Aflac Incorporated : INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF (form 10-K)

February 23, 2021 at 05:17 pm EST

OPERATIONS


Certain statements included in this section constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Forward-looking statements are made based on management's current
expectations and beliefs concerning future developments and their potential
effects upon the Company. The Company's actual results may differ, possibly
materially, from expectations or estimates reflected in such forward-looking
statements. Certain important factors that could cause actual results to differ,
possibly materially, from expectations or estimates reflected in such
forward-looking statements can be found in the "Risk Factors" and
"Forward-Looking Statements" sections herein.

                                 MD&A OVERVIEW

The following financial review provides a discussion of the Company's results of
operations and financial condition, as well as a summary of the Company's
critical accounting estimates. This section should be read in conjunction with
Part I - Item 1. Business and the audited consolidated financial statements and
accompanying notes included in Part II - Item 8. Financial Statements and
Supplementary Data of this report. This MD&A is divided into the following
sections:
                                                             Page
                     Executive Summary                       34
                     Industry Trends                         39
                     Outlook                                 40
                     Results of Operations                   40
                     Investments                             53
                     Policy Liabilities                      62
                     Benefit Plans                           62
                     Policyholder Protection                 62
                     Off Balance Sheet Arrangements          62
                     Liquidity and Capital Resources         63
                     Critical Accounting Estimates           69



The Company elected to omit discussion on the earliest of the three years
covered by the consolidated financial statements presented in Item 8. Financial
Statements and Supplementary Data. Readers should refer to Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations located
in the Company's   Annual Report on Form 10-K for the year ended December 31,
2019  , filed on February 21, 2020, for reference to discussion of the year
ended December 31, 2018, the earliest of the three years presented. Amounts
reported in this MD&A may not add due to rounding.



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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                               EXECUTIVE SUMMARY

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, the
majority of the Company's employees in Japan and the U.S. shifted to remote
working environments, with returns to office undertaken throughout the year as
warranted by local conditions. Both Aflac Japan and Aflac U.S. took measures to
address employee health and safety and increase employees' ability to develop
and maintain more flexible working conditions. The Company established command
centers to monitor and communicate on developments, and operations remained
stable throughout the year. The Company also took prompt action at the beginning
of the pandemic to strengthen its capital and liquidity position, and it
continued to undertake de-risking activity in its investment portfolios and to
adjust to market conditions throughout the year. Both Aflac Japan and Aflac U.S.
also accelerated investments in digital initiatives to improve productivity,
efficiency and customer service over the long term.

In 2020, both Aflac Japan and Aflac U.S. experienced a significant decrease in
sales due to the effects of the pandemic and related government responses.
Pandemic-related claims and associated reserve increases in both Japan and the
U.S. have not materially impacted 2020 results and were more than offset by a
reduction in claims related to routine medical needs. The pandemic's impact on
economic conditions have contributed to sales declines, pressuring premium
growth rates. This, in turn, has been partially offset by lower lapse rates in
the U.S. Economic conditions in the U.S. have resulted in lower interest rates
having an impact on net investment income. The Company did not experience
material realized losses or impairments and credit losses associated with the
pandemic. The Company continues to closely monitor the effects and risks of
COVID-19 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 provides in this MD&A.

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. To further support liquidity and capital
resources, the Parent Company, in March 2020, issued four series of senior notes
totaling ¥57.0 billion and, in April 2020, issued $1.0 billion in senior notes
through public debt offerings under its U.S. shelf registration statement.
Accordingly, as of December 31, 2020 the Company held approximately $5.1 billion
in cash and cash equivalents for stress conditions, which includes the Parent
Company's target minimum amount of $2.0 billion held to provide a capital buffer
and liquidity support at the holding company. Even after these debt offerings,
the Company's leverage ratio remains at levels that the Company believes are
adequate to maintain current ratings and leave capacity for further debt
issuances. The Company has available liquidity in its unsecured revolving credit
facilities of $1.0 billion and ¥100.0 billion, respectively, and currently has
no borrowings under either of these facilities. In April 2020, Aflac increased
its internal limit for Federal Home Loan Bank of Atlanta (FHLB) borrowings to
$800 million, $300 million of which the Company has designated to be used for
short-term liquidity needs of the U.S. insurance subsidiaries and subject to
qualified collateral availability and other conditions. 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 and is
taking a tactical approach to capital allocation. 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. While the SMR is
particularly sensitive to market volatility resulting from widening of credit
spreads, both SMR and RBC are sensitive to credit downgrades and defaults. The
Company has capital tools available to increase SMR and RBC including the
reduction of subsidiary dividends paid to the Parent Company by its insurance
subsidiaries and Parent Company capital contributions to insurance subsidiaries
sourced through cash on hand, proceeds from debt issuances or by drawing on the
revolving credit facilities noted above. For example, the Parent Company made a
capital contribution of $150 million to CAIC in May 2020 and, pursuant to
surplus notes, loaned $50 million to CAIC in December 2020 and $130 million to
Aflac in September 2020, the latter of which was used toward the acquisition of
Zurich North America's U.S. Corporate Life and


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pensions business in November 2020. The Company also has a committed reinsurance
facility in the amount of approximately ¥120 billion of reserves that could be
deployed to support SMR. Additionally, Aflac Japan reduced the dividends it
provides to the Parent Company in 2020 by ¥75 billion compared to initial 2020
plans. The Company intends to maintain a target minimum SMR of 500% for Aflac
Japan and a target minimum RBC of approximately 400% for Aflac, consistent with
the Company's risk management practices.

As a result of market volatility, the Company has made tactical adjustments to
its existing foreign currency-hedging program in Aflac Japan to mitigate hedging
cost and settlement risk while maintaining a strong SMR. Prior to and continuing
through the pandemic, Aflac Japan has maintained a collar program on a portion
of its U.S. dollar program to mitigate against more extreme moves in foreign
exchange rates and therefore support SMR. In the first quarter of 2020, the
Company reduced the size of the collar program by approximately $3 billion. In
December 2020, the Company reduced the total size of the forward and collar
programs by approximately $5 billion and purchased foreign currency options to
hedge approximately $5 billion of U.S. dollar-denominated assets. While these
adjustments will moderately increase the Company's exposure to SMR volatility,
the Company believes that they will also reduce its exposure to pricing
volatility and the related risk of negative settlements should there be a
material weakening in the yen. 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. 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. The Company continued with de-risking
activity in 2020, reducing positions in the portfolios seen as more vulnerable
in the current environment. Although economic and market conditions improved in
the second half of 2020, the Company remains cautious about the continued path
of the recovery and the potential longer term impacts on certain sectors most
vulnerable to the impacts of the pandemic. The Company continues seeking ways to
improve the health of the portfolio through de-risking and other repositioning
actions. Certain investments have been adversely impacted with credit rating
downgrades and increased price volatility, including investments in issuers that
faced an immediate and severe impact such as those in travel and lodging,
leisure, non-emergency medical and energy sectors. The Company continues working
with certain issuers 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 Notes 1 and 3 of the Notes to the Consolidated Financial
Statements.

Markets have stabilized from the extreme volatility seen at the outset of the
crisis, although issuers continue to be affected by reduced business activity
and consumer demand. Volatility in oil prices and reduction in global energy
demand continue to adversely impact issuers in the energy sector. U.S. interest
rates declined, and availability of new investments in certain private asset
classes such as middle market loans, commercial mortgages and transitional real
estate remain below pre-crisis levels. As a result, net investment income may be
adversely impacted over time from lower reinvestment rates for fixed maturity
investments and lower interest on floating rate assets. The Company continues to
make tactical adjustments to its investment portfolios in response to the
crisis, and continues to assess its investment strategy and asset allocation to
identify additional tactical adjustments that may be necessary due to the
continuing effects of the pandemic.

•Crisis Management



The Company has crisis command centers set up in Japan and the U.S. These
command centers are generally utilized for any type of crisis, including natural
disasters and cybersecurity events. The command centers participate in regular
updates to the Company's leadership regarding developments in Japan and the
U.S., including government and regulatory actions, operations, employee policies
and conditions and distribution status. In addition, capital market, central
bank and government stimulus updates are provided, as well as updates on
cybersecurity, including with respect to the Company's remote workforce.
Moreover, the Company's financial leadership group meets more frequently and has
focused on the capital markets, capital and liquidity position, stress testing
and any defensive actions that may be necessary as the crisis unfolds.



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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations •Aflac Japan initiatives



In February 2020, Aflac Japan began to implement actions such as working from
home, staggered work hours, limitations on the number of personnel attending
in-person meetings and restrictions on traveling between buildings and floors in
Aflac Japan worksites. In response to the state of emergency and requests made
by the Japan government in April 2020, over 70% of Aflac Japan employees were
working from home as of mid-April. The state of emergency was lifted nationwide
in May 2020; however, in January 2021, the state of emergency was reinstated in
certain prefectures experiencing elevated rates of infection. As of December 31,
2020, Aflac Japan had approximately 50% of its workforce working remotely. Aflac
Japan is evaluating return to the office measures; however, throughout the
development of the pandemic in 2020, including the increase in COVID-19 cases in
Japan during the fourth quarter, 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.

Aflac Japan has announced several additional actions taken for its employees including travel restrictions and extended paid leave.

Aflac Japan remains focused on generating new business through direct mail made
to existing and prospective customers. In addition, Aflac Japan is promoting
digital and web-based sales to groups and introduced a new 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, in
October 2020, Aflac Japan implemented a new virtual sales tool that enables
online consultations and policy applications to be completed entirely online.
During 2020, Aflac Japan also accelerated investments in digital and paperless
initiatives designed to increase long term productivity, efficiency, customer
service and business continuity. Face-to-face sales have been challenged and are
having an impact on sales results. In 2020, Aflac Japan experienced a sales
decline of 36.2% on a yen basis, compared to 2019, primarily due to the impact
of the COVID-19 pandemic and the continuing effects of the Japan Post
investigation. See the Aflac Japan Segment of this MD&A for additional
information regarding sales in the Japan Post channel and the strategic alliance
with Japan Post.

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 March
2020, Aflac Japan extended the grace period on premium payments for six months
up to September 30, 2020 and it was re-extended to April 30, 2021 in certain
cases. In January 2021, the grace period 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. Policyholders are required
to file for relief through this extension. In April 2020, Aflac Japan announced
that it will pay certain accidental death and disability benefits in the event
of a death directly caused by COVID-19.

To assist with the COVID-19 pandemic, Aflac Japan has donated ¥500 million to the Japan Medical Associations and to identified municipalities where Aflac Japan has operations.

•Aflac U.S. and Corporate and Other initiatives

The Parent Company and Aflac U.S. began to implement Company mandates including
restrictions on travel and in-person meetings applicable to U.S. employees
beginning in February 2020 and required work from home directives across their
U.S. work force in March 2020. As of December 31, 2020, approximately 95% of
U.S. employees were working remotely. The Company currently anticipates that a
return to the worksite for U.S. based employees of the Parent Company and Aflac
U.S. will be conducted in phases beginning no sooner than the second half of
2021, 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. However, Aflac U.S. anticipates
that the remote configuration could remain for an indefinite period of time
without materially impacting operations. The Parent Company and Aflac U.S.
continue to maintain employee and worksite safety measures including travel
restrictions, building access restrictions and in-person meeting restrictions.

Aflac U.S. has announced 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. is focused on supporting its agency channel, most of which are small businesses, by offering zero-interest loans and cash stipends in lieu of canceled recognition trips.





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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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. 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. In
addition, licensure of newly recruited agents has been delayed in some states
due to the unavailability or difficulty of temporary licenses or online
training. Further, despite government stimulus measures, the long-term economic
effects of the pandemic on prospective and existing customers is still largely
unknown. Similar to Aflac Japan, the Aflac U.S. sales team has worked to adjust
its sales approach given the reduction in face-to-face sales. Key elements to
this approach include realizing sales at the worksite through 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. Further, during 2020 Aflac U.S. also accelerated investments in
digital initiatives designed to improve long term productivity, efficiency and
customer service. Aflac U.S. is in its second 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.

Face-to-face sales have been challenged and are having an impact on sales
results. In 2020, Aflac U.S. experienced a sales decline of 30.8%, compared to
2019, reflecting the impacts of the pandemic. The Aflac U.S. benefit ratio
decreased in 2020, as compared to 2019; however, the ratio began to recover in
the second half of 2020, which management believes may indicate the beginning of
a return to levels seen over the past several years. The Company expanded a
previously piloted wellness initiative beginning in the third quarter of 2020,
using digital and direct account engagement to raise awareness among
policyholders as to the availability of valuable wellness benefits. The Company
estimates this effort had an impact on incurred claims of approximately $19
million since September 2020.

Aflac U.S. is encouraging policyholders who are displaying COVID-19 symptoms to
seek treatment and is paying wellness benefits on applicable policies for
COVID-19 tests, when completed claims are submitted. Aflac U.S. is also
providing coverage for treatment in temporary facilities and by telemedicine in
certain circumstances.

Throughout 2020, 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 December 31, 2020, premium grace periods
remained in effect in 10 states and Puerto Rico. Although aggregate policy
lapses decreased from the prior year, Aflac U.S. experienced an increase in
policy lapses in the second half of 2020 in certain states where premium grace
periods expired and government stimulus measures discussed below were not
renewed or initiated. If the premium grace periods continue to expire in 2021,
Aflac U.S. would expect an increase in lapse rates.

In September 2020, the Company announced a voluntary separation program for
certain U.S. employees. The program provided eligible employees with a severance
package, including twelve months of salary, the employee's targeted bonus payout
for 2020 and one year of Consolidated Omnibus Budget Reconciliation Act (COBRA)
or retiree medical, if eligible. Employees accepted into this program were
notified in October 2020 and most transitions were completed by December 31,
2020, with a small number continuing into the first quarter of 2021. The Company
recorded a one-time severance charge of $43 million in the fourth quarter of
2020 related to the program.

In 2020, the Parent Company contributed $6 million to organizations that are providing assistance for health care workers assisting with the COVID-19 pandemic.

•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 Japan, initial emergency orders declared by the Japan government were lifted; however, emergency orders have been reinstated in certain prefectures that include Tokyo and surrounding areas experiencing elevated rates of infection.

The FSA has requested that financial service providers in Japan respond appropriately while continuing their


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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, etc. in cases of death or
specified serious disabilities from COVID-19.

In April 2020, the Cabinet of Japan approved ¥117 trillion or more than 20% of
GDP in emergency stimulus measures, including various tax measures. In May 2020,
the Cabinet of Japan approved a second ¥117 trillion stimulus package. The Diet
passed a supplementary budget to fund the package in June 2020. The second
stimulus package was intended to help small and mid-sized businesses fund leave
allowances for furloughed workers and provides rent assistance for business
operations.

In the U.S., initial statewide shelter in place or stay at home orders were lifted although reopening plans have been paused or reversed in certain states experiencing an increase in cases, and shelter in place orders have been reinstated in some areas.

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 Coronavirus Aid, Relief, and Economic Security (CARES) Act, was signed into
law in March 2020 and was designed to provide approximately $2 trillion in
financial stimulus in the form of financial aid to individuals, businesses,
nonprofits, states, and municipalities. Among other measures, the CARES Act
provided for $260 billion in expanded unemployment benefits and $290 billion of
direct payments to individuals, and established a $349 billion Paycheck
Protection Program (PPP) providing for loans to small businesses, nonprofits,
and veteran's organizations with 500 or fewer employees. In April 2020, an
additional $320 billion was allocated to the PPP, including $10 billion for
administrative costs and $60 billion allocated to small lenders and community
banks. In December 2020, the Consolidated Appropriations Act, 2021 (CAA) was
signed into law. Among other measures, the CAA allocated an additional $284
billion to the PPP, extended the program to March 31, 2021, and provided for
expanded unemployment benefits and direct payments to individuals. The CARES Act
also included a five-year net operating loss (NOL) carryback, payroll tax relief
and other significant provisions for businesses. Section 4013 of the CARES Act
gives entities temporary relief from certain accounting and disclosure
requirements for troubled debt restructurings (TDRs). The Company has applied
GAAP relief with respect to certain qualifying loan modifications. See Notes 1
and 3 of Notes to the Consolidated Financial Statements for additional details.

The Federal Reserve has also taken various actions in an effort to support the
economy and markets in response to heightened volatility and uncertainty. These
actions include reducing by 1.5% each the rate that it charges for direct loans
to banks, as well as the target for the rate banks charge each other for
overnight funds (federal funds rate); initiating quantitative easing with no
stated cap on purchases; committing to purchase U.S. Treasury securities, agency
mortgage-backed and agency commercial mortgaged-backed securities;
re-establishing the Term Asset-Backed Securities Loan Facility (TALF) originally
launched in 2009, through which it will lend to holders of AA-rated asset-backed
securities; and establishing facilities to support purchase of corporate bonds
from large investment-grade companies.

Performance Highlights



For the full year of 2020, total revenues were down .7% to $22.1 billion,
compared with $22.3 billion for the full year of 2019. Net earnings were $4.8
billion, or $6.67 per diluted share, compared with $3.3 billion, or $4.43 per
diluted share, for the full year of 2019. The increase in net earnings and net
earnings per diluted share in 2020 primarily reflects a $1.4 billion benefit
from the release of valuation allowances on deferred foreign tax credits, which
were allowed due to newly released U.S. tax regulations. The Company recorded a
one-time severance charge of $43 million in the fourth quarter of 2020 related
to the voluntary separation program.

Results for 2020 included pretax net investment losses of $270 million, compared
with net investment losses of $135 million in 2019. Net investment losses in
2020 included $200 million of credit losses primarily driven by increases in
credit losses; $169 million of net losses from certain derivative and foreign
currency gains or losses; $184 million of net gains on equity securities; and
$85 million of net losses from sales and redemptions.



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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The average yen/dollar exchange rate(1) in 2020 was 106.86, or 2.1% stronger than the rate of 109.07 in 2019.



Adjusted earnings(2) for the full year of 2020 were $3.6 billion, or $4.96 per
diluted share, compared with $3.3 billion, or $4.44 per diluted share, in 2019.
The stronger yen/dollar exchange rate impacted adjusted earnings per diluted
share by $.04.

Total investments and cash at the December 31, 2020 were $149.8 billion,
compared with $138.1 billion at December 31, 2019. In 2020, Aflac Incorporated
repurchased $1.5 billion, or 37.9 million of its common shares. At December 31,
2020, the Company had 99.2 million remaining shares authorized for repurchase.

Shareholders' equity was $33.6 billion, or $48.46 per share, at December 31,
2020, compared with $29.0 billion, or $39.84 per share, at December 31, 2019.
Shareholders' equity at December 31, 2020 included a net unrealized gain on
investment securities and derivatives of $10.3 billion, compared with a net
unrealized gain of $8.5 billion at December 31, 2019. Shareholders' equity at
December 31, 2020 also included an unrealized foreign currency translation loss
of $1.1 billion, compared with an unrealized foreign currency translation loss
of $1.6 billion at December 31, 2019. The annualized return on average
shareholders' equity in 2020 was 15.3%, driven primarily by a benefit from new
tax regulations.

Shareholders' equity excluding accumulated other comprehensive income (AOCI)(2)
(adjusted book value) was $24.6 billion, or $35.56 per share at December 31,
2020, compared with $22.3 billion, or $30.74 per share, at December 31, 2019.
The annualized adjusted return on equity excluding foreign currency impact(2) in
2020 was 15.0%.

(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.

                                INDUSTRY TRENDS

The Company is impacted by financial markets, economic conditions, regulatory oversight and a variety of trends that affect the industries where it competes.

Financial and Economic Environment



The Company's business and results of operations are materially affected by
conditions in the global capital markets and the economy generally. Stressed
conditions, volatility and disruptions in global capital markets, particular
markets, or financial asset classes can have an adverse effect on the Company,
in part because the Company has a large investment portfolio and its insurance
liabilities and derivatives are sensitive to changing market factors. See Item
1A. Risk Factors for the risk factor entitled, "Difficult conditions in global
capital markets and the economy, including those caused by the novel coronavirus
COVID-19, could have a material adverse effect on the Company's investments,
capital position, revenue, profitability, and liquidity and harm the Company's
business."

Demographics

Aflac Japan
With Japan's aging population and the rise in healthcare costs, supplemental
health care insurance products remain attractive. However, due to the aging
population and decline in birthrate, new opportunities for customer demographics
are not as readily available. Japan's existing customers and potential customers
seek products that are easily understood, cost-effective and can be accessed
through technology-enabled devices.

Aflac U.S.
Customer demographics continue to evolve and new opportunities present
themselves in different customer segments such as the millennial and
multicultural markets. Customer expectations and preferences are changing.
Trends indicate existing customers and potential customers seek cost-effective
solutions that are easily understood and can be accessed through
technology-enabled devices. Additionally, income protection and the health needs
of retiring baby boomers are continuing to shape the insurance industry.

Regulatory Environment

See Item 1. Business - Aflac Japan Government Regulation and Aflac U.S. Government Regulation for a discussion of regulatory developments that may impact the Company and the associated risks.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Competitive Environment

See Item 1. Business - Aflac Japan Competitive Markets and Aflac U.S. Competitive Markets for a discussion of the competitive environment and the basis on which the Company competes in each of its segments.


                                  2021 OUTLOOK

The Company's strategy to drive long-term shareholder value is to pursue growth
through product development, distribution expansion and digital advancements to
improve the customer experience.

The Company's objectives in 2021 are to navigate the COVID-19 pandemic while
maintaining strong pre-tax margins in its Aflac Japan and Aflac U.S. segments,
continuing to accelerate the pace of investment in its digital technology, and
integrating and building upon recent acquisitions. The Company believes that its
strategy of positioning itself for future growth and efficiency while defending
and leveraging its market-leading position, powerful brand recognition and
diverse distribution in Japan and the U.S. will provide support toward these
objectives.

The Company announced a 17.9% increase in the first quarter 2021 dividend
compared to the prior quarter, and it intends to maintain strong capital ratios
in Aflac Japan and Aflac U.S. in support of its commitment to shareholder
dividends while remaining tactical in its deployment of capital in the form of
share repurchases and opportunistic investments. The Company intends to maintain
a target minimum SMR of 500% for Aflac Japan and a target minimum RBC of
approximately 400% for Aflac, consistent with the Company's risk management
practices.

Aflac Japan Segment
In Japan, the Company anticipates that the shift in earned premium from first
sector savings products to third sector cancer and medical products and first
sector protection products, will continue to result in moderately lower benefit
ratios in the Aflac Japan segment. The Company expects expenses to be elevated
in 2021 as Aflac Japan's investments in its paperless initiative and other
digital projects are being accelerated. The Company also anticipates that
benefit and expense ratios will continue to experience some level of revenue
pressure due to the impact of paid up policies and reduced sales in 2020. For
the 2020 through 2022 period, the Company expects a decline in Aflac Japan
revenue in the range of 2.0% to 3.0% on a compound annual growth rate basis.

Aflac U.S. Segment
The Company expects the profit margins for the Aflac U.S. segment to decline in
2021 as benefit ratios stabilize, expense ratios continue to be elevated in
light of investments into U.S. platforms and revenues face pressure due to the
impact of the global pandemic on sales. For the 2020 through 2022 period, the
Company expects Aflac U.S. revenue to range from a decline of 1.0% to a growth
of 1.5% on a compound annual growth rate basis.

Corporate and Other Segment
The Company expects corporate segment results to reflect stable net investment
income in 2021 compared to 2020, assuming that U.S. interest rates remain
stable.

For important disclosures applicable to statements made in this 2021 Outlook,
please see the Risk Factors section and the statement on Forward-Looking
Information at the beginning of Item 1. Business, the Risk Factors identified in
Item 1A. and Item 7. Management Discussion and Analysis.

                             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.



                                       40

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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.

The following discussion includes references to the Company's performance
measures, adjusted earnings, adjusted earnings per diluted share, and amortized
hedge costs/income, which are not calculated in accordance with U.S. GAAP
(non-U.S. GAAP). These measures exclude items that the Company believes may
obscure the underlying fundamentals and trends in the Company's insurance
operations because they tend to be driven by general economic conditions and
events or related to infrequent activities not directly associated with its
insurance operations. The Company's management uses adjusted earnings and
adjusted earnings per diluted share to evaluate the financial performance of its
insurance operations on a consolidated basis, and the Company believes that a
presentation of these measures is vitally important to an understanding of its
underlying profitability drivers and trends of its insurance business. The
Company believes that amortized hedge costs/income, which are a component of
adjusted earnings, 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.

The Company defines the non-U.S. GAAP financial measures included in this filing as follows:

•Adjusted earnings are the profits derived from operations. The most comparable
U.S. GAAP measure is net earnings. Adjusted earnings are adjusted revenues less
benefits and adjusted expenses. 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
net investment gains and losses, except for amortized hedge costs/income related
to foreign currency exposure management strategies and net interest cash flows
from derivatives associated with certain investment strategies. 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.

•Adjusted earnings per share (basic or diluted) are adjusted earnings for the
period divided by the weighted average outstanding shares (basic or diluted) for
the period presented. The most comparable U.S. GAAP measure is net earnings per
share.

•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. 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. The most comparable U.S. GAAP measure is net earnings.

•Adjusted earnings per diluted share excluding current period foreign currency
impact are adjusted earnings excluding current period foreign currency impact
divided by the weighted average outstanding diluted shares for the period
presented. The most comparable U.S. GAAP measure is net earnings per share.

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

•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. The
most comparable U.S. GAAP measure is total book value. The Company considers
adjusted book value important as it excludes AOCI, which fluctuates due to
market movements that are outside management's control.

•Adjusted return on equity (ROE) excluding foreign currency impact is calculated
using adjusted earnings excluding current period foreign currency impact divided
by average shareholders' equity, excluding AOCI. The most comparable U.S. GAAP
financial measure is return on average equity as determined using net earnings
and average total shareholders' equity.

--------------------------------------------------------------------------------
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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
measures of net earnings and net earnings per diluted share, respectively, for
the years ended December 31.
Reconciliation of Net Earnings to Adjusted Earnings(1)
In Millions Per Diluted Share
2020 2019 2020 2019
Net earnings $ 4,778 $ 3,304 $ 6.67 $ 4.43
Items impacting net earnings:
Net investment (gains) losses (2),(3),(4),(5) 229 15 .32 .02
Other and non-recurring (income) loss 28 1 .04 .00
Income tax (benefit) expense on items
excluded from adjusted earnings (72) (3) (.10) .00
Tax reform adjustment (6) 0 (4) .00 (.01)
Tax valuation allowance release (7) (1,411) 0 (1.97) .00
Adjusted earnings 3,552 3,314 4.96 4.44
Current period foreign currency impact (8) (31) N/A (.04) N/A
Adjusted earnings excluding current period
foreign currency impact $ 3,521 $ 3,314 $ 4.92 $ 4.44

(1) Amounts may not foot due to rounding.
(2) Amortized hedge costs of $206 in 2020 and $257 in 2019, related to certain
foreign currency exposure management strategies have been reclassified from net
investment gains (losses) and included in adjusted earnings as a decrease to net
investment income. See "Hedge Costs/Income" discussion below for further
information.
(3) Amortized hedge income of $97 in 2020 and $89 in 2019, related to certain
foreign currency exposure management strategies have been reclassified from net
investment gains (losses) and included in adjusted earnings as an increase to
net investment income. See "Hedge Costs/Income" discussion below for further
information.
(4) Net interest cash flows from derivatives associated with certain investment
strategies of $12 in 2020 and $(17) in 2019 have been reclassified from net
investment gains (losses) and included in adjusted earnings as a component of
net investment income.
(5) A gain of $56 in 2020 and $66 in 2019 related to the interest rate component
of the change in fair value of foreign currency swaps on notes payable have been
reclassified from net investment gains (losses) and included in adjusted
earnings as a component of interest expense.
(6) The impact of tax reform was adjusted in 2019 as a result of additional
guidance released by the IRS.
(7) One-time tax benefit recognized in 2020 representing the release of
valuation allowances on deferred foreign tax credits due to new tax regulations.
(8) Prior period foreign currency impact reflected as "N/A" to isolate change
for current period only.

Reconciling Items

Net Investment Gains and Losses



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 include securities transactions, credit losses,
derivative and foreign currency activities and changes in fair value of equity
securities.
Securities Transactions, Credit Losses and Gains (Losses) on 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. Prior to January 1, 2020, impairments include
other-than-temporary impairment losses on investment securities as well as
changes in loan loss reserves for loan receivables. Effective January 1, 2020,
credit losses include losses for held-to-maturity fixed maturity securities,
available-for-sale fixed maturity securities, loan receivables, loan commitments
and reinsurance recoverables.


                                       42

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Certain Derivative and Foreign Currency Gains (Losses)

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 variable interest entity (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. Amortized hedge costs/ income related to certain
foreign currency exposure management strategies (see Amortized Hedge Cost/Income
section below), and net interest cash flows from derivatives associated with
certain investment strategies and notes payable are reclassified from net
investment gains (losses) and included in adjusted earnings.

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. For additional information
regarding foreign currency hedging, refer to Hedging Activities in the
Investments section of this MD&A.

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.

In 2020, other items also included integration costs related to the Company's
acquisition of Zurich North America's U.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 $13 million for the year ended December 31, 2020.



                                       43

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Income Taxes



The Company's combined U.S. and Japanese effective income tax rate on pretax
earnings was (14.9)% in 2020 and 25.7% in 2019. In 2020, the combined effective
tax rate differs from the U.S. statutory rate primarily due to the release of
certain valuation allowances established on the Company's deferred foreign tax
credit benefits. The release of these valuation allowances was a result of the
issuance of Final and Proposed Regulations by the U.S. Treasury and Internal
Revenue Service in September 2020, and resulted in a one-time income tax benefit
of $1.4 billion in the third quarter of 2020. Total income taxes were $(.6)
billion in 2020 and $1.1 billion in 2019. Japanese income taxes on Aflac Japan's
results account for most of the Company's consolidated income tax expense.

For additional information, see Note 10 of the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates - Income Taxes section of this MD&A.



The 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 the risk factor
entitled "Tax rates applicable to the Company may change" in Part I, Item 1A.
Risk Factors 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. These and other
yen-denominated financial statement items are, however, translated into dollars
for financial reporting purposes. The Company translates Aflac Japan's
yen-denominated income statement into dollars using the average exchange rate
for the reporting period, and the Company translates its yen-denominated balance
sheet using the exchange rate at the end of the period.

Due to the size of Aflac Japan, whose functional currency is the Japanese yen,
fluctuations in the yen/dollar exchange rate can have a significant effect on
the Company's 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. 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.
                        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 business activities, including
reinsurance retrocession activities are included in the Corporate and other
segment. See the Item 1. Business section of this Form 10-K for a summary of
each segment's products and distribution channels.

In 2020, Aflac Japan sales for protection-type first sector and third sector
products decreased 36.9% and total sales decreased 36.2% on a yen basis,
compared to 2019, primarily due to the impact of the COVID-19 pandemic and the
continuing effects of the Japan Post investigation. Sales from Aflac U.S. were
down 30.8% in 2020, as compared to 2019, due to social distancing efforts, which
eliminated face-to-face sales opportunities beginning in mid-March 2020. The
respective Aflac Japan and Aflac U.S. platforms and distribution partners
continue to work to adapt to the new environment. The Company continues to
monitor the effects of COVID-19 on its operating results and has taken several
steps to mobilize its resources to ensure adequate liquidity, a strong capital
position, business continuity and employee safety during this pandemic. See the
Executive Summary subsection of this MD&A for additional information.

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.


                                       44

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
•Operating Ratios
•Expense Ratio
•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.

                              AFLAC JAPAN SEGMENT

Aflac Japan Pretax Adjusted Earnings



Changes in Aflac Japan's pretax adjusted earnings and profit margins are
primarily affected by morbidity, mortality, expenses, persistency and investment
yields. The following table presents a summary of operating results for Aflac
Japan for the years ended December 31.
                    Aflac Japan Summary of Operating Results


(In millions)                                                  2020          2019
Net premium income                                          $ 12,670      $ 12,772
Net investment income: (1)
Yen-denominated investment income                              1,296

1,307

U.S. dollar-denominated investment income                      1,569

1,446


Net investment income                                          2,865

2,753

Amortized hedge costs related to certain foreign currency exposure management strategies

257


Adjusted net investment income                                 2,659         2,496
Other income (loss)                                               42            45
Total adjusted revenues                                       15,371        15,313
Benefits and claims, net                                       8,851         8,877
Adjusted expenses:
Amortization of deferred policy acquisition costs                644           709
Insurance commissions                                            740           731
Insurance and other expenses                                   1,873         1,734
Total adjusted expenses                                        3,257         3,174
Total benefits and adjusted expenses                          12,108

12,051


Pretax adjusted earnings                                    $  3,263      $

3,261

Weighted-average yen/dollar exchange rate 106.86 109.07

In Dollars In Yen
Percentage change over previous period: 2020 2019 2020 2019
Net premium income (.8) % .1 % (2.8) % (1.1) %
Adjusted net investment income 6.5 % 3.9 4.4 % 2.2
Total adjusted revenues .4 .7 (1.7) (.6)
Pretax adjusted earnings .1 % 1.7 (2.0) .2

(1) Net interest cash flows from derivatives associated with certain investment
strategies of $9 and $(17) in 2020 and 2019, respectively, have been
reclassified from net investment gains (losses) and included in adjusted
earnings as a component of net investment income.
In yen terms, Aflac Japan's net premium income decreased in 2020, primarily due
to an anticipated decrease in first sector premiums as savings products reached
premium paid-up status and constrained sales from the impact of pandemic

--------------------------------------------------------------------------------
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
conditions. Adjusted net investment income increased in 2020 primarily due to
higher income from U.S. dollar-denominated assets and lower hedge costs.

Annualized premiums in force at December 31, 2020, were ¥1.43 trillion, compared
with ¥1.49 trillion in 2019. The decrease in annualized premiums in force in yen
of 4.2% in 2020 and 2.5% in 2019 was driven primarily by limited-pay products
reaching paid up status. Annualized premiums in force, translated into dollars
at respective year-end exchange rates, were $13.8 billion in 2020 and $13.6
billion in 2019.

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's U.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's U.S.
dollar-denominated investment income and related items into yen by comparing
certain segment results with those that would have been reported had foreign
currency exchange rates remained unchanged from the prior year. 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 Prior Year
(Yen Operating Results)
For the Years Ended December 31,
Including Foreign Excluding Foreign
Currency Changes Currency Changes
2020 2019 2020 2019
Adjusted net investment income 4.4 % 2.2 % 5.7 % 2.9 %
Total adjusted revenues (1.7) (.6) (1.5) (.5)
Pretax adjusted earnings (2.0) .2 (1.0) .7

The following table presents a summary of operating ratios in yen terms for Aflac Japan for the years ended December 31. Ratios to total adjusted revenues:

                      2020        2019
Benefits and claims, net                               57.6  %     58.0  %
Adjusted expenses:
Amortization of deferred policy acquisition costs       4.2         4.6
Insurance commissions                                   4.8         4.8
Insurance and other expenses                           12.2        11.3
Total adjusted expenses                                21.2        20.7
Pretax adjusted earnings                               21.2        21.3
Ratios to total premiums:
Benefits and claims, net                               69.9  %     69.5  %
Adjusted expenses:
Amortization of deferred policy acquisition costs       5.1         5.5



In 2020, the benefit ratio to total premiums increased, compared to the prior
year, primarily due to higher persistency, resulting in an increase in future
policy benefit reserves, partially offset by the continued change in mix of
first and third sector business as first sector products become paid-up. In
2020, the adjusted expense ratio increased mainly due to the decrease in total
revenues and an increase in expenses related to the paperless and COVID-19
initiatives, which include the expansion of and enhancements to virtual desktops
and telework terminals to support a remote workforce, partially offset by lower
DAC amortization due to higher persistency. In total for 2020, the pretax
adjusted profit margin decreased slightly as compared to 2019. For 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.



                                       46

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Aflac Japan Sales

The following table presents Aflac Japan's new annualized premium sales for the years ended December 31.


                                                      In Dollars                     In Yen
(In millions of dollars and billions of yen)     2020         2019               2020         2019
New annualized premium sales                   $  477       $  731             ¥ 50.9       ¥ 79.7
Increase (decrease) over prior period           (34.8) %     (15.9) %

(36.2) % (16.9) %

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


                              2020         2019
Cancer                        56.6  %      59.2  %
Medical                       31.2         31.0
Income support                 1.0          1.2
Ordinary life:
WAYS                            .7           .5
Child endowment                 .4           .2
Other ordinary life (1)        9.5          7.4
Other                           .6           .5
  Total                      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
decreased 36.9% in 2020, compared with 2019. The decline in sales primarily
reflects the impact of the COVID-19 pandemic and the continuing effects of the
Japan Post investigation.

Sales of Aflac Japan cancer products in the Japan Post Group channel experienced
a material decline beginning in August 2019 and continued in 2020. 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 Part I, Item 1A. Risk Factors. Aflac Japan experienced a sharp
drop-off in total sales, beginning in the second quarter of 2020 and continuing
into 2021, due to the impact of the COVID-19 pandemic and continuing effects of
the Japan Post investigation.

The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the years ended December 31.


                                         2020         2019
Independent corporate and individual     52.3  %      45.7  %
Affiliated corporate (1)                 42.6         50.0
Bank                                      5.1          4.3
  Total                                 100.0  %     100.0  %


(1) Includes Japan Post

In 2020, Aflac Japan recruited 48 new sales agencies. At December 31, 2020,
Aflac Japan was represented by more than 8,500 sales agencies, with
approximately 112,000 licensed sales associates employed by those agencies. The
number of sales agencies has declined in recent years due to Aflac Japan's focus
on supporting agencies with strong management frameworks, high productivity and
more producing agents.


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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations



Japan Post offers Aflac's cancer insurance products in more than 20,000 postal
outlets. Notwithstanding the recent reduction in sales of Aflac Japan's cancer
products in the Japan Post channel, the Company believes this alliance with
Japan Post has benefited and will continue to benefit its cancer insurance sales
over the long term.

At December 31, 2020, Aflac Japan had agreements to sell its products at 361 banks, approximately 90% of the total number of banks in Japan.

Strategic Alliance with Japan Post Holdings



On December 19, 2018, the Parent Company and Aflac Japan entered into a Basic
Agreement with Japan Post Holdings a Japanese corporation. Pursuant to the terms
of the Basic Agreement, Japan Post Holdings agreed to form a capital
relationship with the Parent Company, and 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, cooperation in new product development to promote
customer-centric business management, cooperation in domestic and/or overseas
business expansion and joint investment in third party entities and cooperation
regarding asset management.

On February 28, 2019, the Parent Company entered a Shareholders Agreement with
Japan Post Holdings, J&A Alliance Holdings Corporation, a Delaware corporation,
solely in its capacity as trustee of J&A Alliance Trust, a New York voting trust
(Trust), and General Incorporated Association J&A Alliance, a Japanese general
incorporated association. Pursuant to the Shareholders Agreement, Japan Post
Holdings agreed to cause the Trust to use commercially reasonable efforts to
acquire, through open market or private block purchases in the U.S., beneficial
ownership of approximately 7% of the Common Stock in connection with the Basic
Agreement. According to a Schedule 13G/A filed by Japan Post Holdings with the
SEC on January 6, 2021, the Trust had beneficially acquired 7.45% of the
outstanding Common Shares as of December 31, 2020. Japan Post Holdings is the
sole beneficiary of the Trust.

On May 1, 2020, the Parent Company filed a registration statement on Form S-3
that registered the sale of its common stock from time to time by J&A Alliance
Holdings Corporation in its capacity as trustee of the Trust. The filing was
made strictly pursuant to a contractual requirement contained in the
Shareholders Agreement. Notwithstanding the contractual commitment and filing of
the Form S-3, the Trust continues to be subject to a lockup period for a period
expiring four years after the Trust acquired 7% of the Parent Company's
outstanding shares, under the terms of the Shareholders Agreement.

The Trust has agreed not to own more than 10% of the Parent Company's
outstanding shares for a period expiring four years after the Trust acquired 7%
of such shares, five years after it acquires 5% of such shares, or ten years
after the Trust begins acquiring the Parent Company's stock. After expiration of
such period, the Trust has agreed not to own more than the greater of 10% of the
Parent Company's outstanding shares or such shares representing 22.5% of the
voting rights in the Parent Company.

In light of the fact that the shares acquired by the Trust, like all Aflac
Incorporated common shares, will be eligible for 10-for-1 voting rights after
being held for 48 consecutive months, the Shareholders Agreement further
provides for voting restrictions that effectively limit the trustee's voting
rights to no more than 20% of the voting rights in the Parent Company and
further restrict the trustee's voting rights with respect to certain change in
control transactions. Japan Post Holdings will not have a Board seat on the
Parent Company's Board of Directors and will not have rights to control, manage
or intervene in the management of the Parent Company.

As of December 31, 2019, all regulatory approvals expressly set forth in the
Shareholders Agreement have been obtained. The Shareholders Agreement requires
the parties to use reasonable best efforts to cooperate in connection with any
ongoing regulatory matters related to or arising from the Trust's acquisition or
ownership or control of the shares of Company Common Stock, including any
applications or filings in connection with a direct or indirect acquisition of
control of or merger with an insurer by the Company or its affiliates. The
foregoing is subject to and qualified in its entirety by reference to the full
text of the Shareholders Agreement, a copy of which is attached as Exhibit 10.50
to the Company's Quarterly Report on Form 10-Q filed April 26, 2019, and the
terms of which exhibit are incorporated herein by reference.

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.



                                       48


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 and public and private
fixed maturity securities. Aflac Japan's U.S. dollar-denominated investments
include fixed maturity investments and growth assets, including public equity
securities and 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.

The following table details the investment purchases for Aflac Japan for the years ended December 31.


              (In millions)                                2020         2019
              Yen-denominated:
               Fixed maturity securities:
                 Japan government and agencies           $   736      $   583
                 Private placements                          574        1,122
                 Other fixed maturity securities             385          542
               Equity securities                             276          212
                  Total yen-denominated                  $ 1,971      $ 2,459

              U.S. dollar-denominated:
               Fixed maturity securities:
                 Other fixed maturity securities         $ 1,393      $ 2,767
                 Infrastructure debt                         101           66

                 Collateralized loan obligations             300            0
               Equity securities                               0           58
               Commercial mortgage and other loans:
                 Transitional real estate loans              688        1,846
                 Commercial mortgage loans                    12          565
                 Middle market loans                       2,215        1,442
               Other investments                             279          145
                  Total dollar-denominated               $ 4,988      $ 6,889
                    Total Aflac Japan purchases          $ 6,959      $ 9,348

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



Funds available for investment include cash flows from operations, investment
income, and funds generated from maturities, redemptions, securities lending,
and other securities transactions. Securities lending is also used from time to
time to accelerate the availability of funds for investment. Purchases of
securities from period to period are determined based on multiple objectives
including appropriate portfolio diversification, the relative value of a
potential investment and availability of investment opportunities, liquidity,
credit and other risk factors while adhering to the Company's investment policy
guidelines.

The following table presents the results of Aflac Japan's investment yields for the years ended and as of December 31.

--------------------------------------------------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                                                                           2020             2019
Total purchases for the period (in millions) (1)                        $ 6,680          $ 9,203
New money yield (1),(2)                                                    3.75  %          3.83  %
Return on average invested assets (3)                                      2.38             2.33

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

2.59 % 2.64 %




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

The decrease in the Aflac Japan new money yield in 2020 was primarily due to lower yields on floating rate 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.

AFLAC U.S. SEGMENT

Aflac U.S. Pretax Adjusted Earnings



Changes in Aflac U.S. pretax adjusted earnings and profit margins are primarily
affected by morbidity, mortality, expenses, persistency and investment yields.
The following table presents a summary of operating results for Aflac U.S. for
the years ended December 31.
                    Aflac U.S. Summary of Operating Results
(In millions)                                            2020          2019
Net premium income                                    $ 5,758       $ 5,808
Adjusted net investment income (1)                        705           720
Other income                                              102            22
Total adjusted revenues                                 6,565         6,550
Benefits and claims                                     2,765         2,871
Adjusted expenses:
Amortization of deferred policy acquisition costs         570           573
Insurance commissions                                     576           590
Insurance and other expenses                            1,386         1,244
Total adjusted expenses                                 2,532         2,407
Total benefits and adjusted expenses                    5,297         5,279
Pretax adjusted earnings                              $ 1,268       $ 1,272
Percentage change over previous period:
Net premium income                                        (.9) %        1.8  %
Net investment income                                    (2.1)         (1.0)
Total adjusted revenues                                    .2           1.7
Pretax adjusted earnings                                  (.3)         (1.0)


(1) Net interest cash flows from derivatives associated with certain investment
strategies of $3 for the year ended December 31, 2020 have been reclassified
from net investment gains (losses) and included in adjusted earnings as a
component of net investment income.

Annualized premiums in force decreased 3.2% in 2020 and increased 1.1% in 2019.
Annualized premiums in force at December 31 were $6.1 billion in 2020, compared
with $6.3 billion in 2019.



                                       50


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table presents a summary of operating ratios for Aflac U.S. for
the years ended December 31.
Ratios to total adjusted revenues:                      2020        2019
Benefits and claims                                    42.1  %     43.8  %
Adjusted expenses:
Amortization of deferred policy acquisition costs       8.7         8.7
Insurance commissions                                   8.8         9.0
Insurance and other expenses                           21.1        19.0
Total adjusted expenses                                38.6        36.7
Pretax adjusted earnings                               19.3        19.4
Ratios to total premiums:
Benefits and claims                                    48.0        49.4
Adjusted expenses:
Amortization of deferred policy acquisition costs       9.9         9.9



The benefit ratio decreased in 2020, compared with 2019, reflecting reduced
accidents, wellness medical visits and routine procedures due to
shelter-in-place orders and heightened social distancing due to COVID-19. The
adjusted expense ratio increased in 2020, compared with 2019, primarily due to
anticipated spending increases reflecting ongoing investments in the U.S.
platform, distribution, and customer experience, TPA related expenses from the
acquisition of Argus, the Voluntary Separation Plan, and lower unit cost
capitalization reflecting a decline in sales. The pretax adjusted profit margin
decreased slightly in 2020 when compared with 2019, due to higher expense
ratios, offset somewhat by lower benefit ratios. For 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
years ended December 31.
(In millions)                                2020          2019
New annualized premium sales              $ 1,093       $ 1,580

Increase (decrease) over prior period (30.8) % (1.3) %





The following table details the contributions to Aflac's U.S. new annualized
premium sales by major insurance product category for the years ended
December 31.
                          2020         2019
Accident                  26.1  %     28.5  %
Short-term disability     22.3        22.5
  Critical care (1)       22.2        21.9
Hospital indemnity        18.0        16.6
Dental/vision              4.1         4.4
Life                       7.3         6.1
Total                    100.0  %     100.0%

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



New annualized premium sales for accident insurance, the Aflac U.S. leading
product category, decreased 36.6%, short-term disability sales decreased 31.5%,
critical care insurance sales (including cancer insurance) decreased 30.1%, and
hospital indemnity insurance sales decreased 25.2% in 2020, compared with 2019.
Overall sales decreased in 2020 as well net earned premium decreased .9%.
Primarily, the decline in sales for Aflac U.S. is attributable COVID-19 social
distancing efforts, which limited face-to-face sales opportunities beginning in
mid-March 2020. See the Executive Summary section entitled "COVID-19" of this
MD&A for additional information.
In 2020, the Aflac U.S. sales forces included an average of approximately 6,500
U.S. agents, including brokers, who were actively producing business on a weekly
basis. The Company believes that this average weekly producer equivalent


                                       51

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
metric allows sales management to monitor progress and needs, as well as serve
as a leading indicator of future production capacity.
In November 2020, the Company, through its insurance subsidiaries Aflac and
Aflac New York, acquired Zurich North America's U.S. Corporate Life and Pensions
business, which consists of group life, disability and absence management
products. Aflac and Aflac New York agreed to reinsure on an indemnity basis
Zurich North America's U.S. in-force group life and disability policies with
annualized earned premium of over $100 million. Aflac also acquired assets
needed to support the group life and disability business, along with an absence
management platform.
In November 2019, the Company acquired Argus Holdings, LLC and its subsidiary
Argus Dental & Vision, Inc., a benefits management organization and national
network dental and vision company, which provides a platform for Aflac Dental
and Vision. Argus is an addition to the Aflac U.S. segment.

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. as of December 31.


               (In millions)                               2020         2019
               Fixed maturity securities:
                  Other fixed maturity securities        $   573      $ 1,032
                  Infrastructure debt                         45          119
                  Collateralized loan obligations            150            0
               Equity securities                               8           58
               Commercial mortgage and other loans:
                  Transitional real estate loans             143          423
                  Commercial mortgage loans                   52          104
                  Middle market loans                         79           99
               Other investments                              31           16
                   Total Aflac U.S. Purchases            $ 1,081      $ 1,851



Funds available for investment include cash flows from operations, investment
income, and funds generated from maturities, redemptions, and other securities
transactions. Purchases of securities from period to period are determined based
on multiple objectives, including appropriate portfolio diversification, the
relative value of a potential investment and availability of investment
opportunities, liquidity, credit and other risk factors while adhering to the
Company's investment policy guidelines.

The following table presents the results of Aflac's U.S. investment yields for the years ended and as of December 31.


                                                   2020          2019

Total purchases for period (in millions) (1) $ 1,050 $ 1,835 New money yield (1), (2)

                           3.04  %       4.51  %
Return on average invested assets (3)              4.90          5.07
Portfolio book yield, end of period (1)            5.18  %       5.40  %


(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



                                       52


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The decrease in the Aflac U.S. new money yield for the year ended December 31,
2020 was primarily due to lower U.S. interest rates.

See Note 3 of the Notes to the Consolidated Financial Statements and the Market
Risks of Financial Instruments - Credit Risk subsection of Item 7A. for more
information regarding the sector concentrations of 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 operating
results for Corporate and other for the years ended December 31.

                Corporate and Other Summary of Operating Results


(In millions)                                                    2020       2019
Premium income                                                 $  194      $ 200
Net investment income                                              80         88

Amortized hedge income related to certain foreign currency management strategies


Adjusted net investment income                                    177        177
Other income                                                       13         15
Total adjusted revenues                                           384        393
Benefits and claims, net                                          180        194
Adjusted expenses:
Interest expense                                                  164        133
Other adjusted expenses                                           155        137
Total adjusted expenses                                           319        270
Total benefits and adjusted expenses                              499        464
Pretax adjusted earnings                                       $ (115)     $ (72)



Adjusted net investment income benefited from the Company's enterprise corporate
hedging program for the years ended December 31, 2020 and 2019, respectively.
Beginning in 2020, net investment income also includes the Company's portion of
earnings from its strategic equity investment in an asset management company.
See the Hedging Activities subsection of this MD&A for further information on
the enterprise corporate hedging program. The increase in interest expense in
2020 is primarily due to the issuance of additional senior notes in the first
and second quarter of 2020. See Note 9 of the Notes to the Consolidated
Financial Statements for more information on these senior notes.

In October 2020, the Company entered into an agreement to purchase approximately
$200 million in newly issued common stock of Trupanion, Inc., a provider of
medical insurance for pets in the United States and Canada. The Company closed
on approximately $60 million of this transaction in October 2020. The Company
closed on the remaining approximately $140 million of this transaction in
November 2020 which resulted in the Company owning approximately 9% of the
outstanding common stock of Trupanion, Inc. The Company also announced that it
has entered into an alliance agreement with Trupanion, Inc. to sell pet
insurance on an exclusive basis in the United States, subject to certain
exceptions, and to explore on an exclusive basis potential distribution
opportunities for pet insurance in Japan.


                                  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.



                                       53


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For additional information concerning the Company's investments, see Notes 3, 4,
and 5 of the Notes to the Consolidated Financial Statements.

The following tables detail investments by segment as of December 31.



                        Investment Securities by Segment
                                                                      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
                                                                            2019
                                                                                    Corporate and
(In millions)                            Aflac Japan            Aflac U.S.              Other                Total
Available for sale, fixed maturity
securities,
at fair value                          $     75,780           $    13,703           $     1,779           $  91,262
Held to maturity, fixed maturity
securities,
at amortized cost                            30,085                     0                     0              30,085
Equity securities                               657                    67                    78                 802
Commercial mortgage and other loans:
Transitional real estate loans                4,507                   943                     0               5,450
Commercial mortgage loans                     1,308                   399                     0               1,707
Middle market loans                           2,141                   271                     0               2,412
Other investments:
Policy loans                                    234                    16                     0                 250
Short-term investments (1)                      386                   242                     1                 629
Limited partnerships                            496                    55                    17                 568
Other                                             0                    30                     0                  30
   Total investments                        115,594                15,726                 1,875             133,195
Cash and cash equivalents                     1,674                   417                 2,805               4,896
       Total investments and cash      $    117,268           $    16,143           $     4,680           $ 138,091

(1) Includes securities lending collateral


                                       54

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The ratings of the Company's securities referenced in the table below are based
on the ratings designations provided by major rating organizations such as
Moody's, Standard & Poor's and Fitch or, if not rated, are determined based on
the Company's internal analysis of such securities. When the ratings issued by
the rating agencies differ, the Company utilizes the second lowest rating when
three or more rating agency ratings are available or the lowest rating when only
two rating agency ratings are available.

The distributions of fixed maturity securities the Company owns, by credit rating, as of December 31 were as follows:


           Composition of Fixed Maturity Securities by Credit Rating


                                      2020                                               2019
                    Amortized                  Fair                    Amortized                  Fair
                      Cost                     Value                     Cost                     Value
AAA                       1.0  %                     .9  %                   1.1  %                    1.0  %
AA                        4.5                       4.6                      4.3                       4.4
A                        69.3                      69.5                     68.6                      69.8
BBB                      21.9                      21.9                     23.1                      22.1
BB or lower               3.3                       3.1                      2.9                       2.7
Total                   100.0  %                  100.0  %                 100.0  %                  100.0  %

As of December 31, 2020, the Company's direct and indirect exposure to securities in its investment portfolio that were guaranteed by third parties was immaterial both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of December 31, 2020.


                                        Credit            Amortized            Fair
(In millions)                           Rating              Cost               Value            Unrealized Loss
Transocean Inc.                            CCC                $ 50             $ 16                       $ (34)
Diamond Offshore Drilling Inc.              D                   28                7                         (21)
KLM Royal Dutch Airlines                    B                  153              134                         (19)
Grenke Finance PLC                         BBB                  68               56                         (12)
Chevron Corp.                              AA                  145              135                         (10)
Intesa Sanpaolo Spa                        BBB                 151              141                         (10)
National Football League                    A                  156              147                          (9)
Kommunal Landspensjonskasse (KLP)          BBB                 145              137                          (8)
Heathrow Funding Ltd.                      BBB                  97               89                          (8)
Lloyds Banking Group PLC                    A                  222              216                          (6)



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, with the exception of Diamond Offshore Drilling Inc. which has
declared bankruptcy. 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.



                                       55

--------------------------------------------------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                       Below-Investment-Grade Investments


                                                             December 31, 2020
                                                                                      Unrealized
                                              Par        Amortized        Fair           Gain
      (In millions)                          Value        Cost (1)        Value         (Loss)


      Investcorp Capital Limited           $   407      $      407      $   459      $       52
      Commerzbank                              386             262          431             169
      Pemex Project Funding Master Trust       290             290          294               4
      KLM Royal Dutch Airlines                 193             153          134             (19)
      Autostrade Per Litalia Spa               193             192          205              13
      Telecom Italia SpA                       193             193          250              57
      Barclays Bank PLC                        193             127          169              42
      Apache Corporation                       138             130          154              24
      Ovintiv Inc.                             134             138          155              17
      IKB Deutsche Industriebank AG            126              56           89              33
      Other Issuers                          1,017             875        1,006             131
           Subtotal (2)                      3,270           2,823        3,346             523
      Senior secured bank loans                214             235          207             (28)
      High yield corporate bonds               675             703          712               9
      Middle market loans                    3,757           3,636


3,640               4
           Grand Total                     $ 7,916      $    7,397      $ 7,905      $      508


(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.


                                       56


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Fixed Maturity Securities by Sector
The Company maintains diversification in investments by sector to avoid
concentrations to any one sector, thus managing exposure risk. The following
table shows the distribution of fixed maturities by sector classification as of
December 31.
                                                                                  2020
                                                                             Gross
                                                     Amortized            Unrealized    Gross Unrealized                  % of


(In millions)                                         Cost (1)               Gains           Losses       Fair Value      Total
Government and agencies                      $                56,649    $      9,822    $         (52)   $   66,419              48.9  %
Municipalities                                                 2,855             668               (7)        3,517               2.5
Mortgage- and asset-backed securities                          1,009              35               (6)        1,038                .9
Public utilities                                               8,837           2,057              (16)       10,879               7.6
Electric                                                       7,131           1,683              (13)        8,803               6.1
Natural Gas                                                      318              63                0           381                .3
Other                                                            615             133                0           747                .5
Utility/Energy                                                   773             178               (3)          948                .7
Sovereign and Supranational                                    1,784             337               (3)        2,113               1.5
Banks/financial institutions                                  10,525           1,644             (109)       12,062               9.0
Banking                                                        6,299           1,041              (37)        7,305               5.4
Insurance                                                      2,007             404              (36)        2,375               1.7
Other                                                          2,219             199              (36)        2,382               1.9
Other corporate                                               34,397           6,143             (288)       40,253              29.6
Basic Industry                                                 3,309             720              (15)        4,013               2.9
Capital Goods                                                  3,388             566              (20)        3,934               2.9
Communications                                                 4,096             940              (33)        5,003               3.5
Consumer Cyclical                                              3,159             573              (29)        3,703               2.7
Consumer Non-Cyclical                                          7,209           1,256              (44)        8,423               6.2
Energy                                                         4,130             641              (57)        4,715               3.6
Other                                                          1,565             210               (6)        1,769               1.3
Technology                                                     3,514             341              (38)        3,816               3.0
Transportation                                                 4,027             896              (46)        4,877               3.5
    Total fixed maturity securities          $               116,056    $     20,706    $        (481)   $  136,281             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.



                                       57

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table details investment securities by type of issuance as of
December 31.

                   Investment Securities by Type of Issuance
                                                    2020                                      2019
                                       Amortized             Fair                Amortized              Fair
(In millions)                          Cost (1)              Value                 Cost                Value
Publicly issued securities:
Fixed maturity securities             $  95,545            $ 111,479            $  89,625            $ 105,557
Equity securities                           740                  740                  717                  717
   Total publicly issued                 96,285              112,219               90,342              106,274
Privately issued securities: (2)
Fixed maturity securities (3)            20,511               24,802               19,831               23,299
Equity securities                           543                  543                   85                   85
   Total privately issued                21,054               25,345               19,916               23,384
   Total investment securities        $ 117,339            $ 137,564            $ 110,258            $ 129,658

(1) Net of allowance for credit losses (2) Primarily consists of securities owned by Aflac Japan (3) Excludes Rule 144A securities

The following table details the Company's reverse-dual currency securities as of December 31.


                      Reverse-Dual Currency Securities(1)
(Amortized cost, in millions)                                      2020                 2019
Privately issued reverse-dual currency securities               $ 5,300

$ 4,993 Publicly issued collateral structured as reverse-dual currency securities

                                                        1,775                1,678
Total reverse-dual currency securities                          $ 7,075              $ 6,671
Reverse-dual currency securities as a percentage of total
investment
securities                                                          6.0  %               6.1  %

(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" 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.
•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.


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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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's U.S. Dollar-Denominated Hedge Program below).

•Aflac Japan maintains certain unhedged U.S. dollar-denominated securities, which serve as an economic currency hedge of a portion of the Company's investment in Aflac Japan (see Aflac Japan's U.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's U.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 as of December 31.
                                                                  2020                           2019
                                                         Amortized      Fair            Amortized      Fair
(In millions)                                             Cost (1)      Value              Cost        Value

Available-for-sale securities:

Fixed maturity securities (excluding bank loans) $ 19,249 $ 21,108 $ 18,012 $ 19,542

Fixed maturity securities - bank loans (floating rate) 319 283

                677         649
Equity securities                                              20          20                 19          19

Commercial mortgage and other loans:


 Transitional real estate loans (floating rate)             4,331       4,298              4,507       4,543
 Commercial mortgage loans                                  1,268       1,365              1,308       1,319
 Middle market loans (floating rate)                        3,365       3,377              2,141       2,153
Other investments                                             828         828                496         496
   Total U.S. Dollar Program                               29,380      31,279             27,160      28,721

Available-for-sale securities:

Fixed maturity securities - economically converted to yen

                                                         2,085       3,094              1,700       2,608

Total U.S. dollar-denominated investments in Aflac Japan

$  31,465    $

34,373 $ 28,860 $ 31,329

(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. In the first quarter of 2020, the Company reduced the
size of the collar program by approximately $3 billion. In December 2020, the
Company reduced the total size of the forward and collar programs by
approximately $5 billion and purchased foreign currency options to hedge
approximately $5 billion of U.S. dollar-denominated assets. While these
adjustments will moderately increase the Company's exposure to SMR volatility,
the Company believes that they will also reduce its exposure to pricing
volatility and the related risk of negative settlements should there be a
material weakening in the yen. 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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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
As of December 31, 2020, Aflac Japan had $6.4 billion outstanding notional
amounts of foreign currency forwards and $13.1 billion outstanding notional
amounts of foreign currency options, of which none were in-the-money, hedging
the U.S. dollar-denominated investments. The fair value of Aflac Japan's
unhedged U.S. dollar-denominated portfolio was $9.4 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 $21 million in 2020 and net cash outflows of $20
million in 2019, associated with the currency derivatives used for hedging Aflac
Japan's U.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 $9.9 billion as of December 31, 2020,
compared with $9.1 billion as of December 31, 2019.

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 years ended December 31, 2020 and 2019,
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's U.S dollar exposure
remains reduced as a result of Aflac Japan's U.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 $97 million in 2020 and $89
million in 2019. 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.

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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table presents metrics related to Aflac Japan amortized hedge
costs and the Parent Company amortized hedge income for the years ended December
31.

Hedge Cost/Income Metrics(1)
2020 2019
Aflac Japan:
FX Forwards

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

$6.4               $8.8
  Weighted average remaining tenor (in months) (3)                          12.7               8.5
  Amortized hedge income (cost) for period (in millions)                   $(197)             $(256)
FX Options
FX option notional at the end of period (in billions) (2)                  $13.1               $9.2
Weighted average remaining tenor (in months) (3)                            5.3                1.9
Amortized hedge income (cost) for period (in millions)                      $(9)               $(1)
Corporate and Other (Parent Company):
FX Forwards

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

$5.0               $4.9
  Weighted average remaining tenor (in months)(3)                           12.1               13.7
  Amortized hedge income (cost) for period (in millions)                    $102               $90
FX Options
FX option notional at the end of period (in billions) (2)                   $2.0               $2.0
Weighted average remaining tenor (in months) (3)                            7.2                8.4
Amortized hedge income (cost) for period (in millions)                      $(5)               $(1)


(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

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 Risks, and Item 1A, specifically to the
Risk Factors titled "The Company is exposed to foreign currency fluctuations in
the yen/dollar exchange rate" and "Lack of availability of acceptable
yen-denominated investments could adversely affect the Company's results of
operations, financial position or liquidity."

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

--------------------------------------------------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                               POLICY LIABILITIES

The following table presents policy liabilities by segment and in total for the
years ended December 31.
          (In millions)                                   2020           2019
          Japan segment:
          Future policy benefits                       $  88,652      $  81,462
          Unpaid policy claims                             3,177          2,879
          Other policy liabilities                        11,299         11,452
          Total Japan policy liabilities                 103,128         95,793
          U.S. segment:
          Future policy benefits                           9,674          9,405
          Unpaid policy claims                             2,010          1,779
          Other policy liabilities                           126            111
          Total U.S. policy liabilities                   11,810         11,295
          Consolidated:
          Future policy benefits                          97,783         90,335
          Unpaid policy claims                             5,187          4,659
          Other policy liabilities                        11,421         11,560
          Total consolidated policy liabilities (1)    $ 114,391      $ 106,554

(1) The sum of the Japan and U.S. segments exceeds the total due to reinsurance and retrocession activity.

See Note 7 of the Notes to the Consolidated Financial Statements for additional information on the Company's policy liabilities.


                                 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 14 of the Notes to the Consolidated Financial Statements.


                            POLICYHOLDER PROTECTION

Policyholder Protection Corporation



The Japanese insurance industry has a policyholder protection system that
provides funds for the policyholders of insolvent insurers. Legislation enacted
regarding the framework of the Life Insurance Policyholder Protection
Corporation (LIPPC) included government fiscal measures supporting the LIPPC. In
November 2016, Japan's Diet passed legislation that again extends 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
¥1.9 billion for LIPPC assessments in each of the years ended December 31, 2020
and 2019.

Guaranty Fund Assessments

Under U.S. state guaranty association laws, certain insurance companies can be
assessed (up to prescribed limits) for certain obligations to the policyholders
and claimants of impaired or insolvent insurance companies that write the same
line or similar lines of business. The amount of the guaranty fund assessment
that an insurer is assessed is based on its proportionate share of premiums in
that state. See Note 15 of the Notes to the Consolidated Financial Statements
for further information on guaranty fund assessments.

                         OFF-BALANCE SHEET ARRANGEMENTS

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



As of December 31, 2020, 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 for information on material
unconditional purchase obligations that are not recorded on the Company's
balance sheet.



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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                        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 return on equity. 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. Amid the COVID-19 pandemic, the
Company remains committed to prudent liquidity and capital management. At
December 31, 2020, the Company held $5.1 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. To maintain a strong
capital position during the COVID-19 pandemic in 2020, dividends paid to the
Parent Company by Aflac Japan were reduced. For additional information on the
impact to subsidiary dividends paid to the Parent Company as a result of
COVID-19, see the Executive Summary section of this MD&A.

The following table presents the amounts provided to the Parent Company for the years ended December 31.



              Liquidity Provided by Subsidiaries to Parent Company
            (In millions)                                  2020         2019
            Dividends declared or paid by subsidiaries   $ 2,068      $ 3,466
            Management fees paid by subsidiaries             131          151

The following table details Aflac Japan remittances for the years ended December 31.


                            Aflac Japan Remittances
(In millions of dollars and billions of yen)                            2020              2019
Aflac Japan management fees paid to Parent Company                   $    71           $    75
Expenses allocated to Aflac Japan (in dollars)                             0                 4

Aflac Japan profit remittances to the Parent Company (in dollars) 1,215

             2,070

Aflac Japan profit remittances to the Parent Company (in yen) ¥ 129.8

           ¥ 225.2



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 consider whether the amount of such investments
should be increased or decreased relative to the Company's view of economic
equity surplus in Aflac Japan in light of potentially rising hedge costs and
other factors. See the Hedging Activity subsection in this MD&A for more
information.



                                       63


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 December 31, 2020, the Parent Company and Aflac
had four lines of credit with third parties and seven intercompany lines of
credit. For additional information, see Note 9 of the Notes to the Consolidated
Financial Statements.

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.

                         Major Contractual Obligations

The following table presents the estimated payments by period of the Company's
major contractual obligations as of December 31, 2020. The Company translated
its yen-denominated obligations using the December 31, 2020, exchange rate.
Actual future payments as reported in dollars will fluctuate with changes in the
yen/dollar exchange rate.
                       Distribution of Payments by Period
                                                                                  Less                                  Three to
                                        Total                  Total              Than               One to               Five               After
(In millions)                        Liability(1)             Payments          One Year           Three Years            Years           Five Years
Future policy benefits liability
(Note 7)(2)                        $      97,783            $ 256,340

$ 10,057 $ 19,724 $ 19,661 $ 206,898 Unpaid policy claims liability (Note 7)(3)

                                5,187                5,187             3,343                 1,090               432                 322
Other policyholders' funds (Note
7)(3)                                      7,824               10,219               373                   477               868               8,501
Long-term debt - principal (Note
9)                                         7,745                7,804                 0                   700             1,320               5,784
Long-term debt - interest (Note 9)            49                2,984               221                   426               345               1,992
Cash collateral on loaned
securities (Note 3)                          964                  964               964                     0                 0                   0
Operating service agreements                        (4)
(Note 15)                                       N/A               407               195                   168                44                   0
Operating lease obligations
(Note 9)                                     143                  152                52                    51                21                  28
Finance lease obligations (Note 9)            11                   11                 4                     5                 2                   0
Total contractual obligations      $     119,706            $ 284,068

$ 15,209 $ 22,641 $ 22,693 $ 223,525




Liabilities for unrecognized tax benefits in the amount of $19 have been
excluded from the tabular disclosure above because the timing of cash payment is
not reasonably estimable.
(1) Liability amounts are those reported on the consolidated balance sheet as of
December 31, 2020.
(2) The estimated payments due by period reflect future estimated cash payments
to be made to policyholders and others for future policy benefits. These
projected cash outflows are based on assumptions for future policy persistency,
mortality, morbidity, and other assumptions comparable with the Company's
experience, consider future premium receipts on current policies in force, and
assume market growth and interest crediting consistent with assumptions used in
amortizing deferred acquisition costs. These cash outflows are undiscounted with
respect to interest and, as a result, the sum of the cash outflows shown for all
years in the table of $256,340 exceeds the corresponding liability amount of
$97,783. The Company has made significant assumptions to determine the future
estimated cash outflows related to the underlying policies and contracts. Due to
the significance of the assumptions used, actual cash outflow amounts and timing
will differ, possibly materially, from these estimates.
(3) Includes assumptions as to the timing of policyholders reporting claims for
prior periods and the amount of those claims. Actual amounts and timing of
unpaid policy claims payments may differ significantly from the estimates above.
(4) Not applicable

For more information on the Company's major contractual obligations, see the applicable Note in the Notes to the Consolidated Financial Statements as indicated in the line items in the table above.



The Company's consolidated financial statements convey its financing
arrangements during the periods presented. The Company has not engaged in
material intra-period short-term financings during the periods presented that
are not otherwise reported in its balance sheet or disclosed therein. The
Company was in compliance with all of the covenants of its notes payable and
lines of credit at December 31, 2020. The Company has not entered into
transactions involving the transfer of financial assets with an obligation to
repurchase financial assets that have been accounted for as a sale under
applicable accounting standards, including securities lending transactions. See
Notes 1, 3, and 4 of the Notes to the Consolidated Financial Statements for 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 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


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Company is not aware of a trend, demand, commitment, event or uncertainty that
would likely 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 years 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 years
ended December 31.
(In millions)                                     2020         2019
Operating activities                            $ 5,958      $ 5,455
Investing activities                             (4,619)      (3,171)
Financing activities                             (1,115)      (1,713)

Exchange effect on cash and cash equivalents 21 (12) Net change in cash and cash equivalents $ 245 $ 559


                              Operating Activities

The principal cash inflows for the Company's insurance activities come from
insurance premiums and investment income. The principal cash outflows are the
result of policy claims, operating expenses, income tax, as well as interest
expense. As a result of policyholder aging, claims payments are expected to
gradually increase over the life of a policy. Therefore, future policy benefit
reserves are accumulated in the early years of a policy and are designed to help
fund future claims payments.

The Company expects its future cash flows from premiums and investment
portfolios to be sufficient to meet its cash needs for benefits and expenses.
Consolidated cash flow from operations increased 9.2% in 2020, compared with
2019.

                              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 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 an emphasis on digital
applications designed to improve the customer experience, gain efficiencies, and
develop new markets in an effort to enhance and defend long-term shareholder
value. Investments are included in equity securities or the other investments
line in the consolidated balance sheets.

As part of an arrangement with FHLB, Aflac U.S. obtains low-cost funding from
FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In 2020,
Aflac U.S. borrowed and repaid $299 million under this program. As of
December 31, 2020, Aflac U.S. had outstanding borrowings of $301 million
reported in its balance sheet. To further support liquidity and capital
resources amid the pandemic, in April 2020, Aflac U.S. increased its internal
limit for borrowings under this program to $800 million, $300 million of which
the Company has designated to be used for short-term liquidity needs only and
subject to qualified collateral availability and other conditions.

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

--------------------------------------------------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations


                              Financing Activities

Consolidated cash used by financing activities was $1.1 billion in 2020 and $1.7 billion in 2019.



In April 2020, the Parent Company issued $1.0 billion of senior notes through a
U.S. public debt offering. The notes bear interest at a fixed rate of 3.60% per
annum, payable semi-annually, and will mature in April 2030. These notes are
redeemable at the Parent Company's option in whole at any time or in part from
time to time at a redemption price equal to the greater of: (i) the aggregate
principal amount of the notes to be redeemed or (ii) the amount equal to the sum
of the present values of the remaining scheduled payments for principal of and
interest on the notes to be redeemed, not including any portion of the payments
of interest accrued as of such redemption date, discounted to such redemption
date on a semiannual basis at the yield to maturity for a U.S. Treasury security
with a maturity comparable to the remaining term of the notes, plus 45 basis
points, plus in each case, accrued and unpaid interest on the principal amount
of the notes to be redeemed to, but excluding, such redemption date.

In March 2020, the Parent Company issued four series of senior notes totaling
¥57.0 billion through a public debt offering under its U.S. shelf registration
statement. The first series, which totaled ¥12.4 billion, bears interest at a
fixed rate of .300% per annum, payable semiannually and will mature in September
2025. The second series, which totaled ¥13.3 billion, bears interest at a fixed
rate of .550% per annum, payable semi-annually, and will mature in March 2030.
The third series, which totaled ¥20.7 billion, bears interest at a fixed rate of
.750% per annum, payable semiannually and will mature in March 2032. The fourth
series, which totaled ¥10.6 billion, bears interest at a fixed rate of .830% per
annum, payable semi-annually, and will mature in March 2035. These notes may
only be redeemed before maturity, in whole but not in part, upon the occurrence
of certain changes affecting U.S. taxation, as specified in the indenture
governing the terms of the issuance.

In January 2020, the Parent Company used the net proceeds from senior notes issued in December 2019 to redeem $350 million of its 4.00% fixed-rate senior notes due February 2022.



In December 2019, the Parent Company issued four series of senior notes totaling
¥38.0 billion through a public debt offering under its U.S. shelf registration
statement. The first series, which totaled ¥12.6 billion, bears interest at a
fixed rate of .500% per annum, payable semi-annually, and will mature in
December 2029. The second series, which totaled ¥9.3 billion, bears interest at
a fixed rate of .843% per annum, payable semi-annually, and will mature in
December 2031. The third series, which totaled ¥9.8 billion, bears interest at a
fixed rate of .934% per annum, payable semi-annually, and will mature in
December 2034. The fourth series, which totaled ¥6.3 billion, bears interest at
a fixed rate of 1.122% per annum, payable semi-annually, and will mature in
December 2039. These notes may only be redeemed before maturity, in whole but
not in part, upon the occurrence of certain changes affecting U.S. taxation, as
specified in the indenture governing the terms of the issuance.

In September 2019, the Parent Company renewed a ¥30.0 billion senior term loan
facility. The first tranche of the facility, which totaled ¥5.0 billion, bears
interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR),
or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will
mature in September 2026. The applicable margin ranges between .30% and .70%,
depending on the Parent Company's debt ratings as of the date of determination.
The second tranche, which totaled ¥25.0 billion, bears interest at a rate per
annum equal to the TIBOR, or alternate TIBOR, if applicable, plus the applicable
TIBOR margin and will mature in September 2029. The applicable margin ranges
between .45% and 1.00%, depending on the Parent Company's debt ratings as of the
date of determination.

In April 2019, ALIJ issued ¥30.0 billion (par value) of perpetual subordinated
bonds. These bonds bear interest at a fixed rate of .963% per annum and then at
six-month Euro Yen LIBOR plus an applicable spread on and after the day
immediately following April 18, 2024. The bonds will be callable on each
interest payment date on and after April 18, 2024. In November 2019, ALIJ
amended the bonds to change their duration from perpetual to a stated maturity
date of April 16, 2049 and to remove provisions that permitted ALIJ to defer
payments of interest under certain circumstances.

See Note 9 of the Notes to the Consolidated Financial Statements for further information on the debt issuances discussed above.

The Company was in compliance with all of the covenants of its notes payable and lines of credit at December 31, 2020.

Cash returned to shareholders through treasury stock purchases and dividends was $2.3 billion in 2020, compared with $2.4 billion in 2019.


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following tables present a summary of treasury stock activity during the
years ended December 31.

                            Treasury Stock Purchased
(In millions of dollars and thousands of shares)     2020         2019
Treasury stock purchases                           $ 1,537      $ 1,627
Number of shares purchased:
Share repurchase program                            37,899       31,994
Other                                                  542          592
  Total shares purchased                            38,441       32,586



                             Treasury Stock Issued

(In millions of dollars and thousands of shares) 2020 2019 Stock issued from treasury:


  Cash financing                                   $    34      $    49
  Noncash financing                                     54           50
  Total stock issued from treasury                 $    88      $    99
Number of shares issued                              2,393        2,324



Under share repurchase authorizations from the Company's board of directors, the
Company purchased 37.9 million shares of its common stock in 2020, compared with
32.0 million shares in 2019. In August 2020, the Company's board of directors
authorized the purchase of 100 million shares of its common stock. As of
December 31, 2020, a remaining balance of 99.2 million shares of the Company's
common stock was available for purchase under share repurchase authorizations by
its board of directors. See Note 11 of the Notes to the Consolidated Financial
Statements for additional information. 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 in 2020 of $1.12 per share increased 3.7%
over 2019. The following table presents the dividend activity for the years
ended December 31.

                         Dividends Paid to Shareholders
(In millions)                                    2020       2019
Dividends paid in cash                          $ 769      $ 771

Dividends through issuance of treasury shares 29 30 Total dividends to shareholders

$ 798      $ 801



In November 2020, the board of directors announced a 17.9% increase in the
quarterly cash dividend, effective with the first quarter of 2021. The first
quarter 2021 cash dividend of $.33 per share is payable on March 1, 2021, to
shareholders of record at the close of business on February 17, 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


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
as a capital contingency plan. Additionally, the Company could take action to
enter into derivatives on unhedged U.S. dollar-denominated investments with
foreign currency options or forwards. See Notes 8 and 9 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 for additional information on
the Company's investment strategies, hedging activities, and reinsurance,
respectively.

Aflac Japan's SMR ratio remains high and reflects a strong capital and surplus
position. As of December 31, 2020, Aflac Japan's SMR was 960%, compared with
1,043% at December 31, 2019. 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.

The FSA is considering the introduction of an economic value-based solvency
regime based on the Insurance Capital Standards (ICS) for insurance companies in
Japan. The FSA is currently conducting field testing with insurance companies in
Japan for the purpose of investigating the impact of the introduction of
regulations. Provisional specifications are expected to be decided in 2022, and
a new capital regime to replace the current solvency regime may be introduced as
early as 2025.

Aflac U.S.

A life insurance company's statutory capital and surplus is determined according
to rules prescribed by the NAIC, as modified by the insurance department in the
insurance company's state of domicile. Statutory accounting rules are different
from U.S. GAAP and are intended to emphasize policyholder protection and company
solvency. The continued long-term growth of the Company's business may require
increases in the statutory capital and surplus of its insurance operations. The
Company's insurance operations may secure additional statutory capital through
various sources, such as internally generated statutory earnings, reduced
dividends paid to the Parent Company, capital contributions by the Parent
Company from funds generated through debt or equity offerings, or reinsurance
transactions. The NAIC's RBC formula is used by insurance regulators to help
identify inadequately capitalized insurance companies. The RBC formula
quantifies insurance risk, business risk, asset risk and interest rate risk by
weighing the types and mixtures of risks inherent in the insurer's operations.

The combined RBC ratio for Aflac U.S. as of December 31, 2020 was 550%. The
Company calculates its combined RBC ratio to include all U.S. regulated life
insurance entities as if a single combined U.S. RBC entity net of intercompany
items related to capital resources and risk.

The table below presents RBC ratios for the Company's U.S. life insurance subsidiaries as of December 31, the most recently statutory fiscal year-end for the subsidiaries for which RBC was filed. The Company intends to maintain a target minimum RBC of approximately 400% for Aflac, consistent with the Company's risk management practices.



                    2020
Aflac                508  %
CAIC                 975
TOIC               6,964
Aflac New York     1,077



The NAIC completed its Solvency Modernization Initiative (SMI) process relating
to updating the U.S. insurance solvency regulation framework. The SMI focused on
key issues such as capital requirements, governance and risk management, group
supervision, reinsurance, statutory accounting and financial reporting matters.
The NAIC still has some ongoing


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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
initiatives related to SMI, such as monitoring the international efforts on
group capital requirements as well as RBC. In 2020, the NAIC formally adopted a
group capital calculation (GCC) that conceptually uses an RBC aggregation
methodology for all entities within the insurance company holding system. The
GCC is intended to be a regulatory tool used by regulators as a means to
standardize group capital requirements. In addition, the NAIC has also proposed
changes to investment risk factors for fixed maturity securities which are
expected to be adopted for 2021 RBC filings. Any negative developments by the
NAIC in these areas could result in increased capital requirements for the
Company.

Aflac is subject to the NAIC's Own Risk and Solvency Assessment (ORSA) reporting
requirement. Through the ORSA requirements, Aflac is expected to regularly, no
less than annually, conduct an ORSA to assess the adequacy of its risk
management framework, and its current and projected future solvency position;
internally document the process and results of the assessment; and provide a
confidential high-level ORSA Summary Report annually to the lead state
commissioner. In November 2020, Aflac filed its ORSA report with the Nebraska
Department of Insurance.

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its
regulations. The Nebraska Department of Insurance imposes certain limitations
and restrictions on payments of dividends, management fees, loans and advances
to the Parent Company. Under Nebraska insurance law, prior approval of the
Nebraska Department of Insurance is required for dividend distributions that
exceed the greater of the net income from operations, which excludes net
investment gains, for the previous year determined under statutory accounting
principles, or 10% of statutory capital and surplus as of the previous year-end.
Dividends declared by Aflac during 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.

                                     Other

For information regarding commitments and contingent liabilities, see Note 15 of the Notes to the Consolidated Financial Statements.


                             Additional Information

Investors should note that the Company announces material financial information
in its SEC filings, press releases and public conference calls. In accordance
with SEC guidance, the Company may also use the Investor Relations section of
the Company's website (http://investors.aflac.com) to communicate with investors
about the Company. It is possible that the financial and other information the
Company posts there could be deemed to be material information. The information
on the Company's website is not part of this document. Further, the Company's
references to website URLs are intended to be inactive textual references only.

                         CRITICAL ACCOUNTING ESTIMATES

The Company prepares its financial statements in accordance with U.S. GAAP.
These principles are established primarily by the FASB. In this MD&A, references
to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards
Codification™ (ASC). The preparation of financial statements in conformity with
U.S. GAAP requires the Company to make estimates based on currently available
information when recording transactions resulting from business operations. The
estimates that the Company deems to be most critical to an understanding of
Aflac's results of operations


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  Item 7. Management's Discussion and Analysis of Financial Condition and
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 82% of its liabilities are reported as of December 31, 2020, and thus has a
direct effect on net earnings and shareholders' equity. Subsequent experience or
use of other assumptions could produce significantly different results.

Valuation of Investments, Including Derivatives, and Recognition of Current Expected Credit Losses



Aflac's investments, primarily consisting of debt and equity securities, include
both publicly issued and privately issued securities. For publicly issued
securities, the Company determines the fair values from quoted market prices
readily available from public exchange markets and price quotes and valuations
from third party pricing vendors. For the majority of privately issued
securities within the Company's investment portfolio, a third party pricing
vendor has developed valuation models that the Company utilizes to determine
fair values. For the remaining privately issued securities, the Company uses
non-binding price quotes from outside brokers. In September 2020, the Company
refined its valuation model for private placements to explicitly incorporate
currency basis swap adjustments (market observable data) to assumed interest
rate curves where appropriate as noted in Note 5 of the Notes to the
Consolidated Financial Statements.

The Company estimates the fair values of its securities on a monthly basis. The
Company monitors the estimated fair values obtained from its pricing vendors and
brokers for consistency from month to month, while considering current market
conditions. The Company also periodically discusses with its pricing brokers and
vendors the pricing techniques they use to monitor the consistency of their
approach and periodically assess the appropriateness of the valuation level
assigned to the values obtained from them. If a fair value appears unreasonable,
the Company will re-examine the inputs and assess the reasonableness of the
pricing data with the vendor. Additionally, the Company may compare the inputs
to relevant market indices and other performance measurements. Based on
management's analysis, the valuation is confirmed or may be revised if there is
evidence of a more appropriate estimate of fair value based on available market
data. The Company has performed verification of the inputs and calculations in
any valuation models to confirm that the valuations represent reasonable
estimates of fair value. Inputs used to value derivatives include, but are not
limited to, interest rates, credit spreads, foreign currency forward and spot
rates, and interest volatility.

The Company estimates an expected lifetime credit loss on investments measured
at amortized cost including held-to-maturity fixed maturity securities, loan
receivables and loan commitments on a quarterly basis. For the Company's
available-for-sale fixed maturity securities, the Company evaluates estimated
credit losses only when the fair value of the available-for-sale fixed maturity
security is below its amortized cost basis

The Company's approach to estimating credit losses is complex and incorporates
significant judgments. In addition to a security, or an asset class, or an
issuer-specific credit fundamentals, it considers past events, current economic
conditions and forecasts of future economic conditions. The Company's estimates
are revised as conditions change and new information becomes available.

See Notes 1, 3, 4 and 5 of the Notes to the Consolidated Financial Statements for additional information.

Deferred Policy Acquisition Costs and Policy Liabilities



Insurance premiums for most of the Company's health and life policies, including
cancer, accident, hospital, critical illness, dental, vision, term life, whole
life, long-term care and disability, are recognized as revenue over the
premium-paying periods of the contracts when due from policyholders. When
revenues are reported, the related amounts of benefits and expenses are charged
against such revenues, so that profits are recognized in proportion to premium
revenues during the period the policies are expected to remain in force. This
association is accomplished by means of annual additions to the liability for
future policy benefits and the deferral and subsequent amortization of policy
acquisition costs.

Premiums from the Company's products with limited-pay features, including term
life, whole life, WAYS, and child endowment, are collected over a significantly
shorter period than the period over which benefits are provided. Premiums for
these products are recognized as revenue over the premium-paying periods of the
contracts when due from policyholders. Any gross premium in excess of the net
premium is deferred and recorded in earnings, such that profits are recognized
in a constant relationship with insurance in force. Benefits are recorded as an
expense when they are incurred. A liability for future policy benefits is
recorded when premiums are recognized using the net premium method.



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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Deferred Policy Acquisition Costs



The calculation of DAC and the liability for future policy benefits requires the
use of estimates based on sound actuarial valuation techniques. For new policy
issues, the Company reviews its actuarial assumptions and deferrable acquisition
costs each year and revise them when necessary to more closely reflect recent
experience and studies of actual acquisition costs. For policies in force, the
Company evaluates DAC by major product groupings to determine that they are
recoverable from future revenues, and any amounts determined not to be
recoverable are charged against net earnings. See Note 6 of the Notes to the
Consolidated Financial Statements for a detail of the DAC activity for the past
two years.

Policy Liabilities

The Company's policy liabilities, which are determined in accordance with applicable guidelines as defined under U.S. GAAP and Actuarial Standards of Practice, include two components that involve analysis and judgment: future policy benefits and unpaid policy claims, which accounted for 85% and 5% of total policy liabilities as of December 31, 2020, respectively.



Future policy benefits provide for claims that will occur in the future and are
generally calculated as the present value of future expected benefits to be
incurred less the present value of future expected net benefit premiums. The
Company calculates future policy benefits based on assumptions of morbidity,
mortality, persistency and interest. These assumptions are generally established
at the time a policy is issued. The assumptions used in the calculations are
closely related to those used in developing the gross premiums for a policy. As
required by U.S. GAAP, the Company also includes a provision for adverse
deviation, which is intended to accommodate adverse fluctuations in actual
experience.

Unpaid policy claims include those claims that have been incurred and are in the
process of payment as well as an estimate of those claims that have been
incurred but have not yet been reported to the Company. The Company computes
unpaid policy claims on a non-discounted basis using statistical analyses of
historical claims payments, adjusted for current trends and changed conditions.
The Company updates the assumptions underlying the estimate of unpaid policy
claims regularly and incorporates its historical experience as well as other
data that provides information regarding the Company's outstanding liability.

The Company's insurance products provide fixed-benefit amounts per occurrence
that are not subject to medical-cost inflation. Furthermore, the Company's
business is widely dispersed in both the U.S. and Japan. This geographic
dispersion and the nature of the Company's benefit structure mitigate the risk
of a significant unexpected increase in claims payments due to localized
epidemics and events of a catastrophic nature. Claims incurred under Aflac's
policies are generally reported and paid in a relatively short time frame. The
unpaid claims liability is sensitive to morbidity assumptions, in particular,
severity and frequency of claims. Severity is the ultimate size of a claim, and
frequency is the number of claims incurred. The Company's claims experience is
primarily related to the demographics of its policyholders.

As a part of its established financial reporting and accounting practices and
controls, the Company performs detailed annual actuarial reviews of its
policyholder liabilities (gross premium valuation analysis) and reflects the
results of those reviews in its results of operations and financial condition as
required by U.S. GAAP. For Aflac Japan, the Company's annual reviews in 2020 and
2019 indicated no need to strengthen liabilities associated with policies in
Japan. For Aflac U.S., the Company's annual reviews in 2020 and 2019 indicated
no need to strengthen liabilities associated with policies in the U.S.



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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The table below reflects the growth of the future policy benefits liability for
the years ended December 31.

                             Future Policy Benefits
(In millions of dollars and billions of yen)       2020           2019
Aflac U.S.                                      $  9,674       $  9,405
Growth rate                                          2.9  %         2.9  %
Aflac Japan                                     $ 88,652       $ 81,462
Growth rate                                          8.8  %         4.7  %
Consolidated                                    $ 97,783       $ 90,335
Growth rate                                          8.2  %         4.6  %
Yen/dollar exchange rate (end of period)          103.50         109.56
Aflac Japan                                     ¥  9,176       ¥  8,925
Growth rate                                          2.8  %         3.3  %



The growth of the future policy benefits liability in yen for Aflac Japan and in
dollars for Aflac U.S. has been due to the aging of the Company's in-force block
of business and the addition of new business.

In computing the estimate of unpaid policy claims, the Company considers many
factors, including the benefits and amounts available under the policy; the
volume and demographics of the policies exposed to claims; and internal business
practices, such as incurred date assignment and current claim administrative
practices. The Company monitors these conditions closely and makes adjustments
to the liability as actual experience emerges. Claim levels are generally stable
from period to period; however, fluctuations in claim levels may occur. In
calculating the unpaid policy claim liability, the Company does not calculate a
range of estimates. The following table shows the expected sensitivity of the
unpaid policy claims liability as of December 31, 2020, to changes in severity
and frequency of claims.
                 Sensitivity of Unpaid Policy Claims Liability


(In millions)                                                 Total Severity
                      Decrease             Decrease                                 Increase            Increase
Total Frequency         by 2%               by 1%              Unchanged             by 1%               by 2%
Increase by 2%           $  (1)               $ 26                 $ 54                $ 81               $ 109
Increase by 1%             (27)                  0                   27                  54                  81
Unchanged                  (54)                (27)                   0                  27                  54
Decrease by 1%             (80)                (54)                 (27)                  0                  26
Decrease by 2%            (107)                (80)                 (54)                (27)                 (1)



Other policy liabilities, which accounted for 10% of total policy liabilities as
of December 31, 2020, consisted primarily of annuity and unearned premium
reserves, and discounted advance premiums on deposit from policyholders in
conjunction with their purchase of certain Aflac Japan insurance products. These
advanced premiums are deferred upon collection and recognized as premium revenue
over the contractual premium payment period. Advanced premiums represented 19%
and 24% of the December 31, 2020 and 2019 other policy liabilities balances,
respectively. See the Aflac Japan segment subsection of this MD&A for further
information.

Income Taxes

Income tax provisions are generally based on pretax earnings reported for
financial statement purposes, which differ from those amounts used in preparing
the Company's income tax returns. Deferred income taxes are recognized for
temporary differences between the financial reporting basis and income tax basis
of assets and liabilities, based on enacted tax laws and statutory tax rates
applicable to the periods in which the Company expects the temporary differences
to reverse. The evaluation of a tax position in accordance with U.S. GAAP is a
two-step process. Under the first step, the enterprise determines whether it is
more likely than not that a tax position will be sustained upon examination by
taxing authorities. The second step is measurement, whereby a tax position that
meets the more-likely-than-not recognition threshold is measured to determine
the amount of benefit to recognize in the financial statements. A valuation
allowance is established for deferred tax assets when it is more likely than not
that an amount will not be realized. The determination of a valuation allowance
for deferred tax assets requires management to make certain judgments and
assumptions.



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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In evaluating the ability to recover deferred tax assets, the Company's
management considers all available evidence, including taxable income in open
carry back years, the existence of cumulative losses in the most recent years,
forecasted earnings, future taxable income exclusive of reversing temporary
differences and carryforwards, future taxable temporary difference reversals,
and prudent and feasible tax planning strategies. In the event the Company
determines it is not more likely than not that it will be able to realize all or
part of its deferred tax assets in the future, a valuation allowance would be
charged to earnings in the period such determination is made. Likewise, if it is
later determined that it is more likely than not that those deferred tax assets
would be realized, the previously provided valuation allowance would be
reversed. Future economic conditions and market volatility, including increases
in interest rates or widening credit spreads, can adversely impact the Company's
tax planning strategies and in particular the Company's ability to utilize tax
benefits on previously recognized capital losses. The Company's judgments and
assumptions are subject to change given the inherent uncertainty in predicting
future performance and specific industry and investment market conditions.

In September 2020, the U.S. Treasury and Internal Revenue Service issued Final
and Proposed Regulations. Under the guidance of these regulations, the Company
recognized a one-time income tax benefit of $1.4 billion due to the release of
previously established valuation allowances related to deferred foreign tax
credit benefits. The Company believes this will also reduce the effective tax
rate in future periods, subject to any future changes in the U.S. tax policy.
For additional information on income tax, see Note 10 of the Notes to the
Consolidated Financial Statements presented in this report.

Future Adoption of Accounting Standard for Long-Duration Insurance Contracts



In August 2018, the FASB issued ASU 2018-12, "Financial Services - Insurance,
Targeted Improvements to the Accounting for Long-Duration Contracts" (The ASU).
The update significantly changes how insurers account for long-duration
contracts, amends existing recognition, measurement, presentation, and
disclosure requirements applicable to the Company. Issues addressed in the new
guidance include: 1) a requirement to review and, if there is a change, update
cash flow assumptions for the liability for future policy benefits at least
annually, and to update the discount rate assumption quarterly, 2) accounting
for market risk benefits at fair value, 3) simplified amortization for deferred
acquisition costs, and 4) enhanced financial statement presentation and
disclosures.

Since the initial issuance, the FASB has deferred the ASU effective date for two
years, such that the amendments are now effective for the Company for fiscal
years, and interim periods within those fiscal years, beginning after December
15, 2022. Early application of the amendments is permitted, however, the Company
does not expect to early adopt the updated standard. The Company plans to use
the additional time to educate investors and analysts on the adoption impact,
conduct robust testing and analysis, enhance the control environment, and
perform parallel financial reporting.

The Company expects that the ASU's adoption will have a significant impact on
the Company's reported financial position, results of operations, and
disclosures. The Company anticipates that the requirement to update assumptions
for liability for future policy benefits will have a significant impact on its
results of operations, systems, processes and controls while the requirement to
update the discount rate will have a significant impact on its AOCI and equity.
The Company currently has no products with market risk benefits.

There are two permitted transition methods upon adoption and the Company has
selected the modified retrospective transition method. Under the modified
retrospective method, the opening reserve balance at the transition date
(January 1, 2021, assuming January 1, 2023 adoption), would generally be the
same as the closing balance before transition; however, it would be updated for
changes in the discount rate required under the new guidance with the difference
impacting AOCI.

The new guidance requires that discount rates used for the discounting of
insurance liabilities be initially adjusted on the adoption date and
subsequently at each reporting period to the market levels for the
upper-medium-grade (low credit risk) fixed income instrument yields (single-A in
the currency of the underlying insurance contract) reflecting the duration of
the Company's insurance liabilities. The update of the discount rate will be
recognized in AOCI.

The Company expects that the impact to its reported financial statements under
U.S. GAAP will be greatly influenced by the nature of the Company's business
model. Adoption of the new guidance will reflect the Company's concentration in
Japan third-sector business, in particular cancer insurance, with respect to
which the duration of liabilities is materially longer than asset durations,
while Japan's aggregate block of business continues to see favorable experience
from mortality, morbidity, and expenses. The long duration of the Company's
third-sector insurance liabilities in Japan coupled with limited-to-no-liquidity
of the Japanese long-dated fixed-income market creates challenges in application
of the market-based discount rate guidance and will require the Company to apply
significant judgments in designing discount


                                       73

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  Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
rate methodologies for its Japanese third-sector liabilities. Under the modified
retrospective method, the impact of a low discount rate applied to long-duration
third sector liabilities is recognized at adoption, while associated favorable
morbidity margins are recognized over time thus driving a pronounced timing
impact to U.S. GAAP equity. In addition, with respect to the Japan segment, the
Company maintains a large portfolio of assets designated as held-to-maturity
(HTM) as a strategy to reduce capital (solvency margin ratio or SMR) volatility.
In a low interest rate environment, such as presently exists in Japan, assets
designated as HTM that were purchased in a higher interest rate environment have
significant embedded gains not reflected in AOCI (HTM securities are carried at
amortized cost under U.S. GAAP), which serves as an economic offset to a low
discount rate applied to policy liabilities. At December 31, 2020, the Company's
HTM portfolio was $24.5 billion at amortized cost and had $5.9 billion in net
unrealized gains. After adoption of ASU 2018-12, the Company also expects net
earnings and net earnings per share (which were $4.8 billion and $6.67 per
diluted share, respectively, in 2020) to reflect larger quarterly fluctuations
due to the new requirement to update assumptions for liability for future policy
benefits.

As an example of the potential impact of the new guidance, and for illustrative
purposes only, under the modified retrospective method and in a low interest
rate environment, the Company would expect AOCI (which was $8.9 billion at
December 31, 2020) to significantly decline upon adoption and to thereafter
reflect larger quarterly fluctuations due to the new requirement to adjust
discount rates quarterly. Conversely, in a higher interest rate environment, the
Company would expect AOCI to decline less or even increase (depending on the
specifics of the interest rate environment), as well as to reflect quarterly
fluctuations.

The ultimate impact on these items from the Company's implementation of the
updated standard is subject to assessments that are dependent on many variables,
including but not limited to (i) how certain aspects of the new standard will be
interpreted and implemented by the Company and other similar companies, such as
(but not limited to) amortization of deferred acquisition costs and selection of
discounting methodologies and inputs, as well as establishment of policies,
processes and controls for setting, monitoring and periodically updating reserve
assumptions, and (ii) changes in the interest rate environment in the US and
Japan. The impact on transition under the modified retrospective method will be
driven by updating discount rates that will increase reserves and lower AOCI by
the corresponding amount.

The Company has created a robust governance framework and a detailed
implementation plan to support timely implementation of the ASU. As part of the
implementation, the Company has made significant progress on key accounting
policy decisions (discount rate, cash flow assumptions, deferred acquisition
costs amortization, and disclosures), and is working toward modernization of its
actuarial platform to increase automation of key reporting and analytical
processes and optimize a control framework around new technologies, data
sourcing and maintenance solutions. The Company has also begun to incorporate
into its ASU implementation project other functional areas not directly
associated with U.S. GAAP reporting that nonetheless will be impacted by the
accounting changes.

The Company expects that while the adoption of this new accounting guidance will
affect the Company's financial statements under U.S. GAAP, it will not impact
financial statements for Aflac Japan under FSA requirements or for Aflac U.S.
under applicable statutory requirements. Therefore, the Company does not expect
adoption of the updated standard to impact its overall cash flows, subsidiaries'
dividend capacity or their ability to meet applicable regulatory capital
standards, nor does the Company anticipate adoption to affect its existing debt
covenants or strategies for capital deployment.
New Accounting Pronouncements

During the last three years, various accounting standard-setting bodies have
been active in soliciting comments and issuing statements, interpretations and
exposure drafts. 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.

Market Closed - Nyse Other stock markets 04:00:01 2024-04-25 pm EDT			5-day change	1st Jan Change
83.73 ^USD	-0.65%		+3.40%	+1.49%

Apr. 15	Morgan Stanley Raises Price Target on Aflac to $84 From $80, Maintains Equalweight Rating	MT
Apr. 11	Wells Fargo Cuts Price Target on Aflac to $81 From $83, Keeps Equalweight Rating	MT

Morgan Stanley Raises Price Target on Aflac to $84 From $80, Maintains Equalweight Rating	Apr. 15	MT
Wells Fargo Cuts Price Target on Aflac to $81 From $83, Keeps Equalweight Rating	Apr. 11	MT
Piper Sandler Raises Price Target on Aflac to $95 From $90, Maintains Overweight Rating	Apr. 05	MT
Aflac Insider Sold Shares Worth $423,105, According to a Recent SEC Filing	Mar. 22	MT
Aflac Incorporated Enters into Note Purchase Agreement and Issues Senior Notes	Mar. 21	CI
Aflac Insider Sold Shares Worth $666,760, According to a Recent SEC Filing	Mar. 15	MT
Transcript : Aflac Incorporated Presents at Bank of America Securities Financial Services Conference 2024, Feb-21-2024 03:20 PM	Feb. 21
Aflac Insider Sold Shares Worth $2,436,696, According to a Recent SEC Filing	Feb. 20	MT
Aflac Insider Sold Shares Worth $2,577,817, According to a Recent SEC Filing	Feb. 20	MT
Wells Fargo Adjusts Price Target on Aflac to $83 From $82, Maintains Equalweight Rating	Feb. 06	MT
Aflac Insider Sold Shares Worth $1,247,282, According to a Recent SEC Filing	Feb. 06	MT
Aflac Insider Sold Shares Worth $1,391,408, According to a Recent SEC Filing	Feb. 06	MT
Raymond James Raises Aflac Price Target to $88 From $83, Maintains Outperform Rating	Feb. 02	MT
Sector Update: Financial Stocks Rise Late Afternoon	Feb. 01	MT
Sector Update: Financial	Feb. 01	MT
Top Midday Decliners	Feb. 01	MT
Stocks in motion: Corteva and Ferrari rise, CH Robinson tumbles	Feb. 01
Traders Digest Earnings, Data as US Equity Futures Turn Mostly Higher Pre-Bell	Feb. 01	MT
Transcript : Aflac Incorporated, Q4 2023 Earnings Call, Feb 01, 2024	Feb. 01
Aflac Q4 Earnings, Revenue Decline; Shares Drop After Hours	Jan. 31	MT
Tranche Update on Aflac Incorporated's Equity Buyback Plan announced on August 8, 2017.	Jan. 31	CI
Earnings Flash (AFL) AFLAC INCORPORATED Posts Q4 EPS $1.25, vs. Street Est of $1.45	Jan. 31	MT
Earnings Flash (AFL) AFLAC INCORPORATED Posts Q4 Revenue $3.81B, vs. Street Est of $4.39B	Jan. 31	MT
Aflac Incorporated Reports Earnings Results for the Full Year Ended December 31, 2023	Jan. 31	CI
Aflac Incorporated Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Jan. 31	CI

	1st Jan change	Capi.
AFLAC INCORPORATED	+1.49%	48.18B
AXA	+15.16%	79.66B
METLIFE, INC.	+8.73%	51.99B
MANULIFE FINANCIAL CORPORATION	+9.08%	41.99B
PRUDENTIAL FINANCIAL, INC.	+7.20%	39.96B
GENERALI	+19.29%	37.85B
GREAT-WEST LIFECO INC.	-8.37%	27.37B
PRUDENTIAL PLC	-18.37%	24.45B
CATHAY FINANCIAL HOLDING CO., LTD.	+6.12%	21.84B
DAI-ICHI LIFE HOLDINGS, INC.	+20.69%	21.14B

Aflac Incorporated

Equities

AFL

US0010551028

Life & Health Insurance

Aflac Incorporated : INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF (form 10-K)

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