assessment of the issuer's or borrower's business activities, assets, products, market position, financial condition, and future prospects, including sustainability of the issuer’s or borrower’s business and the impact of environmental, social and governance-related factors.
Evaluating the underlying risks in the Company's credit portfolio involves a multitude of factors including but not limited to its assessment of the issuer's or borrower's business activities, assets, products, market position, financial condition, and future prospects, including sustainability of the issuer’s or borrower’s business.
Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheets are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI). The Company’s LFPB was $83,718 million as of December 31, 2023.
Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheets are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI). The Company’s LFPB was $70,381 million as of December 31, 2024.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $1.2 billion and $1.3 billion as of December 31, 2023 and 2022, respectively.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $804 million and $1.2 billion as of December 31, 2024 and 2023, respectively.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $343, $91 and $138 in 2023, 2022 and 2021, respectively, is included as a reduction to net investment income.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $165, $343 and $91 in 2024, 2023 and 2022, respectively, is included as a reduction to net investment income.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $343, $91 and $138 in 2023, 2022 and 2021, respectively, is included as a reduction to net investment income.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $165, $343 and $91 in 2024, 2023 and 2022, respectively, is included as a reduction to net investment income.
Similarly, the combination of the U.S. corporate bonds and the foreign currency forwards and options that the Company has entered into, as discussed in the Aflac Japan Investment subsection of MD&A, economically creates a yen-denominated investment that qualifies for inclusion as a component of the Company's investment in Aflac Japan for net investment hedge purposes.
Quantitative and Qualitative Disclosures About Market Risk Similarly, the combination of the U.S. corporate bonds and the foreign currency forwards and options that the Company has entered into, as discussed in the Aflac Japan Investment subsection of MD&A, economically creates a yen-denominated investment that qualifies for inclusion as a component of the Company's investment in Aflac Japan for net investment hedge purposes.
As of December 31, 2023, the Parent Company had $1.2 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S. dollar to Japanese yen. Changes in the values of these swaps are recorded in current period earnings.
As of December 31, 2024, the Parent Company had $450 million notional amount of cross-currency interest rate swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S. dollar to Japanese yen. Changes in the values of these swaps are recorded in current period earnings.

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