UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-07434
Aflac Incorporated
(Exact name of registrant as specified in its charter)
Georgia
58-1167100
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1932 Wynnton Road
Columbus, Georgia
31999
(Address of principal executive offices)
(ZIP Code)
Registrant’s telephone number, including area code: 706.323.3431
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.10 Par Value
AFL
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. ¨ Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No
The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2025, was
$56,035,389,963.
The number of shares of the registrant’s common stock outstanding at February 16, 2026, with $.10 par value, was 516,369,452.
Documents Incorporated By Reference
Certain information contained in the Notice and Proxy Statement for the Company’s 2026 Annual Meeting of Shareholders is
incorporated by reference into Part III hereof.
Aflac Incorporated
Annual Report on Form 10-K
For the Year Ended December 31, 2025
Table of Contents
PART I
Page
Item 1.
Business
2
Item 1A. Risk Factors
13
Item 1B. Unresolved Staff Comments
27
Item 1C. Cybersecurity
27
Item 2.
Properties
28
Item 3.
Legal Proceedings
28
Item 4.
Mine Safety Disclosures
28
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
29
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
188
Item 9A. Controls and Procedures
188
Item 9B. Other Information
189
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
189
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
190
Item 11.
Executive Compensation
190
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
190
Item 13.
Certain Relationships and Related Transactions, and Director Independence
190
Item 14.
Principal Accounting Fees and Services
190
PART IV
Item 15.
Exhibits and Financial Statement Schedules
191
Item 16. Form 10-K Summary
207
Glossary of Selected Terms
208
i
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. Aflac Incorporated and its subsidiaries (the Company) desire to take
advantage of these provisions. 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 or furnished to the Securities and
Exchange Commission (SEC). 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. The Company
undertakes no obligation to update such forward-looking statements, except as may be required by law.
• expect
• anticipate
• believe
• goal
• objective
• strategy
• may
• should
• estimate
• intend
• project
• future
• will
• assume
• potential
• target
• outlook
• continue
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 Japanese 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, and uncertainty regarding the
impact of the incident involving unauthorized access to the Company’s network in June 2025
•
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
Item 1. Business
1
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.). 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. Throughout its 70-year history, the Company’s supplemental insurance policies have given policyholders the
opportunity to focus on recovery, not financial stress.
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. 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 SEC.
REVENUE-GENERATING ACTIVITIES
The Company's strategy for growth in Japan and the U.S. 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. The Company
also offers a complement of other voluntary and employer-paid 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. To help promote its
insurance products, the Company’s marketing campaigns feature the Aflac Duck.
LONG-TERM GROWTH STRATEGY
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. 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 its international debut in Japan in 2003. In the time since its 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. Celebrating its 25th anniversary in the U.S., the Aflac Duck continues to be
a helpmate who increases brand knowledge and connection.
Item 1. Business
2
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). 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, Inc. (ABS), which provides a platform for
Aflac Dental and Vision in the U.S.
For information on the Company's results of operations and financial information by segment, see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 2 of the Notes to the
Consolidated Financial Statements.
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.
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. 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. Aflac Japan remains focused 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 products as outlined below.
Third Sector Insurance Products
Cancer
Cancer Insurance Aflac Japan pioneered the cancer insurance market in Japan in 1974, and remains the number
one provider of cancer insurance in Japan today. Aflac Japan's cancer insurance products provide a lump-sum benefit
upon initial diagnosis of cancer and fixed daily benefits for subsequent hospitalization and outpatient treatments due
to cancer, as well as cancer-related surgical and convalescent care benefits. In March 2025, Aflac Japan launched a
new cancer insurance product, Miraito, a service-integrated product designed to allow customers the flexibility to
choose necessary coverage to meet their individual needs. Aflac Japan continues to provide Yori-sou Cancer
Consultation Support, a service that provides comprehensive support from the moment a policyholder suspects
cancer through treatment and recovery. This service is provided to all existing policyholders of Aflac Japan cancer
insurance products, including Miraito.
Medical and Other Health
Medical Insurance Aflac Japan's medical insurance products provide benefits for hospitalization, surgeries and
outpatient treatment of various illnesses, as well as lump sum benefits related to three critical illnesses: cancer, heart
attack, and stroke. In December 2025, Aflac Japan launched a new medical insurance product, Anshin Palette, which
offers customers the flexibility to choose only the coverage they need from a wide range of options.
Other
Nursing Care Insurance Aflac Japan's Nursing Care Insurance provides coverage for out-of-pocket costs incurred
when receiving public nursing care services.
Item 1. Business
3
First Sector Insurance Products
Life
Protection-Type Life Insurance
Whole Life Prepare Smart Whole-Life Insurance is a whole life insurance product with low cash surrender value,
which offers non-smoking policyholders further discounted premiums, and it provides beneficiaries, typically a
designated family member, with a pre-determined benefit payment upon the death of the insured.
GIFT GIFT is a term life insurance product that provides beneficiaries, typically family members, with a fixed amount
of money every month upon a breadwinner’s death or serious disability as family support.
Savings-Type Life Insurance
Tsumitasu Launched in June 2024, Tsumitasu is an insurance product designed primarily for post-retirement
preparation, with asset formation features and coverage for nursing care and other benefits.
WAYS and Child Endowment WAYS is an insurance product which has features that allow policyholders to convert a
portion of their life insurance to medical, nursing care or fixed annuity benefits at a predetermined age. Aflac Japan's
child endowment insurance product offers a death benefit until a child reaches age 18. This product also pays a lump-
sum benefit at the time of the child's entry into high school, as well as an educational annuity for each of the four
years during his or her college education.
Distribution Channels
Traditional Sales Channel This distribution channel includes individual agencies, independent corporate agencies and
affiliated corporate agencies. Aflac Japan was represented by approximately 6,300 sales agencies at the end of 2025,
with approximately 112,000 licensed sales associates employed by those agencies, including individual agencies.
Dai-ichi Life Aflac Japan's alliance with Dai-ichi Life was launched in 2001, and approximately 37,000 Dai-ichi Life
representatives offer Aflac Japan's cancer products. Dai-ichi Life is included in Aflac Japan's affiliated corporate agencies
distribution channel.
Japan Post Group Aflac Japan's alliance with Japan Post Group, which is included in Aflac Japan's affiliated corporate
agencies distribution channel, was launched in 2008. After the alliance strengthened in 2013, the number of postal outlets
of Japan Post Co. Ltd. (Japan Post Co.) offering Aflac Japan's cancer product increased, with approximately 20,000 postal
outlets as of December 31, 2025. Japan Post Insurance Co., Ltd. (Japan Post Insurance) offers Aflac Japan's cancer
products through its 76 branches responsible for corporate sales and 626 service departments in charge of individual
sales.
Daido Life Aflac Japan's alliance with Daido Life was launched in 2013, and approximately 3,700 Daido Life
representatives offer Aflac Japan's cancer products to mainly small and medium-sized business owners, executives and
employees. Daido Life is included in Aflac Japan's affiliated corporate agencies distribution channel.
Banks Consumers in Japan rely on banks to provide not only traditional bank services, but also as one key source to
provide insurance solutions and other services. At December 31, 2025, Aflac Japan had agreements with approximately
90% of the total number of banks in Japan to sell its products.
Competitive Markets
The Company competes with other insurance carriers through product design, price, policyholder service, and sales
efforts. Since the deregulation of the Japan market in 2001, the number of insurance companies offering stand-alone
cancer and medical insurance has increased, intensifying competition. However, based on Aflac Japan's size of
annualized premiums in force and diversified distribution network, the Company believes it is well-positioned to continue
to adapt to increased competition. Furthermore, the Company believes the continued development and maintenance of
operating efficiencies will allow Aflac Japan to offer affordable products that appeal to consumers. The Company believes
Aflac Japan will remain a leading provider of third sector products such as cancer and medical insurance coverage in
Japan, principally due to its experience in the market, well-known brand, low-cost operations, expansive marketing system
and product expertise.
Item 1. Business
4
Government Regulation
Financial Services Agency (FSA) The financial and business affairs of Aflac Japan are subject to examination by Japan's
FSA. Aflac Japan files annual and interim reports and financial statements for the Japanese insurance operations based
on a March 31 fiscal year-end, prepared in accordance with Japanese regulatory accounting practices prescribed or
permitted by the FSA. Japanese regulatory basis earnings are determined using accounting principles that differ materially
from U.S. generally accepted accounting principles (U.S. GAAP). For additional information, see Note 14 of the Notes to
the Consolidated Financial Statements.
Two FSA regulations applicable to Aflac Japan are outlined below.
▪
Privacy and Cybersecurity
With regard to personal information obtained from policyholders, the insured, or others, Aflac Japan is regulated in
Japan by the Act on the Protection of Personal Information (APPI) and guidelines issued by FSA and other
governmental authorities.
•
FSA Solvency Standard
The FSA maintains a solvency standard, the solvency margin ratio (SMR), which is used by Japanese regulators
to monitor the financial strength of insurance companies. Aflac Japan's SMR is sensitive to interest rate, credit
spread and foreign exchange rate changes. See the Liquidity and Capital Resources section of Item 7. MD&A for
additional information on SMR, including a discussion of measures the Company has taken to mitigate the
sensitivity of Aflac Japan's SMR and the introduction of an economic value-based solvency regime based on the
Insurance Capital Standards (ICS) for insurance companies effective for Aflac Japan's 2025 fiscal year-end.
Companies Act of Japan Aflac Japan dividend distributions to the Parent Company are subject to permitted dividend
capacity under the Companies Act of Japan.
Policyholder Protection The Japanese insurance industry has a policyholder protection corporation that provides funds for
the policyholders of insolvent insurers. For additional information, see the Policyholder Protection section of Item 7.
MD&A.
For additional information regarding Aflac Japan's operations and regulations, see the Aflac Japan Segment subsection of
Item 7. MD&A and Notes 2 and 14 of the Notes to the Consolidated Financial Statements.
AFLAC U.S.
The Company designs its U.S. insurance products to provide supplemental coverage for people who already have major
medical or primary insurance coverage, as Aflac U.S. insurance policies pay benefits regardless of other insurance. Aflac
U.S. products are distributed in the individual and group supplemental insurance markets. Aflac's individual policies are
portable, meaning that individuals may retain their full insurance coverage upon separation from employment or affiliation
with a group, generally at the same premium. Individual policies are typically guaranteed-renewable for the lifetime of the
policyholder (to age 75 for short-term disability policies).
Insurance Products
Accident
Accident Insurance Aflac U.S. offers accident coverage on both an individual and group basis. These policies pay
cash benefits in the event of a covered injury. The accident portion of the policy includes lump-sum benefits for
accidental death, dismemberment and specific injuries as well as fixed benefits for hospital confinement. Additional
benefits are also available for home modifications, wellness and increased benefits for injuries related to participation
in an organized sporting activity.
Item 1. Business
5
Disability
Disability Insurance Aflac U.S. offers short-term disability benefits on both an individual and group basis and long-
term disability benefits on a group basis. These plans provide coverage for covered injury, illness or mental health
conditions.
Critical Care
Cancer Insurance Aflac U.S.'s cancer insurance products provide a lump-sum benefit upon initial diagnosis of cancer
and subsequent benefits for treatment received due to cancer. Aflac U.S. offers cancer insurance on an individual
basis.
Critical Illness Insurance Aflac U.S. offers coverage for critical illness plans on both an individual and group basis.
These policies are designed to pay cash benefits in the event of critical illnesses such as heart attack, stroke or
cancer.
Hospital Indemnity
Hospital Indemnity Insurance Aflac U.S. offers hospital indemnity coverage on both an individual and group basis.
Hospital indemnity products provide policyholders fixed dollar benefits triggered by hospitalization due to accident or
sickness. Indemnity benefits for inpatient and outpatient surgeries, as well as various other diagnostic events, are also
available. Aflac U.S. also offers a lump sum rider for a range of critical illness events that can be added to its individual
accident, short-term disability and hospital indemnity products.
Dental and Vision
Dental and Vision Insurance Aflac U.S. offers network dental and vision products on a group basis, as well as fixed-
benefit dental coverage on an individual basis.
Life
Life Insurance Aflac U.S. offers term- and whole-life policies on both an individual and group basis.
Seasonality
In recent years, new annualized premium sales are generally higher in the fourth quarter for Aflac U.S. group business
due to the timing of open enrollment for many employers. As a result, a significant portion of total new annualized
premium sales for Aflac U.S. group business are generated in the fourth quarter, which typically results in over one third of
Aflac U.S. total sales being generated in the fourth quarter.
Distribution Channels
Independent Associates/Career Agents The career agent channel in Aflac U.S. focuses on marketing Aflac to the small
business market, defined as employers of between three and 99 employees. Sales associates in the U.S. are independent
contractors and are paid commissions and other variable compensation based on first-year and renewal premiums from
their sales of insurance products.
Brokers The broker channel of Aflac U.S. focuses on selling to the mid- and large-case market, which is comprised of
employers with 100 or more employees and typically an average size of 1,000 employees or more. Brokers in the U.S. are
independent contractors and are paid commissions and other variable compensation based on first-year and renewal
premiums from their sales of insurance products.
In 2025, the Aflac U.S. sales force included an average of approximately 5,300 U.S. agents, including brokers, who were
actively producing business on a weekly basis. For additional information, see the Aflac U.S. Segment subsection of Item
7. MD&A.
Consumer Markets While Aflac U.S. primarily markets its insurance products at the worksite, Aflac U.S. is also expanding
its distribution strategy to directly reach consumers outside of the traditional worksite through digital lead generation.
Item 1. Business
6
Competitive Markets
Aflac U.S. competes against several supplemental insurance carriers on a national and regional basis. Aflac U.S. believes
its policies, premium rates, platforms, value-added services and sales commissions are competitive by product
type. Moreover, Aflac U.S. believes that its products are distinct from competitive offerings given its product focus
(including features, benefits and claims service model), distribution capabilities and brand awareness.
Since Aflac products provide an additional level of financial protection for policyholders, the Company believes the
increased financial exposure some employees may face creates a favorable opportunity for Aflac U.S. products. However,
given the profitability erosion some major medical carriers are facing in their core lines of business, the Company has
seen a more competitive landscape as these carriers seek entry into Aflac's supplemental product segments and leverage
their core benefit offerings by bundling and discounting products in order to gain market share.
Government Regulation
State Insurance Regulation The Parent Company and its U.S. insurance subsidiaries, Aflac, CAIC, TOIC (Nebraska-
domiciled insurance companies), Aflac New York (a New York-domiciled insurance company) and ABS (a licensed third-
party administrator in most U.S. jurisdictions and a pre-paid limited health service organization in Florida) are subject to
state regulations in the U.S. as an insurance holding company system. Such regulations generally provide that certain
transactions between companies within the holding company system must be fair and equitable. In addition, transfers of
assets among such affiliated companies, certain dividend payments from insurance subsidiaries and certain transactions
between companies within the system, including management fees, loans and advances are subject to prior notice to, or
approval by, state regulatory authorities. These laws generally require, among other things, the insurance holding
company and each insurance company directly owned by the holding company to register with the insurance departments
of their respective domiciliary states and to furnish annually financial and other information about the operations of
companies within the holding company system.
Like all U.S. insurance companies, Aflac, CAIC, TOIC and Aflac New York are subject to regulation and supervision in the
jurisdictions in which they do business. In general, the insurance laws of the various jurisdictions establish supervisory
agencies with broad administrative powers relating to, among other things:
• granting and revoking licenses to transact business
• regulating trade and claims practices
• licensing of insurance agents and brokers
• approval of policy forms and premium rates
• standards of solvency and maintenance of specified policy benefit reserves and minimum loss ratio requirements
• capital requirements
• limitations on dividends to shareholders
• the nature of and limitations on investments
• deposits of securities for the benefit of policyholders
• filing of financial statements prepared in accordance with statutory insurance accounting practices prescribed or
permitted by regulatory authorities
• periodic examinations of the market conduct, financial, and other affairs of insurance companies
The insurance laws of Nebraska that govern the Company's activities provide that the acquisition or change of “control” of
a domestic insurer or of any person that controls a domestic insurer cannot be consummated without the prior approval of
the Nebraska Department of Insurance (NDOI). 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. 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%. Similar laws apply in New York, the domiciliary jurisdiction of Aflac's New York insurance
subsidiary.
State insurance departments conduct periodic examinations of the books and records, financial reporting, policy filings
and market conduct of insurance companies domiciled in their states, generally once every three to five years.
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). Beginning in 2024 and concluding in 2025,
the NDOI and the New York State Department of Financial Services (NYSDFS) conducted full-scope, risk-focused
Item 1. Business
7
financial examinations on their respective state domiciled insurance entities covering the reporting period January 1, 2020
– December 31, 2023. Additionally, beginning in 2023 and concluding in 2025, the NYSDFS conducted a routine market
conduct examination on Aflac New York covering the five-year period ended on December 31, 2022. There were no
material findings in any of the NDOI and NYSDFS final examination reports.
NAIC Risk-Based Capital The NAIC continually reviews regulatory matters, such as risk-based capital (RBC)
modernization, group capital calculations and liquidity risk assessment. The NAIC uses an RBC formula relating to
insurance risk, business risk, asset risk and interest rate risk to facilitate identification by insurance regulators of
inadequately capitalized insurance companies based upon the types and mix of risk inherent in the insurer's operations.
The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of a
company's regulatory total adjusted capital to its authorized control level RBC as defined by the NAIC. Companies below
specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The
levels are company action, regulatory action, authorized control, and mandatory control. See Note 14 of the Notes to the
Consolidated Financial Statements and the Liquidity and Capital Resources section of Item 7. MD&A for additional
information on RBC.
Guaranty Association and Similar Arrangements Under state insurance guaranty association laws and similar laws in
international jurisdictions, the Company is subject to assessments, based on the share of business the Company writes in
the relevant jurisdiction, for certain obligations of insolvent insurance companies to policyholders and claimants. In the
U.S., some states permit member insurers to recover assessments paid through full or partial premium tax offsets. 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. In most states, the definition is met with a declaration of financial insolvency by a court of
competent jurisdiction.
Federal and State Regulation Federal and state legislation and regulations in several areas, including health care reform
legislation, financial services reform legislation, securities regulation, pension regulation, privacy, anti-money laundering,
tort reform legislation and taxation, can significantly and adversely affect insurance companies. Certain federal and state
laws and 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. The ACA, as enacted, does not require material changes in the
design of the Company's insurance products. However, indirect consequences of, or changes to, the legislation
and regulations could present challenges that could potentially have an impact on the Company's sales model,
financial condition and results of operations. Certain provisions of the ACA have been and may continue to be
subject to challenge through litigation, the ultimate effects of which on the ACA are uncertain. See Item 1A. Risk
Factors for the risk factor entitled, "Extensive regulation and changes in legislation can impact profitability and
growth" for additional information.
•
Dodd-Frank Act
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and
regulations issued thereunder, in particular rules to require central clearing for certain types of derivatives, may
have an impact on the Company's derivative activity, including activity on behalf of Aflac Japan. The Dodd-Frank
Act also established a Federal Insurance Office (FIO) under the U.S. Department of the Treasury to monitor all
aspects of the insurance industry and of lines of business other than certain health insurance, certain long-term
care insurance and crop insurance.
Item 1. Business
8
•
Privacy and Cybersecurity
In the absence of a comprehensive federal privacy law, states are making a push towards privacy legislation.
Personally identifiable information is used in support of many of the Company's business processes. For many
years, the standard for protection and treatment of that data was benchmarked by privacy and security provisions
of the federal Gramm-Leach-Bliley Act of 1999 (GLBA) and in the Health Insurance Portability and Accountability
Act of 1996 (HIPAA). 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 or share, or limit the use of their data. Although not all
apply to Aflac U.S. operations, an example of these state privacy laws is the California Consumer Privacy Act.
Businesses across industries have also seen an increase in lawsuits alleging tracking technologies on their
websites violate state or federal wiretapping laws. At the federal level, the Telephone Consumer Protection Act
(TCPA) continues to provide plaintiffs with a private right of action for claims alleging violation of the TCPA.
Additionally, certain states are adopting the NAIC Model Bulletin on the Use of Artificial Intelligence Systems by
Insurers and, in limited cases, passing their own laws related to artificial intelligence.
Cybersecurity continues to be an area of evolving focus for legislation and regulatory activity. The NYSDFS
Cybersecurity Requirements for Financial Services Companies applies to Aflac New York. This regulation
requires, among other things, risk assessments, administrative and technical controls, incident reporting
procedures, business continuity plans, and certain cybersecurity governance, such as the designation of a Chief
Information Security Officer and senior governing body oversight. In addition, more than 25 states have adopted
the NAIC’s Insurance Data Security Model Law, which requires similar cybersecurity measures. For information
regarding the Company's cybersecurity risk management, strategy, and governance, see Item 1C. Cybersecurity.
For additional information regarding Aflac U.S. operations and regulations, see the Aflac U.S. Segment subsection of Item
7. MD&A and Notes 2 and 14 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.
Investments of Aflac U.S., as well as certain sub-advised assets of Aflac Japan, are managed by the Company’s U.S.
asset management subsidiary, Aflac Asset Management LLC (AAM), and investments of Aflac Japan are managed
pursuant to an investment advisory agreement between Aflac Japan and the Company's asset management subsidiary in
Japan, Aflac Asset Management Japan Ltd. (AAMJ). 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. 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 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.
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.
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 $2.1 billion in 2025 and
$2.0 billion in 2024. The Company believes its employee relations are generally satisfactory.
Item 1. Business
9
The following table details the number of full-time employees as of December 31.
2025
Aflac Japan
6,804
Aflac U.S.
5,117
Corporate and other
795
Total
12,716
Talent
The Company uses internal and external resources to attract, retain and develop talent across a variety of backgrounds
and demographics.
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. For example, in 2024, Aflac Japan launched Aflac
Leadership Academy, a corporate learning initiative specializing in the development of Aflac Japan's next-generation
management. Aflac Japan also implemented a human capital management system that provides employees access to
descriptions and necessary skills for all job positions across the Company to more proactively design their careers.
Aflac U.S. actively partners with colleges, universities and civic organizations to attract exceptional talent. Aflac U.S.
provides a range of internships, co-op programs and transitional opportunities designed to help emerging professionals
grow and succeed. Additionally, employees have access to educational resources that support self-development and skill-
enhancement, enabling them to strengthen both technical and professional capabilities.
Compensation
Aflac Japan and Aflac U.S. Human Resources operate as centralized compensation functions, providing guidance and
oversight to management teams to ensure pay aligns with job scope, responsibilities, and duties. This function reviews
new-hire offers, promotions and salary adjustments to maintain fairness and consistency. Defined salary structures are
regularly evaluated and updated using market data. Job levels and corresponding compensation are determined annually
based on market benchmarks and role requirements. Employee performance reviews occur each year end and influence
both bonuses and salary decisions.
Health and Wellness
In 2025, Aflac Japan was certified, for the eighth 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. This certification is awarded for best practices
in employee health management, strategically focused work style and development of a socially appreciative work
environment. 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. 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.
Workforce Demographics
•
As of December 31, 2025, women account for 55% of Aflac Japan employees and 34% of those in leadership
roles. Women also held 22% of senior management roles.
•
As of December 31, 2025, 47% of Aflac U.S. and the Parent Company employees located in the U.S. were people
of color and 65% were women. Women also occupied 51% of leadership roles located in the U.S. and 35% of
senior management roles. In 2025, 55% of new hires located in the U.S. were people of color and 68% were
women.
Item 1. Business
10
•
Established in 2009, Aflac Heartful Services Co., Ltd. (Aflac Heartful Services), a subsidiary of Aflac Japan,
promotes the hiring of employees with disabilities. 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’ 158 employees as of
December 31, 2025, 124 have a disability. Aflac Heartful Services supports these employees with the assistance
of advisors for long-term career support.
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. 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.
Aflac U.S. conducts an employee engagement survey every two years to capture feedback on company culture and
overall satisfaction. Insights from the survey are used in collaboration with leadership to drive continuous improvements
and enhance the employee experience.
Item 1. Business
11
Information about the Company's Executive Officers
Daniel P. Amos
Chairman, Aflac Incorporated and Aflac, since 2001; Chief Executive Officer, Aflac
Incorporated and Aflac, since 1990; President, Aflac Incorporated, from 2024 until 2025
74
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
61
Robin L. 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
62
Max K. 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
47
Bradley E. 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
60
Masatoshi Koide
President and Representative Director, Aflac Japan, since 2018(2)
65
Charles D. Lake II
President, Aflac International, since 2014; Chairman and Representative Director, Aflac
Japan, since 2018(2)
64
Virgil R. 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
57
Frederic J. Simard
Deputy President, Aflac U.S., since 2026; Executive Vice President, Chief Operating
Officer, Aflac U.S., from 2025 until 2026; Chief Financial Officer, Aflac U.S., from 2023 until
2026; 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
57
Audrey B. 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
61
NAME
PRINCIPAL OCCUPATION(1)
AGE
(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. 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.
Item 1. Business
12
ITEM 1A. RISK FACTORS
The Company faces a wide range of risks, and its continued success depends on its ability to identify, prioritize, and
appropriately manage enterprise risk exposures. Readers should carefully consider each of the following risks and all of
the other information set forth in this Form 10-K. These risks and other factors may affect forward-looking statements,
including those in this document or made by the Company elsewhere, such as in earnings release webcasts, investor
conference presentations or press releases. The risks and uncertainties described herein may not be the only ones facing
the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently
believes to be immaterial may also adversely affect its business. If any of the following risks and uncertainties develops
into actual events, there could be a material impact on the Company's business, results of operations, financial condition
and liquidity.
Investment and Markets Risk Factors
Difficult conditions in global capital markets and the economy could have a material adverse effect on the
Company's investments, capital position, revenue, profitability, and liquidity and harm the Company's business.
The Company's results of operations are materially affected by conditions in the global capital markets and the global
economy generally, including in its two primary operating markets of the U.S. and Japan. Inflation globally remains
elevated but continues to trend downwards after monetary tightening, recovery of supply chains, and phasing out of
extraordinary fiscal support. 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. 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 geopolitical tensions, including armed
conflicts and regime changes, exacerbate uncertainty and can contribute to volatility across both physical and financial
asset classes. Economic uncertainty is also impacted by potential policy changes in the U.S., including proposed domestic
regulations focused on consumer pricing, trade tariffs and increasing trade restrictions driven by security concerns and
broader geopolitical tensions. 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.
The Company's investments are vulnerable to adverse market developments such as asset price volatility, lack of market
liquidity, credit rating downgrades, payment defaults, asset restructurings, increased losses, and other risks. 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. 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. 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. The Company may need to adjust its investment strategy and/or be forced to liquidate investments
to pay claims. The continuing difference between U.S. dollar and Japanese yen interest rates also contributes to costs of
hedging foreign currency exchange 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. See the risk factor below entitled, “The Company is
exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and
liquidity” for additional information. See the Investments and Results of Operations by Segment sections of Item 7. MD&A,
for additional information.
As the Company holds a significant amount of fixed maturity securities issued by borrowers located in many different parts
of the world, its financial results are directly influenced by global financial markets. Potential weakness in global capital
markets could adversely affect the Company's financial condition, including its capital position and overall profitability.
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). Government actions to stimulate the economy affect the value of the Company's existing
holdings, its reinvestment rate on new investments in JGBs or other Japanese yen-denominated assets, and consumer
behavior relative to the Company's suite of insurance products. The additional government debt from fiscal stimulus
Item 1A. Risk Factors
13
actions could adversely impact the Japan sovereign credit profile, which could in turn lead to volatility in Japanese capital
and currency markets. 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.
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. It is possible that lenders or debt investors may also
become concerned if the Company incurs large investment losses or if the level of the Company's business activity
decreases due to a market downturn or there are further adverse economic trends in the U.S. or Japan, specifically, or
generally in developed markets.
The Company needs liquidity to pay its operating expenses, dividends on its common stock, interest on its debt, and
liabilities. See the Liquidity and Capital Resources section of Item 7. MD&A, for additional information. In the event the
Company's current resources do not meet its needs, the Company may need to seek additional financing. The Company's
access to additional financing will depend on a variety of factors such as market conditions, the general availability of
credit within the financial services industry and its credit rating. See the risk factor below entitled, “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” for additional information.
Broad economic factors such as consumer spending, business investment, government spending, the volatility and
strength of the capital markets and inflation, as well as ongoing central bank responses to these factors, all affect the
business and economic environment and, indirectly, the amount and profitability of the Company's business. In an
economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower
business investment and lower consumer spending, the demand for financial and insurance products could be adversely
affected. This adverse effect could be particularly significant for companies such as Aflac that distribute supplemental,
discretionary insurance products primarily through the worksite in the event that economic conditions result in a decrease
in the number of new hires and total employees. Adverse changes in the economy could potentially lead the Company's
customers to be less inclined to purchase supplemental insurance coverage or to decide to cancel or modify existing
insurance coverage. Further, Aflac U.S. may experience higher rates of policy lapses during periods of increased job
turnover and workforce mobility within the U.S. economy. The above factors could adversely affect the Company's net
earned premiums, results of operations and financial condition. The Company is unable to predict the course of the global
financial markets or the recurrence, duration or severity of disruptions in such markets.
Defaults, downgrades, widening credit spreads or other events impairing the value of the fixed maturity
securities and loan receivables in the Company's investment portfolio may reduce the Company's earnings and
capital position.
The Company is subject to the risk that the issuers and/or guarantors of fixed maturity securities and loan receivables the
Company owns may default on principal or interest. A significant portion of the Company's portfolio represents an
unsecured obligation of the issuer, including some that may be subordinated to other debt in the issuer’s capital structure.
In these cases, many factors can influence the overall creditworthiness of the issuer and ultimately its ability to service
and repay the Company's holdings. 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. Factors unique to the Company's
securities including contractual protections such as financial covenants or relative position in the issuer's capital structure
also influence the value of the Company's holdings. In addition, for investments representing secured obligations of an
issuer, such as mortgage loan receivables, the underlying value of the collateral may not be sufficient to fully recover the
amount of principal and interest owed to the Company if a default occurs.
Most of the Company's investments carry a rating by one or more of the Nationally Recognized Statistical Rating
Organizations (NRSROs or rating agencies). Any change in the rating agencies' approach to evaluating credit and
assigning an opinion could negatively impact the fair value of the Company's portfolio. Any expected or sustained credit
deterioration of the Company's investments will negatively impact the Company's net income and capital position through
credit impairment and other credit related losses. Credit related losses that are not temporary in nature would also affect
the Company's solvency ratios in the U.S., Japan and Bermuda. 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. The Company is also subject to the risk that any collateral providing
credit enhancement to the Company's investments could deteriorate.
Item 1A. Risk Factors
14
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 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. 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. Interest rate risk is an inherent
portfolio, business and capital risk for the Company, and significant changes in interest rates could have a material
adverse effect on the Company's consolidated results of operations, financial condition or cash flows through realized
losses, impairments, changes in unrealized positions, and liquidity. Changes in interest rates could also result in the
Company having to recognize gains or losses because the Company disposes of some or all of its investments prior to
their maturity.
The Company's exposure to interest rate risk relates primarily to the ability to invest future cash flows to support the
interest rate assumption made at the time of the establishment of the Company's product pricing and reserving. Low
levels of interest rates on investments experienced in Japan and the U.S. over the last decade have also reduced the
level of investment income earned by the Company. 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. While the Company generally
seeks to maintain a diversified portfolio of fixed-income investments that reflects the cash flow and duration characteristics
of the liabilities it supports, the Company may not be able to fully mitigate the interest rate risk of its assets relative to its
liabilities. Prolonged periods of low interest rates also heighten the risk associated with future increases in interest rates
because an increasing proportion of the Company's investment portfolio include investments that bear lower rates of
return than the embedded book yield of the investment portfolio. 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. In addition, uncertainty regarding the timing, pace and magnitude of
future interest rate changes could further increase fluctuations in the value of the Company’s assets and liabilities and
adversely affect its capital position and liquidity.
A sustained decline in interest rates could hinder the Company's ability to earn the returns assumed in the pricing and the
reserving for its insurance products at the time of sale and issue and may also influence the Company's ability to develop
and price attractive new products and could impact its overall sales levels. 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. 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.
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. 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. Significant increases
in interest rates could cause declines in the values of the Company's investment portfolio which have a secondary impact
on the Company's overall evaluation of its deferred tax asset position. An increase in the differential of short-term U.S. and
Japan interest rates would also increase the cost of hedging a portion of the U.S. dollar-denominated assets held by Aflac
Japan into Japanese yen, which could have a material adverse effect on the Company's business, results of operations or
financial condition. Further, some of the insurance products that Aflac sells in the U.S. and Japan provide cash surrender
values, and a rise in interest rates could trigger significant policy surrenders, which might require the Company to sell
investment assets and recognize unrealized losses. 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. For Aflac Japan, rising interest rates and widening credit
Item 1A. Risk Factors
15
spreads, which reduce the fair value of Aflac Japan’s fixed-maturity investments, when combined with a strengthening
Japanese yen, and the resulting decrease in the Japanese yen value of Aflac Japan’s U.S. dollar-denominated fixed-
maturity investments, have a negative impact on Aflac Japan's regulatory capital. For regulatory accounting purposes for
Aflac Japan, there are also certain requirements for realizing impairments that could be triggered by rising interest rates,
negatively impacting Aflac Japan's regulatory earnings and corresponding dividends and capital deployment.
See the Interest Rate Risk subsection of Item 7A. Quantitative and Qualitative Disclosures about Market Risk for
additional information.
The Company's concentration of business in Japan poses risks to its operations and financial condition.
Aflac Japan's adjusted revenues accounted for 53% of the Company's total adjusted revenues in 2025, compared with
55% in 2024 and 60% in 2023. The percentage of the Company's total assets attributable to Aflac Japan was 76% at
December 31, 2025, compared with 77% at December 31, 2024. 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. Further, because of the concentration of the Company's business in Japan and its need for
long-dated Japanese yen-denominated assets, the Company has a substantial concentration of JGBs in its investment
portfolio exposing the Company to credit deterioration and potential downgrades of JGBs. See the risk factor entitled “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” for additional information.
The Company seeks to match investment currency and interest rate risk to its Japanese yen liabilities. The low interest
rates on Japanese yen-denominated securities has a negative effect on overall net investment income. A large portion of
the cash available for reinvestment each year is deployed in Japanese yen-denominated instruments and subject to the
low level of Japanese yen interest rates.
Lack of availability of acceptable Japanese yen-denominated investments could adversely affect the Company's
results of operations, financial position or liquidity.
The Company aims to match both the duration and currency of its assets with its liabilities. This is very difficult for Aflac
Japan and Aflac Re due to the lack of available long-dated Japanese yen-denominated fixed income instruments beyond
JGBs.
Aflac Japan’s investment strategy includes U.S. dollar-denominated investments. This program includes public
investment-grade bonds as well as U.S. dollar-denominated investment-grade commercial mortgage loans, middle market
loans, infrastructure debt, collateralized loan obligations and other loan types, high yield bond and public and private
equities. The Company plans to continue adding other instruments denominated in U.S. dollars, including floating rate
investments, to improve the portfolio diversification and/or return profile. Some of the U.S. dollar-denominated asset
classes that the Company has added, and anticipates continuing to add, have less liquidity than investment-grade
corporate bonds and in periods of market stress, certain of these U.S. dollar-denominated asset classes may experience
significantly reduced liquidity, increased valuation uncertainty or wider bid-ask spreads. Aflac Re's investment strategy
also includes U.S. dollar-denominated investments that are presently comprised exclusively of investment-grade bonds.
Investing in U.S. dollar-denominated investments in Aflac Japan and Aflac Re creates an unmatched foreign currency
exposure and related capital ratio volatility, as both Aflac Japan and Aflac Re insurance liabilities are Japanese yen-
denominated. Although the Company engages in certain foreign exchange hedging activities to partially mitigate this risk,
and such hedged assets may be used to satisfy Japanese yen-denominated insurance liabilities and other business
obligations, important risks remain.
In recent years, the Company has reduced the proportion of U.S. dollar-denominated investments that are subject to a
currency hedge, and this proportion continues to be subject to change at the Company’s discretion. The Company has
increased U.S. dollar risk exposure as the comprehensive hedging program may not always correlate to the underlying
U.S. dollar-denominated assets, thereby increasing earnings volatility. These risks can significantly impact the Company's
consolidated results of operations, financial position or liquidity.
Further, foreign currency derivatives used for hedging are periodically settled, which results in cash receipt or payment at
inception, maturity or early termination. Cumulative net cash settlements on derivatives hedging currency exposure of
Item 1A. Risk Factors
16
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 Japanese 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. If the Company reduces the notional amount of foreign exchange derivatives prior to
the maturity of the hedged U.S. dollar-denominated investments, the foreign exchange gains or losses on the U.S. dollar-
denominated investments remain economically unrealized. These foreign currency gains or losses on the investments are
only economically realized, or monetized, through sale, maturity or redemption of the investments and concurrent
conversion to Japanese yen. However, the Company may not realize the benefit of offsetting adverse cash settlements on
hedging derivatives with cash receipts on the U.S. dollar-denominated investments if the foreign exchange rates move in
an adverse direction before the investments are converted to Japanese yen, or if the investments are never converted to
Japanese yen. As an example of the latter, if the Company’s actual insurance risk experience in Japan is as expected or
more favorable than expected, the need for Japanese yen to pay expenses and claims would correspondingly remain at
or below expected levels, thereby diminishing operational requirements to convert U.S. dollar-denominated investments to
Japanese yen. The settlement of the foreign currency derivatives is included in settlement of derivatives, net in the
investing activities section of the Company’s consolidated statements of cash flows.
See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the Japanese yen/U.S. dollar
(yen/dollar) exchange rate”, the Hedging Activities subsection of Item 7. MD&A, and the Currency Risk subsection of Item
7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.
The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate.
Due to the size of Aflac Japan, where functional currency is the Japanese yen, fluctuations in the foreign exchange rate
between the Japanese yen and the U.S. dollar have had, and may continue to have, a significant effect on the Company's
reported financial position and results of operations. Aflac Japan's premiums and a significant portion of its investment
income are received in Japanese yen, and its claims and almost all expenses are paid in Japanese yen. In accordance
with U.S. GAAP, the Company translates its Japanese yen-denominated financial statement accounts into U.S. dollars for
financial reporting purposes with the resulting foreign currency translation adjustments included in equity. Japanese yen
weakening has the effect of suppressing current year results in relation to the prior year, including the resulting negative
impact on equity. Japanese yen strengthening has the effect of magnifying current year results in relation to the prior year,
including the resulting positive impact on equity.
Also in accordance with U.S. GAAP, U.S. dollar denominated assets and liabilities held by Aflac Japan are remeasured to
Japanese yen and Japanese yen-denominated assets and liabilities held by Aflac Re are remeasured to U.S. dollar with
the resulting foreign currency remeasurement for certain of these assets and liabilities included in earnings.
Consequently, fluctuations in the yen/dollar exchange rate have resulted and could continue to result in significant
earnings volatility. Japanese yen weakening in relation to the U.S. dollar increases the Japanese yen value on U.S. dollar
denominated asset, while Japanese yen strengthening decreases the Japanese yen value of the U.S. dollar denominated
assets.
In addition, differences between interest rates in Japan and the U.S. can lead to weakening of the Japanese yen relative
to the U.S. dollar and could suppress the Company's reported financial position and results of operations relative to the
comparable prior period.
For regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by
changes in the yen/dollar exchange rate and could negatively impact Aflac Japan's earnings and the corresponding
dividends and capital deployment.
The Company engages in certain foreign currency hedging activities to hedge the exposure to Japanese yen from its net
investment in Japanese operations. Aflac Japan purchases Japanese yen-denominated assets and U.S. dollar-
denominated assets, which may be hedged to Japanese yen, to support Japanese yen-denominated policy liabilities.
However, an increase in the difference between short-term U.S. and Japan interest rates would increase the cost of
hedging a portion of the U.S. dollar-denominated assets held by Aflac Japan into Japanese yen, which could have a
material adverse effect on the Company's business, results of operations or financial condition. As indicated in MD&A, the
Company has determined that the unhedged U.S. dollar-denominated investment portfolio acts as a natural economic
currency hedge of a portion of the Company’s investment in Aflac Japan against erosion of economic value. 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
Item 1A. Risk Factors
17
pay dividends to the Parent Company. The Company has historically maintained and currently maintains the size of the
unhedged portfolio at levels below the economic equity surplus in Aflac Japan, but this strategy may not be successful.
Additionally, the Parent Company utilizes forward contracts as part of its Enterprise Corporate Hedging Program to protect
the economic value of Aflac Japan in U.S. dollar terms by hedging foreign currency exchange risk related to dividend
payments by Aflac Japan. The Company is exposed to currency risk when Japanese 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 foreign
currency exchange gains or losses, respectively, are realized. This primarily occurs when Aflac Japan pays dividends in
Japanese yen to the Parent Company, but it also has an impact when cash in the form of Japanese yen is converted to
U.S. dollars for investment into U.S. dollar-denominated assets. The foreign exchange rates prevailing at the time of
dividend payment may differ from the foreign exchange rates prevailing at the time the Japanese yen profits were earned.
If the markets experience a significant strengthening of Japanese 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
foreign exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the
Parent Company could be significant.
These hedging activities are limited in scope and the strategies may not be successful.
For additional information regarding unhedged U.S. dollar-denominated securities, see the risk factor above entitled, “Lack
of availability of acceptable Japanese yen-denominated investments could adversely affect the Company’s results of
operations, financial position or liquidity”. See the Currency Risk subsection of Item 7A. Quantitative and Qualitative
Disclosures about Market Risk for additional information.
The valuation of the Company's investments and derivatives includes methodologies, estimations and
assumptions that are subject to differing interpretations and could result in changes to investment valuations
that may adversely affect the Company's results of operations or financial condition.
The Company reports a significant amount of its fixed maturity securities and other investments at fair value. As such,
valuations may include inputs and assumptions that are less observable or require greater estimation and valuation
methods that are more sophisticated, thereby resulting in values that may be greater or less than the value at which the
investments may be ultimately sold. Volatility in interest rates and foreign exchange markets, including changes in yield
curves and discount rates, may increase the sensitivity of the Company's investment and derivative valuations to changes
in market assumptions. Rapidly changing and unprecedented credit and equity market conditions could materially impact
the valuation of securities as reported within the Company's consolidated financial statements and the period-to-period
changes in fair value could vary significantly.
Valuations of the Company's derivatives fluctuate with changes in underlying market variables, such as interest rates and
foreign exchange rates. During periods of market turbulence created by political instability, economic uncertainty,
government interventions or other factors, the Company may experience significant changes in the volatility of its
derivative valuations. Extreme market conditions can also affect the liquidity of such instruments creating marked
differences in transaction levels and counterparty valuations. Depending on the severity and direction of the movements in
its derivative valuations, the Company will face increases in the amount of collateral required to be posted with its
counterparties. Liquidity stresses to the Company may also occur if the required collateral amounts increase significantly
over a very short period of time. Conversely, the Company may be exposed to an increase in counterparty credit risk for
short periods of time while calling collateral from its counterparties.
See the Critical Accounting Estimates section of Item 7. MD&A, and Notes 1, 3, 4, and 5 of the Notes to the Consolidated
Financial Statements for additional information.
The determination of the amount of expected credit losses recorded on the Company's investments is based on
significant valuation judgments and could materially impact its results of operations or financial position.
The Company estimates an allowance for credit losses on investments measured at amortized cost including held-to-
maturity securities, loan receivables and loan commitments. For collateral dependent financial assets, including loans
where foreclosure is probable, the allowance for credit losses is based on the fair value of the underlying collateral. For
the Company’s available-for-sale securities, the Company evaluates an estimate for credit losses only when the fair value
of the available-for-sale security is below its amortized cost basis.
The Company’s approach to estimating an allowance for credit losses is complex and incorporates significant judgments.
In addition to a security, an asset class, or issuer-specific credit fundamentals, it considers relevant historical information
Item 1A. Risk Factors
18
(e.g. loss statistics), current market conditions and reasonable and supportable micro and macroeconomic forecasts. The
Company's management updates its expected credit loss assumptions regularly as conditions change and as new
information becomes available and reflects expected credit losses in the Company's earnings when considered
necessary. Furthermore, additional credit losses may need to be taken in the future. Historical trends may not be
indicative of future expectations of credit losses. See Note 3 of the Notes to the Consolidated Financial Statements for
additional information.
The Company cannot provide assurance that these evaluations will be accurate and effective. If the Company’s estimates
of credit losses are not accurate and actual credit losses are higher than the Company’s estimates, the Company’s net
income and capital position will be negatively impacted. These higher losses would also negatively affect the Company's
solvency ratios in the U.S., Japan and Bermuda.
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 rates, negatively impacting Aflac
Japan's earnings and corresponding dividend and capital deployment.
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.
NRSROs may change their ratings or outlook on an insurer's ratings due to a variety of factors including but not limited to
competitive position; profitability; cash generation and other sources of liquidity; capital levels; quality of the investment
portfolio; and perception of management capabilities. The ratings assigned to the Company by the NRSROs are important
factors in the Company's ability to access liquidity and capital from the bank market, debt capital markets or other
available sources, such as reinsurance transactions. Downgrades of the Company's credit ratings could give its derivative
counterparties the right to require early termination of derivatives transactions or delivery of additional collateral, thereby
adversely affecting the Company's liquidity.
Downgrades of the Company's ratings could also have a material adverse effect on agent recruiting and retention, sales,
competitiveness and the marketability of its products, all of which could negatively impact the Company's liquidity,
operating results and financial condition. Additionally, sales through the bank channel in Japan could be adversely
affected as a result of their reliance on and sensitivity to ratings levels.
The Company cannot predict what actions rating agencies may take, or what actions the Company may take in response
to the actions of rating agencies. As with other companies in the financial services industry, the Company's ratings could
be downgraded at any time and without any notice by any NRSRO.
A decline in the creditworthiness of other financial institutions could adversely affect the Company.
The Company has exposure to and routinely executes transactions with counterparties in the financial services industry,
including broker dealers, derivative counterparties, commercial banks and other institutions. The Company uses derivative
instruments to mitigate various risks associated with its investment portfolio, notes payable, and subsidiary dividends. The
Company's use of derivatives results in financial exposure to derivative counterparties. If the Company's counterparties
fail or refuse to honor their obligations under derivative instruments, the Company's hedges of the risks will be ineffective,
and the Company's financial condition and results of operations could be adversely affected.
The Company engages in derivative transactions directly with affiliates and unaffiliated third parties under International
Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the ISDA agreements also
include Credit Support Annexes (CSAs), which generally provide for two-way collateral postings at the first dollar of
exposure. In addition, a significant portion of the derivative transactions have provisions that give the counterparty the
right to terminate the transaction upon a downgrade of Aflac’s financial strength rating. The actual amount of payments
that the Company could be required to make depends on market conditions, the fair value of outstanding affected
transactions, and other factors prevailing at and after the time of the downgrade. If the Company is required to post
collateral to support derivative contracts and/or pay cash to settle the contracts at maturity, the Company's liquidity could
be strained. In addition, the Company's cleared swaps result in counterparty exposure to clearing brokers and central
clearinghouses; while this exposure is mitigated in part by clearinghouse and clearing broker capital and regulation, no
assurance can be provided that these counterparties will fulfill their obligations. The Company also has exposure to
counterparties to securities lending transactions in the event they fail to return loaned securities. The Company is also
exposed to the risk that there may be a decline in value of securities posted as collateral for securities lending programs
or a decline in value of investments made with cash posted as collateral for such programs.
Item 1A. Risk Factors
19
Further, the Company has agreements with various Japanese financial institutions for the distribution of its insurance
products. For example, at December 31, 2025, the Company had agreements with 358 banks to market Aflac's products
in Japan. Sales through these banks represented 3.3% of Aflac Japan's new annualized premium sales in 2025. Any
material adverse effect on these or other financial institutions could also have an adverse effect on the Company's sales.
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. 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.
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.
The Company's sales, results of operations and financial condition could be materially adversely affected if its sales
networks deteriorate or if the Company does not adequately provide support, training and education for its existing
network of sales associates, brokers, other distribution partners and employees. In the U.S., competition exists for sales
associates and brokers with demonstrated ability. 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, such as 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. 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 more competitive 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. In addition to the
Company's commissioned sales force in the U.S., Aflac has expanded its sales leadership team to include a salaried
sales force of over 200 market directors and broker sales professionals. The Company's inability to attract and retain
qualified sales associates, brokers and other distribution partners, including its alliance partners in Japan, could have a
material adverse effect on the Company's sales, results of operations and financial condition.
Additionally, as the Japan and U.S. employment markets continue to evolve, there is risk that the Company's practices
regarding attracting, developing, and retaining employees may not be fully effective. Employees may leave the Company
or choose other employers over the Company due to various factors, including a competitive labor market. Although Aflac
U.S. has not experienced any material labor shortage to date, it has experienced elevated levels of workforce turnover
and there has been an overall tightening of, and increased competition within, the U.S. labor market. These conditions,
together with higher levels of inflation may result in increased operating expenses. A sustained labor shortage or
continuing elevated turnover rates within the Aflac U.S. workforce, due to labor market factors or the state of the U.S.
economy, could lead to increased costs of the day-to-day operation of the Aflac U.S. business, the inability to hire and
retain employees, or the outsourcing of certain operations. Failure to successfully meet and maintain sufficient levels of
employees may diminish the Company's ability to achieve its financial and compliance objectives, both of which are time
consuming and personnel-intensive.
If future policy benefits, claims or expenses exceed those anticipated in establishing premiums and reserves, the
Company's financial results would be adversely affected.
The assumptions and estimates that the Company uses in establishing premiums and reserves depend on the Company's
judgment regarding the likelihood of future events and are inherently uncertain. Many factors can cause actual outcomes
to deviate from these assumptions and estimates, such as changes in incidence rates, economic conditions, changes in
government healthcare policy, advances in medical technology, changes in treatment patterns, and changes in average
lifespan. Accordingly, the Company cannot determine with precision the ultimate amounts that it will pay for, or the timing
of payment of, actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level the
Company assumes prior to payment of benefits or claims. If the Company's actual experience is different from its
assumptions or estimates, the Company's premiums and reserves may prove inadequate. Reserve assumptions are
Item 1A. Risk Factors
20
regularly reviewed by the Company and may be revised if future expectations change. These experience deviations and
assumption updates could have a material adverse effect on the Company's business, results of operations and financial
condition.
The success of the Company's business depends in part on effective information technology systems, on
continuing to develop and implement improvements in technology, and on successful execution of revenue
growth and expense management initiatives.
The Company's business depends in large part on its technology systems for interacting with employers, policyholders,
sales associates, and brokers, and the Company's business strategy involves providing customers with easy-to-use
products to meet their needs and ensuring employees have the technology in place to support those needs. Some of the
Company's information technology systems and software are older, legacy-type systems that are less efficient and require
an ongoing commitment of significant resources to maintain or upgrade to current standards including adequate business
continuity procedures. As such, the Company is investing in technology and other capabilities to continuously enhance its
customer experience, while also seeking to increase efficiencies. The Company is also developing new and innovative
products and enhancing existing products. The Company will continue to incur expenses related to, among other things,
investments in digital capabilities and product innovation including the development and use of artificial intelligence (AI).
The Company’s development of new technology, including the use of AI by the Company and third-party vendors, could
lead to an increased risk of a business interruption or a cybersecurity breach. Further, the Company’s long-term strategy
depends on successful operational execution and its ability to execute on its transformational initiatives, including
investments in technology and other initiatives intended to grow revenue and control expenses, combined with its ability to
achieve efficiencies and attract and retain personnel. If the Company does not maintain the effectiveness of its systems
and continue to develop and enhance information systems that support its business processes in a cost-efficient manner,
the Company's sales, business retention, operations and reputation could be adversely affected and it could be exposed
to litigation, regulatory proceedings and fines or penalties.
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, could harm the
Company's business.
The Company stores confidential policyholder, employee, agent, broker, and other proprietary information on its
information technology systems. The Company also depends heavily on its telecommunication, information technology
and other operational systems and on the integrity and timeliness of data it uses to run its businesses and service its
customers. The Company’s information technology and other systems, as well as those of third-party providers and
participants in the Company’s distribution channels, have been and will likely continue to be subject to physical or
electronic break-ins, unauthorized tampering, security breaches, social engineering, phishing, web application attacks,
computer viruses or other malicious codes, or other cyber-related attacks, that may result in the failure to adequately
maintain the security, confidentiality, integrity, or privacy of sensitive data, including personal information relating to
customers and prospective customers, or in the misappropriation of the Company's intellectual property or proprietary
information. The risk of a cybersecurity incident impacting business operations has grown as third parties continue to
develop new and highly sophisticated methods of attack. The rapid evolution and increased adoption of artificial
intelligence technologies may also heighten the Company's cybersecurity risks by making cyber-attacks more difficult to
detect, contain, and mitigate.
The Company and its third-parties or vendors have and may continue to experience outages or cyber-related attacks that
disrupt the operations or impact the confidentiality, availability or integrity of information, which may result in operational,
legal, regulatory or financial harm. Furthermore, depending upon the type of attack, it could impact the confidentiality,
integrity and/or availability of IT systems and data, disrupting business operations and resulting in the loss of consumer
confidence. Although the Company attempts to manage its exposure to such events through the purchase of cyber
liability insurance, such events are inherently unpredictable, and insurance may not be sufficient to protect the Company
against all losses. As a result, events such as these, including the June 2025 cyber incident where the Company became
aware of the exfiltration of certain personal information relating to a substantial number of customers, beneficiaries,
employees, agents, and other individuals in the Company’s U.S. business, could adversely affect the Company's financial
condition or results of operations due to incurred costs and remediation. Although data leakage issues the Company has
experienced, as of the date of this report, have not been determined to have a reasonably likely material impact on the
Company's financial condition or results of operations, the Company's security systems or processes may not prevent or
mitigate future break-ins, tampering, security breaches or other cyber-related attacks. As the Company pursues IT
transformation and increased cloud adoption, it inherently exposes the Company to potential cyber-related attacks.
Item 1A. Risk Factors
21
Interruption in telecommunication, information technology and other operational systems, or a failure to maintain the
security, confidentiality or privacy of sensitive data residing on such systems, whether due to actions by the Company or
others, including third-party providers and participants in the company’s distribution channels, could delay or disrupt the
Company's ability to do business and service its customers, seriously harm the Company's brand, reputation, and ability
to compete effectively, subject it to regulatory sanctions and other claims, lead to a loss of customers and revenues and
otherwise adversely affect the Company's business. In addition, the costs to address or remediate system interruptions or
security threats and vulnerabilities, whether before or after an incident, could be significant.
The Company could also be subject to legal risk, including government enforcement action and civil litigation, related to
cyber-attacks and security breaches, which could adversely affect the Company’s business, reputation, financial condition
or results of operations. In addition, the Company may be adversely impacted by reputational harm or a loss of confidence
in the security and integrity of its information technology systems among customers, beneficiaries, employees, agents,
and others.
As a holding company, the Parent Company depends on the ability of its subsidiaries to transfer funds to it to
meet its debt service and other obligations and to pay dividends on its common stock.
The Parent Company is a holding company and has no direct operations, and its most significant assets are the stock of
its subsidiaries. Because the Parent Company conducts its operations through its operating subsidiaries, the Parent
Company depends on those entities for dividends and other payments to generate the funds necessary to meet its debt
service and other obligations, to pay dividends on and conduct repurchases of its common stock, and to make
investments into its subsidiaries or external opportunities.
Aflac is domiciled in Nebraska and is subject to insurance regulations that impose certain limitations and restrictions on
payments of dividends, management fees, loans and advances by Aflac to the Parent Company. The Nebraska insurance
statutes require prior approval for dividend distributions that exceed the greater of the net income from operations, which
excludes net realized investment gains, for the previous year determined under statutory accounting principles, or 10% of
statutory capital and surplus as of the previous year-end. The Nebraska insurance department also must approve service
arrangements and other transactions within the affiliated group of companies. The FSA does not allow dividends or other
payments from Aflac Japan unless it meets certain financial criteria as governed by Japanese corporate law. Under these
criteria, dividend capacity at the Japan subsidiary is defined as total equity excluding common stock and capital reserves
but reduced for net after-tax unrealized losses on available-for-sale securities.
The ability of Aflac and Aflac Japan to pay dividends or make other payments to the Parent Company could also be
constrained by the Company's dependency on financial strength ratings from independent rating agencies. Any inability of
the Company's subsidiaries to pay dividends or make other payments to the Parent Company could have a material
adverse effect on the Company's financial condition and results of operations.
For the foregoing reasons, there is no assurance that the earnings from, or other available assets of, the Parent
Company's operating subsidiaries will be sufficient to make distributions to enable the Company to operate.
The Company's risk management policies and procedures may prove to be ineffective and leave the Company
exposed to unidentified or unanticipated risk, which could adversely affect the Company's businesses or result
in losses.
The Company has developed an enterprise-wide risk management and governance framework to mitigate risk and loss to
the Company. The Company maintains policies, procedures and controls intended to identify, measure, monitor, report
and analyze the risks to which the Company is exposed. However, there are inherent limitations to risk management
strategies because risk may exist, or emerge in the future, that the Company has not appropriately anticipated or
identified. If the Company's risk management framework proves ineffective, the Company may suffer unexpected losses
and could be materially adversely affected. As the Company's businesses change and the markets in which it operates
evolve, the Company's risk management framework may not evolve at the same pace as those changes, and risks may
not be appropriately identified, monitored or managed. In times of market stress, unanticipated market movements or
unanticipated claims experience resulting from greater than expected morbidity, mortality, longevity, or persistency, the
effectiveness of the Company's risk management strategies may be limited, resulting in losses to the Company. Under
difficult or less liquid market conditions, the Company's risk management strategies may be ineffective or more difficult or
expensive to execute because other market participants may be using the same or similar strategies to manage risk.
Many of the Company's risk management strategies or techniques are based upon historical customer and market
behavior and all such strategies and techniques are based to some degree on management’s subjective judgment. The
Item 1A. Risk Factors
22
Company cannot provide assurance that its risk management framework, including the underlying assumptions or
strategies, will be accurate and effective.
Management of operational, legal and regulatory risks requires, among other things, policies, procedures and controls to
record properly and verify a large number of transactions and events, and these policies, procedures and controls may not
be fully effective. The Company's businesses and corporate areas primarily use models to project future cash flows
associated with pricing products, calculating reserves and valuing assets, and evaluating risk and determining capital
requirements, among other uses. These models are utilized under a risk management policy approved by the Company's
executive risk management committees, however, the models may not operate properly and rely on assumptions and
projections that are inherently uncertain. As the Company's businesses continue to grow and evolve, the number and
complexity of models the Company utilizes expands, increasing the Company's exposure to error in the design,
implementation or use of models, including the associated input data and assumptions.
Past or future misconduct by the Company's employees or employees of third parties (suppliers which are cost-based
relationships and alliance partners which are revenue-generating relationships) could result in violations of law by the
Company, regulatory sanctions and/or serious reputational or financial harm, and the precautions the Company takes to
prevent and detect this activity may not be effective in all cases. Despite the Company's published Supplier Code of
Conduct, due diligence of the Company's alliance partners, and rigorous contracting procedures (including financial, legal,
IT security, AI and risk reviews), there can be no assurance that controls and procedures that the Company employs will
be effective. Additionally, the use of third parties also poses operational risks that could result in financial loss, operational
disruption, brand damage, or compliance issues. Inadequate oversight of the Company's third-party suppliers due to the
lack of policies, procedures, training and governance may lead to financial loss or damage to the Aflac brand.
The use of third-party vendors to support the Company's operations makes the Company susceptible to the
operational risk of those third parties, which could lower revenues, increase costs, reduce profits, disrupt
business, or damage the Company’s reputation.
The Company utilizes third-party vendors to provide certain business support services and functions, which exposes the
Company to risks outside the control of the Company that may lead to business disruptions. The reliance on these third-
party vendors creates a number of business risks, such as the risk that the Company may not maintain service quality,
control or effective management of the outsourced business operations and that the Company cannot control the
information systems, facilities or networks of such third-party vendors. Additionally, the Company is at risk of being unable
to meet legal, regulatory, financial or customer obligations if the information systems, facilities or networks of a third-party
vendor are disrupted, damaged or fail, whether due to physical disruptions, such as fire, natural disaster, pandemic or
power outage, or due to cybersecurity incidents, ransomware or other impacts to vendors, including labor strikes, political
unrest and terrorist attacks. Since certain third-party vendors conduct operations for the Company outside the U.S., the
political and military events in foreign jurisdictions could have an adverse impact on the Company’s outsourced
operations. The Company may be adversely affected by a third-party vendor who operates in a poorly controlled manner
or fails to deliver contracted services, which could lower revenues, increase costs, reduce profits, disrupt business, or
damage the Company’s reputation.
Regulatory Risk Factors
Tax rates applicable to the Company may change.
The Company is subject to taxation in Japan, and in the U.S. under federal and numerous state and local tax jurisdictions.
In preparing the Company's financial statements, the Company estimates the amount of tax that will become payable, but
the Company's effective tax rate may be different than estimates due to numerous factors including accounting for income
taxes, the mix of earnings from Japan and the U.S., the results of tax audits, adjustments to the value of uncertain tax
positions, changes to estimates and other factors. 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. Any of these factors could cause the Company to experience an
effective tax rate significantly different from previous periods or the Company's current estimates. If the Company's
effective tax rate were to increase, the Company's financial condition and results of operations could be adversely
affected.
Item 1A. Risk Factors
23
If the Company fails to comply with restrictions on customer privacy and information security, including taking
steps to ensure that its third-party service providers and business associates who access, store, process or
transmit sensitive customer information maintain its security, integrity, confidentiality and availability, the
Company's reputation and business operations could be materially adversely affected.
The collection, maintenance, use, protection, disclosure and disposal of individually identifiable data by the Company's
businesses are regulated at the international, federal and state levels. These laws and rules are subject to change by
legislation or administrative or judicial interpretation. With regard to personal information obtained from policyholders, the
insured, or others, Aflac Japan is regulated in Japan by the APPI and guidelines issued by FSA and other governmental
authorities.
Various state laws in the U.S. address the unauthorized access and acquisition of personal information and the use and
disclosure of individually identifiable health data. HIPAA requires the Company to impose privacy and security
requirements on its business associates (as such term is defined in the HIPAA regulations). A number of states, including
California and New York, have adopted and continue to expand their privacy and cybersecurity laws and regulations in
recent years. Additionally, the U.S. Congress and many states are considering new privacy and security requirements that
would apply to the Company's business. Compliance with new privacy and security laws, requirements, and new
regulations may result in cost increases due to necessary systems changes, new limitations or constraints on the
Company's business models, the development of new administrative processes, and the effects of potential
noncompliance by the Company's business associates. They also may impose further restrictions on the Company's
collection, disclosure and use of customer identifiable data that are housed in one or more of the Company's
administrative databases. Noncompliance with any privacy laws or any security breach involving the misappropriation,
loss, theft or other unauthorized disclosure of sensitive or confidential customer information, whether by the Company or
by one of its third parties, could have a material adverse effect on the Company's business, reputation, brand and results
of operations, including: material fines and penalties; compensatory, special, punitive and statutory damages; consent
orders regarding the Company's privacy and security practices; adverse actions against the Company's licenses to do
business; and injunctive relief.
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.
Although the Company provides for appropriate protections through its contracts and performs information security risk
assessments of its third-party service providers and business associates, the Company still has limited control over their
actions and practices. In addition, despite the security measures the Company has in place to ensure compliance with
applicable laws and rules, the Company's facilities and systems, and those of the Company's third-party providers and
participants in its distribution channels may be vulnerable to security breaches, acts of vandalism or theft, computer
viruses, misplaced or lost data, programming and/or human errors or other similar events. From time to time, the
Company, its third-party providers and participants in the Company’s distribution channels have experienced and will likely
continue to experience such events. In such cases, notification to affected individuals, state and federal regulators, state
attorneys general and media may be required, depending upon the number of affected individuals and whether personal
information including health or financial data was subject to unauthorized access.
Extensive regulation and changes in legislation can impact profitability and growth.
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. Department of Justice, state attorneys general, the U.S. Commodity Futures Trading Commission, and the U.S.
Department of the Treasury, including the Internal Revenue Service (IRS), in the U.S. The Company is subject to the risk
that compliance with any particular regulator's or enforcement authority's interpretation of a legal or regulatory issue may
result in non-compliance with another regulator's or enforcement authority's interpretation of the same issue, particularly
when compliance is judged in hindsight. 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.
Item 1A. Risk Factors
24
Additionally, changes in the overall legal or regulatory environment may, even absent any particular regulator's or
enforcement authority's interpretation of an issue changing, cause the Company to change its views regarding the actions
it needs to take from a legal or regulatory risk management perspective. 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.
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. 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.
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. These factors require the Company to anticipate market trends and make changes to
differentiate the Company's products and services from those of its competitors. The Company also faces potential
competition from existing or new companies in the U.S. and Japan that have not historically been active in the
supplemental health insurance industry, but some of which have greater financial, marketing and management resources
than the Company. Further, some of these potential competitors could introduce new means of product development and
delivery that disrupt the Company’s business model. Failure to anticipate market trends and/or to differentiate the
Company's products and services can affect the Company's ability to retain or grow profitable lines of business. Further,
as employers and brokers are increasingly requesting a full suite of products from one insurance provider, a failure to
react and adapt to these demands could result in decreased sales or market share.
The Company's future success will depend, in part, on its ability to keep pace with rapid technological changes and to use
technology to satisfy and grow customer demand for the Company's products and services and to create additional
efficiencies in its operations. The Company may not be able to effectively implement new technology-driven products and
services or be successful in marketing these products and services to its customers. A failure to meet evolving customer
demands through innovative product development, effective distribution channels, and continuous investment in the
Company's technology could adversely affect the Company's operating results. Further, the evolving fragmentation of
media and marketing channels that has developed over recent years could weaken the impact of the Company’s
advertising efforts over time. As a result, the Company's ability to effectively compete to retain or acquire new business
may be impaired, and its business, financial condition or results of operations may be adversely affected.
Catastrophic events could adversely affect the Company's financial condition and results of operations as well as
the availability of the Company’s infrastructure and systems.
The Company's insurance operations are exposed to the risk of catastrophic events including, but not necessarily limited
to, epidemics, pandemics, tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, major public health
issues and terrorism or other acts of violence. Claims resulting from natural or man-made catastrophic events could cause
substantial volatility in the Company's financial results for any fiscal quarter or year and could materially reduce its
profitability or harm the Company's financial condition, as well as affect its ability to write new business. In addition, such
events may lead to periods of voluntary or required premium grace periods, which may lead to volatility in lapse rates and
related premiums. Any resulting or coincidental economic effects could impact the Company's business, financial
condition, results of operations, capital position, liquidity or prospects in a number of ways. 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 2026 Outlook section of Item 7. MD&A.
Additionally, the Company's operations, as well as those of its vendors, service providers and counterparties, may be
adversely affected by such catastrophic events to the extent they disrupt the Company's physical infrastructure, human
resources or systems that support its businesses and customers. Although the Company has a global crisis management
framework to minimize the business disruption from a catastrophic event, such framework may not be effective to avoid an
adverse impact to the Company from such an event. While the assessment of risks related to climate change are part of
the Company's credit review process, climate change-related risks may adversely impact the value of the securities that
Item 1A. Risk Factors
25
the Company holds. Further, the Company cannot predict the effects that any legal or regulatory changes made in
response to climate change concerns or major public health issues would have on the Company's business.
Events, including those external to the Company's operations, could damage the Company's reputation.
The Company has made significant investments in the Aflac brand over a long period of time. Because insurance products
are intangible, the Company's ability to compete for and maintain policyholders relies to a large extent on consumer trust
in the Company's business, including its alliance partners, sales associates and other distribution partners. The perception
of unfavorable business practices or financial weakness with respect to the Company, its alliance partners, sales
associates or other distribution partners could create doubt regarding the Company's ability to honor the commitments it
has made to its policyholders. Such perceptions could also negatively impact the Company’s ability to attract and retain
qualified sales associates, brokers and other distribution partners, including its alliance partners in Japan, and could have
a material adverse effect on the Company's sales, results of operations and financial condition. These effects could also
result from a perception of a lack of commitment to sustainability efforts and attention to societal impacts, unfavorable
positions on items of public policy, or from failure to make progress toward the Company's sustainability goals. Maintaining
the Company's stature as a trustworthy insurer and responsible corporate citizen, which helps support the strength of the
Company's brand, is critical to the Company's reputation and the failure or perceived failure to do so could adversely
affect the Company's brand value, financial condition and results of operations.
The Company depends heavily on key management personnel, and the loss of services of one or more of its key
executives could harm the Company's business.
The Company’s success depends to a significant extent on the efforts and abilities of its key management personnel. 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.
The Company's financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or
expanded. Accordingly, from time to time the Company is required to adopt new or revised accounting standards issued
by recognized authoritative bodies, including the FASB. Changes to accounting standards could have a material adverse
effect on the Company's results of operations and financial condition. For additional information, see Note 1 of the Notes
to the Consolidated Financial Statements.
The Company faces risks related to litigation, regulatory investigations and inquiry and other matters.
The Company is a defendant in various lawsuits considered to be in the normal course of business. The final results of
any litigation cannot be predicted with certainty, and plaintiffs may seek very large amounts in class actions or other
litigation. Although some of this litigation is pending in states where large punitive damages, bearing little relation to the
actual damages sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of
pending litigation will not have a material adverse effect on its financial position, results of operations, or cash flows.
However, a substantial legal liability or a significant federal, state or other regulatory action against the Company, as well
as regulatory inquiries or investigations, could harm the Company's reputation, result in changes in operations, result in
material fines or penalties, result in significant costs due to legal fees, settlements or judgments against the Company, or
otherwise have a material adverse effect on the Company's business, financial condition and results of operations.
Without limiting the foregoing, the litigation and regulatory matters the Company is, has been, or may become, subject to
include matters related to sales agent recruiting, policy sales practices, claim payments and procedures including denial
or delay of benefits, the low level of Aflac U.S. benefit ratios in recent financial periods, material misstatements or
omissions in the Company's financial reports or other public statements, and/or corporate governance, corporate culture
or business ethics matters. Further, the Company may be subject to claims of or litigation regarding sexual or other forms
of misconduct or harassment, or discrimination on the basis of race, color, national origin, religion, gender, or other bases,
notwithstanding that the Company's Code of Business Conduct and Ethics prohibits such harassment and discrimination
by its employees, the Company has ongoing training programs and provides opportunities to report claims of
noncompliant conduct, and it investigates and may take disciplinary action regarding alleged harassment or
discrimination. Any violations of or deviation from laws, regulations, internal or external codes or standards of normative
behavior, or perceptions of such violations or deviations, by the Company's employees or by independent sales agents
could adversely impact the Company's reputation and brand value, financial condition and results of operations.
Item 1A. Risk Factors
26
Allegations or determinations of agent misclassification could adversely affect the Company’s results of
operations, financial condition and liquidity.
A majority of the Company's U.S. sales force is, and has historically been, comprised of independent agents. While the
Company believes that it has properly classified such agents as independent contractors, the Company may be subject to
claims, regulatory action by state or federal departments of labor or tax authorities, changes in state or federal law, or
litigation asserting that such agents are employees. The laws and regulations governing the classification of workers in the
U.S. may be changed or interpreted differently compared to past interpretations, including in states where the Company
generates significant sales through independent agents. An allegation or determination that independent agents in the
Company’s U.S. sales force have been misclassified as independent contractors could result in changes in the
Company’s operations and U.S. business model, result in material fines or penalties, result in significant costs due to legal
fees, settlements or judgments against the Company, or otherwise have a material adverse effect on the Company's
business, results of operation, financial condition and liquidity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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. The Board has delegated oversight of the Company’s information security
program to the Audit and Risk Committee.
The Company’s senior officers, including its Global Chief Information Security Officer (GCISO), are responsible for the
operation of the global information security program and communicate quarterly with the Audit and Risk Committee on the
program, including with respect to the state of the program, compliance with applicable regulations, risks associated with
current and evolving threats, and recommendations for changes in the information security program. The global
information security program includes a cybersecurity incident response plan that is designed to provide a management
framework across Company functions for a coordinated assessment and response to cybersecurity incidents. This
framework establishes a protocol to report certain incidents to the GCISO and other senior officers, with the goal of timely
assessing such incidents, determining applicable disclosure requirements, and communicating with the Board of Directors
as appropriate. 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. The above framework
tracks and allows team members to monitor each incident throughout its lifecycle to help ensure the Company is informed
about cybersecurity incidents as they are mitigated and remediated. Post-incident reviews are also performed as
appropriate to identify potential additional controls that may feasibly be implemented to help prevent recurrence.
As a part of the global information security program, an enterprise cybersecurity risk assessment is performed annually in
coordination with the GCISO to identify and assess cybersecurity risks and mitigating controls. The assessment results
are incorporated into a risk register managed by the Company’s overall enterprise risk management group to integrate the
risks into the overall risk management processes. The Company engages with independent firms to conduct operational
control assessments, which cover information protection. Periodically, the Company engages independent consultants to
review certain aspects of the cyber program. Additionally, the Company performs third-party risk assessments to evaluate
security controls and identify inherent and residual risks associated with third-party engagements. Issues identified during
third-party risk assessments are documented and escalated to Company management through an established committee
structure based on the risk ratings associated with each issue.
The Company also utilizes professionals from the Company’s legal team and GCISO'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. Specifically, the GCISO 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
Item 1A. Risk Factors
27
Systems Control. The GCISO and the senior security leadership team have an average of over 20 years of experience in
the field of cybersecurity.
As of the date of this Form 10-K, the Company is not aware of any cybersecurity incidents that occurred during the year
ended December 31, 2025 that have materially affected or are reasonably likely to materially affect the Company,
including its business strategy, results of operations, or financial condition and that are required to be reported in this Form
10-K.
For further discussion of the risks associated with cybersecurity incidents, see Item 1A. Risk Factors for the risk factor
titled "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, could harm the Company's
business" for additional information regarding how the Company's business strategy, results of operations, and financial
condition could be adversely affected by risks from cybersecurity threats.
ITEM 2. PROPERTIES
In Tokyo, Japan, the Company has two primary campuses. The first campus includes a building, owned by the Company,
for the customer call center, the claims department, the information technology departments, and a training facility. This
campus also includes a leased property, which houses Aflac Japan's policy administration and customer service
departments. The second campus comprises leased office space, which serves as Aflac Japan's headquarters and
houses administrative and investment support functions. The Company also leases additional office space in Tokyo, along
with regional offices located throughout the country.
In the U.S., the Company owns land and buildings that comprise two primary campuses located in Columbus, Georgia.
These campuses include buildings that serve as the Company's worldwide headquarters and house administrative
support and information technology functions for U.S. operations. The Company leases office space in Columbia, South
Carolina, which houses the Company's CAIC subsidiary (branded as Aflac Group Insurance); in New York, New York,
which houses the Company's Global Investment division; in Tampa, Florida, which houses the Company's ABS subsidiary;
and in Windsor, Connecticut and Plantation, Florida, which house the operations of the Company's group life, disability
and absence management business. 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
The Company is a defendant in various lawsuits and receives various regulatory inquiries considered to be in the normal
course of business. Members of the Company's senior legal and financial management teams review litigation and
regulatory inquiries on a quarterly and annual basis and the Company updates the related estimates, accruals, and
disclosures, if any, based on such reviews. For litigation and regulatory matters where it is probable that a loss has been
incurred, and the amount of that loss can be reasonably estimated, the Company establishes accruals for loss
contingencies. Where a loss may be reasonably possible but not probable, or is probable but not reasonably estimable, no
accrual is recorded. The final results of any litigation or regulatory inquiries cannot be predicted with certainty. Although
some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages
sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will
not have a material adverse effect on its financial position, results of operations, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 1B. Unresolved Staff Comments
28
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Aflac Incorporated's common stock is principally traded on the New York Stock Exchange under the symbol AFL.
Holders
As of February 16, 2026, there were 75,463 holders of record of the Company's common stock.
Dividends
For a summary of dividends paid to shareholders in 2025 and 2024 and potential restrictions on the Company's ability to
pay future dividends, see the Liquidity and Capital Resources section of Item 7. MD&A.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
29
Stock Performance Graph
The following graph compares the five-year performance of the Company's common stock to the Standard & Poor's 500
(S&P 500) Index and the Standard & Poor's 500 Life and Health Insurance (S&P 500 Life and Health Insurance) Index.
The S&P 500 Life and Health Insurance Index includes: Aflac Incorporated, Globe Life Inc., MetLife, Inc., Principal
Financial Group, Inc. and Prudential Financial, Inc.
Performance Graphic Index
December 31,
2020
2021
2022
2023
2024
2025
Aflac Incorporated
100.00 134.56 170.03 199.58 255.62 278.50
S&P 500
100.00 128.71 105.40 133.10 166.40 196.16
S&P 500 Life & Health Insurance
100.00 136.68 150.82 157.83 189.87 201.00
Copyright© 2026 Standard & Poor’s, a division of S&P Global. All rights reserved.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
30
Issuer Purchases of Equity Securities
During the year ended December 31, 2025, 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
2,698,784
$
104.83
2,698,784
44,618,770
February 1 - February 28
3,230,149
104.37
2,835,980
41,782,790
March 1 - March 31
2,965,821
108.23
2,961,981
38,820,809
April 1 - April 30
2,066,573
106.68
2,066,573
36,754,236
May 1 - May 31
3,421,623
104.89
3,420,321
33,333,915
June 1 - June 30
2,431,870
102.92
2,428,908
30,905,007
July 1 - July 31
0
0.00
0
30,905,007
August 1 - August 31
4,346,516
106.09
4,346,516 126,558,491
September 1 - September 30
4,989,921
108.13
4,984,848 121,573,643
October 1 - October 31
2,098,587
109.26
2,098,587 119,475,056
November 1 - November 30
2,393,020
111.96
2,392,998 117,082,058
December 1 - December 31
2,761,491
109.83
2,758,014 114,324,044
Total
33,404,355 (1)
$
106.93
32,993,510 114,324,044 (2)
(1) During the year ended December 31, 2025, 410,845 shares were purchased in connection with income tax withholding obligations
related to the vesting of restricted-share-based awards during the period.
(2) The total remaining shares available for purchase at December 31, 2025, consisted of 14,324,044 shares related to a 100,000,000
share repurchase authorization by the board of directors announced in November 2022 and 100,000,000 shares related to a
100,000,000 share repurchase authorization by the board of directors announced in August 2025.
ITEM 6. [RESERVED]
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
31
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements included in this section constitute forward-looking statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements are made based on management’s current expectations and beliefs
concerning future developments and their potential effects upon the Company. The Company’s actual results may differ, possibly
materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause
actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in
the Risk Factors and Forward-Looking Information sections herein.
MD&A OVERVIEW
The following financial review provides a discussion of the Company’s results of operations and financial condition, as well
as a summary of the Company’s critical accounting estimates. This section should be read in conjunction with Part I, Item
1. Business and the audited consolidated financial statements and accompanying notes included in Part II, Item 8.
Financial Statements and Supplementary Data of this report. This MD&A is divided into the following sections:
Page
Executive Summary
33
Industry Trends
34
Outlook
34
Results of Operations
35
Investments
53
Hedging Activities
58
Policy Liabilities
61
Benefit Plans
62
Policyholder Protection
62
Liquidity and Capital Resources
62
Critical Accounting Estimates
68
The Company has elected to omit discussion on the earliest of the three years covered by the consolidated financial
statements presented in Item 8. Financial Statements and Supplementary Data. Readers should refer to Item 7.
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, 2024, filed on February 26, 2025, for reference to
discussions of the year ended December 31, 2023, the earliest of the three years presented. Amounts reported in this
MD&A may not foot due to rounding.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
32
EXECUTIVE SUMMARY
Performance Highlights
For the full year of 2025, total revenues were down 9.3% to $17.2 billion, compared with $18.9 billion for the full year of
2024, primarily due to net investment losses of $572 million in 2025 compared with net investment gains of $1.3 billion in
2024. Net earnings were $3.6 billion, or $6.82 per diluted share, for the full year of 2025, compared with $5.4 billion,
or $9.63 per diluted share, for the full year of 2024.
Net earnings in 2025 included net investment losses of $572 million, compared with net investment gains of $1.3 billion in
2024. Net investment losses in 2025 included $467 million of net losses from certain derivative and foreign currency gains
or losses; an increase in credit loss allowances of $191 million and $6 million of impairments; offset by a $72 million gain
from an increase in the fair value of equity securities and $20 million of net gains from sales and redemptions.
The average yen/dollar exchange rate(1) in 2025 was 149.32, or 1.1% stronger than the rate of 150.97 in 2024.
Adjusted earnings(2) for the full year of 2025 were $4.0 billion, or $7.49 per diluted share, compared with $4.1 billion,
or $7.21 per diluted share, in 2024. The stronger yen/dollar exchange rate positively impacted adjusted earnings per
diluted share by $.04.
In 2025, Aflac Incorporated repurchased $3.5 billion, or 33.0 million of its common shares. At December 31, 2025, the
Company had 114.3 million remaining shares authorized for repurchase.
Shareholders’ equity was $29.5 billion, or $56.85 per share, at December 31, 2025, compared with $26.1 billion, or $47.45
per share, at December 31, 2024. Shareholders’ equity at December 31, 2025 included a cumulative increase of $8.0
billion from the effect of changes in discount rate assumptions on insurance reserves, compared with a corresponding
cumulative increase of $2.0 billion at December 31, 2024, and a net unrealized loss on investment securities and
derivatives of $1.8 billion, compared with a net unrealized gain of $4 million at December 31, 2024. Shareholders’ equity
at December 31, 2025 also included an unrealized foreign currency translation loss of $4.8 billion, compared with an
unrealized foreign currency translation loss of $5.0 billion at December 31, 2024. The annualized return on average
shareholders’ equity in 2025 was 13.1%.
Shareholders’ equity excluding accumulated other comprehensive income (adjusted book value(2)) was $28.0 billion, or
$54.06 per share, at December 31, 2025, compared with $29.1 billion, or $52.87 per share, at December 31, 2024.
Adjusted book value excluding foreign currency remeasurement(2) was $22.1 billion, or $42.66 per share, at December 31,
2025, compared with $23.4 billion, or $42.46 per share, at December 31, 2024. The annualized adjusted return on equity
excluding foreign currency remeasurement(2) in 2025 was 17.6%.
(1) Yen/dollar exchange rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).
(2) See the Results of Operations section of this MD&A for a definition of this non-U.S. GAAP financial measure.
Cyber Incident
As previously disclosed, the Company identified an incident involving unauthorized access to a limited number of its
systems in the U.S. on June 12, 2025. The Company promptly initiated its cybersecurity incident response protocols and
believes it contained the unauthorized access within hours. The Company's systems were not affected by ransomware,
and the Company remained able to serve its policyholders and underwrite policies, review claims, and otherwise service
customers as usual.
The Company is aware of the exfiltration of certain data including claims information, health information, social security
numbers and/or other personal information relating to a substantial number of customers, beneficiaries, employees,
agents, and other individuals in the Company’s U.S. business. In December 2025, the Company completed a detailed
review of the potentially impacted files and determined that personal information associated with approximately 22.65
million individuals was involved, and began notifying impacted individuals and regulatory authorities as required by
applicable laws.
Based on the information currently available, as of the date of this report, the Company does not believe that the incident
is reasonably likely to have a material impact on the Company’s financial condition or results of operations. The Company
continues to assess the financial impact of the cybersecurity incident, including how much of the financial impact will be
covered by insurance. As a result of the cybersecurity incident, the Company has incurred certain costs and may,
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
33
depending on future developments, incur additional costs, including but not limited to: costs to provide credit monitoring,
identity theft protection, and Medical Shield to impacted individuals and maintain a call center related to the provision of
such services; incident response costs; expenses arising from potential litigation, governmental investigations, or
enforcement actions; expenses related to compliance, finance, and legal advisory services; elevated cybersecurity
insurance premiums; and costs incurred in meeting evolving legal and regulatory requirements concerning cybersecurity
governance, monitoring, and disclosure. The costs associated with the incident to date, including the cost to investigate
and respond to the incident as well as related legal and other professional services, resulted in a slight increase to the
Company's expenses and are recorded in the insurance and other expenses line in the consolidated statement of
earnings.
INDUSTRY TRENDS
The Company is impacted by financial markets, economic conditions, regulatory oversight and a variety of trends that
affect the industries where it competes.
Financial and Economic Environment
The Company’s business and results of operations are materially affected by conditions in the global capital markets and
the economy generally. Stressed conditions, volatility and disruptions in global capital markets, particular markets, or
financial asset classes can have an adverse effect on the Company, in part because the Company has a large investment
portfolio and its insurance liabilities and derivatives are sensitive to changing market factors. See Item 1A. Risk Factors for
the risk factor entitled, "Difficult conditions in global capital markets and the economy could have a material adverse effect
on the Company's investments, capital position, revenue, profitability, and liquidity and harm the Company's business."
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. Japan’s existing customers and potential customers seek products that
are easily understood, affordable and accessible via digital platforms.
Aflac U.S. Segment
Customer demographics continue to shift, generating new opportunities across various consumer groups, including
millennials and diverse cultural communities. As customer expectations and preferences change, trends indicate that both
existing and potential customers seek affordable options that are easily understood and accessible via digital platforms.
Furthermore, the insurance industry continues to be impacted by the financial security requirements and healthcare
demands of the aging baby boomer generation.
Regulatory Environment
See Item 1. Business - Aflac Japan Government Regulation and Aflac U.S. Government Regulation for a discussion of
regulatory developments that may impact the Company and the associated risks.
Competitive Environment
See Item 1. Business - Aflac Japan Competitive Markets and Aflac U.S. Competitive Markets for a discussion of the
competitive environment and the basis on which the Company competes in each of its segments.
2026 OUTLOOK
The Company’s strategy to drive long-term shareholder value is to pursue growth and maintain solid pretax profit margins
while exercising tactical capital deployment. The Company's approach to pursue growth is through product development
and distribution expansion, along with enhanced efficiency through technological upgrades and operational refinement.
The Company's objectives in 2026 include preserving solid pretax profit margins with increased sales production achieved
through the ongoing promotional efforts for products launched in 2025 in Aflac Japan and continued growth initiatives
across both its Aflac Japan and Aflac U.S. segments. The Company believes this strategy positions it for future growth
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
34
and efficiency while defending and leveraging its market-leading position, powerful brand recognition and varied
distribution in Japan and the U.S.
In November 2025, the board of directors announced a 5.2% increase in the quarterly cash dividend, effective with the
first quarter of 2026. The Company intends to maintain strong capital ratios in Aflac Japan and Aflac U.S. in support of its
commitment to shareholder dividends while remaining tactical in its deployment of capital in the form of share repurchases
and opportunistic investments. The Company's target range for economic solvency ratio (ESR) is 170% to 230% for Aflac
Japan and a target combined RBC range of 350% to 450%, over time, for Aflac U.S., which are consistent with the
Company's risk management practices.
Aflac Japan Segment
For 2026, the Company expects Aflac Japan to generate a benefit ratio in the range of 60% to 63% driven by favorable
trends in morbidity experience, new product launches featuring lower benefit ratios, and the premium shift over recent
years from first sector savings products to third sector cancer and medical products, as well as first sector protection
products. The Company expects Aflac Japan to generate an expense ratio in the range of 20% to 23% reflecting
continued growth and strategic initiatives. 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.
Aflac U.S. Segment
For 2026, the Company expects Aflac U.S. to generate a benefit ratio in the range of 48% to 52% driven by growth in life,
disability, and dental and vision insurance products, all of which typically carry higher benefit ratios. The Company expects
Aflac U.S. to generate an expense ratio in the range of 36% to 39%. However, continued revenue growth associated with
these products is expected to decrease expense ratios over time.
Corporate and other
The Company's objectives for Corporate and other in 2026 include achieving solid pretax adjusted earnings, 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.
For important disclosures applicable to statements made in this 2026 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. The Company’s operating
expenses primarily consist of insurance benefits provided and reserves established for anticipated future insurance
benefits, general business expenses, commissions and other costs of selling and servicing its products. Profitability for the
Company depends principally on its ability to price its insurance products at a level that enables the Company to earn a
margin over the costs associated with providing benefits and administering those products. Profitability also depends on,
among other items, actuarial and policyholder behavior experience on insurance products, and the Company's ability to
attract and retain customer assets, generate and maintain favorable investment results, effectively deploy capital and
utilize tax capacity, and manage expenses.
This document includes references to the Company’s financial performance measures which are not calculated in
accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial
measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance
operations because they tend to be driven by general economic conditions and events or related to infrequent activities
not directly associated with insurance operations.
Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange
rate can have a significant effect on reported results. In periods when the Japanese yen weakens, translating Japanese
yen into U.S. dollars results in fewer U.S. dollars being reported. When the Japanese yen strengthens, translating
Japanese yen into U.S. dollars results in more U.S. dollars being reported. Consequently, Japanese yen weakening has
the effect of suppressing current period results in relation to the comparable prior period, while Japanese yen
strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant
portion of the Company’s business is conducted in Japanese yen and never converted into U.S. dollars but translated into
U.S. dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
35
value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding
the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral
operating performance over time. 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. 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 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. 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. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the
financial performance of the Company’s insurance operations on a consolidated basis and believes that a
presentation of these financial measures is vitally important to an understanding of the underlying profitability
drivers and trends of the Company’s insurance business. The most comparable U.S. 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. The Company considers adjusted net investment gains and losses important as it represents the
remainder amount that is considered outside management’s control, while excluding the components that are
within management’s control and are accordingly reclassified to net investment income and interest expense. The
most comparable U.S. GAAP financial measure for adjusted net investment gains and losses is net investment
gains and losses.
•
Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign
currency derivatives to hedge certain foreign currency exchange risks in the Company's Japan segment or in
Corporate and other. These amortized hedge costs/income are estimated at the inception of the derivatives based
on the specific terms of each contract and are recognized on a straight-line basis over the contractual term of the
derivative. The Company believes that amortized hedge costs/income measure the periodic currency risk
management costs/income related to hedging certain foreign currency exchange risks and are an important
component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge
costs/income.
•
Adjusted earnings excluding current period foreign currency impact are computed using the average foreign
exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign
exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is
adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding
diluted shares for the period presented. The Company considers adjusted earnings excluding current period
foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact
important because a significant portion of the Company's business is conducted in Japan and foreign exchange
rates are outside management’s control; therefore, the Company believes it is important to understand the impact
of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP
financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings
per diluted share excluding current period foreign currency impact are net earnings and net earnings per share,
respectively.
•
Adjusted book value is the U.S. GAAP book value (representing total shareholders’ equity), less accumulated
other comprehensive income as recorded on the U.S. GAAP balance sheet. Adjusted book value per common
share is adjusted book value at the period end divided by the ending outstanding common shares for the period
presented. The Company considers adjusted book value and adjusted book value per common share important
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
36
as they exclude accumulated other comprehensive income, which fluctuates due to market movements that are
outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and
adjusted book value per common share are total book value and total book value per common share, respectively.
•
Adjusted book value excluding foreign currency remeasurement is the U.S. GAAP book value (representing
total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S. GAAP
balance sheet and excluding the cumulative (beginning January 1, 2021) foreign currency gains/losses associated
with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. Adjusted book value
excluding foreign currency remeasurement per common share is adjusted book value excluding foreign currency
remeasurement at the period end divided by the ending outstanding common shares for the period presented.
The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value
excluding foreign currency remeasurement per common share important as they exclude both accumulated other
comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to
market movements that are outside management's control. The most comparable U.S. GAAP financial 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
accumulated other comprehensive income. Management uses adjusted return on equity to evaluate the financial
performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of
this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of
the Company’s insurance business. The Company considers adjusted return on equity important as it excludes
components of accumulated other comprehensive income, which fluctuate due to market movements that are
outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity
is return on equity as determined using annualized net earnings and average total shareholders’ equity.
•
Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings
divided by average shareholders’ equity, excluding both accumulated other comprehensive income and the
cumulative (beginning January 1, 2021) foreign currency gains/losses associated with i) foreign currency
remeasurement and ii) sales and redemptions of invested assets. The Company considers adjusted return on
equity excluding foreign currency remeasurement important because it excludes both accumulated other
comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to
market movements that are outside management's control. The most comparable U.S. GAAP financial measure
for adjusted return on equity excluding foreign currency remeasurement is return on equity 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
exchange rate for the comparable prior year period. The Company considers U.S. dollar-denominated investment
income excluding foreign currency impact important as it eliminates the impact of foreign currency changes on the
Aflac Japan segment results, which are outside management’s control. The most comparable U.S. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
37
The following table is a reconciliation of items impacting adjusted earnings and adjusted earnings per diluted share to the
most directly comparable U.S. GAAP financial measures of net earnings and net earnings per diluted share, respectively,
for the years ended December 31.
Reconciliation of Net Earnings to Adjusted Earnings
In Millions
Per Diluted Share
2025
2024
2025
2024
Net earnings
$ 3,646
$ 5,443
$ 6.82
$ 9.63
Items impacting net earnings:
Adjusted net investment (gains) losses (1)
375
(1,495)
.70
(2.65)
Other and non-recurring (income) loss
54
23
.10
.04
Income tax (benefit) expense on items
excluded from adjusted earnings
(67)
101
(.13)
.18
Adjusted earnings
4,008
4,072
7.49
7.21
Current period foreign currency impact (2)
(19)
N/A
(.04)
N/A
Adjusted earnings excluding current period
foreign currency impact
$ 3,989
$ 4,072
$ 7.46
$ 7.21
(1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.
(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 measure of net investment (gains) losses for the years ended December 31.
Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses
(In millions)
2025
2024
Net investment (gains) losses
$
572
$ (1,271)
Items impacting net investment (gains) losses:
Amortized hedge costs
(45)
(26)
Amortized hedge income
98
113
Net interest income (expense) from derivatives associated with certain
investment strategies
(252)
(338)
Impact of interest from derivatives associated with notes payable
2
27
Adjusted net investment (gains) losses
$
375
$ (1,495)
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. This investment strategy incorporates asset-
liability matching to align the expected cash flows of the portfolio to the needs of the Company's liability structure. The
Company does not purchase securities with the intent of generating investment gains or losses. However, investment
gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific
issuers, tax planning strategies, and/or general portfolio management and rebalancing. The realization of investment
gains and losses is independent of the underwriting and administration of the Company's insurance products.
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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
38
Securities Transactions, Credit Losses and Changes in the Fair Value of Equity Securities
Securities transactions include gains and losses from sales and redemptions of investments where the amount received is
different from the amortized cost of the investment. Credit losses include losses for held-to-maturity securities, available-
for-sale securities, loan receivables, loan commitments and reinsurance recoverables. Changes in the fair value of equity
securities are the result of gains or losses driven by fluctuations in market prices.
Certain Derivative and Foreign Currency Activities
The Company's derivative activities include:
•
foreign currency forwards and options used in hedging foreign currency exchange risk on U.S. dollar-denominated
investments held by Aflac Japan, 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 Japanese yen and hedge the Company's long-term exposure to a weakening Japanese yen;
•
foreign currency swaps used to economically hedge the foreign currency exchange risk associated with certain
investments denominated in other foreign currencies held by Aflac Japan;
•
cross-currency swaps, also referred to as foreign currency swaps, associated with certain senior notes and
subordinated debentures;
•
foreign currency swaps that are associated with variable interest entity (VIE) bond purchase commitments, and
investments in special-purpose entities, including VIEs where the Company is the primary beneficiary;
•
foreign currency forwards used to economically hedge the foreign currency exchange risk associated with certain
investments denominated in other foreign currencies held by Aflac Japan;
•
interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments;
•
interest rate swaptions (swaptions) used to hedge changes in the fair value associated with interest rate
fluctuations for certain U.S. dollar-denominated available-for-sale securities; and
•
bond purchase commitments at the inception of investments in consolidated VIEs.
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 exchange rate.
For additional information regarding net investment gains and losses, including details of reported amounts for the periods
presented, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements.
Other and Non-recurring Items
The U.S. insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent
insurers. The system can result in periodic charges to the Company as a result of insolvencies/bankruptcies that occur
with other companies in the life insurance industry. Some states permit member insurers to recover assessments paid
through full or partial premium tax offsets. These charges neither relate to the ordinary course of the Company’s business
nor reflect the Company’s underlying business performance, but result from external situations not controlled by the
Company. The Company excludes any charges associated with U.S. guaranty fund assessments and the corresponding
tax benefit or expense from adjusted earnings.
In Japan, the government also requires the insurance industry to contribute to a policyholder protection corporation that
provides funds for the policyholders of insolvent insurers; however, these costs are calculated and administered differently
than in the U.S. In Japan, these costs are not directly related to specific insolvencies or bankruptcies, but are rather a
regular operational cost for an insurance company. Based on this structure, the Company does not remove the Japan
policyholder protection expenses from adjusted earnings.
The Company considers the costs associated with the early redemption of its debt to be unrelated to the underlying
fundamentals and trends in 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
39
In 2025, as part of the U.S. defined benefit plan freeze effective January 1, 2024, the Company purchased a
nonparticipating single premium group annuity contract from an external insurer to settle its obligations under the plan and
paid to the insurer the related annuity premium. As a result, the Company recognized a settlement charge of $55 million in
2025. The settlement charge was both unusual and non-recurring; therefore, the Company excluded the settlement
charge from adjusted earnings.
In 2024, as part of the U.S. defined benefit plan freeze effective January 1, 2024, the Company offered lump sum
payments to certain participants. The lump sum payments were distributed in the fourth quarter of 2024 and resulted in a
settlement charge of $18 million in 2024 due to the payments being greater than the settlement threshold. The settlement
charge was both unusual and non-recurring and unrelated to other recurring benefit costs associated with the plan;
therefore, the Company excluded the settlement charge from adjusted earnings.
Foreign Currency Translation
Aflac Japan’s premiums and a significant portion of its investment income are received in Japanese yen, and its claims
and most expenses are paid in Japanese yen. Aflac Japan purchases Japanese yen-denominated assets and U.S. dollar-
denominated assets, which may be hedged to Japanese yen, to support Japanese yen-denominated policy liabilities.
Japanese yen-denominated income statement accounts are translated to U.S. dollars using the weighted average yen/
dollar foreign exchange rate for the reporting period, except realized gains and losses on securities transactions which are
translated at the foreign exchange rate on the trade date of each transaction. Japanese yen-denominated balance sheet
accounts are translated to U.S. dollars using the spot yen/dollar exchange rate at the end of the reporting period.
In recent periods, the Japanese yen has weakened against the U.S. dollar. Although the Company is unable to predict the
timing or extent of future movements of the yen/dollar exchange rate, the Company maintains hedging strategies (see the
Hedging Activities section of this MD&A) that are intended to mitigate the impacts of Japanese yen fluctuation on the
Company’s financial position and results of operations. See the risk factor entitled “The Company is exposed to foreign
currency fluctuations in the yen/dollar exchange rate” in 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 19.6% in 2025 and 15.2%
in 2024. The combined effective tax rate differs from the U.S. statutory rate primarily due to the impact of tax credits from
federal historic rehabilitation and solar investments in partnerships and the exclusion of foreign currency translation gains
and losses on certain Aflac Japan U.S. dollar-denominated investments held in the Delaware Statutory Trust. Total income
taxes were $887 million in 2025 and $974 million in 2024. 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. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
40
Reconciliation of Book Value to Adjusted Book Value
(Excluding Foreign Currency Remeasurement)
The following table is a reconciliation of items impacting adjusted book value excluding foreign currency remeasurement
and adjusted book value excluding foreign currency remeasurement per common share to the most directly comparable
U.S. GAAP financial measures of book value and book value per common share, respectively, for the years ended
December 31.
(In millions, except for share and per-share amounts)
2025
2024
U.S. GAAP book value
$
29,490
$
26,098
Items impacting U.S. GAAP book value:
Unrealized foreign currency translation gains (losses)
(4,847)
(4,998)
Unrealized gains (losses) on securities and derivatives
(1,822)
4
Effect of changes in discount rate assumptions
8,035
2,006
Pension liability adjustment
86
10
Total accumulated other comprehensive income
1,452
(2,978)
Adjusted book value
28,038
29,076
Foreign currency remeasurement gains (losses)
5,910
5,725
Adjusted book value excluding foreign currency remeasurement
22,128
23,351
Number of shares outstanding at end of period
518,690
549,964
U.S. GAAP book value per common share
$
56.85
$
47.45
Items impacting U.S. GAAP book value per common share:
Unrealized foreign currency translation gains (losses) per common share
(9.34)
(9.09)
Unrealized gains (losses) on securities and derivatives per common share
(3.51)
.01
Effect of changes in discount rate assumptions per common share
15.49
3.65
Pension liability adjustment per common share
.17
.02
Total accumulated other comprehensive income per common share
2.80
(5.41)
Adjusted book value per common share
54.06
52.87
Foreign currency remeasurement gains (losses) per common share
11.39
10.41
Adjusted book value excluding foreign currency remeasurement per
common share
42.66
42.46
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
41
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. GAAP financial measure of return on equity for the years ended
December 31.
2025
2024
U.S. GAAP return on equity - net earnings (1)
13.1 %
22.6 %
Impact of excluding unrealized foreign currency translation gains (losses)
(2.6)
(3.6)
Impact of excluding unrealized gains (losses) on securities and derivatives
(.5)
.4
Impact of excluding effect of changes in discount rate assumptions
2.6
(.2)
Impact of excluding pension liability adjustment
.0
.0
Impact of excluding accumulated other comprehensive income
(.4)
(3.4)
U.S. GAAP return on equity less accumulated other comprehensive income
12.8
19.2
Differences between adjusted earnings and net earnings (2)
1.3
(4.8)
Adjusted return on equity - reported
14.0
14.4
Impact of excluding gains (losses) associated with foreign currency remeasurement (3)
3.6
2.9
Adjusted return on equity excluding foreign currency remeasurement
17.6
17.3
(1) U.S. 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 gains/losses associated with foreign currency remeasurement is calculated by excluding the cumulative (beginning January
1, 2021) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested
assets. The impact is the difference of adjusted return on equity - reported compared with adjusted return on equity, excluding from
shareholders' equity, gains/losses associated with foreign currency remeasurement.
RESULTS OF OPERATIONS BY SEGMENT
U.S. 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. Aflac Japan is the principal contributor to consolidated earnings. In
addition, the Parent Company, other business units that are not individually reportable, reinsurance activities, including
internal reinsurance activity with Aflac Re, and other business activities not included in Aflac Japan or Aflac U.S., as well
as intercompany eliminations, are included in Corporate and other. See Item 1. Business for a summary of each
segment's products and distribution channels.
Consistent with U.S. GAAP guidance for segment reporting, pretax adjusted earnings is the Company's U.S. GAAP
measure of segment performance. The Company believes that a presentation of this measure is vitally important to an
understanding of the underlying profitability drivers and trends of its business. Additional performance measures used to
evaluate the financial condition and performance of the Company's segments are listed below.
•
Operating Ratios
•
New Annualized Premium Sales
•
New Money Yield
•
Return on Average Invested Assets
•
Portfolio Book Yield
•
Average Weekly Producer
•
Premium Persistency
For additional information on the Company’s performance measures included in this MD&A, see the Glossary of Selected
Terms found directly following Part IV. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
42
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.
Aflac Japan Summary of Operating Results
In Dollars
In Yen
(In millions of dollars and billions of yen)
2025
2024
2025
2024
Net earned premiums (1)
$
6,744
$
6,930
¥
1,009
¥
1,050
Net investment income: (2)
Yen-denominated investment income
894
879
134
133
U.S. dollar-denominated investment income
1,732
1,849
259
281
Net investment income
2,626
2,727
393
414
Amortized hedge costs
45
26
7
4
Adjusted net investment income
2,581
2,701
386
410
Other income (loss)
32
28
5
4
Total adjusted revenues
9,357
9,659
1,399
1,464
Benefits and claims:
Benefits and claims, excluding reserve remeasurement
4,528
4,761
678
721
Reserve remeasurement (gains) losses
(529)
(444)
(79)
(64)
Total benefits and claims, net
3,999
4,317
599
657
Adjusted expenses:
Amortization of deferred policy acquisition costs
323
321
48
49
Insurance commissions
427
435
64
66
Insurance and other expenses
1,168
1,092
175
165
Total adjusted expenses
1,918
1,848
287
280
Total benefits and adjusted expenses
5,917
6,165
886
936
Pretax adjusted earnings
$
3,440
$
3,494
¥
514
¥
528
Weighted-average yen/dollar exchange rate
149.32
150.97
—
—
Percentage change over previous period:
Net earned premiums
(2.7) %
(13.9) %
(3.9) %
(6.9) %
Adjusted net investment income
(4.4)
4.6
(5.9)
12.1
Total adjusted revenues
(3.1)
(9.4)
(4.4)
(2.3)
Total benefits and claims, net
(7.4)
(18.7)
(8.8)
(11.8)
Total adjusted expenses
3.8
(12.7)
2.6
(5.8)
Pretax adjusted earnings
(1.5)
8.0
(2.7)
15.5
(1) Includes a gain (loss) of $(52) and $(81) in 2025 and 2024, respectively, related to remeasurement of the deferred profit liability for
limited-payment contracts.
(2) Net interest income/expense from derivatives associated with certain investment strategies of $(228) and $(305) in 2025 and 2024,
respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net
investment income.
In 2025, operating results in Japanese yen terms compared to the previous year were as follows:
•
Net earned premiums decreased primarily due to approximately ¥21 billion related to the internal cancer
reinsurance transaction with Aflac Re established in the fourth quarter of 2024 and approximately ¥15 billion from
limited-pay products reaching premium paid-up status. Net earned premiums also reflect a remeasurement loss of
approximately ¥8 billion related to assumption updates of the deferred profit liability for limited-payment contracts
in the third quarter of 2025, compared to a remeasurement loss of approximately ¥11 billion in the third quarter of
2024.
•
Adjusted net investment income decreased primarily due to lower floating rate income from U.S. dollar-
denominated investments.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
43
•
Total adjusted revenues decreased primarily due to the decreases in net earned premiums and adjusted net
investment income.
•
Total benefits and claims decreased primarily due to ¥68 billion of reserve remeasurement gains related to
assumption updates in the third quarter of 2025, compared to reserve remeasurement gains of approximately
¥50 billion in the third quarter of 2024, as well as the internal cancer reinsurance transaction with Aflac Re
established in the fourth quarter of 2024.
•
Total adjusted expenses increased primarily due to higher technology and sales-related expenses, partially offset
by the impact of the internal cancer reinsurance transaction with Aflac Re established in the fourth quarter of 2024
and an increase in the capitalization of deferred policy acquisition costs resulting from higher sales.
•
Pretax adjusted earnings decreased primarily due to the decrease in total adjusted revenues, partially offset by
the decrease in total benefits and claims.
Annualized premiums in force at December 31, 2025 were ¥1.18 trillion, compared with ¥1.21 trillion at December 31,
2024. The decrease in annualized premiums in force in Japanese yen of 2.5% in 2025 and 3.0% in 2024 was driven
primarily by limited-pay products reaching premium paid-up status. Annualized premiums in force, translated into U.S.
dollars at respective year-end foreign exchange rates, were $7.5 billion at December 31, 2025, compared with $7.6 billion
at December 31, 2024.
As of December 31, 2025, Aflac Japan exceeded 22 million individual policies in force in Japan, with approximately 14
million cancer policies in force in Japan.
Aflac Japan's investment portfolios include U.S. dollar-denominated securities and reverse dual-currency securities
(Japanese yen-denominated fixed maturity securities with dollar coupon payments). In years when the Japanese yen
strengthens in relation to the dollar, translating Aflac Japan's U.S. dollar-denominated investment income into Japanese
yen lowers growth rates for net investment income, total adjusted revenues and pretax adjusted earnings in Japanese yen
terms. In years when the Japanese yen weakens, translating U.S. dollar-denominated investment income into Japanese
yen magnifies growth rates for net investment income, total adjusted revenues and pretax adjusted earnings in Japanese
yen terms.
The following table illustrates the effect of translating Aflac Japan's U.S. dollar-denominated investment income and
related items into Japanese yen by comparing certain segment results with those that would have been reported had
foreign exchange rates remained unchanged from the prior year. Amounts excluding foreign currency impact on U.S.
dollar-denominated investment income were determined using the average foreign exchange rate for the comparable
prior year period. See non-U.S. GAAP financial measures defined above.
Aflac Japan Percentage Changes Over Prior Year
(Japanese Yen Operating Results)
For the Years Ended December 31,
Including Foreign
Currency Changes
Excluding Foreign
Currency Changes
2025
2024
2025
2024
Adjusted net investment income
(5.9) %
12.1 %
(5.3) %
6.5 %
Total adjusted revenues
(4.4)
(2.3)
(4.2)
(3.7)
Pretax adjusted earnings
(2.7)
15.5
(2.2)
11.1
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
44
The following table presents a summary of operating ratios in Japanese yen terms for Aflac Japan for the years ended
December 31 followed by a discussion of the significant drivers of changes in operating ratios in Japanese yen compared
to the previous year.
Ratios to total adjusted revenues:
2025
2024
Total benefits and claims, net
42.8 %
44.8 %
Adjusted expenses:
Amortization of deferred policy acquisition costs
3.5
3.3
Insurance commissions
4.6
4.5
Insurance and other expenses
12.5
11.3
Total adjusted expenses
20.5
19.1
Pretax adjusted earnings
36.7
36.0
Ratios to total premiums:
Total benefits and claims, net
59.3 %
62.5 %
Adjusted expenses:
Amortization of deferred policy acquisition costs
4.8
4.6
•
In 2025, the total benefits and claims to total premiums ratio decreased primarily due to lower benefits resulting
from assumption updates in the third quarter of 2025.
•
The total adjusted expense ratio increased in 2025 primarily due to a year-over-year decrease in total adjusted
revenues and an increase in total adjusted expenses.
•
In total, the pretax adjusted profit margin increased in 2025 primarily due to the lower benefit ratio.
The following table presents Aflac Japan's premium persistency on a 12-month rolling basis as of December 31.
2025
2024
Premium persistency
93.1 %
93.4 %
Aflac Japan Sales
The following table presents Aflac Japan's new annualized premium sales for the years ended December 31.
In Dollars
In Yen
(In millions of dollars and billions of yen)
2025
2024
2025
2024
New annualized premium sales
$
498
$
422
¥ 74.4
¥ 64.1
Increase (decrease) over prior period
18.1 %
(2.2) %
16.0 %
5.6 %
In 2025, the increase in new annualized premium sales on a Japanese yen basis was driven primarily by continued strong
sales of the new cancer insurance product, Miraito, as well as sales of Tsumitasu.
The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product
for the years ended December 31.
2025
2024
Cancer
67.2 %
57.5 %
Medical and other health
11.9
16.1
Life insurance:
Traditional life (1)
19.1
23.0
WAYS
1.1
2.2
Child endowment
.1
.2
Other
.6
1.0
Total
100.0 %
100.0 %
(1) Includes term life, whole life and Tsumitasu
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
45
The foundation of Aflac Japan's product portfolio has been, and continues to be, third sector products, which include
cancer, medical and other products. With continued cost pressure on Japan’s health care system, the Company expects
the need for third sector products will continue to rise in the future and that the cancer and medical insurance products
Aflac Japan provides will continue to be an important part of its product portfolio. Additionally, the Company believes that
sales of first sector products, including Tsumitasu, WAYS and Child Endowment, position Aflac Japan for potential future
long-term sales opportunities by marketing these products to a younger demographic as well as potential cross-selling
opportunities of Aflac Japan's third sector products.
The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the years
ended December 31.
2025
2024
Independent corporate and individual
47.5 %
48.2 %
Affiliated corporate (1)
49.2
48.6
Bank
3.3
3.2
Total
100.0 %
100.0 %
(1) Includes Japan Post Group, Dai-ichi Life and Daido Life
In 2025, Aflac Japan recruited 236 new sales agencies. At December 31, 2025, Aflac Japan was represented by
approximately 6,300 sales agencies, with approximately 112,000 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, 2025, Aflac Japan had agreements to sell its products at 358 banks, approximately 90% of the total
number of banks in Japan.
Strategic Alliance with Japan Post Holdings
On May 10, 2024, the Parent Company reported that the shares owned by the J&A Alliance Trust (Trust) represented, in
aggregate, 20% of the voting power of the Parent Company's common stock. The Shareholders Agreement, entered into
on February 28, 2019, by the Parent Company, Japan Post Holdings Co., Ltd., J&A Alliance Holdings Corporation, solely
in its capacity as trustee of the Trust and General Incorporated Association J&A Alliance, provides voting restrictions that
require the Trust to vote (i) all shares representing voting rights in excess of 20% of the voting rights in the Parent
Company and (ii) all of its shares in connection with a change in control transaction, in each case, in a manner
proportionally equal to votes of shares not beneficially owned by the Trust. Japan Post Holdings Co., Ltd. does not have a
board seat on the Parent Company’s board of directors and does not have rights to control, manage or intervene in the
management of the Parent Company. According to a Form 13F filed by Japan Post Holdings with the SEC on January 27,
2026, Japan Post Holdings owned 52.3 million Aflac Incorporated common shares as of December 31, 2025.
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). Pursuant to the terms of the Basic
Agreement, among other items, Japan Post Holdings and Aflac Japan agreed to reconfirm existing initiatives regarding
cancer insurance and to consider new joint initiatives. 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. The Trust has agreed not to own more than the greater of 10% of the Parent Company’s outstanding shares
or such shares representing 22.5% of the voting rights in the Parent Company.
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.
Aflac Japan Investments
The level of investment income in Japanese 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
46
As part of the Company's portfolio management and asset allocation process, Aflac Japan primarily invests in Japanese
yen- and U.S. dollar-denominated investments. Aflac Japan's Japanese yen-denominated investments primarily consist of
JGBs, public and private fixed maturity securities and equity securities. Aflac Japan's U.S. dollar-denominated
investments include fixed maturity investments, loan receivables, and growth assets, including alternative investments in
limited partnerships or similar investment vehicles. 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 derivatives to economically hedge the foreign currency exchange risk on the fair value of a
portion of the U.S. dollar-denominated investments.
The following table details the investment purchases for Aflac Japan for the years ended December 31.
(In millions)
2025
2024
Yen-denominated:
Fixed maturity securities:
Japan government and agencies
$ 5,122
$
0
Private placements
182
131
Other fixed maturity securities
165
290
Equity securities
497
407
Commercial mortgage and other loans:
Other loans
25
0
Other investments
48
28
Total yen-denominated
6,039
856
U.S. dollar-denominated:
Fixed maturity securities:
Other fixed maturity securities
4,035
2,532
Infrastructure debt
178
291
Collateralized loan obligations
74
30
Equity securities
1
0
Commercial mortgage and other loans:
Transitional real estate loans
33
79
Middle market loans
1,064
987
Other loans
110
74
Other investments
390
349
Total U.S. dollar-denominated
5,885
4,342
Other currencies:
Fixed maturity securities:
Infrastructure debt
52
26
Private placements
1
0
Other fixed maturity securities
66
0
Commercial mortgage and other loans:
Other loans
26
47
Other investments
12
5
Total other currencies
157
78
Total Aflac Japan purchases
$ 12,081
$ 5,276
See the Investments section of this MD&A for further discussion of these investment programs, and see Notes 1 and 3 of
the Notes to the Consolidated Financial Statements for additional information regarding loans and loan receivables.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
47
Funds available for investment include cash flows from operations, investment income and funds generated from
maturities, redemptions, securities lending and other securities transactions. Securities lending is also used from time to
time to accelerate the availability of funds for investment. 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.
The following table presents the results of Aflac Japan's investment yields for the years ended and as of December 31
2025
2024
Total purchases for the period (in millions) (1)
$ 11,631
$ 4,894
New money yield (1),(2)
4.17 %
6.11 %
Return on average invested assets (3)
3.22
3.33
Portfolio book yield, including U.S. dollar-denominated investments,
end of period (1),(2)
3.26 %
3.22 %
(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 decrease in the Aflac Japan new money yield in 2025 was primarily due to higher allocations to lower yielding asset
classes. See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the Investments and Hedging
Activities sections of this MD&A for additional information on the Company's investments and hedging strategies.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
48
AFLAC U.S. SEGMENT
Aflac U.S. Pretax Adjusted Earnings
Changes in Aflac U.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 U.S. for the years
ended December 31.
Aflac U.S. Summary of Operating Results
(In millions)
2025
2024
Net earned premiums
$ 5,999
$ 5,829
Adjusted net investment income (1)
830
847
Other income
74
63
Total adjusted revenues
6,903
6,739
Benefits and claims:
Benefits and claims, excluding reserve remeasurement
2,969
2,821
Reserve remeasurement (gains) losses
(132)
(95)
Total benefits and claims, net
2,837
2,726
Adjusted expenses:
Amortization of deferred policy acquisition costs
551
530
Insurance commissions
564
563
Insurance and other expenses
1,530
1,501
Total adjusted expenses
2,645
2,594
Total benefits and adjusted expenses
5,482
5,320
Pretax adjusted earnings
$ 1,421
$ 1,419
Percentage change over previous period:
Net earned premiums
2.9 %
2.7 %
Adjusted net investment income
(2.0)
3.3
Total adjusted revenues
2.4
1.8
Total benefits and claims, net
4.1
12.1
Total adjusted expenses
2.0
(3.6)
Pretax adjusted earnings
.1
(5.5)
(1) Net interest income/expense from derivatives associated with certain investment strategies of $(24) and $(36) in 2025 and 2024,
respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net
investment income.
In 2025, operating results compared to the previous year were as follows:
•
Net earned premiums increased primarily due to improved sales.
•
Adjusted net investment income decreased primarily due to lower floating rate income.
•
Total adjusted revenues increased primarily due to the increase in net earned premiums, partially offset by the
decrease in adjusted net investment income.
•
Total benefits and claims increased primarily due to higher incurred claims, partially offset by $60 million of
reserve remeasurement gains related to assumption updates in the third quarter of 2025, compared to reserve
remeasurement gains of $11 million in the third quarter of 2024.
•
Total adjusted expenses increased primarily due to a one-time technology-related expense and higher variable
expenses associated with the growth in net earned premiums.
•
Pretax adjusted earnings were essentially flat.
Annualized premiums in force increased 4.9% in 2025 and 3.6% in 2024. Annualized premiums in force at December 31,
2025 were $6.7 billion, compared with $6.4 billion at December 31, 2024.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
49
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.
Ratios to total adjusted revenues:
2025
2024
Total benefits and claims
41.1 %
40.5 %
Adjusted expenses:
Amortization of deferred policy acquisition costs
8.0
7.9
Insurance commissions
8.2
8.4
Insurance and other expenses
22.2
22.3
Total adjusted expenses
38.3
38.5
Pretax adjusted earnings
20.6
21.1
Ratios to total premiums:
Total benefits and claims
47.3 %
46.8 %
Adjusted expenses:
Amortization of deferred policy acquisition costs
9.2
9.1
•
In 2025, the total benefits and claims to total premiums ratio increased primarily due to higher incurred claims.
•
The total adjusted expense ratio decreased slightly in 2025 primarily due to a year-over-year increase in total
adjusted revenues.
•
In total, the pretax adjusted profit margin decreased in 2025 primarily due to the higher benefit ratio.
The following table presents premium persistency for Aflac U.S. on a 12-month rolling basis as of December 31.
2025
2024
Premium persistency
79.2 %
79.3 %
Aflac U.S. Sales
The following table presents Aflac's U.S. new annualized premium sales for the years ended December 31.
(In millions)
2025
2024
New annualized premium sales
$ 1,589
$ 1,543
Increase (decrease) over prior period
3.0 %
(1.0) %
The increase in new annualized premium sales for Aflac U.S. in 2025 was primarily driven by sales of group products.
The following table details the contributions to Aflac's U.S. new annualized premium sales by major insurance product
category for the years ended December 31.
2025
2024
Accident
18.9 %
19.6 %
Disability
26.4
26.3
Critical care (1)
19.8
20.9
Hospital indemnity
13.2
13.7
Dental/vision
6.2
5.3
Life
15.5
14.2
Total
100.0 %
100.0 %
(1) Includes cancer, critical illness and hospital intensive care products
In 2025, the Aflac U.S. sales force included an average of approximately 5,300 U.S. agents, including brokers, who were
actively producing business on a weekly basis. The Company believes that this average weekly producer equivalent
metric allows sales management to monitor progress and needs, as well as serve as a leading indicator of future
production capacity.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
50
Aflac U.S. Investments
The level of investment income is affected by available cash flow from operations, the timing of investing the cash flow,
yields on new investments and other factors.
As part of the Company's portfolio management and asset allocation process, Aflac U.S. invests in fixed maturity
securities, loan receivables and growth assets, including equity securities and alternative investments in limited
partnerships. Aflac U.S. invests in both publicly traded and privately originated investment-grade and below-investment-
grade fixed maturity securities and loan receivables.
The following table details the investment purchases for Aflac U.S. for the years ended December 31.
(In millions)
2025
2024
U.S. dollar-denominated:
Fixed maturity securities:
Other fixed maturity securities
$
844
$
654
Infrastructure debt
49
64
Collateralized loan obligations
25
12
Equity securities
0
26
Commercial mortgage and other loans:
Transitional real estate loans
9
21
Commercial mortgage loans
31
13
Middle market loans
165
133
Other loans
12
11
Other investments:
Limited partnerships
215
39
Other
21
0
Total U.S. dollar-denominated
1,371
973
Other currencies:
Other investments
4
0
Total other currencies
4
0
Total Aflac U.S. purchases
$ 1,375
$
973
Funds available for investment include cash flows from operations, investment income and funds generated from
maturities, redemptions, and other securities transactions. 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.
The following table presents the results of Aflac's U.S. investment yields for the years ended and as of December 31.
2025
2024
Total purchases for period (in millions) (1)
$ 1,156
$ 934
New money yield (1),(2)
6.73 %
6.90 %
Return on average invested assets (3)
4.94
5.00
Portfolio book yield, end of period (1),(2)
5.47 %
5.58 %
(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 and external management fees
(3) Net of investment expenses, year-to-date number reflected on a quarterly average basis
The decrease in the Aflac U.S. new money yield in 2025 was primarily due to lower short-term rates on floating rate
assets. See Notes 3 and 5 of the Notes to the Consolidated Financial Statements and the Investments section of this
MD&A for additional information on the Company's investments.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
51
CORPORATE AND OTHER
Changes in the pretax adjusted earnings of Corporate and other are primarily affected by internal reinsurance activity and
net investment income. The following table presents a summary of operating results for Corporate and other for the years
ended December 31.
Corporate and Other Summary of Operating Results
(In millions)
2025
2024
Net earned premiums
$
806
$
680
Net investment income (loss) (1)
368
201
Amortized hedge income
98
113
Adjusted net investment income
466
314
Other income
5
13
Total adjusted revenues
1,277
1,007
Benefits and claims:
Benefits and claims, excluding reserve remeasurement
491
426
Reserve remeasurement (gains) losses
(33)
(19)
Total benefits and claims, net
458
407
Adjusted expenses:
Interest expense
210
156
Other adjusted expenses
508
412
Total adjusted expenses
718
568
Total benefits and adjusted expenses
1,176
975
Pretax adjusted earnings
$
101
$
32
Percentage change over previous period:
Net earned premiums
18.5 %
70.0 %
Adjusted net investment income
48.4
613.6
Total adjusted revenues
26.8
118.9
Total benefits and claims, net
12.5
(12.8)
Total adjusted expenses
26.4
36.2
Pretax adjusted earnings
215.6
107.5
(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $65 and $165 in 2025 and 2024,
respectively, is included as a reduction to net investment income. Tax credits on these investments of $69 and $164 in 2025 and
2024, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See Note 1 of the Notes
to the Consolidated Financial Statements for additional information on these investments.
In 2025, operating results compared to the previous year were as follows:
•
Net earned premiums and total benefits and claims increased primarily due to higher internal reinsurance activity
resulting from the transaction established in the fourth quarter of 2024. The increase in total benefits and claims
was partially offset by $31 million of reserve remeasurement gains related to assumption updates in the third
quarter of 2025, compared to reserve remeasurement gains of $20 million in the third quarter of 2024.
•
Adjusted net investment income increased primarily due to $100 million from a lower volume of federal historic
rehabilitation and solar tax credit investments, with offsetting tax benefits recognized as a corresponding lower
income tax expense, and higher Aflac Re investment income of $46 million from a higher volume of assets as part
of the reinsurance agreement established in the fourth quarter of 2024.
•
Total adjusted revenues increased primarily due to the increases in adjusted net investment income and net
earned premiums.
•
Total adjusted expenses increased primarily due to $61 million from higher costs pertaining to business
operations, including costs related to the ongoing response to the cybersecurity incident and legal and other
professional services related thereto, higher interest expense of $54 million, and $35 million associated with
internal reinsurance activity.
•
Pretax adjusted earnings increased primarily due to the increase in total adjusted revenues, partially offset by the
increases in total adjusted expenses and total benefits and claims.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
52
The Parent Company invests in partnerships that specialize in rehabilitating historic structures or the installation of solar
equipment in order to receive federal historic rehabilitation and solar tax credits. These investments are classified as
limited partnerships and included in other investments in the consolidated balance sheets. The change in value of each
investment is reported as a reduction to net investment income. Tax credits generated by these investments are reported
as an income tax benefit in the consolidated statements of earnings.
INVESTMENTS
The Company’s investment strategy utilizes disciplined asset and liability management while seeking long-term risk-
adjusted investment returns and the delivery of stable income within regulatory and capital objectives, and preserving
shareholder value.
In attempting to optimally balance these objectives, the Company seeks to maintain on behalf of Aflac Japan a diversified
portfolio of Japanese yen-denominated investment assets, a U.S. dollar-denominated investment portfolio hedged back to
Japanese yen and a portfolio of unhedged U.S. dollar-denominated assets. As part of the Company's portfolio
management and asset allocation process, Aflac U.S. invests in fixed maturity securities and growth assets, including
equity securities and alternative investments in limited partnerships. Aflac U.S. invests in both publicly traded and privately
originated investment-grade and below-investment-grade fixed maturity securities and loans.
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
2025
(In millions)
Aflac Japan
Aflac U.S.
Corporate
and Other
Total
Fixed maturity securities available-for-sale, at
fair value
$
44,782
$
12,426
$
6,913
$
64,121
Fixed maturity securities held-to-maturity, at
amortized cost (1)
16,120
0
0
16,120
Equity securities
632
2
253
887
Commercial mortgage and other loans: (1)
Transitional real estate loans
2,818
658
135
3,611
Commercial mortgage loans
878
565
0
1,443
Middle market loans
3,827
439
0
4,266
Other loans
373
57
15
445
Other investments:
Policy loans
172
38
0
210
Short-term investments (2)
596
223
554
1,373
Limited partnerships
3,273
536
300
4,109
Real estate owned
777
125
0
902
Other
0
28
0
28
Investment in affiliate (3)
0
1,164
(1,164)
0
Total investments
74,248
16,261
7,006
97,515
Cash and cash equivalents
2,025
829
3,391
6,245
Total investments and cash
$
76,273
$
17,090
$
10,397
$
103,760
(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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
53
2024
(In millions)
Aflac Japan
Aflac U.S.
Corporate
and Other
Total
Fixed maturity securities available-for-sale, at
fair value
$
45,970
$
12,296
$
7,003
$
65,269
Fixed maturity securities held-to-maturity, at
amortized cost (1)
15,966
0
0
15,966
Equity securities
458
2
336
796
Commercial mortgage and other loans: (1)
Transitional real estate loans
3,648
866
189
4,703
Commercial mortgage loans
915
608
0
1,523
Middle market loans
3,847
436
0
4,283
Other loans
284
61
15
360
Other investments:
Policy loans
168
35
0
203
Short-term investments (2)
484
366
749
1,599
Limited partnerships
2,861
306
268
3,435
Real estate owned
570
112
0
682
Other
0
39
0
39
Investment in affiliate (3)
0
638
(638)
0
Total investments
75,171
15,765
7,922
98,858
Cash and cash equivalents
2,062
1,010
3,157
6,229
Total investments and cash
$
77,233
$
16,775
$
11,079
$
105,087
(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). The Company's TRE and CML investments are collateralized by commercial real estate, including
some office properties. The Company considers these investments to be well diversified by geography and among
property types. Further, the Company believes that the portfolio is generally well positioned with exposures concentrated
in high quality underlying properties with institutional investors who are experienced in managing their assets during
periods of market volatility.
While generally resilient, the Company's investments in TREs and CMLs have been affected by conditions in the
commercial real estate market, with a greater impact on mortgages secured by office properties. The Company invested
in certain TREs and CMLs that are currently in default of interest or maturity payments. The Company works with the
affected borrowers to resolve specific situations through loan continuance with potential modifications, through loan sales,
or through the process of foreclosure or deed in lieu of foreclosure. Since the third quarter of 2023, the Company has
taken possession, through foreclosure or deed in lieu of foreclosure, of certain commercial real estate properties, which
secured defaulted loans. Properties acquired by the Company through foreclosure and deed in lieu of foreclosure are
reported as real estate owned (REO) in other investments in the Company's consolidated balance sheets.
In 2025, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real
estate properties with an amortized cost of $257 million. As a result of the amortized cost of the TREs exceeding the
estimated fair value of the collateral upon consummating the foreclosures or deed in lieu of foreclosure transactions, the
Company recognized a net loss of $10 million in net investment gains (losses) for the year ended December 31, 2025.
In 2024, the Company completed foreclosure or deed in lieu of foreclosure on TREs collateralized with commercial real
estate properties with an amortized cost of $502 million. As a result of the amortized cost of the TREs exceeding the
estimated fair value of the collateral upon consummating the foreclosures or deed in lieu of foreclosure transactions, the
Company recognized a net loss of $34 million in net investment gains (losses) for the year ended December 31, 2024.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
54
The Company utilizes third-party asset managers to source, underwrite and manage each loan, as well as any resulting
REO. The Company closely monitors the activities of these managers. In the event that a loan workout is necessary, the
Company believes these external managers have the experience and resources to manage the process to maximize
recovery.
The Company also monitors its commercial mortgage and other loan investments internally on an ongoing basis, including
a review of loans' credit quality indicators and payment status as current, past due, restructured or under foreclosure. 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.
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. When the ratings issued by the rating agencies differ, the Company utilizes
the second lowest rating when three or more rating agency ratings are available or the lowest rating when only two rating
agency ratings are available.
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
2025
2024
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
AAA
1.1 %
1.1 %
1.5 %
1.5 %
AA
6.6
7.1
6.0
6.3
A
69.0
66.0
68.0
66.1
BBB
21.9
24.2
22.9
24.4
BB or lower
1.4
1.6
1.6
1.7
Total
100.0 %
100.0 %
100.0 %
100.0 %
As of December 31, 2025, the Company's direct and indirect exposure to securities in its investment portfolio that were
guaranteed by third parties was immaterial both individually and in the aggregate.
The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of December 31, 2025.
(In millions)
Credit
Rating
Amortized
Cost
Fair
Value
Unrealized
Loss
Japan National Government
A+
$ 32,618
$ 28,434
$ (4,184)
Urban Renaissance Agency
A+
156
92
(64)
KLM Royal Dutch Airlines
B+
127
88
(39)
JP Morgan Chase and Co.
A+
195
157
(38)
Lubrizol Corporation
AA
217
181
(36)
Mitsubishi Estate Co Ltd.
A
127
93
(34)
Tokyo Gas Co Ltd
A+
96
62
(34)
Prologis LP
A
145
112
(33)
West Japan Railway Company
A+
102
69
(33)
Japan Expressway Holding and Debt
A+
203
173
(30)
Generally, declines in fair values can be a result of changes in interest rates, yen/dollar exchange rate, and changes in net
spreads driven by a broad market move or a change in the issuer's underlying credit quality. The Company believes these
issuers have the ability to continue making timely payments of principal and interest. See the Unrealized Investment Gains
and Losses section in Note 3 of the Notes to the Consolidated Financial Statements for further discussions of unrealized
losses related to the Company's investments.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
55
Below-Investment-Grade Securities
The Company's portfolio of below-investment-grade securities includes fixed maturity 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 as of December 31.
Below-Investment-Grade Investments
2025
(In millions)
Par
Value
Amortized
Cost (1)
Fair
Value
Unrealized
Gain
(Loss)
Investcorp Capital Limited
$
222
$
222
$
224
$
2
Hella KG Hueck and Co.
141
140
139
(1)
KLM Royal Dutch Airlines
128
127
88
(39)
Telecom Italia SpA
128
128
163
35
IKB Deutsche Industriebank AG
83
46
69
23
Amarok Parent LLC
25
23
25
2
CPI Property Group SA
19
19
18
(1)
Tralka Spa (Chadwick)
18
18
16
(2)
Hawaiian Electric Industries Inc.
13
13
11
(2)
Other Issuers
18
18
18
0
Subtotal (2)
795
754
771
17
High yield corporate bonds
510
403
500
97
Middle market loans
4,133
3,969
3,885
(84)
Grand Total
$
5,438
$
5,126
$
5,156
$
30
(1) Net of allowance for credit losses
(2) Securities initially purchased as investment grade, but have subsequently been downgraded to below investment grade
The Company maintains an allocation to higher yielding corporate bonds within the Aflac Japan and Aflac U.S. portfolios.
Most of these securities were rated below-investment-grade at the time of purchase, but the Company also purchased
several that were rated investment grade which, because of market pricing, offer yields commensurate with below-
investment-grade risk profiles. The objective of this allocation was to enhance the Company's yield on invested assets and
further diversify credit risk. All investments in this program must have a minimum rating at purchase of low BB using the
Company's above described rating methodology and are managed by the Company's internal credit portfolio management
team.
The Company invests in middle market loans primarily to U.S. corporate borrowers, most of which have below-
investment-grade ratings. The objectives of this program include enhancing the yield on invested assets, achieving further
diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of
floating rate assets.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
56
Fixed Maturity Securities by Sector
The Company maintains diversification in investments by sector to avoid concentrations to any one sector, thus managing
exposure risk. The following table shows the distribution of fixed maturities by sector classification as of December 31.
2025
(In millions)
Amortized
Cost (1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
% of
Total
Government and agencies
$
33,752 $
124 $
(4,442) $
29,434
41.5 %
Municipalities
2,276
88
(205)
2,159
2.8
Mortgage- and asset-backed securities
4,195
244
(73)
4,366
5.2
Public utilities
6,895
592
(284)
7,203
8.5
Electric
5,457
465
(177)
5,746
6.7
Natural Gas
892
74
(80)
886
1.1
Other
546
53
(27)
571
.7
Sovereign and supranational
765
34
(22)
777
.9
Banks/financial institutions
9,054
688
(498)
9,244
11.1
Banking
5,105
374
(278)
5,201
6.2
Insurance
1,866
182
(69)
1,979
2.3
Other
2,083
132
(151)
2,064
2.6
Other corporate
24,446
3,099
(1,131)
26,414
30.0
Basic Industry
2,031
337
(105)
2,264
2.4
Capital Goods
2,748
341
(106)
2,983
3.4
Communications
2,630
453
(77)
3,007
3.2
Consumer Cyclical
1,875
203
(45)
2,033
2.3
Consumer Non-Cyclical
5,794
775
(249)
6,320
7.1
Energy
2,327
418
(25)
2,720
2.9
Other
982
44
(120)
905
1.2
Technology
3,229
242
(163)
3,308
4.0
Transportation
2,830
286
(241)
2,874
3.5
Total fixed maturity securities
$
81,383 $
4,869 $
(6,655) $
79,597
100.0 %
(1) Net of allowance for credit losses
Securities by Type of Issuance
The Company has investments in both publicly and privately issued securities. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
57
The following table details investment securities by type of issuance as of December 31.
Investment Securities by Type of Issuance
2025
2024
(In millions)
Amortized
Cost (1)
Fair
Value
Amortized
Cost (1)
Fair
Value
Publicly issued securities:
Fixed maturity securities
$ 65,522
$ 63,559
$ 65,291
$ 66,476
Equity securities
726
726
638
638
Total publicly issued
66,248
64,285
65,929
67,114
Privately issued securities: (2)
Fixed maturity securities (3)
15,861
16,038
14,764
15,565
Equity securities
161
161
158
158
Total privately issued
16,022
16,199
14,922
15,723
Total investment securities
$ 82,270
$ 80,484
$ 80,851
$ 82,837
(1) Net of allowance for credit losses
(2) Primarily consists of securities owned by Aflac Japan
(3) Excludes Rule 144A securities
The following table details the Company's reverse dual-currency securities as of December 31.
Reverse Dual-Currency Securities(1)
(Amortized cost, in millions)
2025
2024
Privately issued reverse dual-currency securities
$ 3,196
$ 3,368
Publicly issued collateral structured as reverse dual-currency securities
895
945
Total reverse dual-currency securities
$ 4,091
$ 4,313
Reverse dual-currency securities as a percentage of total investment
securities
5.0 %
5.3 %
(1) Principal payments in Japanese yen and interest payments in U.S. 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. Aflac Japan’s investments in Japanese
yen-denominated privately issued securities consist primarily of non-Japanese issuers, are rated investment grade at
purchase and have longer maturities, thereby allowing the Company to improve asset/liability matching and overall
investment returns. These securities are generally either privately negotiated arrangements or issued under medium-term
note programs and have standard documentation commensurate with credit ratings of the issuer, except when internal
credit analysis indicates that additional protective and/or event-risk covenants were required. Many of these investments
have protective covenants appropriate to the specific investment. These may include a prohibition of certain activities by
the borrower, maintenance of certain financial measures, and specific conditions impacting the payment of the Company's
notes.
HEDGING ACTIVITIES
The Company uses derivative contracts to hedge foreign currency exchange risk and interest rate risk. The Company
uses various strategies, including derivatives, to manage these risks. See Item 7A. Quantitative and Qualitative
Disclosures About Market Risk for additional information about market risk and the Company’s use of derivatives.
See Note 4 of the Notes to the Consolidated Financial Statements for:
•
A description of the Company's derivatives, hedging strategies and underlying risk exposure.
•
Information about the notional amount and fair market value of the Company's derivatives.
•
Impact on earnings and other comprehensive income (loss) from various qualifying and non-qualifying hedging
relationships.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
58
Foreign Currency Exchange Risk Hedge Program
The Company has deployed the following hedging strategies to mitigate exposure to foreign currency exchange risk:
•
Aflac Japan hedges U.S. dollar-denominated investments back to Japanese yen (see Aflac Japan’s U.S. Dollar-
Denominated Hedge Program below).
•
Aflac Japan maintains certain unhedged U.S. dollar-denominated securities, which serve as an economic
currency hedge of a portion of the Company's investment in Aflac Japan, while utilizing foreign currency options to
mitigate against significant movements in the yen/dollar exchange rate (see Aflac Japan’s U.S. Dollar-
Denominated Hedge Program below).
•
Aflac Japan economically hedges the foreign currency exchange risk on certain of its investments that are
denominated in other foreign currencies.
•
The Parent Company designates Japanese yen-denominated liabilities (notes payable and loans) as non-
derivative hedging instruments and designates certain foreign currency forwards and options as derivative hedges
of the Company’s net investment in Aflac Japan (see Enterprise Corporate Hedging Program below).
•
The Parent Company enters into forward and option contracts to protect the value of Aflac Japan in U.S. dollar
terms by hedging foreign currency exchange risk related to dividend payments by Aflac Japan and reduce
enterprise-wide hedge costs (see Enterprise Corporate Hedging Program below).
The following table presents metrics related to the Company's Foreign Currency Exchange Risk Hedge Program,
including associated amortized hedge costs/income, for the years ended December 31. See the Results of Operations
section of this MD&A for the Company's definition of amortized hedge costs/income.
2025
2024
Aflac Japan:
FX Forwards
FX forward notional at end of period (in billions) (1)
$
0.9
$
0.0
Amortized hedge income (cost) for period (in millions)
$
(12)
$
1
FX Options
FX option notional at the end of period (in billions) (1)
$
25.0
$
24.2
Amortized hedge income (cost) for period (in millions)
$
(33)
$
(27)
Corporate and other (Parent Company):
FX Forwards
FX forward notional at end of period (in billions) (1)
$
1.8
$
1.8
Amortized hedge income (cost) for period (in millions)
$
98
$
113
FX Options
FX option notional at the end of period (in billions) (1)
$
0.0
$
0.0
Amortized hedge income (cost) for period (in millions)
$
0
$
0
(1) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.
Amortized hedge costs/income can fluctuate based upon many factors, including the derivative notional amount, the
length of time of the derivative contract, changes in both U.S. and Japan interest rates, and the cross-currency basis.
Amortized hedge costs/income have fluctuated in recent periods due to changes in the previously mentioned factors.
Aflac Japan’s U.S. Dollar-Denominated Hedge Program (U.S. Dollar Program)
Aflac Japan buys U.S. dollar-denominated investments, typically corporate bonds, and hedges them back to Japanese
yen with foreign currency forwards and options to hedge foreign currency exchange risk. This economically creates
Japanese yen assets that match Japanese yen liabilities during the life of the derivative and provides favorable capital
treatment under the Japan SMR calculations. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
59
2025
2024
(In millions)
Amortized
Cost (1)
Fair
Value
Amortized
Cost (1)
Fair
Value
Available-for-sale securities:
Fixed maturity securities
$
12,618 $
15,075
$
9,835 $
12,183
Equity securities
22
24
22
22
Commercial mortgage and other loans:
Transitional real estate loans (floating rate)
2,818
2,849
3,648
3,656
Commercial mortgage loans
878
811
915
811
Middle market loans (floating rate)
3,827
3,751
3,847
3,794
Other loans
204
209
174
173
Other investments
3,136
3,136
2,862
2,862
Total U.S. Dollar Program
23,503
25,855
21,303
23,501
Available-for-sale securities:
Fixed maturity securities - economically converted to yen
1,632
2,398
1,645
2,406
Total U.S. dollar-denominated investments in Aflac Japan
$
25,135 $
28,253
$ 22,948 $
25,907
(1) Net of allowance for credit losses
The U.S. Dollar Program includes all U.S. dollar-denominated investments held by Aflac Japan other than the investments
in certain consolidated VIEs where the instrument is economically converted to Japanese yen as a result of a derivative in
the consolidated VIE. The Company uses foreign currency forwards to hedge foreign currency exchange risk on certain
U.S. dollar-denominated investments held by Aflac Japan and one-sided foreign currency put options to mitigate the risk
of a decline in the value of U.S. dollar-denominated assets (in Japanese yen terms) related to extreme foreign exchange
rate changes. 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 rates and therefore support SMR. As of December 31, 2025,
none of the Company's foreign currency options hedging Aflac Japan's U.S. dollar-denominated assets were in-the-
money.
Foreign currency derivatives used for hedging are periodically settled, which results in cash receipt or payment at
inception, maturity or early termination. The following table presents the settlements associated with the Company's
foreign currency derivatives used for hedging Aflac Japan’s U.S. dollar-denominated investments for the years ended
December 31.
(In millions)
2025
2024
Net cash inflows (outflows)
$
(71)
$
(508)
In addition to the U.S. dollar Program, Aflac Japan utilizes foreign currency forwards to economically hedge the foreign
currency exchange risk on certain of its variable-rate investments denominated in other foreign currencies. As of
December 31, 2025, the Company had foreign currency forwards on other foreign currency-denominated investments with
a fair value of $135 million.
Aflac Japan also utilizes foreign currency swaps to economically hedge the foreign currency exchange risk on certain of
its fixed maturity securities denominated in other foreign currencies. As of December 31, 2025, the Company had foreign
currency swaps on other foreign currency-denominated investments with a fair value of $48 million.
Enterprise Corporate Hedging Program
The Company has designated certain Japanese yen-denominated liabilities and foreign currency forwards and options of
the Parent Company as accounting hedges of its net investment in Aflac Japan. The Company's consolidated Japanese
yen-denominated net asset position was partially hedged at $6.8 billion as of December 31, 2025, with hedging
instruments comprised of $5.0 billion of Japanese yen-denominated debt and $1.8 billion of foreign currency forwards,
compared with $5.9 billion as of December 31, 2024, with hedging instruments comprised of $4.1 billion of Japanese yen-
denominated debt and $1.8 billion of foreign currency forwards.
The Company makes its accounting designation of net investment hedge at the beginning of each quarter. If the total of
the designated Parent Company non-derivative and derivative notional is equal to or less than the Company's net
investment in Aflac Japan, the hedge is deemed to be effective, and the foreign currency exchange effect on the
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
60
Japanese yen-denominated liabilities and the change in estimated fair value of the derivatives are included in unrealized
foreign currency translation gains (losses) in the consolidated statements of comprehensive income (loss). The
Company's net investment hedge was effective during the years ended December 31, 2025 and 2024, respectively. For
additional information on the Company's net investment hedging strategy, see Note 4 of the Notes to the Consolidated
Financial Statements.
In order to economically mitigate risks associated with the enterprise-wide exposure to the Japanese 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 Japanese yen, the Parent Company is effectively lowering its overall economic exposure to the
Japanese yen. In addition to reducing Japanese yen exposure from dividend payments by Aflac Japan to the Parent
Company, this strategy also reduces enterprise-wide hedge costs. This activity is reported in Corporate and other. The
Company continually evaluates the program’s efficacy.
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
Japanese yen, in order to support and optimize BMA capital requirements. For additional information on the Company's
internal reinsurance platform, see Note 8 of the Notes to the Consolidated Financial Statements and the Liquidity and
Capital Resources section of this MD&A.
For additional discussion of the risks associated with the foreign currency exposure refer to the Currency Risk section in
Item 7A. Quantitative and Qualitative Disclosures about Market Risk, and Item 1A. specifically to the Risk Factors titled
“The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate“ and “Lack of availability of
acceptable Japanese yen-denominated investments could adversely affect the Company's results of operations, financial
position or liquidity."
Interest Rate Risk Hedge Program
Aflac Japan and Aflac U.S. use interest rate swaps from time to time to mitigate the risk of investment income volatility for
certain variable-rate investments. Additionally, to manage interest rate risk associated with its U.S. dollar-denominated
investments held by Aflac Japan, from time to time the Company utilizes interest rate swaptions.
See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's hedging
activities.
POLICY LIABILITIES
The following table presents policy liabilities by segment and in total for the years ended December 31.
(In millions)
2025
2024
Japan segment:
Future policy benefits
$
52,595
$
60,885
Other policy liabilities
6,697
6,664
Total Japan policy liabilities
59,292
67,549
U.S. segment:
Future policy benefits
10,798
10,584
Other policy liabilities
580
479
Total U.S. policy liabilities
11,378
11,063
Consolidated:
Future policy benefits
62,320
70,381
Other policy liabilities
7,263
7,127
Total consolidated policy liabilities (1)
$
69,583
$
77,508
(1) The sum of the Japan and U.S. segments exceeds the total due to reinsurance and retrocession activity.
See Note 7 of the Notes to the Consolidated Financial Statements for additional information on the Company's policy
liabilities.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
61
BENEFIT PLANS
Aflac Japan and Aflac U.S. have various benefit plans. For additional information on the Company's Japanese and U.S.
plans, see Note 13 of the Notes to the Consolidated Financial Statements.
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. In March 2022, Japan's Diet passed legislation that
extended the government's fiscal support of the LIPPC through March 2027. In March 2022, the LIPPC reached the
required balance for the total life industry of ¥400 billion as specified by its Articles of Incorporation. 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, 2025 and 2024.
Guaranty Fund Assessments
Under U.S. state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for
certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same
line or similar lines of business. 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
additional information on guaranty fund assessments. Guaranty fund assessments for the years ended December 31,
2025 and 2024 were immaterial.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company.
Capital refers to the long-term financial resources available to support the operations of the businesses, fund business
growth and provide for an ability to withstand adverse circumstances. Financial leverage (leverage) refers to a strategy of
utilizing debt in managing the Company's capital structure and cost of capital. The Company targets and actively manages
liquidity, capital and leverage in the context of a number of considerations, including:
•
business investment and growth needs
•
strategic growth objectives
•
financial flexibility and obligations
•
capital support for hedging activity
•
a constantly evolving business and economic environment
•
a balanced approach to capital allocation and deployment to shareholders
The governance framework supporting liquidity, capital, and leverage includes global senior management and board
committees that review and approve all significant capital related decisions.
The Company remains committed to prudent liquidity and capital management. To provide a capital buffer and liquidity
support at the holding company, the target minimum amount for the Parent Company is approximately $1.0 billion.
Aflac Japan and Aflac U.S. generate cash flows from their operations and provide the primary sources of liquidity to the
Parent Company through management fees and dividends, with Aflac Japan being the largest contributor. The primary
uses of cash by the Parent Company are shareholder dividends, the repurchase of its common stock, interest on its
outstanding indebtedness and operating expenses.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
62
The following table presents the amounts provided to the Parent Company for the years ended December 31.
Liquidity Provided by Subsidiaries to Parent Company
(In millions)
2025
2024
Management fees paid by subsidiaries
$
170
$
163
Dividends declared or paid by subsidiaries
3,826
3,841
The following table details Aflac Japan remittances, which are included in the totals above, for the years ended December
31.
Aflac Japan Remittances
(In millions of dollars and billions of yen)
2025
2024
Aflac Japan management fees paid to Parent Company
$
73
$
69
Aflac Japan dividends declared or paid to Parent Company (in U.S. dollars)
2,681
2,865
Aflac Japan dividends declared or paid to Parent Company (in yen)
¥ 396.7
¥ 441.6
The Company maintains liquidity at the Parent Company for risk management purposes and to support certain derivative
activity. Further, the Company plans to continue to maintain a population of unhedged U.S. dollar-denominated
investments held by 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. See the Hedging Activities subsection of this MD&A for additional information.
The Company believes that its balance of cash and cash equivalents and cash generated by operations will be sufficient
to satisfy both its short-term and long-term cash requirements and plans for cash, including material cash requirements
from known contractual obligations and returning capital to shareholders through share repurchases and dividends.
In addition to cash and cash equivalents, the Company also maintains credit facilities, both intercompany and with
external partners, and a number of other available tools to support liquidity needs on a global basis. 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. The Company was in compliance
with all of the covenants of its notes payable and lines of credit at December 31, 2025.
In August 2025, the Parent Company expanded its sources of liquidity by entering into two separate facility agreements,
as follows:
1.
A 10-year facility agreement with a Delaware trust (2035 Trust) that provides the Parent Company with the right to
issue and sell to the 2035 Trust from time to time up to $1.0 billion of senior notes due August 2035.
2.
A 30-year facility agreement with a Delaware trust (2055 Trust) that provides the Parent Company the right to
issue and sell to the 2055 Trust from time to time up to $1.0 billion of senior notes due August 2055.
As of December 31, 2025, the Parent Company had no senior note issuances under these facility agreements.
For additional information, see Note 9 of the Notes to the Consolidated Financial Statements.
As part of enterprise-wide capital management and optimization, the Company also utilizes the intercompany reinsurance
platform to execute internal reinsurance transactions with Aflac Re. For additional information, see Note 8 of the Notes to
the Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
63
The following table presents the estimated payments of the Company's material cash requirements from known
contractual obligations as of December 31, 2025. The Company translated its Japanese yen-denominated obligations
using the December 31, 2025 foreign exchange rate. Actual future payments as reported in U.S. dollars will fluctuate with
changes in the yen/dollar exchange rate.
(In millions)
Total
Liability(1)
Total
Payments
Short-term
Payments
Long-term
Payments
Future policy benefits liability (Note 7)(2)
$
62,320
$
173,047
$
8,499
$
164,548
Other policyholders' funds (Note 7)(3)
5,445
5,934
633
5,301
Long-term debt – principal (Note 9)
8,330
8,378
700
7,678
Long-term debt – interest (Note 9)
49
2,477
197
2,280
Cash collateral on loaned securities (Note 3)
3,989
3,989
3,989
0
Operating service agreements (Note 15)
N/A
520
198
322
Operating lease obligations (Note 9)
73
86
37
49
Finance lease obligations (Note 9)
6
6
2
4
Total contractual obligations
$
80,212
$
194,437
$
14,255
$
180,182
(1) Liability amounts are those reported on the consolidated balance sheet as of December 31, 2025.
(2) The estimated payments reflect future estimated cash payments to be made to policyholders and others for future policy benefits and
certain related expenses using assumptions aligned with the Company's experience on policy persistency, mortality, morbidity and
other assumptions. These cash outflows are undiscounted with respect to interest, and future premium payments received from
policyholders are not included. 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.
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. 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, 2025, the Company had no material
letters of credit, standby letters of credit, guarantees or standby repurchase obligations. The Company has not entered
into transactions involving the transfer of financial assets with an obligation to repurchase financial assets that have been
accounted for as a sale under applicable accounting standards, including securities lending transactions. See Notes 1, 3,
and 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's securities
lending and derivative activities. With the exception of disclosed activities in those referenced footnotes and the Risk
Factors entitled, "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" and "Lack of
availability of acceptable Japanese yen-denominated investments could adversely affect the Company's results of
operations, financial position or liquidity," the Company is not aware of any trend, demand, commitment, event or
uncertainty that would reasonably result in its liquidity increasing or decreasing by a material amount.
Consolidated Cash Flows
The Company consistently generates positive cash flows from operations, and has the ability to adjust cash flow
management from other sources of liquidity including reinvestment cash flows and selling investments in order to meet
short-term cash needs.
The Company translates cash flows for Aflac Japan's yen-denominated items into U.S. dollars using weighted-average
foreign exchange rates. In years when the Japanese yen weakens, translating Japanese yen into U.S. dollars causes
fewer U.S. dollars to be reported. When the Japanese yen strengthens, translating Japanese yen into U.S. dollars causes
more U.S. dollars to be reported.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
64
The following table summarizes consolidated cash flows by activity for the years ended December 31.
(In millions)
2025
2024
Operating activities
$ 2,555
$ 2,707
Investing activities
1,561
2,781
Financing activities
(4,069)
(3,486)
Exchange effect on cash and cash equivalents
(31)
(79)
Net change in cash and cash equivalents
$
16
$ 1,923
Operating Activities
The principal cash inflows for the Company's insurance activities come from insurance premiums and investment income.
The principal cash outflows are the result of policy claims, operating expenses, income tax, as well as interest expense.
As a result of policyholder aging, claims payments are expected to gradually increase over the life of a policy. Therefore,
future policy benefit reserves are accumulated in the early years of a policy and are designed to help fund future claims
payments.
The Company expects its future cash flows from premiums and investment portfolios to be sufficient to meet its cash
needs for benefits and expenses. Consolidated cash flow from operations decreased 5.6% in 2025, compared with 2024.
Investing Activities
The Company's investment objectives provide for liquidity primarily through the purchase of publicly traded investment-
grade fixed maturity securities. 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. However, the long-term nature of the Company's business and its strong cash flows provide the Company
with the ability to minimize the effect of mismatched durations and/or yields identified by various asset adequacy analyses.
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.
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, 2025, of the $400 million committed, approximately $297 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 central mission of Aflac Global Ventures is to support the organic growth and business
development needs of Aflac Japan and Aflac U.S. with an emphasis on digital applications designed to improve the
customer experience, gain efficiencies, and develop new markets in an effort to enhance and defend long-term
shareholder value. Investments are included in equity securities or other investments 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 2025, Aflac U.S. borrowed and
repaid $777 million under this program. As of December 31, 2025, Aflac U.S. had outstanding borrowings of $334 million
reported in its balance sheet.
See Note 3 of the Notes to the Consolidated Financial Statements for details on certain investment commitments.
Financing Activities
Cash flows from financing activities consist primarily of share repurchases, dividends to shareholders and, from time to
time, debt issuances and redemptions.
See Note 9 of the Notes to the Consolidated Financial Statements for information on debt issuances and redemptions.
Cash returned to shareholders through treasury stock purchases and dividends was $4.7 billion in 2025, compared with
$3.9 billion in 2024.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
65
The following tables present a summary of treasury stock activity during the years ended December 31.
Treasury Stock Purchased
(In millions of dollars and thousands of shares)
2025
2024
Treasury stock purchases
$ 3,530
$ 2,800
Number of shares purchased:
Share repurchase program
32,994
30,428
Other
411
494
Total shares purchased
33,405
30,922
Treasury Stock Issued
(In millions of dollars and thousands of shares)
2025
2024
Stock issued from treasury:
Cash financing
$
8
$
14
Noncash financing
72
67
Total stock issued from treasury
$
80
$
81
Number of shares issued
985
1,042
In August 2025, the Company's board of directors authorized the purchase of an additional 100 million shares of its
common stock. As of December 31, 2025, a remaining balance of 114.3 million shares of the Company's common stock
were available for purchase under share repurchase authorizations by its board of directors. See Note 11 of the Notes to
the Consolidated Financial Statements for additional information.
Cash dividends paid to shareholders in 2025 of $2.32 per share increased 16.0% over 2024. The following table presents
the dividend activity for the years ended December 31.
Dividends Paid to Shareholders
(In millions)
2025
2024
Dividends paid in cash
$ 1,198
$ 1,087
Dividends through issuance of treasury shares
43
41
Total dividends to shareholders
$ 1,241
$ 1,128
In November 2025, the board of directors announced a 5.2% increase in the quarterly cash dividend, effective with the
first quarter of 2026. The first quarter 2026 cash dividend of $.61 per share is payable on March 2, 2026, to shareholders
of record at the close of business on February 18, 2026.
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. Under these criteria, dividend capacity at Aflac Japan is defined as total equity
excluding common stock and capital reserves 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. Aflac Japan's SMR is sensitive to interest rate, credit spread, and
foreign exchange rate changes; therefore, the Company continues to evaluate alternatives for reducing this sensitivity,
including the reduction of subsidiary dividends paid to the Parent Company and Parent Company capital contributions. In
the event of a rapid change in market risk conditions causing SMR to decline, or in the event of reduced liquidity, the
Company has a senior unsecured revolving credit facility in the amount of ¥100 billion as a contingency plan. See Note 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
66
The Company has already undertaken various measures to mitigate the sensitivity of Aflac Japan's SMR. For example,
the Company employs policy reserve matching (PRM) investment strategies, which is a Japan-specific accounting
treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost
consistent with corresponding liabilities. In order for a PRM-designated asset to be held at amortized cost, there are
certain criteria that must be maintained. The primary criterion relates to maintaining the duration of designated assets and
liabilities within a specified tolerance range. If the duration difference is not maintained within the specified range without
rebalancing, then a certain portion of the assets must be reclassified as available-for-sale and held at fair value with any
associated unrealized gain or loss recorded in surplus. To rebalance, assets may need to be sold in order to maintain the
duration with the specified range, resulting in realizing a gain or loss from the sale. For U.S. GAAP, PRM investments are
categorized as available-for-sale. The Company also uses foreign currency derivatives to hedge a portion of its U.S.
dollar-denominated investments. 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, 2025, Aflac
Japan's SMR was 995%, compared with 1,221% at December 31, 2024. The Company is committed to maintaining strong
capital levels, consistent with maintaining current insurance financial strength and credit ratings.
The FSA will implement an economic value-based solvency regime based on the ICS for insurance companies in Japan.
The initial report on the ESR will be issued as of March 31, 2026, which is Aflac Japan's 2025 fiscal year-end. As of
December 31, 2025, Aflac Japan estimated the ESR to be above the Company's target range of 170% to 230%.
Aflac U.S.
A life insurance company’s statutory capital and surplus is determined according to rules prescribed by the NAIC, as
modified by the insurance department in the insurance company’s state of domicile. Statutory accounting rules are
different from U.S. GAAP and are intended to emphasize policyholder protection and company solvency. The continued
long-term growth of the Company's business may require increases in the statutory capital and surplus of its insurance
operations. The Company's insurance operations may secure additional statutory capital through various sources, such as
internally generated statutory earnings, reduced dividends paid to the Parent Company, capital contributions by the Parent
Company from funds generated through debt or equity offerings, or reinsurance transactions. The NAIC’s RBC formula is
used by insurance regulators to help identify inadequately capitalized insurance companies. 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, 2025 was estimated to be 570%, compared with 677% as of
December 31, 2024. The Company calculates its combined RBC ratio to include all U.S. regulated life insurance entities
as if a single combined U.S. RBC entity net of intercompany items related to capital resources and risk.
Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its regulations. The NDOI imposes certain limitations
and restrictions on payments of dividends, management fees, loans and advances to the Parent Company. Under
Nebraska insurance law, prior approval of the NDOI is required for dividend distributions that exceed the greater of the net
income from operations, which excludes net investment gains, for the previous year determined under statutory
accounting principles, or 10% of statutory capital and surplus as of the previous year-end. Dividends declared by Aflac
during 2026 in excess of $664 million would be considered extraordinary and require such approval. Similar laws apply in
New York, the domiciliary jurisdiction of Aflac New York.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
67
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). Aflac Re is required to file annual and quarterly returns for its Bermuda Solvency Capital Requirement
(BSCR) which utilizes an Economic Balance Sheet (EBS) framework to determine Aflac Re’s Enhanced Capital
Requirement (ECR). Aflac Re is also subject to a Minimum Margin of Solvency (MSM) related to its statutory financial
statements. The MSM is equal to the greater of $8,000,000; 2% of the first $500,000,000 of assets under management
plus 1.5% of the amount by which assets exceed $500,000,000; or 25% of ECR.
Under the EBS framework, Aflac Re is required to value assets equal to U.S. GAAP fair values, and insurance reserves
are valued using technical provisions which consist of a best estimate liability plus a risk margin. The best estimate liability
can be calculated by applying the standard approach or, with regulatory approval, the scenario-based approach. The
standard approach uses discount rates for insurance reserves as prescribed by the BMA. The scenario-based approach
uses a discount rate based on the yield of eligible assets owned by the insurer as determined using a series of prescribed
stress scenarios. At December 31, 2025 and 2024, Aflac Re was in compliance with the ECR and MSM 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.
Further, Aflac Re may not reduce its total statutory capital by 15% or more without prior regulatory approval. Additionally,
Aflac Re is not permitted to pay any dividends that would cause Aflac Re to fail to meet its minimum capital requirements.
Other
For information regarding commitments and contingent liabilities, see Note 15 of the Notes to the Consolidated Financial
Statements.
Additional Information
Investors should note that the Company announces material financial information in its SEC filings, press releases and
public conference calls. In accordance with SEC guidance, the Company may also use the Investor Relations section of
the Company's website (http://investors.aflac.com) to communicate with investors about the Company. 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.
CRITICAL ACCOUNTING ESTIMATES
The Company prepares its financial statements in accordance with U.S. GAAP. These principles are established primarily
by the FASB. In this MD&A, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting
Standards Codification™ (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the
Company to make estimates based on currently available information when recording transactions resulting from business
operations. 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 (LFPB), and income taxes. The preparation and evaluation of these critical
accounting estimates involve the use of various assumptions developed from management’s analyses and judgments.
Calculations of DAC and the LFPB require the use of estimates based on actuarial valuation techniques. The application
of these critical accounting estimates determines the values at which 92% of the Company's assets and 74% of its
liabilities are reported as of December 31, 2025, and thus has a direct effect on net earnings and shareholders' equity.
Subsequent experience or use of other assumptions could produce significantly different results.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
68
Valuation of Investments, Including Derivatives
The Company's investments, primarily consisting of fixed maturity and equity securities, include both publicly issued and
privately issued securities. For publicly issued securities, the Company determines the fair values from quoted market
prices readily available from public exchange markets and price quotes and valuations from third-party pricing vendors.
For the majority of privately issued securities and derivatives associated with VIEs within the Company's investment
portfolio, the Company utilizes valuation models developed by a third-party pricing vendor to determine fair values. These
models and associated processes and controls are executed by Company personnel. For the remaining privately issued
securities, the Company uses non-binding price quotes from outside brokers and fair values provided by its external
managers. The Company's valuation model for private placements explicitly incorporates currency basis swap
adjustments (market observable data) to assumed interest rate curves where appropriate.
The Company estimates the fair values of its securities on a monthly basis. The Company monitors the estimated fair
values obtained from its pricing vendors, external managers, and brokers for consistency from month to month, while
considering current market conditions. The Company also periodically discusses with its pricing brokers and vendors the
pricing techniques they use to monitor the consistency of their approach and to periodically assess the appropriateness of
the valuation level assigned to the values obtained from them. If a fair value appears unreasonable, the Company will re-
examine the inputs and assess the reasonableness of the pricing data with the provider. Additionally, the Company may
compare the inputs to relevant market indices and other performance measurements. Based on management's analysis,
the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on
available market data and information. The Company has performed verification of the inputs and calculations in any
valuation models to confirm that the valuations represent reasonable estimates of fair value. 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 allowance for credit losses on investments measured at amortized cost including held-to-
maturity securities, loan receivables and certain loan commitments on a quarterly basis. For collateral dependent financial
assets, including loans where foreclosure is probable, the allowance for credit losses is based on the fair value of the
underlying collateral. For the Company’s available-for-sale securities, the Company evaluates an estimate for credit
losses only when the fair value of the available-for-sale security is below its amortized cost basis.
The Company’s approach to estimating an allowance for credit losses is complex and incorporates significant judgments.
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.
For additional information, see the tabular disclosure entitled "Sensitivity of Fair Values of Financial Instruments to Interest
Rate Change" in Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Notes 1, 3, 4 and 5 of the
Notes to the Consolidated Financial Statements.
Deferred Policy Acquisition Costs and Future Policy Benefits
Substantially all of the supplemental health and life insurance policies the Company issues are classified as long-duration
contracts. The contract provisions generally cannot be changed or canceled during the contract period. However, the
Company may adjust premiums for supplemental health policies issued in the U.S. within prescribed guidelines and with
the approval of state insurance regulatory authorities.
Insurance premiums for most of the Company's health and life insurance policies are recognized as earned premiums
over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the
related amounts of benefits and expenses are charged against such revenues. This association is accomplished by
means of annual increases or decreases to the LFPB and the deferral and subsequent amortization of policy acquisition
costs.
Premiums from the Company's products with limited-pay features are collected over a significantly shorter period than the
contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned
premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net
premium is deferred and reported as a deferred profit liability, a component of the LFPB, which is subsequently amortized
in net earned premiums such that profits are recognized in a constant relationship with insurance in force. Benefits are
recorded as an expense when they are incurred and LFPB is recorded when premiums are recognized using the net
premium method.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
69
Deferred Policy Acquisition Costs
Amortization of DAC is computed using the same contract groupings (also referred to as cohorts) and mortality and
termination assumptions that are used in computing the LFPB. These assumptions are reviewed and updated at least
annually. The effects of changes in assumptions are recognized prospectively over the remaining contract term as a
revision of the future amortization pattern, while current period amortization is calculated based on the actual experience
during the quarter. For additional information, see Notes 1 and 6 of the Notes to the Consolidated Financial Statements.
Future Policy Benefits
The Company's LFPB is determined in accordance with applicable guidelines as defined under U.S. GAAP and Actuarial
Standards of Practice and represent claims that are expected to occur in the future and incurred claims. Incurred claims
represent claims in the process of payment as well as an estimate of those claims that have been incurred but have not
yet been reported to the Company. LFPB is determined using the net level premium method. The LFPB is calculated
using assumptions and estimates including, (1) cash flow assumptions (mortality, morbidity, and termination, also referred
to as lapses), (2) expense assumptions, and (3) discount rates. The assumptions and estimates that the Company uses
depend on its judgment regarding the likelihood of future events and are inherently uncertain.
Cash flow assumptions are established at policy inception and are evaluated each quarter to determine if an update is
needed. Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability
due to actual experience are included in reserve remeasurement (gains) losses in the consolidated statements of
earnings.
To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third
quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the
beginning of the reporting period and are included as a cumulative catch-up adjustment in reserve remeasurement (gains)
losses in the consolidated statements of earnings.
Expense assumptions are established at policy inception, determined for each issue-year cohort as a percentage of paid
claims. These expense assumptions are locked in and remain unchanged over the term of the insurance policy.
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 included in benefits and claims, excluding reserve remeasurement in the
consolidated statements of earnings. These locked-in discount rates are determined separately for each issue-year cohort
as a single discount rate that reflects the duration characteristics of the corresponding insurance contracts and will remain
unchanged after the calendar year of issue.
Discount rates used to measure the carrying value of the 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 is included in the effect of changes in discount rate assumptions in accumulated other
comprehensive income (loss).
The Company's discount rate methodology involves constructing a current discount rate curve separately for discounting
cash flows used to calculate the Japan and U.S. LFPB. This methodology is designed to prioritize observable inputs
based on market data available in the local debt markets where the respective policies were issued in the currency in
which the policies are denominated. For the discount rates applicable to tenors for which the single-A debt market is not
liquid or there is little or no observable market data, the Company uses various estimation techniques consistent with the
fair value guidance in ASC 820 - Fair Value Measurement, which include, but are not limited to: (i) for tenors where there
is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-
specific single-A credit spreads and applying them to risk-free government rates; (ii) for tenors where there is very limited
or no observable single-A or similar market data, interpolation and extrapolation techniques.
If interest rates decreased by 100 basis points, the Company's LFPB balance as of December 31, 2025 would increase by
$7.4 billion, assuming all other factors remain constant. Likewise, if interest rates increased by 100 basis points, the
Company's LFPB balance as of December 31, 2025 would decrease by $5.9 billion, assuming all other factors remain
constant.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
70
If morbidity assumptions decreased by 100 basis points, the Company's LFPB balance as of December 31, 2025 would
decrease by $299 million, assuming all other factors remain constant. Likewise, if morbidity assumptions increased by 100
basis points, the Company's LFPB balance as of December 31, 2025 would increase by $303 million, assuming all other
factors remain constant.
For additional information on future policy benefits, see Notes 1 and 7 of the Notes to the Consolidated Financial
Statements.
Income Taxes
Income tax provisions are generally based on pretax earnings reported for financial statement purposes, which differ from
those amounts used in preparing the Company's income tax returns. Deferred income taxes are recognized for temporary
differences between the financial reporting basis and income tax basis of assets and liabilities, based on enacted tax laws
and statutory tax rates applicable to the periods in which the Company expects the temporary differences to reverse. The
evaluation of a tax position in accordance with U.S. GAAP is a two-step process. Under the first step, the enterprise
determines whether it is more likely than not that a tax position will be sustained upon examination by taxing authorities.
The second step is measurement, whereby a tax position that meets the more-likely-than-not recognition threshold is
measured to determine the amount of benefit to recognize in the financial statements. A valuation allowance is established
for deferred tax assets when it is more likely than not that an amount will not be realized. The determination of a valuation
allowance for deferred tax assets requires management to make certain judgments and assumptions.
In evaluating the ability to recover deferred tax assets, the Company's management considers all available evidence,
including taxable income in open carry back years, the existence of cumulative losses in the most recent years, forecasted
earnings, future taxable income exclusive of reversing temporary differences and carryforwards, future taxable temporary
difference reversals, and prudent and feasible tax planning strategies. In the event the Company determines it is not more
likely than not that it will be able to realize all or part of its deferred tax assets in the future, a valuation allowance would be
charged to earnings in the period such determination is made. Likewise, if it is later determined that it is more likely than
not that those deferred tax assets would be realized, the previously provided valuation allowance would be reversed.
Future economic conditions and market volatility, including increases in interest rates or widening credit spreads, can
adversely impact the Company’s tax planning strategies and in particular the Company’s ability to utilize tax benefits on
previously recognized capital losses. The Company's judgments and assumptions are subject to change given the
inherent uncertainty in predicting future performance and specific industry and investment market conditions.
An increase or decrease in the Company's effective tax rate by one percentage point would have resulted in an increase
or decrease in the Company's 2025 income tax expense of $50 million.
For additional information on income taxes, see Note 10 of the Notes to the Consolidated Financial Statements.
New Accounting Pronouncements
For information on new accounting pronouncements and the impact, if any, on the Company's financial position or results
of operations, see Note 1 of the Notes to the Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed primarily to the following types of market risks: currency risk, interest rate risk, credit risk and
equity risk. Fluctuations in these factors could impact the Company’s consolidated results of operations or financial
condition. 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. Aflac Japan’s premiums and a
significant portion of its investment income are received in Japanese yen, and its claims and most expenses are paid in
Japanese yen. Aflac Japan purchases Japanese yen-denominated assets and U.S. dollar-denominated assets, which
may be hedged to Japanese yen, to support Japanese yen-denominated policy liabilities. These and other Japanese yen-
denominated financial statement items are, however, translated into U.S. dollars for financial reporting purposes. Most of
Aflac Japan's cash and liabilities are Japanese yen-denominated.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
71
The Company engages in hedging activities to mitigate certain currency risks from holding U.S. dollar-denominated
investments in Aflac Japan; however, this hedging program also has some inherent risks. There is a risk that in a scenario
of long-term Japanese yen weakening there could be significant derivative losses that create corresponding liquidity
requirements to support interim derivative settlements. Further, the derivatives used for hedging are shorter in duration
than the hedged investments, so there is rollover risk. In unfavorable market environments, the rollover of derivatives
throughout the hedging period could result in increased hedge costs. Additionally, as discussed in detail in the Risk
Factors section titled “Lack of availability of acceptable Japanese 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 Japanese 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 Japanese yen.
The Company has taken steps to refine the strategy to mitigate currency exposure of Aflac Japan from U.S. dollar-
denominated investments while balancing the consideration of the economic equity surplus in Aflac Japan. This
refinement in strategy resulted in an increased amount of the unhedged U.S. dollar-denominated investments held in Aflac
Japan while at the same time mitigating hedge cost increases. Generally, Aflac Japan’s exposure to the currency risk
increases when its portfolio of unhedged U.S. dollar-denominated investments increases. As the value of the U.S. dollar-
denominated investment portfolio in Aflac Japan fluctuates and the Company’s business model evolves, the Company
periodically reevaluates this size of the unhedged portfolio and may accordingly adjust up or down its currency hedging
targets. 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 Japanese yen funds are converted into U.S. dollars. This occurs when
Japanese yen-denominated funds are paid as dividends and management fees from Aflac Japan to the Parent Company
and with quarterly settlements of internal reinsurance transactions. The foreign exchange rates prevailing at the time of
Japanese yen payments will differ from the foreign exchange rates prevailing at the time the Japanese yen profits were
earned. The Company may use a portion of the Japanese yen dividend and management fee payments to service Aflac
Incorporated's Japanese yen-denominated notes payable with the remainder converted into U.S. dollars. Internal
reinsurance transactions create foreign currency exposure at Aflac Re, primarily due to Japanese yen-denominated
reinsurance liabilities to Aflac Japan while a majority of Aflac Re's assets are denominated in U.S. dollars, which may
require Aflac Re to convert U.S. dollars to Japanese yen or enter foreign exchange derivatives with the Parent Company
to manage Japanese yen-denominated liabilities.
In addition to Japanese yen payments and internal reinsurance transactions, certain investment activities for Aflac Japan
expose the Company to economic currency risk when Japanese yen are converted into U.S. dollars. As noted above, the
Company invests a portion of its Japanese yen cash flows in U.S. dollar-denominated assets. This requires that the
Company convert the Japanese 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. Additionally, the Parent Company enters into forward contracts to
accomplish a dual objective of hedging foreign currency rate risk to dividend payments by Aflac Japan, and reducing
enterprise-wide hedge costs. The Company also balances the volume of hedging instruments between forwards and
options in an attempt to manage and balance the risks associated with collateral, hedge costs and cash settlements. If the
markets experience a significant strengthening of Japanese 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 foreign
exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent
Company could be significant.
Aside from the activities discussed above, the Company generally does not convert Japanese yen into U.S. dollars;
however, it does translate financial statement amounts from Japanese yen into U.S. dollars for financial reporting
purposes. Therefore, reported amounts are affected by foreign currency fluctuations. The Company reports unrealized
foreign currency translation gains and losses in accumulated other comprehensive income (loss). In periods when the
Japanese yen weakens against the dollar, translating Japanese yen into U.S. dollars causes fewer U.S. dollars to be
reported. When the Japanese yen strengthens, translating Japanese yen into U.S. dollars causes more U.S. dollars to be
reported. The weakening of the Japanese yen relative to the U.S. dollar will generally adversely affect the value of the
Company's Japanese yen-denominated investments in U.S. dollar terms. The Company also considers the economic
equity surplus in Aflac Japan and related exposure to foreign currency. The Company manages this currency risk by
investing a portion of Aflac Japan's investment portfolio in U.S. dollar-denominated securities and by the Parent
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
72
Company's issuance of Japanese yen-denominated debt. As a result, the effect of currency fluctuations on the Company's
net assets is reduced.
The following table demonstrates the effect of foreign currency fluctuations by presenting the dollar values of the
Company's Japanese yen-denominated assets and liabilities, and its consolidated Japanese yen-denominated net asset
exposure at selected foreign exchange rates as of December 31.
U.S. Dollar Value of Japanese Yen-Denominated Assets and Liabilities
at Selected Foreign Exchange Rates
(In millions)
2025
2024
Yen/dollar exchange rates
141.56
156.56 (1)
171.56 143.18
158.18 (1)
173.18
Yen-denominated financial instruments:
Assets:
Securities available-for-sale: (2)
Fixed maturity securities (3)
$ 30,987 $ 28,019 $ 25,569 $ 35,805 $ 32,409 $ 29,603
Fixed maturity securities - consolidated
variable interest entities (4)
511
462
422
514
465
425
Securities held-to-maturity: (2)
Fixed maturity securities
17,828 16,120 14,710 17,638 15,966 14,583
Equity securities
674
609
556
534
484
442
Cash and cash equivalents
1,042
942
860
894
809
739
Derivatives
134
179
329
111
240
384
Other financial instruments
302
273
249
382
346
315
Subtotal
51,478 46,604 42,695 55,878 50,719 46,491
Liabilities:
Notes payable
5,830
5,270
4,808
4,808
4,351
3,973
Derivatives
882
972
1,160
811
933
1,065
Subtotal
6,712
6,242
5,968
5,619
5,284
5,038
Net yen-denominated financial instruments
44,766 40,362 36,727 50,259 45,435 41,453
Other yen-denominated assets
11,411 10,318
9,416 12,040 10,898
9,954
Other yen-denominated liabilities
73,390 66,360 60,559 80,551 72,913 66,599
Consolidated yen-denominated net assets
(liabilities) subject to foreign currency
fluctuation(2)
$ (17,213) $ (15,680) $ (14,416) $ (18,252) $ (16,580) $ (15,192)
(1) Actual period-end foreign exchange rate
(2) Net of allowance for credit losses
(3) Does not include the U.S. dollar-denominated corporate bonds for which the Company has entered into foreign currency derivatives
as discussed in the Aflac Japan Investment subsection of MD&A
(4) Does not include U.S. dollar-denominated bonds that have corresponding cross-currency swaps in consolidated VIEs
The Company is required to consolidate certain VIEs. Some of the consolidated VIEs held by Aflac Japan use foreign
currency swaps to convert foreign denominated cash flows to Japanese yen, the functional currency of Aflac Japan, in
order to minimize cash flow fluctuations. Foreign currency swaps exchange an initial principal amount in two currencies,
agreeing to re-exchange the currencies at a future date, at an agreed upon foreign exchange rate. There may also be
periodic exchanges of payments at specified intervals based on the agreed upon rates and notional amounts. Prior to
consolidation, the Company's beneficial interest in these VIEs was a Japanese yen-denominated available-for-sale
security. Upon consolidation, the original Japanese yen-denominated investment was derecognized and the underlying
fixed maturity securities and cross-currency swaps were recognized. The combination of a U.S. dollar-denominated
investment and cross-currency swap economically creates a Japanese yen-denominated investment and has no impact
on the Company's net investment hedge position.
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 Japanese yen-
denominated investment that qualifies for inclusion as a component of the Company's investment in Aflac Japan for net
investment hedge purposes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
73
For additional information regarding the Company's Aflac Japan net investment hedge, see the Hedging Activities
subsection of Item 7. MD&A.
Interest Rate Risk
The Company's primary interest rate exposure is to the impact of changes in interest rates on the fair value of its
investments in fixed maturity securities. Significant increases in interest rates cause declines in the values of the
Company's investment portfolio which also has a secondary impact on the Company's overall evaluation of its deferred
tax asset position. The Company monitors its investment portfolio on a quarterly basis utilizing a full valuation
methodology, measuring price volatility, and sensitivity of the fair values of its investments to interest rate changes on the
fixed maturity securities the Company owns. For example, if the current duration of a fixed maturity security is 10 years,
then the fair value of that security will increase by approximately 10% if market interest rates decrease by 100 basis
points, assuming all other factors remain constant. Likewise, the fair value of the debt security will decrease by
approximately 10% if market interest rates increase by 100 basis points, assuming all other factors remain constant.
The estimated effect of potential increases in interest rates on the fair values of fixed maturity securities and loans the
Company owns; derivatives and notes payable as of December 31 follows:
Sensitivity of Fair Values of Financial Instruments
to Interest Rate Changes
2025
2024
(In millions)
Fair
Value
+100
Basis
Points
Fair
Value
+100
Basis
Points
Assets:
Fixed maturity securities:
Yen-denominated
$ 43,957
$ 40,214
$ 49,646
$ 44,699
U.S. dollar-denominated
35,509
32,746
32,369
30,677
Other currencies
131
123
26
23
Total fixed maturity securities
79,597
73,083
82,041
75,399
Commercial mortgage and other loans
9,617
9,567
10,653
10,598
Derivatives
$
179
$
178
$
240
$
225
Liabilities:
Notes payable (1)
$
7,849
$
7,418
$
7,027
$
6,601
Derivatives
972
848
933
957
(1) Excludes lease obligations
There are various factors that affect the fair value of the Company's investments in fixed maturity securities. Included in
those factors are changes in the prevailing interest rate environment, which directly affect the balance of unrealized gains
or losses for a given period in relation to a prior period. Decreases in market yields generally improve the fair value of
fixed maturity securities, while increases in market yields generally have a negative impact on the fair value of the
Company's fixed maturity securities. However, the Company does not expect to realize a majority of any unrealized gains
or losses. For additional information on unrealized losses on fixed maturity securities, see Note 3 of the Notes to the
Consolidated Financial Statements.
The Company attempts to match the duration of its assets with the duration of its liabilities. The following table presents
the approximate duration of Japanese yen-denominated assets and liabilities of Aflac Japan, along with premiums, as of
December 31.
(In years)
2025
2024
Yen-denominated fixed maturity securities
11
11
Policy benefits and related expenses to be paid in future years
14
14
Premiums to be received in future years on policies in force
10
10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
74
The following table presents the approximate duration of U.S. dollar-denominated assets and liabilities of Aflac U.S., along
with premiums, as of December 31.
(In years)
2025
2024
U.S. dollar-denominated fixed maturity securities
7
7
Policy benefits and related expenses to be paid in future years
7
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.
Comparison of Interest Rates for Future Policy Benefits
and Investment Yields
(Net of Investment Expenses)
2025
2024
U.S.
Japan
U.S.
Japan
Policies issued during year:
Required interest on policy reserves
5.58 %
4.17 % (1)
5.28 %
3.32 % (1)
New money yield on investments
6.51
3.95
6.68
5.92
Policies in force at year-end:
Required interest on policy reserves
4.47
2.85
(1)
4.46
2.88
(1)
Portfolio book yield, end of period
5.25
3.04
5.36
3.03
(1) Represents investments for Aflac Japan that support policy obligations and therefore excludes Aflac Japan’s annuity products
Aflac Japan investment yields above include U.S. dollar-denominated investment yields prior to factoring in amortized
hedge costs. The Company continues to monitor the spread between its new money yield and the required interest
assumption for newly issued products in both the U.S. and Japan and will re-evaluate those assumptions as necessary.
Currently, when investments the Company owns mature, the proceeds may be reinvested at a yield below that of the
interest required for the accretion of policy benefit liabilities on policies issued in earlier years. Overall, adequate profit
margins exist in Aflac Japan's aggregate block of business because of changes in the mix of business and favorable
experience from mortality, morbidity and expenses.
Periodically, the Company may enter into derivative transactions to hedge interest rate risk, depending on general
economic conditions. For additional information on interest rate derivatives, see the Hedging Activities subsection of Item
7. MD&A and Note 4 of the Notes to the Consolidated Financial Statements.
Credit Risk
A significant portion of the Company's investment portfolio consists of fixed maturity securities and loans that expose it to
the credit risk of the underlying issuer or borrower. The Company carefully evaluates this risk on every new investment
and closely monitors the credit risk of its existing investment portfolio. The Company incorporates the needs of its
products and liabilities, the overall requirements of the business, and other factors in addition to its underwriting of the
credit risk for each investment in the portfolio.
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. 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. For assets managed by external asset managers, the Company provides investment and
credit risk parameters that must be used when making investment decisions and requires ongoing monitoring and
reporting from the asset managers on significant changes in credit risks within the portfolio.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
75
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, 2025
Total
% of Total
No.
Consolidated Corporate/Sovereign Exposure
Consolidated
Fixed Maturity
Credit
Book Value
Securities
Rating
1
Japan National Government (1)
$
32,618
40.08 %
A+
2
Bank of America NA
288
.36
Bank of America NA
160
.20
A-
Bank of America NA
128
.16
BBB+
3
E.On International Finance Bv
272
.33
BBB+
4
Banobras
236
.29
BBB-
5
Nordea Bank AB
224
.28
A-
6
Investcorp SA
222
.27
BB
7
Walt Disney Co.
221
.27
A
8
AXA
220
.27
BBB+
9
Berkshire Hathaway Inc
217
.27
AA
10
Deutsche Telekom AG
211
.26
BBB+
11
CFE
204
.25
BBB
12
Japan Expressway Holding and Debt
203
.25
A+
13
Barclay's Bank PLC
202
.25
BBB+
14
JP Morgan Chase & Co.
195
.24
A+
15
Czech (Republic Of)
192
.24
AA-
Subtotal
$
35,725
43.89 %
Total fixed maturity securities
$
81,388
100.00 %
(1)JGBs or JGB-backed securities
As previously disclosed, the Company owns long-dated fixed maturity securities in support of its long-dated policyholder
obligations. Some of the Company's largest global investment holdings are positions that were purchased many years ago
and increased in size due to merger and consolidation activity among the issuing entities. In addition, many of the
Company's largest holdings are Japanese yen-denominated, therefore strengthening of the Japanese yen can increase its
position in U.S. dollars, and weakening of the Japanese yen can decrease its position in U.S. dollars. The Company's
global investment guidelines establish concentration limits for its investment portfolios.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
76
Geographical Exposure
The following table indicates the geographic exposure of the Company's fixed maturity securities as of December 31.
2025
2024
(In millions)
Amortized
Cost
% of
Total
Amortized
Cost
% of
Total
Japan
$
35,775
44.0 %
$
37,115
46.5 %
United States and Canada
30,191
37.1
27,146
34.0
United Kingdom
2,607
3.2
2,756
3.4
Germany
1,846
2.3
1,755
2.2
France
1,563
1.9
1,645
2.1
Peripheral Eurozone
1,274
1.6
1,353
1.6
Italy
620
.8
724
.9
Ireland
125
.2
110
.1
Spain
529
.6
519
.6
Nordic Region
1,396
1.7
1,451
1.8
Sweden
844
1.0
833
1.0
Norway
185
.2
254
.3
Denmark
233
.3
231
.3
Finland
134
.2
133
.2
Other Europe
2,060
2.5
2,005
2.4
Netherlands
959
1.2
896
1.1
Switzerland
505
.6
516
.6
Czech Republic
339
.4
335
.4
Austria
15
.0
14
.0
Belgium
114
.1
118
.1
Poland
128
.2
126
.2
Asia excluding Japan
1,154
1.4
1,218
1.5
Africa and Middle East
601
.7
565
.7
Latin America
1,359
1.7
1,419
1.8
Australia
1,481
1.8
1,520
1.9
All Others
81
.1
112
.1
Total fixed maturity securities
$
81,388
100.0 %
$
80,060
100.0 %
The primary factor considered when determining the domicile of investment exposure is the legal country risk location of
the issuer. However, other factors such as the location of the parent guarantor, the location of the company's headquarters
or major business operations (including location of major assets), location of primary market (including location of revenue
generation) and specific country risk publicly recognized by rating agencies can influence the assignment of the country
(or geographic) risk location. 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
77
Derivative Counterparties
The Company is a direct counterparty to the majority of derivative instruments and is exposed to credit risk in the event of
nonperformance by the counterparties in those contracts. For the foreign currency swaps associated with the Company's
VIE investments for which it is the primary beneficiary, the Company bears the risk of foreign exchange and/or credit loss
due to counterparty default even though it is not a direct counterparty to those contracts. The risk of counterparty default
for the Company's VIE and senior note and subordinated debenture swaps, foreign currency swaps, certain foreign
currency forwards, foreign currency options and interest rate swaptions is mitigated by collateral posting requirements that
counterparties to those transactions must meet. If collateral posting agreements are not in place or the counterparty
defaults on its collateral posting obligations, the counterparty risk associated with foreign currency forwards and foreign
currency options is the risk that at expiry of the contract, the counterparty is unable to deliver the agreed upon amount of
Japanese yen at the agreed upon price or delivery date, thus exposing the Company to additional unhedged exposure to
U.S. dollars held in the Aflac Japan investment portfolio. See Note 4 of the Notes to the Consolidated Financial
Statements for additional information.
Equity Risk
Market prices for equity securities are subject to fluctuation and consequently the amount realized in the subsequent sale
of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may
result from the relative price of alternative investments and general market conditions. The Company's three largest equity
exposures had a fair value of $184 million or approximately 21% of its total investment in equity securities as of
December 31, 2025. If equity prices experienced a hypothetical broad-based decline of 10%, the fair value of the
Company's equity investments would decline by approximately $89 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
78
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
80
Consolidated Financial Statements
84
Consolidated Statements of Earnings
84
Consolidated Statements of Comprehensive Income (Loss)
85
Consolidated Balance Sheets
86
Consolidated Statements of Shareholders' Equity
87
Consolidated Statements of Cash Flows
89
Notes to the Consolidated Financial Statements
90
Note 1. Summary of Significant Accounting Policies
90
Note 2. Business Segment Information and Selected Foreign Currency Translation Items
102
Note 3. Investments
106
Note 4. Derivative Instruments
124
Note 5. Fair Value Measurements
133
Note 6. Deferred Policy Acquisition Costs
147
Note 7. Policy Liabilities
148
Note 8. Reinsurance
157
Note 9. Notes Payable and Lease Obligations
158
Note 10. Income Taxes
167
Note 11. Shareholders' Equity
171
Note 12. Share-Based Compensation
175
Note 13. Benefit Plans
178
Note 14. Statutory Accounting and Dividend Restrictions
184
Note 15. Commitments and Contingent Liabilities
186
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of the
Company's management, including its principal executive officer and principal financial officer, the Company conducted an
evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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, 2025.
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, 2025, which is included herein.
Item 8. Financial Statements and Supplementary Data
79
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, 2025, 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, 2025, 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, 2025 and 2024, 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, 2025, and the related notes and financial statement schedules II, III,
and IV (collectively, the consolidated financial statements), and our report dated February 25, 2026 expressed an
unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Atlanta, Georgia
February 25, 2026
Item 8. Financial Statements and Supplementary Data
80
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, 2025 and 2024, 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, 2025, and the
related notes and financial statement schedules II, III, and IV (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
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, 2025, 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 25, 2026 expressed an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Fair value of certain privately issued securities
As discussed in Note 5 to the consolidated financial statements, the fair values of certain privately issued securities
are estimated using a discounted cash flow valuation model, developed by a third-party pricing vendor and executed
by Company personnel. This model takes into consideration any unique characteristics of the securities and makes
various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve using the most appropriate
comparable security(ies) of the issuer and issuer-specific credit default swap spreads. This credit curve is then used
with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including
illiquidity adjustments, if necessary, to price the security by discounting those loss adjusted cash flows. Judgment is
required to determine the inputs and assumptions used in the valuation model, including the determination of the most
appropriate comparable securities to develop an issuer-specific loss adjusted credit curve when it cannot be
developed from the specific security features. As of December 31, 2025, the values of certain privately issued
securities are included within the financial statement captions of fixed maturity securities available-for-sale, at fair
Item 8. Financial Statements and Supplementary Data
81
value of $60.5 billion; fixed maturity securities available-for-sale consolidated variable interest entities, at fair value of
$3.6 billion; and, fixed maturity securities held-to-maturity, at amortized cost of $16.1 billion.
We identified the assessment of the fair values of certain privately issued securities as a critical audit matter. Due to
the complexity of the valuation model, subjective auditor judgment and specialized valuation skills and knowledge
were needed to evaluate the valuation model, the methodology used to estimate fair value, and the Company's
determination of the most appropriate comparable securities to develop an issuer-specific loss adjusted credit curve,
when necessary.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls, with the assistance of valuation professionals, over
the Company’s process to estimate the fair values of certain privately issued securities. This included controls over
the Company’s determination of comparable securities, when appropriate, to develop an issuer-specific loss adjusted
credit curve to be used in the valuation model to estimate fair values. We involved valuation professionals with
specialized skills and knowledge to assist in assessing the estimated fair values of such securities, which included
•
Evaluating the Company's valuation methodology for compliance with U.S. generally accepted accounting
principles
•
Assessing the Company's model to estimate the fair values of privately issued securities by determining that
differences in fair values between that model and an independent internal model above pre-established
tolerances, if any, were investigated by the Company
•
Evaluating, for a selection of privately issued securities, the comparable securities used to develop an issuer-
specific loss adjusted credit curve by assessing whether the determination of comparable securities was
reasonable based on the Company’s methodology and our knowledge of the securities and the markets for
such securities
•
Developing an independent estimate of fair value for a selection of privately issued securities based on
independently developed valuation models and assumptions, as applicable, using market data sources and
comparing our independent estimate to the Company's fair value.
Valuation of the liability for future policy benefits
As discussed in Note 1 and Note 7 to the consolidated financial statements, the liability for future policy benefits
(LFPB) is determined using the net level premium method as the present value of expected future policy benefits to
be paid to or on behalf of policyholders and certain related expenses less the present value of expected future net
premiums receivable under the Company's insurance contracts, where expected future net premiums receivable are
future gross premiums receivable under the contract multiplied by the net premium ratio (NPR). Future policy benefits
are calculated using assumptions and estimates including, (1) cash flow assumptions (mortality, morbidity, and
terminations, also referred to as lapses), (2) expense assumptions and (3) discount rates. Cash flow assumptions are
established at policy inception and are evaluated each quarter to determine if an update is needed. 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 included in benefits and claims, excluding reserve remeasurement in the consolidated
statements of earnings. Discount rates used to measure the carrying value of the LFPB in the consolidated balance
sheets are updated each reporting period, and the difference between the liability balances calculated using the
locked-in discount rates and the updated discount rates is included in the effect of changes in discount rate
assumptions in accumulated other comprehensive income (loss) (AOCI). The Company’s LFPB was $62.3 billion as
of December 31, 2025.
We identified the evaluation of certain assumptions used in estimating the LFPB as a critical audit matter. A high level
of auditor effort, including specialized skills and knowledge and subjective auditor judgment was involved in the
evaluation of actuarial methodologies, certain cash flow assumptions (mortality, morbidity, and termination), and the
discount rate curve assumptions for Japan.
The following are the primary procedures we performed to address this critical audit matter. With the assistance of
valuation and actuarial professionals, we evaluated the design and tested the operating effectiveness of certain
internal controls related to the Company’s LFPB. This included controls related to actuarial methodologies and the
development of certain cash flow assumptions (mortality, morbidity, and termination) and the discount rate curve. We
involved valuation professionals with specialized skills and knowledge to assist in assessing the methodology and
assumptions used by the Company to develop the discount rate curve for Japan by developing an independent
Item 8. Financial Statements and Supplementary Data
82
discount rate curve and comparing it to that used by the Company. We also involved actuarial professionals with
specialized skills and knowledge, who assisted in
•
Assessing the actuarial methodologies used by the Company to estimate the LFPB for consistency with generally
accepted actuarial methodologies
•
Evaluating certain of the Company's cash flow assumptions (mortality, morbidity, and termination) by assessing them
in comparison to the Company’s relevant historical experience data and anticipated trends
•
Evaluating the Company’s LFPB estimate by recalculating the projected cash flows for a selection of policies and
comparing the results to the Company’s estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 1963.
Atlanta, Georgia
February 25, 2026
Item 8. Financial Statements and Supplementary Data
83
Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings
Years Ended December 31,
(In millions, except for share and per-share amounts)
2025
2024
2023
Revenues:
Net earned premiums, principally supplemental health insurance (1)
$ 13,548
$ 13,440
$ 14,123
Net investment income
4,076
4,116
3,811
Net investment gains (losses)
(572)
1,271
590
Other income (loss)
112
100
177
Total revenues
17,164
18,927
18,701
Benefits and expenses:
Benefits and claims, excluding reserve remeasurement
7,987
8,008
8,594
Reserve remeasurement (gains) losses
(694)
(558)
(383)
Total benefits and claims, net
7,293
7,450
8,211
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs
874
851
816
Insurance commissions
991
998
1,052
Insurance and other expenses
3,253
3,014
3,165
Interest expense
220
197
195
Total acquisition and operating expenses
5,338
5,060
5,228
Total benefits and expenses
12,631
12,510
13,439
Earnings before income taxes
4,533
6,417
5,262
Income tax expense (benefit):
Current
1,115
1,330
1,663
Deferred
(228)
(356)
(1,060)
Income taxes
887
974
603
Net earnings
$
3,646
$
5,443
$ 4,659
Net earnings per share:
Basic
$
6.84
$
9.68
$
7.81
Diluted
6.82
9.63
7.78
Weighted-average outstanding common shares used in
computing earnings per share (In thousands):
Basic
532,885
562,492
596,173
Diluted
534,878
565,015
598,745
Cash dividends per share
$
2.32
$
2.00
$
1.68
(1) Includes a gain (loss) of $(52), $(81) and $20 in 2025, 2024 and 2023, respectively, related to remeasurement of the deferred profit
liability for limited-payment contracts.
See the accompanying Notes to the Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
84
Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31,
(In millions)
2025
2024
2023
Net earnings
$ 3,646
$ 5,443
$ 4,659
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during
period
146
(769)
(366)
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities
during period
(2,316)
(1,224)
2,493
Reclassification adjustment for (gains) losses on
fixed maturity securities included in net earnings
(6)
(197)
(166)
Unrealized gains (losses) on derivatives during period
8
3
6
Effect of changes in discount rate assumptions during period
7,631
5,780
(582)
Pension liability adjustment during period
97
23
35
Total other comprehensive income (loss) before income taxes
5,560
3,616
1,420
Income tax expense (benefit) related to items of other comprehensive
income (loss)
1,130
1,074
511
Other comprehensive income (loss), net of income taxes
4,430
2,542
909
Total comprehensive income (loss)
$ 8,076
$ 7,985
$ 5,568
See the accompanying Notes to the Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
85
Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets
December 31,
(In millions, except for share and per-share amounts)
2025
2024
Assets:
Investments and cash:
Fixed maturity securities available-for-sale, at fair value (no allowance for credit losses in
2025 and 2024, amortized cost $62,444 in 2025 and $61,455 in 2024)
$
60,485
$
61,841
Fixed maturity securities available-for-sale - consolidated variable interest entities, at fair value
(amortized cost $2,819 in 2025 and $2,634 in 2024)
3,636
3,428
Fixed maturity securities held-to-maturity, at amortized cost, net of allowance for credit losses
of $5 in 2025 and $5 in 2024 (fair value $15,476 in 2025 and $16,772 in 2024)
16,120
15,966
Equity securities, at fair value
887
796
Commercial mortgage and other loans, net of allowance for credit losses of $426 in 2025 and $355
in 2024 (includes $7,896 in 2025 and $8,693 in 2024 of consolidated variable interest entities)
9,765
10,869
Other investments
(includes $2,320 in 2025 and $2,176 in 2024 of consolidated variable interest entities)
6,622
5,958
Cash and cash equivalents
6,245
6,229
Total investments and cash
103,760
105,087
Receivables
835
779
Accrued investment income
718
710
Deferred policy acquisition costs
9,034
8,758
Property and equipment, at cost less accumulated depreciation
351
387
Other
1,772
1,845
Total assets
$ 116,470
$ 117,566
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits
$
62,320
$
70,381
Unpaid policy claims
495
381
Unearned premiums
1,323
1,286
Other policyholders’ funds
5,445
5,460
Total policy liabilities
69,583
77,508
Income taxes
1,368
573
Payables for return of cash collateral on loaned securities
3,989
2,037
Notes payable and lease obligations
8,409
7,498
Other
3,631
3,852
Total liabilities
86,980
91,468
Commitments and contingent liabilities (Note 15)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2025 and 2024;
issued 1,357,909 shares in 2025 and 1,356,763 shares in 2024
136
136
Additional paid-in capital
3,024
2,894
Retained earnings
54,682
52,277
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)
(4,847)
(4,998)
Unrealized gains (losses) on fixed maturity securities
(1,809)
24
Unrealized gains (losses) on derivatives
(13)
(20)
Effect of changes in discount rate assumptions
8,035
2,006
Pension liability adjustment
86
10
Treasury stock, at average cost
(29,804)
(26,231)
Total shareholders’ equity
29,490
26,098
Total liabilities and shareholders’ equity
$ 116,470
$ 117,566
See the accompanying Notes to the Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
86
Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(In millions, except for per share amounts)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Shareholders'
Equity
Balance at December 31, 2022
$
135 $
2,641 $
44,367 $
(6,429) $
(20,574) $
20,140
Net earnings
0
0
4,659
0
0
4,659
Unrealized foreign currency translation
gains (losses) during period, net of
income taxes
0
0
0
(505)
0
(505)
Unrealized gains (losses) on fixed maturity
securities during period, net of income
taxes and reclassification adjustments
0
0
0
1,841
0
1,841
Unrealized gains (losses) on derivatives
during period, net of income taxes
0
0
0
5
0
5
Effect of changes in discount rate assumptions
during period, net of income taxes
0
0
0
(460)
0
(460)
Pension liability adjustment during period,
net of income taxes
0
0
0
28
0
28
Dividends to shareholders (1)
($1.76 per share)
0
0
(1,033)
0
0
(1,033)
Exercise of stock options
0
13
0
0
0
13
Share-based compensation
1
74
0
0
0
75
Purchases of treasury stock
0
0
0
0
(2,854)
(2,854)
Treasury stock reissued
0
43
0
0
33
76
Balance at December 31, 2023
136
2,771
47,993
(5,520)
(23,395)
21,985
Net earnings
0
0
5,443
0
0
5,443
Unrealized foreign currency translation
gains (losses) during period, net of
income taxes
0
0
0
(929)
0
(929)
Unrealized gains (losses) on fixed maturity
securities during period, net of income
taxes and reclassification adjustments
0
0
0
(1,115)
0
(1,115)
Unrealized gains (losses) on derivatives
during period, net of income taxes
0
0
0
2
0
2
Effect of changes in discount rate assumptions
during period, net of income taxes
0
0
0
4,566
0
4,566
Pension liability adjustment during period,
net of income taxes
0
0
0
18
0
18
Dividends to shareholders (1)
($2.08 per share)
0
0
(1,159)
0
0
(1,159)
Exercise of stock options
0
9
0
0
0
9
Share-based compensation
0
65
0
0
0
65
Purchases of treasury stock
0
0
0
0
(2,868)
(2,868)
Treasury stock reissued
0
49
0
0
32
81
Balance at December 31, 2024
$
136 $
2,894 $
52,277 $
(2,978) $
(26,231) $
26,098
(1) Dividends to shareholders are recorded in the period in which they are declared.
See the accompanying Notes to the Consolidated Financial Statements.
(continued)
Item 8. Financial Statements and Supplementary Data
87
Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity (continued)
(In millions, except for per share amounts)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Shareholders'
Equity
Balance at December 31, 2024
$
136 $
2,894 $
52,277 $
(2,978) $
(26,231) $
26,098
Net earnings
0
0
3,646
0
0
3,646
Unrealized foreign currency translation
gains (losses) during period, net of
income taxes
0
0
0
151
0
151
Unrealized gains (losses) on fixed maturity
securities during period, net of income
taxes and reclassification adjustments
0
0
0
(1,833)
0
(1,833)
Unrealized gains (losses) on derivatives
during period, net of income taxes
0
0
0
7
0
7
Effect of changes in discount rate assumptions
during period, net of income taxes
0
0
0
6,029
0
6,029
Pension liability adjustment during period,
net of income taxes
0
0
0
76
0
76
Dividends to shareholders (1)
($2.35 per share)
0
0
(1,241)
0
0
(1,241)
Exercise of stock options
0
7
0
0
0
7
Share-based compensation
0
76
0
0
0
76
Purchases of treasury stock
0
0
0
0
(3,606)
(3,606)
Treasury stock reissued
0
47
0
0
33
80
Balance at December 31, 2025
$
136 $
3,024 $
54,682 $
1,452 $
(29,804) $
29,490
(1) Dividends to shareholders are recorded in the period in which they are declared.
See the accompanying Notes to the Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
88
Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31,
(In millions)
2025
2024
2023
Cash flows from operating activities:
Net earnings
$ 3,646
$ 5,443
$ 4,659
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Change in receivables and advance premiums
(66)
51
(133)
Capitalization of deferred policy acquisition costs
(1,105)
(1,056)
(1,086)
Amortization of deferred policy acquisition costs
874
851
816
Change in policy liabilities
(815)
(302)
(552)
Change in income tax liabilities
(278)
(393)
(967)
Net investment (gains) losses
572
(1,271)
(590)
Other, net
(273)
(616)
1,043
Net cash provided (used) by operating activities
2,555
2,707
3,190
Cash flows from investing activities:
Proceeds from investments sold or matured:
Fixed maturity securities available-for-sale
11,049
7,205
3,811
Equity securities
491
782
404
Fixed maturity securities held-to-maturity
3
3
3
Commercial mortgage and other loans
2,167
2,435
1,641
Costs of investments acquired:
Fixed maturity securities available-for-sale
(11,742)
(5,542)
(2,801)
Equity securities
(510)
(411)
(357)
Commercial mortgage and other loans
(1,484)
(1,376)
(996)
Other investments, net
(256)
(972)
(417)
Settlement of derivatives, net
(20)
(184)
79
Cash received (pledged or returned) as collateral, net
2,158
780
(401)
Other, net
(295)
61
(149)
Net cash provided (used) by investing activities
1,561
2,781
817
Cash flows from financing activities:
Purchases of treasury stock
(3,530)
(2,800)
(2,801)
Proceeds from borrowings
1,039
823
204
Principal payments under debt obligations
(84)
(194)
0
Dividends paid to shareholders
(1,198)
(1,087)
(966)
Change in investment-type contracts, net
(266)
(214)
(160)
Treasury stock reissued
8
14
17
Other, net
(38)
(28)
(17)
Net cash provided (used) by financing activities
(4,069)
(3,486)
(3,723)
Effect of foreign exchange rate changes on cash and cash equivalents
(31)
(79)
79
Net change in cash and cash equivalents
16
1,923
363
Cash and cash equivalents, beginning of period
6,229
4,306
3,943
Cash and cash equivalents, end of period
$ 6,245
$ 6,229
$ 4,306
Supplemental disclosures of cash flow information:
Income taxes paid
$ 1,165
$ 1,367
$ 1,569
Interest paid
197
180
185
Noncash interest
23
17
10
Noncash real estate acquired in satisfaction of debt
247
468
217
Noncash financing activities:
Lease obligations
30
33
75
Treasury stock issued for:
Associate stock bonus
22
20
17
Shareholder dividend reinvestment
43
41
37
Share-based compensation grants
7
6
5
See the accompanying Notes to the Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
89
Aflac Incorporated and Subsidiaries
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental
health and life insurance in Japan and the United States (U.S.). The Company's insurance business is marketed and
administered through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan and through American Family Life Assurance
Company of Columbus (Aflac), American Family Life Assurance Company of New York (Aflac New York), Continental
American Insurance Company (CAIC), Tier One Insurance Company (TOIC) and Aflac Benefits Solutions, Inc. (ABS) in
the U.S. The Company’s operations consist of two reportable business segments: Aflac Japan, which includes ALIJ, and
Aflac U.S., which includes Aflac, Aflac New York, CAIC, TOIC, and ABS. Aflac New York is a wholly owned subsidiary of
Aflac. Most of the Aflac U.S. policies are individually underwritten and marketed through independent agents. With the
exception of dental and vision products administered by ABS, and certain group life insurance products, Aflac U.S.
markets and administers group products through CAIC, branded as Aflac Group Insurance. Additionally, Aflac U.S.
markets its consumer markets products through TOIC. The Company's insurance operations in the U.S. and Japan
service the two markets for the Company's insurance business. The Parent Company, other operating business units that
are not individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re Bermuda Ltd.
(Aflac Re), and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations,
are included in Corporate and other.
Basis of Presentation
The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (U.S.
GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to
the Consolidated Financial Statements, references to U.S. GAAP issued by the FASB are derived from the FASB
Accounting Standards CodificationTM (ASC). The consolidated financial statements include the accounts of the Parent
Company, its subsidiaries, and those entities required to be consolidated under applicable accounting standards. All
material intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on
currently available information when recording transactions resulting from business operations. The most significant items
on the Company's balance sheet that involve a greater degree of accounting estimates and actuarial determinations
subject to changes in the future are the valuation of investments and derivatives, deferred policy acquisition costs (DAC),
liabilities for future policy benefits (LFPB) and income taxes. These accounting estimates and actuarial determinations are
sensitive to market conditions, investment yields, interest rates, mortality, morbidity, commission and other acquisition
expenses and terminations by policyholders. As additional information becomes available, or actual amounts are
determinable, the recorded estimates are revised and reflected in the consolidated financial statements. Although some
variability is inherent in these estimates, the Company believes the amounts provided are reasonable and reflective of the
best estimates of management.
Significant Accounting Policies
Foreign Currency Translation and Remeasurement: The functional currency of Aflac Japan is the Japanese yen. The
Company translates its Japanese yen-denominated financial statement accounts into U.S. dollars as follows.
•
Assets and liabilities are translated at end-of-period foreign exchange rates.
•
Realized gains and losses on security transactions are translated at the foreign exchange rate on the trade date
of each transaction.
•
Other revenues, expenses, and cash flows are translated using average foreign exchange rates for the period.
The resulting foreign currency translation adjustments are included in accumulated other comprehensive income.
Foreign currency gains and losses resulting from the remeasurement of foreign currency and realized foreign currency
exchange gains and losses are included in net investment gains (losses) in the consolidated statements of earnings.
Item 8. Financial Statements and Supplementary Data
90
The Parent Company has designated a majority of its Japanese yen-denominated liabilities (Japanese yen-denominated
notes payable and Japanese 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.
The gains or losses on hedging derivative instruments and the foreign currency remeasurement gains or losses on the
non-derivative hedging instruments that are designated as, and are effective as, an economic hedge of the net investment
in Aflac Japan are reported as unrealized foreign currency translation gains (losses) in other comprehensive income and
are included in accumulated other comprehensive income.
Insurance Revenue and Expense Recognition: Substantially all supplemental health and life insurance policies the
Company issues are classified as long-duration contracts. The contract provisions generally cannot be changed or
canceled during the contract period. However, the Company may adjust premiums for supplemental health policies issued
in the U.S. within prescribed guidelines and with the approval of state insurance regulatory authorities.
Insurance premiums for most of the Company's health and life insurance policies are recognized as earned premiums
over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the
related amounts of benefits and expenses are charged against such revenues. This association is accomplished by
means of annual increases or decreases to the LFPB and the deferral and subsequent amortization of policy acquisition
costs.
Premiums from the Company's products with limited-pay features are collected over a significantly shorter period than the
contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned
premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net
premium is deferred and reported as a deferred profit liability, which is subsequently amortized in net earned premiums
such that profits are recognized in a constant relationship with insurance in force.
Net premium is calculated as gross premium multiplied by the net premium ratio (NPR) and represents the portion of
gross premium required to provide for benefits and expenses. Benefits are recorded as an expense when they are
incurred and LFPB is recorded when premiums are recognized using the net premium method.
Policyholders also have an option to pay discounted advanced premiums for certain of the Company's products.
Advanced premiums are deferred and recognized when due from policyholders over the otherwise required contractual
premium payment period.
Benefit expense is bifurcated between benefits and claims and reserve remeasurement (gains) losses. The NPR is used
to measure benefit expense and is calculated as the ratio of the present value of actual and future expected benefits and
expenses to the present value of actual and future expected gross premiums. A revised NPR is calculated as of the
beginning of each reporting period using updated future cash flow expectations.
Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting
period and the end of the current reporting period both using the revised NPR and the locked-in discount rates.
Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the
beginning of the current reporting period using the same locked-in discount rates. One reserve measure uses the NPR as
of the end of the prior reporting period, and the second uses the revised NPR.
The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original
discount rate used at contract issue date.
Advertising expense is reported as incurred and included in insurance and other expenses in the consolidated statements
of earnings. For the years ended December 31, 2025, 2024 and 2023, advertising expense was $160 million, $181 million
and $188 million, respectively.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, money market instruments, and other
debt instruments with a maturity of 90 days or less when purchased.
Item 8. Financial Statements and Supplementary Data
91
Investments:
Fixed Maturity and Equity Securities
The Company's fixed maturity securities are classified as either held-to-maturity or available-for-sale. Fixed maturity
securities classified as held-to-maturity are securities that the Company has the ability and intent to hold to maturity or
redemption and are carried at amortized cost, net of allowance for credit losses.
All other fixed maturity securities are classified as available-for-sale and are carried at fair value. If the fair value is higher
than the amortized cost, 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 reported in other
comprehensive income and included in accumulated other comprehensive income.
Amortized cost of fixed maturity securities is based on the Company's purchase price adjusted for accrual of discount, or
amortization of premium, and recognition of impairment charges, if any. The amortized cost of fixed maturity securities the
Company purchases at a discount or premium will equal the face or par value at maturity or the call date, if applicable.
Interest is reported as net investment income when earned and is adjusted for the amortization of any premium or
discount.
For mortgage- and asset-backed securities, the Company recognizes income using a constant effective yield, which is
based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments
change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments.
The Company has investments in marketable equity securities which are carried at fair value. Changes in the fair value of
equity securities are included in net investment gains (losses) in the consolidated statements of earnings. Dividends are
included in net investment income when declared.
The Company uses the specific identification method to determine the gain or loss from securities transactions. The
realized gain or loss is included in net investment gains (losses) in the consolidated statements of earnings. Securities
transactions are accounted for based on values as of the trade date of the transaction.
Commercial Mortgage and Other Loans
Commercial mortgage and other loans include transitional real estate loans (TREs), commercial mortgage loans (CMLs),
middle market loans (MMLs), and other loans. The Company's investments in TREs, CMLs, MMLs, and other loans are
accounted for as loan receivables and are reported at amortized cost on the acquisition date. The Company has the intent
and ability to hold these loan receivables for the foreseeable future or until they mature; therefore, they are considered
held for investment and are carried at amortized cost, net of allowance for credit losses, and included in commercial
mortgage and other loans in the consolidated balance sheets. Income on commercial mortgage and other loans is
recognized using the interest method and included in net investment income in the consolidated statements of earnings.
The Company designates nonaccrual status for a nonperforming fixed maturity security or loan receivable or a fixed
maturity security or loan receivable that is not generating its stated interest rate because of nonpayment of periodic
interest or principal by the borrower. The Company applies the cash basis method to record any payments received on
nonaccrual assets. The Company resumes the accrual of interest on fixed maturity securities and loan receivables that
are currently making contractual payments or for those that are not current where the borrower has paid timely (less than
30 days outstanding).
Other Investments
Other investments include limited partnerships, real estate owned (REO), short-term investments with maturities at the
time of purchase of one year or less, but greater than 90 days, and policy loans.
Limited partnerships are accounted for using the equity method of accounting. Under the equity method of accounting, the
Company reports its proportionate share of the investee's earnings or losses as a component of net investment income in
the consolidated statements of earnings. The underlying investments held by the Company’s limited partnerships primarily
consist of private equity and real estate.
Item 8. Financial Statements and Supplementary Data
92
In addition, the Company invests in partnerships that primarily specialize in rehabilitating historic structures or the
installation of solar equipment that are tax equity investments. These investments derive investment returns in the form of
income tax credits or other tax incentives. Beginning January 1, 2024, tax equity investments that meet certain criteria are
accounted for using the proportional amortization method, where the initial cost of the investment is amortized in
proportion to the tax credits received and recognized as a component of income tax expense (benefit). Tax equity
investments that do not meet the qualification criteria for the proportional amortization method are accounted for using the
equity method of accounting.
REO represents commercial properties obtained through foreclosure or deed in lieu of foreclosure of certain of the
Company's loan receivables. REO is classified as held-and-used for the production of income or held-for-sale. When held-
and-used for the production of income, REO is recorded at fair value upon acquisition, which establishes the property’s
initial cost basis. Thereafter, it is carried at cost less accumulated depreciation and written down to fair value for
impairment losses. When held-for-sale, REO is initially recorded at fair value less costs to sell and is subsequently carried
at the lower of the initial carrying value or fair value less costs to sell and is not depreciated.
REO depreciation is recorded on a straight-line basis over the estimated useful life of the asset and is included in net
investment income. A review for impairment is performed whenever events or circumstances indicate that the carrying
value may not be recoverable. An impairment loss is included in net investment gains (losses) when the carrying value of
the property exceeds the expected undiscounted cash flows generated from the property. Net operating income earned on
REO is included in net investment income in the consolidated statements of earnings.
Short-term investments are reported at amortized cost, which approximates fair value.
Variable Interest Entities (VIEs)
The Company has investments in VIEs, which consist of fixed maturity securities, loan receivables, limited partnerships
and derivative instruments. The Company is the primary beneficiary of the VIE if the Company has (1) the power to direct
the activities of the VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE. If the Company determines that it is the primary beneficiary
of the VIE, it consolidates these entities in its consolidated financial statements. Consolidated VIEs are segregated by the
caption "consolidated variable interest entities" in the consolidated balance sheets.
While the consolidated VIEs generally operate within a defined set of contractual terms, there are certain powers that are
retained by the Company that are considered significant in the conclusion that the Company is the primary beneficiary.
These powers vary by structure but generally include:
•
the initial selection of the underlying collateral;
•
the ability to obtain the underlying collateral in the event of default; and
•
the ability to appoint or dismiss key parties in the structure.
The Company's powers surrounding the underlying collateral were the most significant powers considered due to the
impact these powers have on the economics of the VIE. The Company has no obligation to provide any continuing
financial support to any of the entities in which it is the primary beneficiary. The Company's maximum loss is limited to its
original investment and, in certain cases, to any unfunded commitment held in the VIE. Neither the Company nor any of
its creditors have the ability to obtain the underlying collateral, nor does the Company have control over the instruments
held in VIEs, unless there is an event of default.
Securities Lending and Pledged Assets
The Company lends fixed maturity securities and, from time to time, public equity securities to financial institutions in
short-term security-lending transactions. These short-term securities lending arrangements are primarily used to earn
investment income. These securities continue to be reported as investment assets in the consolidated balance sheets
during the terms of the loans and are not reported as sales. The Company receives cash or other securities as collateral
for such loans. When the Company obtains non-cash collateral it amounts to 102% or more of the fair value of the loaned
securities. When unrestricted cash is received as collateral it is equivalent to 100% or more of the fair value of the loaned
securities. For loans involving unrestricted cash or securities as collateral, the collateral is reported as an asset with a
corresponding liability for the return of the collateral. For loans where the Company receives as collateral securities that
the Company is not permitted to sell or repledge, the collateral is not reflected in the consolidated financial statements.
Item 8. Financial Statements and Supplementary Data
93
Allowance for Credit Losses: The Company estimates an allowance for credit losses on the following financial assets:
•
Fixed maturity securities
◦
Available-for-sale securities
◦
Held-to-maturity securities
•
Loan receivables and loan commitments
•
Short-term receivables
•
Premiums receivable
•
Reinsurance recoverables
For available-for-sale and held-to-maturity securities, loan receivables, including collateral dependent assets and certain
loan commitments, changes in the allowance for credit losses are included in net investment gains (losses) in the
consolidated statements of earnings. Write-offs and partial write-offs are reported as a reduction to the amortized cost of
the fixed maturity security or loan receivable with a corresponding reduction to the allowance for credit losses.
For available-for-sale securities, the Company evaluates estimated credit losses only when the fair value of the available-
for-sale security is below its amortized cost basis.
The Company’s off-balance sheet credit exposure is primarily attributable to loan commitments that are not
unconditionally cancellable. The allowance for credit losses for these loan commitments is included in other liabilities in
the consolidated balance sheets.
For premiums receivable, changes in the allowance for credit losses are included in net earned premiums in the
consolidated statements of earnings. The Company estimates an allowance for credit losses for premiums receivable
utilizing an aging methodology based on historical loss information, adjusted for current conditions and reasonable and
supportable forecasts. Premiums receivable are reported net of the allowance for credit losses and included in receivables
in the consolidated balance sheets.
For reinsurance recoverables, changes in the allowance for credit losses are included in net investment gains (losses) in
the consolidated statements of earnings. Reinsurance recoverables are reported net of the allowance for credit losses and
included in other assets in the consolidated balance sheets.
The Company has elected not to estimate an allowance for credit losses on accrued interest income for all asset types.
The Company writes off accrued interest when it is more than ninety days past due by reducing interest income, which is
included in net investment income in the consolidated statements of earnings.
For additional information on the Company's methodology for calculating allowance for credit losses, see Notes 3 and 8.
Derivatives and Hedging:
Freestanding Derivative Instruments
Freestanding derivative instruments are reported at fair value and included in other assets and other liabilities in the
consolidated balance sheets. These instruments may include foreign currency forwards, foreign currency options, foreign
currency swaps, interest rate swaps and interest rate swaptions. These derivative instruments are typically used to reduce
exposure to risks such as foreign currency exchange or interest rate. The Company does not use derivatives for trading
purposes.
Changes in the fair value of derivative instruments not designated as an accounting hedge or that do not qualify for hedge
accounting are included in net investment gains (losses) in the consolidated statements of earnings.
Accruals on derivatives are included in other assets or other liabilities in the consolidated balance sheets.
Hedge Accounting
From time to time, the Company designates as hedging instruments derivative and non-derivative instruments that meet
the requirements for hedge accounting. To qualify for hedge accounting, the instrument must be highly effective in
mitigating the designated risk attributable to the hedged item.
At the inception of hedging relationships, the Company formally documents all relationships between hedging instruments
Item 8. Financial Statements and Supplementary Data
94
and hedged items, as well as its risk-management objectives and strategies for undertaking the respective hedging
relationship. The Company also documents its hedge accounting designation and the methodology that will be used to
assess the effectiveness of the hedging relationship at and after hedge inception. The documentation process includes
linking derivatives and non-derivative financial instruments that are designated in hedging relationships with specific
assets or groups of assets or liabilities in the consolidated balance sheets or to specific forecasted transactions, as well as
defining the effectiveness testing methods to be used.
The Company formally assesses whether the derivatives and non-derivative financial instruments used in hedging
activities have been, and are expected to continue to be, highly effective in offsetting their designated risk. Hedge
effectiveness is formally assessed at inception and on a quarterly basis throughout the life of the hedging relationship
using qualitative and quantitative methods. Qualitative methods may include the comparison of critical terms of the
derivative to the hedged item. Quantitative methods may include regression, dollar offset, or other statistical analysis of
changes in fair value or cash flows associated with the hedging relationship.
The assessment of hedge effectiveness determines the accounting treatment of changes in fair value.
Hedge accounting designations are cash flow hedge, fair value hedge, or net investment hedge.
Cash Flow Hedge
A cash flow hedge is a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability
or the hedge of a forecasted transaction.
For derivative instruments that are designated in cash flow hedging relationships, the gain or loss on the portion of the
hedging instrument included in the assessment of effectiveness is included in unrealized gains (losses) on derivatives in
the consolidated statements of comprehensive income (loss). Amounts included in accumulated other comprehensive
income are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings
and are included in the same line item in the consolidated statements of earnings as the hedged item.
Fair Value Hedge
A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability, attributable to a
particular risk.
For derivative instruments that are designated in highly effective fair value hedge relationships, the effective portion of the
gain or loss of the hedging instrument included in the assessment of effectiveness is included in the line item of the
consolidated statements of earnings in which gain or loss on the hedged item is included.
Net Investment Hedge
A net investment hedge is a hedge of foreign currency exposure of a net investment in a foreign operation. The Company
designates and accounts for certain foreign currency forwards and options as net investment hedges of the Company's
net investment in Aflac Japan when they meet the requirements for hedge accounting. The Company also designates the
Parent Company’s Japanese yen-denominated liabilities as a non-derivative net investment hedge of the Company's net
investment in Aflac Japan. For additional information on the Parent Company’s Japanese yen-denominated liabilities, see
Note 9.
At the beginning of each quarter, the Company makes its net investment hedge designation for foreign currency
derivatives and Japanese yen-denominated liabilities. For foreign currency derivatives designated as net investment
hedges, the Company assesses hedge effectiveness using the spot-rate method. According to this method, the change in
fair value of the hedging instrument due to fluctuations in the spot exchange rate is included in unrealized foreign currency
translation gains (losses) in the statements of comprehensive income (loss). For Japanese-yen denominated liabilities
designated as net investment hedges, the foreign currency translation gain or loss determined by references to the spot
foreign exchange rate is also included in unrealized foreign currency translation gains (losses) in the statements of
comprehensive income (loss).
Amounts included in accumulated other comprehensive income are reclassified to earnings only when the hedged net
investment is sold or when a liquidation of the respective net investment in the foreign entity is substantially completed.
When a sale or liquidation occurs, the deferred gain or loss is reclassified to earnings and included in the same line item in
the consolidated statements of earnings as the gain or loss on the sale of the hedged net investment.
Item 8. Financial Statements and Supplementary Data
95
All other changes in fair value of the foreign currency derivatives designated as net investment hedges are excluded from
the assessment of hedge effectiveness and are included in net investment gains (losses) in the consolidated statements
of earnings.
Should these designated net investment hedge positions exceed the Company's net investment in Aflac Japan, the
foreign currency exchange effect on the excess portion is included in net investment gains (losses) in the consolidated
statements of earnings.
Hedge Accounting Termination
The Company discontinues hedge accounting prospectively when (1) it is determined that the derivative is no longer
highly effective in offsetting changes in the estimated cash flows or fair value of a hedged item; (2) the derivative is de-
designated as a hedging instrument; or (3) the derivative expires or is sold, terminated or exercised.
When hedge accounting is discontinued on a cash flow or fair value hedge, the derivative is reported at fair value in the
consolidated balance sheets, with changes in the fair value included in net investment gains (losses) in the consolidated
statements of earnings. For discontinued cash flow hedges, including those where the derivative is sold, terminated or
exercised, changes in the fair value included in accumulated other comprehensive income are reclassified to earnings
when earnings are impacted by the cash flow of the hedged item.
Embedded Derivatives
The Company may purchase certain investments or enter into contracts that contain embedded derivatives. The Company
assesses whether an embedded derivative is clearly and closely related to its host contract. If the Company determines
that the embedded derivative is not clearly and closely related to the host contract, and a separate instrument with the
same terms would qualify as a derivative instrument, the embedded derivative is separated from that contract and
reported at fair value with the host instrument in the consolidated balance sheets. Changes in the fair value are included in
current period earnings. If the Company has elected the fair value option, the embedded derivative is not bifurcated, and
the entire investment is held at fair value with changes in fair value included in current period earnings.
Pledged Collateral
The Company receives and pledges cash or other securities as collateral on open derivative positions.
Cash received as collateral is reported as an asset with a corresponding liability for the return of the collateral. Cash
pledged as collateral is recorded as a reduction to cash, and a corresponding receivable is recognized for the return of the
cash collateral.
The Company generally can repledge or resell collateral obtained from counterparties, although the Company does not
typically exercise such rights. Securities received as collateral are not recognized unless the Company were to exercise
its right to sell that collateral or exercise remedies on that collateral upon a counterparty default. Securities that the
Company has pledged as collateral continue to be carried as investment assets in the consolidated balance sheets.
The Company does not offset amounts recognized for derivative instruments and amounts recognized for the right to
reclaim or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty
under a master netting arrangement.
For additional information on the Company's derivative instruments, see Note 4. For additional information on the
Company's valuation methodology for derivatives, see Note 5.
Deferred Policy Acquisition Costs: The Company incurs significant costs in connection with acquiring new and renewal
insurance business. Costs that are related directly to the successful acquisition of new or the renewal of existing
insurance contracts are capitalized as DAC. DAC primarily includes the excess of current-year commissions over ultimate
renewal-year commissions and certain direct and incremental policy issue, underwriting and sales expenses directly
related to successful policy acquisition.
DAC is amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level
basis, as follows:
Item 8. Financial Statements and Supplementary Data
96
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
Face amount is the stated dollar amount that the policy’s beneficiaries receive upon the death of the insured. For life and
health products issued in Japan, the constant-level basis used is units in force, which is a proxy for the face amount and
insurance in force, respectively.
Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination
assumptions that are used in computing the LFPB. These assumptions are reviewed and updated at least annually. The
effects of changes in assumptions are recognized prospectively over the remaining contract term as a revision of the
future amortization pattern, while current period amortization is calculated based on the actual experience during the
quarter.
Internal Replacements
For some products, policyholders can elect to modify product benefits, features, rights or coverages. These transactions
are known as internal replacements and can occur by:
•
exchanging a contract for a new contract, or
•
amendment, endorsement, or rider to a contract, or
•
the election of a feature or coverage within a contract.
The Company performs the following two-step analysis of the internal replacements to determine if the modification is
substantive to the base policy: (1) determine if the modification is integrated with the base policy, and (2) if it is integrated,
determine if the resulting contract is substantially changed. Contract modifications resulting in integrated contract features
can be determined only in conjunction with the value of the base policy. Non-integrated features are not related to or
dependent on the value of the base policy.
For an internal replacement transaction that results in a policy that is integrated and substantially changed, the policy is
treated as lapsed for amortization purposes, and the costs of acquiring the new policy are capitalized and amortized in
accordance with the Company's accounting policies for DAC.
For internal replacement transactions where the resulting contract is integrated and substantially unchanged, unamortized
DAC from the original policy continue to be amortized over the expected life of the cohort, and the costs of replacing the
policy are accounted for as policy maintenance costs and expensed as incurred.
Non-integrated internal replacement transactions are accounted for as separately issued contracts within the cohort open
at the effective date of the non-integrated feature. Any DAC related to the non-integrated contract feature or coverage are
accounted for in accordance with the Company's accounting policies for DAC.
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. Classes of property and equipment as of December 31 were as follows:
(In millions)
2025
2024
Property and equipment:
Land
$
168
$
168
Buildings
399
392
Equipment and furniture
451
478
Total property and equipment
1,018
1,038
Less accumulated depreciation
667
651
Net property and equipment
$
351
$
387
Item 8. Financial Statements and Supplementary Data
97
Depreciation and other amortization expenses, which are included in insurance and other expenses in the consolidated
statements of earnings, were $36 million in 2025, compared with $40 million in 2024 and $39 million in 2023.
Goodwill: Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognized. The amount of goodwill recognized is also
impacted by measurement differences resulting from certain assets and liabilities not recorded at fair value (e.g. income
taxes, employee benefits). Goodwill is not amortized, but is tested for impairment at a level of a reporting unit at least
annually, in the same reporting period each year. Goodwill is included in the other assets line item in the consolidated
balance sheets and was $260 million at December 31, 2025, compared with $263 million at December 31, 2024. A
significant majority of the goodwill balance is attributable to business combinations within the Aflac U.S. segment, which
represents the reporting unit for goodwill impairment testing.
Policy Liabilities: The Company's total policy liabilities consist of:
•
Future policy benefits
•
Unpaid policy claims
•
Unearned premiums
•
Other policyholders' funds
Future Policy Benefits
Long-duration insurance contracts issued by the Company are grouped into annual calendar-year cohorts based on the
contract issue date, reportable segment, legal entity and product type. Limited-pay contracts are grouped into separate
cohorts from other traditional products in the same manner and are further separated based on their premium payment
structures. For long-duration insurance contracts, the Company calculates an integrated LFPB reserve that represents all
payments under the contract including future expected claims, unpaid policy claims and related expenses.
The LFPB is determined using the net level premium method as the present value of expected future policy benefits to be
paid to or on the behalf of policyholders and certain related expenses less the present value of expected future net
premiums receivable under the Company’s insurance contracts, where expected future net premiums receivable are
future gross premiums receivable under the contract multiplied by the NPR.
The LFPB is calculated using assumptions and estimates including, (1) cash flow assumptions (mortality, morbidity, and
terminations, also referred to as lapses), (2) expense assumptions and (3) discount rates. The assumptions and estimates
that the Company uses depend on its judgment regarding the likelihood of future events and are inherently uncertain.
Cash flow assumptions are established at policy inception and are evaluated each quarter to determine if an update is
needed.
Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to
actual experience are included in reserve remeasurement (gains) losses in the consolidated statements of earnings.
To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third
quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the
beginning of the reporting period and are included as a cumulative catch-up adjustment in reserve remeasurement (gains)
losses in the consolidated statements of earnings.
Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of
paid claims. These expense assumptions are locked in and remain unchanged over the term of the insurance policy.
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 included in benefits and claims, excluding reserve remeasurement in the
consolidated statements of earnings. These locked-in discount rates are determined separately for each issue-year cohort
as a single discount rate that reflects the duration characteristics of the corresponding insurance contracts and will remain
unchanged after the calendar year of issue.
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 included in the effect of changes in discount rate assumptions in accumulated other
comprehensive income (loss).
Item 8. Financial Statements and Supplementary Data
98
The Company's discount rate methodology involves constructing a current discount rate curve separately for discounting
cash flows used to calculate the Japan and U.S. LFPB, reflective of the characteristics of the insurance liabilities, such as
currency and tenor. For additional information on the Company's discount rate methodology, see Note 7.
The difference in the liability balance calculated as of the beginning of the current reporting period and the end of the
current reporting period both using the revised NPR and the locked-in discount rates is included in benefits and claims in
the consolidated statements of earnings.
For internal replacements that are determined to be substantially changed, policy liabilities related to the original policy
that was replaced are immediately released, and policy liabilities are established for the new insurance contract. The
policy reserves are evaluated based on the new policy features, and changes are recognized at the date of contract
change/modification. For internal replacements that are substantially unchanged, no changes to the reserves are
recognized. For modifications that are not integrated with the base policy, new coverage is recognized as a separately
issued contract within the current cohort.
Unpaid Policy Claims
Unpaid policy claims primarily represent unpaid policy claims on the Company’s short-duration insurance contracts.
Unearned Premiums
Unearned premiums consist of unearned premiums and advance premiums.
Unearned premiums represent the portion of premium related to the unexpired coverage as of a balance sheet date and
are deferred and recognized in net earned premiums when earned.
Advance premiums consist primarily of discounted advance premiums on deposit from policyholders in conjunction with
their purchase of certain Aflac Japan limited-payment insurance products. Advanced premiums are deferred upon
collection and recognized as earned premiums over the contractual premium payment period.
Other Policyholders' Funds
The other policyholders’ funds liability consists primarily of the fixed annuity line of business in Aflac Japan which has fixed
benefits and premiums.
Reinsurance: The Company enters into reinsurance agreements in the normal course of business. For each reinsurance
agreement, the Company determines if the agreement provides indemnification against loss or liability relating to
insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided
are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums, benefits and acquisition costs are reported net of insurance ceded.
Income Taxes: Income tax provisions are generally based on pretax earnings reported for financial statement purposes,
which differ from those amounts used in preparing the Company's income tax returns. Deferred income taxes are
recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities,
based on enacted tax laws and statutory tax rates applicable to the periods in which the Company expects the temporary
differences to reverse. 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.
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. The Company reviews the estimated liability for
policyholder protection corporation contributions on an annual basis and reports any adjustments in Aflac Japan's
expenses.
In the U.S., each state has a guaranty association that supports insolvent insurers operating in those states. 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
Item 8. Financial Statements and Supplementary Data
99
assessment is based is written. See Note 15 for further discussion of the guaranty fund assessments charged to the
Company.
Treasury Stock: Treasury stock is reflected as a reduction of shareholders' equity at cost. The Company uses the
weighted-average purchase cost to determine the cost of treasury stock that is reissued. The Company includes any gains
and losses in additional paid-in capital when treasury stock is reissued.
Share-Based Compensation: The Company measures compensation cost related to its share-based payment
transactions at fair value on the grant date, and the Company recognizes those costs in the financial statements over the
vesting period during which the employee provides service in exchange for the award. The Company has made an entity-
wide accounting policy election to estimate the number of awards that are expected to vest and the corresponding
forfeitures.
Earnings Per Share: The Company computes basic earnings per share (EPS) by dividing net earnings by the weighted-
average number of unrestricted shares outstanding for the period. 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.
New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Accounting Standards Update (ASU) 2023-09 Income Taxes (Topic 740) - Improvements to Income Tax
Disclosures
In December 2023, the FASB issued amendments that require enhanced income tax disclosures including (1) disclosure
of specific categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid
disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax
disclosures.
The Company adopted this guidance for the annual period beginning January 1, 2025 and elected a prospective
implementation. The adoption of this guidance did not have an impact on the Company’s financial position or results of
operations. See Note 10 for expanded disclosures required as a result of the amended guidance.
ASU 2023-07 Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued amendments that add certain segment disclosures related to significant segment
expenses and require that a public entity disclose the title and position of the Chief Operating Decision Maker (CODM)
and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment
performance and deciding how to allocate resources.
The Company adopted this guidance for the annual period beginning January 1, 2024, and interim periods beginning
January 1, 2025. The adoption of this guidance did not have an impact on the Company’s financial position or results of
operations. See Note 2 for expanded disclosures required as a result of the amended guidance.
ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax
Credit Structures Using the Proportional Amortization Method
In March 2023, the FASB issued amendments to permit reporting entities to elect to account for their tax equity
investments, regardless of the tax credit program from which the income tax credits are received, using the proportional
amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the
initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes
the net amortization and income tax credits and other income tax benefits in the income statement as a component of
income tax expense (benefit).
The Company early adopted this guidance on July 1, 2023. The adoption of this guidance did not have a significant impact
on the Company's financial position, results of operations or disclosures.
Item 8. Financial Statements and Supplementary Data
100
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. As a result of eliminating the TDR guidance for creditors, all loan modifications will follow the
existing loan refinancing or restructuring guidance.
The Company adopted this guidance on January 1, 2023 on a prospective basis. The adoption did not have an impact on
the Company’s financial position or results of operations.
ASU 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration
Contracts, as clarified and amended by:
ASU 2019-09 Financial Services - Insurance: Effective Date
ASU 2020-11 Financial Services - Insurance: Effective Date and Early Application
In August 2018, the FASB issued amendments that significantly changed how insurers account for long-duration
contracts. The Company adopted the standard on January 1, 2023 using a modified retrospective transition method which
resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021
transition date (Transition Date). The modified retrospective transition method generally results in applying the guidance to
contracts on the basis of existing carrying values as of the Transition Date. On the Transition Date, the Company
calculated the ratio of the present value of expected future policy benefits and expenses less existing carrying values to
the present value of expected future gross premiums (Transition Date NPR) using updated assumptions and the discount
rate immediately before the Transition Date. The Company capped the Transition Date NPR at 100% for any cohorts with
a Transition Date NPR greater than 100%. The Company calculated the LFPB using the Transition Date NPR (capped at
100% if required) and two different discount rates: (i) the discount rate used immediately before the Transition Date, and
(ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit
risk) fixed income instruments (as of December 31, 2020). For cohorts with their Transition Date NPR capped at 100%,
the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB
calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the
Transition Date. For all cohorts on the Transition Date, the Company recorded in accumulated other comprehensive
income net of tax, the difference in the LFPB calculated using the two different discount rates (i.e., the discount rate used
immediately before the Transition Date and the updated discount rate as of the Transition Date).
Upon adoption, the Company adjusted opening equity for the Transition Date impacts to accumulated other
comprehensive income and retained earnings and adjusted prior periods then presented (years 2021 and 2022) following
the updated standard. Based upon the modified retrospective transition method, the Transition Date impact from adoption
resulted in a decrease in accumulated other comprehensive income of approximately $18.6 billion and a decrease in
retained earnings (RE) of approximately $0.3 billion.
The adoption of ASU 2018-12 did not have an impact on the Company's balance for deferred policy acquisition costs upon
adoption.
In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the
deferred profit liability on products with limited-payment features from the benefits and claims, net line item to the net
earned premiums line item in the consolidated statements of earnings. This reclassification had no impact on net
earnings. The change in presentation has been made for all comparative periods presented.
Accounting Pronouncements Pending Adoption
ASU 2024-03 Income Statement (Topic 220) - Disaggregation of Income Statement Expenses
In November 2024, the FASB issued amendments that require disaggregated disclosure, in the notes to the financial
statements, of specified information about certain costs and expenses including (1) the amounts of employee
compensation, depreciation, and intangible asset amortization; (2) certain expense, gain, or loss amounts that are already
required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; (3)
qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated
Item 8. Financial Statements and Supplementary Data
101
quantitatively, and (4) the total amount of selling expenses and, in annual reporting periods, the Company’s definition of
selling expenses.
The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after
December 15, 2027. Early adoption is permitted. The adoption of this guidance has no impact on the Company’s financial
position or results of operations. The Company is evaluating the impact of adoption on its disclosures.
Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material
impact to the Company's business.
2.
BUSINESS SEGMENT INFORMATION AND SELECTED FOREIGN CURRENCY TRANSLATION ITEMS
The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell
supplemental health and life insurance. In addition, the Parent Company, other operating business units that are not
individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re, and other business
activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and
other. The Company does not allocate corporate overhead expenses to business segments.
The Company’s reportable segments are regularly reviewed by the Company's CODM, Senior Executive Vice President
and Chief Financial Officer, in deciding how to allocate resources and in assessing performance. The Company's CODM
reviews and approves the annual budget and operating forecast, which allocates resources to segments and serves as a
key benchmark for tracking performance and accountability of each segment's operating results. The Company’s CODM
evaluates the performance of the segments using, in comparison to the annual budget, operating forecast and historical
results, a financial performance measure called pretax adjusted earnings and believes this financial performance measure
to be vitally important for understanding the underlying profitability drivers and trends of the Company’s insurance
business.
•
Pretax adjusted earnings are adjusted revenues less benefits and adjusted expenses. The adjustments to both
revenues and expenses account for certain items that are outside management's control because they tend to be
driven by general economic conditions and events or are related to infrequent activities not directly associated
with insurance operations. The Company excludes income taxes related to operations to arrive at pretax adjusted
earnings.
◦
Adjusted revenues are U.S. GAAP total revenues excluding net investment gains and losses, except for
amortized hedge costs/income related to foreign currency exposure management strategies and net
interest income/expense from derivatives associated with certain investment strategies, which are
reclassified from net investment gains (losses) and included in adjusted earnings as a component of
adjusted net investment income when analyzing operations.
◦
Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of
interest from derivatives associated with notes payable but excluding any non-recurring or other items not
associated with the normal course of the Company’s insurance operations and that do not reflect the
Company’s underlying business performance.
Aflac Japan's adjusted revenues accounted for 53% of the Company's total adjusted revenues in 2025, compared with
55% in 2024 and 60% in 2023. The percentage of the Company's total assets attributable to Aflac Japan was 76% at
December 31, 2025, compared with 77% at December 31, 2024.
Item 8. Financial Statements and Supplementary Data
102
Information regarding operations by reportable segment and Corporate and other for the years ended December 31 is
presented in the following tables.
(In millions)
2025
2024
2023
Revenues:
Aflac Japan:
Net earned premiums (1)
$ 6,744
$ 6,930
$ 8,047
Adjusted net investment income
2,581
2,701
2,582
Other income
32
28
35
Total adjusted revenue Aflac Japan
9,357
9,659
10,664
Aflac U.S.:
Net earned premiums
5,999
5,829
5,675
Adjusted net investment income
830
847
820
Other income
74
63
128
Total adjusted revenue Aflac U.S.
6,903
6,739
6,623
Corporate and other (2)
1,277
1,007
460
Total adjusted revenues
17,537
17,405
17,747
Net investment gains (losses)
(572)
1,271
590
Reconciling items:
Amortized hedge costs
45
26
157
Amortized hedge income
(98)
(113)
(121)
Net interest (income) expense from derivatives
associated with certain investment strategies
252
338
328
Total revenues
$ 17,164
$ 18,927
$ 18,701
(1) Includes a gain (loss) of $(52), $(81) and $20 in 2025, 2024 and 2023, respectively, related to remeasurement of the deferred profit
liability for limited-payment contracts.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024 and
2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164 and $334 in
2025, 2024 and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See
Note 1 for additional information on these investments.
Item 8. Financial Statements and Supplementary Data
103
(In millions)
2025
2024
2023
Adjusted revenues:
Aflac Japan (1)
$
9,357
$
9,659
$ 10,664
Aflac U.S.
6,903
6,739
6,623
Corporate and other (2)
1,277
1,007
460
Total adjusted revenues
17,537
17,405
17,747
Benefits and adjusted expenses:
Aflac Japan:
Benefits and claims, excluding reserve remeasurement
4,528
4,761
5,409
Reserve remeasurement (gains) losses
(529)
(444)
(96)
Total benefits and claims, net
3,999
4,317
5,313
Adjusted expenses:
Amortization of deferred policy acquisition costs
323
321
326
Insurance commissions
427
435
491
Insurance and other expenses
1,168
1,092
1,300
Total benefits and adjusted expenses Aflac Japan
5,917
6,165
7,430
Aflac U.S.:
Benefits and claims, excluding reserve remeasurement
2,969
2,821
2,715
Reserve remeasurement (gains) losses
(132)
(95)
(284)
Total benefits and claims, net
2,837
2,726
2,431
Adjusted expenses:
Amortization of deferred policy acquisition costs
551
530
490
Insurance commissions
564
563
561
Insurance and other expenses
1,530
1,501
1,640
Total benefits and adjusted expenses Aflac U.S.
5,482
5,320
5,122
Corporate and other
1,176
975
885
Total adjusted expenses
$ 12,575
$ 12,460
$ 13,437
Pretax earnings:
Aflac Japan (1)
$
3,440
$
3,494
$
3,234
Aflac U.S.
1,421
1,419
1,501
Corporate and other (2)
101
32
(425)
Pretax adjusted earnings
4,962
4,945
4,310
Other income (loss)
(54)
(23)
39
Net investment gains (losses)
(572)
1,271
590
Reconciling items:
Amortized hedge costs
45
26
157
Amortized hedge income
(98)
(113)
(121)
Net interest (income) expense from derivatives
associated with certain investment strategies
252
338
328
Impact of interest from derivatives associated
with notes payable
(2)
(27)
(41)
Total earnings before income taxes
$
4,533
$
6,417
$
5,262
Income taxes applicable to pretax adjusted earnings
$
954
$
873
$
577
Effect of foreign currency translation on after-tax adjusted
earnings
19
(103)
(113)
(1) Includes a gain (loss) of $(52), $(81) and $20 for 2025, 2024 and 2023, respectively, related to remeasurement of the deferred profit
liability for limited-payment contracts.
(2) The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024 and
2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164 and $334 in
2025, 2024 and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See
Note 1 for additional information on these investments.
Item 8. Financial Statements and Supplementary Data
104
Internal Reinsurance: Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by Aflac Japan and
is reported as a part of Corporate and other. Under these internal reinsurance transactions, Aflac Japan's net earned
premiums are reduced by the amount of premiums ceded to Aflac Re. Aflac Re recorded net earned premiums of
$692 million in 2025, $568 million in 2024 and $258 million in 2023 related to these reinsurance transactions with Aflac
Japan. These internal reinsurance transactions have no financial statement impact on a consolidated basis, except for the
effect of foreign currency accounting. For additional information on these internal reinsurance transactions, see Note 8.
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 14
for information concerning restrictions on transfers from Aflac Japan.
(In millions)
2025
2024
2023
Management fees
$
73
$
69
$
67
Profit remittances
2,681
2,865
2,623
Total transfers from Aflac Japan
$ 2,754
$ 2,934
$ 2,690
Total Assets: The Company's total assets as of December 31 were as follows:
(In millions)
2025
2024
Assets:
Aflac Japan
$ 88,537
$ 90,210
Aflac U.S.
22,317
21,930
Corporate and other
5,616
5,426
Total assets
$ 116,470
$ 117,566
Receivables: Receivables consist primarily of monthly insurance premiums due from individual policyholders or their
employers for payroll deduction of premiums, net of allowance for credit losses. Total receivables were $835 million and
$779 million as of December 31, 2025 and 2024, respectively. The allowance for credit losses related to premiums
receivable was $107 million and $108 million as of December 31, 2025 and 2024, respectively. At December 31, 2025,
$167 million, or 20.0% of total receivables, were related to Aflac Japan's operations, compared with $197 million, or
25.3%, at December 31, 2024.
Selected Foreign Currency Translation Items
Japanese Yen-Translation Effects: The following table shows the Japanese yen/U.S. dollar (yen/dollar) exchange rates
used for or during the periods ended December 31. For comparison, exchange effects for the current year were calculated
using the yen/dollar exchange rate that was used in the prior year.
2025
2024
2023
Statements of Earnings:
Weighted-average yen/dollar exchange rate (1)
149.32
150.97
140.57
Yen percent strengthening (weakening)
1.1 %
(6.9) %
(7.4) %
Exchange effect on pretax adjusted earnings (in millions)
$
24
$ (125)
$ (131)
2025
2024
Balance Sheets:
Yen/dollar exchange rate at December 31(1)
156.56
158.18
Yen percent strengthening (weakening)
1.0 %
(10.3) %
Exchange effect on total assets (in millions)
$
878
$ (6,127)
Exchange effect on total liabilities (in millions)
(2,159)
(9,624)
(1) Rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).
Item 8. Financial Statements and Supplementary Data
105
3. INVESTMENTS
Net Investment Income
The components of net investment income for the years ended December 31 were as follows:
(In millions)
2025
2024
2023
Fixed maturity securities
$ 3,017
$ 2,894
$ 2,873
Equity securities
20
24
28
Commercial mortgage and other loans
821
1,046
1,002
Other investments (1)
231
130
(70)
Short-term investments and cash equivalents
230
258
213
Gross investment income
4,319
4,352
4,046
Less investment expenses
243
236
235
Net investment income
$ 4,076
$ 4,116
$ 3,811
(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024, and
2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164, and $334 in
2025, 2024, and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See
Note 1 for additional information on these investments.
Item 8. Financial Statements and Supplementary Data
106
Investment Holdings
The amortized cost and allowance for credit losses for the Company's investments in fixed maturity securities and the fair
values of these investments as well as the fair value of the Company's investments in equity securities are presented in
the following tables.
2025
(In millions)
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities available-for-sale, carried at fair
value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies
$
18,063 $
0 $
41 $
3,727 $ 14,377
Municipalities
856
0
5
145
716
Mortgage- and asset-backed securities
297
0
1
38
260
Public utilities
2,519
0
123
174
2,468
Sovereign and supranational
330
0
7
13
324
Banks/financial institutions
5,382
0
170
477
5,075
Other corporate
5,438
0
357
534
5,261
Total yen-denominated
32,885
0
704
5,108
28,481
U.S. dollar-denominated:
U.S. government and agencies
230
0
2
2
230
Municipalities
1,185
0
83
54
1,214
Mortgage- and asset-backed securities
3,854
0
239
35
4,058
Public utilities
4,292
0
465
107
4,650
Sovereign and supranational
57
0
21
0
78
Banks/financial institutions
3,672
0
518
21
4,169
Other corporate
18,967
0
2,740
597
21,110
Total U.S. dollar-denominated
32,257
0
4,068
816
35,509
Other currencies:
Mortgage- and asset-backed securities
44
0
4
0
48
Public utilities
52
0
4
0
56
Other corporate
25
0
2
0
27
Total other currencies
121
0
10
0
131
Total securities available-for-sale
$
65,263 $
0 $
4,782 $
5,924 $ 64,121
Item 8. Financial Statements and Supplementary Data
107
2024
(In millions)
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities available-for-sale, carried at fair
value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies
$
19,409 $
0 $
465 $
2,234 $
17,640
Municipalities
869
0
65
79
855
Mortgage- and asset-backed securities
327
0
4
23
308
Public utilities
2,746
0
202
108
2,840
Sovereign and supranational
330
0
16
8
338
Banks/financial institutions
5,376
0
267
342
5,301
Other corporate
5,329
0
568
305
5,592
Total yen-denominated
34,386
0
1,587
3,099
32,874
U.S. dollar-denominated:
U.S. government and agencies
208
0
1
3
206
Municipalities
1,167
0
65
53
1,179
Mortgage- and asset-backed securities
2,987
0
302
34
3,255
Public utilities
3,938
0
418
151
4,205
Sovereign and supranational
57
0
21
0
78
Banks/financial institutions
3,271
0
420
36
3,655
Other corporate
18,050
0
2,493
752
19,791
Total U.S. dollar-denominated
29,678
0
3,720
1,029
32,369
Other currencies:
Other corporate
25
0
1
0
26
Total other currencies
25
0
1
0
26
Total securities available-for-sale
$
64,089 $
0 $
5,308 $
4,128 $
65,269
2025
(In millions)
Amortized
Cost
Allowance
for Credit
Losses
Net
Carrying
Amount
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities held-to-maturity, carried at
amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies
$
15,461 $
2 $
15,459 $
81 $
713 $ 14,827
Municipalities
235
0
235
0
6
229
Public utilities
32
0
32
0
3
29
Sovereign and supranational
381
3
378
6
9
375
Other corporate
16
0
16
0
0
16
Total yen-denominated
16,125
5
16,120
87
731 15,476
Total securities held-to-maturity
$
16,125 $
5 $
16,120 $
87 $
731 $ 15,476
Item 8. Financial Statements and Supplementary Data
108
2024
(In millions)
Amortized
Cost
Allowance
for Credit
Losses
Net
Carrying
Amount
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities held-to-maturity, carried at
amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies
$
15,311 $
2 $
15,309 $
759 $
9 $ 16,059
Municipalities
235
0
235
22
0
257
Public utilities
32
0
32
1
0
33
Sovereign and supranational
377
3
374
31
0
405
Other corporate
16
0
16
2
0
18
Total yen-denominated
15,971
5
15,966
815
9 16,772
Total securities held-to-maturity
$
15,971 $
5 $
15,966 $
815 $
9 $ 16,772
2025
2024
(In millions)
Fair Value
Fair Value
Equity securities, carried at fair value through net earnings:
Equity securities:
Yen-denominated
$
609
$
484
U.S. dollar-denominated
278
312
Total equity securities
$
887
$
796
For additional information on the Company's valuation methodology for fixed maturity and equity securities, see Note 5.
During 2025 and 2024, the Company did not reclassify any investments from the held-to-maturity category to the
available-for-sale category.
Item 8. Financial Statements and Supplementary Data
109
Contractual and Economic Maturities
The contractual and economic maturities of the Company's investments in fixed maturity securities at December 31, 2025,
were as follows:
(In millions)
Amortized
Cost (1)
Fair
Value
Available-for-sale:
Due in one year or less
$ 1,676
$ 1,743
Due after one year through five years
7,704
8,618
Due after five years through 10 years
16,143
17,021
Due after 10 years
35,545
32,373
Mortgage- and asset-backed securities
4,195
4,366
Total fixed maturity securities available-for-sale
$ 65,263
$ 64,121
Held-to-maturity:
Due in one year or less
$
32
$
32
Due after one year through five years
1,418
1,435
Due after five years through 10 years
7,182
7,240
Due after 10 years
7,488
6,769
Total fixed maturity securities held-to-maturity
$ 16,120
$ 15,476
(1) Net of allowance for credit losses
Economic maturities are used for certain fixed maturity securities with no stated maturity where the expected maturity date
is based on the combination of features in the financial instrument such as the right to call or prepay obligations or
changes in coupon rates.
Investment Concentrations
The Company's process for investing in credit-related investments begins with an independent approach to underwriting
each issuer's fundamental credit quality. The Company evaluates independently those factors that it believes could
influence an issuer's ability to make payments under the contractual terms of the Company's instruments. This includes a
thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial
considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics,
and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs);
and contractual provisions of the instrument (such as financial covenants and position in the capital structure). The
Company further evaluates the investment considering broad business and portfolio management objectives, including
asset/liability needs, portfolio diversification, and expected income.
Investment exposures that individually exceeded 10% of shareholders' equity as of December 31 were as follows:
2025
2024
(In millions)
Credit
Rating
Amortized
Cost
Fair
Value
Credit
Rating
Amortized
Cost
Fair
Value
Japan National Government(1)
A+
$32,618
$28,434
A+
$33,822
$32,844
(1) Japan Government Bonds (JGBs) or JGB-backed securities
Item 8. Financial Statements and Supplementary Data
110
Net Investment Gains and Losses
Information regarding pretax net investment gains and losses for the years ended December 31 follows:
(In millions)
2025
2024
2023
Net investment gains (losses):
Sales and redemptions:
Fixed maturity securities available-for-sale:
Gross gains from sales
$
149
$
80
$
24
Gross losses from sales
(579)
(634)
(61)
Foreign currency gains (losses)
436
806
204
Other investments:
Gross gains (losses) from sales and redemptions
14
7
33
Total sales and redemptions
20
259
200
Equity securities
72
140
88
Real estate owned impairments
(6)
0
0
Credit losses:
Fixed maturity securities held-to-maturity
0
0
1
Commercial mortgage and other loans
(192)
(207)
(146)
Impairment losses
0
(55)
0
Loan commitments
0
1
9
Reinsurance recoverables and other
1
5
(3)
Total credit losses
(191)
(256)
(139)
Derivatives and other:
Derivative gains (losses)
(295)
(363)
(531)
Foreign currency gains (losses)
(172)
1,491
972
Total derivatives and other
(467)
1,128
441
Total net investment gains (losses)
$
(572)
$
1,271
$
590
For the year ended December 31, 2025, the Company recognized an impairment loss of $6 million on an office-type REO
property classified as held-and-used for the production of income. The impairment was based on the Company's
evaluation of a material adverse change in occupancy and resulted in an estimated fair value of the REO property of $12
million. The fair value was based on expected future cash flows utilizing inputs classified as Level 3 under the fair value
guidance in ASC 820.
The unrealized holding gains, net of losses, included in net investment gains and losses for the year ended December 31,
2025 that relate to equity securities held at the December 31, 2025 reporting date were $46 million. The unrealized
holding gains, net of losses, included in net investment gains and losses for the year ended December 31, 2024 that
relate to equity securities held at the December 31, 2024 reporting date were $118 million. The unrealized holding gains,
net of losses, included in net investment gains and losses for the year ended December 31, 2023 that relate to equity
securities held at the December 31, 2023 reporting date were $63 million.
Unrealized Investment Gains and Losses
Information regarding changes in unrealized investment gains and losses included in other comprehensive income (loss)
for the years ended December 31 follows:
(In millions)
2025
2024
2023
Changes in unrealized gains (losses):
Fixed maturity securities available-for-sale
$ (2,322)
$ (1,421)
$ 2,327
Total change in unrealized gains (losses)
$ (2,322)
$ (1,421)
$ 2,327
Item 8. Financial Statements and Supplementary Data
111
Effect on Shareholders' Equity
The net effect on shareholders' equity of unrealized gains and losses from fixed maturity securities at December 31
follows:
(In millions)
2025
2024
Unrealized gains (losses) on securities available-for-sale
$ (1,142)
$ 1,180
Deferred income taxes
(667)
(1,156)
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities
$ (1,809)
$
24
Gross Unrealized Loss Aging
The following tables present the fair values and gross unrealized losses of the Company's available-for-sale securities,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss
position at December 31.
2025
Total
Less than 12 months
12 months or longer
(In millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fixed maturity securities available-
for-sale:
U.S. government and
agencies:
U.S. dollar-denominated
$
37
$
2
$
0
$
0
$
37
$
2
Japan government and
agencies:
Yen-denominated
13,521
3,727
7,966
692
5,555
3,035
Municipalities:
U.S. dollar-denominated
630
54
8
0
622
54
Yen-denominated
520
145
234
6
286
139
Mortgage- and asset-
backed securities:
U.S. dollar-denominated
547
35
217
5
330
30
Yen-denominated
183
38
9
1
174
37
Public utilities:
U.S. dollar-denominated
1,055
107
169
2
886
105
Yen-denominated
838
174
0
0
838
174
Sovereign and supranational:
Yen-denominated
276
13
236
0
40
13
Banks/financial institutions:
U.S. dollar-denominated
252
21
62
0
190
21
Yen-denominated
3,467
477
495
26
2,972
451
Other corporate:
U.S. dollar-denominated
4,535
597
620
5
3,915
592
Yen-denominated
2,395
534
640
33
1,755
501
Total
$ 28,256
$ 5,924
$ 10,656
$ 770
$ 17,600
$ 5,154
Item 8. Financial Statements and Supplementary Data
112
2024
Total
Less than 12 months
12 months or longer
(In millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fixed maturity securities available-
for-sale:
U.S. government and
agencies:
U.S. dollar-denominated
$
106
$
3
$
59
$
1
$
47
$
2
Japan government and
agencies:
Yen-denominated
8,136
2,234
2,070
57
6,066
2,177
Municipalities:
U.S. dollar-denominated
666
53
67
3
599
50
Yen-denominated
341
79
96
2
245
77
Mortgage- and asset-
backed securities:
U.S. dollar-denominated
567
34
173
2
394
32
Yen-denominated
196
23
12
0
184
23
Public utilities:
U.S. dollar-denominated
1,570
151
699
19
871
132
Yen-denominated
1,020
108
368
11
652
97
Sovereign and supranational:
Yen-denominated
47
8
0
0
47
8
Banks/financial institutions:
U.S. dollar-denominated
625
36
376
7
249
29
Yen-denominated
3,197
342
471
22
2,726
320
Other corporate:
U.S. dollar-denominated
6,097
752
2,036
59
4,061
693
Yen-denominated
1,733
305
289
14
1,444
291
Total
$ 24,301
$ 4,128
$ 6,716
$ 197
$ 17,585
$ 3,931
Analysis of Securities in Unrealized Loss Positions
The unrealized losses on the Company's available-for-sale securities have been primarily related to general market
factors such as changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific
concerns with the issuer's ability to pay interest and repay principal.
For available-for-sale securities in an unrealized loss position, the Company performs detailed analyses to identify
whether the drivers of the decline in fair value are due to general market factors, such as the recent rise in interest rates,
or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the
Company's resources to the review and monitoring of securities with real credit-related concerns that could impact
ultimate collection of principal and interest. 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. For non-corporate issuers, the Company
analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the
public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also
considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific
characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other
relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's
investment through payment of interest and principal.
Item 8. Financial Statements and Supplementary Data
113
Assuming no credit-related factors develop and excluding any impact resulting from fluctuations in the yen/dollar
exchange rate, unrealized gains and losses on available-for-sale securities are expected to diminish as investments near
maturity. Based on its credit analysis, the Company believes that the issuers of its available-for-sale securities in the
sectors presented in the table above have the ability to service their obligations to the Company. Further, the Company
does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the
investments before recovery of their amortized cost bases, which may be at maturity.
However, if the Company identifies certain available-for-sale securities where the amortized cost basis exceeds the
present value of the cash flows expected to be collected due to credit-related factors, an allowance for credit losses is
recognized. 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, 2025. Refer to the Allowance for
Credit Losses Methodology section below for additional information.
As of December 31, 2025 and 2024, the Company had an immaterial amount of fixed maturity securities on nonaccrual
status.
Commercial Mortgage and Other Loans
The following table presents the composition of the carrying value for commercial mortgage and other loans by property
type as of December 31.
2025
2024
(In millions)
Amortized
Cost
% of
Total
Amortized
Cost
% of
Total
Commercial mortgage and other loans:
Transitional real estate loans:
Office
$
1,229
12.1 %
$
1,361
12.1 %
Retail
267
2.6
349
3.1
Apartments/Multi-Family
1,555
15.3
2,201
19.6
Industrial
75
.7
117
1.1
Hospitality
522
5.1
556
5.0
Other
240
2.4
318
2.8
Total transitional real estate loans
3,888
38.2
4,902
43.7
Commercial mortgage loans:
Office
255
2.5
300
2.7
Retail
217
2.1
214
1.9
Apartments/Multi-Family
539
5.3
572
5.1
Industrial
427
4.2
436
3.9
Other
14
.1
15
.1
Total commercial mortgage loans
1,452
14.2
1,537
13.7
Middle market loans
4,404
43.2
4,423
39.4
Other loans
447
4.4
362
3.2
Total commercial mortgage and other loans
$
10,191
100.0 %
$ 11,224
100.0 %
Allowance for credit losses
(426)
(355)
Total net commercial mortgage and other loans
$
9,765
$ 10,869
CMLs and TREs are secured by properties entirely within the U.S. (with the largest concentrations in California (22%),
Texas (13%) and Florida (8%)). MMLs are issued only to companies domiciled within the U.S. and Canada.
Transitional Real Estate Loans
TREs are relatively short-term floating rate commercial mortgage loans that are secured by a first lien on the property.
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.
Item 8. Financial Statements and Supplementary Data
114
As of December 31, 2025, the Company had $140 million in outstanding commitments to fund TREs. These commitments
are contingent on the final underwriting and due diligence to be performed.
Commercial Mortgage Loans
CMLs are typically fixed rate loans on commercial real estate with partial repayment of principal over the life of the loan
with the remaining outstanding principal being repaid upon maturity. This loan portfolio is generally considered higher
quality investment grade loans.
Middle Market Loans
MMLs are typically first lien senior secured cash flow loans to small to mid-size companies for working capital, refinancing,
acquisition, and recapitalization. These loans are generally considered to be below investment grade.
As of December 31, 2025, the Company had commitments of approximately $704 million to fund future MMLs. These
commitments are contingent upon the availability of MMLs that meet the Company's underwriting criteria.
Other Loans
Other loans are primarily infrastructure loans. Infrastructure loans are typically senior secured, financing operating
portfolios of renewable and conventional energy generation assets characterized by predictable, often contractual cash
flows for loan repayment. The infrastructure loan portfolio weighted average rating is investment grade.
As of December 31, 2025, the Company had commitments of approximately $1 million to fund future other loans. These
commitments are contingent upon the availability of other loans that meet the Company's underwriting criteria.
Past Due and Nonaccrual Loans
The following tables present an aging of past due and nonaccrual loans at amortized cost, before allowance for credit
losses, as of December 31.
2025
(In millions)
Current
Less Than
90 Days
Past Due
90 Days
or More
Past Due(1)
Total Past
Due
Total
Loans
Nonaccrual
Status
Transitional real estate loans
$
3,418 $
0 $
470 $
470 $
3,888 $
545
Commercial mortgage loans
1,452
0
0
0
1,452
0
Middle market loans
4,263
58
83
141
4,404
98
Other loans
447
0
0
0
447
0
Total
$
9,580 $
58 $
553 $
611 $
10,191 $
643
(1) As of December 31, 2025, there were no loans that were 90 days or more past due that continued to accrue interest.
2024
(In millions)
Current
Less Than
90 Days
Past Due
90 Days
or More
Past Due(1)
Total Past
Due
Total
Loans
Nonaccrual
Status
Transitional real estate loans
$
4,364 $
195 $
343 $
538 $
4,902 $
378
Commercial mortgage loans
1,537
0
0
0
1,537
0
Middle market loans
4,295
63
65
128
4,423
108
Other loans
362
0
0
0
362
0
Total
$
10,558 $
258 $
408 $
666 $
11,224 $
486
(1) As of December 31, 2024, there were no loans that were 90 days or more past due that continued to accrue interest.
For each of the years ended December 31, 2025 and 2024, the Company recognized $2 million of interest income on
loans that were on nonaccrual status. For the year ended December 31, 2023, the Company recognized no interest
income on loans that were on nonaccrual status. Of these loans, TREs with an amortized cost of $30 million and
$140 million had no credit loss allowance as of December 31, 2025 and December 31, 2024, respectively, because these
loans are collateral dependent assets for which the estimated fair values of the collateral were in excess of amortized
Item 8. Financial Statements and Supplementary Data
115
cost. As of December 31, 2025 and 2024, MMLs with an amortized cost of $36 million and $5 million, respectively, were
on nonaccrual status without an allowance for credit losses.
Loan Modifications to Borrowers Experiencing Financial Difficulties
The Company granted certain loan modifications to borrowers experiencing financial difficulty during 2025, 2024 and
2023. The types of modifications granted may include interest rate reductions, principal forgiveness, other-than-
insignificant payment delays, term extensions or a combination of these types of modifications. The amount, timing, and
extent of modifications granted are considered in determining any allowance for credit loss recorded.
Loans that have both been modified and are paid or written off during the period, resulting in an amortized cost balance of
zero at the end of the period, are not included in the disclosures below.
The following tables present the amortized cost basis of modified loans to borrowers experiencing financial difficulty and
the financial effect of the modifications, disaggregated by loan classification and type of modification, for the years ended
December 31.
2025
(In millions)
Amortized
Cost (1)
% of
Total
Financial Effect
Transitional real estate loans:
Term extension
$
159
4.4 %
Term extension of 20 months on average
Term extension and interest rate
reduction
178
4.9
Term extension of 26 months on average and reduction
in the weighted-average contractual interest rate from
5.2% to 4.1%
Middle market loans:
Principal forgiveness
$
15
.3 %
Reduction in the amortized cost basis of $9 million
Term extension
45
1.1
Term extension of 9 months on average
Other-than-insignificant
payment delays
33
.8
Delay in principal and interest payments of 36 months
on average
Principal forgiveness and term
extension
35
.8
Reduction in the amortized cost basis of $40 million and
term extension of 33 months on average
Principal forgiveness, term
extension and interest rate
reduction
13
.3
Reduction in the amortized cost basis of $5 million, term
extension of 45 months on average, and reduction in the
weighted-average contractual interest rate from 10.5%
to 9.5%
(1) Net of allowance for credit losses
2024
(In millions)
Amortized
Cost (1)
% of
Total
Financial Effect
Transitional real estate loans:
Other-than-insignificant payment
delays
$
125
2.7 %
Delay in payments of 24 months on average
Other-than-insignificant payment
delays and interest rate
reduction
278
5.9
Delay in payments of 44 months on average and
reduction in the weighted-average contractual interest
rate from 8.0% to 6.6%
Other-than-insignificant payment
delays, principal forgiveness and
interest rate reduction
81
1.7
Delay in payments of 33 months on average, $1 million
of principal forgiven, and reduction in the weighted-
average contractual interest rate from 8.2% to 7.3%
(1) Net of allowance for credit losses
Additionally, an immaterial percentage of MMLs with an amortized cost of $15 million were modified in the form of interest
rate reductions and maturity extensions during the year ended December 31, 2024.
For the year ended December 31, 2023, loan modifications to borrowers experiencing financial difficulty were immaterial.
Item 8. Financial Statements and Supplementary Data
116
The following tables present an aging of loans that received modifications in the 12 months preceding December 31, at
amortized cost.
2025
(In millions)
Current
Less Than
90 Days
Past Due
90 Days
or More
Past Due
Nonaccrual
Status
Transitional real estate loans
$
337 $
0 $
0 $
43
Middle market loans
135
6
0
0
Total
$
472 $
6 $
0 $
43
2024
(In millions)
Current
Less Than
90 Days
Past Due
90 Days
or More
Past Due
Nonaccrual
Status
Transitional real estate loans
$
403 $
81 $
0 $
0
Middle market loans
15
0
0
0
Total
$
418 $
81 $
0 $
0
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial
difficulty to understand the effectiveness of its modification efforts. Loans that were granted a modification in the past 12
months, as of December 31, 2025 and 2024, and subsequently defaulted in the years ended December 31, 2025 and
2024, were immaterial. There were no modified loans to borrowers experiencing financial difficulties in the past 12
months, as of December 31, 2023, that subsequently defaulted in the year ended December 31, 2023.
As of December 31, 2025, the Company had $15 million of outstanding commitments to lend additional funds to borrowers
experiencing financial difficulty that were granted a loan modification, compared with $14 million as of December 31,
2024.
Allowance for Credit Losses
The following table presents the roll forward of the allowance for credit losses by portfolio segment for loans and by
accounting classification for securities.
(In millions)
Transitional
Real Estate
Loans
Commercial
Mortgage
Loans
Middle
Market
Loans
Other Loans
and Loan
Commitments
Held-to-
Maturity
Securities
Available-
for-Sale
Securities
Total
Balance at December 31, 2022
$
(54) $
(9) $
(129) $
(24) $
(7) $
0 $
(223)
(Addition to) release of allowance
for credit losses(1)
(124)
(7)
(17)
8
1
0
(139)
Writeoffs, net of recoveries
66
0
0
0
0
0
66
Change in foreign exchange
0
0
0
0
1
0
1
Balance at December 31, 2023
(112)
(16)
(146)
(16)
(5)
0
(295)
(Addition to) release of allowance
for credit losses
(148)
(17)
(44)
(1)
0
0
(210)
Writeoffs, net of recoveries
61
19
50
0
0
0
130
Change in foreign exchange
0
0
0
0
0
0
0
Balance at December 31, 2024
(199)
(14)
(140)
(17)
(5)
0
(375)
(Addition to) release of allowance
for credit losses
(107)
5
(89)
0
0
0
(191)
Writeoffs, net of recoveries
29
0
91
0
0
0
120
Change in foreign exchange
0
0
0
0
0
0
0
Balance at December 31, 2025
$
(277) $
(9) $
(138) $
(17) $
(5) $
0 $
(446)
(1) Includes an allowance for credit losses of $4 recognized on financial assets accounted for as purchased financial assets with credit
deterioration that is not recorded in earnings upon recognition.
As of December 31, 2025, the Company identified TREs with an amortized cost of $137 million in anticipation of potential
foreclosure or deed in lieu of foreclosure transactions. As of December 31, 2025, the Company established an allowance
for credit losses of $45 million related to these loans.
Item 8. Financial Statements and Supplementary Data
117
As of December 31, 2025, the Company’s held-to-maturity portfolio includes Japan Government and Agency securities
with an amortized cost of $15.3 billion that meet the requirements for zero-credit-loss expectation and therefore have been
excluded from the measurement of the allowance for credit losses.
Allowance for Credit Losses Methodology
Available-for-sale Securities
For available-for-sale securities, the Company evaluates estimated credit losses only when the amortized cost basis
exceeds the present value of the cash flows expected to be collected due to credit related factors. The Company’s
methodology for estimating an allowance for credit losses for available-for-sale securities utilizes the discounted cash flow
model, based on past events, current market conditions and future economic conditions, as well as industry analysis and
credit ratings of the securities. In addition, the Company evaluates the specific issuer’s probability of default and expected
recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as
well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of
expected cash flows.
An investment in an available-for-sale security may be impaired if the fair value falls below amortized cost. The Company
regularly reviews its available-for-sale portfolio for declines in fair value. The Company's available-for-sale impairment
model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to
sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost.
The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and
assessment of known and inherent risks associated with the respective securities. Such evaluations and assessments are
revised as conditions change and new information becomes available.
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. The Company performs ongoing analyses of its liquidity needs,
which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow
and liquidity needs.
Held-to-maturity Securities, Loan Receivables, and Loan Commitments
The Company calculates its allowance for credit losses for held-to-maturity securities, loan receivables and loan
commitments by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an
individual asset. For held-to-maturity securities, MMLs, and MML commitments, the Company groups assets by industry,
country, and key credit quality indicators. The Company groups CMLs and TREs and respective loan commitments by
property type, property location and key credit quality indicators. On a quarterly basis, CMLs and TREs within a portfolio
segment that share similar risk characteristics are pooled for the allowance calculation. 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.
The allowance for credit losses for held-to-maturity securities and loan receivables is estimated using a probability-of-
default (PD) / loss-given-default (LGD) method, discounted for the time value of money. For held-to-maturity securities,
available-for-sale securities, and loan receivables, the Company includes the change in present value due to the passage
of time in the change in the allowance for credit losses. The Company’s methodology for estimating credit losses utilizes
the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment
(such as prepayment options, renewal options, call options, or extension options). 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.
For the CML and TRE portfolio, the Company applies reasonable and supportable forecasts of macroeconomic variables
as well as national and local real-estate market factors to estimate future credit losses where the market factors revert
back to historical levels over time with the period being dependent on current market conditions, projected market
conditions and difference in the current and historical market levels for each factor.
For off-balance sheet credit exposure primarily attributable to loan commitments that are not unconditionally cancellable,
the Company considers the contractual period of exposure to credit risk, the likelihood that funding will occur, the risk of
Item 8. Financial Statements and Supplementary Data
118
loss, and the current conditions and expectations of future economic conditions to estimate the allowance for credit
losses.
The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in
underwriting practices and significant events or conditions and makes adjustments as necessary.
Key Credit Quality Indicators
The Company’s key credit quality indicators used in the grouping of assets are outlined by investment type below.
•
For held-to-maturity securities and MMLs, the Company’s key credit quality indicator is credit ratings. The
Company’s held-to-maturity portfolio is composed of investment grade securities that are senior unsecured
instruments, while its MMLs generally have below-investment-grade ratings but are typically senior secured
instruments. The Company monitors the credit ratings periodically, but not less frequently than quarterly.
•
For TREs, the Company’s key credit quality indicators include performance of the loan and loan-to-value (LTV),
which is calculated by dividing the current outstanding loan balance by the estimated property value, primarily
using values at origination. Given that TREs involve properties undergoing a repositioning of their commercial
profile, LTV provides the most insight into the credit risk of the loan. The Company monitors the performance of
the loans periodically, but not less frequently than quarterly. The monitoring process also focuses on higher risk
loans, which include those that are delinquent or for which foreclosure or deed in lieu of foreclosure is anticipated.
•
For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR).
DSCR is the most recently available net operating income of the underlying property compared to the required
debt service of the loan.
•
For other loans, the Company's key credit quality indicator is credit ratings. The Company monitors these credit
ratings periodically, but not less frequently than quarterly.
The following tables present as of December 31, 2025 the amortized cost basis of TREs, CMLs, MMLs, and other loans
by year of origination and key credit quality indicator.
Transitional Real Estate Loans
(In millions)
2025
2024
2023
2022
2021
Prior
Total
Loan-to-Value Ratio:
0%-59.99%
$
0 $
0 $
0 $
319 $
344 $
10 $
673
60%-69.99%
0
0
27
397
423
403
1,250
70%-79.99%
0
0
14
678
512
24
1,228
80% or greater
0
0
0
155
252
330
737
Total
$
0 $
0 $
41 $
1,549 $
1,531 $
767 $
3,888
Current-period gross
writeoffs:
$
0 $
0 $
0 $
5 $
0 $
24 $
29
Commercial Mortgage Loans
(In millions)
2025
2024
2023
2022
2021
Prior
Total
Weighted-
Average
DSCR
Loan-to-Value Ratio:
0%-59.99%
$
11 $
0 $
32 $
0 $
244 $
944 $
1,231
2.74
60%-69.99%
20
0
0
0
25
55
100
2.11
70%-79.99%
0
0
0
0
0
8
8
1.50
80% or greater
0
12
0
0
0
101
113
1.16
Total
$
31 $
12 $
32 $
0 $
269 $
1,108 $
1,452
2.56
Weighted Average DSCR
1.80
1.10
2.55
0.00
3.01
2.49
Current-period gross
writeoffs:
$
0 $
0 $
0 $
0 $
0 $
0 $
0
Item 8. Financial Statements and Supplementary Data
119
Middle Market Loans
(In millions)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Total
Credit Ratings:
BBB
$
31 $
52 $
36 $
0 $
57 $
106 $
15 $
297
BB
452
473
40
331
285
552
72
2,205
B
194
149
46
284
388
360
39
1,460
CCC
22
3
0
9
59
196
16
305
CC
5
2
0
9
16
17
5
54
C and lower
0
0
0
0
16
62
5
83
Total
$
704 $
679 $
122 $
633 $
821 $
1,293 $
152 $
4,404
Current-period gross
writeoffs:
$
0 $
0 $
0 $
7 $
29 $
55 $
0 $
91
Other Loans
(In millions)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Total
Credit Ratings:
A
$
0 $
0 $
0 $
67 $
0 $
0 $
0 $
67
AA
0
0
0
8
3
0
0
11
BBB
33
244
66
26
0
0
0
369
Total
$
33 $
244 $
66 $
101 $
3 $
0 $
0 $
447
Current-period gross
writeoffs:
$
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0
Other Investments
The table below presents the composition of the carrying value for other investments as of December 31.
(In millions)
2025
2024
Other investments:
Policy loans
$
210
$
203
Short-term investments (1)
1,373
1,599
Limited partnerships (2)
4,109
3,435
Real estate owned
902
682
Other
28
39
Total other investments
$
6,622
$
5,958
(1) Includes securities lending collateral
(2) Includes tax credit investments and asset classes such as private equity and real estate funds
As of December 31, 2025 and 2024, all REO was classified as held-and-used for the production of income. Depreciation
expense on REO was $29 million, $13 million, and an immaterial amount for the years ended December 31, 2025, 2024,
and 2023, respectively. Additionally, as of December 31, 2025 and 2024, accumulated depreciation on REO was $41
million and $14 million, respectively.
The Company had $3.0 billion and $2.8 billion in outstanding commitments to fund investments in limited partnerships,
which included $2.1 billion and $2.1 billion of unfunded commitments related to VIEs that are non-consolidated as of
December 31, 2025 and 2024, respectively.
Item 8. Financial Statements and Supplementary Data
120
Variable Interest Entities
In the normal course of its activities, the Company invests in legal entities that are VIEs. The Company's variable interests
in VIEs are limited to the debt and equity instruments issued by them. With the exception of commitments to limited
partnerships and to certain loan investments made in the normal course of business, the Company has not provided any
direct or contingent obligations to fund the limited activities of these VIEs, or support related to the limited activities of
these VIEs, and does not have any intention to do so in the future, nor has it provided any direct or indirect financial
guarantees.
The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related
investments, and in certain cases, to any unfunded commitments held in the VIE.
For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature.
VIEs - Consolidated
If the Company determines that it is the VIE’s primary beneficiary, it consolidates the VIE. Creditors or beneficial interest
holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company
except to the extent of the unfunded commitments referenced above, as the Company’s obligation to each VIE is limited
to the amount of its committed investment.
The following table presents the carrying value and balance sheet caption in which the assets and liabilities of
consolidated VIEs are reported as of December 31.
Investments in Consolidated Variable Interest Entities
(In millions)
2025
2024
Assets:
Fixed maturity securities available-for-sale
$ 3,636
$ 3,428
Commercial mortgage and other loans
7,896
8,693
Other investments (1)
2,320
2,176
Other assets (2)
45
53
Total assets of consolidated VIEs
$ 13,897
$ 14,350
Liabilities:
Other liabilities (2)
$
765
$
604
Total liabilities of consolidated VIEs
$
765
$
604
(1) Consists entirely of alternative investments in limited partnerships, which represent VIEs where the Company is not the primary
beneficiary and therefore are not consolidated
(2) Consists entirely of derivatives
The Company is the sole investor in the consolidated VIEs listed in the table above. The Company invests in fixed
maturity securities issued by VIEs that in turn hold U.S. dollar-denominated fixed maturity securities coupled with foreign
currency swap agreements. The weighted-average lives of the Company's investments in these VIEs are very similar to
the underlying collateral held by these VIEs. The activities of these VIEs are limited to holding invested assets and foreign
currency swaps and utilizing the cash flows from these securities to service the VIEs' debt. Neither the Company nor any
of its creditors are able to obtain the underlying collateral of these VIEs unless there is an event of default or other
specified event. The Company is not a direct counterparty to the foreign currency swap contracts and has no control over
them. The Company's loss exposure to these VIEs is limited to its original investment. These consolidated VIEs do not
rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and foreign
currency swap contracts, if applicable. The underlying collateral assets and funding of these consolidated VIEs are
generally static in nature.
Item 8. Financial Statements and Supplementary Data
121
Investments in Unit Trust Structures
The Company also utilizes unit trust structures in Aflac Japan to invest in various asset classes, which include CMLs,
MMLs, TREs, other loans and limited partnerships. As the sole investor of these VIEs, the Company is required to
consolidate these trusts. The limited partnership investments are comprised of private equity and real estate. The
Company's loss exposure to these VIEs is limited to its original investments, together with any unfunded portion of the
Company's commitments made in the normal course of business to fund certain loan investments and limited partnership
investments, as described in the Commercial Mortgage and Other Loans and Other Investments sections of this note.
Excluding these commitments, the Company does not provide financial or other support to consolidated VIEs.
VIEs - Not Consolidated
The table below presents the carrying value and balance sheet caption in which the Company's investments in VIEs that
are not consolidated are reported as of December 31.
Investments in Variable Interest Entities Not Consolidated
(In millions)
2025
2024
Assets:
Fixed maturity securities available-for-sale
$ 6,750
$ 6,243
Other investments (1)
1,603
1,124
Total investments in VIEs not consolidated
$ 8,353
$ 7,367
(1) Consists entirely of alternative investments in limited partnerships
Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt
obligations issued by the VIEs. These fixed maturity securities include structured securities, primarily asset-backed
securities. The Company's involvement in the related VIEs is limited to that of a passive investor in asset-backed
securities issued by the VIEs. The Company also invests in fixed maturity securities issued by VIEs that are the primary
financing vehicles used by their corporate sponsors to raise financing in the capital markets. The variable interests created
by these VIEs are principally or solely a result of the debt instruments issued by them. The Company does not have the
power to direct the activities that most significantly impact the entity's economic performance, nor does it have the
obligation to absorb losses of the VIE entity or the right to receive benefits from the entity that could be significant to the
entity. As such, the Company is not the primary beneficiary of these VIEs and therefore is not required to consolidate
them.
The Company also holds equity investments in limited partnerships that have been determined to be VIEs. These
partnerships primarily invest in private equity and real estate funds. The Company’s maximum exposure to loss on these
investments is limited to the amount of its investment and any unfunded commitments. As described in the Other
Investments section of this note, the Company makes commitments to fund partnership investments in the normal course
of business. Excluding these commitments, the Company did not provide financial or other support to unconsolidated
VIEs. The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The
Company classifies these investments as other investments in the consolidated balance sheets.
Item 8. Financial Statements and Supplementary Data
122
Securities Lending and Pledged Securities
In the normal course of business, the Company enters into securities lending transactions. Details of the collateral by
loaned security type and remaining maturity of the agreements as of December 31 were as follows:
Securities Lending Transactions Accounted for as Secured Borrowings
Remaining Contractual Maturity of the Agreements
2025
2024
(In millions)
Overnight
and
Continuous(1)
Up to
30
days
30-90
days
Total
Overnight
and
Continuous(1)
Up to
30
days
Total
Securities lending
transactions:
Fixed maturity securities:
Japan government and agencies
$
0 $ 1,591 $ 1,329 $ 2,920 $
0 $ 1,027 $ 1,027
Public utilities
54
0
0
54
34
0
34
Banks/financial institutions
150
0
0
150
193
0
193
Other corporate
865
0
0
865
783
0
783
Total borrowings
$
1,069 $ 1,591 $ 1,329 $ 3,989 $
1,010 $ 1,027 $ 2,037
Gross amount of recognized liabilities for securities
lending transactions
$ 3,989
$ 2,037
(1) The related loaned security, under the Company's U.S. securities lending program, can be returned to the Company at the
transferee's discretion; therefore, they are classified as Overnight and Continuous.
In connection with securities lending, in addition to cash collateral received, the Company received from counterparties
securities collateral of $2.2 billion and $3.0 billion at December 31, 2025, and 2024, respectively, which may not be sold or
re-pledged, unless the counterparty is in default. Such securities collateral is not reflected in the consolidated balance
sheets.
The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of
December 31, 2025 and 2024, 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.
At December 31, 2025, fixed maturity 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.
Item 8. Financial Statements and Supplementary Data
123
4. DERIVATIVE INSTRUMENTS
The Company's freestanding derivative instruments include:
•
foreign currency forwards and options used in hedging foreign currency exchange risk on U.S. dollar-denominated
investments held by Aflac Japan, 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 Japanese yen and hedge the Company's long-term exposure to a weakening Japanese yen;
•
foreign currency swaps used to economically hedge the foreign currency exchange risk associated with certain
investments denominated in other foreign currencies held by Aflac Japan;
•
cross-currency swaps, also referred to as foreign currency swaps, associated with certain senior notes and
subordinated debentures;
•
foreign currency swaps that are associated with VIE bond purchase commitments, and investments in special-
purpose entities, including VIEs where the Company is the primary beneficiary;
•
foreign currency forwards used to economically hedge the foreign currency exchange risk associated with certain
investments denominated in other foreign currencies held by Aflac Japan;
•
interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments;
•
interest rate swaptions (swaptions) used to hedge changes in the fair value associated with interest rate
fluctuations for certain U.S. dollar-denominated available-for-sale securities; and
•
bond purchase commitments at the inception of investments in consolidated VIEs.
Foreign currency forwards and options are executed for Aflac Japan in order to hedge the foreign currency exchange risk
on the carrying value of certain U.S. dollar-denominated investments. The average maturity of these forwards and options
can change depending on factors such as market conditions and types of investments being held. In situations where the
maturity of the forwards and options is shorter than the underlying investment being hedged, the Company may enter into
new forwards and options near maturity of the existing derivative in order to continue hedging the underlying investment.
In forward transactions, Aflac Japan agrees with another party to buy a fixed amount of Japanese yen and sell a
corresponding amount of U.S. dollars at a specified future date. The Company also uses one-sided foreign currency put
options to mitigate the settlement risk on U.S. dollar-denominated assets related to extreme foreign exchange rate
changes.
From time to time, Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan
agrees with another party to simultaneously purchase put options and sell call options. In the purchased put transactions,
Aflac Japan obtains the option to buy a fixed amount of Japanese yen and sell a corresponding amount of U.S. dollars at
a specified future date. In the sold call transactions, Aflac Japan agrees to sell a fixed amount of Japanese yen and buy a
corresponding amount of U.S. dollars at a specified future date. The combination of purchasing the put option and selling
the call option results in no net premium being paid (i.e. a costless or zero-cost collar).
From time to time, the Company may also enter into foreign currency forwards and options to hedge the foreign currency
exchange risk associated with the net investment in Aflac Japan. In these forward transactions, the Company agrees with
another party to buy a fixed amount of U.S. dollars and sell a corresponding amount of Japanese yen at a specified price
at a specified future date. In the option transactions, the Company may use a combination of foreign currency options to
protect expected future cash flows by simultaneously purchasing Japanese yen put options (options that protect against a
weakening Japanese yen) and selling Japanese yen call options (options that limit participation in a strengthening
Japanese yen). The combination of these two actions create a zero-cost collar. Additionally, the Company enters into
purchased options to hedge cash flows from the net investment in Aflac Japan.
The Company enters into foreign currency swaps pursuant to which it exchanges an initial principal amount in one
currency for an initial principal amount of another currency, with an agreement to re-exchange the principal amounts at a
future date. There may also be periodic exchanges of payments at specified intervals based on the agreed upon rates and
notional amounts. Foreign currency swaps are used primarily in the consolidated VIEs held by Aflac Japan to convert
foreign-denominated cash flows to Japanese yen in order to minimize cash flow fluctuations. The Company also uses
foreign currency swaps to economically hedge the foreign currency exchange risk on certain fixed maturity securities
denominated in other foreign currencies held by Aflac Japan, as well as to economically convert certain of its U.S. dollar-
denominated senior note and subordinated debenture principal and interest obligations into Japanese yen-denominated
obligations.
Item 8. Financial Statements and Supplementary Data
124
The Company also uses foreign currency forwards to economically hedge the foreign currency exchange risk on certain
variable-rate investments denominated in other foreign currencies held by Aflac Japan.
In order to reduce investment income volatility from its variable-rate investments, the Company enters into receive–fixed,
pay–floating interest rate swaps. These derivatives are cleared and settled through a central clearinghouse.
Swaptions are used to mitigate the adverse impact resulting from significant changes in the fair value of U.S. dollar-
denominated available-for-sale securities due to fluctuation in interest rates. In a payer swaption, the Company pays a
premium to obtain the right, but not the obligation, to enter into a swap contract where it will pay a fixed rate and receive a
floating rate. Interest rate swaption collars are combinations of two swaption positions. In order to maximize the efficiency
of the collars while minimizing cost, a collar strategy is used whereby the Company purchases a long payer swaption (the
Company purchases an option that allows it to enter into a swap where the Company will pay the fixed rate and receive
the floating rate of the swap) and sells a short receiver swaption (the Company sells an option that provides the
counterparty with the right to enter into a swap where the Company will receive the fixed rate and pay the floating rate of
the swap). The combination of purchasing the long payer swaption and selling the short receiver swaption results in no net
premium being paid (i.e. a costless or zero-cost collar).
Bond purchase commitments result from repackaged bond structures that are consolidated VIEs whereby there is a delay
in the trade date and settlement date of the bond within the structure to ensure completion of all necessary legal
agreements to support the consolidated VIE that issues the repackaged bond. Since the Company has a commitment to
purchase the underlying bond at a specified price, the agreement meets the definition of a derivative. The fair value of the
derivative is derived based on the current market value of the bond compared to the fixed purchase price to be paid on the
settlement date.
Derivative Balance Sheet Classification
The table below summarizes the balance sheet classification of the Company's derivative instruments at fair value, at
December 31. The fair value amounts presented exclude income accruals. Derivative assets are included in other assets
while derivative liabilities are included in other liabilities in the consolidated balance sheets. The notional amount of
derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of
exposure or credit risk.
2025
2024
(In millions)
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
Hedge Designation/ Derivative
Type
Notional
Amount
Fair Value
Fair Value
Notional
Amount
Fair Value
Fair Value
Cash flow hedges:
Foreign currency swaps - VIE
$
18
$
0
$
5
$
18
$
0
$
6
Total cash flow hedges
18
0
5
18
0
6
Net investment hedge:
Foreign currency forwards
1,828
120
0
1,809
185
0
Total net investment hedge
1,828
120
0
1,809
185
0
Non-qualifying strategies:
Foreign currency swaps
49
0
0
450
2
0
Foreign currency swaps - VIE
2,960
45
760
3,042
53
598
Foreign currency forwards
945
0
18
0
0
0
Foreign currency options
25,000
0
0
24,195
0
0
Interest rate swaps
36,728
14
189
17,230
0
329
Total non-qualifying strategies
65,682
59
967
44,917
55
927
Total derivatives
$ 67,528
$
179
$
972
$ 46,744
$
240
$
933
Item 8. Financial Statements and Supplementary Data
125
Cash Flow Hedge
The Company designates and accounts for certain foreign currency swaps as cash flow hedges when they meet the
requirements for hedge accounting. For certain variable-rate U.S. dollar-denominated available-for-sale securities held by
Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the U.S. dollar variable rate interest and
principal payments to fixed rate Japanese yen interest and principal payments. The remaining maximum length of time
over which these cash flows are hedged is approximately one year.
Fair Value Hedge
The Company designates and accounts for certain foreign currency forwards, options, and interest rate swaptions as fair
value hedges when they meet the requirements for hedge accounting.
Foreign currency forwards and options hedge the foreign currency exchange risk associated with certain U.S. dollar-
denominated available-for-sale securities held by Aflac Japan. For these derivatives and the related hedged items, gains
and losses included in the assessment of hedge effectiveness are included in current earnings.
The change in the fair value of the foreign currency forwards related to changes in the difference between the spot rate
and the forward price, and the change in fair value of the foreign currency option related to the time value of the option,
are excluded from the assessment of hedge effectiveness and are included in current earnings.
Interest rate swaptions hedge the interest rate risk associated with certain U.S. dollar-denominated available-for-sale
securities held by Aflac Japan. Gains and losses associated with these derivatives and included in the assessment of
hedge effectiveness, premium amortization and time value amortization while the hedge items are still outstanding, are
included in current earnings. If the interest rate swaption is terminated but the hedged item is still outstanding, the
amortization of the disposal amount of the interest rate swaption is included in current earnings over the remaining life of
the hedged items. When the related hedged items are redeemed, the time value gains and losses for the interest rate
swaptions are included in current earnings, which is consistent with the accounting for the impact of the hedged item.
The change in the fair value of interest rate swaptions related to the time value of the swaption is excluded from the
assessment of hedge effectiveness and is included in the consolidated statements of comprehensive income (loss) and
amortized into earnings over its legal term.
Fair Value Hedging Relationships
The following table presents the gains and losses on derivatives and the related hedged items in fair value hedging
relationships for the year ended December 31, 2023. The Company had no fair value hedges during the years ended
December 31, 2025 and 2024.
(In millions)
Hedging Derivatives
Hedged
Items
Hedging
Derivatives
Hedged Items
Total
Gains
(Losses)
Gains
(Losses)
Excluded
from
Effectiveness
Testing
Gains
(Losses)
Included in
Effectiveness
Testing(1)
Gains
(Losses)(1)
Net Investment
Gains (Losses)
Recognized
for Fair Value
Hedge
2023:
Foreign currency
options
Fixed maturity
securities
(65)
(65)
0
0
0
Total gains (losses)
$
(65) $
(65) $
0 $
0 $
0
(1) For the year ended December 31, 2023, gains and losses included in the hedge assessment on interest rate swaptions and related
hedged items were immaterial.
Item 8. Financial Statements and Supplementary Data
126
The following table presents the carrying amounts of (1) assets designated and qualified as hedged items in fair value
hedges of interest rate risk and (2) the related cumulative hedge adjustment included in the carrying amount. The
Company had no fair value hedges of interest rate risk as of December 31, 2025 and 2024; therefore, the amounts
presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.
(In millions)
Carrying Amount of the Hedged
Assets/(Liabilities)(1)
Cumulative Amount of Fair Value
Hedging Adjustment Included in
the Carrying Amount of Hedged
Assets/(Liabilities)
2025
2024
2025
2024
Fixed maturity securities
$
1,238
$
1,294
$
121
$
137
(1) The balance includes hedging adjustment on discontinued hedging relationships of $121 in 2025 and $137 in 2024.
Net Investment Hedge
The Company's investment in Aflac Japan is affected by changes in the foreign exchange rate. To mitigate this exposure,
the Parent Company designated some of its Japanese yen-denominated liabilities (see Note 9) as non-derivative net
investment hedges and certain foreign currency forwards and options as derivative net investment hedges of the foreign
currency exchange risk associated with the Company's net investment in Aflac Japan.
The Company's net investment hedge was effective during the years ended December 31, 2025, 2024 and 2023.
Non-qualifying Strategies
The Company uses foreign currency swaps to economically hedge the foreign currency exchange risk associated with
certain investments denominated in other foreign currencies held by Aflac Japan.
For the Company's derivative instruments in consolidated VIEs that do not qualify for hedge accounting, changes in fair
value are reported in current earnings. The gain or loss in earnings includes amounts attributable to the derivatives in
those investment structures. While the change in fair value of the derivative instrument is reported in current earnings, the
change in the fair value of the available-for-sale securities associated with these instruments is included in accumulated
other comprehensive income.
The Company uses foreign currency forwards and options to economically hedge the foreign currency exchange risk
associated with certain U.S. dollar-denominated loan receivables held by Aflac Japan. These arrangements are not
designated as accounting hedges because the foreign currency remeasurement gains and losses associated with the
loan receivables substantially offsets gains and losses from foreign currency forwards in current period earnings.
Additionally, the Company uses foreign currency forwards to economically hedge the foreign currency exchange risk
associated with certain U.S. dollar-denominated available-for-sale securities and certain investments denominated in
other foreign currencies held by Aflac Japan.
The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on
certain variable-rate investments.
The Parent Company had cross-currency swap agreements related to certain of its U.S. dollar-denominated senior notes
to effectively convert interest and principal on the notes from U.S. dollar to Japanese yen. These swaps matured in 2025.
Changes in the fair value of these swaps were reported in earnings in the period where they occurred.
Item 8. Financial Statements and Supplementary Data
127
Impact of Derivatives and Hedging Instruments
The following table summarizes the impact to earnings and other comprehensive income (loss) from all derivatives and hedging instruments for the years ended
December 31.
2025
2024
2023
(In millions)
Net
Investment
Income
Net
Investment
Gains
(Losses)
Other
Comprehensive
Income (Loss)
Net
Investment
Income
Net
Investment
Gains
(Losses)
Other
Comprehensive
Income (Loss)
Net
Investment
Income
Net
Investment
Gains (Losses)
Other
Comprehensive
Income (Loss)
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE
$
(1)
$
(3)
$
8
$
(1)
$
(4)
$
2
$
(1)
$
(4)
$
5
Total cash flow hedges
(1)
(3) (1)
8
(1)
(4) (1)
2
(1)
(4) (1)
5
Fair value hedges:
Foreign currency options
0
0
(65)
Interest rate swaptions (2)
0
0
0
(1)
0
1
(1)
0
1
Total fair value hedges
0
0
0
(1)
0
1
(1)
(65)
1
Net investment hedge:
Non-derivative hedging
instruments
0
33
0
426
0
257
Foreign currency forwards
103
(80)
138
258
234
313
Foreign currency options
0
0
0
0
(5)
0
Total net investment hedge
103
(47)
138
684
229
570
Non-qualifying strategies:
Foreign currency swaps
0
2
4
Foreign currency swaps - VIE
(265)
(215)
(201)
Foreign currency forwards
(63)
17
(349)
Foreign currency options
(32)
(107)
(53)
Interest rate swaps
(35)
(194)
(88)
Forward bond purchase
commitment - VIE
0
0
(4)
Total non-qualifying strategies
(395)
(497)
(691)
Total
$
(1)
$
(295)
$
(39)
$
(2)
$
(363)
$ 687
$
(2)
$
(531)
$ 576
(1) Impact of cash flow hedges reported as net investment gains (losses) includes $4 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended
December 31, 2025, compared with $4 of losses during the years ended December 31, 2024 and 2023, respectively.
(2) Includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended December 31, 2025, compared with $1 of losses during the years ended
December 31, 2024 and 2023, respectively, related to fair value hedges excluded component. Impact shown net of effect of hedged items.
Item 8. Financial Statements and Supplementary Data
128
As of December 31, 2025, $4 million of deferred gains on derivative instruments recorded in accumulated other
comprehensive income are expected to be reclassified into earnings during the next 12 months.
Credit Risk Assumed through Derivatives
For the foreign currency swaps associated with the Company's VIE investments for which it is the primary beneficiary, the
Company bears the risk of loss due to counterparty default even though it is not a direct counterparty to those contracts.
The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of
its senior notes and subordinated debentures; foreign currency forwards; and foreign currency options, and therefore the
Company is exposed to credit risk in the event of nonperformance by the counterparties in those contracts. 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, 2025, all of the Company's derivative agreement counterparties were investment grade.
The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties
under International Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the
ISDA agreements also include Credit Support Annexes (CSAs) provisions, which generally provide for two-way collateral
postings at the first dollar of exposure. The Company mitigates the risk that counterparties to transactions might be unable
to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally
requiring that collateral be posted at the outset of the transaction. In addition, a significant portion of the derivative
transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of the
Company's financial strength rating. The actual amount of payments that the Company could be required to make
depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after
the time of the downgrade.
The Company also engages in OTC cleared derivative transactions through regulated central clearing counterparties.
These positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the
Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to these
derivatives.
Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the
counterparties. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were
in a net liability position by counterparty was approximately $861 million and $804 million as of December 31, 2025 and
2024, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on
December 31, 2025, the Company estimates that it would be required to post a maximum of $669 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. See the Offsetting tables below for
collateral posted or received as of the reported balance sheet dates.
Offsetting of Financial Instruments and Derivatives
Most of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the
net settlement of all derivative contracts between the Parent Company or its subsidiaries and the respective counterparty
in the event of default or upon the occurrence of certain termination events. Collateral support agreements with the master
netting arrangements generally provide that the Company will receive or pledge financial collateral at the first dollar of
exposure.
The Company has securities lending agreements with unaffiliated financial institutions that post collateral to the Company
in return for the use of its fixed maturity and public equity securities (see Note 3). When the Company has entered into
securities lending agreements with the same counterparty, the agreements generally provide for net settlement in the
event of default by the counterparty. This right of set-off allows the Company to keep and apply collateral received if the
counterparty failed to return the securities borrowed from the Company as contractually agreed.
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.
Item 8. Financial Statements and Supplementary Data
129
Offsetting of Financial Assets and Derivative Assets
2025
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
$
122
$
0
$
122
$
(1)
$
(34)
$
(84)
$
3
OTC - cleared
12
0
12
(12)
0
0
0
Total derivative
assets subject to a
master netting
agreement or
offsetting
arrangement
134
0
134
(13)
(34)
(84)
3
Derivative
assets not subject
to a master netting
agreement or
offsetting
arrangement
OTC - bilateral
45
45
45
Total derivative
assets not subject
to a master netting
agreement or
offsetting
arrangement
45
45
45
Total derivative
assets
179
0
179
(13)
(34)
(84)
48
Securities lending
and similar
arrangements
3,945
0
3,945
0
0
(3,945)
0
Total
$ 4,124
$
0
$ 4,124
$
(13)
$
(34)
$ (4,029)
$
48
Item 8. Financial Statements and Supplementary Data
130
2024
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
$
187
$
0
$
187
$
0
$
(45)
$ (135)
$
7
Total derivative
assets subject to a
master netting
agreement or
offsetting
arrangement
187
0
187
0
(45)
(135)
7
Derivative
assets not subject
to a master netting
agreement or
offsetting
arrangement
OTC - bilateral
53
53
53
Total derivative
assets not subject
to a master netting
agreement or
offsetting
arrangement
53
53
53
Total derivative
assets
240
0
240
0
(45)
(135)
60
Securities lending
and similar
arrangements
2,001
0
2,001
0
0
(2,001)
0
Total
$ 2,241
$
0
$ 2,241
$
0
$
(45)
$ (2,136)
$
60
Item 8. Financial Statements and Supplementary Data
131
Offsetting of Financial Liabilities and Derivative Liabilities
2025
Gross Amounts Not Offset
in Balance Sheet
(In millions)
Gross
Amount of
Recognized
Liabilities
Gross
Amount
Offset in
Balance
Sheet
Net Amount
of Liabilities
Presented in
Balance
Sheet
Financial
Instruments
Securities
Collateral
Cash
Collateral
Pledged
Net
Amount
Derivative
liabilities:
Derivative
liabilities subject
to a master netting
agreement or
offsetting
arrangement
OTC - bilateral
$
19
$
0
$
19
$
(1)
$
(17)
$
0
$
1
OTC - cleared
188
0
188
(12)
(24)
(151)
1
Total derivative
liabilities subject
to a master netting
agreement or
offsetting
arrangement
207
0
207
(13)
(41)
(151)
2
Derivative
liabilities not
subject to a
master netting
agreement or
offsetting
arrangement
OTC - bilateral
765
765
765
Total derivative
liabilities not
subject to a
master netting
agreement or
offsetting
arrangement
765
765
765
Total derivative
liabilities
972
0
972
(13)
(41)
(151)
767
Securities lending
and similar
arrangements
3,989
0
3,989
(3,945)
0
0
44
Total
$ 4,961
$
0
$ 4,961
$ (3,958)
$
(41)
$ (151)
$ 811
Item 8. Financial Statements and Supplementary Data
132
2024
Gross Amounts Not Offset
in Balance Sheet
(In millions)
Gross
Amount of
Recognized
Liabilities
Gross
Amount
Offset in
Balance
Sheet
Net Amount
of Liabilities
Presented in
Balance
Sheet
Financial
Instruments
Securities
Collateral
Cash
Collateral
Pledged
Net
Amount
Derivative
liabilities:
Derivative
liabilities subject
to a master netting
agreement or
offsetting
arrangement
OTC - cleared
$
329
$
0
$
329
$
0
$
0
$ (329)
$
0
Total derivative
liabilities subject
to a master netting
agreement or
offsetting
arrangement
329
0
329
0
0
(329)
0
Derivative
liabilities not
subject to a
master netting
agreement or
offsetting
arrangement
OTC - bilateral
604
604
604
Total derivative
liabilities not
subject to a
master netting
agreement or
offsetting
arrangement
604
604
604
Total derivative
liabilities
933
0
933
0
0
(329)
604
Securities lending
and similar
arrangements
2,037
0
2,037
(2,001)
0
0
36
Total
$ 2,970
$
0
$ 2,970
$ (2,001)
$
0
$ (329)
$ 640
For additional information on the Company's derivative and other financial instruments, see Notes 1, 3 and 5.
5.
FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. These two types of inputs create three valuation hierarchy levels, as follows:
•
Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets.
•
Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market
prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all
significant valuation inputs are observable in active markets.
•
Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active
market.
Item 8. Financial Statements and Supplementary Data
133
The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and
carried at fair value on a recurring basis as of December 31.
2025
(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
$ 13,921
$
686
$
0
$ 14,607
Municipalities
0
1,930
0
1,930
Mortgage- and asset-backed securities
0
2,072
2,294
4,366
Public utilities
0
6,298
876
7,174
Sovereign and supranational
0
383
19
402
Banks/financial institutions
0
9,235
9
9,244
Other corporate
0
26,239
159
26,398
Total fixed maturity securities
13,921
46,843
3,357
64,121
Equity securities
727
0
160
887
Other investments
1,373
0
0
1,373
Cash and cash equivalents
6,245
0
0
6,245
Other assets:
Foreign currency swaps
0
45
0
45
Foreign currency forwards
0
120
0
120
Interest rate swaps
0
14
0
14
Total other assets
0
179
0
179
Total assets
$ 22,266
$ 47,022
$ 3,517
$ 72,805
Liabilities:
Other liabilities:
Foreign currency swaps
$
0
$
765
$
0
$
765
Foreign currency forwards
0
18
0
18
Interest rate swaps
0
189
0
189
Total liabilities
$
0
$
972
$
0
$
972
Item 8. Financial Statements and Supplementary Data
134
2024
(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
$ 17,088
$
758
$
0
$ 17,846
Municipalities
0
2,034
0
2,034
Mortgage- and asset-backed securities
0
2,407
1,156
3,563
Public utilities
0
6,398
647
7,045
Sovereign and supranational
0
393
23
416
Banks/financial institutions
0
8,946
10
8,956
Other corporate
0
25,178
231
25,409
Total fixed maturity securities
17,088
46,114
2,067
65,269
Equity securities
639
0
157
796
Other investments
1,599
0
0
1,599
Cash and cash equivalents
6,229
0
0
6,229
Other assets:
Foreign currency swaps
0
55
0
55
Foreign currency forwards
0
185
0
185
Total other assets
0
240
0
240
Total assets
$ 25,555
$ 46,354
$ 2,224
$ 74,133
Liabilities:
Other liabilities:
Foreign currency swaps
$
0
$
604
$
0
$
604
Interest rate swaps
0
329
0
329
Total liabilities
$
0
$
933
$
0
$
933
Item 8. Financial Statements and Supplementary Data
135
The following tables present the carrying amount and fair value categorized by fair value hierarchy level for the
Company's financial instruments that are not carried at fair value as of December 31.
2025
(In millions)
Carrying
Value
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 held-to-maturity,
carried at amortized cost:
Fixed maturity securities:
Government and agencies
$ 15,459
$
14,696
$
131
$
0
$ 14,827
Municipalities
235
0
229
0
229
Public utilities
32
0
29
0
29
Sovereign and
supranational
378
0
375
0
375
Other corporate
16
0
16
0
16
Commercial mortgage and
other loans
9,765
0
0
9,617
9,617
Other investments (1)
28
0
28
0
28
Total assets
$ 25,913
$
14,696
$
808
$ 9,617
$ 25,121
Liabilities:
Other policyholders’ funds
$
5,445
$
0
$
0
$ 5,376
$ 5,376
Notes payable
(excluding leases)
8,330
0
7,167
682
7,849
Total liabilities
$ 13,775
$
0
$ 7,167
$ 6,058
$ 13,225
(1) Excludes policy loans of $210, equity method investments of $4,109, and REO of $902, at carrying value
Item 8. Financial Statements and Supplementary Data
136
2024
(In millions)
Carrying
Value
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 held-to-maturity,
carried at amortized cost:
Fixed maturity securities:
Government and agencies
$ 15,309
$ 15,916
$
143
$
0
$ 16,059
Municipalities
235
0
257
0
257
Public utilities
32
0
33
0
33
Sovereign and
supranational
374
0
405
0
405
Other corporate
16
0
18
0
18
Commercial mortgage and
other loans
10,869
0
0
10,653
10,653
Other investments (1)
39
0
39
0
39
Total assets
$ 26,874
$ 15,916
$
895
$ 10,653
$ 27,464
Liabilities:
Other policyholders’ funds
$ 5,460
$
0
$
0
$ 5,389
$ 5,389
Notes payable
(excluding leases)
7,402
0
6,352
675
7,027
Total liabilities
$ 12,862
$
0
$ 6,352
$ 6,064
$ 12,416
(1) Excludes policy loans of $203, equity method investments of $3,435, and REO of $682, at carrying value
Fair Value of Financial Instruments
Fixed maturity and equity securities
The fair values of the Company's public fixed maturity securities are generally based on prices provided by third-party
pricing vendors. The Company utilizes internally generated valuations or broker quotes for privately issued fixed maturity
securities or fixed maturity securities where there is no price available from a third-party pricing vendor.
The fair values of the Company's public equity securities are generally based on price quotes, including quoted market
prices readily available from independent public exchange markets or established security dealer associations. The
Company determines the fair values of privately issued equity securities using the following approaches or techniques:
•
price quotes and valuations from third-party pricing vendors,
•
in-house valuations, and
•
non-binding price quotes the Company obtains from outside brokers.
The pricing data and market quotes the Company obtains from outside sources, including third-party pricing services, are
reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and
assess the reasonableness of the pricing data with the provider. Additionally, the Company may compare the inputs to
relevant market indices and other performance measurements. Based on management's analysis, the valuation is
confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market
data. The Company has performed verification of the inputs and calculations in any valuation models, including
independent validations and back testing, to confirm that the valuations represent reasonable estimates of fair value. For
the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers
it uses.
For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor. The
models and associated processes and controls are executed by Company personnel.
Item 8. Financial Statements and Supplementary Data
137
These models are discounted cash flow valuation models but also use information from related markets, specifically public
bond markets and the credit default swap (CDS) market, to estimate expected cash flows. The models take into
consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-
specific loss adjusted credit curve using the most appropriate comparable security(ies) of the issuer and issuer-specific
CDS spreads. This credit curve is then used with the relevant recovery rates to estimate expected cash flows and
modeling of additional features, including illiquidity adjustments, if necessary, to price the security by discounting those
loss adjusted cash flows. 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.
Item 8. Financial Statements and Supplementary Data
138
The following tables present the pricing sources for the fair values of the Company's fixed maturity and equity securities
as of December 31.
2025
(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
$ 13,921
$
383
$
0
$ 14,304
Internal
0
303
0
303
Total government and agencies
13,921
686
0
14,607
Municipalities:
Third-party pricing vendor
0
1,706
0
1,706
Internal
0
224
0
224
Total municipalities
0
1,930
0
1,930
Mortgage- and asset-backed securities:
Third-party pricing vendor
0
1,824
0
1,824
Internal
0
248
0
248
Broker/other
0
0
2,294
2,294
Total mortgage- and asset-backed securities
0
2,072
2,294
4,366
Public utilities:
Third-party pricing vendor
0
3,660
0
3,660
Internal
0
2,638
0
2,638
Broker/other
0
0
876
876
Total public utilities
0
6,298
876
7,174
Sovereign and supranational:
Third-party pricing vendor
0
79
0
79
Internal
0
304
0
304
Broker/other
0
0
19
19
Total sovereign and supranational
0
383
19
402
Banks/financial institutions:
Third-party pricing vendor
0
5,605
0
5,605
Internal
0
3,630
5
3,635
Broker/other
0
0
4
4
Total banks/financial institutions
0
9,235
9
9,244
Other corporate:
Third-party pricing vendor
0
21,294
0
21,294
Internal
0
4,945
20
4,965
Broker/other
0
0
139
139
Total other corporate
0
26,239
159
26,398
Total securities available-for-sale
$ 13,921
$ 46,843
$
3,357
$ 64,121
Equity securities, carried at fair value:
Third-party pricing vendor
$
727
$
0
$
0
$
727
Internal
0
0
24
24
Broker/other
0
0
136
136
Total equity securities
$
727
$
0
$
160
$
887
Item 8. Financial Statements and Supplementary Data
139
2025
(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 held-to-maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third-party pricing vendor
$ 14,696
$
131
$
0
$ 14,827
Total government and agencies
14,696
131
0
14,827
Municipalities:
Third-party pricing vendor
0
229
0
229
Total municipalities
0
229
0
229
Public utilities:
Third-party pricing vendor
0
29
0
29
Total public utilities
0
29
0
29
Sovereign and supranational:
Third-party pricing vendor
0
188
0
188
Internal
0
187
0
187
Total sovereign and supranational
0
375
0
375
Other corporate:
Third-party pricing vendor
0
16
0
16
Total other corporate
0
16
0
16
Total securities held-to-maturity
$ 14,696
$
780
$
0
$ 15,476
Item 8. Financial Statements and Supplementary Data
140
2024
(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
$ 17,088
$
446
$
0
$ 17,534
Internal
0
312
0
312
Total government and agencies
17,088
758
0
17,846
Municipalities:
Third-party pricing vendor
0
1,791
0
1,791
Internal
0
243
0
243
Total municipalities
0
2,034
0
2,034
Mortgage- and asset-backed securities:
Third-party pricing vendor
0
2,352
0
2,352
Internal
0
55
37
92
Broker/other
0
0
1,119
1,119
Total mortgage- and asset-backed securities
0
2,407
1,156
3,563
Public utilities:
Third-party pricing vendor
0
3,628
0
3,628
Internal
0
2,770
0
2,770
Broker/other
0
0
647
647
Total public utilities
0
6,398
647
7,045
Sovereign and supranational:
Third-party pricing vendor
0
78
0
78
Internal
0
315
0
315
Broker/other
0
0
23
23
Total sovereign and supranational
0
393
23
416
Banks/financial institutions:
Third-party pricing vendor
0
4,975
0
4,975
Internal
0
3,971
5
3,976
Broker/other
0
0
5
5
Total banks/financial institutions
0
8,946
10
8,956
Other corporate:
Third-party pricing vendor
0
20,051
0
20,051
Internal
0
5,127
116
5,243
Broker/other
0
0
115
115
Total other corporate
0
25,178
231
25,409
Total securities available-for-sale
$ 17,088
$ 46,114
$
2,067
$ 65,269
Equity securities, carried at fair value:
Third-party pricing vendor
$
639
$
0
$
0
$
639
Internal
0
0
26
26
Broker/other
0
0
131
131
Total equity securities
$
639
$
0
$
157
$
796
Item 8. Financial Statements and Supplementary Data
141
2024
(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 held-to-maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third-party pricing vendor
$ 15,916
$
143
$
0
$ 16,059
Total government and agencies
15,916
143
0
16,059
Municipalities:
Third-party pricing vendor
0
257
0
257
Total municipalities
0
257
0
257
Public utilities:
Third-party pricing vendor
0
33
0
33
Total public utilities
0
33
0
33
Sovereign and supranational:
Third-party pricing vendor
0
198
0
198
Internal
0
207
0
207
Total sovereign and supranational
0
405
0
405
Other corporate:
Third-party pricing vendor
0
18
0
18
Total other corporate
0
18
0
18
Total securities held-to-maturity
$ 15,916
$
856
$
0
$ 16,772
The following is a discussion of the determination of fair value of the Company's remaining financial instruments.
Derivatives
The Company uses derivative instruments to manage the risk associated with certain assets. However, the derivative
instrument may not be classified in the same fair value hierarchy level as the associated asset. The significant inputs to
pricing derivatives are generally observable in the market or can be derived from observable market data. When these
inputs are observable, the derivatives are classified as Level 2.
The Company uses present value techniques to value non-option based derivatives. It also uses option pricing models to
value option based derivatives. Key inputs are as follows:
Instrument Type
Level 2
Interest rate derivatives
Swap yield curves
Basis curves
Interest rate volatility (1)
Foreign 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 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
The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are
classified as Level 2.
Item 8. Financial Statements and Supplementary Data
142
The Parent Company had cross-currency 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. These swaps matured in
March 2025. Their fair values were based on observable market inputs; therefore, they were classified as Level 2.
To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the
market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract,
the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange
since it maintains a daily margin to mitigate counterparties' credit risk. These derivatives are priced using observable
inputs, accordingly, they are classified as Level 2.
For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct
counterparty to the swap contracts. Nevertheless, the Company has full transparency into the contracts to properly value
the swaps for reporting purposes. For these derivatives, the Company utilizes valuation models developed by independent
valuation analytics providers. The models are market standard discounted cash flow models and all associated processes
and controls are executed by Company personnel. These models take into consideration any unique characteristics of the
derivatives in determining the appropriate valuation methodology to estimate expected cash flows. The fair values of these
swaps are based on observable market inputs and are classified as Level 2 within the fair value hierarchy.
For forward bond purchase commitments with VIEs, the fair value of the derivative is based on the difference in the fixed
purchase price and the current market value of the related bond prior to the settlement date. Since the bond is typically a
public bond with readily available pricing, the derivatives associated with the forward purchase commitment are classified
as Level 2 within the fair value hierarchy.
Commercial mortgage and other loans
Commercial mortgage and other loans include TREs, CMLs, MMLs and other loans. The Company's loan receivables do
not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are
determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or
floating-rate benchmark yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk.
The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore,
these investments are classified as Level 3 within the fair value hierarchy.
Other investments
Other investments includes short-term investments that are measured at fair value where amortized cost approximates
fair value.
Other policyholders' funds
The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan.
The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be
equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were
to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for
reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified
this valuation as Level 3.
Notes payable
The fair values of the Company's publicly issued notes payable are determined by utilizing available sources of
observable inputs from third-party pricing vendors and are classified as Level 2. The Company's private placement notes
payable are valued using the same internal models that the Company uses for its Japanese yen-denominated and U.S.
dollar-denominated private placement investment portfolio. The fair values for these private placements are deemed Level
2 valuations, as they are model-derived valuations that are generated internally with all significant valuation inputs being
observed in active markets. The fair values of the Company's Japanese yen-denominated loans approximate their
carrying values and are classified as Level 3.
Item 8. Financial Statements and Supplementary Data
143
Transfers between Hierarchy Levels and Level 3 Rollforward
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable
data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices
are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and
liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with
market observable data. This may be due to a significant increase in market activity, a specific event, or one or more
significant input(s) becoming observable.
The following tables present the changes in fair value of the Company's investments carried at fair value classified as
Level 3 as of December 31.
2025
Fixed Maturity Securities
Equity
Securities
(In millions)
Mortgage-
and
Asset-
Backed
Securities
Public
Utilities
Sovereign
and
Supranational
Banks/
Financial
Institutions
Other
Corporate
Total
Balance, beginning of period
$
1,156
$
647
$
23
$
10
$
231
$
157
$ 2,224
Net investment gains (losses) included
in earnings
1
1
0
0
(2)
(4)
(4)
Unrealized gains (losses) included in
other comprehensive income (loss)
24
29
0
(1)
5
0
57
Purchases, issuances, sales
and settlements:
Purchases
909
242
0
0
24
9
1,184
Issuances
0
0
0
0
0
0
0
Sales
0
1
0
0
(2)
(2)
(3)
Settlements
(153)
(44)
(4)
0
(2)
0
(203)
Transfers into Level 3
395
0
0
0
0
0
395
Transfers out of Level 3
(38)
0
0
0
(95)
0
(133)
Balance, end of period
$
2,294
$
876
$
19
$
9
$
159
$
160
$ 3,517
Changes in unrealized gains (losses)
relating to Level 3 assets and liabilities
still held at the end of the period
included in earnings
$
1
$
1
$
0
$
0
$
0
$
0
$
2
2024
Fixed Maturity Securities
Equity
Securities
(In millions)
Mortgage-
and
Asset-
Backed
Securities
Public
Utilities
Sovereign
and
Supranational
Banks/
Financial
Institutions
Other
Corporate
Total
Balance, beginning of period
$
772
$
253
$
30
$
78
$
648
$
248
$ 2,029
Net investment gains (losses) included
in earnings
3
1
0
0
0
(9)
(5)
Unrealized gains (losses) included in
other comprehensive income (loss)
2
(19)
(3)
(9)
(1)
0
(30)
Purchases, issuances, sales
and settlements:
Purchases
377
179
0
9
193
3
761
Issuances
0
0
0
0
0
0
0
Sales
0
0
0
0
0
(1)
(1)
Settlements
(93)
(33)
(4)
(9)
(4)
(84)
(227)
Transfers into Level 3
205
499
0
0
5
0
709
Transfers out of Level 3
(110)
(233)
0
(59)
(610)
0
(1,012)
Balance, end of period
$
1,156
$
647
$
23
$
10
$
231
$
157
$ 2,224
Changes in unrealized gains (losses)
relating to Level 3 assets and liabilities
still held at the end of the period
included in earnings
$
2
$
0
$
0
$
0
$
0
$
(10) $
(8)
Item 8. Financial Statements and Supplementary Data
144
Fair Value Sensitivity
Level 3 Significant Unobservable Input Sensitivity
The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments carried at fair value as of
December 31. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
2025
(In millions)
Fair Value
Valuation Technique(s)
Unobservable Input
Range
Weighted
Average
Assets:
Securities available-for-sale, carried at fair value:
Fixed maturity securities:
Mortgage- and asset-backed securities
$ 2,294
Consensus pricing
Offered quotes
88.75
-
106.70
(a)
100.42
Public utilities
876
Discounted cash flow
Credit spreads
100 bps
-
391 bps
(c)
163 bps
Sovereign and supranational
19
Consensus pricing
Offered quotes
N/A
(b)
N/A
Banks/financial institutions
9
Adjusted cost
Private financials
N/A
(d)
N/A
Other corporate
159
Discounted cash flow
Credit spreads
75 bps
-
384 bps
(c)
217 bps
Equity securities
160
Adjusted cost
Private financials
N/A
(d)
N/A
Total assets
$ 3,517
(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques
(b) 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
2024
(In millions)
Fair Value
Valuation Technique(s)
Unobservable Input
Range
Weighted
Average
Assets:
Securities available-for-sale, carried at fair value:
Fixed maturity securities:
Mortgage- and asset-backed securities
$ 1,156
Consensus pricing
Offered quotes
84.08
-
104.60
(a)
99.07
Public utilities
647
Discounted cash flow
Credit spreads
100 bps
-
375 bps
(c)
162 bps
Sovereign and supranational
23
Consensus pricing
Offered quotes
N/A
(b)
N/A
Banks/financial institutions
10
Adjusted cost
Private financials
N/A
(d)
N/A
Other corporate
231
Discounted cash flow
Credit spreads
91 bps
-
294 bps
(c)
173 bps
Equity securities
157
Adjusted cost
Private financials
N/A
(d)
N/A
Total assets
$ 2,224
(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques
(b) 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
Item 8. Financial Statements and Supplementary Data
145
The following is a discussion of the significant unobservable inputs or valuation techniques used in determining the fair
value of securities classified as Level 3.
Credit Spreads
The Company holds certain assets that are of a unique, specialized, and/or securitized nature that do not trade on a
regular basis in an active market, which makes their fair values difficult to estimate. Most of these assets are managed by
external asset managers and the Company utilizes these managers for their expertise when evaluating various inputs
used to determine the fair values for these assets, including identifying the appropriate credit or risk spread over risk-free
interest rates that incorporates the unique nature or structure of the asset in the valuations. For those assets of a similar
nature but not managed by external asset managers, the Company internally estimates the spreads and risk adjustments
over risk-free interest rates that reflect the unique nature or structure of the asset as well as the current pricing
environment and market conditions for comparable or related investments. Credit or risk spreads are an important input
needed to complete the discounted cash flow analyses used to estimate an investment’s fair value. Credit or risk spreads
underlying these fair values are a significant, unobservable input whose derivation is based on the Company’s evaluation
of a combination of the external manager’s expertise and knowledge, the current pricing environment, and market
conditions for the specific asset.
Offered Quotes
In circumstances where the Company's valuation model price is overridden because it implies a value that is not
consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company
also receives unadjusted prices from brokers for certain of its mortgage and asset-backed securities. These quotes are
non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an
unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial
institutions, certain other corporate, and equity securities investments.
Private Financials
The Company invests in the debt and equity securities of private companies operating in the cancer, healthtech, insurtech,
finance, internet of things, big data and analytics sectors. Due to their private and often small, startup nature, these
companies rely on capital provided by institutional and private equity investors for their ongoing operations. They do not
have public securities that trade on a regular basis in an active market, which makes their fair values difficult to estimate.
The Company values these investments on a cost basis with appropriate adjustments made based on monitoring private
financial information provided by these companies. Adjustments to valuations are generally made as new funding tranches
are executed or if the financial information provided significantly changes indicating the need for impairment. This private
financial information is unobservable and is a significant determinant in the fair value of these corporate venture
investments.
For additional information on the Company's investments and financial instruments, see Notes 1, 3 and 4.
Item 8. Financial Statements and Supplementary Data
146
6. DEFERRED POLICY ACQUISITION COSTS
The following tables present a rollforward of deferred policy acquisition costs by reporting segment and disaggregated by product type for the years ended
December 31.
2025
Aflac Japan
Aflac U.S.
(In millions)
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Total
Deferred policy acquisition costs:
Balance, beginning of year
$
2,776 $
1,833 $
441 $
52
$
915 $
636 $ 1,348 $
452 $
86 $
219 $
0
$ 8,758
Capitalization
357
85
33
3
137
127
162
90
13
98
0
1,105
Amortization expense
(188)
(99)
(33)
(3)
(143)
(122)
(155)
(79)
(12)
(40)
0
(874)
Foreign currency translation and
other
20
21
5
(1)
0
0
0
0
0
0
0
45
Balance, end of year
$
2,965 $
1,840 $
446 $
51
$
909 $
641 $ 1,355 $
463 $
87 $
277 $
0
$ 9,034
2024
Aflac Japan
Aflac U.S.
(In millions)
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Total
Deferred policy acquisition costs:
Balance, beginning of year
$
2,971 $
2,041 $
491 $
56
$
917 $
625 $ 1,336 $
436 $
86 $
172 $
1
$ 9,132
Capitalization
300
103
36
4
141
129
165
89
12
77
0
1,056
Amortization expense
(184)
(100)
(34)
(3)
(143)
(118)
(153)
(73)
(12)
(30)
(1)
(851)
Foreign currency translation and
other
(311)
(211)
(52)
(5)
0
0
0
0
0
0
0
(579)
Balance, end of year
$
2,776 $
1,833 $
441 $
52
$
915 $
636 $ 1,348 $
452 $
86 $
219 $
0
$ 8,758
Commissions deferred as a percentage of total acquisition costs deferred were 67% in 2025, compared with 69% in 2024 and 67% in 2023.
There were no changes to the inputs, judgments or methods used to determine amortization amounts during 2025 and 2024. 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 2025 and 2024.
The Company recognizes the effects of changes in assumptions prospectively over the remaining contract term as a revision of the future amortization pattern.
See Note 1 for additional information on deferred policy acquisition costs.
Item 8. Financial Statements and Supplementary Data
147
7. POLICY LIABILITIES
Future Policy Benefits
The following tables present the changes in the present value of expected future net premiums and the present value of
expected future policy benefits by reporting segment and disaggregated by product type for the years ended December
31. 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.
Item 8. Financial Statements and Supplementary Data
148
2025
Aflac Japan
Aflac U.S.
(In millions)
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Present value of expected future net premiums:
Balance at December 31, 2024
$ 14,184 $ 11,817 $
5,156 $
846
$
2,497 $
1,635 $
3,901 $
1,122 $
196 $
909 $ 826
Beginning balance at original discount rate
14,008
11,845
5,084
864
2,687
1,726
4,340
1,221
209
976
824
Effect of changes in cash flow assumptions
(661)
136
(40)
5
18
(22)
(163)
(8)
(10)
(5)
386
Effect of actual variances from expected
experience
(436)
(84)
(62)
(12)
21
20
(2)
16
(10)
(32)
146
Adjusted beginning of period balance
12,911
11,897
4,982
857
2,726
1,724
4,175
1,229
189
939 1,356
Issuances
1,114
253
405
9
295
341
488
211
50
246
571
Interest accrual
364
292
110
16
110
69
177
50
9
42
73
Net premiums collected (1)
(1,379)
(1,076)
(795)
(95)
(487)
(402)
(590)
(255)
(39)
(171)
(138)
Foreign currency translation
193
146
70
13
0
0
0
0
0
0
0
Other
(2)
(1)
0
0
(7)
(6)
(8)
(4)
(1)
(5)
(27)
Ending balance at original discount rate
13,201
11,511
4,772
800
2,637
1,726
4,242
1,231
208
1,051 1,835
Effect of changes in discount rate assumptions
(994)
(1,162)
(225)
(75)
(112)
(41)
(297)
(60)
(6)
(30)
133
Balance at December 31, 2025
$ 12,207 $ 10,349 $
4,547 $
725
$
2,525 $
1,685 $
3,945 $
1,171 $
202 $
1,021 $ 1,968
Present value of expected future policy benefits:
Balance at December 31, 2024
$ 40,781 $ 20,606 $ 24,265 $ 4,225
$
3,127 $
2,330 $ 10,701 $
1,897 $
441 $
1,847 $ 1,288
Beginning balance at original discount rate
37,856
21,957
26,330
4,765
3,386
2,466
12,013
2,073
477
2,126 1,293
Effect of changes in cash flow assumptions
(1,130)
108
(101)
74
47
(46)
(219)
(4)
(15)
(17)
399
Effect of actual variances from expected
experience
(483)
(102)
(61)
(21)
9
5
(15)
8
(13)
(53)
148
Adjusted beginning of period balance
36,243
21,963
26,168
4,818
3,442
2,425
11,779
2,077
449
2,056 1,840
Issuances
1,138
260
417
14
300
355
503
217
50
254
574
Interest accrual
1,299
564
569
91
138
99
515
87
20
87
97
Benefit payments
(2,723)
(1,044)
(1,753)
(218)
(532)
(478)
(985)
(310)
(61)
(109)
(207)
Foreign currency translation
481
236
315
53
0
0
0
0
0
0
0
Other
0
0
0
0
0
0
0
0
0
0
0
Ending balance at original discount rate
36,438
21,979
25,716
4,758
3,348
2,401
11,812
2,071
458
2,288 2,304
Effect of changes in discount rate assumptions
(1,451)
(4,287)
(4,822) (1,087)
(164)
(65)
(967)
(116)
(20)
(212)
140
Balance at December 31, 2025
34,987
17,692
20,894
3,671
3,184
2,336
10,845
1,955
438
2,076 2,444
Net liability for future policy benefits
22,780
7,343
16,347
2,946
659
651
6,900
784
236
1,055
476
Less: reinsurance recoverable
4,406
1,062
0
0
0
0
0
0
0
25
11
Net liability for future policy benefits after
reinsurance recoverable
$ 18,374 $
6,281 $ 16,347 $ 2,946
$
659 $
651 $
6,900 $
784 $
236 $
1,030 $ 465
(1) Net premiums collected represent the portion of gross premiums collected from policyholders that is used to fund expected future benefit payments.
Item 8. Financial Statements and Supplementary Data
149
2024
Aflac Japan
Aflac U.S.
(In millions)
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Present value of expected future net premiums:
Balance at December 31, 2023
$ 17,509 $ 14,697 $
6,488 $ 1,088
$
2,488 $
1,652 $
4,074 $
1,107 $
206 $
853 $ 277
Beginning balance at original discount rate
16,452
14,040
6,258
1,069
2,630
1,738
4,416
1,193
217
909
272
Effect of changes in cash flow assumptions
(625)
(154)
(190)
(19)
65
(47)
(106)
(21)
(17)
(5)
(8)
Effect of actual variances from expected
experience
(71)
(164)
(97)
(14)
66
12
(100)
21
(12)
(29)
13
Adjusted beginning of period balance
15,756
13,722
5,971
1,036
2,761
1,703
4,210
1,193
188
875
277
Issuances
983
361
478
16
307
364
543
231
52
226
592
Interest accrual
378
302
110
17
106
66
173
46
9
37
25
Net premiums collected (1)
(1,453)
(1,135)
(862)
(101)
(479)
(401)
(578)
(244)
(39)
(157)
(53)
Foreign currency translation
(1,655)
(1,405)
(613)
(104)
0
0
0
0
0
0
0
Other
(1)
0
0
0
(8)
(6)
(8)
(5)
(1)
(5)
(17)
Ending balance at original discount rate
14,008
11,845
5,084
864
2,687
1,726
4,340
1,221
209
976
824
Effect of changes in discount rate assumptions
176
(28)
72
(18)
(190)
(91)
(439)
(99)
(13)
(67)
2
Balance at December 31, 2024
$ 14,184 $ 11,817 $
5,156 $
846
$
2,497 $
1,635 $
3,901 $
1,122 $
196 $
909 $ 826
Present value of expected future policy benefits:
Balance at December 31, 2023
$ 50,161 $ 25,257 $ 29,731 $ 5,178
$
3,109 $
2,422 $ 11,290 $
1,943 $
478 $
1,764 $ 798
Beginning balance at original discount rate
43,626
25,023
30,256
5,444
3,302
2,541
12,120
2,076
506
1,971
769
Effect of changes in cash flow assumptions
(815)
(228)
(302)
(7)
109
(73)
(112)
(31)
(28)
(3)
(12)
Effect of actual variances from expected
experience
(117)
(193)
(110)
(24)
91
(16)
(144)
21
(16)
(43)
(7)
Adjusted beginning of period balance
42,694
24,602
29,844
5,413
3,502
2,452
11,864
2,066
462
1,925
750
Issuances
1,004
373
488
22
311
381
559
237
55
231
597
Interest accrual
1,356
570
582
93
133
98
515
84
20
78
50
Benefit payments
(2,773)
(1,033)
(1,510)
(208)
(560)
(465)
(925)
(314)
(60)
(108)
(104)
Foreign currency translation
(4,425)
(2,555)
(3,074)
(555)
0
0
0
0
0
0
0
Other
0
0
0
0
0
0
0
0
0
0
0
Ending balance at original discount rate
37,856
21,957
26,330
4,765
3,386
2,466
12,013
2,073
477
2,126 1,293
Effect of changes in discount rate assumptions
2,925
(1,351)
(2,065)
(540)
(259)
(136)
(1,312)
(176)
(36)
(279)
(5)
Balance at December 31, 2024
40,781
20,606
24,265
4,225
3,127
2,330
10,701
1,897
441
1,847 1,288
Net liability for future policy benefits
26,597
8,789
19,109
3,379
630
695
6,800
775
245
938
462
Less: reinsurance recoverable
5,085
1,245
0
0
0
0
0
0
0
18
0
Net liability for future policy benefits after
reinsurance recoverable
$ 21,512 $
7,544 $ 19,109 $ 3,379
$
630 $
695 $
6,800 $
775 $
245 $
920 $ 462
(1) Net premiums collected represent the portion of gross premiums collected from policyholders that is used to fund expected future benefit payments.
Item 8. Financial Statements and Supplementary Data
150
The following tables present the weighted-average interest rates and weighted-average liability duration (calculated using the original discount rate) by reporting
segment and disaggregated by product type as of December 31.
2025
Aflac Japan
Aflac U.S.
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Weighted-average interest, original discount rate (1)
3.8 %
2.5 %
2.1 %
1.8 %
4.1 %
4.4 %
4.5 %
4.5 %
4.3 %
3.9 %
5.5 %
Weighted-average interest, current discount rate (1)
3.1 %
3.6 %
2.8 %
3.4 %
5.2 %
5.0 %
5.4 %
5.3 %
5.2 %
5.3 %
5.4 %
Weighted-average liability duration (years)
12.3
22.9
16.2
16.2
7.8
5.6
10.8
9.0
7.5
13.5
8.6
(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.
2024
Aflac Japan
Aflac U.S.
Cancer
Medical
and Other
Health
Life
Insurance
Other
Accident
Disability
Critical
Care
Hospital
Indemnity
Dental/
Vision
Life
Insurance
Other
Weighted-average interest, original discount rate (1)
3.9 %
2.5 %
2.1 %
1.8 %
4.0 %
4.3 %
4.6 %
4.5 %
4.3 %
3.8 %
5.4 %
Weighted-average interest, current discount rate (1)
2.2 %
2.8 %
2.1 %
2.5 %
5.3 %
5.2 %
5.3 %
5.3 %
5.3 %
5.3 %
5.3 %
Weighted-average liability duration (years)
12.6
23.5
16.1
16.7
7.7
5.6
11.1
9.0
7.6
13.5
9.1
(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.
Item 8. Financial Statements and Supplementary Data
151
The following table presents a reconciliation of the disaggregated rollforwards above to the ending liability for future policy
benefits presented in the consolidated balance sheets as of December 31. The deferred profit liability for limited-payment
contracts and the deferred reinsurance gain liability are presented together with the liability for future policy benefits in the
consolidated balance sheets and have been included as reconciling items in the table below.
(In millions)
2025
2024
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer
$
22,780
$
26,597
Medical and other health
7,343
8,789
Life insurance
16,347
19,109
Other
2,946
3,379
Aflac U.S.
Accident
659
630
Disability
651
695
Critical care
6,900
6,800
Hospital indemnity
784
775
Dental/vision
236
245
Life insurance
1,055
938
Other
476
462
Corporate and other
4,317
5,072
Deferred profit liability
2,066
1,844
Deferred reinsurance gain liability
757
806
Intercompany eliminations (1)
(4,997)
(5,760)
Total
$
62,320
$
70,381
(1) Elimination entry necessary due to the internal reinsurance transactions with Aflac Re and to recapture a portion of policy liabilities
ceded externally as a result of the reinsurance retrocession transaction. See Note 8 for additional details.
There were no changes to the inputs, judgments or methods used in measuring the liability for future policy benefits in
2025 and 2024.
Discount Rate Methodology
The Company’s discount rate methodology involves constructing a current discount rate curve separately for discounting
cash flows used to calculate the Japan and U.S. LFPB, reflective of the characteristics of the insurance liabilities, such as
currency and tenor. Discount rates are updated each reporting period and require estimation techniques (e.g.,
interpolation, extrapolation) for determination of points on the curve for which there is limited or no observable market
data.
Discount rates are determined using upper-medium grade (low credit risk) fixed-income instrument yields that reflect the
duration characteristics of the liability. Locked-in discount rates are determined separately for each issue-year cohort as a
single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income
instrument forward curves in the calendar year, where the weights are the annualized premiums issued for each month of
the cohort. The single discount rate for each issue-year cohort is determined by solving for a rate that produces an
equivalent NPR to the forward curve and will remain unchanged after the calendar year of issue.
In the Aflac Japan segment, all long-duration insurance policies are denominated in Japanese yen. A significant portion of
policies are characterized by tenors exceeding the availability of liquid market data in Japan for single-A rated (as a proxy
for upper-medium grade) corporate Japanese yen-denominated debt. The discount rate curve is designed to prioritize the
observable inputs where available, while past the last liquid point, the data is derived based on estimation techniques
consistent with the fair value guidance in ASC 820. The Aflac Japan segment's curve utilizes liquid market indices tracking
publicly traded Japanese yen-denominated single-A corporate debt for the initial 10-year tenor. For the bonds within these
market indices where only local ratings are available, the Company prioritizes the bonds with local ratings that are
equivalent to a single-A rating based on international rating standards.
Item 8. Financial Statements and Supplementary Data
152
For the discount rates applicable to tenors for which the Japan single-A debt market is not liquid but there is sufficient
observable market data and/or the observable market data is available for similar instruments (between 10 and 30 years),
the Company estimates tenor-specific single-A credit spreads and applies them to risk-free government rates. Lastly, for
the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30
years), the discount curve is derived by extrapolation of risk-free rates beyond their last liquid point following the Smith-
Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate. The ultimate
forward rate is based on the economic value-based solvency regime, which is consistent with the International Association
of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (effective for Aflac Japan's 2025 fiscal year-end, which
is March 31, 2026), and is adjusted for credit and inflation components.
For the Aflac U.S. segment where all long-duration insurance policies are denominated in U.S. dollars and substantially all
have cash flow duration within 30 years, for which the U.S. upper-medium grade fixed-income market is liquid and
observable, the Company uses data from a liquid fixed-income market index tracking single-A U.S. corporate debt. For the
insignificant portion of the policies with cash flow tenors exceeding 30 years, the discount curve beyond that tenor is
extrapolated following the Smith-Wilson method from year 30 to the same ultimate forward rate calculated for the Japan
discount curve at year 60 and held constant thereafter. The use of the same ultimate rate for U.S. and Japan segments is
based on the assumption of long-term global economic convergence.
There were no changes to the methods used to determine the discount rates during the years ended December 31, 2025
and 2024.
Cash Flow Assumptions
Cash flow assumptions include (1) mortality, (2) morbidity and (3) termination or lapses.
Mortality rate assumptions are based on industry tables and adjusted for the Company's actual or expected experience.
These assumptions typically vary by age, gender, and other demographic characteristics such as smoking status.
Morbidity assumptions are based on the Company's internal data and consider emerging experience. These assumptions
are reflective of the coverage and benefits provided and generally vary by age, gender, duration, and any other material
policyholder characteristics. In cases where a calendar-year trend is significant, future cash flow projections may include a
trend adjustment.
In Japan, separate lapse assumptions are set based on actual or expected experience. These lapse and total termination
rate assumptions vary by line of business and with policyholder characteristics such as duration. In the U.S., the majority
of the future cash flows are modeled using total termination rates (which include both lapse and mortality) and are
adjusted for actual experience. Policy provisions, such as reaching premium paid-up status, are taken into account when
setting assumptions.
The Company evaluates actual experience compared with expected experience for cash flow assumptions each quarter.
•
In 2025 and 2024, the variance of actual experience from expected experience was primarily due to favorable
variances in morbidity assumptions as compared to actual experience.
The Company performs a more detailed review of its assumptions annually during the third quarter.
•
In 2025, the Company's annual assumption review process resulted in favorable changes largely due to favorable
morbidity assumptions in Japan and favorable morbidity and termination assumptions in the U.S.
•
In 2024, the Company's annual assumption review process resulted in favorable changes largely due to recent
favorable Japan morbidity experience.
Favorable morbidity experience has been reflected in the annual assumptions primarily due to lower utilization of certain
cancer benefits, including reduced hospitalizations and fewer first-occurrence claims influenced by COVID-19-related
behavioral changes. While recognizing ongoing uncertainty, management has reviewed these trends and incorporated
elements of the observed experience into its assumptions where considered appropriate.
Item 8. Financial Statements and Supplementary Data
153
The following table summarizes the amount of net earned premiums recognized in the consolidated statements of
earnings by reporting segment and disaggregated by product type for the years ended December 31.
(In millions)
2025
2024
2023
Net earned premiums:
Aflac Japan
Cancer
$ 3,405
$ 3,545
$ 4,063
Medical and other health
2,131
2,181
2,631
Life insurance
1,227
1,225
1,532
Other
129
134
149
Aflac U.S.
Accident
1,229
1,265
1,288
Disability
1,408
1,327
1,256
Critical care
1,763
1,763
1,749
Hospital indemnity
728
727
725
Dental/vision
207
202
214
Life insurance
683
565
475
Other
200
110
45
Corporate and other
806
680
400
Reinsurance ceded
(368)
(284)
(404)
Total
$ 13,548
$ 13,440
$ 14,123
The following table summarizes the amount of interest expense related to insurance contracts recognized in benefits and
claims, excluding reserve remeasurement in the consolidated statements of earnings by reporting segment and
disaggregated by product type for the years ended December 31.
(In millions)
2025
2024
2023
Interest expense:
Aflac Japan
Cancer
$
935
$
978
$ 1,061
Medical and other health
272
268
274
Life insurance
459
472
501
Other
75
76
80
Aflac U.S.
Accident
28
27
25
Disability
30
32
34
Critical care
338
342
345
Hospital indemnity
37
38
39
Dental/vision
11
11
13
Life insurance
45
41
37
Other
24
25
27
Total
$ 2,254
$ 2,310
$ 2,436
Item 8. Financial Statements and Supplementary Data
154
The following tables present the amount of expected future gross premiums and expected future policy benefits and
expenses (undiscounted and discounted at the current period discount rate) by reporting segment and disaggregated by
product type as of December 31. These tables are presented gross of internal and external ceded reinsurance.
Future gross premiums represent the expected amount of future premiums to be received. For limited-payment policies,
the premiums are collected over a shorter period than the policy term over which benefits are provided. As a result, once
the policy reaches premium paid-up status, the future gross premiums can be significantly less than the future benefit
payments. Further, benefits and expenses are generally greater in the later years of a policy. These are the primary
factors that result in future gross premiums lower than future benefit and expense payments for certain lines of business
of the Company.
2025
2024
(In millions)
Gross
Premiums
Benefits and
Expenses
Gross
Premiums
Benefits and
Expenses
Undiscounted expected future gross premiums
and expected future policy benefits and
expenses:
Aflac Japan
Cancer
$ 52,505
$
54,844
$ 51,712
$
56,881
Medical and other health
32,757
35,043
33,250
34,864
Life insurance
10,781
37,340
10,915
37,520
Other
1,351
6,419
1,477
6,479
Aflac U.S.
Accident
8,560
4,660
8,862
4,687
Disability
5,697
3,033
5,727
3,094
Critical care
19,182
19,971
19,624
20,340
Hospital indemnity
4,757
3,027
4,859
3,017
Dental/vision
1,081
657
1,118
679
Life insurance
3,326
3,948
2,966
3,559
Other
3,477
4,105
2,143
2,273
Total
$ 143,474
$
173,047
$ 142,653
$ 173,393
2025
2024
(In millions)
Gross
Premiums
Benefits and
Expenses
Gross
Premiums
Benefits and
Expenses
Discounted expected future gross premiums
and expected future policy benefits and
expenses:
Aflac Japan
Cancer
$ 36,796
$
34,987
$ 40,170
$
40,781
Medical and other health
22,239
17,692
25,171
20,606
Life insurance
8,625
20,894
9,367
24,265
Other
1,018
3,671
1,204
4,225
Aflac U.S.
Accident
6,002
3,184
6,057
3,127
Disability
4,478
2,336
4,404
2,330
Critical care
11,988
10,845
11,900
10,701
Hospital indemnity
3,333
1,955
3,312
1,897
Dental/vision
755
438
761
441
Life insurance
2,358
2,076
2,050
1,847
Other
2,105
2,444
1,290
1,288
Total
$ 99,697
$
100,522
$ 105,686
$
111,508
Loss expense as a result of NPR capping for the years ended December 31, 2025, 2024 and 2023 was immaterial.
Item 8. Financial Statements and Supplementary Data
155
Other Policyholders' Funds
As of December 31, 2025 and 2024, the largest component of the other policyholders' funds liability was the Company's
annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums.
The following table presents the changes in other policyholders’ funds for the years ended December 31.
(In millions)
2025
2024
Other policyholders' funds:
Fixed annuities account balance, beginning of period (1)
$
5,221
$
5,939
Premiums received
97
104
Transfers from WAYS conversions
307
249
Surrenders and withdrawals
(64)
(58)
Benefit payments
(513)
(446)
Interest credited
49
49
Foreign currency translation and other
55
(616)
Fixed annuities account balance, end of period
5,152
5,221
Other deposit type reserves
293
239
Total
$
5,445
$
5,460
(1) Aflac Japan fixed annuities
The following table presents other policyholders’ funds balances by range of guaranteed crediting rates as of December
31.
2025
2024
(In millions)
Range of Guaranteed
Minimum Crediting
Rates (2)
At
Guaranteed
Minimum
Cash
Surrender
Value
Range of Guaranteed
Minimum Crediting
Rates (2)
At
Guaranteed
Minimum
Cash
Surrender
Value
Fixed annuities (1)
0.5% - 2.2%
$5,152
$5,083
0.5% - 2.2%
$5,221
$5,150
(1) Aflac Japan fixed annuities
(2) Weighted-average crediting rate of 1.5% at December 31, 2025 and 2024.
Aflac Japan’s fixed annuities have guaranteed fixed crediting rates which results in the policyholders' funds balances
being sufficient to cover all guaranteed benefit amounts. The reserves are adequate to fully fund future benefits at any
given time.
See Note 1 for additional information on policy liabilities.
Item 8. Financial Statements and Supplementary Data
156
8. REINSURANCE
The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business,
primarily to provide additional capacity for future growth, optimize capital, limit losses, and minimize exposure to
significant risks. For each of its reinsurance agreements, the Company determines whether the agreement provides
indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards.
These reinsurance transactions are indemnity reinsurance agreements that do not relieve the Company from its
obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, the Company remains liable
for the reinsured claims.
The following table reconciles direct earned premiums, direct benefits and claims, excluding reserve remeasurement
gains and losses, and reserve remeasurement gains and losses to net amounts after the effect of reinsurance for the
years ended December 31.
(In millions)
2025
2024
2023
Earned premiums:
Direct
$ 13,760
$ 13,562
$ 14,318
Ceded
(368)
(284)
(404)
Assumed
156
162
209
Net earned premiums
$ 13,548
$ 13,440
$ 14,123
Benefits and claims, excluding reserve remeasurement:
Direct
$
8,174
$
8,098
$ 8,599
Ceded
(249)
(153)
(147)
Assumed
62
63
142
Benefits and claims, excluding reserve remeasurement
7,987
8,008
8,594
Reserve remeasurement (gains) losses:
Direct
(683)
(558)
(394)
Ceded
(11)
0
11
Reserve remeasurement (gains) losses
(694)
(558)
(383)
Total benefits and claims, net
$
7,293
$
7,450
$ 8,211
The Company reported a deferred reinsurance gain liability related to reinsurance transactions, which represents ceded
reserves in excess of consideration paid or consideration received in excess of assumed reserves. The remaining
consolidated deferred reinsurance gain liability of $125 million and $146 million as of December 31, 2025 and 2024,
respectively, is included in future policy benefits in the consolidated balance sheets and is being amortized over the
expected lives of the policies. The amortization is included in benefits and claims in the consolidated statements of
earnings.
The Company also reported a reinsurance recoverable with a remaining balance, net of allowance for credit losses of
$161 million and $163 million as of December 31, 2025 and 2024, respectively. As of both December 31, 2025 and 2024,
the related allowance for credit losses was $4 million. The allowance for credit losses is estimated using a PD / LGD
method and the key credit quality indicator is the credit rating of the Company’s significant reinsurance counterparties.
The Company uses external credit ratings focused on these reinsurers' financial strength and credit worthiness. As of
December 31, 2025, the Company's significant reinsurance counterparties were rated A+. The Company monitors these
credit ratings periodically, but not less frequently than quarterly.
Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. The inter-segment amounts
associated with these internal reinsurance transactions are eliminated in consolidation.
In October 2024, ALIJ entered into a coinsurance transaction whereby it ceded 30% of the liabilities associated with
certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $1.8 billion of reserves
associated with these policies. Approximately $1.7 billion of assets were transferred from ALIJ to Aflac Re as
consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial
statement impact on a consolidated basis, except for the effect of foreign currency accounting.
Item 8. Financial Statements and Supplementary Data
157
In December 2023, the Company entered into a novation agreement under which Aflac Re assumed the duties,
obligations and liabilities through reinsurance of business ALIJ previously ceded to an external reinsurer and recorded a
pretax loss of $151 million in 2023.
In October 2023, ALIJ entered into a coinsurance transaction whereby it ceded 30% of the liabilities associated with
certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $1.9 billion of reserves
associated with these policies. Approximately $1.7 billion of assets were transferred from ALIJ to Aflac Re as
consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial
statement impact on a consolidated basis, except for the effect of foreign currency accounting.
In January 2023, ALIJ entered into a coinsurance transaction whereby it ceded 28% of the liabilities associated with
certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $2.1 billion of reserves
associated with these policies. Approximately $1.9 billion of assets were transferred from ALIJ to Aflac Re as
consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial
statement impact on a consolidated basis, except for the effect of foreign currency accounting.
In January 2023, ALIJ also entered into an external coinsurance transaction to cede 1.5% of the liabilities associated with
the same cancer insurance policies and riders, in connection with which ALIJ transferred cash consideration to the
reinsurer.
9. NOTES PAYABLE AND LEASE OBLIGATIONS
A summary of notes payable and lease obligations as of December 31 follows:
Item 8. Financial Statements and Supplementary Data
158
(In millions)
2025
2024
1.125% senior sustainability notes due March 2026
$
400
$
399
2.875% senior notes due October 2026
299
299
3.60% senior notes due April 2030
995
994
6.90% senior notes due December 2039
221
221
6.45% senior notes due August 2040
255
255
4.00% senior notes due October 2046
394
394
4.750% senior notes due January 2049
542
542
Yen-denominated senior notes and subordinated debentures:
.300% senior notes paid September 2025 (principal amount ¥12.4 billion)
0
79
.932% senior notes due January 2027 (principal amount ¥60.0 billion)
382
378
1.048% senior notes due March 2029 (principal amount ¥13.0 billion)
83
81
1.075% senior notes due September 2029 (principal amount ¥33.4 billion)
213
211
.500% senior notes due December 2029 (principal amount ¥12.6 billion)
80
79
.550% senior notes due March 2030 (principal amount ¥13.3 billion)
85
84
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)
186
184
1.726% senior notes due October 2030 (principal amount ¥35.0 billion)
223
0
1.412% senior notes due March 2031 (principal amount ¥27.9 billion)
178
176
.633% senior notes due April 2031 (principal amount ¥30.0 billion)
191
189
.843% senior notes due December 2031 (principal amount ¥9.3 billion)
59
58
.750% senior notes due March 2032 (principal amount ¥20.7 billion)
131
130
1.990% senior notes due May 2032 (principal amount ¥18.2 billion)
116
0
1.320% senior notes due December 2032 (principal amount ¥21.1 billion)
134
133
2.003% senior notes due December 2032 (principal amount ¥23.4 billion)
149
0
.844% senior notes due April 2033 (principal amount ¥12.0 billion)
76
76
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)
97
95
1.682% senior notes due March 2034 (principal amount ¥7.7 billion)
49
48
1.600% senior notes due March 2034 (principal amount ¥18.3 billion)
116
115
.934% senior notes due December 2034 (principal amount ¥9.8 billion)
62
62
.830% senior notes due March 2035 (principal amount ¥10.6 billion)
67
66
2.320% senior notes due May 2035 (principal amount ¥38.3 billion)
245
0
2.369% senior notes due June 2035 (principal amount ¥9.5 billion)
60
0
1.740% senior notes due March 2036 (principal amount ¥15.0 billion)
95
94
1.039% senior notes due April 2036 (principal amount ¥10.0 billion)
64
63
1.594% senior notes due September 2037 (principal amount ¥6.5 billion)
41
41
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)
56
56
1.920% senior notes due March 2039 (principal amount ¥16.5 billion)
104
103
1.122% senior notes due December 2039 (principal amount ¥6.3 billion)
40
39
2.650% senior notes due May 2040 (principal amount ¥11.6 billion)
74
0
2.779% senior notes due June 2040 (principal amount ¥7.0 billion)
45
0
1.264% senior notes due April 2041 (principal amount ¥10.0 billion)
63
63
2.160% senior notes due March 2044 (principal amount ¥5.7 billion)
36
35
3.040% senior notes due May 2045 (principal amount ¥7.0 billion)
45
0
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)
379
375
1.560% senior notes due April 2051 (principal amount ¥20.0 billion)
127
125
2.144% senior notes due September 2052 (principal amount ¥12.0 billion)
76
75
1.958% subordinated bonds due December 2053 (principal amount ¥30.0 billion)
191
188
2.400% senior notes due March 2054 (principal amount ¥19.5 billion)
124
122
Yen-denominated loans:
Variable interest rate loan due August 2027 (1.08% in 2025 and .84% in 2024,
principal amount ¥11.7 billion)
75
74
Variable interest rate loan due August 2029 (1.18% in 2025 and .94% in 2024,
principal amount ¥25.3 billion)
161
160
Variable interest rate loan due August 2032 (1.33% in 2025 and 1.09% in 2024,
principal amount ¥70.0 billion)
446
441
Finance lease obligations payable through 2030
6
5
Operating lease obligations payable through 2049
73
91
Total notes payable and lease obligations
$
8,409
$
7,498
Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the
life of the notes.
Item 8. Financial Statements and Supplementary Data
159
In June 2025, the Parent Company issued four series of senior notes totaling ¥74.9 billion through a public debt offering
under its U.S. shelf registration statement. The first series, which totaled ¥35.0 billion, bears interest at a fixed rate of
1.726% per annum, payable semiannually, and will mature in October 2030. The second series, which totaled
¥23.4 billion, bears interest at a fixed rate of 2.003% per annum, payable semiannually, and will mature in December
2032. The third series, which totaled ¥9.5 billion, bears interest at a fixed rate of 2.369% per annum, payable
semiannually, and will mature in June 2035. The fourth series, which totaled ¥7.0 billion, bears interest at a fixed rate of
2.779% per annum, payable semiannually, and will mature in June 2040. These notes are redeemable at the Parent
Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as
specified in the indenture governing the terms of the issuance. In addition, the notes maturing in October 2030, December
2032, June 2035 and June 2040 are redeemable at the Parent Company's option, in whole or in part from time to time, on
or after July 18, 2030, September 14, 2032, December 5, 2034, and December 5, 2039, 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 May 2025, the Parent Company issued four series of senior notes totaling ¥75.1 billion through a private placement.
The first series, which totaled ¥18.2 billion, bears interest at a fixed rate of 1.990% per annum, payable semiannually, and
will mature in May 2032. The second series, which totaled ¥38.3 billion, bears interest at a fixed rate of 2.320% per
annum, payable semiannually, and will mature in May 2035. The third series, which totaled ¥11.6 billion, bears interest at
a fixed rate of 2.650% per annum, payable semiannually, and will mature in May 2040. The fourth series, which totaled
¥7.0 billion, bears interest at a fixed rate of 3.040% per annum, payable semiannually, and will mature in May 2045. These
notes are redeemable at the Parent Company's option (i) in whole at any time or (ii) in part from time to time in an amount
not less than 5% of the aggregate principal amount then outstanding of the notes to be redeemed.
In March 2024, the Parent Company issued five series of senior notes totaling ¥75.0 billion through a private placement.
The first series, which totaled ¥18.3 billion, bears interest at a fixed rate of 1.600% per annum, payable semiannually, and
will mature in March 2034. The second series, which totaled ¥15.0 billion, bears interest at a fixed rate of 1.740% per
annum, payable semiannually, and will mature in March 2036. The third series, which totaled ¥16.5 billion, bears interest
at a fixed rate of 1.920% per annum, payable semiannually, and will mature in March 2039. The fourth series, which
totaled ¥5.7 billion, bears interest at a fixed rate of 2.160% per annum, payable semiannually, and will mature in March
2044. The fifth series, which totaled ¥19.5 billion, bears interest at a fixed rate of 2.400% per annum, payable
semiannually, and will mature in March 2054. These notes are redeemable at the Parent Company's option (i) in whole at
any time or (ii) in part from time to time in an amount not less than 5% of the aggregate principal amount then outstanding
of the notes to be redeemed.
In March 2024, the Parent Company issued three series of senior notes totaling ¥48.6 billion through a public debt offering
under its U.S. shelf registration statement. The first series, which totaled ¥13.0 billion, bears interest at a fixed rate of
1.048% per annum, payable semiannually, and will mature in March 2029. The second series, which totaled ¥27.9 billion,
bears interest at a fixed rate of 1.412% per annum, payable semiannually, and will mature in March 2031. The third series,
which totaled ¥7.7 billion, bears interest at a fixed rate of 1.682% per annum, payable semiannually, and will mature in
March 2034. These notes are redeemable at the Parent Company’s option at any time, in whole but not in part, upon the
occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance. In
addition, the notes maturing in March 2029, March 2031 and March 2034 are redeemable at the Parent Company's
option, in whole or in part from time to time, on or after December 21, 2028, December 31, 2030 and September 21, 2033,
respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus
accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.
In December 2023, ALIJ issued ¥30.0 billion (par value) of subordinated bonds that will mature in December 2053. The
bonds bear interest at an initial rate of 1.958% per annum until December 5, 2028. Thereafter, the rate of interest of the
bonds will be reset every five years to a rate of interest equal to the then-current five-year JGB rate plus (i) 1.650% per
annum on and after the day immediately following December 5, 2028 to December 5, 2033, and (ii) 2.650% per annum on
and after the day immediately following December 5, 2033 to December 5, 2053. The bonds are redeemable, in whole but
not in part, (i) at any time upon the occurrence of certain regulatory or tax events, as specified in the indenture governing
the terms of the bonds or (ii) on each interest rate reset date on or after December 5, 2028.
Item 8. Financial Statements and Supplementary Data
160
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 semiannually, and will mature in September 2029. The second series, which totaled
¥21.1 billion, bears interest at a fixed rate of 1.320% per annum, payable semiannually, and will mature in December
2032. The third series, which totaled ¥6.5 billion, bears interest at a fixed rate of 1.594% per annum, payable
semiannually, and will mature in September 2037. The fourth series, which totaled ¥12.0 billion, bears interest at a fixed
rate of 2.144% per annum, payable semiannually, and will mature in September 2052. These notes are redeemable at the
Parent Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S.
taxation, as specified in the indenture governing the terms of the issuance. In addition, the notes maturing in 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 August 2022, the Parent Company renewed a senior term loan facility with a commitment amount totaling ¥107.0 billion.
The first tranche of the facility, which totaled ¥11.7 billion, bears interest at a rate per annum equal to the Tokyo interbank
market rate (TIBOR), or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2027.
The applicable margin ranges between .225% and .625%, depending on the Parent Company's debt ratings as of the date
of determination. The second tranche, which totaled ¥25.3 billion, bears interest at a rate per annum equal to TIBOR, or
alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2029. The applicable margin
ranges between .325% and .725%, depending on the Parent Company's debt ratings as of the date of determination. The
third tranche, which totaled ¥70.0 billion, bears interest at a rate per annum equal to TIBOR, or alternate TIBOR, if
applicable, plus the applicable TIBOR margin and will mature in August 2032. The applicable margin ranges
between .475% and 1.025%, depending on the Parent Company's debt ratings as of the date of determination.
In April 2021, the Parent Company issued five series of senior notes totaling ¥82.0 billion through a public debt offering
under its then existing U.S. shelf registration statement. The first series, which totaled ¥30.0 billion, bears interest at a
fixed rate of .633% per annum, payable semiannually, and will mature in April 2031. The second series, which totaled
¥12.0 billion, bears interest at a fixed rate of .844% per annum, payable semiannually, and will mature in April 2033. The
third series, which totaled ¥10.0 billion, bears interest at a fixed rate of 1.039% per annum, payable semiannually, and will
mature in April 2036. The fourth series, which totaled ¥10.0 billion, bears interest at a fixed rate of 1.264% per annum,
payable semiannually, and will mature in April 2041. The fifth series, which totaled ¥20.0 billion, bears interest at a fixed
rate of 1.560% per annum, payable semiannually, and will mature in April 2051. The notes are redeemable at the Parent
Company’s option (i) at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation,
as specified in the indenture governing the terms of the issuance or (ii) on or after the date that is six months prior to the
stated maturity date of the series, in whole or in part, at a redemption price equal to the aggregate principal amount to be
redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of
redemption.
In March 2021, the Parent Company issued $400 million of senior sustainability notes through a U.S. public debt offering.
The notes bear interest at a fixed rate of 1.125% per annum, payable semiannually, and will mature in March 2026. The
Company intends, but is not contractually committed, to allocate an amount at least equivalent to the net proceeds from
this issuance exclusively to existing or future investments in, or financing of, assets, businesses or projects that meet the
eligibility criteria of the Company's sustainability bond framework described in the offering documentation in connection
with such notes. These notes are redeemable at the Parent Company's option in whole at any time or in part from time to
time at a redemption price equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii)
the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on
the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date,
discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S. Treasury security with a
maturity comparable to the remaining term of the notes, plus 10 basis points, plus in each case, accrued and unpaid
interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.
Item 8. Financial Statements and Supplementary Data
161
In April 2020, the Parent Company issued $1.0 billion of senior notes through a U.S. public debt offering. The notes bear
interest at a fixed rate of 3.60% per annum, payable semiannually, and will mature in April 2030. These notes are
redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal
to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the
present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not
including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date
on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining
term of the notes, plus 45 basis points, plus in each case, accrued and unpaid interest on the principal amount of the
notes to be redeemed to, but excluding, such redemption date.
In March 2020, the Parent Company issued four series of senior notes totaling ¥57.0 billion through a public debt offering
under its then existing U.S. shelf registration statement. The first series, which totaled ¥12.4 billion, bore interest at a fixed
rate of .300% per annum, payable semiannually, and matured in September 2025. The second series, which totaled
¥13.3 billion, bears interest at a fixed rate of .550% per annum, payable semiannually, and will mature in March 2030. The
third series, which totaled ¥20.7 billion, bears interest at a fixed rate of .750% per annum, payable semiannually and will
mature in March 2032. The fourth series, which totaled ¥10.6 billion, bears interest at a fixed rate of .830% per annum,
payable semiannually, and will mature in March 2035. These notes may only be redeemed before maturity, in whole but
not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the
terms of the issuance. In September 2025, the Parent Company extinguished ¥12.4 billion of .300% senior notes upon
their maturity.
In December 2019, the Parent Company issued four series of senior notes totaling ¥38.0 billion through a public debt
offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥12.6 billion, bears interest
at a fixed rate of .500% per annum, payable semiannually, and will mature in December 2029. The second series, which
totaled ¥9.3 billion, bears interest at a fixed rate of .843% per annum, payable semiannually, and will mature in December
2031. The third series, which totaled ¥9.8 billion, bears interest at a fixed rate of .934% per annum, payable semiannually,
and will mature in December 2034. The fourth series, which totaled ¥6.3 billion, bears interest at a fixed rate of 1.122%
per annum, payable semiannually, and will mature in December 2039. The notes are redeemable at the Parent
Company’s option (i) at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation,
as specified in the indenture governing the terms of the issuance or (ii) on or after the date that is six months prior to the
stated maturity date of the series, in whole or in part, at a redemption price equal to the aggregate principal amount to be
redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of
redemption.
In October 2018, the Parent Company issued $550 million of senior notes through a U.S. public debt offering. The notes
bear interest at a fixed rate of 4.750% per annum, payable semiannually, and will mature in January 2049. These notes
are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price
equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum
of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not
including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date
on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining
term of the notes, plus 25 basis points, plus in each case, accrued and unpaid interest on the principal amount of the
notes to be redeemed to, but excluding, such redemption date.
In October 2018, the Parent Company issued three series of senior notes totaling ¥53.4 billion through a public debt
offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥29.3 billion, bears interest
at a fixed rate of 1.159% per annum, payable semiannually, and will mature in October 2030. The second series, which
totaled ¥15.2 billion, bears interest at a fixed rate of 1.488% per annum, payable semiannually, and will mature in October
2033. The third series, which totaled ¥8.9 billion, bears interest at a fixed rate of 1.750% per annum, payable
semiannually, and will mature in October 2038. These notes may only be redeemed before maturity, in whole but not in
part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of
the issuance.
Item 8. Financial Statements and Supplementary Data
162
In October 2017, the Parent Company issued ¥60.0 billion of subordinated debentures through a U.S. public debt offering.
The debentures bear interest at an initial rate of 2.108% per annum through October 22, 2027, or earlier redemption.
Thereafter, the rate of interest of the debentures will be reset every five years to a rate of interest equal to the then-current
Japanese yen 5-year Swap Offered Rate plus 205 basis points. The debentures are payable semiannually in arrears and
will mature in October 2047. The debentures are redeemable (i) at any time, in whole but not in part, upon the occurrence
of certain tax events or certain rating agency events, as specified in the indenture governing the terms of the debentures
or (ii) on or after October 23, 2027, in whole or in part, at a redemption price equal to their principal amount plus accrued
and unpaid interest to, but excluding, the date of redemption.
In January 2017, the Parent Company issued ¥60.0 billion of senior notes through a U.S. public debt offering. The notes
bear interest at a fixed rate of .932% per annum, payable semiannually, and will mature in January 2027. These notes
may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S.
taxation, as specified in the indenture governing the terms of the issuance.
In September 2016, the Parent Company issued two series of senior notes totaling $700 million through a U.S. public debt
offering. The first series, which totaled $300 million, bears interest at a fixed rate of 2.875% per annum, payable
semiannually and will mature in October 2026. The second series, which totaled $400 million, bears interest at a fixed rate
of 4.00% per annum, payable semiannually, and will mature in October 2046.
In 2010 and 2009, the Parent Company issued senior notes through U.S. public debt offerings; the details of these notes
are as follows. In August 2010, the Parent Company issued $450 million of senior notes that will mature in August 2040. In
December 2009, the Parent Company issued $400 million of senior notes that will mature in December 2039. These
senior notes pay interest semiannually and are redeemable at the Parent Company's option in whole at any time or in part
from time to time at a redemption price equal to the greater of: (i) the principal amount of the notes or (ii) the present value
of the remaining scheduled payments of principal and interest to be redeemed, discounted to the redemption date, plus
accrued and unpaid interest. In December 2016, the Parent Company completed a tender offer in which it extinguished
$176 million principal of its 6.90% senior notes due December 2039 and $193 million principal of its 6.45% senior notes
due August 2040. The pretax loss due to the early redemption of these notes was $137 million.
For the Company's Japanese yen-denominated notes and loans, the principal amount as stated in dollar terms will
fluctuate from period to period due to changes in the yen/dollar exchange rate. The Company has designated the majority
of its Japanese yen-denominated notes payable as a non-derivative hedge of the foreign currency exposure of the
Company's investment in Aflac Japan.
The aggregate contractual maturities of notes payable during each of the years after December 31, 2025, are as follows:
(In millions)
2026
$ 700
2027
458
2028
0
2029
539
2030
1,496
Thereafter
5,185
Total
$ 8,378
Interest expense related to the Company's notes payable, which is included in interest expense in the consolidated
statements of earnings, was $217 million, $194 million and $190 million for the years ended December 31, 2025, 2024
and 2023, respectively.
Operating lease costs, included in insurance and other expenses in the consolidated statements of earnings, were $42
million, $43 million and $49 million for the years ended December 31, 2025, 2024 and 2023, respectively. Operating cash
outflows for operating leases were $42 million, $41 million and $48 million for the years ended December 31, 2025, 2024
and 2023, respectively.
Item 8. Financial Statements and Supplementary Data
163
Senior Note Facility Agreements
In August 2025, the Parent Company entered into two separate facility agreements: a 10-year facility agreement (2035
Facility Agreement) with a Delaware trust (2035 Trust) and a 30-year facility agreement (2055 Facility Agreement) with a
Delaware trust (2055 Trust). In connection with these transactions, the trusts issued and sold pre-capitalized trust
securities in private placements and invested the proceeds in a portfolio of principal and/or interest strips of U.S. Treasury
securities (the Strips). These trusts are an off-balance sheet funding arrangement.
The 2035 Facility Agreement provides the Parent Company the right to issue and sell to the 2035 Trust from time to time
up to $1.0 billion of 5.251% senior notes due August 2035 in exchange for a corresponding amount of the Strips held by
the 2035 Trust. In return, the Parent Company agreed to pay a semiannual facility fee to the 2035 Trust at a rate of
0.9875% per annum applied to the unexercised amount of senior notes that the Parent Company could issue and sell to
the 2035 Trust.
The 2055 Facility Agreement provides the Parent Company the right to issue and sell to the 2055 Trust from time to time
up to $1.0 billion of 5.991% senior notes due August 2055 in exchange for a corresponding amount of the Strips held by
the 2055 Trust. In return, the Parent Company agreed to pay a semiannual facility fee to the 2055 Trust at a rate of
1.1218% per annum applied to the unexercised amount of senior notes that the Parent Company could issue and sell to
the 2055 Trust.
The Parent Company can redeem the senior notes at any time, in whole or in part, by returning the Strips to the trusts or
by delivering cash at a redemption price equal to the greater of the principal amount or a make-whole redemption price, in
each case plus accrued and unpaid interest to, but excluding, the date of redemption. As of December 31, 2025, the
Parent Company had no senior note issuances under these facility agreements.
Item 8. Financial Statements and Supplementary Data
164
A summary of the Company's lines of credit as of December 31, 2025 follows:
Aflac Incorporated
and Aflac
uncommitted
bilateral
364 days
December 4,
2026
$100 million
$0 million
The rate quoted by the bank and agreed
upon at the time of borrowing
Up to 3 months
None
General
corporate
purposes
Aflac Incorporated
unsecured
revolving
5 years
May 13,
2030, or the
date
commitments
are terminated
pursuant to an
event of default ¥100.0 billion
¥0.0 billion
A rate per annum equal to, at the
Company's option, either (a) TIBOR plus an
applicable margin or (b) an alternative
TIBOR based on the rate offered by the
agent to major banks in yen for the
applicable period plus an applicable margin
No later than
May 14, 2030
.28% to .45%,
depending on
the Parent
Company's debt
ratings as of the
date of
determination
General
corporate
purposes,
including a
capital
contingency
plan for the
operations of
the Parent
Company
Aflac Incorporated
and Aflac
unsecured
revolving
5 years
November 15,
2027, or the
date
commitments
are terminated
pursuant to an
event of default $1.0 billion
$0.0 billion
A rate per annum equal to, at the
Company's option, either, (a) Secured
Overnight Financing Rate (SOFR) for U.S.
dollar-denominated borrowings or TIBOR
for Japanese yen-denominated borrowings,
in either case adjusted for certain costs, or
(b) a base rate determined by reference to
the highest of (1) the federal funds rate plus
1/2 of 1%, (2) the rate of interest for such
day announced by the agent as its prime
rate, or (3) SOFR for an interest period of
one month plus 1.00%, in each case plus
an applicable margin
No later than
November 15, 2027
.08% to
.20%,
depending on
the Parent
Company's debt
ratings as of the
date of
determination
General
corporate
purposes,
including a
capital
contingency
plan for the
operations of
the Parent
Company
Aflac Incorporated
and Aflac
uncommitted
bilateral
None
specified
None specified
$50 million
$0 million
A rate per annum equal to, at the Parent
Company's option, either (a) a rate
determined by reference to SOFR for the
interest period relevant to such borrowing or
(b) the base rate determined by reference
to the highest of (1) the lender's U.S. dollar
short-term commercial loan rate and (2) the
federal funds rate plus 1/2 of 1%
Up to 3 months
None
General
corporate
purposes
Aflac(1)
uncommitted
revolving
364 days
November 30,
2026
$250 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
75 basis points per annum
No later than
December 1, 2026
None
General
corporate
purposes
Aflac Incorporated(1)
(Tranche 1)
uncommitted
revolving
364 days
November 25,
2026
¥50.0 billion
¥0.0 billion
Three-month Japanese yen TIBOR plus 75
basis points per annum
No later than
November 27, 2026 None
General
corporate
purposes
Aflac Incorporated(1)
(Tranche 2)
uncommitted
revolving
364 days
November 25,
2026
¥50.0 billion
¥0.0 billion
Three-month Japanese yen TIBOR plus 75
basis points per annum
No later than
November 27, 2026 None
General
corporate
purposes
Aflac New York(1)
uncommitted
revolving
364 days
December 1,
2026
$25 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
75 basis points per annum
No later than
December 2, 2026
None
General
corporate
purposes
CAIC(1)
uncommitted
revolving
364 days
December 1,
2026
$15 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
75 basis points per annum
No later than
December 2, 2026
None
General
corporate
purposes
Borrower(s)
Type
Term
Expiration
Date
Capacity
Amount
Outstanding
Interest Rate on Borrowed Amount
Maturity Period
Commitment
Fee
Business
Purpose
(1) Intercompany credit agreement
(continued)
Item 8. Financial Statements and Supplementary Data
165
Borrower(s)
Type
Term
Expiration
Date
Capacity
Amount
Outstanding
Interest Rate on Borrowed Amount
Maturity Period
Commitment
Fee
Business
Purpose
TOIC(1)
uncommitted
revolving
364 days
December 1,
2026
$0.3 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
75 basis points per annum
No later than
December 2, 2026
None
General
corporate
purposes
Aflac GI Holdings
LLC(1)
uncommitted
revolving
364 days
December 1,
2026
$30 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
75 basis points per annum
No later than
December 2, 2026
None
General
corporate
purposes
Aflac Incorporated(1)
uncommitted
revolving
364 days
December 1,
2026
$400 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
97 basis points per annum for U.S. dollar-
denominated borrowings or three-month
TIBOR plus 97 basis points per annum for
Japanese yen-denominated borrowings
No later than
December 2, 2026
None
General
corporate
purposes
Aflac Re(1)
uncommitted
revolving
364 days
December 1,
2026
$400 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
68 basis points per annum for U.S. dollar-
denominated borrowings or three-month
TIBOR plus 68 basis points per annum for
Japanese yen-denominated borrowings
No later than
December 2, 2026
None
General
corporate
purposes
Aflac Asset
Management LLC(1)
uncommitted
revolving
364 days
December 1,
2026
$25 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
68 basis points per annum for U.S. dollar-
denominated borrowings or three-month
TIBOR plus 68 basis points per annum for
Japanese yen-denominated borrowings
No later than
December 2, 2026
None
General
corporate
purposes
Aflac Global Ventures
LLC(1)
uncommitted
revolving
364 days
December 1,
2026
$2 million
$0 million
Three-month term SOFR plus a 10 basis
point SOFR adjustment and an additional
68 basis points per annum for U.S. dollar-
denominated borrowings or three-month
TIBOR plus 68 basis points per annum for
Japanese yen-denominated borrowings
No later than
December 2, 2026
None
General
corporate
purposes
(1) Intercompany credit agreement
The Company was in compliance with all of the covenants of its notes payable and lines of credit at December 31, 2025. No events of default or defaults occurred
during 2025 and 2024.
Item 8. Financial Statements and Supplementary Data
166
10. INCOME TAXES
The components of pretax earnings for the year ended December 31, 2025 were as follows:
(In millions)
Foreign
U.S.
Total
2025:
Pretax earnings
$ 3,321
$ 1,212
$ 4,533
The Company elected a prospective implementation for the adoption of ASU 2023-09 Income Taxes (Topic 740). See Note
1 for additional information.
The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as
follows:
(In millions)
Foreign
U.S.
Total
2025:
Current
$
785
$
330
$ 1,115
Deferred
217
(445)
(228)
Total income tax expense
$ 1,002
$
(115)
$
887
2024:
Current
$ 1,196
$
134
$ 1,330
Deferred
159
(515)
(356)
Total income tax expense
$ 1,355
$
(381)
$
974
2023:
Current
$ 1,275
$
388
$ 1,663
Deferred
(160)
(900)
(1,060)
Total income tax expense
$ 1,115
$
(512)
$
603
The Japan income tax rate for the fiscal years 2025, 2024 and 2023 was 28.0%. The Japan income tax rate will increase
to 28.9% beginning April 1, 2026. The Bermuda corporate income tax rate for the 2025 fiscal year was 15%.
Aflac Japan holds certain U.S. dollar-denominated assets in a Delaware Statutory Trust (DST). These assets are mostly
comprised of various U.S. dollar-denominated commercial mortgage loans. The functional currency of the DST for U.S.
tax purposes was historically the Japanese yen. In 2022, the Company requested a change in tax accounting method
through the Internal Revenue Service's automatic consent procedures to change the functional currency of the DST for
U.S. tax purposes to the U.S. dollar. As a result, foreign currency translation gains or losses on assets held in the DST are
no longer recognized for U.S. tax purposes. The non-taxable foreign currency translation gain/loss resulting from the
method change resulted in the Company recognizing an income tax expense of $23 million in 2025. The Company
recognized an income tax benefit of $208 million in 2024 and $174 million in 2023.
Income tax expense in the accompanying consolidated statements of earnings varies from the amount computed by
applying the expected U.S. tax rate of 21% to pretax earnings.
Item 8. Financial Statements and Supplementary Data
167
The principal reasons for the differences and the related tax effects for the year ended December 31, 2025 were as
follows:
(In millions)
2025
Income taxes based on U.S. statutory rates
$ 952 21.0 %
Domestic federal reconciling items:
Tax credits
Solar tax credits
(54) (1.2)
Other tax credits
(41)
(.9)
Nontaxable and nondeductible items
DST functional currency change
23
.5
Other nontaxable and nondeductible items, net
23
.5
Effects of cross-border tax laws
U.S. effects of foreign branch
(184) (4.0)
Changes in tax law
(112) (2.5)
Other, net
(19)
(.4)
Foreign reconciling items:
Japan:
Japan federal rate differential
69
1.5
Japan local rate differential
151
3.3
Changes in tax law
112
2.5
Other foreign tax effects, Japan
3
.1
Bermuda:
Bermuda corporate income tax credit
(26)
(.6)
Bermuda rate differential
(10)
(.2)
Income tax expense
$ 887 19.6 %
For the year ended December 31, 2025, applicable U.S. state income taxes were immaterial.
The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:
(In millions)
2024
2023
Income taxes based on U.S. statutory rates
$ 1,348
$ 1,105
DST functional currency change
(208)
(174)
Solar and historic tax credits, net of amortization
(164)
(348)
Other, net
(2)
20
Income tax expense
$ 974
$ 603
Item 8. Financial Statements and Supplementary Data
168
(In millions)
2025
2024
2023
Statements of earnings
$
887
$
974
$ 603
Other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) during
period
(6)
160
140
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity
securities during period
(489)
(265)
520
Reclassification adjustment for (gains) losses
on fixed maturity securities included in net earnings
(1)
(41)
(35)
Unrealized gains (losses) on derivatives during period
2
1
1
Effect of changes in discount rate assumptions during period
1,603
1,214
(122)
Pension liability adjustment during period
21
5
7
Total income tax expense (benefit) related to items of
other comprehensive income (loss)
1,130
1,074
511
Total income taxes
$ 2,017
$ 2,048
$ 1,114
The components of income taxes paid, net of refunds received for the year ended December 31, 2025 were as follows:
(In millions)
2025
U.S. federal
$
104
Foreign:
Japan federal
970
Other foreign taxes
91
Total income taxes paid, net of refunds
$ 1,165
The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of
December 31 were as follows:
(In millions)
2025
2024
Deferred income tax liabilities:
Deferred policy acquisition costs
$ 2,695
$ 2,637
Unrealized gains and other basis differences on investments
0
615
Foreign currency gain on Aflac Japan
0
1
Premiums receivable
36
43
Policy benefit reserves
6,585
2,509
Other
237
54
Total deferred income tax liabilities
9,553
5,859
Deferred income tax assets:
Unfunded retirement benefits
4
4
Other accrued expenses
40
32
Policy and contract claims
504
514
Foreign currency loss on Aflac Japan
7
0
Deferred compensation
0
31
Depreciation
295
255
Anticipatory foreign tax credit
4,966
3,262
Deferred foreign tax credit and carryforward
1,098
1,428
Unrealized losses and other basis differences in investments
1,360
0
Total deferred income tax assets
8,274
5,526
Net deferred income tax (asset) liability
1,279
333
Current income tax (asset) liability
89
240
Total income tax liability
$ 1,368
$
573
Item 8. Financial Statements and Supplementary Data
169
The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a
valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be
realized. The Company has determined no valuation allowance against its anticipatory foreign tax credits is necessary.
The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan
deferred tax liabilities in the future. Deferred foreign tax credits are foreign tax credits generated in the current tax year by
the Japanese life company, but are unable to be utilized until 2026 due to Japan's current tax year not closing until March
31, 2026. Based upon a review of the Company's anticipated future taxable income, and including all other available
evidence, both positive and negative, the Company's management has concluded that it is more likely than not that all
other deferred tax assets will be realized.
Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income
each year. For current U.S. income tax purposes, as of December 31, 2025, there were non-life operating loss
carryforwards of $26 million available to offset against future taxable income, which expire after December 31, 2040, and
there were life operating loss carryforwards available to offset against future taxable income of $106 million, which do not
expire. The Company has no capital loss carryforwards available to offset capital gains. The Company has a foreign tax
credit carryforward of $296 million as of December 31, 2025, which expires after December 31, 2034.
The Company files federal income tax returns in the U.S., Japan, and Bermuda as well as state or prefecture income tax
returns in various jurisdictions in the two countries. The 2023 U.S. federal consolidated tax return is currently under
examination. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax
returns for years before 2022 are no longer subject to examination. Japan corporate income tax returns for years before
the tax year ended March 2023 are no longer subject to examination. Management believes it has established adequate
tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's
consolidated financial statements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended
December 31:
(In millions)
2025
2024
Balance, beginning of year
$
0
$
1
Reductions for tax positions of prior years
0
(1)
Balance, end of year
$
0
$
0
Included in the balance of the liability for unrecognized tax benefits at December 31, 2025 and 2024, were no tax positions
for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.
Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter
deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing
authority to an earlier period. As of December 31, 2025, the Company did not have an accrual for permanent uncertainties
and therefore did not have an effect on the annual effective rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The
Company recognized no interest and penalties in 2025, and an immaterial amount of interest and penalties in 2024 and
2023.
Item 8. Financial Statements and Supplementary Data
170
11. SHAREHOLDERS' EQUITY
Share Data: The following table is a reconciliation of the number of shares of the Company's common stock for the years
ended December 31.
(In thousands of shares)
2025
2024
2023
Common stock - issued:
Balance, beginning of period
1,356,763
1,355,398
1,354,079
Exercise of stock options and issuance of restricted shares
1,146
1,365
1,319
Balance, end of period
1,357,909
1,356,763
1,355,398
Treasury stock:
Balance, beginning of period
806,799
776,919
738,823
Purchases of treasury stock:
Share repurchase program
32,994
30,428
38,896
Other
411
494
364
Dispositions of treasury stock:
Shares issued to AFL Stock Plan
(698)
(751)
(897)
Exercise of stock options
(60)
(104)
(88)
Other
(227)
(187)
(179)
Balance, end of period
839,219
806,799
776,919
Shares outstanding, end of period
518,690
549,964
578,479
Share Repurchase Program: In August 2025, the Company's board of directors authorized the purchase of an additional
100 million shares of its common stock. As of December 31, 2025, a remaining balance of 114.3 million shares of the
Company's common stock was available for purchase under share repurchase authorizations by its board of directors.
During 2025, the Company repurchased 33.0 million shares of its common stock in the open market for $3.5 billion. The
Company repurchased 30.4 million shares for $2.8 billion in 2024 and 38.9 million shares for $2.8 billion in 2023.
Voting Rights: In accordance with the Parent Company's articles of incorporation, shares of common stock are generally
entitled to one vote per share until they have been held by the same beneficial owner for a continuous period of 48
months, at which time they become entitled to 10 votes per share.
EPS: A reconciliation of basic and diluted weighted-average shares outstanding used in the computation of basic and
diluted EPS for the years ended December 31 is as follows:
(In thousands of shares)
2025
2024
2023
Weighted-average outstanding shares used for calculating basic EPS
532,885
562,492
596,173
Dilutive effect of share-based awards
1,993
2,523
2,572
Weighted-average outstanding shares used for calculating diluted EPS
534,878
565,015
598,745
Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation
of basic EPS, but are included in the calculation of weighted-average shares used in the computation of diluted EPS. Anti-
dilutive share-based awards are excluded from the computation of diluted EPS.
The following table presents the approximate number of share-based awards to purchase shares, on a weighted-average
basis, that were considered to be anti-dilutive and were excluded from the calculation of diluted EPS at December 31.
(In thousands)
2025
2024
2023
Anti-dilutive share-based awards
1
17
51
Item 8. Financial Statements and Supplementary Data
171
Reclassifications from Accumulated Other Comprehensive Income
The tables below are reconciliations of accumulated other comprehensive income by component for the years ended
December 31.
Changes in Accumulated Other Comprehensive Income
2025
(In millions)
Unrealized
Foreign
Currency
Translation
Gains
(Losses)
Unrealized
Gains
(Losses)
on Fixed
Maturity
Securities
Unrealized
Gains
(Losses)
on
Derivatives
Effect of
Changes in
Discount
Rate
Assumptions
Pension
Liability
Adjustment
Total
Balance at December 31, 2024
$ (4,998)
$
24
$
(20)
$ 2,006
$
10
$ (2,978)
Other comprehensive
income (loss) before
reclassification
151
(1,828)
3
6,029
76
4,431
Amounts reclassified from
accumulated other
comprehensive income
(loss)
0
(5)
4
0
0
(1)
Net current-period other
comprehensive
income (loss)
151
(1,833)
7
6,029
76
4,430
Balance at December 31, 2025
$ (4,847)
$ (1,809)
$
(13)
$ 8,035
$
86
$
1,452
All amounts in the table above are net of tax.
2024
(In millions)
Unrealized
Foreign
Currency
Translation
Gains
(Losses)
Unrealized
Gains
(Losses)
on Fixed
Maturity
Securities
Unrealized
Gains
(Losses)
on
Derivatives
Effect of
Changes in
Discount
Rate
Assumptions
Pension
Liability
Adjustment
Total
Balance at December 31, 2023
$ (4,069)
$ 1,139
$
(22)
$ (2,560)
$
(8)
$ (5,520)
Other comprehensive
income (loss) before
reclassification
(929)
(959)
(3)
4,566
20
2,695
Amounts reclassified from
accumulated other
comprehensive income
(loss)
0
(156)
5
0
(2)
(153)
Net current-period other
comprehensive
income (loss)
(929)
(1,115)
2
4,566
18
2,542
Balance at December 31, 2024
$ (4,998)
$
24
$
(20)
$ 2,006
$
10
$ (2,978)
All amounts in the table above are net of tax.
Item 8. Financial Statements and Supplementary Data
172
2023
(In millions)
Unrealized
Foreign
Currency
Translation
Gains
(Losses)
Unrealized
Gains
(Losses)
on Fixed
Maturity
Securities
Unrealized
Gains
(Losses)
on
Derivatives
Effect of
Changes in
Discount
Rate
Assumptions
Pension
Liability
Adjustment
Total
Balance at December 31, 2022
$ (3,564)
$
(702)
$
(27)
$ (2,100)
$
(36)
$ (6,429)
Other comprehensive
income (loss) before
reclassification
(505)
1,972
1
(460)
28
1,036
Amounts reclassified from
accumulated other
comprehensive income
(loss)
0
(131)
4
0
0
(127)
Net current-period other
comprehensive
income (loss)
(505)
1,841
5
(460)
28
909
Balance at December 31, 2023
$ (4,069)
$ 1,139
$
(22)
$ (2,560)
$
(8)
$ (5,520)
All amounts in the table above are net of tax.
The tables below summarize the amounts reclassified from each component of accumulated other comprehensive income
into net earnings for the years ended December 31.
Reclassifications Out of Accumulated Other Comprehensive Income
(In millions)
2025
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified
from Accumulated Other
Comprehensive Income
Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities
$
6
Net investment gains (losses)
(1)
Tax (expense) or benefit(1)
$
5
Net of tax
Unrealized gains (losses) on derivatives
$
(4)
Net investment gains (losses)
(1)
Net investment income
(5)
Total before tax
1
Tax (expense) or benefit(1)
$
(4)
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)
$
0
Acquisition and operating expenses(2)
Prior service (cost) credit
0
Acquisition and operating expenses(2)
0
Tax (expense) or benefit(1)
$
0
Net of tax
Total reclassifications for the period
$
1
Net of tax
(1) Based on 21% tax rate
(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note
13 for additional details).
Item 8. Financial Statements and Supplementary Data
173
(In millions)
2024
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified
from Accumulated Other
Comprehensive Income
Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities
$ 197
Net investment gains (losses)
(41)
Tax (expense) or benefit(1)
$ 156
Net of tax
Unrealized gains (losses) on derivatives
$
(5)
Net investment gains (losses)
(1)
Net investment income
(6)
Total before tax
1
Tax (expense) or benefit(1)
$
(5)
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)
$
1
Acquisition and operating expenses(2)
Prior service (cost) credit
1
Acquisition and operating expenses(2)
0
Tax (expense) or benefit(1)
$
2
Net of tax
Total reclassifications for the period
$ 153
Net of tax
(1) Based on 21% tax rate
(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note
13 for additional details).
(In millions)
2023
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified
from Accumulated Other
Comprehensive Income
Affected Line Item in the
Statements of Earnings
Unrealized gains (losses) on available-for-sale
securities
$ 166
Net investment gains (losses)
(35)
Tax (expense) or benefit(1)
$ 131
Net of tax
Unrealized gains (losses) on derivatives
$
(4)
Net investment gains (losses)
(1)
Net investment income
(5)
Total before tax
1
Tax (expense) or benefit(1)
$
(4)
Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)
$
0
Acquisition and operating expenses(2)
Prior service (cost) credit
0
Acquisition and operating expenses(2)
0
Tax (expense) or benefit(1)
$
0
Net of tax
Total reclassifications for the period
$ 127
Net of tax
(1) Based on 21% tax rate
(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note
13 for additional details).
Item 8. Financial Statements and Supplementary Data
174
12. SHARE-BASED COMPENSATION
The Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (as Amended
and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan). Share-based awards are designed to
reward employees for their long-term contributions to the Company and provide incentives for them to remain with the
Company. The number and frequency of share-based awards are based on competitive practices, operating results of the
Company, government regulations, and other factors.
The Plan allows for a maximum number of shares issuable over its term of 75 million shares including 38 million shares
that may be awarded in respect of awards other than options or stock appreciation rights. If any awards granted under the
Plan are forfeited or are terminated before being exercised or settled for any reason other than tax forfeiture, then the
shares underlying the awards will again be available under the Plan. As of December 31, 2025, approximately 32.6 million
shares were available for future grants under this plan.
The Plan allows awards to Company employees as follows:
•
Stock options
◦
Incentive stock options
◦
Non-qualifying stock options
•
Performance-based restricted stock awards and units (performance-based restricted stock)
•
Restricted stock awards and units (restricted stock)
•
Stock appreciation rights
Non-employee directors are eligible for grants of non-qualifying stock options, restricted stock, and stock appreciation
rights.
Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while
those issued to Japan-based grantees are settled with treasury shares.
Vesting Schedules
Stock options and stock appreciation rights have an expiration date of no later than 10 years from the grant date.
Generally, the vesting period for share-based awards is the requisite service period, which is typically three years for
employees and one year for non-employee directors. Vesting for employees is generally on a ratable basis over the three
years, typically subject to continued employment.
For performance-based restricted stock, vesting is also contingent on certain performance conditions typically achieved
over three years.
The Compensation Committee of the board of directors has the discretion to determine vesting schedules.
Share-Based Compensation Expense
Share-based compensation expense consists primarily of expenses for stock options, restricted stock, and performance-
based restricted stock. The expense is included in insurance and other expenses in the consolidated statements of
earnings.
The following table presents the impact of share-based compensation expense for the years ended December 31.
(In millions, except for per-share amounts)
2025
2024
2023
Impact on earnings from continuing operations
$ 82
$ 72
$ 79
Impact on earnings before income taxes
82
72
79
Impact on net earnings
65
57
62
Impact on net earnings per share:
Basic
$ .12
$ .10
$ .10
Diluted
.12
.10
.10
Item 8. Financial Statements and Supplementary Data
175
Stock Options
The following tables summarize stock option activity under the employee stock option plan. There were no options granted
in 2025, 2024 or 2023.
(In thousands of shares)
Stock
Option
Shares
Weighted-Average
Exercise Price
Per Share
Outstanding at December 31, 2022
1,577
$ 32.05
Granted in 2023
0
0.00
Canceled in 2023
0
24.75
Exercised in 2023
(526)
30.35
Outstanding at December 31, 2023
1,051
32.90
Granted in 2024
0
0.00
Canceled in 2024
(3)
31.21
Exercised in 2024
(425)
31.40
Outstanding at December 31, 2024
623
33.92
Granted in 2025
0
0.00
Canceled in 2025
(2)
30.53
Exercised in 2025
(301)
31.04
Outstanding at December 31, 2025
320
$ 36.65
(In millions)
2025
2024
2023
Total intrinsic value of options exercised
$ 23
$ 25
$ 22
Cash received from options exercised
9
13
16
Tax benefit realized as a result of options exercised and
restricted stock releases
31
28
20
Stock options and stock appreciation rights granted under the Plan have an exercise price of at least the fair market value
of the underlying stock on the grant date. For awards with an exercise price currently below the quoted closing price of the
Company's common stock, the total pretax intrinsic value of stock options exercised during the period is based on the
difference between the exercise price of the stock options and the closing price of the Company's common stock of
$110.27 as of December 31, 2025.
(In thousands of shares)
2025
2024
2023
Shares exercisable, end of year
320
623
1,051
The Company estimates the fair value of each stock option granted using the Black-Scholes-Merton multiple option
approach. Expected volatility is based on historical periods generally commensurate with the estimated terms of the
options. The Company uses historical data to estimate option exercise and termination patterns within the model.
Separate groups of employees that have similar historical exercise patterns are stratified and considered separately for
valuation purposes. The expected term of options granted is derived from the output of the Company's option model and
represents the weighted-average period of time that options granted are expected to be outstanding. The Company bases
the risk-free interest rate on the Treasury note rate with a term comparable to that of the estimated term of the options.
The following table presents the assumptions used in valuing options granted, if applicable, during the years ended
December 31.
2025
2024
2023
Expected term (years)
8.0
8.0
8.0
Expected volatility
27.2 %
26.8 %
26.7 %
Annual forfeiture rate
4.4
4.4
4.2
Risk-free interest rate
4.2
4.0
3.0
Dividend yield
2.2
2.4
2.3
Item 8. Financial Statements and Supplementary Data
176
The following table summarizes information about stock options outstanding and exercisable at December 31, 2025.
(In thousands of shares)
Options Outstanding
Options Exercisable
Range of
Exercise Prices
Per Share
Stock Option
Shares
Outstanding
Wgtd.-Avg.
Remaining
Contractual
Life (Yrs.)
Wgtd.-Avg.
Exercise
Price
Per Share
Stock Option
Shares
Exercisable
Wgtd.-Avg.
Exercise
Price
Per Share
$ 0.00 - $ 28.97
39
0.1
$ 28.97
39
$ 28.97
28.97 - 36.21
166
1.2
35.17
166
35.17
36.21 - 44.59
115
1.9
41.37
115
41.37
$ 0.00 - $ 44.59
320
1.3
$ 36.65
320
$ 36.65
As of December 31, 2025, the aggregate intrinsic value of stock options outstanding and in-the-money stock options
exercisable was $24 million.
Performance-Based Restricted Stock
Under the Plan, the Company grants selected executive officers performance-based restricted stock with vesting
contingent upon meeting various financial performance goals or other Company identified metrics. Performance-based
restricted stock is generally granted at-the-money and contingently cliff vest over a period of three years, generally subject
to continued employment. Additionally, grants of performance-based restricted stock may also be contingent upon certain
market conditions. Compensation expense for performance-based restricted stock subject to accelerated vesting at the
date of retirement eligibility is expensed over the implicit service period.
In 2025, the Company granted 284 thousand performance-based restricted stock, which are contingent on the
achievement of the Company's financial performance goals and certain market conditions. On the date of grant, the
Company estimated the fair value of performance-based restricted stock with market conditions using a Monte Carlo
simulation model. The model discounts the value of the stock at the assumed vesting date based on a risk-free interest
rate. Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-
out estimate will be updated each quarter. Actual performance, including modification for relative total shareholder return,
may result in the ultimate award of 0% to 200% percent of the initial number of performance-based restricted stock issued,
with the potential for no award if the Company's performance goals are not achieved.
In 2025, the Company also granted 10 thousand performance-based stock units, which are contingent on the
achievement of certain Company determined metrics. Based on estimates of actual performance versus the vesting
thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter. Actual performance may
result in the ultimate award of 0% to 100% percent of the initial number of performance-based restricted stock issued, with
the potential for no award if the Company's determined metrics are not achieved.
The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, a Monte
Carlo simulation model. The Company is responsible for determining the assumptions used in estimating the fair value of
its share-based compensation awards.
Key assumptions used to value performance-based restricted stock granted during 2025 follows:
(In millions)
2025
Expected volatility (based on Aflac Inc. and peer group historical daily stock price)
21.3 %
Expected life from grant date (years)
2.9
Risk-free interest rate (based on U.S. Treasury yields at the date of grant)
4.2 %
Item 8. Financial Statements and Supplementary Data
177
Restricted Stock
The value of restricted stock is based on the fair market value of the Company's common stock at the date of grant. The
following table summarizes restricted stock activity during the years ended December 31.
(In thousands of shares)
Shares
Weighted-Average
Grant-Date
Fair Value
Per Share
Restricted stock at December 31, 2022
2,414
$ 56.21
Granted in 2023
1,171
70.74
Canceled in 2023
(112)
60.62
Vested in 2023
(1,165)
52.77
Restricted stock at December 31, 2023
2,308
62.96
Granted in 2024
1,300
80.90
Canceled in 2024
(48)
74.68
Vested in 2024
(1,461)
47.22
Restricted stock at December 31, 2024
2,099
73.65
Granted in 2025
1,139
104.53
Canceled in 2025
(77)
78.60
Vested in 2025
(1,294)
68.83
Restricted stock at December 31, 2025
1,867
$ 86.15
As of December 31, 2025, total compensation cost not yet recognized in the Company's financial statements related to
restricted stock was $38 million, of which $13 million (1.6 million shares) was related to performance-based restricted
stock. The Company expects to recognize these amounts over a weighted-average period of approximately 1.7 years.
There are no other contractual terms covering restricted stock once vested.
13. BENEFIT PLANS
Pension and Other Postretirement Plans
The Company has funded defined benefit plans in Japan and the U.S.; however, future benefits under the U.S. plan were
frozen effective January 1, 2024, which resulted in the Company recognizing a curtailment gain of $49 million in 2023. As
part of the U.S. plan freeze, the company offered lump sum payments to certain participants. The lump sum payments
were distributed in the fourth quarter of 2024 and resulted in a settlement charge of $18 million in 2024 due to the
payments being greater than the settlement threshold. In January 2025, the Company purchased a nonparticipating single
premium group annuity contract from an external insurer to settle its obligations under the U.S. defined pension plan and
paid to the insurer the related annuity premium. As a result, the Company recognized a settlement charge of $55 million in
2025. Effective April 1, 2025, the external insurer began making annuity payments to plan participants.
The Company also maintains non-qualified, unfunded supplemental retirement plans that provide defined pension benefits
in excess of limits imposed by federal tax law for certain Japanese, U.S. and former employees. However, future benefits
under the Company's Supplemental Executive Retirement Plan and Retirement Plan for Senior Officers were frozen
effective January 1, 2024, provided that actively employed participants may continue to accrue service toward eligibility for
early retirement benefits or delayed early retirement benefits.
The Company provides certain health care benefits for eligible U.S. retired employees, their beneficiaries and covered
dependents (other postretirement benefits). The health care plan is contributory and unfunded. For certain employees and
former employees, additional coverage is provided for all medical expenses for life. Effective January 1, 2014, the plan
was frozen to new participants.
Item 8. Financial Statements and Supplementary Data
178
Information with respect to the Company's benefit plans' assets and obligations as of December 31 follows:
Pension Benefits
Other
Japan
U.S.
Postretirement Benefits
(In millions)
2025
2024
2025
2024
2025
2024
Projected benefit obligation:
Benefit obligation, beginning of year
$ 282
$ 324
$ 584
$ 764
$ 23
$ 25
Service cost
13
14
0
0
0
0
Interest cost
9
8
15
36
1
1
Actuarial (gain) loss
(45)
(18)
8
(7)
3
2
Benefits and expenses paid
(15)
(16)
(15)
(32)
(5)
(5)
Settlement
0
0
(420)
(177)
0
0
Effect of foreign exchange
rate changes
5
(30)
0
0
0
0
Benefit obligation, end of year
249
282
172
584
22
23
Plan assets:
Fair value of plan assets,
beginning of year
345
344
439
648
0
0
Actual return on plan assets
23
27
0
(8)
0
0
Employer contributions
28
27
9
8
5
5
Benefits and expenses paid
(15)
(16)
(15)
(32)
(5)
(5)
Settlement
0
0
(420)
(177)
0
0
Effect of foreign exchange
rate changes
2
(37)
0
0
0
0
Fair value of plan assets,
end of year
383
345
13
439
0
0
Funded status of the plans(1)
$ 134
$ 63
$ (159)
$ (145)
$ (22)
$ (23)
Amounts recognized in accumulated other
comprehensive income:
Net actuarial (gain) loss
$ (68)
$ (10)
$
(40)
$
1
$
6
$ 4
Prior service (credit) cost
0
0
(1)
(1)
0
0
Total included in accumulated
other comprehensive income
$ (68)
$ (10)
$
(41)
$
0
$
6
$ 4
Accumulated benefit obligation
$ 162
$ 184
$ 172
$ 584
N/A
N/A
(1) Underfunded amounts are included in other liabilities in the consolidated balance sheets and overfunded amounts are included in
other assets in the consolidated balance sheets
Item 8. Financial Statements and Supplementary Data
179
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
Pension Benefits
Japan
U.S.
(In millions)
2025
2024
2025
2024
Accumulated benefit obligation
$
162
$
184
$
172
$
584
Fair value of plan assets
383
345
13
439
Information for Pension Plans with a Projected Benefit Obligation in Excess of Plan Assets
Pension Benefits
Japan (1)
U.S.(2)
(In millions)
2025
2024
2025
2024
Projected benefit obligation
$
249
$
282
$
172
$
584
Fair value of plan assets
383
345
13
439
(1) The net amount of projected benefit obligation and plan assets for the overfunded Japan pension plan was $134 and $63 at
December 31, 2025 and 2024, respectively, and was included in other assets in the consolidated balance sheets.
(2) The net amount of projected benefit obligation and plan assets for the underfunded (including unfunded) U.S. pension plan was $159
and $145 at December 31, 2025 and 2024, respectively, and was included in other liabilities in the consolidated balance sheets.
Information for other postretirement benefit plans with an accumulated postretirement benefit obligation in excess of plan
assets has been disclosed in the note on “Obligations and Funded Status” because all the other postretirement benefit
plans are unfunded or underfunded.
Pension Benefits
Other
Japan
U.S.
Postretirement Benefits
2025
2024
2023
2025
2024
2023
2025
2024
2023
Weighted-average
actuarial assumptions:
Discount rate - net periodic
benefit cost
2.31 %
1.84 %
1.95 %
5.60 %
5.33 % (1) 5.24 % (2)
5.60 %
5.04 %
5.28 %
Discount rate - benefit
obligations
3.39
2.31
1.84
5.34
5.60
5.04
4.49
5.60
5.04
Expected long-term return
on plan assets
2.00
2.00
2.00
4.75
4.75
4.75
N/A
N/A
N/A
Rate of compensation
increase
5.90
5.90
N/A
N/A
N/A
4.00
N/A
N/A
N/A
Health care cost trend rates
N/A
N/A
N/A
N/A
N/A
N/A
6.50
(3) 6.30
(3) 6.80
(3)
(1) An interim valuation was required due to the U.S. pension plan settlement. The rate shown is the rate used on the interim valuation
date of November 1, 2024.
(2) An interim valuation was required due to the U.S. pension plan curtailment. The rate shown is the rate used on the interim valuation
date of June 12, 2023.
(3) For the years 2025, 2024 and 2023, the health care cost trend rates are expected to trend down to 3.7% in 48 years, 3.7% in 49
years, and 3.7% in 50 years, respectively.
The Company determines its discount rate assumption for its U.S. pension retirement obligations based on indices for AA
corporate bonds with an average duration of approximately 13 years, and determination of the U.S. pension plan discount
rate utilizes the 85-year extrapolated yield curve. In Japan, the discount rate assumption is determined using the yield
curve equivalent approach, and participant salary and future salary increases are factors in determining pension benefit
cost or the related pension benefit obligation.
The Company bases its assumption for the long-term rate of return on assets on historical trends (10-year or longer
historical rates of return for the Japanese plan assets), expected future market movement, as well as the portfolio mix of
securities in the asset portfolio including, but not limited to, style, class and equity and fixed income allocations. In
addition, the Company's consulting actuaries evaluate its assumptions for long-term rates of return under Actuarial
Standards of Practice (ASOP). Under the ASOP, the actual portfolio type, mix and class are modeled to determine a best
estimate of the long-term rate of return. The Company in turn uses those results to further validate its own assumptions.
Item 8. Financial Statements and Supplementary Data
180
Components of Net Periodic Benefit Cost
Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated
statements of earnings, which includes $68 million, $24 million and $(39) million of other components of net periodic
pension cost and postretirement costs (other than service costs) for the years ended December 31, 2025, 2024 and 2023,
respectively. Total net periodic benefit cost includes the following components:
Pension Benefits
Other
Japan
U.S.
Postretirement Benefits
(In millions)
2025
2024
2023
2025
2024
2023
2025
2024
2023
Service cost
$ 13
$ 14
$ 14
$ 0
$
0
$
7
$ 0
$ 0
$ 0
Interest cost
9
8
9
15
36
41
1
1
1
Expected return on
plan assets
(7)
(7)
(7)
(5)
(30)
(34)
0
0
0
Amortization of net
actuarial (gain) loss
0
0
0
(1)
(1)
(2)
1
0
2
Amortization of prior
service cost (credit)
0
0
0
0
(1)
0
0
0
0
Curtailment (gain) loss
0
0
0
0
0
(49)
0
0
0
Settlement (gain) loss
0
0
0
55
18
0
0
0
0
Net periodic benefit
cost (credit)
$ 15
$ 15
$ 16
$ 64
$ 22
$ (37)
$ 2
$ 1
$ 3
Changes in Accumulated Other Comprehensive Income
The following table summarizes the amounts recognized in other comprehensive loss (income) for the years ended
December 31:
Pension Benefits
Other
Japan
U.S.
Postretirement Benefits
(In millions)
2025
2024
2023
2025
2024
2023
2025
2024
2023
Net actuarial (gain) loss
$ (58)
$ (40)
$ (5)
$
13
$ 31
$ 31
$ 3
$ 2
$ (4)
Amortization of net
actuarial gain (loss)
0
0
0
1
1
2
(1)
0
(2)
Amortization of prior
service cost
0
0
0
0
1
0
0
0
0
Curtailment (gain) loss
0
0
0
0
0
(57)
0
0
0
Settlement (gain) loss
0
0
0
(55)
(18)
0
0
0
0
Total
$ (58)
$ (40)
$ (5)
$ (41)
$ 15
$ (24)
$ 2
$ 2
$ (6)
No transition obligations arose during 2025.
Benefit Payments
The following table provides expected benefit payments, which reflect expected future service, as appropriate.
Pension Benefits
Other
(In millions)
Japan
U.S.
Postretirement Benefits
2026
$ 16
$ 10
$ 4
2027
12
16
4
2028
12
14
3
2029
13
13
2
2030
13
13
1
2031-2035
80
64
4
Item 8. Financial Statements and Supplementary Data
181
Funding
The Company plans to make contributions of $23 million to the Japanese funded defined benefit plan in 2026. The
Company did not make a contribution to the U.S. funded defined benefit plan in 2025. The funding policy for the
Company's non-qualified supplemental defined benefit pension plans and other postretirement benefits plan is to
contribute the amount of the benefit payments made during the year.
Plan Assets
The investment objective of the Company's Japanese funded defined benefit plans is to preserve the purchasing power of
the plan's assets and earn a reasonable inflation-adjusted rate of return over the long term. Furthermore, the Company
seeks to accomplish these objectives in a manner that allows for the adequate funding of plan benefits and expenses. In
order to achieve these objectives, the Company's goal is to maintain a conservative, well-diversified and balanced
portfolio of high-quality equity, fixed-income and money market securities. As a part of its strategy, the Company has
established strict policies covering quality, type and concentration of investment securities. For the Company's Japanese
plan, these policies include limitations on investments in derivatives including futures, options and swaps, and low-liquidity
investments such as real estate, venture capital investments, and privately issued securities. The Company is also
prohibited from trading on margin.
The plan fiduciaries for the Company's funded defined benefit plans have developed guidelines for asset allocations
reflecting a percentage of total assets by asset class, which are reviewed on an annual basis. Asset allocation targets as
of December 31, 2025 were as follows:
Japan
Pension
U.S.
Pension
Domestic equities
9 %
0 %
International equities
11
0
Fixed income securities
46
0
Other
34
100
Total
100 %
100 %
The following tables present the fair value of Aflac Japan's pension plan assets that are measured at fair value on a
recurring basis as of December 31.
2025
(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
Japan pension plan assets:
Equities:
Japanese equity securities
$
0
$
35
$
0
$
35
International equity securities
0
44
0
44
Fixed income securities:
Japanese bonds
0
17
0
17
International bonds
0
129
29
158
Insurance contracts
0
63
0
63
Alternative investments
0
0
65
65
Cash and cash equivalents
1
0
0
1
Total
$
1
$
288
$
94
$
383
Item 8. Financial Statements and Supplementary Data
182
2024
(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
Japan pension plan assets:
Equities:
Japanese equity securities
$
0
$
29
$
0
$
29
International equity securities
0
36
0
36
Fixed income securities:
International bonds
0
154
0
154
Insurance contracts
0
64
0
64
Alternative investments
0
0
62
62
Total
$
0
$
283
$
62
$
345
The following table presents the fair value of Aflac U.S.'s pension plan assets that are measured at fair value on a
recurring basis as of December 31. All of these assets are classified as Level 1 in the fair value hierarchy.
(In millions)
2025
2024
U.S. pension plan assets:
Mutual funds:
Fixed income bond funds
$
0
$ 435
Cash and cash equivalents
13
4
Total
$ 13
$ 439
The fair values of the Company's pension plan investments categorized as Level 1, consisting of mutual funds, are based
on quoted market prices for identical securities traded in active markets that are readily and regularly available to the
Company. The fair values of the Company's pension plan investments classified as Level 2 are based on quoted prices for
similar assets in markets that are not active, other inputs that are observable, such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, and default rates, or other market-corroborated inputs. The
fair values of the Company's pension plan investments classified as Level 3 are based on certain inputs that are not
observable in an active market including the difference between contract rates and market rates, the difference of interest
spread on contract and interest spread on market and the appraisal value of collateralized real estate.
The following tables present the changes in fair value of Aflac Japan's pension plan assets that are classified as Level 3
for the years ended December 31.
2025
(In millions)
International
Bonds
Alternative
Investments
Total
Balance, beginning of period
$
0
$
62
$
62
Actual return on plan assets:
Relating to assets still held at the reporting date
0
3
3
Relating to assets sold during the period
0
0
0
Purchases, sales and settlements
29
0
29
Transfers in and/or out of Level 3
0
0
0
Balance, end of period
$
29
$
65
$
94
Item 8. Financial Statements and Supplementary Data
183
2024
(In millions)
Alternative
Investments
Total
Balance, beginning of period
$
16
$
16
Actual return on plan assets:
Relating to assets still held at the reporting date
2
2
Relating to assets sold during the period
0
0
Purchases, sales and settlements
44
44
Transfers in and/or out of Level 3
0
0
Balance, end of period
$
62
$
62
401(k) Plan
The Company sponsors a 401(k) plan in which it matches a portion of U.S. employees' contributions. The plan provides
for salary reduction contributions by employees and, in 2025, 2024, and 2023, provided matching contributions by the
Company of 100% of each employee's contributions which were not in excess of 4% of the employee's annual cash
compensation. The Company also provides a nonelective contribution to the 401(k) plan of 4% of annual cash
compensation. Effective January 1, 2024, the nonelective 401(k) employer contribution was extended to U.S. employees
who were participants in the defined benefit plan prior to the freeze of future benefits on January 1, 2024.
The 401(k) contributions by the Company, included in acquisition and operating expenses in the consolidated statements
of earnings, were $21 million in 2025 and $21 million in 2024 and $20 million in 2023. The plan trustee held approximately
1.7 million shares of the Company's common stock for plan participants at December 31, 2025.
Stock Bonus Plan
Aflac U.S. maintains a stock bonus plan for eligible U.S. sales associates. Plan participants receive shares of Aflac
Incorporated common stock based on their new annualized premium sales and their first-year persistency of substantially
all new insurance policies. The cost of this plan, which was capitalized as deferred policy acquisition costs, amounted to
$22 million in 2025 and $21 million in 2024 and $19 million in 2023.
14. STATUTORY ACCOUNTING AND DIVIDEND RESTRICTIONS
The Company's insurance subsidiaries are required to report their results of operations and financial position to insurance
regulatory authorities on the basis of statutory accounting practices prescribed or permitted by such authorities.
Aflac Japan must report its results of operations and financial position to the Japanese Financial Services Agency (FSA)
on a Japanese regulatory accounting basis as prescribed by the FSA. Japanese regulatory accounting practices differ in
many respects from U.S. GAAP. For example, under Japanese regulatory accounting practices, policy acquisition costs
are expensed immediately; policy benefit and claim reserving methods and assumptions are different; premiums are
recognized on a cash basis; different consolidation criteria apply to VIEs; reinsurance is recognized on a different basis;
and investments can have a separate accounting classification and treatment referred to as policy reserve matching
bonds (PRM). Capital and surplus of Aflac Japan, based on current Japanese regulatory accounting practices, was $6.9
billion at December 31, 2025, compared with and $8.1 billion at December 31, 2024.
Aflac, CAIC and TOIC report statutory financial statements that are prepared on the basis of accounting practices
prescribed or permitted by the Nebraska Department of Insurance (NDOI). The NDOI recognizes statutory accounting
principles and practices prescribed or permitted by the state of Nebraska for determining and reporting the financial
condition and results of operations of an insurance company, and for determining a company's solvency under Nebraska
insurance law.
Aflac New York reports statutory financial statements that are prepared on the basis of accounting practices prescribed or
permitted by the New York State Department of Financial Services (NYSDFS). The NYSDFS recognizes statutory
accounting principles and practices prescribed or permitted by the state of New York for determining and reporting the
financial condition and results of operations of an insurance company, and for determining a company's solvency under
New York insurance law.
Item 8. Financial Statements and Supplementary Data
184
Statutory Accounting Principles (SAP) as detailed by the National Association of Insurance Commissioners' (NAIC)
Accounting Practices and Procedures Manual have been adopted by both the state of Nebraska and the state of New
York as a component of those prescribed or permitted practices. Statutory accounting practices primarily differ from U.S.
GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using
different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a
different basis. Additionally, the Director of the NDOI and the Superintendent of the NYSDFS each have the right to permit
other specific practices which deviate from prescribed practices. Aflac, CAIC, TOIC and Aflac New York had no permitted
practices as of December 31, 2025, and 2024.
The table below presents statutory capital and surplus based on statutory accounting practices for the Company’s U.S. life
insurance subsidiaries as of December 31.
(In millions)
2025
2024
Aflac
$
2,756
$
2,682
CAIC
148
375
TOIC
48
51
Aflac New York
324
316
As of December 31, 2025, the capital and surplus for each of the Company's U.S. life insurance subsidiaries exceeded
the required company action level capital and surplus.
The table below presents net income (loss) based on statutory accounting practices for the Company’s U.S. life insurance
subsidiaries as of December 31.
(In millions)
2025
2024
2023
Aflac
$
664
$
912
$
1,106
CAIC
85
(94)
(121)
TOIC
(14)
(20)
(27)
Aflac New York
55
46
54
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). Aflac Re is required to file annual and quarterly returns for its Bermuda Solvency Capital Requirement
(BSCR) which utilizes an Economic Balance Sheet (EBS) framework to determine Aflac Re’s Enhanced Capital
Requirement (ECR). Aflac Re is also subject to a Minimum Margin of Solvency (MSM) related to its statutory financial
statements. The MSM is equal to the greater of $8,000,000; 2% of the first $500,000,000 of assets under management
plus 1.5% of the amount by which assets exceed $500,000,000; or 25% of ECR.
Under the EBS framework, Aflac Re is required to value assets equal to U.S. GAAP fair values, and insurance reserves
are valued using technical provisions which consist of a best estimate liability plus a risk margin. The best estimate liability
can be calculated by applying the standard approach or, with regulatory approval, the scenario-based approach. The
standard approach uses discount rates for insurance reserves as prescribed by the BMA. The scenario-based approach
uses a discount rate based on the yield of eligible assets owned by the insurer as determined using a series of prescribed
stress scenarios. At December 31, 2025 and 2024, Aflac Re was in compliance with the ECR and MSM requirements.
Statutory capital and surplus of Aflac Re, based on Bermuda statutory accounting practices, was $991 million at
December 31, 2025, compared with $581 million at December 31, 2024.
The Parent Company depends on its subsidiaries for cash flow, primarily in the form of dividends and management fees.
Consolidated retained earnings in the accompanying financial statements largely represent the undistributed earnings of
the Company's insurance subsidiaries. Amounts available for dividends, management fees and other payments to the
Parent Company by its insurance subsidiaries may fluctuate due to different accounting methods required by regulatory
authorities. These payments are also subject to various regulatory restrictions and approvals related to safeguarding the
interests of insurance policyholders. The Company's U.S. life insurance entities must maintain adequate risk-based capital
(RBC) for U.S. regulatory authorities, Aflac Japan must maintain adequate solvency margins for Japanese regulatory
authorities, and Aflac Re must maintain minimum capital requirements for Bermuda regulatory authorities.
Item 8. Financial Statements and Supplementary Data
185
The maximum amount of dividends that can be paid to the Parent Company by Aflac, CAIC and TOIC without prior
approval of Nebraska's director of insurance is the greater of the net income from operations, which excludes net
investment gains, for the previous year determined under statutory accounting principles, or 10% of statutory capital and
surplus as of the previous year-end. In 2025, Aflac declared dividends of $906 million, compared with $976 million in
2024. Dividends declared by Aflac during 2026 in excess of $664 million would require such approval. In 2025, CAIC
declared and paid an extraordinary distribution of $240 million to the Parent Company. CAIC did not declare dividends in
2024, and TOIC did not declare dividends in 2025 or 2024. From time to time, Aflac New York pays dividends to Aflac, the
parent company of Aflac New York. Aflac New York may not pay dividends to Aflac without the prior approval of the
NYSDFS. Aflac New York declared dividends of $46 million in 2025 and $54 million in 2024, which were authorized by the
NYSDFS.
Aflac Japan is required to meet certain financial criteria as governed by the Companies Act of Japan in order to provide
dividends to the Parent Company. Under these criteria, dividend capacity at Aflac Japan is defined as total equity
excluding common stock and capital reserves but reduced for net after-tax unrealized losses on available-for-sale
securities based on the previous fiscal year-end. Profits remitted by Aflac Japan to the Parent Company were as follows
for the years ended December 31:
In Dollars
In Yen
(In millions of dollars and billions of yen)
2025
2024
2023
2025
2024
2023
Profit remittances
$ 2,681
$ 2,865
$ 2,623
¥ 396.7
¥ 441.6
¥ 374.7
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.
Further, Aflac Re may not reduce its total statutory capital by 15% or more without prior regulatory approval. Additionally,
Aflac Re is not permitted to pay any dividends that would cause Aflac Re to fail to meet its minimum capital requirements.
Aflac Re did not declare dividends in 2025 or 2024.
15. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a defendant in various lawsuits and receives various regulatory inquiries considered to be in the normal
course of business. Members of the Company's senior legal and financial management teams review litigation and
regulatory inquiries on a quarterly and annual basis and the Company updates the related estimates, accruals, and
disclosures, if any, based on such reviews. For litigation and regulatory matters where it is probable that a loss has been
incurred, and the amount of that loss can be reasonably estimated, the Company establishes accruals for loss
contingencies. Where a loss may be reasonably possible but not probable, or is probable but not reasonably estimable, no
accrual is recorded. The final results of any litigation or regulatory inquiries cannot be predicted with certainty. Although
some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages
sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will
not have a material adverse effect on its financial position, results of operations, or cash flows.
Cyber Incident
As previously disclosed, the Company identified an incident involving unauthorized access to a limited number of its
systems in the U.S. on June 12, 2025. The Company promptly initiated its cybersecurity incident response protocols and
believes it contained the unauthorized access within hours. The Company's systems were not affected by ransomware,
and the Company remained able to serve its policyholders and underwrite policies, review claims, and otherwise service
customers as usual. In December 2025, the Company determined that personal information associated with
approximately 22.65 million individuals was involved. The Company has received questions from regulators and has
pending disputes related to the June 2025 incident. The Company believes that the potential amount of loss cannot be
reasonably estimated at this time.
Outsourcing Agreements and Other Commitments
The Company has an outsourcing agreement with a technology and consulting corporation that provides for mainframe
computer operations, distributed mid-range server computer operations, and related support for Aflac Japan. The
agreement has a remaining term of three years with an aggregate remaining cost of ¥33.6 billion ($215 million using the
December 31, 2025 foreign exchange rate).
Item 8. Financial Statements and Supplementary Data
186
The Company has three outsourcing agreements with a management consulting and technology services company. The
first agreement provides for application maintenance and development services for Aflac Japan. The first agreement has a
remaining term of three years with an aggregate remaining cost of ¥12.7 billion ($81 million using the December 31, 2025
foreign exchange rate). The second agreement provides for policy administrative services for Aflac Japan. The second
agreement has a remaining term of three years with an aggregate remaining cost of ¥5.2 billion ($33 million using the
December 31, 2025 foreign exchange rate). The third agreement provides for comprehensive project-related support
services for Aflac Japan. The third agreement has a remaining term of one year with an aggregate remaining cost of ¥1.3
billion ($8 million using the December 31, 2025 foreign exchange rate).
The Company has two outsourcing agreements with information technology and data services companies to provide
application maintenance and development services for Aflac Japan. The first agreement has a remaining term of two
years with an aggregate remaining cost of ¥7.8 billion ($50 million using the December 31, 2025 foreign exchange rate).
The second agreement has a remaining term of two years with an aggregate remaining cost of ¥9.3 billion ($59 million
using the December 31, 2025 foreign exchange rate).
The Company has an outsourcing agreement with an information technology and data services company to provide cloud
hosting services for the Company. The agreement has a remaining term of one year with an aggregate remaining cost of
$32 million.
The Company has a comprehensive agreement with a cloud-based software company to license software for Aflac Japan.
The agreement has a remaining term of four years with an aggregate remaining cost of ¥6.6 billion ($42 million using the
December 31, 2025 foreign exchange rate).
See Note 3 for details on certain investment commitments.
Guaranty Fund Assessments
The U.S. insurance industry has a policyholder protection system that is monitored and regulated by state insurance
departments. These life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto
Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance
companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s
guaranty association. Under state guaranty association laws, certain insurance companies can be assessed (up to
prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies
that write the same line or similar lines of business.
Guaranty fund assessments for the years ended December 31, 2025, 2024 and 2023 were immaterial.
Item 8. Financial Statements and Supplementary Data
187
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no changes in, or disagreements with, accountants on accounting and financial disclosure matters
during the years ended December 31, 2025 and 2024.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report (the
“Evaluation Date”). Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have
concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective.
Internal Control Over Financial Reporting
(a) Management's Annual Report on Internal Control Over Financial Reporting
Management's Annual Report on Internal Control Over Financial Reporting is incorporated herein by reference from
Part II, Item 8. of this report.
(b) Attestation Report of the Registered Public Accounting Firm
The Attestation Report of the Registered Public Accounting Firm on the Company's internal control over financial reporting
is incorporated herein by reference from Part II, Item 8. of this report.
(c) Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter of 2025 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
188
ITEM 9B. OTHER INFORMATION
Insider Trading Arrangements
During the fourth quarter of 2025, the following directors or executive officers adopted or terminated a contract, instruction
or written plan for the purchase or sale of the Parent Company's securities intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement as defined in Regulation S-K Item 408(c):
•
On December 1, 2025, Miwako Hosoda, a member of the Company's board of directors, adopted a Rule 10b5-1
trading plan that provides for the sale of 20% of time-based restricted stock shares to be released 1 year after the
original grant date. The plan will terminate no later than May 29, 2026. The estimated number of gross shares of Aflac
Incorporated common stock to be released is 1,722; however, the actual number of shares released may vary based
on dividends accrued prior to the release date.
•
On December 4, 2025, Joseph L. Moskowitz, a member of the Company's board of directors, adopted a Rule 10b5-1
trading plan that provides for the sale of 2,400 shares of Aflac Incorporated common stock. The plan will terminate no
later than November 13, 2026.
•
On December 5, 2025, Masatoshi Koide, President and Representative Director of Aflac Japan, adopted a Rule
10b5-1 trading plan that provides for the sale of 50% of performance-based restricted stock shares to be released
upon approval of the Company's board of directors and at least 3 years after the original grant date. The plan will
terminate no later than June 30, 2026. The estimated number of gross shares of Aflac Incorporated common stock to
be released is 18,605; however, the actual number of shares released may vary based on achievement of designated
performance metrics.
•
On December 8, 2025, Charles D. Lake II, Chairman and Representative Director of Aflac Japan and President of
Aflac International, adopted a Rule 10b5-1 trading plan that provides for the sale of 55.95% of performance-based
restricted stock shares to be released upon approval of the Company's board of directors and at least 3 years after
the original grant date. The plan will terminate no later than June 30, 2026. The estimated number of gross shares of
Aflac Incorporated common stock to be released is 16,116; however, the actual number of shares released may vary
based on achievement of designated performance metrics.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
189
PART III
Pursuant to General Instruction G to Form 10-K, Items 10 through 14 are incorporated by reference from the Company's
definitive Notice and Proxy Statement relating to the Company's 2026 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission on or about March 19, 2026, pursuant to Regulation 14A under the
Exchange Act. The Audit Committee Report and Compensation Committee Report to be included in such proxy statement
shall be deemed to be furnished in this report and shall not be incorporated by reference into any filing under the
Securities Act of 1933 as a result of such furnishing in Items 10. and 11., respectively.
Refer to the Information Contained in the Proxy
Statement under Captions (filed electronically)
ITEM 10.
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Information about the Company's
Executive Officers -
see Part I, Item 1 herein
Proposal 1 Election of Directors; Delinquent
Section 16(a) Reports; Audit and Risk Committee; Audit
and Risk Committee Report; Director Nominating
Process; Code of Business Conduct and Ethics; and
Insider Trading Policy and Compliance Procedures
ITEM 11.
EXECUTIVE COMPENSATION
Director Compensation; Compensation Committee;
Compensation Committee Report; Compensation
Discussion and Analysis; 2025 Summary Compensation
Table; 2025 Grants of Plan-Based Awards; 2025
Outstanding Equity Awards at Fiscal Year-End; 2025
Option Exercises and Stock Vested; Pension Benefits;
Nonqualified Deferred Compensation; Potential
Payments Upon Termination or Change in Control;
Compensation Committee Interlocks and Insider
Participation; and Equity Granting Policies
ITEM 12.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Beneficial Ownership of the Company's Securities;
Security Ownership of Directors; Proposal 1 Election of
Directors; Security Ownership of Management; and
Equity Compensation Plan Information
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Related Person Transactions; and Director
Independence
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND
SERVICES
Proposal 3 Ratification of Auditors; and Audit and Risk
Committee
Item 10. Directors, Executive Officers and Corporate Governance
190
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. FINANCIAL STATEMENTS
Page(s)
Included in Part II, Item 8. of this report:
Aflac Incorporated and Subsidiaries:
Report of Independent Registered Public Accounting Firm
80
Consolidated Statements of Earnings for each of the years in the three-
year period ended December 31, 2025
84
Consolidated Statements of Comprehensive Income (Loss) for each of the
years in the three-year period ended December 31, 2025
85
Consolidated Balance Sheets as of December 31, 2025 and 2024
86
Consolidated Statements of Shareholders' Equity for each of the years
in the three-year period ended December 31, 2025
87
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2025
89
Notes to the Consolidated Financial Statements
90
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Schedule II -
Condensed Financial Information of Registrant as of December 31, 2025
and 2024, and for each of the years in the three-year period ended
December 31, 2025
197
Schedule III -
Supplementary Insurance Information as of December 31, 2025 and 2024,
and for each of the years in the three-year period ended December 31,
2025
205
Schedule IV -
Reinsurance for each of the years in the three-year period ended
December 31, 2025
206
3. EXHIBIT INDEX
An “Exhibit Index” has been filed as part of this Report beginning on the following page and is
incorporated herein by this reference.
Schedules other than those listed above are omitted because they are not required, are not material, are not applicable, or
the required information is shown in the financial statements or notes thereto.
In reviewing the agreements included as exhibits to this annual report, please remember they are included to provide you
with information regarding their terms and are not intended to provide any other factual or disclosure information about the
Company or the other parties to the agreements. The agreements contain representations and warranties by each of the
parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the
other parties to the applicable agreement and:
•
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to
one of the parties if those statements prove to be inaccurate;
•
have been qualified by disclosures that were made to the other party in connection with the negotiation of the
applicable agreement, which disclosures are not necessarily reflected in the agreement;
•
may apply standards of materiality in a way that is different from what may be viewed as material to you or other
investors; and
•
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the
agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were
made or at any other time.
Item 15. Exhibits, Financial Statement Schedules
191
(b) EXHIBIT INDEX(1)
3.0
-
Articles of Incorporation, as amended – incorporated by reference from Form 10-Q for June 30,
2008, Exhibit 3.0.
3.1
-
Bylaws of Aflac Incorporated, as amended and restated – incorporated by reference from Form 8-K
dated November 17, 2023, Exhibit 3.1.
4.0
-
There are no instruments with respect to long-term debt not being registered in which the total
amount of securities authorized exceeds 10% of the total assets of Aflac Incorporated and its
subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any long-term debt
instrument to the Securities and Exchange Commission upon request.
4.1
-
Description of common stock securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 – incorporated by reference from 2019 Form 10-K, Exhibit 4.1.
4.2
-
Indenture, dated as of May 21, 2009, between Aflac Incorporated and The Bank of New York Mellon
Trust Company, N.A., as trustee – incorporated by reference from Form 8-K dated May 21, 2009,
Exhibit 4.1.
4.3
-
Second Supplemental Indenture, dated as of December 17, 2009, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 6.900% Senior
Note due 2039) – incorporated by reference from Form 8-K dated December 14, 2009, Exhibit 4.1.
4.4
-
Third Supplemental Indenture, dated as of August 9, 2010, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 6.45% Senior Note
due 2040) – incorporated by reference from Form 8-K dated August 4, 2010, Exhibit 4.1.
4.5
-
Twelfth Supplemental Indenture, dated as of September 19, 2016, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.875% Senior
Note due 2026) – incorporated by reference from Form 8-K dated September 19, 2016, Exhibit 4.1.
4.6
-
Thirteenth Supplemental Indenture, dated as of September 19, 2016, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 4.000%
Senior Note due 2046) – incorporated by reference from Form 8-K dated September 19, 2016,
Exhibit 4.2.
4.7
-
Fourteenth Supplemental Indenture, dated as of January 25, 2017, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of .932% Senior
Note due 2027) – incorporated by reference from Form 8-K dated January 25, 2017, Exhibit 4.1.
4.8
-
Fifteenth Supplemental Indenture, dated as of October 18, 2018, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.159% Senior
Note due 2030) – incorporated by reference from Form 8-K dated October 18, 2018, Exhibit 4.1.
4.9
-
Sixteenth Supplemental Indenture, dated as of October 18, 2018, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.488% Senior
Note due 2033) – incorporated by reference from Form 8-K dated October 18, 2018, Exhibit 4.2.
4.10
-
Seventeenth Supplemental Indenture, dated as of October 18, 2018, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.750%
Senior Note due 2038) – incorporated by reference from Form 8-K dated October 18, 2018, Exhibit
4.3.
4.11
-
Eighteenth Supplemental Indenture, dated as of October 31, 2018, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 4.750% Senior
Note due 2049) – incorporated by reference from Form 8-K dated October 31, 2018, Exhibit 4.1.
4.12
-
Nineteenth Supplemental Indenture, dated as of December 17, 2019, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.500%
Senior Note due 2029) – incorporated by reference from Form 8-K dated December 17, 2019,
Exhibit 4.1.
4.13
-
Twentieth Supplemental Indenture, dated as of December 17, 2019, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.843%
Senior Note due 2031) – incorporated by reference from Form 8-K dated December 17, 2019,
Exhibit 4.2.
4.14
-
Twenty-First Supplemental Indenture, dated as of December 17, 2019, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.934%
Senior Note due 2034) – incorporated by reference from Form 8-K dated December 17, 2019,
Exhibit 4.3.
4.15
-
Twenty-Second Supplemental Indenture, dated as of December 17, 2019, between Aflac
Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form
of 1.122% Senior Note due 2039) – incorporated by reference from Form 8-K dated December 17,
2019, Exhibit 4.4.
4.16
-
Twenty-Third Supplemental Indenture, dated as of March 12, 2020, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.300% Senior
Note due 2025) – incorporated by reference from Form 8-K dated March 12, 2020, Exhibit 4.1.
192
4.17
-
Twenty-Fourth Supplemental Indenture, dated as of March 12, 2020, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.550%
Senior Note due 2030) – incorporated by reference from Form 8-K dated March 12, 2020, Exhibit
4.2.
4.18
-
Twenty-Fifth Supplemental Indenture, dated as of March 12, 2020, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.750% Senior
Note due 2032) – incorporated by reference from Form 8-K dated March 12, 2020, Exhibit 4.3.
4.19
-
Twenty-Sixth Supplemental Indenture, dated as of March 12, 2020, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.830% Senior
Note due 2035) – incorporated by reference from Form 8-K dated March 12, 2020, Exhibit 4.4.
4.20
-
Twenty-Seventh Supplemental Indenture, dated as of April 1, 2020, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 3.600% Senior
Note due 2030) – incorporated by reference from Form 8-K dated April 1, 2020, Exhibit 4.1.
4.21
-
Twenty-Eighth Supplemental Indenture, dated as of March 8, 2021, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.125% Senior
Sustainability Note due 2026) – incorporated by reference from Form 8-K dated March 8, 2021,
Exhibit 4.1.
4.22
-
Twenty-Ninth Supplemental Indenture, dated as of April 15, 2021, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.633% Senior
Note due 2031) – incorporated by reference from Form 8-K dated April 15, 2021, Exhibit 4.1.
4.23
-
Thirtieth Supplemental Indenture, dated as of April 15, 2021, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 0.844% Senior
Note due 2033) – incorporated by reference from Form 8-K dated April 15, 2021, Exhibit 4.2.
4.24
-
Thirty-First Supplemental Indenture, dated as of April 15, 2021, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.039% Senior
Note due 2036) – incorporated by reference from Form 8-K dated April 15, 2021, Exhibit 4.3.
4.25
-
Thirty-Second Supplemental Indenture, dated as of April 15, 2021, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.264% Senior
Note due 2041) – incorporated by reference from Form 8-K dated April 15, 2021, Exhibit 4.4.
4.26
-
Thirty-Third Supplemental Indenture, dated as of April 15, 2021, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.560% Senior
Note due 2051) – incorporated by reference from Form 8-K dated April 15, 2021, Exhibit 4.5.
4.27
-
Thirty-Fourth Supplemental Indenture, dated as of September 14, 2022, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.075%
Senior Note due 2029) – incorporated by reference from Form 8-K dated September 14, 2022,
Exhibit 4.1.
4.28
-
Thirty-Fifth Supplemental Indenture, dated as of September 14, 2022, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.320%
Senior Note due 2032) – incorporated by reference from Form 8-K dated September 14, 2022,
Exhibit 4.2.
4.29
-
Thirty-Sixth Supplemental Indenture, dated as of September 14, 2022, between Aflac Incorporated
and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.594%
Senior Note due 2037) – incorporated by reference from Form 8-K dated September 14, 2022,
Exhibit 4.3.
4.30
-
Thirty-Seventh Supplemental Indenture, dated as of September 14, 2022, between Aflac
Incorporated and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form
of 2.144% Senior Note due 2052) – incorporated by reference from Form 8-K dated September 14,
2022, Exhibit 4.4.
4.31
-
Thirty-Eighth Supplemental Indenture, dated as of March 21, 2024, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.048% Senior
Note due 2029) – incorporated by reference from Form 8-K dated March 21, 2024, Exhibit 4.1.
4.32
-
Thirty-Ninth Supplemental Indenture, dated as of March 21, 2024, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.412% Senior
Note due 2031) – incorporated by reference from Form 8-K dated March 21, 2024, Exhibit 4.2.
4.33
-
Fortieth Supplemental Indenture, dated as of March 21, 2024, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.682% Senior
Note due 2034) – incorporated by reference from Form 8-K dated March 21, 2024, Exhibit 4.3.
4.34
-
Forty-First Supplemental Indenture, dated as of June 5, 2025, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 1.726% Senior
Note due 2030) – incorporated by reference from Form 8-K dated June 5, 2025, Exhibit 4.1.
4.35
-
Forty-Second Supplemental Indenture, dated as of June 5, 2025, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.003% Senior
Note due 2032) – incorporated by reference from Form 8-K dated June 5, 2025, Exhibit 4.2.
193
4.36
-
Forty-Third Supplemental Indenture, dated as of June 5, 2025, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.369% Senior
Note due 2035) – incorporated by reference from Form 8-K dated June 5, 2025, Exhibit 4.3.
4.37
-
Forty-Fourth Supplemental Indenture, dated as of June 5, 2025, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.779% Senior
Note due 2040) – incorporated by reference from Form 8-K dated June 5, 2025, Exhibit 4.4.
4.38
-
Subordinated Indenture, dated as of September 26, 2012, between Aflac Incorporated and The
Bank of New York Mellon Trust Company, N.A., as trustee – incorporated by reference from Form 8-
K dated September 26, 2012, Exhibit 4.1.
4.39
-
Second Supplemental Indenture, dated as of October 23, 2017, between Aflac Incorporated and
The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of 2.108%
Subordinated Debenture due 2047) - incorporated by reference from Form 8-K dated October 23,
2017, Exhibit 4.1.
10.0*
-
American Family Corporation Retirement Plan for Senior Officers, as amended and restated
October 1, 1989 – incorporated by reference from 1993 Form 10-K, Exhibit 10.2.
10.1*
-
Amendment to American Family Corporation Retirement Plan for Senior Officers, dated December
8, 2008 – incorporated by reference from 2008 Form 10-K, Exhibit 10.1.
10.2*
- Second Amendment to the American Family Corporation Retirement Plan for Senior Officers, dated
November 16, 2012 – incorporated by reference from Form 10-Q for September 30, 2016, Exhibit
10.2.
10.3*
-
Third Amendment to the American Family Corporation Retirement Plan for Senior Officers, dated
October 18, 2016 – incorporated by reference from Form 10-Q for September 30, 2016, Exhibit
10.3.
10.4*
-
Fourth Amendment to the American Family Corporation Retirement Plan for Senior Officers –
incorporated by reference from Form 8-K dated June 13, 2023, Exhibit 10.2.
10.5*
-
Aflac Incorporated Supplemental Executive Retirement Plan, as amended and restated effective
January 1, 2009 – incorporated by reference from 2008 Form 10-K, Exhibit 10.5.
10.6*
-
First Amendment to the Aflac Incorporated Supplemental Executive Retirement Plan, as amended
and restated effective January 1, 2009 – incorporated by reference from 2012 Form 10-K,
Exhibit 10.3.
10.7*
-
Second Amendment to the Aflac Incorporated Supplemental Executive Retirement Plan, as
amended and restated effective January 1, 2009 – incorporated by reference from 2014 Form 10-K,
Exhibit 10.4.
10.8*
-
Third Amendment to the Aflac Incorporated Supplemental Executive Retirement Plan, as amended
and restated effective January 1, 2009 – incorporated by reference from Form 8-K dated June 13,
2023, Exhibit 10.1.
10.9*
-
Aflac Incorporated Executive Deferred Compensation Plan, as amended and restated, effective
January 1, 2020 – incorporated by reference from 2019 Form 10-K, Exhibit 10.11.
10.10*
-
First Amendment to the Aflac Incorporated Executive Deferred Compensation Plan, as amended
and restated, effective January 1, 2020 – incorporated by reference from Form 10-Q for June 30,
2020, Exhibit 10.1.
10.11*
-
Second Amendment to the Aflac Incorporated Executive Deferred Compensation Plan, as amended
and restated, effective January 1, 2020 – incorporated by reference from Form 10-Q for September
30, 2022, Exhibit 10.1.
10.12*
-
Aflac Incorporated 2018 Management Incentive Plan – incorporated by reference from the 2017
Proxy Statement, Appendix B.
10.13*
-
Aflac Incorporated 2023 Management Incentive Plan – incorporated by reference from Form 8-K
dated February 10, 2023, Exhibit 10.1.
10.14*
-
1999 Aflac Associate Stock Bonus Plan, amended and restated as of February 1, 2021 –
incorporated by reference from Form 10-Q for March 31, 2021, Exhibit 10.1.
10.15*
-
2004 Aflac Incorporated Long-Term Incentive Plan, as amended and restated March 14, 2012 –
incorporated by reference from the 2012 Proxy Statement, Appendix A.
10.16*
-
Form of Non-Employee Director Stock Option Agreement (NQSO) under the 2004 Aflac
Incorporated Long-Term Incentive Plan, as amended and restated March 14, 2012 – incorporated
by reference from Form 10-Q for March 31, 2016, Exhibit 10.13.
10.17*
-
U.S. Form of Employee Stock Option Agreement (Non-Qualifying Stock Option) under the 2004
Aflac Incorporated Long-Term Incentive Plan, as amended and restated March 14, 2012 –
incorporated by reference from Form 10-Q for March 31, 2016, Exhibit 10.21.
10.18*
-
Japan Form of Employee Stock Option Agreement (Non-Qualifying Stock Option) under the 2004
Aflac Incorporated Long-Term Incentive Plan, as amended and restated March 14, 2012 –
incorporated by reference from Form 10-Q for March 31, 2016, Exhibit 10.22.
194
10.19*
-
U.S. Form of Employee Stock Option Agreement (Incentive Stock Option) under the 2004 Aflac
Incorporated Long-Term Incentive Plan, as amended and restated March 14, 2012 – incorporated
by reference from Form 10-Q for March 31, 2016, Exhibit 10.23.
10.20*
- Aflac Incorporated Long-Term Incentive Plan, as amended and restated February 14, 2017 –
incorporated by reference from Form 8-K dated May 1, 2017, Exhibit 10.1.
10.21*
- First Amendment to the Aflac Incorporated Long-Term Incentive Plan, as amended and restated
February 14, 2017 – incorporated by reference from Form 10-Q for September 30, 2022, Exhibit
10.2.
10.22*
- Form of Non-Employee Director Stock Option Agreement (Non-Qualifying Stock Option) under the
Aflac Incorporated Long-Term Incentive Plan, as amended and restated February 14, 2017 –
incorporated by reference from Form 10-Q for June 30, 2017, Exhibit 10.33.
10.23*
- Form of Non-Employee Director Restricted Stock Award Agreement under the Aflac Incorporated
Long-Term Incentive Plan, as amended and restated February 14, 2017 – incorporated by reference
from Form 10-Q for June 30, 2017, Exhibit 10.34.
10.24*
- U.S. Form of Employee Restricted Stock Award Agreement under the Aflac Incorporated Long-Term
Incentive Plan, as amended and restated February 14, 2017 – incorporated by reference from Form
8-K dated February 11, 2022, Exhibit 10.1.
10.25*
- Japan Form of Employee Restricted Stock Award Agreement under the Aflac Incorporated Long-
Term Incentive Plan, as amended and restated February 14, 2017 – incorporated by reference from
Form 8-K dated February 11, 2022, Exhibit 10.2.
10.26*
- U.S. Form of Employee Restricted Stock Unit Award Agreement under the Aflac Incorporated Long-
Term Incentive Plan, as amended and restated February 14, 2017.
10.27*
- Japan Form of Employee Restricted Stock Unit Award Agreement under the Aflac Incorporated
Long-Term Incentive Plan, as amended and restated February 14, 2017.
10.28*
- Aflac Incorporated Retirement Plan for Directors Emeritus, as amended and restated, dated
February 9, 2010 – incorporated by reference from 2009 Form 10-K, Exhibit 10.26.
10.29*
- Amendment to Aflac Incorporated Retirement Plan for Directors Emeritus, as amended and
restated, dated August 10, 2010 – incorporated by reference from Form 10-Q for September 30,
2010, Exhibit 10.27.
10.30*
- Aflac Life Insurance Japan Ltd. Officer Retirement Plan – incorporated by reference from 2019
Form 10-K, Exhibit 10.43.
10.31*
-
Aflac Incorporated Executive Officer Severance Plan – incorporated by reference from Form 10-Q
for March 31, 2023, Exhibit 10.2.
10.32*
-
Aflac Incorporated Employment Agreement with Daniel P. Amos, as amended and restated, dated
August 20, 2015 – incorporated by reference from Form 10-Q for September 30, 2015, Exhibit
10.29.
10.33*
-
Aflac Incorporated Employment Agreement with Audrey Boone Tillman, dated June 11, 2015 –
incorporated by reference from Form 10-Q for March 31, 2018, Exhibit 10.6.
10.34*
-
Amendment to Aflac Incorporated Employment Agreement with Audrey Boone Tillman, dated
October 24, 2022 – incorporated by reference from 2022 Form 10-K, Exhibit 10.34.
10.35*
-
Amendment to Aflac Incorporated Employment Agreement with Audrey Boone Tillman, dated
November 1, 2024 – incorporated by reference from 2024 Form 10-K, Exhibit 10.33.
10.36*
-
Aflac Incorporated Employment Agreement with Max K. Brodén, dated April 29, 2021 – incorporated
by reference from Form 10-Q for March 31, 2021, Exhibit 10.3.
10.37*
-
Amendment to Aflac Incorporated Employment Agreement with Max K. Brodén, dated October 24,
2022 – incorporated by reference from 2022 Form 10-K, Exhibit 10.37.
10.38*
-
Amendment to Aflac Incorporated Employment Agreement with Max K. Brodén, dated November 1,
2024 – incorporated by reference from 2024 Form 10-K, Exhibit 10.36.
10.39
-
Agency Services Agreement, dated March 1, 2008, by and between Japan Post Network Co., Ltd.
and Aflac – incorporated by reference from Form 10-Q for March 31, 2020, Exhibit 10.2.
10.40**
-
Amendment Agreement to Agency Services Agreement, dated June 27, 2016, by and between
Japan Post Co., Ltd. and Aflac – incorporated by reference from Form 10-Q for March 31, 2020,
Exhibit 10.3.
10.41
-
Basic Agreement regarding the “Strategic Alliance Based on Capital Relationship”, dated December
19, 2018, by and among Japan Post Holdings Co., Ltd., Aflac Incorporated and Aflac Life Insurance
Japan Ltd. – incorporated by reference from Form 8-K dated December 19, 2018, Exhibit 10.1.
10.42
-
Letter Agreement, dated December 19, 2018, by and between Japan Post Holdings Co., Ltd. and
Aflac Incorporated – incorporated by reference from Form 8-K dated December 19, 2018, Exhibit
10.2.
195
10.43
-
Shareholders Agreement, dated February 28, 2019, by and between Aflac Incorporated, Japan Post
Holdings Co., Ltd., J&A Alliance Holdings Corporation (solely in its capacity as trustee of J&A
Alliance Trust), and General Incorporated Association J&A Alliance – incorporated by reference from
Form 10-Q for March 31, 2019, Exhibit 10.50.
19***
-
Aflac Incorporated's Insider Trading Policy and Compliance Procedures – incorporated by reference
from 2024 Form 10-K, Exhibit 19.
21
-
Subsidiaries.
23
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-8 Registration
Statement No. 333-158969 with respect to the Aflac Incorporated 401(k) Savings and Profit Sharing
Plan.
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-8 Registration
Statement Nos. 333-135327, 333-161269, 333-202781, 333-245702, and 333-293458 with respect
to the Aflac Incorporated Executive Deferred Compensation Plan.
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-8 Registration
Statement No. 333-115105 and 333-219888 with respect to the Aflac Incorporated Long-Term
Incentive Plan.
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-3 Registration
Statement No. 333-273722 with respect to the AFL Stock Plan.
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-3 Registration
Statement No. 333-271561 with respect to the resale of Aflac Incorporated common stock by J&A
Alliance Holdings Corporation in its capacity as the trustee of J&A Alliance Trust.
-
Consent of independent registered public accounting firm, KPMG LLP, to Form S-3 Registration
Statement No. 333-281977 with respect to the Aflac Incorporated shelf registration statement.
31.1
-
Certification of CEO dated February 25, 2026, required by Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934.
31.2
-
Certification of CFO dated February 25, 2026, required by Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934.
32
-
Certification of CEO and CFO dated February 25, 2026, pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97*
-
Aflac Incorporated Policy on Recoupment of Incentive Compensation, as amended.
101.INS
-
XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
-
Inline XBRL Taxonomy Extension Schema.
101.CAL
-
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
-
Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB
-
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE
-
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
-
Cover Page Interactive Data File - formatted as Inline XBRL and contained in Exhibit 101.
(1) Copies of any exhibit are available upon request by calling the Company's Investor Relations Department at 800.235.2667 -
option 3
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this
report.
** Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
*** Portions of this exhibit have been redacted.
196
(c) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Aflac Incorporated (Parent Only)
Condensed Statements of Earnings
Years ended December 31,
(In millions)
2025
2024
2023
Revenues:
Management and service fees from subsidiaries(1)
$
170
$
163
$
151
Net investment income
147
31
(174)
Interest from subsidiaries(1)
1
1
1
Net investment gains (losses)
122
503
301
Total revenues
440
698
279
Operating expenses:
Interest expense
213
189
187
Other operating expenses
392
282
295
Total operating expenses
605
471
482
Earnings before income taxes and equity in earnings of
subsidiaries
(165)
227
(203)
Income tax expense (benefit)
(103)
(126)
(444)
Earnings before equity in earnings of subsidiaries
(62)
353
241
Equity in earnings of subsidiaries(1)
3,708
5,090
4,418
Net earnings
$ 3,646
$ 5,443
$ 4,659
(1)Eliminated in consolidation
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Report of Independent Registered Public Accounting Firm.
197
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Aflac Incorporated (Parent Only)
Condensed Statements of Comprehensive Income (Loss)
Years ended December 31,
(In millions)
2025
2024
2023
Net earnings
$ 3,646
$ 5,443
$ 4,659
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period
146
(769)
(366)
Unrealized gains (losses) on fixed maturity securities during period
(2,322)
(1,421)
2,327
Unrealized gains (losses) on derivatives during period
8
3
6
Effect of changes in discount rate assumptions during period
7,631
5,780
(582)
Pension liability adjustment during period
97
23
35
Total other comprehensive income (loss) before income taxes
5,560
3,616
1,420
Income tax expense (benefit) related to items of other comprehensive
income (loss)
1,130
1,074
511
Other comprehensive income (loss), net of income taxes
4,430
2,542
909
Total comprehensive income (loss)
$ 8,076
$ 7,985
$ 5,568
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Report of Independent Registered Public Accounting Firm.
198
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Aflac Incorporated (Parent Only)
Condensed Balance Sheets
December 31,
(In millions, except for share and per-share amounts)
2025
2024
Assets:
Investments and cash:
Fixed maturity securities available-for-sale, at fair value (no allowance
for credit losses in 2025 and 2024, amortized cost $1,728 in 2025 and
$1,702 in 2024)
$ 1,714
$ 1,713
Investments in subsidiaries(1)
32,215
27,890
Other investments
978
1,239
Cash and cash equivalents
2,646
2,308
Total investments and cash
37,553
33,150
Due from subsidiaries(1)
206
242
Income taxes receivable
147
71
Other assets
946
1,121
Total assets
$ 38,852
$ 34,584
Liabilities and shareholders' equity:
Liabilities:
Employee benefit plans
$
357
$
347
Notes payable and lease obligations
8,143
7,219
Other liabilities
862
920
Total liabilities
9,362
8,486
Shareholders' equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000
shares in 2025 and 2024; issued 1,357,909 shares in 2025 and 1,356,763
shares in 2024
136
136
Additional paid-in capital
3,024
2,894
Retained earnings
54,682
52,277
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)
(4,847)
(4,998)
Unrealized gains (losses) on fixed maturity securities
(1,809)
24
Unrealized gains (losses) on derivatives
(13)
(20)
Effect of changes in discount rate assumptions
8,035
2,006
Pension liability adjustment
86
10
Treasury stock, at average cost
(29,804)
(26,231)
Total shareholders' equity
29,490
26,098
Total liabilities and shareholders' equity
$ 38,852
$ 34,584
(1)Eliminated in consolidation
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Report of Independent Registered Public Accounting Firm.
199
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Aflac Incorporated (Parent Only)
Condensed Statements of Cash Flows
Years ended December 31,
(In millions)
2025
2024
2023
Cash flows from operating activities:
Net earnings
$ 3,646
$ 5,443
$ 4,659
Adjustments to reconcile net earnings to net cash provided from
operating activities:
Equity in earnings of subsidiaries(1)
(3,708)
(5,090)
(4,418)
Cash dividends received from subsidiaries
3,824
4,274
3,410
Other, net
(52)
(292)
(686)
Net cash provided (used) by operating activities
3,710
4,335
2,965
Cash flows from investing activities:
Fixed maturity securities sold
824
572
547
Fixed maturity securities purchased
(772)
(695)
(345)
Other investments sold (purchased)
125
(243)
(34)
Settlement of derivatives
277
469
693
Additional capitalization of subsidiaries(1)
(15)
(84)
(203)
Other, net
(58)
0
1
Net cash provided (used) by investing activities
381
19
659
Cash flows from financing activities:
Purchases of treasury stock
(3,530)
(2,800)
(2,801)
Proceeds from borrowings
1,039
823
0
Principal payments under debt obligations
(84)
0
0
Dividends paid to shareholders
(1,198)
(1,087)
(966)
Treasury stock reissued
8
14
17
Proceeds from exercise of stock options
7
9
13
Net change in amount due to/from subsidiaries(1)
25
(5)
(6)
Other, net
(20)
(7)
(17)
Net cash provided (used) by financing activities
(3,753)
(3,053)
(3,760)
Net change in cash and cash equivalents
338
1,301
(136)
Cash and cash equivalents, beginning of period
2,308
1,007
1,143
Cash and cash equivalents, end of period
$ 2,646
$ 2,308
$ 1,007
(1) Eliminated in consolidation
See the accompanying Notes to Condensed Financial Statements.
See the accompanying Report of Independent Registered Public Accounting Firm.
200
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Aflac Incorporated (Parent Only)
Notes to Condensed Financial Statements
The accompanying condensed financial statements should be read in conjunction with the consolidated financial
statements and notes thereto of Aflac Incorporated and Subsidiaries included in Part II, Item 8. of this report.
(A) Notes Payable and Lease Obligations
A summary of notes payable and lease obligations as of December 31 follows:
201
(In millions)
2025
2024
1.125% senior sustainability notes due March 2026
$
400
$
399
2.875% senior notes due October 2026
299
299
3.60% senior notes due April 2030
995
994
6.90% senior notes due December 2039
221
221
6.45% senior notes due August 2040
255
255
4.00% senior notes due October 2046
394
394
4.750% senior notes due January 2049
542
542
Yen-denominated senior notes and subordinated debentures:
.300% senior notes paid September 2025 (principal amount ¥12.4 billion)
0
79
.932% senior notes due January 2027 (principal amount ¥60.0 billion)
382
378
1.048% senior notes due March 2029 (principal amount ¥13.0 billion)
83
81
1.075% senior notes due September 2029 (principal amount ¥33.4 billion)
213
211
.500% senior notes due December 2029 (principal amount ¥12.6 billion)
80
79
.550% senior notes due March 2030 (principal amount ¥13.3 billion)
85
84
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)
186
184
1.726% senior notes due October 2030 (principal amount ¥35.0 billion)
223
0
1.412% senior notes due March 2031 (principal amount ¥27.9 billion)
178
176
.633% senior notes due April 2031 (principal amount ¥30.0 billion)
191
189
.843% senior notes due December 2031 (principal amount ¥9.3 billion)
59
58
.750% senior notes due March 2032 (principal amount ¥20.7 billion)
131
130
1.990% senior notes due May 2032 (principal amount ¥18.2 billion)
116
0
1.320% senior notes due December 2032 (principal amount ¥21.1 billion)
134
133
2.003% senior notes due December 2032 (principal amount ¥23.4 billion)
149
0
.844% senior notes due April 2033 (principal amount ¥12.0 billion)
76
76
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)
97
95
1.682% senior notes due March 2034 (principal amount ¥7.7 billion)
49
48
1.600% senior notes due March 2034 (principal amount ¥18.3 billion)
116
115
.934% senior notes due December 2034 (principal amount ¥9.8 billion)
62
62
.830% senior notes due March 2035 (principal amount ¥10.6 billion)
67
66
2.320% senior notes due May 2035 (principal amount ¥38.3 billion)
245
0
2.369% senior notes due June 2035 (principal amount ¥9.5 billion)
60
0
1.740% senior notes due March 2036 (principal amount ¥15.0 billion)
95
94
1.039% senior notes due April 2036 (principal amount ¥10.0 billion)
64
63
1.594% senior notes due September 2037 (principal amount ¥6.5 billion)
41
41
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)
56
56
1.920% senior notes due March 2039 (principal amount ¥16.5 billion)
104
103
1.122% senior notes due December 2039 (principal amount ¥6.3 billion)
40
39
2.650% senior notes due May 2040 (principal amount ¥11.6 billion)
74
0
2.779% senior notes due June 2040 (principal amount ¥7.0 billion)
45
0
1.264% senior notes due April 2041 (principal amount ¥10.0 billion)
63
63
2.160% senior notes due March 2044 (principal amount ¥5.7 billion)
36
35
3.040% senior notes due May 2045 (principal amount ¥7.0 billion)
45
0
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)
379
375
1.560% senior notes due April 2051 (principal amount ¥20.0 billion)
127
125
2.144% senior notes due September 2052 (principal amount ¥12.0 billion)
76
75
2.400% senior notes due March 2054 (principal amount ¥19.5 billion)
124
122
Yen-denominated loans:
Variable interest rate loan due August 2027 (1.08% in 2025 and .84% in 2024,
principal amount ¥11.7 billion)
75
74
Variable interest rate loan due August 2029 (1.18% in 2025 and .94% in 2024,
principal amount ¥25.3 billion)
161
160
Variable interest rate loan due August 2032 (1.33% in 2025 and 1.09% in 2024,
principal amount ¥70.0 billion)
446
441
Operating lease obligations payable through 2032
4
5
Total notes payable and lease obligations
$
8,143
$
7,219
Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the
life of the notes.
In September 2025, the Parent Company extinguished ¥12.4 billion of .300% senior notes upon their maturity.
202
In June 2025, the Parent Company issued four series of senior notes totaling ¥74.9 billion through a public debt offering
under its U.S. shelf registration statement. The first series, which totaled ¥35.0 billion, bears interest at a fixed rate of
1.726% per annum, payable semiannually, and will mature in October 2030. The second series, which totaled
¥23.4 billion, bears interest at a fixed rate of 2.003% per annum, payable semiannually, and will mature in December
2032. The third series, which totaled ¥9.5 billion, bears interest at a fixed rate of 2.369% per annum, payable
semiannually, and will mature in June 2035. The fourth series, which totaled ¥7.0 billion, bears interest at a fixed rate of
2.779% per annum, payable semiannually, and will mature in June 2040. These notes are redeemable at the Parent
Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as
specified in the indenture governing the terms of the issuance. In addition, the notes maturing in October 2030, December
2032, June 2035 and June 2040 are redeemable at the Parent Company's option, in whole or in part from time to time, on
or after July 18, 2030, September 14, 2032, December 5, 2034, and December 5, 2039, 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 May 2025, the Parent Company issued four series of senior notes totaling ¥75.1 billion through a private placement.
The first series, which totaled ¥18.2 billion, bears interest at a fixed rate of 1.990% per annum, payable semiannually, and
will mature in May 2032. The second series, which totaled ¥38.3 billion, bears interest at a fixed rate of 2.320% per
annum, payable semiannually, and will mature in May 2035. The third series, which totaled ¥11.6 billion, bears interest at
a fixed rate of 2.650% per annum, payable semiannually, and will mature in May 2040. The fourth series, which totaled
¥7.0 billion, bears interest at a fixed rate of 3.040% per annum, payable semiannually, and will mature in May 2045. These
notes are redeemable at the Parent Company's option (i) in whole at any time or (ii) in part from time to time in an amount
not less than 5% of the aggregate principal amount then outstanding of the notes to be redeemed.
The aggregate contractual maturities of notes payable during each of the years after December 31, 2025, are as follows:
(In millions)
2026
$ 700
2027
458
2028
0
2029
539
2030
1,496
Thereafter
4,994
Total
$ 8,187
For further information regarding notes payable and lease obligations, see Note 9 of the Notes to the Consolidated
Financial Statements.
(B) Derivatives
At December 31, 2025, the Parent Company's outstanding freestanding derivative contracts were foreign currency
forwards. The foreign currency forwards are designated as derivative hedges of the foreign currency exposure of the
Company's net investment in Aflac Japan. The Parent Company also enters into foreign currency forward contracts with
Aflac Re to economically manage the currency mismatch between Aflac Re's assets which are mostly denominated in
U.S. dollars and its liabilities which are mostly denominated in Japanese yen. The Parent Company does not use
derivative financial instruments for trading purposes, nor does it engage in leveraged derivative transactions. For further
information regarding these derivatives, see Notes 1 and 4 of the Notes to the Consolidated Financial Statements.
(C) Income Taxes
The Parent Company and its eligible U.S. subsidiaries file a consolidated U.S. federal income tax return. Income tax
liabilities or benefits are recorded by each principal subsidiary based upon separate return calculations, and any
difference between the consolidated provision and the aggregate amounts recorded by the subsidiaries is reflected in the
Parent Company financial statements. For further information on income taxes, see Note 10 of the Notes to the
Consolidated Financial Statements.
(D) Dividend Restrictions
See Note 14 of the Notes to the Consolidated Financial Statements for information regarding dividend restrictions.
203
(E) Supplemental Disclosures of Cash Flow Information
(In millions)
2025
2024
2023
Interest paid
$ 197
$ 180
$ 184
Noncash financing activities:
Treasury stock issued for shareholder dividend reinvestment
43
41
37
204
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
Aflac Incorporated and Subsidiaries
Years ended December 31,
(In millions)
Deferred Policy
Acquisition
Costs
Future Policy
Benefits & Unpaid
Policy Claims
Unearned
Premiums
Other
Policyholders'
Funds
2025:
Aflac Japan
$ 5,302
$ 52,602
$ 1,245
$ 5,445
Aflac U.S.
3,732
11,281
97
0
All other
0
4,099
(11)
0
Intercompany eliminations
0
(5,167)
(8)
0
Total
$ 9,034
$ 62,815
$ 1,323
$ 5,445
2024:
Aflac Japan
$ 5,102
$ 60,890
$ 1,199
$ 5,460
Aflac U.S.
3,656
10,960
103
0
All other
0
4,817
22
0
Intercompany eliminations
0
(5,905)
(38)
0
Total
$ 8,758
$ 70,762
$ 1,286
$ 5,460
Segment amounts may not agree in total to the corresponding consolidated amounts due to rounding.
Years Ended December 31,
(In millions)
Net
Earned
Premiums
Net
Investment
Income
Total
Benefits and
Claims, net
Amortization of
Deferred Policy
Acquisition Costs
Other
Operating
Expenses
Premiums
Written
2025:
Aflac Japan
$
6,744
$ 2,854
$
3,999
$
323
$ 1,595
$
7,820
Aflac U.S.
5,999
854
2,837
551
2,094
6,177
All other
805
368
458
0
775
0
Total
$ 13,548
$ 4,076
$
7,293
$
874
$ 4,464
$ 13,997
2024:
Aflac Japan
$
6,930
$ 3,032
$
4,317
$
321
$ 1,527
$
7,866
Aflac U.S.
5,829
883
2,726
530
2,064
5,905
All other
681
201
407
0
618
0
Total
$ 13,440
$ 4,116
$
7,450
$
851
$ 4,209
$ 13,771
2023:
Aflac Japan
$
8,047
$ 3,033
$
5,313
$
326
$ 1,790
$
8,571
Aflac U.S.
5,675
854
2,431
490
2,201
5,666
All other
400
(77)
467
0
421
0
Total
$ 14,123
$ 3,811
$
8,211
$
816
$ 4,412
$ 14,237
Segment amounts may not agree in total to the corresponding consolidated amounts due to rounding.
See the accompanying Report of Independent Registered Public Accounting Firm.
205
SCHEDULE IV
REINSURANCE
Aflac Incorporated and Subsidiaries
Years Ended December 31,
(In millions)
Gross
Amount
Ceded to
Other
Companies
Assumed
from Other
companies
Net
Amount
Percentage
of Amount
Assumed
to Net
2025:
Life insurance in force
$ 245,615
$ 13,495
$ 17,867
$ 249,987
7 %
Premiums:
Health insurance
$ 11,857
$
316
$
132
$ 11,673
1 %
Life insurance
1,903
52
24
1,875
1
Total earned premiums
$ 13,760
$
368
$
156
$ 13,548
1 %
2024:
Life insurance in force
$ 187,553
$ 13,481
$ 21,192
$ 195,264
11 %
Premiums:
Health insurance
$ 11,784
$
233
$
135
$ 11,686
1 %
Life insurance
1,778
51
27
1,754
2
Total earned premiums
$ 13,562
$
284
$
162
$ 13,440
1 %
2023:
Life insurance in force
$ 163,601
$ 15,592
$ 28,716
$ 176,725
16 %
Premiums:
Health insurance
$ 12,335
$
352
$
167
$ 12,150
1 %
Life insurance
1,983
52
42
1,973
2
Total earned premiums
$ 14,318
$
404
$
209
$ 14,123
1 %
Premiums by type may not agree in total to the corresponding consolidated amounts due to rounding.
See the accompanying Report of Independent Registered Public Accounting Firm.
206
ITEM 16. FORM 10-K SUMMARY
Not applicable.
Item 16. Form 10-K Summary
207
Glossary of Selected Terms
Throughout this Annual Report on Form 10-K, the
Company may use certain performance metrics and
other terms which are defined below.
Adjusted net investment income is net investment
income adjusted for i) amortized hedge cost/income
related to foreign currency exposure management
strategies and certain derivative activity and ii) net
interest income/expense from foreign currency and
interest
rate
derivatives
associated
with
certain
investment strategies, which are reclassified from net
investment gains (losses) to net investment income. The
Company considers adjusted net investment income
important because it provides a more comprehensive
understanding of the costs and income associated with
the Company's investments and related hedging
strategies. The metric is used in segment reporting as a
component of segment profitability.
Affiliated corporate agency is an agency in Japan
directly affiliated with a specific corporation that sells
insurance policies primarily to its employees.
Annualized premiums in force is the amount of gross
premium that a policyholder must pay over a full year in
order to keep coverage. The growth of net earned
premiums is directly affected by the change in premiums
in force and by the change in weighted-average yen/
dollar exchange rates. Management uses this measure
as a key indicator of source of earnings.
Average weekly producer is the total number of writing
agents, including brokers, in the U.S. who have
produced greater than $0.00 during the production week
- excluding any manual adjustments - divided by the
number of weeks in the time period. The Company
believes this metric allows sales management to monitor
progress and needs, as well as serve as a leading
indicator of future production capacity.
Capital buffer is an established dollar amount of
liquidity at the Parent Company reserved for injecting
capital into the insurance entities or general liquidity
support for general expenses at the Parent Company.
Cancer policies in force are the number of policies
attributable to cancer products currently in force at the
end of the period for Aflac Japan. The number of policies
increases
with
new
sales
and
decreases
with
terminations. Management uses this number to measure
the growth in Aflac Japan's cancer product line by policy
count.
Earnings per basic share is net earnings divided by
weighted-average number of shares outstanding for the
period.
Earnings Per diluted share is net earnings divided by
the weighted-average number of shares outstanding for
the period plus the weighted-average shares for the
dilutive effect of share-based awards outstanding.
Economic Solvency Ratio (ESR) is an economic value-
based soundness indicator that demonstrates whether
the insurance company has sufficient capital to cover
future risks. Assets and liabilities are evaluated at
economic value, the risk amount incurred in a stressed
environment is measured, and the capital sufficiency for
this risk is assessed. The ESR level, which is the basis
for supervisory intervention by the authorities, is set at
100%.
Group insurance is insurance issued to a group, such
as an employer or trade association, that covers
employees
or
association
members
and
their
dependents through certificates of coverage.
Individual insurance is insurance issued to an
individual with the policy designed to cover that person
and his or her dependents.
Policies in force are the number of policies currently in
force at the end of the period for Aflac Japan. The
number of policies increases with new sales and
decreases with terminations. Management uses this
number to measure the growth in the Company's
business by policy count.
Liquidity
support
is
an
internally
defined
and
established dollar amount of liquidity reserved for
supporting potential collateral and settlements of
derivatives at the Parent Company and short-term
funding needs.
Net investment income is the income derived from
interest and dividends on invested assets, after
deducting investment expenses.
Net earned premiums is a financial measure that
appears on the Company's consolidated statements of
earnings and in its segment reporting. This measure
reflects collected or due premiums that have been
earned ratably on policies in force during the reporting
period, reduced by premiums that have been ceded to
third parties and increased by premiums assumed
through reinsurance.
New annualized premium sales are sometimes
referred to as new sales or sales. An operating measure
that is not reflected on the Company's financial
statements. New annualized premium sales generally
represent annual premiums on policies and riders the
Company sold and incremental increases from policy
conversions that would be collected over a 12-month
period assuming the policies remain in force for that
entire period. For Aflac Japan, new annualized premium
sales are determined by applications submitted during
the reporting period. For Aflac U.S., new annualized
premium sales are determined by applications that are
208
issued during the reporting period. Policy conversions
are defined as the positive difference in the annualized
premium when a policy upgrades in the current reporting
period. The Company believes that this metric is a key
indicator of the Company's future source of earnings.
New money yield is gross yields earned on purchases
of fixed maturities, loan receivables, and equities.
Purchases
exclude
capitalized
interest,
securities
lending/repurchase agreements, short-term/cash activity,
and alternatives. New money yield for equities is based
on the assumed dividend yield at the time of purchase.
The new money yield for Aflac Japan excludes the
impact of any derivatives and associated amortized
hedge
costs
associated
with
USD-denominated
investments. Management uses this metric as a leading
indicator of future investment earning potential.
Operating ratios are used to evaluate the Company's
financial condition and profitability. Examples include: (1)
Ratios to total adjusted revenues, which present
expenses as percentage of total revenues and (2) Ratios
to total premium, including benefit ratio. Operating ratios
include: Benefit Ratio and Expense Ratio.
Portfolio book yield expressed as a percentage of the
investments' book value, represents the gross return
expected to be realized on a security at a point in time
and
is
calculated
for
fixed
maturity
securities,
commercial mortgage and other loans and equity
securities.
It
excludes
amortized
hedge
costs,
investments in limited partnerships and short-term
securities. The yield assumes any early redemption
options will be exercised. Management uses this metric
to measure the future total return on the portfolio.
Premium persistency is the percentage of premiums
remaining in force at the end of a period, usually one
year, and presented on a trailing 12-month average
basis. For example, 95% persistency would mean that
95% of the premiums in force at the beginning of a
period are still in force at the end of the period. The
Company believes that this metric is a key driver of in
force levels, which is a key measure of the size of the
Company's business and future sources of earnings.
Pretax adjusted earnings are earnings as adjusted
before the application of income taxes. This measure is
used in the Company's segment reporting.
Pretax adjusted profit margin is adjusted earnings
divided by adjusted revenues, before taxes are applied.
This measure is used in the Company's segment
reporting.
Return on average invested assets is net investment
income as a percentage of average invested assets
during the period. Management uses this metric to
demonstrate how the Company's actual net investment
income results represent an overall return on the
portfolio to provide a more comparative metric as the
size of the Company's investment portfolio changes over
time.
Risk-based Capital (RBC) Ratio is statutory adjusted
capital divided by statutory required capital. This
insurance ratio is based on rules prescribed by the
National Association
of
Insurance
Commissioners
(NAIC) and provides an indication of the amount of
statutory capital the insurance company maintains,
relative to the inherent risks in the insurer’s operations.
Solvency Margin Ratio (SMR) is solvency margin total
divided by one half of the risk total. This insurance ratio
is prescribed by the Japan Financial Services Agency
(FSA) and is used for all life insurance companies in
Japan to measure the adequacy of the company’s ability
to pay policyholder claims in the event actual risks
exceed expected levels.
Statutory earnings are earnings determined according
to
accounting
rules
prescribed
by
the
National
Association of Insurance Commissioners (NAIC), as
modified by the insurance department in the insurance
company’s state of domicile. These statutory accounting
rules are different from U.S. GAAP and are intended to
emphasize
policyholder
protection
and
company
solvency.
Weighted-average foreign exchange rate is Japan
segment operating earnings for the period (excluding
hedge costs) in yen divided by Japan segment operating
earnings for the period (excluding hedge costs) in U.S.
dollars. Management uses this metric to evaluate and
determine consolidated results on foreign currency
effective basis.
209
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aflac Incorporated
By:
/s/ Daniel P. Amos
February 25, 2026
(Daniel P. Amos)
Chief Executive Officer,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Daniel P. Amos
Chief Executive Officer,
February 25, 2026
(Daniel P. Amos)
Chairman of the Board of Directors
/s/ Max K. Brodén
Senior Executive Vice President,
February 25, 2026
(Max K. Brodén)
Chief Financial Officer
/s/ Robin L. Blackmon
Senior Vice President, Financial Services;
February 25, 2026
(Robin L. Blackmon)
Chief Accounting Officer
210
/s/ W. Paul Bowers
Director
February 25, 2026
(W. Paul Bowers)
/s/ Arthur R. Collins
Director
February 25, 2026
(Arthur R. Collins)
/s/ Michael A. Forrester
Director
February 25, 2026
(Michael A. Forrester)
/s/ Miwako Hosoda
Director
February 25, 2026
(Miwako Hosoda)
/s/ Thomas J. Kenny
Director
February 25, 2026
(Thomas J. Kenny)
/s/ Georgette D. Kiser
Director
February 25, 2026
(Georgette D. Kiser)
/s/ Karole F. Lloyd
Director
February 25, 2026
(Karole F. Lloyd)
/s/ Nobuchika Mori
Director
February 25, 2026
(Nobuchika Mori)
/s/ Joseph L. Moskowitz
Director
February 25, 2026
(Joseph L. Moskowitz)
/s/ Katherine T. Rohrer
Director
February 25, 2026
(Katherine T. Rohrer)
211