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OFFON

AFLAC INCORPORATED

(AFL)
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Aflac Incorporated : INC Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) (form 10-Q)

07/29/2021 | 02:17pm EDT

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 (the Parent Company) and its
subsidiaries (collectively with the Parent Company, 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 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.
             • expect    • anticipate   • believe     • goal      • objective
             • may       • should       • estimate    • intends   • projects
             • will      • assumes      • potential   • target    • outlook


The Company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:


•difficult conditions in global capital markets and the economy, including those
caused by COVID-19
•defaults and credit downgrades of investments
•exposure to significant interest rate risk
•concentration of business in Japan
•limited availability of acceptable yen-denominated investments
•foreign currency fluctuations in the yen/dollar exchange rate
•differing judgments 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
•concentration of the Company's investments in any particular single-issuer or
sector
•the effects of COVID-19, and any resulting economic effects and government
interventions, on the Company's business and financial results
•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
•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
•subsidiaries' ability to pay dividends to the Parent Company
•inherent limitations to risk management policies and procedures
•the level of sales of Aflac Japan products in the Japan Post channel
•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 (such as the coronavirus COVID-19), tornadoes,
hurricanes, earthquakes, tsunamis, war or other military action, 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
•allegations or determinations of worker misclassification in the United States
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                                 MD&A OVERVIEW
MD&A is intended to inform the reader about matters affecting the financial
condition and results of operations of Aflac Incorporated and its subsidiaries
for the six-month periods ended June 30, 2021 and 2020, respectively. Results of
operations for interim periods are not necessarily indicative of results for the
entire year. As a result, the following discussion should be read in conjunction
with the consolidated financial statements and notes that are included in the
Company's annual report on Form 10-K for the year ended December 31, 2020 (2020
Annual Report). In this MD&A, amounts may not foot due to rounding. For
additional information on the Company's performance measures included in this
MD&A, see the Glossary of Selected Terms found directly following Part II. Other
Information.
This MD&A is divided into the following sections:
                                                                Page
                   Executive Summary                            68
                   Results of Operations                        72
                   Investments                                  86
                   Hedging Activities                           91
                   Deferred Policy Acquisition Costs            95
                   Policy Liabilities                           95
                   Benefit Plans                                95
                   Policyholder Protection                      95
                   Off-Balance Sheet Arrangements               95
                   Liquidity and Capital Resources              96
                   Critical Accounting Estimates               101



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                               EXECUTIVE SUMMARY

Company Overview

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the
Company) provide financial protection to more than 50 million people worldwide.
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 the United States (U.S.) and Japan. The Company's
insurance business consists of two reporting segments: Aflac Japan and Aflac
U.S.The Parent Company's primary insurance subsidiaries are Aflac Life
Insurance Japan Ltd. in Japan (Aflac Japan) and 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 Argus Dental
& Vision, Inc. (Argus), which provides a platform for Aflac Dental and Vision in
the U.S. (collectively, Aflac U.S.).

COVID-19


The impact of the COVID-19 global pandemic on the Company continues to evolve,
and its future effects remain uncertain. At the onset of the pandemic in 2020,
the majority of the Company's employees in Japan and the U.S. shifted to remote
working environments, with returns to office undertaken as warranted by local
conditions. Both Aflac Japan and Aflac U.S. have taken measures to address
employee health and safety and increase employees' ability to develop and
maintain more flexible working conditions, and operations remained stable
throughout the first six months of 2021. The Company also took prompt action at
the beginning of the pandemic to strengthen its capital and liquidity position,
and continues to monitor its investment portfolios to adjust to market
conditions, including the continuing recovery and inflation expectations. Both
Aflac Japan and Aflac U.S. have accelerated investments in digital initiatives
to improve productivity, efficiency and customer service over the long term.

In the three- and six-month periods ended June 30, 2021, sales for Aflac Japan,
in yen terms, increased 38.4% and 15.7%, respectively, compared to the same
periods in 2020, reflecting the launch of a new medical product in January 2021
and favorable comparisons due to pandemic conditions in 2020. In the three-month
period ended June 30, 2021, sales for Aflac U.S. increased 64.1%, compared to
the same period in 2020, reflecting increased sales activity as a result of the
ongoing economic reopening in the U.S. and favorable comparisons due to pandemic
conditions in 2020. In the six-month period ended June 30, 2021, Aflac U.S.
sales increased 6.6%. Pandemic-related claims and associated reserve increases
in both Japan and the U.S. have not materially impacted financial results in the
first six months of 2021 and were more than offset by a reduction in claims
related to non-COVID-19 medical needs. The pandemic's impact on economic
conditions have contributed to sales declines, pressuring premium growth rates.
This has been partially offset by lower lapse rates in the U.S.The Company has
not experienced material realized losses or impairments and credit losses
associated with the pandemic. The Company continues to monitor the effects and
risks of COVID-19, including its variants, to assess its impact on economic
conditions in Japan and the U.S. and on the Company's business, financial
condition, results of operations, liquidity and capital position. Those impacts
may cause changes to estimates of future earnings, capital deployment,
regulatory capital position, segment dividend payout ratios and other measures
the Company provided under 2021 Outlook in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of the 2020 Annual
Report.

The Company's efforts and other developments are outlined below.

•Liquidity and Capital Resources


The Company entered the crisis in a strong capital and liquidity position,
having maintained capital ratios in Japan and the U.S. at a level designed to
absorb a degree of market volatility. The Company has the ability to adjust cash
flow management from other sources of liquidity including reinvestment cash
flows and selling investments.

The Company remains committed to prudent liquidity and capital management. In
terms of repurchases, the Company remains in the market and is being tactical in
its approach to repurchasing its stock. The Company believes that this approach
will allow it to increase or decrease repurchase activity depending on how the
pandemic and market conditions evolve.

The Company is committed to maintaining a strong Aflac Japan solvency margin ratio (SMR) and Aflac U.S. risk-based capital (RBC) ratios.

The Company regularly evaluates adjustments to its foreign currency-hedging program in Aflac Japan to mitigate

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hedging cost and settlement risk while maintaining a strong SMR, including changes in the level of hedging employed with the U.S dollar-denominated investments. See the Liquidity and Capital Resources section of this MD&A for additional information regarding other potential sources of liquidity and capital resources.

•Investment Portfolio


The Company's investment portfolio was well-positioned entering the crisis, and
the Company continues to follow its strategy of investing primarily in fixed
maturity securities to generate a reliable stream of income. Fundamental credit
analysis and de-risking activity in prior periods contributed to the current
quality of the Company's investments. Although economic and market conditions
have continued to improve, the Company remains cautious about the continued path
of the recovery and the potential longer term impacts of the pandemic. In
addition, the reopening and supply shortages have triggered price increases
which have, among other things, increased inflation expectations and which may
ultimately result in an increase in inflation. The Company continues working
with certain borrowers to provide temporary relief of terms by providing payment
deferrals and other modifications or waivers where the Company believes it
improves its overall position. For additional information on these loan
modifications, see Note 3 of the Notes to the Consolidated Financial Statements.

•Crisis Management


The Company established command centers in Japan and the U.S. to monitor and
communicate pandemic developments to the Company's leadership. The command
centers participate in regular updates to the Company's leadership, including
government and regulatory actions, operations, employee policies and conditions
and distribution status. In addition, updates on cybersecurity are provided,
including with respect to the Company's remote workforce. Moreover, the
Company's financial leadership group has been meeting more frequently since the
onset of the pandemic and has focused on the capital markets, capital and
liquidity position, stress testing and any defensive actions that may be
necessary.

•Aflac Japan initiatives


Aflac Japan has maintained certain measures implemented at the onset of the
pandemic, such as restrictions on travel, working from home, staggered work
hours and limitations on the number of personnel attending in-person meetings.
As of June 30, 2021, Aflac Japan had approximately 54% of its workforce working
remotely. Aflac Japan continues to evaluate return to the office measures;
however, throughout the pandemic, Aflac Japan has evaluated its operational
capabilities and anticipates that the remote configuration could remain for an
indefinite period of time without materially impacting operations.

In June 2021, in response to the Government of Japan's initiative to accelerate
vaccinations, Aflac Japan began offering workplace vaccinations to employees,
temporary workers and contractors, including employee co-resident spouses,
children and relatives who wish to be vaccinated. Aflac Japan also introduced a
special paid leave system for employees who wish to receive a COVID-19
vaccination.

Aflac Japan remains focused on generating new business to existing and
prospective customers through direct mail and digital methods. Aflac Japan has
also accelerated investments in digital and paperless initiatives designed to
increase long term productivity, efficiency, customer service and business
continuity.

•Aflac U.S. and Corporate and Other initiatives


The Parent Company and Aflac U.S. continue to maintain certain employee and
worksite safety measures that were first implemented at the onset of the
pandemic, including restrictions on international travel, as well as protocols
to limit in-person meetings applicable to U.S. employees. As of June 30, 2021,
over 85% of U.S. employees were working remotely. While a small number of U.S.
employees remained at or previously returned to one of the Company's worksites,
a company-wide effort to return U.S. based employees of the Parent Company,
Aflac U.S. and the U.S. asset management subsidiary to the worksite began in
July 2021. The return to worksite is a phased approach throughout the rest of
2021 and into 2022, subject to factors including the availability of treatments
and vaccines, the return schedule of school systems and the availability of
child care, the number of COVID-19 cases and the COVID-19 replication rate in
areas of the U.S. where the Company has significant operations. For those
employees who are working in one of the Company's worksites, safety protocols
have been put in place that align with or exceed those recommended by the
Centers for Disease Control and Prevention (CDC). After the return to worksite,
the Parent Company and Aflac U.S. expect to adopt a workforce model
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comprised of a mix of full time office employees, full time remote employees, and employees who will split their time between office and remote work.

The Parent Company and Aflac U.S. also continues to maintain several actions taken for its employees. These include a commitment to cover the costs of COVID-19 testing and extended paid leave in certain circumstances.


Aflac U.S. policy sales, enrollment and agent recruiting functions are highly
dependent upon face-to-face interaction between independent agents and brokers
with prospective and new customers and agents. Throughout the pandemic,
opportunities for such interaction have been significantly reduced by reactions
to the pandemic, such as social distancing, shelter in place orders and work
from home initiatives. Notwithstanding the general improvement of economic
conditions to date in 2021, the impact of pandemic conditions on Aflac U.S.
sales remains subject to uncertainty as the effects of varying levels of
vaccination and the emergence of COVID-19 variants continue to develop. Aflac
U.S. has accelerated investments in digital initiatives designed to improve long
term productivity, efficiency and customer service. Further, Aflac U.S. is in
its third year of the build-out of the Consumer Markets business for the digital
direct-to-consumer sale of insurance and sales made through that platform have
continued to grow.

•Major government initiatives


Government authorities in Japan and the U.S. have implemented several
initiatives in response to the COVID-19 pandemic, including actions designed to
mitigate the adverse health effects of the virus and those designed to provide
broad-based relief and economic support to all aspects of the economy.

In January 2021, in response to the spread of COVID-19, the Government of Japan
issued a state of emergency declaration covering 11 prefectures, including Tokyo
and Osaka. The declaration was lifted in stages in areas where improvements in
infection rates and lower healthcare system utilization were observed, and it
was lifted in all areas on March 21, 2021. On April 23, 2021, due to the
continued spread of COVID-19, the Government of Japan issued a state of
emergency declaration covering four prefectures, including Tokyo and Osaka, from
April 25, 2021 until May 11, 2021. This declaration was expanded to ten
prefectures and extended until June 20, 2021, due to the emergence of COVID-19
variants and the continued increase in infections and impacts on the healthcare
system. On June 20, 2021, the declaration was lifted in nine prefectures,
including Tokyo and Osaka, and extended only in Okinawa until July 11. On July
8, 2021, due to a rise in COVID-19 infections, the Government of Japan issued a
new state of emergency declaration for Tokyo for the period from July 12, 2021
to August 22, 2021. The state of emergency declaration for Okinawa was also
further extended to August 22, 2021. In addition to the restrictions imposed by
these emergency declarations, certain local governments continue to request a
reduction of the onsite workforce and restraint from non-urgent traveling.

The Financial Services Agency (FSA) has requested that financial service
providers in Japan respond appropriately while continuing their essential
operations. This request includes insurance companies, which have been asked to
continue essential operations such as benefits and claims payment, including
policyholder loans. Moreover, following the expansion of the impact of COVID-19,
the FSA requested insurance companies to consider flexible interpretation and
application of insurance policy provisions and measures required for products
from the standpoint of protecting policyholders. In accordance with the FSA's
request, Aflac Life Insurance Japan Ltd. implemented a measure to pay accidental
death benefits and accidental serious disability benefits under its accidental
death benefit rider in cases of death or specified serious disabilities from
COVID-19.

Throughout the pandemic, Aflac Japan has also followed the guidance of the FSA
in terms of treating customers with care, ensuring ease and timeliness of claims
payments and extended coverage for temporary medical facilities and telemedicine
in certain circumstances, and waiver of interest on certain policyholder loans.
In January 2021, the grace period on premium payments was extended to July 31,
2021 for the policyholders who live in areas under the state of emergency and in
February 2021, the scope was expanded to all regions in Japan. Furthermore, in
response to the state of emergency declaration in April 2021, in May 2021 and
July 2021, the grace period on premium payments was extended to October, 31,
2021, November 30, 2021 and January 31, 2022, respectively. Aflac Japan will
continue to provide flexibility for policyholders who live in areas under the
state of emergency, including extending the payment grace period for a maximum
of six months from the state of emergency declaration. Policyholders are
required to file for relief through this extension.

During 2021, in response to fluctuations in COVID-19 infection rates and the
declaration of a state of emergency by the Government of Japan, Aflac Japan has
responded to requests of the Government of Japan and local governments while
also giving priority to customer service quality and business continuity.
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In the U.S., initial statewide shelter in place or stay at home orders were lifted and economic activity restrictions are easing in most states and have been lifted in a number of other states.


Throughout the pandemic, Aflac U.S. has taken steps to comply with
COVID-19-related directives issued by state regulatory authorities, including
those requiring or requesting premium grace periods. As of June 30, 2021,
premium grace periods remained in effect in six states, Puerto Rico and the
District of Columbia. Aflac U.S. experienced some increase in policy lapses in
the first six months of 2021 in certain states where premium grace periods
expired. If the premium grace periods continue to expire throughout 2021, Aflac
U.S. would expect an increase in lapse rates, and a decrease in corresponding
persistency rates.

The U.S. government took action in response to the COVID-19 pandemic by providing broad-based relief and economic support to all aspects of the economy.


The American Rescue Plan (ARP) Act of 2021 was signed into law in March 2021 and
was designed to provide approximately $1.9 trillion in financial stimulus in the
form of financial aid to individuals, businesses, nonprofits, states, and
municipalities. Among other measures, the ARP Act provides funding for vaccines
and testing; for states, tribal and local governments; and for small businesses.
The ARP Act also expands eligibility for the Paycheck Protection Program created
by the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in
March 2020.

Performance Highlights

Total revenues were $5.6 billion in the second quarter of 2021, compared with
$5.4 billion in the second quarter of 2020. Net earnings were $1.1 billion, or
$1.62 per diluted share in the second quarter of 2021, compared with $805
million, or $1.12 per diluted share, in the second quarter of 2020, driven by
higher net investment gains.

Total revenues were $11.4 billion in the first six months of 2021, compared with
$10.6 billion in the first six months of 2020. Net earnings were $2.4 billion,
or $3.49 per diluted share in the first six months of 2021, compared with
$1.4 billion, or $1.89 per diluted share, in the first six months of 2020,
driven by higher net investment gains.

Results in the second quarter of 2021 included pretax net investment gains of
$89 million, compared with net investment losses of $170 million in the second
quarter of 2020. Net investment gains in the second quarter of 2021 included a
decrease in credit loss allowances of $12 million; $99 million of net losses
from certain derivative and foreign currency gains or losses; $170 million of
net gains on equity securities; and $6 million of net gains from sales and
redemptions.

Results in the first six months of 2021 included pretax net investment gains of
$396 million, compared with net investment losses of $633 million in the first
six months of 2020. Net investment gains in the first six months of 2021
included a decrease in credit loss allowances of $34 million; $265 million of
net gains from certain derivative and foreign currency gains or losses; $102
million of net gains on equity securities; and $5 million of net losses from
sales and redemptions.

The average yen/dollar exchange rate(1) for the three-month period ended
June 30, 2021 was 109.48, or 1.7% weaker than the average yen/dollar exchange
rate(1) of 107.65 for the same period in 2020. The average yen/dollar exchange
rate(1) for the six-month period ended June 30, 2021 was 107.79, or .4% stronger
than the average yen/dollar exchange rate(1) of 108.25 for the same period in
2020.

Adjusted earnings(2) in the second quarter of 2021 were $1.1 billion, or $1.59
per diluted share, compared with $921 million, or $1.28 per diluted share, in
the second quarter of 2020, driven by lower-than-expected benefit ratios and
higher net investment income, primarily in Japan. The weaker yen/dollar exchange
rate impacted adjusted earnings per diluted share by $.01. Adjusted earnings(2)
in the first six months of 2021 were $2.1 billion, or $3.11 per diluted share,
compared with $1.8 billion, or $2.49 per diluted share, in the first six months
of 2020. The stronger yen/dollar exchange rate impacted adjusted earnings per
diluted share by $(.01).

Total investments and cash at June 30, 2021 were $146.7 billion, compared with
$142.2 billion at June 30, 2020. In the first six months of 2021, Aflac
Incorporated repurchased $1.2 billion, or 22.6 million of its common shares. At
June 30, 2021, the Company had 76.5 million remaining shares authorized for
repurchase.

Shareholders' equity was $33.7 billion, or $50.20 per share, at June 30, 2021, compared with $29.4 billion, or $41.21 per share, at June 30, 2020. Shareholders' equity at June 30, 2021 included a net unrealized gain on investment securities and derivatives of $10.0 billion, compared with a net unrealized gain of $8.5 billion at June 30, 2020. Shareholders' equity

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at June 30, 2021 also included an unrealized foreign currency translation loss
of $1.7 billion, compared with an unrealized foreign currency translation loss
of $1.5 billion at June 30, 2020. The annualized return on average shareholders'
equity in the second quarter of 2021 was 13.4%.

Shareholders' equity excluding accumulated other comprehensive income (AOCI)(2)
(adjusted book value) was $25.7 billion, or $38.27 per share at June 30, 2021,
compared with $22.7 billion, or $31.75 per share, at June 30, 2020. The
annualized adjusted return on equity (ROE) excluding foreign currency impact(2)
in the second quarter of 2021 was 17.0%.

(1) Yen/U.S. 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.


                             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 yen weakens, translating yen into
dollars results in fewer dollars being reported. When the yen strengthens,
translating yen into dollars results in more dollars being reported.
Consequently, yen weakening has the effect of suppressing current period results
in relation to the comparable prior period, while 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 yen and
never converted into dollars but translated into dollars for U.S. GAAP reporting
purposes, which results in foreign currency impact to earnings, cash flows and
book 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 on book value
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 cannot be predicted or that are outside management's control.
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 cash flows from derivatives
associated with notes payable but excluding any nonrecurring or other items not
associated with the normal course of the Company's insurance operations and that
do not reflect the Company's underlying business performance. 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 cash
flows from foreign currency and interest rate derivatives associated with
certain investment strategies, which are both reclassified to net investment
income, and iii) the impact of interest cash flows from
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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 exchange
risks in the Company's Japan segment or in the Corporate and Other segment.
These amortized hedge costs/ income are estimated at the inception of the
derivatives based on the specific terms of each contract and are recognized on a
straight-line basis over the term of the hedge. 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 currency exchange rate for the comparable prior-year
period, which eliminates fluctuations driven solely by foreign currency 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 AOCI as recorded on the U.S. GAAP balance sheet.
Adjusted book value per common share is adjusted book value at the period end
divided by the ending outstanding common shares for the period presented. The
Company considers adjusted book value and adjusted book value per common share
important as they exclude AOCI, which fluctuates due to market movements that
are outside management's control. The most comparable U.S. GAAP financial
measures for adjusted book value and adjusted book value per common share are
total book value and total book value per common share, respectively.

•Adjusted return on equity excluding foreign currency impact is adjusted
earnings excluding the current period foreign currency impact divided by average
shareholders' equity, excluding AOCI. The Company considers adjusted return on
equity excluding foreign currency impact important as it excludes changes in
foreign currency and components of AOCI, which fluctuate due to market movements
that are outside management's control. The most comparable U.S. GAAP financial
measure for adjusted return on equity excluding foreign currency impact is ROE
as determined using net earnings and average total shareholders' equity.

•U.S. dollar-denominated investment income excluding foreign currency impact
represents amounts excluding foreign currency impact on U.S. dollar-denominated
investment income using the average foreign currency exchange rate for the
comparable prior year period. 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.

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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.
             Reconciliation of Net Earnings to Adjusted Earnings(1)
                                         In Millions                      Per Diluted Share                       In Millions                          Per Diluted Share
                                                     Three Months Ended June 30,                                                  Six Months Ended June 30,
                                     2021            2020               2021                2020             2021             2020                2021                2020
Net earnings                      $ 1,105$ 805$     1.62$ 1.12$ 2,398$ 1,370$     3.49$ 1.89
Items impacting net earnings:
Adjusted net investment (gains)
losses (2)                            (85)           166                (.12)                .23             (388)             614                (.57)                .85
Other and non-recurring (income)
loss                                   53              0                 .08                 .00               59               15                 .09                 .02
Income tax (benefit) expense on
items excluded from adjusted
earnings                                7            (50)                .01                (.07)              69             (196)                .10                (.27)

Adjusted earnings                   1,080            921                1.59                1.28            2,138            1,803                3.11                2.49
Current period foreign currency
impact (3)                              6               N/A              .01                    N/A            (7)                N/A             (.01)                   N/A
Adjusted earnings excluding
current period foreign currency
impact                            $ 1,086$ 921$     1.59$ 1.28$ 2,131$ 1,803$     3.10$ 2.49


(1) Amounts may not foot due to rounding.
(2) See reconciliation of net investment (gains) losses to adjusted net
investment (gains) losses below
(3) Prior period foreign currency impact reflected as "N/A" to isolate change
for current period only.

Reconciling Items

Net Investment Gains and Losses


   Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment
                               (Gains) Losses(1)
                                                     Three Months Ended June
                                                               30,                    Six Months Ended June 30,
(In millions)                                         2021             2020             2021             2020
Net investment (gains) losses                      $    (89)$  170$   (396)$  633
Items impacting net investment (gains) losses:
Amortized hedge costs                                   (17)            (50)              (36)           (105)
Amortized hedge income                                   16              27                33              56
Net interest cash flows from derivatives
associated
 with certain investment strategies                      (9)              6               (17)              0
Interest rate component of the change in fair
value
 of foreign currency swaps on notes payable              14              14                27              30
Adjusted net investment (gains) losses             $    (85)$  166

$ (388)$ 614

(1) Amounts may not foot due to rounding.


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 growth and profitability. This investment strategy
incorporates asset-liability matching (ALM) 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
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•Changes in the Fair Value of Equity Securities
•Certain Derivative and Foreign Currency Activities.

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 fixed maturity
securities, available-for-sale fixed maturity 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 exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio

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

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


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

•interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments

•interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities

•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 remeasurement associated with changes in the
foreign currency exchange rate.

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

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.

Other items excluded from adjusted earnings included integration costs related
to the Company's acquisition of Zurich North America'sU.S. Corporate Life and
Pensions business; these costs primarily consist of expenditures for legal,
accounting, consulting, integration of systems and processes and other similar
services. These integration costs amounted to $5 million and $12 million for the
three- and six-month periods ended June 30, 2021, respectively.

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Income Taxes


The Company's combined U.S. and Japanese effective income tax rate on pretax
earnings was 19.5% for the three-month period ended June 30, 2021, compared with
24.8% for the same period in 2020. The Company's combined U.S. and Japanese
effective income tax rate on pretax earnings was 19.4% for the six-month period
ended June 30, 2021, compared with 23.4% for the same period in 2020. The
reduction in the effective tax rate for the three- and six-month periods ended
June 30, 2021 was driven by new tax regulations released in the third quarter of
2020 and historic and solar tax credits. The combined effective tax rate differs
from the U.S. statutory rate primarily due to foreign earnings taxed at
different rates. For additional information, see Critical Accounting Estimates -
Income Taxes section of the MD&A in the 2020 Annual Report.

The Company expects that its effective tax rate for future periods will be
approximately 20%. The effective tax rate continues to be subject to future tax
law changes both in the U.S. and in foreign jurisdictions. See risk factor
entitled "Tax rates applicable to the Company may change" in the 2020 Annual
Report for more information.

Foreign Currency Translation


Aflac Japan's premiums and a significant portion of its investment income are
received in yen, and its claims and most expenses are paid in yen. Aflac Japan
purchases yen-denominated assets and U.S. dollar-denominated assets, which may
be hedged to yen, to support yen-denominated policy liabilities. Yen-denominated
income statement accounts are translated to U.S. dollars using a weighted
average Japanese yen/U.S. dollar foreign exchange rate, except realized gains
and losses on security transactions which are translated at the exchange rate on
the trade date of each transaction. Yen-denominated balance sheet accounts are
translated to U.S. dollars using a spot Japanese yen/U.S. dollar foreign
exchange rate.


                        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. Businesses that are not individually reportable, such as the Parent
Company, asset management subsidiaries and other business activities, including
reinsurance retrocession activities, are included in the Corporate and other
segment. See the Item 1. Business section of the 2020 Annual Report 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
•Average Weekly Producer

For additional information on the Company's performance measures included in
this MD&A, see the Glossary of Selected Terms found directly following Part II.
Other Information. 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.
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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.

                    Aflac Japan Summary of Operating Results
                                                                     Three Months Ended                     Six Months Ended
                                                                          June 30,                              June 30,
(In millions)                                                       2021                2020              2021              2020
Net premium income                                            $    2,987

$ 3,158$ 6,111$ 6,308 Net investment income: (1) Yen-denominated investment income

                                    315                 319                643              641
U.S. dollar-denominated investment income                            493                 364                890              740
Net investment income                                                808                 683              1,533            1,381

Amortized hedge costs related to certain foreign currency exposure

 management strategies                                                17                  50                 36              105
Adjusted net investment income                                       792                 633              1,497            1,276
Other income (loss)                                                   10                  12                 22               22
Total adjusted revenues                                            3,789               3,803              7,630            7,606
Benefits and claims, net                                           1,998               2,205              4,134            4,391
Adjusted expenses:
Amortization of deferred policy acquisition costs                    169                 155                341              328
Insurance commissions                                                179                 184                366              369
Insurance and other expenses                                         438                 420                898              824
Total adjusted expenses                                              786                 759              1,605            1,521
Total benefits and adjusted expenses                               2,785               2,964              5,739            5,912
      Pretax adjusted earnings                                $    1,004

$ 839$ 1,891$ 1,694 Weighted-average yen/dollar exchange rate

                         109.48              107.65             107.79           108.25


                                                                   In Dollars                                                                         In Yen
                                            Three Months Ended                        Six Months Ended                       Three Months Ended                        Six Months Ended
Percentage change over                           June 30,                                 June 30,                                June 30,                                 June 30,
 previous period:                         2021                  2020               2021              2020                 2021                  2020                2021               2020
Net premium income                            (5.4) %             (.4) %            (3.1) %            (.7) %                 (3.8) %             (2.5) %            (3.7) %            (2.3) %
Adjusted net investment
  income                                      25.1                3.9               17.3               4.7                    27.4                 2.0               17.0                3.0
Total adjusted revenues                        (.4)                .3                 .3                .2                     1.4                (1.8)               (.2)              (1.4)
Pretax adjusted earnings                      19.7                1.0               11.6               1.7                    22.0                (1.2)              11.3                 .0


(1) Net interest cash flows from derivatives associated with certain investment
strategies of $(9) and $6 for the three-month periods and $(17) and an
immaterial amount for the six-month periods ended June 30, 2021 and 2020,
respectively, have been reclassified from net investment gains (losses) and
included in adjusted earnings as a component of net investment income.
In the three- and six-month periods ended June 30, 2021, Aflac Japan's net
premium income decreased, in yen terms, due to an anticipated decrease in first
sector premiums as savings products reached premium paid-up status and
constrained sales during the COVID-19 pandemic. Adjusted net investment income
increased in the three- and six-month periods ended June 30, 2021, primarily due
to higher alternative and floating rate income and lower hedge costs.
Annualized premiums in force decreased 4.5% to ¥1.39 trillion as of June 30,
2021, compared with ¥1.46 trillion as of June 30, 2020. The decrease in
annualized premiums in force in yen was driven primarily by limited-pay products
reaching paid up status and lower sales during the COVID-19 pandemic. Annualized
premiums in force, translated into dollars at respective period-end exchange
rates, were $12.6 billion at June 30, 2021, compared with $13.5 billion at
June 30, 2020.

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Aflac Japan's investment portfolios include U.S. dollar-denominated securities
and reverse-dual currency securities (yen-denominated debt securities with
dollar coupon payments). In years when the yen strengthens in relation to the
dollar, translating Aflac Japan'sU.S. dollar-denominated investment income into
yen lowers growth rates for net investment income, total adjusted revenues, and
pretax adjusted earnings in yen terms. In years when the yen weakens,
translating U.S. dollar-denominated investment income into yen magnifies growth
rates for net investment income, total adjusted revenues, and pretax adjusted
earnings in yen terms.
The following table illustrates the effect of translating Aflac Japan'sU.S.
dollar-denominated investment income and related items into yen by comparing
certain segment results with those that would have been reported had foreign
currency exchange rates remained unchanged from the comparable period in the
prior year. Amounts excluding foreign currency impact on U.S. dollar-denominated
investment income were determined using the average foreign currency exchange
rate for the comparable prior year period. See non-U.S. GAAP financial measures
defined above.
              Aflac Japan Percentage Changes Over Previous Period
                            (Yen Operating Results)
                         For the Periods Ended June 30,
                                                              Including Foreign                                                                          Excluding Foreign
                                                               Currency Changes                                                                          Currency Changes
                                      Three Months                                      Six Months                               Three Months                                     Six Months
                                  2021                  2020                   2021                2020                   2021                  2020                     2021                    2020
Adjusted net investment
income                         27.4        %          2.0      %            17.0    %                3.0    %             26.2        %          3.3    %             17.2                     4.0    %
Total adjusted revenues         1.4                  (1.8)                   (.2)                   (1.4)                  1.2                  (1.6)                  (.2)                   (1.3)
Pretax adjusted earnings       22.0                  (1.2)                  11.3                      .0                  21.1                   (.3)                 11.4                      .7


The following table presents a summary of operating ratios in yen terms for
Aflac Japan.
                                                           Three Months Ended                                    Six Months Ended
                                                                June 30,                                             June 30,
Ratios to total adjusted revenues:                      2021                        2020                     2021                       2020
Benefits and claims, net                            52.7     %                   58.0    %               54.2            %           57.8    %
Adjusted expenses:
Amortization of deferred policy acquisition
costs                                                4.5                          4.1                     4.5                         4.3
Insurance commissions                                4.7                          4.8                     4.8                         4.9
Insurance and other expenses                        11.6                         11.0                    11.8                        10.8
Total adjusted expenses                             20.8                         20.0                    21.0                        20.0
Pretax adjusted earnings                            26.5                         22.0                    24.8                        22.2
Ratios to total premiums:
Benefits and claims, net                            66.9     %                   69.8    %               67.6     %                  69.6    %
Adjusted expenses:
Amortization of deferred policy acquisition
costs                                                5.7                          4.9                     5.6                         5.2


In the three- and six-month periods ended June 30, 2021, the benefit ratio
decreased, compared with the same periods in the prior year. This is primarily
due to the continued change in mix of first and third sector business, favorable
third sector claim experience, and higher surrenders in Aflac Japan's medical
products. In the three- and six-month periods ended June 30, 2021, the adjusted
expense ratio increased due to an increase in expenses, mainly due to increased
outsourcing expenses related primarily to enhancement of business continuity
infrastructure in times of crises such as the COVID-19 pandemic situation,
paperless and digital experience and an increase in DAC amortization caused by
higher surrenders in Aflac Japan's medical products. In total, the pretax
adjusted profit margin increased in the three- and six-month periods ended
June 30, 2021. For the full year of 2021, the Company will continue to monitor
the situation with respect to COVID-19, and potential impacts on the pretax
adjusted profit margin and benefit ratio.

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Aflac Japan Sales
The following table presents Aflac Japan's new annualized premium sales for the
periods ended June 30.
                                                           In Dollars                                                     In Yen
                                        Three Months                     Six Months                    Three Months               Six Months
(In millions of dollars and
billions of yen)                   2021             2020            2021           2020            2021            2020      2021            2020

New annualized premium sales $ 124$ 91$ 256

$ 220 ¥ 13.6 ¥ 9.8 ¥ 27.6 ¥ 23.8 Increase (decrease) over prior period

                             36.5  %         (58.1) %        16.5  %  

(43.3) % 38.4 % (58.8) % 15.7 % (44.1) %

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

                                  Three Months                        Six Months
                              2021              2020             2021             2020
Cancer                          48.9  %         54.7  %           47.1  %         55.1  %
Medical                         39.7            32.5              41.5            32.4
Income support                    .6              .9                .6             1.1
Ordinary life:
WAYS                              .8              .8                .7              .7
Child endowment                   .4              .4                .3              .4
Other ordinary life (1)          8.9            10.0               8.9             9.6
Other                             .7              .7                .9              .7
  Total                        100.0  %        100.0  %          100.0  %        100.0  %

(1) Includes term and whole life


The foundation of Aflac Japan's product portfolio has been, and continues to be,
third sector products, which include cancer, medical and income support
insurance products. Aflac Japan has been focusing more on promotion of cancer
and medical insurance products in this low-interest-rate environment. These
products are less interest-rate sensitive and more profitable compared to first
sector savings products. With continued cost pressure on Japan's health care
system, the Company expects the need for third sector products will continue to
rise in the future and that the medical and cancer insurance products Aflac
Japan provides will continue to be an important part of its product portfolio.

Sales of protection-type first sector and third sector products on a yen basis
increased 38.6% in the second quarter of 2021, compared with the same period in
2020, primarily due to the launch of a new medical product in January 2021 and
favorable comparisons as a result of pandemic conditions in 2020.

Sales of Aflac Japan cancer products in the Japan Post Group channel experienced
a material decline beginning in August 2019 which has continued into the first
six months of 2021. On March 24, 2021, Japan Post Group announced that it
planned to begin resuming proactive sales of financial products on April 1,
2021, which the Company believes will lead to gradual improvement of cancer
insurance sales in the second half of the year. For additional information, see
the risk factor entitled "Events related to the ongoing Japan Post
investigation and other matters regarding sales of Japan Post Insurance products
could negatively impact the Company's sales and results of operations," in Item
1A. Risk Factors in the 2020 Annual Report. Beginning in the second quarter of
2020 and continuing into 2021, Aflac Japan experienced a sharp drop-off in total
sales, as compared to pre-pandemic levels, due to the ongoing effects of the
COVID-19 pandemic.

In response to the COVID-19 pandemic, Aflac Japan continues to promote digital
and web-based sales to groups and use of its system that enables smart
device-based insurance application by allowing the customer and an Aflac Japan
operator to see the same screen through their smart devices. Further, Aflac
Japan continues to utilize its virtual sales tool that enables online
consultations and policy applications to be completed entirely online.
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The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the three-month periods ended June 30.


                                         2021         2020
Independent corporate and individual     51.1  %      53.8  %
Affiliated corporate (1)                 44.0         42.8
Bank                                      4.9          3.4
Total                                   100.0  %     100.0  %


(1) Includes Japan Post

During the three-month period ended June 30, 2021, Aflac Japan recruited 22 new
sales agencies. At June 30, 2021, Aflac Japan was represented by more than 8,300
sales agencies, with more than 113,000 licensed sales associates employed by
those agencies. The number of sales agencies has declined in recent years due to
Aflac Japan's focus on supporting agencies with strong management frameworks,
high productivity and more producing agents.

At June 30, 2021, Aflac Japan had agreements to sell its products at 359 banks, approximately 90% of the total number of banks in Japan.

Strategic Alliance with Japan Post Holdings


As previously reported, on December 19, 2018, the Parent Company and Aflac Japan
entered into a Basic Agreement with Japan Post Holdings Co., Ltd., a Japanese
corporation (Japan Post Holdings). 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, including leveraging digital technology in various processes and
cooperation in new product development to promote customer-centric business
management. In June 2021, the Parent Company and Aflac Japan, Japan Post
Holdings, Japan Post Co., Ltd. and Japan Post Insurance Co., Ltd. agreed to
pursue several specific initiatives toward building a "'Co-creation Platform' to
support customers and local communities," consistent with Japan Post Group's
medium-term management plan announced in May 2021. The initiatives are directed
at, among other items, the promotion of Aflac Japan cancer insurance, digital
transformation within the Japan Post Group, and certain diversity efforts.

Aflac Japan Investments


The level of investment income in yen is affected by available cash flow from
operations, the timing of investing the cash flow, yields on new investments,
the effect of yen/dollar exchange rates on U.S. dollar-denominated investment
income, and other factors.

As part of the Company's portfolio management and asset allocation process,
Aflac Japan invests in yen and U.S. dollar-denominated investments.
Yen-denominated investments primarily consist of JGBs, public and private fixed
maturity securities and public equity securities. Aflac Japan'sU.S.
dollar-denominated investments include fixed maturity investments and growth
assets, including alternative investments in limited partnerships or similar
investment vehicles. Aflac Japan has been investing in both publicly-traded and
privately originated U.S. dollar-denominated investment-grade and
below-investment-grade fixed maturity securities and loan receivables, and has
entered into foreign currency forwards and options to hedge the currency risk on
the fair value of a portion of the U.S. dollar investments.

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The following table details the investment purchases for Aflac Japan.

                                                              Three Months Ended June 30,                 Six Months Ended June 30,
(In millions)                                                   2021              2020                      2021                2020
Yen-denominated:
 Fixed maturity securities:
   Japan government and agencies                             $      0$     0$       1,181$   736
   Private placements                                              98               23                          311              113
   Other fixed maturity securities                                 29              194                          136              271
 Equity securities                                                  5              139                          122              142
 Other investments                                                  4                0                            6                0
    Total yen-denominated                                    $    136$   356$       1,756$ 1,262

U.S. dollar-denominated:
 Fixed maturity securities:
   Other fixed maturity securities                           $    396$   390$       1,001$   917
   Infrastructure debt                                              0               20                            0               55

   Collateralized loan obligations                                 36                0                          153                0
 Equity securities                                                  8                0                            8                0

Commercial mortgage and other loans:

   Transitional real estate loans                                 638               97                          699              465
   Commercial mortgage loans                                       17                0                           17               12
   Middle market loans                                            484              240                        1,266            1,427
 Other investments                                                 91               48                          147               98
    Total dollar-denominated                                 $  1,670$   795$       3,291$ 2,974
      Total Aflac Japan purchases                            $  1,806$ 1,151$       5,047$ 4,236

See the Investments section of this MD&A for further discussion of these investment programs, and see Notes 3 and 4 of the Notes to the Consolidated Financial Statements and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report for more information regarding loans and loan receivables.


The following table presents the results of Aflac Japan's investment yields for
the periods ended June 30.
                                                                        Three Months                                Six Months
                                                                 2021                   2020                   2021                   2020
Total purchases for the period (in millions) (1)           $ 1,711$ 1,103$ 4,894$ 4,138
New money yield (1), (2)                                      4.05        % 

3.41 % 3.18 % 3.86 % Return on average invested assets (3)

                         2.83                   2.28                   2.65                   2.32

Portfolio book yield, including U.S. dollar-denominated investments, end of period (1)

                                2.61        % 

2.63 % 2.61 % 2.63 %



(1) Includes fixed maturity securities, commercial mortgage and other loans,
equity securities, and excludes alternative investments in limited partnerships
(2) Reported on a gross yield basis; excludes investment expenses, external
management fees, and amortized hedge costs
(3) Net of investment expenses and amortized hedge costs, year-to-date number
reflected on a quarterly average basis

The increase in the Aflac Japan new money yield in the three-month period ended
June 30, 2021 was primarily due to higher allocations to floating rate asset
classes. The decrease in the Aflac Japan new money yield in the six-month period
ended June 30, 2021 was primarily due to higher allocations to lower yielding
yen-denominated asset classes. See Notes 3, 4 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 and hedging strategies.

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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.
                    Aflac U.S. Summary of Operating Results
                                                              Three Months Ended                      Six Months Ended
                                                                   June 30,                               June 30,
(In millions)                                                2021                2020               2021              2020
Net premium income                                     $    1,408$ 1,458$   2,830$ 2,941
Adjusted net investment income                                189                 172                 366              348
Other income                                                   30                  26                  58               54
Total adjusted revenues                                     1,627               1,656               3,254            3,343
Benefits and claims                                           613                 646               1,169            1,359
Adjusted expenses:
Amortization of deferred policy acquisition costs             111                 134                 250              293
Insurance commissions                                         136                 148                 275              299
Insurance and other expenses                                  354                 302                 701              640
Total adjusted expenses                                       601                 584               1,226            1,232
Total benefits and adjusted expenses                        1,213               1,230               2,396            2,591
       Pretax adjusted earnings                        $      413$   426$     859$   752
Percentage change over previous period:
Net premium income                                           (3.4)          %     (.1)               (3.8)   %          .7    %
Adjusted net investment income                                9.9                (4.4)                5.2             (2.5)
Total adjusted revenues                                      (1.8)                 .9                (2.7)             1.9
Pretax adjusted earnings                                     (3.1)               26.0                14.2             13.8



In the three- and six-month periods ended June 30, 2021, net premium income for
Aflac U.S. decreased primarily due to constrained sales as a result of the
COVID-19 pandemic. Total adjusted revenues decreased in the three- and six-month
periods ended June 30, 2021, mainly due to the decline in net premium income
from reduced sales activity, partially offset by the increase in adjusted net
investment income from higher variable net investment income. Pretax adjusted
earnings decreased in the three-month period ended June 30, 2021, primarily
driven by lower net premium income and higher adjusted expenses despite lower
benefits. Pretax adjusted earnings increased in the six-month period ended
June 30, 2021, driven primarily by the lower-than-expected benefit ratios due to
lower incurred claims related to pandemic conditions.

Annualized premiums in force decreased 1.5% to $6.0 billion at June 30, 2021, compared with $6.1 billion at June 30, 2020.

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

                                                               Three Months Ended                                     Six Months Ended
                                                                    June 30,                                              June 30,
Ratios to total adjusted revenues:                          2021                         2020                     2021                        2020
Benefits and claims                                     37.7     %                    39.0    %               35.9     %                   40.7    %
Adjusted expenses:
Amortization of deferred policy acquisition costs        6.8                           8.1                     7.7                          8.8
Insurance commissions                                    8.4                           8.9                     8.5                          8.9
Insurance and other expenses                            21.8                          18.2                    21.5                         19.1
Total adjusted expenses                                 36.9                          35.3                    37.7                         36.9
 Pretax adjusted earnings                               25.4                          25.7                    26.4                         22.5
Ratios to total premiums:
Benefits and claims                                     43.5     %                    44.3    %               41.3     %                   46.2    %
Adjusted expenses:
Amortization of deferred policy acquisition costs        7.9                           9.2                     8.8                         10.0



For the three- and six-month periods ended June 30, 2021, the benefit ratio
decreased compared with the same period in 2020, reflecting reduced estimates of
both COVID-19-related and non-COVID-19-related incurred claims since the advent
of the pandemic. The adjusted expense ratio increased in the three- and
six-month periods ended June 30, 2021, when compared with the same periods in
2020, primarily due to the decline in total adjusted revenues, partially offset
by lower acquisition costs and lower DAC amortization, due to the decline in
sales and impacted by higher persistency. The pretax adjusted profit margin
increased in the six-month period ended June 30, 2021, as compared with the same
period in 2020, primarily due to lower benefit ratios. For the full year of
2021, the Company will continue to monitor the situation with respect to
COVID-19, and potential impacts on the pretax adjusted profit margin and benefit
ratio.

Aflac U.S. Sales
The following table presents Aflac's U.S. new annualized premium sales for the
periods ended June 30.
                                                    Three Months                         Six Months
(In millions)                                  2021                  2020         2021              2020
New annualized premium sales              $    264$  161$ 515$  484
Increase (decrease) over prior period         64.1        %       (55.6)  % 

6.6 % (31.2) %



The following table details the contributions to Aflac's U.S. new annualized
premium sales by major insurance product category for the periods ended June 30.
                                Three Months                              Six Months
                          2021                  2020               2021                 2020
Accident               27.2    %             25.7    %          26.7    %             26.7   %
Disability             22.7                  23.9               22.9                  23.0
 Critical care(1)      21.0                  20.6               21.8                  21.0
Hospital indemnity     16.4                  17.1               16.6                  17.0
Dental/vision           5.4                   4.1                5.0                   4.3
Life                    7.3                   8.6                7.0                   8.0
Total                 100.0    %            100.0    %         100.0        %        100.0     %

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


New annualized premium sales for accident insurance, the leading Aflac U.S.
product category, increased 73.4%; disability sales increased 55.4%; critical
care insurance sales (including cancer insurance) increased 67.7%; and hospital
indemnity insurance sales increased 57.0% in the second quarter of 2021,
compared with the same period in 2020. The increase in sales for Aflac U.S. in
the second quarter of 2021 is primarily attributable to increased sales activity
as a result of the ongoing economic reopening in the U.S. and favorable
comparisons due to pandemic conditions in 2020. See the Executive Summary
section entitled COVID-19 of this MD&A for additional information.

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In the second quarter of 2021, the Aflac U.S. sales force included an average of
approximately 5,900 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.
Aflac U.S. believes that limitations on face-to-face sales opportunities during
the COVID-19 pandemic have tended to suppress the development of newly recruited
agents into business producers and the productivity of veteran agents and
brokers, which since the onset of the pandemic has resulted in fewer average
weekly producers and has acted as a headwind to Aflac U.S. sales. While gains
were made in recruiting during the second quarter of 2021 compared with the
second quarter of 2020, most notably among recruited brokers, Aflac U.S. remains
focused on mitigating and reversing this trend as the U.S. economy continues to
recover from the pandemic.

In response to the COVID-19 pandemic, Aflac U.S. remains focused on supporting
its agency channel, most of which are small businesses, by offering financial
support and an extended value proposition. The Aflac U.S. sales team has pivoted
to accommodate preferred enrollment conditions which include realizing sales at
the worksite through in-person enrollment, an enrollment call center, video
enrollment through co-browsing and self-enrollment. The traditional agent sales
team is also using virtual recruiting and training through video conferencing in
order to maintain or increase the recruiting pipeline. The Aflac U.S. broker
sales team is focused on product enhancements due to COVID-19 as well as
leveraging technology based solutions to drive enrollment.

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 investments and growth assets, including
public equity securities and alternative investments in limited partnerships.
Aflac U.S. has been investing 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.

                                                Three Months Ended                 Six Months Ended
                                                     June 30,                          June 30,
(In millions)                                     2021             2020            2021            2020
Fixed maturity securities:
   Other fixed maturity securities        $      130$  85$     376$ 267
   Infrastructure debt                             0                  4              0               20
   Collateralized loan obligations                18                 11             30               11
Equity securities                                113                  1            113                5

Commercial mortgage and other loans:

   Transitional real estate loans                113                  7            137               45
   Commercial mortgage loans                     129                 10            163               37
   Middle market loans                            41                  5            100               43
Other investments                                 10                  5             16               11
    Total Aflac U.S. Purchases            $      554$ 128$     935$ 439

See Note 3 of the Notes to the Consolidated Financial Statements and Notes 1 and 3 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report for more information regarding loans and loans receivables.

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The following table presents the results of Aflac's U.S. investment yields for
the periods ended June 30.
                                                        Three Months                       Six Months
                                                    2021               2020           2021           2020
Total purchases for period (in millions) (1)   $    544$ 123$ 919$ 428
New money yield (1), (2)                           3.63        %       3.04   %       3.47     %     3.54     %
Return on average invested assets (3)              4.94                4.81           4.83           4.91
Portfolio book yield, end of period (1)            5.07          %     5.30 

% 5.07 % 5.30 %



(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 increase in the Aflac U.S. new money yield for the three-month period ended
June 30, 2021 was primarily due to higher allocations to floating rate asset
classes. The decrease in the Aflac U.S. new money yield for the six-month period
ended June 30, 2021 was primarily due to lower yields in fixed rate asset
classes. See Notes 3 and 5 of the Notes to the Consolidated Financial Statements
and the Analysis of Financial Condition section of this MD&A for additional
information on the Company's investments.

CORPORATE AND OTHER


Changes in the pretax adjusted earnings of Corporate and other are primarily
affected by investment income. The following table presents a summary of results
for Corporate and other.
                Corporate and Other Summary of Operating Results
                                                           Three Months Ended                      Six Months Ended
                                                                June 30,                               June 30,
(In millions)                                             2021              2020                 2021                2020
Premium income                                        $       45$   49$       93$   97
Net investment income (loss) (1)                             (13)             21                    3                  45
Amortized hedge income related to certain foreign
currency
 management strategies                                        16              27                   33                  56
Adjusted net investment income                                 3              48                   36                 101
Other income                                                   2               3                    5                   6
Total adjusted revenues                                       50             100                  133                 204
Benefits and claims, net                                      41              47                   84                  87
Adjusted expenses:
Interest expense                                              43              43                   87                  76
Other adjusted expenses                                       42              40                   65                  69
Total adjusted expenses                                       85              83                  152                 145
Total benefits and adjusted expenses                         126             130                  236                 232
Pretax adjusted earnings                              $      (76)$  (30)$     (102)$  (28)


(1) Amortization of federal historic rehabilitation and solar investments in
partnerships of $30 for the three- and six-month periods ended June 30, 2021, is
included as a reduction to net investment income. Offsetting tax credits on
these investments of $12 and $25 for the three- and six-month periods ended
June 30, 2021, respectively, have been recorded as an income tax benefit in the
consolidated statement of earnings. See Note 3 of the Notes to the Consolidated
Financial Statements for additional information on these investments.

In the three- and six-month periods ended June 30, 2021, the decrease in total
adjusted revenues was primarily driven by a decline in adjusted net investment
income as a result of the amortization for federal historic rehabilitation and
solar investments in partnerships discussed below, as well as lower amortized
hedge income. The decrease in pretax adjusted earnings in the three-month period
ended June 30, 2021, was primarily driven by lower adjusted net investment
income. The decrease in pretax adjusted earnings for the six-month period ended
June 30, 2021, was primarily driven by lower adjusted net investment income and
higher interest expense associated with debt issuances.

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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 sheet. The change in value of each investment is recorded
as a reduction to net investment income. Offsetting tax credits generated by
these investments are recorded as an income tax benefit in the consolidated
statement of earnings. Beginning in 2020, net investment income also includes
the Company's portion of earnings from its strategic equity investment in an
asset management company.

                                  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 yen-denominated investment assets, U.S. dollar-denominated
investment portfolio hedged back to 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 investments and
growth assets, including public 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.

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The following tables detail investments by segment.

                        Investment Securities by Segment
                                                                        June 30, 2021
                                                                                    Corporate and
(In millions)                            Aflac Japan            Aflac U.S.              Other                Total
Available for sale, fixed maturity
securities,
  at fair value                        $     85,243$    15,036$     2,005$ 102,284
Held to maturity, fixed maturity
securities,
  at amortized cost (1)                      22,891                     0                     0              22,891
Equity securities                               729                   180                   566               1,475
Commercial mortgage and other loans:
Transitional real estate loans (1)            4,329                   886                     0               5,215
Commercial mortgage loans (1)                 1,268                   582                     5               1,855
Middle market loans (1)                       3,977                   285                     0               4,262
Other investments:
Policy loans                                    224                    19                     0                 243
Short-term investments (2)                      579                   240                   848               1,667
Limited partnerships                          1,105                   122                   102               1,329
Other                                             0                    19                     0                  19
   Total investments                        120,345                17,369                 3,526             141,240
Cash and cash equivalents                     2,025                   815                 2,629               5,469
       Total investments and cash      $    122,370$    18,184$     6,155$ 146,709


(1) Net of allowance for credit losses
(2) Includes securities lending collateral
                                                                      December 31, 2020
                                                                                    Corporate and
(In millions)                            Aflac Japan            Aflac U.S.              Other                Total
Available for sale, fixed maturity
securities,
  at fair value                        $     88,757$    15,133$     1,992$ 105,882
Held to maturity, fixed maturity
securities,
  at amortized cost (1)                      24,464                     0                     0              24,464
Equity securities                               674                    66                   543               1,283
Commercial mortgage and other loans:
Transitional real estate loans (1)            4,331                   900                     0               5,231
Commercial mortgage loans (1)                 1,268                   420                     0               1,688
Middle market loans (1)                       3,365                   270                     0               3,635
Other investments:
Policy loans                                    242                    18                     0                 260
Short-term investments (2)                      449                   242                   448               1,139
Limited partnerships                            828                    91                    85               1,004
Other                                             0                    26                     0                  26
   Total investments                        124,378                17,166                 3,068             144,612
Cash and cash equivalents                     2,001                   785                 2,355               5,141
       Total investments and cash      $    126,379$    17,951$     5,423$ 149,753


(1) Net of allowance for credit losses
(2) Includes securities lending collateral

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
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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, were as follows:

           Composition of Fixed Maturity Securities by Credit Rating
                              June 30, 2021

December 31, 2020

                   Amortized                  Fair                     Amortized                    Fair
                      Cost                    Value                       Cost                      Value
AAA                      1.0  %                    0.9  %                      1.0  %                     .9  %
AA                       5.0  %                    5.1  %                      4.5                       4.6
A                       68.6  %                   68.4  %                     69.3                      69.5
BBB                     22.2  %                   22.4  %                     21.9                      21.9
BB or lower              3.2  %                    3.2  %                      3.3                       3.1
Total                  100.0  %                  100.0  %                    100.0  %                  100.0  %



As of June 30, 2021, the Company's direct and indirect exposure to securities in
its investment portfolio that were guaranteed by third parties was immaterial
both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of June 30, 2021.

                                         Credit            Amortized            Fair
(In millions)                            Rating              Cost               Value            Unrealized Loss
Transocean Inc.                             CCC                $ 49$ 35$ (14)
KLM Royal Dutch Airlines                     B                  147              135                         (12)
Grenke Finance PLC                          BBB                  63               55                          (8)
Intesa Sanpaolo Spa                         BBB                 141              134                          (7)
Nippon Prologis REIT Inc.                    A                   90               84                          (6)
Kommunal Landspensjonskasse (KLP)           BBB                 136              131                          (5)
Alphabet Inc.                               AA                  175              170                          (5)
National Football League                     A                  145              141                          (4)
Lloyds Banking Group PLC                     A                  208              204                          (4)
Mitsui Fudosan Co. Ltd.                      A                   94               91                          (3)



Generally, declines in fair values can be a result of changes in interest rates,
yen/dollar exchange rate, and changes in net spreads driven by a broad market
move or a change in the issuer's underlying credit quality. The Company believes
these issuers have the ability to continue making timely payments of principal
and interest. See the Unrealized Investment Gains and Losses section in Note 3
of the Notes to the Consolidated Financial Statements for further discussions of
unrealized losses related to financial institutions and other corporate
investments.

Below-Investment-Grade Securities

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

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                       Below-Investment-Grade Investments
                                                           June 30, 2021
                                                                                  Unrealized
                                          Par        Amortized        Fair           Gain
(In millions)                            Value        Cost (1)        Value         (Loss)
Investcorp Capital Limited             $   385$      384$   402$       18
Commerzbank                                362             250          420             170
Pemex Project Funding Master Trust         271             271          278               7
Autostrade Per Litalia Spa                 181             179          212              33
KLM Royal Dutch Airlines                   181             147          135             (12)
Telecom Italia SpA                         181             181          241              60
Barclays Bank PLC                          181             122          202              80
Apache Corporation                         138             124          159              35
Ovintiv Inc.                               134             132          173              41
IKB Deutsche Industriebank AG              118              53          110              57
Other Issuers                              806             718          884             166
     Subtotal (2)                        2,938           2,561        3,216             655
Senior secured bank loans                  120             124          118              (6)
High yield corporate bonds                 798             782          830              48
Middle market loans                      4,116           4,002        4,036              34
     Grand Total                       $ 7,972$    7,469$ 8,200$      731


(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 invests in senior secured bank loans and middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The objectives of these programs 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.


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.

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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.

                                                                                                   June 30, 2021
                                                                                  Gross
                                                                               Unrealized          Gross Unrealized                                  % of
(In millions)                                   Amortized Cost (1)                Gains                 Losses             Fair Value                Total
Government and agencies                     $                54,067          $      8,617          $         (78)         $   62,606                      48.6  %
Municipalities                                                2,799                   635                     (7)              3,427                       2.5
Mortgage- and asset-backed securities                         1,236                    49                     (1)              1,285                       1.1
Public utilities                                              8,531                 1,927                     (6)             10,451                       7.7
Electric                                                      6,906                 1,584                     (4)              8,485                       6.2
Natural Gas                                                     298                    56                      0                 354                        .3
Other                                                           583                   129                      0                 711                        .5
Utility/Energy                                                  744                   158                     (2)                901                        .7
Sovereign and Supranational                                   1,641                   298                      0               1,939                       1.5
Banks/financial institutions                                 10,313                 1,657                    (67)             11,903                       9.3
Banking                                                       6,111                 1,091                    (24)              7,180                       5.5
Insurance                                                     1,917                   388                    (22)              2,282                       1.7
Other                                                         2,285                   178                    (21)              2,441                       2.1
Other corporate                                              32,766                 6,151                    (90)             38,827                      29.3
Basic Industry                                                3,154                   712                    (10)              3,855                       2.8
Capital Goods                                                 3,367                   571                     (7)              3,931                       3.0
Communications                                                3,463                   770                    (12)              4,220                       3.1
Consumer Cyclical                                             2,699                   533                     (2)              3,229                       2.4
Consumer Non-Cyclical                                         7,028                 1,238                    (15)              8,253                       6.2
Energy                                                        3,744                   750                      4               4,498                       3.4
Other                                                         1,506                   217                     (5)              1,717                       1.4
Technology                                                    4,197                   512                    (22)              4,688                       3.8
Transportation                                                3,608                   848                    (21)              4,436                       3.2
    Total fixed maturity securities         $               111,353          $     19,334$        (249)$  130,438

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.

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The following table details investment securities by type of issuance.

                   Investment Securities by Type of Issuance
                                               June 30, 2021                           December 31, 2020
                                       Amortized             Fair                Amortized              Fair
(In millions)                          Cost (1)              Value               Cost (1)              Value
Publicly issued securities:
Fixed maturity securities             $  91,868$ 106,856$  95,545$ 111,479
Equity securities                           899                  899                  740                  740
   Total publicly issued                 92,767              107,755               96,285              112,219
Privately issued securities: (2)
Fixed maturity securities (3)            19,485               23,582               20,511               24,802
Equity securities                           576                  576                  543                  543
   Total privately issued                20,061               24,158               21,054               25,345
   Total investment securities        $ 112,828$ 131,913$ 117,339$ 137,564

(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.

                      Reverse-Dual Currency Securities(1)
                                                                  June 30,                      December 31,
(Amortized cost, in millions)                                       2021                            2020
Privately issued reverse-dual currency securities                $ 4,968$ 5,300

Publicly issued collateral structured as reverse-dual currency securities

                                                1,661                             1,775
Total reverse-dual currency securities                           $ 6,629$ 7,075
Reverse-dual currency securities as a percentage of total
investment
  securities                                                         5.9  %                            6.0  %

(1) Principal payments in yen and interest payments in dollars


Aflac Japan has a portfolio of privately issued securities to better match
liability characteristics and secure higher yields than those available on
Japanese government or other public corporate bonds. Aflac Japan's investments
in 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 rate
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" in the 2020 Annual Report for more information
about market risk and the Company's use of derivatives.

Derivatives are designed to reduce risk on an economic basis while minimizing the impact on financial results. The Company's derivatives programs vary depending on the type of risk being hedged. 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.
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•The unrealized and realized gains and losses impact on adjusted earnings of
derivatives in cash flow, fair value, net investments in foreign operations, or
non-qualifying hedging relationships.

Foreign Currency Exchange Rate Risk Hedge Program
The Company has deployed the following hedging strategies to mitigate exposure
to foreign currency exchange rate risk:
•Aflac Japan hedges U.S. dollar-denominated investments back to yen (see Aflac
Japan'sU.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 (see Aflac Japan'sU.S. Dollar-Denominated Hedge Program below).

•The Parent Company designates 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 accomplish a
dual objective of hedging foreign currency exchange rate risk related to
dividend payments by its subsidiary, ALIJ, and reducing enterprise-wide hedge
costs. (see Enterprise Corporate Hedging Program below).

Aflac Japan'sU.S. Dollar-Denominated Hedge Program


Aflac Japan buys U.S. dollar-denominated investments, typically corporate bonds,
and hedges them back to yen with foreign currency forwards and options to hedge
foreign currency exchange rate risk. This economically creates yen assets that
match yen liabilities during the life of the derivative and provides capital
relief. 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.
                                                                June 30,                           December 31,
                                                                  2021                                 2020
                                                      Amortized            Fair            Amortized            Fair
(In millions)                                          Cost (1)            Value            Cost (1)            Value

Available-for-sale securities:

Fixed maturity securities (excluding bank loans) $ 18,272$ 20,771$ 19,249$ 21,108

 Fixed maturity securities - bank loans (floating
rate)                                                      172               164                319               283
Equity securities                                           24                24                 20                20

Commercial mortgage and other loans:

 Transitional real estate loans (floating rate)          4,330             4,324              4,331             4,298
 Commercial mortgage loans                               1,268             1,338              1,268             1,365
 Middle market loans (floating rate)                     3,977             4,016              3,365             3,377
Other investments                                        1,105             1,105                828               828
   Total U.S. Dollar Program                            29,148            31,742             29,380            31,279

Available-for-sale securities:

Fixed maturity securities - economically converted to yen

                                                   2,109             3,170              2,085             3,094
   Total U.S. dollar-denominated investments in
Aflac Japan                                          $  31,257          $ 

34,912 $ 31,465$ 34,373

(1) Net of allowance for credit losses


U.S. Dollar Program includes all U.S. dollar-denominated investments in Aflac
Japan other than the investments in certain consolidated VIEs where the
instrument is economically converted to yen as a result of a derivative in the
consolidated VIE. Aflac Japan maintains a collar program on a portion of its US
dollar program to mitigate against more extreme moves in foreign exchange and
therefore support SMR. Depending on further developments, including the
possibility of further market volatility, there may be additional costs
associated with maintaining the collar program. The Company is continually
evaluating other adjustments, including the possibility of changing the level of
hedging employed with the U.S dollar-denominated investments.

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As of June 30, 2021, Aflac Japan had $6.4 billion outstanding notional amounts
of foreign currency forwards and $8.0 billion outstanding notional amounts of
foreign currency options, of which none were in-the-money, hedging its U.S.
dollar-denominated investments. The fair value of Aflac Japan's unhedged U.S.
dollar-denominated portfolio was $15.2 billion (excluding certain U.S.
dollar-denominated assets shown in the table above as a result of consolidation
that have been economically converted to yen using derivatives).

Foreign exchange derivatives used for hedging are periodically settled, which
results in cash receipt or payment at maturity or early termination. The Company
had net cash outflows of $6 million and net cash inflows of $1 million for the
three-month periods and net cash inflows of $102 million and net cash outflows
of $32 million for the six-month periods ended June 30, 2021 and 2020,
respectively, associated with the currency derivatives used for hedging Aflac
Japan'sU.S. dollar-denominated investments.

Enterprise Corporate Hedging Program


The Company has designated certain yen-denominated liabilities and foreign
currency forwards and options of the Parent Company as accounting hedges of its
net investment in Aflac Japan. The Company's consolidated yen-denominated net
asset position was partially hedged at $10.4 billion as of June 30, 2021,
compared with $9.9 billion as of December 31, 2020.

The Company makes its accounting designation of net investment hedge at the
beginning of each quarter. If the total of the designated Parent Company
non-derivative and derivative notional is equal to or less than the Company's
net investment in Aflac Japan, the hedge is deemed to be effective, and the
currency exchange effect on the yen-denominated liabilities and the change in
estimated fair value of the derivatives are reported in the unrealized foreign
currency component of other comprehensive income. The Company's net investment
hedge was effective during the six-month periods ended June 30, 2021 and 2020,
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 yen and the level and volatility of hedge costs, the Parent
Company enters into foreign exchange forward and option contracts. By buying
U.S. dollars and selling yen, the Parent Company is effectively lowering its
overall economic exposure to the yen, while Aflac Japan'sU.S dollar exposure
remains reduced as a result of Aflac Japan'sU.S. dollar-denominated hedge
program that economically creates yen assets. Among other objectives, this
strategy is intended to offset the enterprise-wide amortized hedge costs by
generating amortized hedge income. The portion of the enterprise-wide amortized
hedge income contributed by this strategy was $16 million and $27 million for
the three-month periods and $33 million and $56 million for the six-month
periods ended June 30, 2021 and 2020, respectively. This activity is reported in
Corporate and Other. As this program evolves, the Company will continue to
evaluate the program's efficacy. See the Results of Operations section of this
MD&A for the Company's definition of amortized hedge costs/income.

The following table presents metrics related to Aflac Japan amortized hedge costs and the Parent Company amortized hedge income for the periods ended June 30.




















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                          Hedge Cost/Income Metrics(1)
                                                              Three Months                            Six Months
                                                          2021                2020             2021                2020
Aflac Japan:
FX Forwards

FX forward (sell USD, buy yen) notional at end of period (in billions)(2)

                                   $6.4$9.1$6.4$9.1
  Weighted average remaining tenor (in months)(3)         6.6                 8.1               6.6                8.1
  Amortized hedge income (cost) for period (in
millions)                                                $(13)$(48)$(29)$(101)

FX Options FX option notional at the end of period (in billions) (2)

                                                       $8.0                8.9              $8.0                8.9
Weighted average remaining tenor (in months) (3)          3.9                 1.2               3.9                1.2
Amortized hedge income (cost) for period (in millions)    $(4)$(2)$(7)$(4)
Corporate and Other (Parent Company):
FX Forwards

FX forward (buy USD, sell yen) notional at end of period (in billions)(2)

                                   $5.0$5.0$5.0$5.0
  Weighted average remaining tenor (in months)(3)         12.6                12.1             12.6                12.1
  Amortized hedge income (cost) for period (in
millions)                                                 $17$28$35$58

FX Options FX option notional at the end of period (in billions) (2)

                                                       $2.0$2.7$2.0$2.7
Weighted average remaining tenor (in months) (3)          7.2                 5.6               7.2                5.6
Amortized hedge income (cost) for period (in millions)    $(1)$(1)$(2)$(2)


(1) See the Results of Operations section of this MD&A for the Company's
definition of amortized hedge costs/income.
(2) Notional is reported net of any offsetting positions within Aflac Japan or
the Parent Company, respectively.
(3) Tenor based on period reporting date to settlement date

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 supply and demand for dollar
funding. Amortized hedge costs and income have fluctuated in recent periods due
to changes in the previously mentioned factors.

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.

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
Factor titled "The Company is exposed to foreign currency fluctuations in the
yen/dollar exchange rate" and "Lack of availability of acceptable
yen-denominated investments could adversely affect the Company's results of
operations, financial position or liquidity" in the 2020 Annual Report.

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's hedging activities.

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                       DEFERRED POLICY ACQUISITION COSTS

The following table presents deferred policy acquisition costs by segment. (In millions) June 30, 2021

            December 31, 2020                % Change
Aflac Japan                $ 6,501$  6,991                        (7.0) % (1)
Aflac U.S.                   3,309                        3,450                        (4.1)
Total                      $ 9,810$ 10,441                        (6.0) %

(1) Aflac Japan's deferred policy acquisition costs decreased .7% in yen during the six months ended June 30, 2021.

See Note 6 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report for additional information on the Company's deferred policy acquisition costs.

                               POLICY LIABILITIES
The following table presents policy liabilities by segment.
(In millions)                                                 June 30, 2021                    December 31, 2020                       % Change
Aflac Japan                                                     $  96,940$ 103,128                                     (6.0) % (1)
Aflac U.S.                                                         11,837                            11,810                                       .2
Other                                                                 280                               274                                      2.2
Intercompany eliminations(2)                                         (771)                             (821)                                    (6.1)
Total                                                           $ 108,286$ 114,391                                     (5.3) %


(1) Aflac Japan's policy liabilities increased .4% in yen during the six months
ended June 30, 2021.
(2) Elimination entry necessary due to recapture of a portion of policy
liabilities ceded externally, as a result of the reinsurance retrocession
transaction as described in Note 7 of the Notes to the Consolidated Financial
Statements.

                                 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 11 of the accompanying Notes to the Consolidated Financial Statements and Note 14 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report.

                            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
November 2016, Japan's Diet passed legislation that extended the government's
fiscal support of the LIPPC through March 2022. Effective April 2014, the annual
LIPPC contribution amount for the total life industry was lowered from ¥40
billion to ¥33 billion. Aflac Japan recognized an expense of ¥.9 billion and
¥1.0 billion for the six-month periods ended June 30, 2021 and 2020,
respectively, for LIPPC assessments.

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. Guaranty fund assessments for the six-month periods ended June 30,
2021 and 2020, were immaterial.

                         OFF-BALANCE SHEET ARRANGEMENTS

See Note 3 of the Notes to the Consolidated Financial Statements for details on certain investment commitments.

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As of June 30, 2021, the Company had no material letters of credit, standby
letters of credit, guarantees or standby repurchase obligations. See Note 15 of
the Notes to the Consolidated Financial Statements in the 2020 Annual Report for
information on material unconditional purchase obligations that are not recorded
on the Company's balance sheet.

                        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 an investment strategy of using debt to
increase the potential ROE. 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 shareholder deployment.

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's cash and cash equivalents include unrestricted cash on hand, money
market instruments, and other debt instruments with a maturity of 90 days or
less when purchased, all of which has minimal market, settlement or other risk
exposure. The target minimum amount for the Parent Company's cash and cash
equivalents is approximately $2.0 billion to provide a capital buffer and
liquidity support at the holding company. This amount excludes $400 million of
proceeds from the issuance of senior sustainability notes discussed below, which
proceeds contribute to the capital buffer but are not intended to support
holding company liquidity. Amid the COVID-19 pandemic, the Company remains
committed to prudent liquidity and capital management. At June 30, 2021, the
Company held $5.5 billion in cash and cash equivalents for stress conditions,
which includes the Parent Company's target minimum amount of $2.0 billion. For
additional information on the Company's liquidity and capital resources in
response to COVID-19, see the Executive Summary section of this MD&A.

Aflac Japan and Aflac U.S. 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 and interest on its
outstanding indebtedness and operating expenses.
The following table presents the amounts provided to the Parent Company for the
six-month periods ended June 30.

              Liquidity Provided by Subsidiaries to Parent Company
(In millions)                                  2021        2020

Dividends declared or paid by subsidiaries $ 1,552$ 892 Management fees paid by subsidiaries

              64         68



The following table details Aflac Japan remittances for the six-month periods ended June 30.

                            Aflac Japan Remittances
(In millions of dollars and billions of yen)                   2021                    2020

Aflac Japan management fees paid to Parent Company $ 30

$ 38

Aflac Japan dividends declared or paid to Parent Company (in dollars)

                                                  1,402                     667
Aflac Japan dividends declared or paid to Parent Company
(in yen)                                                    ¥ 154.5                  ¥ 72.8



The Company intends to maintain higher than historical levels of liquidity and
capital at the Parent Company for stress conditions and with the goals of
addressing the Company's hedge costs and related potential need for collateral
and mitigating against long-term weakening of the Japanese yen. Further, the
Company plans to continue to maintain a portfolio of unhedged U.S. dollar based
investments at Aflac Japan and to consider whether the amount of such
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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 Activity subsection of this MD&A for
more information.

In addition to cash and 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 2018,
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 2021. The Company believes outside
sources for additional debt and equity capital, if needed, will continue to be
available. Additionally, as of June 30, 2021, the Parent Company and Aflac had
four lines of credit with third parties as well as nine intercompany lines of
credit. For additional information, see Note 8 of the Notes to the Consolidated
Financial Statements.

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. The
Company was in compliance with all of the covenants of its notes payable and
lines of credit at June 30, 2021. The Company has not entered into transactions
involving the transfer of financial assets with an obligation to repurchase
financial assets that have been accounted for as a sale under applicable
accounting standards, including securities lending transactions. See Notes 3 and
4 of the Notes to the Consolidated Financial Statements and Notes 1, 3, and 4 of
the Notes to the Consolidated Financial Statements in the 2020 Annual Report for
more information on the Company's securities lending and derivative activities.
With the exception of disclosed activities in those referenced footnotes and the
Risk Factors in the 2020 Annual Report entitled, "The Company is exposed to
foreign currency fluctuations in the yen/dollar exchange rate" and "Lack of
availability of acceptable 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 translates cash flows for Aflac Japan's yen-denominated items into
U.S. dollars using weighted-average exchange rates. In periods when the yen
weakens, translating yen into dollars causes fewer dollars to be reported. When
the yen strengthens, translating yen into dollars causes more dollars to be
reported.
The following table summarizes consolidated cash flows by activity for the
six-month periods ended June 30.
(In millions)                                     2021         2020
Operating activities                            $ 2,328$ 2,601
Investing activities                               (839)      (2,120)
Financing activities                             (1,141)         152

Exchange effect on cash and cash equivalents (20) (1) Net change in cash and cash equivalents $ 328$ 632

                              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.

                              Investing Activities

The Company's investment objectives provide for liquidity primarily through the
purchase of publicly traded investment-grade debt 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
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time or when market opportunities arise, the Company disposes of selected fixed
maturity securities that are available for sale to improve the duration matching
of assets and liabilities, improve future investment yields, and/or re-balance
its portfolio. As a result, dispositions before maturity can vary significantly
from year to year.

As part of its overall corporate strategy, the Company has committed $400
million to Aflac Ventures, LLC (Aflac Ventures), as opportunities emerge. Aflac
Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures)
which is reported in the Corporate and Other segment. 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 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 the other investments line in
the consolidated balance sheets.

As part of an arrangement with Federal Home Loan Bank of Atlanta (FHLB), Aflac
U.S. obtains low-cost funding from FHLB supported by acceptable forms of
collateral pledged by Aflac U.S. In the first six months of 2021, Aflac U.S.
borrowed and repaid $51 million under this program. As of June 30, 2021, Aflac
U.S. had outstanding borrowings of $317 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

Consolidated cash used by financing activities was $1.1 billion in the first six
months of 2021, compared with consolidated cash provided by financing activities
of $152 million for the same period of 2020.

In April 2021, the Parent Company issued five series of senior notes totaling
¥82.0 billion through a public debt offering under its U.S. shelf registration
statement. The first series, which totaled ¥30.0 billion, bears interest at a
fixed rate of .633% per annum, payable semi-annually, 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 semi-annually, 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 semi-annually, 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 semi-annually, 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 semi-annually, 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 May 2021, the Parent Company used a portion of the net proceeds from the April 2021 issuance of its various series of senior notes to redeem $700 million of the Parent Company's 3.625% senior notes due June 2023.


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 semi-annually, 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.

See Note 8 of the Notes to the Consolidated Financial Statements for further information on the debt issuance discussed above.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at June 30, 2021.

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Cash returned to shareholders through treasury stock purchases and dividends was
$1.6 billion during the six-month period ended June 30, 2021, compared with $1.0
billion during the six-month period ended June 30, 2020.

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

                            Treasury Stock Purchased
(In millions of dollars and thousands of shares)     2021          2020
Treasury stock purchases                           $ 1,150$    637
Number of shares purchased:
Share repurchase program                            22,614        15,193
Other                                                  381           521
  Total shares purchased                            22,995        15,714



                             Treasury Stock Issued

(In millions of dollars and thousands of shares) 2021 2020 Stock issued from treasury:

  Cash financing                                   $    13$    21
  Noncash financing                                     28           28
  Total stock issued from treasury                 $    41$    49
Number of shares issued                              1,157        1,403



During the first six months of 2021, the Company repurchased 22.6 million shares
of its common stock for $1.2 billion as part of its share repurchase program. As
of June 30, 2021, a remaining balance of 76.5 million shares of the Company's
common stock was available for purchase under share repurchase authorizations by
its board of directors. For information on the impact of COVID-19 on the
Company's share repurchase program, see the Executive Summary section of this
MD&A.

Cash dividends paid to shareholders were $.33 per share in the second quarter of
2021, compared with $.28 per share in the second quarter of 2020. The following
table presents the dividend activity for the six-month periods ended June 30.

(In millions)                                    2021       2020
Dividends paid in cash                          $ 430$ 388

Dividends through issuance of treasury shares 16 14 Total dividends to shareholders

                 $ 446$ 402



In July 2021, the board of directors declared the third quarter cash dividend of
$.33 per share, an increase of 17.9% compared with the same period in 2020. The
dividend is payable on September 1, 2021 to shareholders of record at the close
of business on August 18, 2021.

                            Regulatory Restrictions

Aflac Japan


Aflac Japan is required to meet certain financial criteria as governed by
Japanese corporate law in order to provide dividends to the Parent Company.
Under these criteria, dividend capacity at the Japan subsidiary is basically
defined as total equity excluding common stock, accumulated other comprehensive
income amounts, capital reserves (representing statutorily required amounts in
Japan) but reduced for net after-tax unrealized losses on available-for-sale
securities. These dividend capacity requirements are generally aligned with the
SMR. Japan's FSA maintains its own solvency standard which is quantified through
the SMR. 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, the Company has one senior unsecured revolving credit facility
in the amount of ¥100 billion and a committed reinsurance facility in the amount
of approximately ¥120 billion as a capital contingency plan. Additionally, the
Company could take action to enter into derivatives on unhedged U.S.
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dollar-denominated investments with foreign currency options or forwards. See Notes 7 and 8 of the Notes to the Consolidated Financial Statements for additional information.


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 re-classified
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 in the 2020 Annual Report for
additional information on the Company's investment strategies, hedging
activities, and reinsurance, respectively.

As of June 30, 2021, Aflac Japan's SMR remains high and reflects a strong
capital and surplus position. The Company is committed to maintaining strong
capital levels throughout the pandemic, consistent with maintaining current
insurance financial strength and credit ratings. For additional information see
the Executive Summary COVID-19 section of this MD&A.

Aflac U.S.


A life insurance company's statutory capital and surplus is determined according
to rules prescribed by the National Association of Insurance Commissioners
(NAIC), as modified by the insurance department in the insurance company's state
of domicile. 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. As of June 30, 2021,
Aflac's RBC ratio remains high and reflects a strong capital and surplus
position.

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its
regulations. The maximum amount of dividends that can be paid to the Parent
Company by Aflac, CAIC and TOIC without prior approval of Nebraska's director of
insurance is the greater of the net income from operations, which excludes net
investment gains, for the previous year determined under statutory accounting
principles, or 10% of statutory capital and surplus as of the previous year-end.
Dividends declared by Aflac during 2021 in excess of $872 million would be
considered extraordinary and require such approval. Similar laws apply in New
York, the domiciliary jurisdiction of Aflac New York.

                      Privacy and Cybersecurity Governance

The Company's Board of Directors has adopted an information security policy
directing management to establish and operate a global information security
program with the goals of monitoring existing and emerging 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 Security and
Chief Information Security Officer, are responsible for the operation of the
global information security program and communicates quarterly with the Audit
and Risk Committee on the program, including with respect to the state of the
program, compliance with applicable regulations, current and evolving threats,
and recommendations for changes in the information security program. The global
information security program also includes a cybersecurity incident response
plan that is designed to provide a management framework across Company functions
for a coordinated assessment and response to potential security incidents. This
framework establishes a protocol to report certain incidents to the Global
Security and Chief Information Security Officer and other senior officers, with
the goal of timely assessing such incidents, determining applicable disclosure
requirements and communicating with the Audit and Risk Committee. The incident
response plan directs the executive officers to report certain incidents
immediately and directly to the Lead Non-Management Director.

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                                     Other

For information regarding commitments and contingent liabilities, see Note 12 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
Aflac's results of operations and financial condition are those related to the
valuation of investments and derivatives, DAC, liabilities for future policy
benefits and unpaid policy claims, 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. The application
of these critical accounting estimates determines the values at which 94% of the
Company's assets and 80% of its liabilities are reported as of June 30, 2021,
and thus has a direct effect on net earnings and shareholders' equity.
Subsequent experience or use of other assumptions could produce significantly
different results.

There have been no changes in the items the Company has identified as critical
accounting estimates during the six months ended June 30, 2021. For additional
information, see the Critical Accounting Estimates section of MD&A included in
the 2020 Annual Report.

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.

© Edgar Online, source Glimpses

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