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

FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a safe harbor to
encourage companies to provide prospective information, so long as those
informational statements are identified as forward-looking and are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those included in the
forward-looking statements. Aflac Incorporated and its subsidiaries desire to
take advantage of these provisions. This report contains cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected herein, and in any other statements made by
Company officials in communications with the financial community and contained
in documents filed with the Securities and Exchange Commission (SEC).
Forward-looking statements are not based on historical information and relate to
future operations, strategies, financial results or other developments.
Furthermore, forward-looking information is subject to numerous assumptions,
risks and uncertainties. In particular, statements containing words such as the
ones listed below or similar words, as well as specific projections of future
results, generally qualify as forward-looking. The Company undertakes no
obligation to update such forward-looking statements.
             • expect    • anticipate   • believe     • goal      • objective
             • may       • should       • estimate    • intends   • projects
             • will      • assumes      • potential   • target    • outlook

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

•the effects of COVID-19, and any resulting economic effects and government
interventions, on the Company's business and financial results
•ability to attract and retain qualified sales associates, brokers, employees,
and distribution partners
•events related to the Japan Post investigation and other matters
•competitive environment and ability to anticipate and respond to market trends
•difficult conditions in global capital markets and the economy
•deviations in actual experience from pricing and reserving assumptions
•ability to continue to develop and implement improvements in information
technology systems
•defaults and credit downgrades of investments
•exposure to significant interest rate risk
•concentration of business in Japan
•limited availability of acceptable yen-denominated investments
•tax rates applicable to the Company may change
•failure to comply with restrictions on policyholder privacy and information
security
•interruption in telecommunication, information technology and other operational
systems, or a failure to maintain the security, confidentiality or privacy of
sensitive data residing on such systems
•catastrophic events including, but not necessarily limited to, epidemics,
pandemics (such as the coronavirus COVID-19), tornadoes, hurricanes,
earthquakes, tsunamis, war or other military action, terrorism or other acts of
violence, and damage incidental to such events
•ability to protect the Aflac brand and the Company's reputation
•extensive regulation and changes in law or regulation by governmental
authorities
•foreign currency fluctuations in the yen/dollar exchange rate
•decline in creditworthiness of other financial institutions
•significant valuation judgments in determination of amount of impairments taken
on the Company's investments
•U.S. tax audit risk related to conversion of the Japan branch to a subsidiary
•subsidiaries' ability to pay dividends to the Parent Company
•decreases in the Company's financial strength or debt ratings
•inherent limitations to risk management policies and procedures
•concentration of the Company's investments in any particular single-issuer or
sector
•differing judgments applied to investment valuations
•ability to effectively manage key executive succession
•changes in accounting standards
•level and outcome of litigation
•allegations or determinations of worker misclassification in the United States
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                                 MD&A OVERVIEW
MD&A is intended to inform the reader about matters affecting the financial
condition and results of operations of Aflac Incorporated and its subsidiaries
for the three- and nine-month periods ended September 30, 2020 and 2019,
respectively. Results of operations for interim periods are not necessarily
indicative of results for the entire year. As a result, the following discussion
should be read in conjunction with the consolidated financial statements and
notes that are included in the Company's annual report on Form 10-K for the year
ended December 31, 2019 (2019 Annual Report). In this MD&A, amounts may not foot
due to rounding. For additional information on the Company's performance
measures included in this MD&A, see the Glossary of Selected Terms found
directly following Part II. Other Information.
This MD&A is divided into the following sections:
                                                                Page
                   Executive Summary                            72
                   Results of Operations                        78
                   Investments                                  92
                   Deferred Policy Acquisition Costs           100
                   Policy Liabilities                          101
                   Benefit Plans                               100
                   Policyholder Protection                     101
                   Off-Balance Sheet Arrangements              101
                   Liquidity and Capital Resources             101
                   Critical Accounting Estimates               107



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                               EXECUTIVE SUMMARY

Company Overview

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the
Company) provide financial protection to more than 50 million people worldwide.
The Company's principal business is providing supplemental health and life
insurance products with the goal to provide customers the best value in
supplemental insurance products in the United States (U.S.) and Japan. The
Company's insurance business consists of two reporting segments: Aflac Japan and
Aflac U.S. The Parent Company's primary insurance subsidiaries are Aflac Life
Insurance Japan Ltd. in Japan (Aflac Japan) and American Family Life Assurance
Company of Columbus (Aflac); Continental American Insurance Company (CAIC),
branded as Aflac Group Insurance (AGI); American Family Life Assurance Company
of New York (Aflac New York); Tier One Insurance Company (TOIC) and Argus Dental
& Vision, Inc. (Argus), which provides a platform for Aflac Dental and Vision in
the U.S. (collectively, Aflac U.S.).

COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak
a global pandemic. The impact of COVID-19 on the Company continues to evolve,
and its future effects remain uncertain. 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 in a number of
ways, and may cause changes to estimates of future earnings, capital deployment,
regulatory capital position, segment dividend payout ratios and other guidance
the Company provided under 2020 Outlook in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of the 2019 Annual
Report.

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

•Liquidity and Capital Resources

The Company entered the crisis in a strong capital and liquidity position,
having maintained capital ratios in Japan and the U.S. at a level designed to
absorb a degree of market volatility. 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 September 30, 2020 the Company held approximately $5.6
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 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 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 repurchase
guidance, 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. 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 has to
date reduced dividends it provides to the Parent Company in 2020 by ¥75 billion
compared to initial 2020 plans. Taking into consideration the strong liquidity
position of the Parent Company as well as the continuing development of economic
conditions in Japan and the U.S., the Company currently plans to defer the
payment of further subsidiary dividends to the Parent
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Company until the fourth quarter of 2020. Further dividend delays or reductions
may be undertaken as the Company continues to monitor developments. The Company
intends to maintain the RBC ratio for Aflac in the 525% to 575% range for 2020.

As a result of market volatility, the Company has made tactical adjustments to
its foreign currency-hedging program in Aflac Japan to mitigate hedging cost and
settlement risk while maintaining a strong SMR. Aflac Japan maintains a collar
program on a portion of its US 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 to $9 billion and marginally widened the collars. 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 evaluating other
adjustments, including the possibility of hedging additional 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 the third quarter, reducing positions in the portfolios seen as more
vulnerable in the current environment. Although economic and market conditions
improved throughout much of the quarter, 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 issuers to provide temporary relief of terms by providing
payment deferrals and other modifications where the Company believes it improves
its overall position. For additional information on these loan modifications,
see Note 3 of the Notes to the Consolidated Financial Statements.

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. Due to the
decline in U.S. interest rates, and limitations on the availability of new
investments in certain private asset classes such as middle market loans,
commercial mortgages and transitional real estate, net investment income may be
adversely impacted over time from lower reinvestment rates for fixed maturity
investments and lower interest on floating rate assets. Net investment income
may not fully reflect activity during the quarter because certain investments,
such as private limited partnerships, typically report their results to the
Company one to three months following the end of the reporting period.
Therefore, the increase in net investment income from these investments in the
third quarter reflects to some extent price increases in publicly traded
equities during the second quarter. There are a number of factors that impact
private limited partnership income, but the Company expects public equity
markets to be a favorable driver to this component of net investment income in
the fourth quarter, based on the positive performance of leading equity indices
during the third quarter, such as the S&P 500 and Russell 2000. 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 recession.

•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 Japan and U.S. 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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•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. On April 7, 2020, the Japan government declared a state
of emergency in seven prefectures including Tokyo and Osaka and requested that
companies in these prefectures reduce the number of employees coming into the
office by 70% or more. Accordingly, Aflac Japan implemented increasing levels of
remote working levels for its work force toward the requested level. On April
16, 2020, the state of emergency was expanded nationwide in Japan, and on May
25, 2020, the state of emergency was lifted nationwide. As of September 30,
2020, Aflac Japan has approximately 50% of its workforce working from home.
Aflac Japan is evaluating return to the office measures; however, Aflac Japan
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
smartphone-based insurance application by allowing the customer and an Aflac
operator to see the same screen through their smartphones. Face-to-face sales
have been challenged and are having an impact on sales results. During the third
quarter, Aflac Japan experienced a sales decline of 32.0% on a yen basis,
compared to the third quarter of 2019, due to the effects of the pandemic. 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. Aflac Japan
initially extended a six-month grace period on premium payments, and in June
2020, the grace period for premiums due through September 30, 2020 was extended
to April 30, 2021. Policyholders are required to file for relief through this
extension. On April 18, 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 September 30, 2020, approximately 95% of
employees were working remotely, with 100% of employees working remotely in
certain areas including New York City, including all investment employees based
in the U.S. 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 early 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 whom are small businesses, by offering zero-interest loans and cash stipends in lieu of canceled recognition trips.

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.
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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
economic effects of the pandemic on prospective and existing customers is still
largely unknown. Similar to Aflac Japan, the Aflac U.S. sales team is working 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. Finally, 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. During the three- and nine-month periods ended September 30, 2020,
Aflac U.S. experienced a sales decline of 35.7% and 32.7%, respectively,
compared to the same respective periods in 2019, reflecting the impacts of the
pandemic. The Aflac U.S. benefit ratio decreased in the three-month period ended
September 30, 2020, as compared to the same period in 2019; however, the ratio
increased in comparison to the second quarter 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 in the
third quarter, 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 approximately $14 million impact on incurred
claim in the third quarter.

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.

During the first nine months of 2020, Aflac U.S. took steps to comply with
COVID-19-related directives issued by state regulatory authorities, including
those requiring or requesting premium grace periods. As of September 30, 2020,
premium grace periods remained in effect in 13 states. Although aggregate policy
lapses decreased from the prior year, Aflac U.S. experienced an increase in
policy lapses in the third quarter 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 throughout
2020, Aflac U.S. would expect an increase in lapse rates.

In light of the anticipated combined effects of reduced sales and persistency,
Aflac U.S. currently expects 2020 earned premium results in the range of flat to
a decline of 3% compared with 2019. In September 2020, the Company announced a
voluntary separation program for certain U.S. employees. The program provides
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. The
volunteer period opened on September 15, 2020 and closed October 1, 2020.
Employees accepted into this program were notified in October 2020 and the
Company expects transitions to be completed by December 31, 2020. The Company
expects to take a one-time severance charge related to the program in the fourth
quarter of 2020 of approximately $45 million.

To date, the Parent Company has 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.

On April 7, 2020, Prime Minister Abe issued a state of emergency declaration
targeting seven prefectures based on the revised Act on Special Measures for
Pandemic Influenza and New Infectious Diseases Preparedness and Response. On
April 16, 2020, the state of emergency was expanded to all 47 prefectures. The
state of emergency was lifted in phases, with 39 prefectures released on May 14,
2020, three additional prefectures released on May 21, and the state of
emergency lifted nationwide on May 25. On June 19, 2020, restrictions on
intraprefecture travel were lifted. Japanese Prime Minister Shinzo Abe announced
his retirement on August 28, 2020. Chief
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Cabinet Secretary Yoshihide Suga was elected Liberal Democratic Party President
on September 14, 2020 and elected Prime Minister on September 16, 2020. Prime
Minister Suga has indicated his intention to further Abe's policies, including
efforts to counter the effects of COVID-19.

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

On April 20, 2020, the Cabinet of Japan approved ¥117 trillion or more than 20%
of GDP in emergency stimulus measures, including various tax measures to address
the financial difficulties that businesses are facing. The stimulus package
includes measures decided earlier in February and March as emergency COVID-19
response and the "Comprehensive Economic Measures to Create a Future with
Security and Growth" formulated in December 2019. The package is divided into
measures covering two stages of the COVID-19 outbreak: the "emergency support
phase," and the "V-shaped recovery phase." The emergency support phase is
described as covering until a noticeable slowdown in the spread of COVID-19 and
provides cash benefits of ¥100 thousand per person to Japanese citizens and
other measures that focus on improvements to the medical service system. The
"V-shaped recovery phase" focuses on a campaign to boost demand after the
pandemic abates, as well as to reinforce Japan's economic foundations through
measures such as supply-chain reforms and promotion of telework.

On May 27, 2020, the Cabinet of Japan approved a second ¥117 trillion stimulus
package. The Diet passed a supplementary budget to fund the package on June 12,
2020. The second stimulus package is 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., statewide shelter in place or stay at home orders have been lifted although reopening plans have been paused or reversed in certain states experiencing an increase in cases.

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 Families First Coronavirus Response Act was signed into law on March 18,
2020 with the goal of mitigating the financial impact of the COVID-19 on states,
territories, the uninsured, the unemployed, workers and individuals who rely on
food assistance, such as children and low-income seniors.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, was signed into
law on March 7, 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. On April 24, 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, and on July 4, 2020, the application deadline for the PPP was extended
from June 30, 2020 to August 8, 2020. 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 the accounting and disclosure requirements for troubled
debt restructurings (TDRs) under ASC 310-40 in certain situations. On April 7,
2020, certain regulatory banking agencies, in consultation with the Financial
Accounting Standards Board (FASB), issued the Interagency Statement on Loan
Modifications and Reporting for Financial Institutions Working with Customers
Affected by the Coronavirus (Interagency statement) applicable for all entities,
which offers practical expedients for evaluating whether loan modifications in
response to the COVID-19 pandemic are treated as TDRs. The Company has applied
GAAP relief under Section 4013 of the CARES Act and the Interagency statement
with respect to certain qualifying loan modifications. See Notes 1 and 3 of
Notes to the Consolidated Financial Statements for additional details.

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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

Total revenues were $5.7 billion in the third quarter of 2020, compared with
$5.5 billion in the third quarter of 2019. Net earnings were $2.5 billion, or
$3.44 per diluted share in the third quarter of 2020, compared with $777
million, or $1.04 per diluted share, in the third quarter of 2019. The increase
in net earnings and net earnings per diluted share in the third quarter of 2020
reflects a $1.4 billion benefit primarily from the release of valuation
allowances on deferred foreign tax credits, which were allowed due to newly
released U.S. tax regulations.

Total revenues were $16.2 billion in the first nine months of 2020, compared
with $16.7 billion in the first nine months of 2019. Net earnings were $3.8
billion, or $5.31 per diluted share in the first nine months of 2020, compared
with $2.5 billion, or $3.37 per diluted share, in the first nine months of 2019.
The decline in total revenues in the first nine months of 2020 was driven
primarily by an increase in net investment losses. The increase in net earnings
and net earnings per diluted share in 2020 reflects a $1.4 billion benefit
primarily from the release of valuation allowances on deferred foreign tax
credits, which were allowed due to newly released U.S. tax regulations.

Results in the third quarter of 2020 included pretax net investment gains of
$108 million, compared with net investment losses of $153 million in the third
quarter of 2019. Net investment gains in the third quarter of 2020 included $142
million of gains, reflecting a decline in the allowances associated the
Company's estimate of current expected credit losses (CECL); $48 million of net
losses from certain derivative and foreign currency gains or losses; $12 million
of net gains on equity securities; and $2 million of net gains from sales and
redemptions.

Results in the first nine months of 2020 included pretax net investment losses
of $525 million, compared with net investment losses of $147 million in the
first nine months of 2019. Net investment losses in the first nine months of
2020 included $179 million of credit losses primarily driven by increases in
CECL allowances; $183 million of net losses from certain derivative and foreign
currency gains or losses; $106 million of net losses on equity securities; and
$57 million of net losses from sales and redemptions.
The average yen/dollar exchange rate(1) for the three-month period ended
September 30, 2020 was 106.23, or 1.0% stronger than the average yen/dollar
exchange rate of 107.31 for the same period in 2019. The average yen/dollar
exchange rate(1) for the nine-month period ended September 30, 2020 was 107.63,
or 1.4% stronger than the average yen/dollar exchange rate of 109.16 for the
same period in 2019.
Adjusted earnings(2) in the third quarter of 2020 were $994 million, or $1.39
per diluted share, compared with $863 million, or $1.16 per diluted share, in
the third quarter of 2019, reflecting an increase of 15.2%, driven primarily by
favorable effective tax rates. This increase includes a cumulative adjustment of
$202 million, or $0.28 per share, with respect to the first nine months of 2020,
of which $69 million, or $0.10 per share, related to the third quarter of 2020.
The slightly stronger yen/dollar exchange rate did not have a significant impact
on adjusted earnings per diluted share. Adjusted earnings(2) in the first nine
months of 2020 were $2.8 billion, or $3.88 per diluted share, compared with $2.6
billion, or $3.41 per diluted share, in the first nine months of 2019. The
stronger yen/dollar exchange rate impacted adjusted earnings per diluted share
by $.02.
Total investments and cash at the end of September 2020 were $146.1 billion,
compared with $139.5 billion at September 30, 2019. In the first nine months of
2020, Aflac Incorporated repurchased $1.0 billion, or 26.1 million of its common
shares. At the end of September 2020, the Company had 110.9 million remaining
shares authorized for repurchase.

Shareholders' equity was $32.5 billion, or $46.16 per share, at September 30,
2020, compared with $29.4 billion, or $40.04 per share, at September 30, 2019.
Shareholders' equity at September 30, 2020 included a net unrealized gain on
investment securities and derivatives of $9.5 billion, compared with a net
unrealized gain of $8.9 billion at September 30, 2019. Shareholders' equity at
September 30, 2020 also included an unrealized foreign currency translation loss
of $1.3 billion, compared with an unrealized foreign currency translation loss
of $1.5 billion at September 30, 2019. The
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annualized return on average shareholders' equity in the third quarter of 2020 was 31.7%, 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 $34.91 per share at September 30,
2020, compared with $22.2 billion, or $30.18 per share, at September 30, 2019.
The annualized adjusted return on equity excluding foreign currency impact(2) in
the third quarter of 2020 was 16.8%.

(1) Yen/U.S. dollar exchange rates are based on the published MUFG Bank, Ltd.
telegraphic transfer middle rate (TTM).
(2) See the Results of Operations section of this MD&A for a definition of this
non-U.S. GAAP financial measure.


                             RESULTS OF OPERATIONS
The Company earns its revenues principally from insurance premiums and
investments. The Company's operating expenses primarily consist of insurance
benefits provided and reserves established for anticipated future insurance
benefits, general business expenses, commissions and other costs of selling and
servicing its products. Profitability for the Company depends principally on its
ability to price its insurance products at a level that enables the Company to
earn a margin over the costs associated with providing benefits and
administering those products. Profitability also depends on, among other items,
actuarial and policyholder behavior experience on insurance products, and the
Company's ability to attract and retain customer assets, generate and maintain
favorable investment results, effectively deploy capital and utilize tax
capacity, and manage expenses.

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. generally
accepted accounting principles (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.
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•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 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.

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.
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             Reconciliation of Net Earnings to Adjusted Earnings(1)

                                           In Millions                      Per Diluted Share                       In Millions                          Per Diluted Share
                                                     Three Months Ended September 30,                                            Nine Months Ended September 30,
                                       2020            2019               2020                2019             2020             2019                2020                2019
Net earnings                        $ 2,456          $ 777          $     3.44              $ 1.04          $ 3,826          $ 2,523          $     5.31              $ 3.37
Items impacting net earnings:
Net investment (gains)
 losses (2),(3),(4),(5)                (117)           119                (.16)                .16              497               49                 .69                 .07
Other and non-recurring
(income) loss                             1              0                 .00                 .00               16                1                 .02                 .00

Income tax (benefit) expense

 on items excluded from
 adjusted earnings                       72            (33)                .10                (.04)            (125)             (15)               (.17)               (.02)
Tax valuation allowance
 release (6)                         (1,418)             0               (1.99)                .00           (1,418)               0               (1.97)                .00
Adjusted earnings                       994            863                1.39                1.16            2,797            2,558                3.88                3.41

Current period foreign currency

 impact (7)                              (3)              N/A              .00                    N/A           (17)                N/A             (.02)                   N/A
Adjusted earnings excluding
current period foreign currency
impact                              $   991          $ 863          $     1.39              $ 1.16          $ 2,780          $ 2,558          $     3.86              $ 3.41


(1) Amounts may not foot due to rounding.
(2) Amortized hedge costs of $51 and $66 for the three-month periods and $155
and $191 for the nine-month periods ended September 30, 2020, and 2019,
respectively, 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 $22 and $21 for the three-month periods and $78
and $61 for the nine-month periods ended September 30, 2020 and 2019,
respectively, 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 $7 and $(4) for the three-month periods and $7 and $(18) for the
nine-month periods ended September 30, 2020 and 2019, respectively, have been
reclassified from net investment gains (losses) and included in adjusted
earnings as a component of net investment income.
(5) A gain of $13 and $16 for the three-month periods and $43 and $50 for the
nine-month periods ended September 30, 2020 and 2019, respectively, 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) One-time tax benefit recognized in the third quarter of 2020 representing
the release of valuation allowances on deferred foreign tax credits due to new
tax regulations.
(7) 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.

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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.

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 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
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regular operational cost for an insurance company. Based on this structure, the
Company does not remove the Japan policyholder protection expenses from adjusted
earnings.

Income Taxes

The Company's combined U.S. and Japanese effective income tax rate on pretax
earnings was (112.9)% for the three-month period ended September 30, 2020,
compared with 25.0% for the same period in 2019. The Company's combined U.S. and
Japanese effective income tax rate on pretax earnings was (30.0)% for the
nine-month period ended September 30, 2020, compared with 25.5% for the same
period 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 issued by the U.S. Treasury and Internal Revenue Service on
September 29, 2020, and resulted in a one-time income tax benefit of $1.4
billion in the third quarter of 2020. For additional information, see Note 9 of
the accompanying Notes to the Consolidated Financial Statements and the Critical
Accounting Estimates - Income Taxes section of the MD&A in the 2019 Annual
Report.

The Company expects that its effective tax rate for future periods will be
approximately 20%. The effective tax rate continues to be subject to future tax
law changes both in the U.S. and in foreign jurisdictions. See risk factor
entitled "Tax rates applicable to the Company may change" in the 2019 Annual
Report for more information.

Foreign Currency Translation

Aflac Japan's premiums and a significant portion of its investment income are
received in yen, and its claims and most expenses are paid in yen. Aflac Japan
purchases yen-denominated assets and U.S. dollar-denominated assets, which may
be hedged to yen, to support yen-denominated policy liabilities. 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. Aflac'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, and asset management subsidiaries and other business activities,
including reinsurance retrocession activities, are included in the Corporate and
other segment. See the Item 1. Business section of the 2019 Annual Report for a
summary of each segment's products and distribution channels.

During the third quarter, Aflac Japan sales for protection-type first sector and
third sector products decreased 32.8% and total sales decreased 32.0% on a yen
basis, compared to the same period in 2019, primarily due to continued effects
of the COVID-19 pandemic. Sales from Aflac U.S. were down 35.7% in the third
quarter of 2020, compared to the same period in 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.

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Consistent with U.S. GAAP guidance for segment reporting, pretax adjusted earnings is the Company's U.S. GAAP measure of segment performance. The Company believes that a presentation of this measure is vitally important to an understanding of the underlying profitability drivers and trends of its business. Additional performance measures used to evaluate the financial condition and performance of the Company's segments are listed below.

•operating ratios
•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.
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AFLAC JAPAN SEGMENT
Aflac Japan Pretax Adjusted Earnings
Changes in Aflac Japan's pretax adjusted earnings and profit margins are
primarily affected by morbidity, mortality, expenses, persistency and investment
yields. The following table presents a summary of operating results for Aflac
Japan.

                    Aflac Japan Summary of Operating Results
                                                                       Three Months Ended                     Nine Months Ended
                                                                          September 30,                         September 30,
(In millions)                                                         2020                2019              2020               2019
Net premium income                                              $    3,168             $ 3,241          $    9,476          $ 9,593
Net investment income: (1)
Yen-denominated investment income                                      331                 357                 972              986
U.S. dollar-denominated investment income                              383                 368               1,122            1,083
Net investment income                                                  714                 725               2,094            2,069

Amortized hedge costs related to certain foreign currency exposure management strategies

                                          51                  66                 155              191
Adjusted net investment income                                         663                 659               1,939            1,878
Other income (loss)                                                     11                  12                  32               34
Total adjusted revenues                                              3,842               3,912              11,447           11,505
Benefits and claims, net                                             2,259               2,268               6,651            6,652
Adjusted expenses:
Amortization of deferred policy acquisition costs                      151                 179                 479              538
Insurance commissions                                                  185                 185                 553              546
Insurance and other expenses                                           500                 442               1,323            1,265
Total adjusted expenses                                                835                 806               2,355            2,349
Total benefits and adjusted expenses                                 3,094               3,074               9,006            9,001
      Pretax adjusted earnings                                  $      747             $   838          $    2,442          $ 2,504
Weighted-average yen/dollar exchange rate                           106.23              107.31              107.63           109.16


                                                                 In Dollars                                                                         In Yen
Percentage change over             Three Months Ended September 30,       

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

       Nine Months Ended September 30,
previous period:                       2020                2019                 2020               2019                2020                 2019                 2020                2019
Net premium income                       (2.3) %              2.6  %              (1.2) %            (.6) %               (3.3) %             (1.2) %              (2.6) %            (1.0) %
Adjusted net investment
income                                     .6                 8.7                  3.2               4.3                   (.2)                4.0                  1.9                3.4
Total adjusted revenues                  (1.8)                3.6                  (.5)               .2                  (2.8)                (.3)                (1.9)               (.3)
Pretax adjusted earnings                (10.9)               10.8                 (2.5)              3.9                 (11.6)                6.1                 (3.8)               3.2


(1) Net interest cash flows from derivatives associated with certain investment
strategies of $6 and $(4) for the three-month periods and $5 and $(18) for the
nine-month periods ended September 30, 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 the three- and nine-month periods ended September 30, 2020, Aflac Japan's net
premium income decreased, in yen terms, primarily due to an anticipated decrease
in first sector premiums as savings products reached premium paid-up status.
Adjusted net investment income increased in the nine-month period ended
September 30, 2020, primarily due to higher income from U.S. dollar denominated
assets and lower hedge costs.
Annualized premiums in force decreased .5% to ¥1.44 trillion as of September 30,
2020, compared with ¥1.50 trillion as of September 30, 2019. The decrease in
annualized premiums in force in yen was driven primarily by limited-pay products
reaching paid up status. Annualized premiums in force, translated into dollars
at respective period-end exchange rates, were $13.6 billion at September 30,
2020, compared with $13.9 billion a year ago.

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,
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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 comparable period in the
prior year. Amounts excluding foreign currency impact on U.S. dollar denominated
investment income were determined using the average foreign currency exchange
rate for the comparable prior year period. See non-U.S. GAAP financial measures
defined above.
              Aflac Japan Percentage Changes Over Previous Period
                            (Yen Operating Results)
                      For the Periods Ended September 30,
                                                         Including Foreign                                                                     Excluding Foreign
                                                         Currency Changes                                                                      Currency Changes
                                      Three Months                                   Nine Months                            Three Months                                   Nine Months
                                   2020                 2019                  2020              2019                  2020                  2019                 2020                   2019
Adjusted net investment
income                           (.2)       %         4.0      %            1.9    %            3.4    %                .4        %         6.1    %              2.8                 3.6    %
Total adjusted revenues         (2.8)                 (.3)                 (1.9)                (.3)                  (2.7)                  .0                  (1.8)                (.2)
Pretax adjusted earnings       (11.6)                 6.1                  (3.8)                3.2                  (11.1)                 7.8                  (3.2)                3.4


The following table presents a summary of operating ratios in yen terms for
Aflac Japan.
                                                           Three Months Ended                                    Nine Months Ended
                                                              September 30,                                        September 30,
Ratios to total adjusted revenues:                      2020                        2019                     2020                        2019
Benefits and claims, net                            58.8     %                   58.0    %               58.1            %            57.8    %
Adjusted expenses:
Amortization of deferred policy acquisition
costs                                                3.9                          4.6                     4.2                          4.7
Insurance commissions                                4.8                          4.7                     4.8                          4.8
Insurance and other expenses                        13.0                         11.3                    11.5                         11.0
Total adjusted expenses                             21.7                         20.6                    20.6                         20.4
Pretax adjusted earnings                            19.4                         21.4                    21.3                         21.7
Ratios to total premiums:
Benefits and claims, net                            71.3     %                   70.0    %               70.2     %                   69.3    %
Adjusted expenses:
Amortization of deferred policy acquisition
costs                                                4.8                          5.5                     5.1                          5.6


In the three- and nine-month periods ended September 30, 2020, the benefit ratio
increased, compared with the same periods in the prior year. This is 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 the three- and
nine-month periods ended September 30, 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, the pretax adjusted profit margin decreased in the
three- and nine-month periods ended September 30, 2020. For the full year of
2020, the Company will continue to monitor the situation with respect to
COVID-19, and potential impacts on the pretax adjusted profit margin and benefit
ratio.

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Aflac Japan Sales
The following table presents Aflac Japan's new annualized premium sales for the
periods ended September 30.
                                                           In Dollars                                                     In Yen
                                       Three Months                     Nine Months                    Three Months               Nine Months
(In millions of dollars and
billions of yen)                   2020            2019            2020            2019            2020            2019      2020            2019

New annualized premium sales $ 119 $ 172 $ 339

$ 560 ¥ 12.6 ¥ 18.5 ¥ 36.4 ¥ 61.2 Increase (decrease) over prior period

                            (31.0) %        (18.7) %        (39.5) %  

(14.4) % (32.0) % (21.5) % (40.4) % (14.7) %

The following table details the contributions to Aflac Japan's new annualized
premium sales by major insurance product for the periods ended September 30.
                                  Three Months                        Nine Months
                              2020              2019              2020             2019
Cancer                          55.7  %         52.2  %            55.3  %         59.5  %
Medical                         32.0            37.5               32.3            30.9
Income support                    .9             1.2                1.0             1.2
Ordinary life:
WAYS                              .8              .5                 .7              .5
Child endowment                   .4              .3                 .4              .2
Other ordinary life (1)          9.6             7.8                9.6             7.2
Other                             .6              .5                 .7              .5
  Total                        100.0  %        100.0  %           100.0  %        100.0  %


(1) Includes term and whole life
The foundation of Aflac Japan's product portfolio has been, and continues to be,
third sector products, which include cancer, medical and income support
insurance products. Aflac Japan has been focusing more on promotion of cancer
and medical insurance products in this low-interest-rate environment. These
products are less interest-rate sensitive and more profitable compared to first
sector savings products. With continued cost pressure on Japan's health care
system, the Company expects the need for third sector products will continue to
rise in the future and that the medical and cancer insurance products Aflac
Japan provides will continue to be an important part of its product portfolio.
Sales of protection-type first sector and third sector products on a yen basis
decreased 32.8% in the third quarter of 2020, compared with the same respective
period in 2019. The decline in sales primarily reflects the impact of the
COVID-19 pandemic.

Sales of Aflac Japan cancer products in the Japan Post Group channel experienced
a material decline beginning in August 2019 which has continued into 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 II, Item 1A. of the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 2020. Aflac Japan experienced a sharp drop-off in
total sales, beginning in the second quarter and continuing into the third
quarter, due to the effects of the COVID-19 pandemic and continuing effects of
the Japan Post investigation.
Independent corporate agencies and individual agencies contributed 51.7% of
total new annualized premium sales for Aflac Japan in the third quarter of 2020,
compared with 48.1% for the same period in 2019. Affiliated corporate agencies,
which include Japan Post, contributed 41.4% of total new annualized premium
sales in the third quarter of 2020, compared with 46.3% in the third quarter of
2019. 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 and will benefit its cancer insurance sales over the long
term. During the three-month period ended September 30, 2020, Aflac Japan
recruited 19 new sales agencies. At September 30, 2020, Aflac Japan was
represented by more than 8,600 sales agencies, with more than 111,000 licensed
sales associates employed by those agencies.

At September 30, 2020, Aflac Japan had agreements to sell its products at 364
banks, approximately 90% of the total number of banks in Japan. Bank channel
sales accounted for 6.9% of new annualized premium sales for Aflac Japan in the
third quarter of 2020, compared with 5.6% in the third quarter of 2019.
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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 8, 2020, the Trust had beneficially acquired 6.47% of the
outstanding Common Shares as of December 31, 2019. Japan Post Holdings is the
sole beneficiary of the Trust. According to a press release by Japan Post
Holdings on February 14, 2020, the Trust had completed the planned beneficial
acquisition of approximately 7% of the outstanding Common Shares as of February
13, 2020.

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.

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
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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.

                                                             Three Months Ended September              Nine Months Ended September
                                                                         30,                                       30,
(In millions)                                                   2020              2019                    2020              2019
Yen-denominated:

Fixed maturity securities:

   Japan government and agencies                            $      94          $     0                $     830          $   583
   Private placements                                             154               92                      267              985
   Other fixed maturity securities                                 45              168                      316              524
 Equity securities                                                121               79                      263              199
    Total yen-denominated                                   $     414          $   339                $   1,676          $ 2,291

U.S. dollar-denominated:

Fixed maturity securities:

   Other fixed maturity securities                          $     314          $   738                $   1,231          $ 2,260
   Infrastructure debt                                              0               10                       55               20

   Collateralized loan obligations                                 99                0                       99                0
 Equity securities                                                  0               29                        0               58

Commercial mortgage and other loans:

   Transitional real estate loans                                 152              398                      617            1,069
   Commercial mortgage loans                                        0              197                       12              235
   Middle market loans                                            238              274                    1,665              962
 Other investments                                                 60               19                      158               92
    Total dollar-denominated                                $     863          $ 1,665                $   3,837          $ 4,696
      Total Aflac Japan purchases                           $   1,277          $ 2,004                $   5,513          $ 6,987

See the Investments section of this MD&A for further discussion of these investment programs, and see Notes 3 and 4 of the Notes to the Consolidated Financial Statements and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the 2019 Annual Report for more information regarding loans and loan receivables.

The following table presents the results of Aflac Japan's investment yields for the periods ended September 30.

                                                                        Three Months                                Nine Months
                                                                 2020                   2019                   2020                   2019
Total purchases for the period (in millions) (1)           $ 1,217                $ 1,985                $ 5,355                $ 6,895
New money yield (1), (2)                                      3.14        % 

3.98 % 3.73 % 3.64 % Return on average invested assets (3)

                         2.35                   2.40                   2.33                   2.34

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

                                2.62        % 

2.62 % 2.62 % 2.62 %

(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 the three-month period ended
September 30, 2020 was primarily due to lower U.S. interest rates. The increase
in the Aflac Japan new money yield in the nine-month period ended September 30,
2020 was primarily due to increased allocations to higher yielding 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.
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AFLAC U.S. SEGMENT
Aflac U.S. Pretax Adjusted Earnings
Changes in Aflac U.S. pretax adjusted earnings and profit margins are primarily
affected by morbidity, mortality, expenses, persistency and investment yields.
The following table presents a summary of operating results for Aflac U.S.
                    Aflac U.S. Summary of Operating Results
                                                              Three Months Ended                      Nine Months Ended
                                                                 September 30,                          September 30,
(In millions)                                                2020                2019               2020               2019
Net premium income                                     $    1,407             $ 1,445           $    4,348          $ 4,365

Net investment income (1)                                     175                 183                  523              540
Other income                                                   24                   2                   78                6
Total adjusted revenues                                     1,606               1,630                4,949            4,911
Benefits and claims                                           679                 710                2,038            2,162
Adjusted expenses:
Amortization of deferred policy acquisition costs             141                 139                  435              429
Insurance commissions                                         140                 145                  439              444
Insurance and other expenses                                  316                 301                  955              880
Total adjusted expenses                                       597                 585                1,829            1,753
Total benefits and adjusted expenses                        1,277               1,295                3,867            3,915
       Pretax adjusted earnings                        $      329             $   335           $    1,082          $   996
Percentage change over previous period:
Net premium income                                           (2.6)          %     1.3    %             (.4)   %         2.0    %
Net investment income                                        (4.4)               (2.1)                (3.1)             (.7)
Total adjusted revenues                                      (1.5)                0.9                   .8              1.7
Pretax adjusted earnings                                     (1.8)                 .3                  8.6             (1.5)


(1) Net interest cash flows from derivatives associated with certain investment
strategies of $1 for the three-month period and $2 for the nine-month period
ended September 30, 2020, respectively, 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 2.9% to $6.0 billion at September 30,
2020, compared with $6.1 billion at September 30, 2019. Net investment income
decreased primarily due to the lower interest rate environment and ongoing
capital management activity.
The following table presents a summary of operating ratios for Aflac U.S.
                                                               Three Months Ended                                     Nine Months Ended
                                                                  September 30,                                         September 30,
Ratios to total adjusted revenues:                          2020                         2019                     2020                         2019
Benefits and claims                                     42.3     %                    43.6    %               41.2     %                    44.0    %
Adjusted expenses:
Amortization of deferred policy acquisition costs        8.8                           8.5                     8.8                           8.7
Insurance commissions                                    8.7                           8.9                     8.9                           9.0
Insurance and other expenses                            19.7                          18.5                    19.3                          17.9
Total adjusted expenses                                 37.2                          35.9                    37.0                          35.7
 Pretax adjusted earnings                               20.5                          20.6                    21.9                          20.3
Ratios to total premiums:
Benefits and claims                                     48.3     %                    49.1    %               46.9     %                    49.5    %
Adjusted expenses:
Amortization of deferred policy acquisition costs       10.0                           9.6                    10.0                           9.8



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For the three-month period ended September 30, 2020, the benefit ratio decreased
compared with the same period in 2019; however, the ratio increased in
comparison to the second quarter of 2020, which management believes may indicate
the beginning of a return to levels seen over the past several years. For the
nine-month period ended September 30, 2020, the benefit ratio decreased compared
with the same period in 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 the
three- and nine-month periods ended September 30, 2020, when compared with the
same periods in 2019, primarily due to anticipated spending increases reflecting
ongoing investments in the U.S. platform, distribution, and customer experience,
and TPA related expenses from the acquisition of Argus, as well as lower unit
cost capitalization reflecting a third quarter decline in sales and lower
general administrative expense due to lower sales, travel and claims activity.
The pretax adjusted profit margin increased in the nine-month period, when
compared with the same period in 2019, due to lower benefit ratios, offset
somewhat by higher expense ratios. For the full year of 2020, the Company will
continue to monitor the situation with respect to COVID-19, and potential
impacts on the pretax adjusted profit margin and benefit ratio.

Aflac U.S. Sales
The following table presents Aflac's U.S. new annualized premium sales for the
periods ended September 30.
                                                   Three Months                          Nine Months
(In millions)                                  2020                 2019          2020               2019
New annualized premium sales              $    221               $ 334          $  705          $ 1,046
Increase (decrease) over prior period        (35.7)       %       (4.2)  %  

(32.7) % (1.6) %

The following table details the contributions to Aflac's U.S. new annualized
premium sales by major insurance product category for the periods ended
September 30.
                                   Three Months                             Nine Months
                             2020                  2019               2020                 2019
Accident                  26.4    %             29.0    %          26.6    %             28.8   %
Short-term disability     24.2                  22.6               23.3                  23.3
 Critical care(1)         20.5                  20.9               20.8                  20.6
Hospital indemnity        16.8                  16.1               16.9                  15.8
Dental/vision              5.0                   5.0                4.5                   5.0
Life                       7.1                   6.4                7.9                   6.5
Total                    100.0    %            100.0    %         100.0        %        100.0     %

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

New annualized premium sales for accident insurance, the leading Aflac U.S.
product category, decreased 41.6%; short-term disability sales decreased 31.0%;
critical care insurance sales (including cancer insurance) decreased 36.9%; and
hospital indemnity insurance sales decreased 33.0% in the third quarter of 2020,
compared with the same period in 2019. Primarily, the decline is 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 the third quarter of 2020, the Aflac U.S. sales force included an average of
approximately 5,500 U.S. agents, including brokers, who were actively producing
business on a weekly basis. The Company believes that this average weekly
producer equivalent metric allows sales management to monitor progress and
needs, as well as serve as a leading indicator of future production capacity.

In March 2020, the Company, through its insurance subsidiaries Aflac and Aflac
New York, entered into an agreement to acquire 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 will reinsure on an
indemnity basis Zurich North America's U.S. in-force group life and disability
policies with annualized earned premium in the anticipated range of $115
million. Aflac will also acquire assets needed to support the group life and
disability business, along with an absence management platform. Subject to
regulatory approvals and customary closing conditions, this transaction is
expected to close in the fourth quarter of 2020.

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Aflac U.S. Investments

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

As part of the Company's portfolio management and asset allocation process,
Aflac U.S. invests in fixed maturity investments and growth assets, including
public equity securities and alternative investments in limited partnerships.
Aflac U.S. has been investing in both publicly traded and privately originated
investment-grade and below-investment-grade fixed maturity securities and loan
receivables.

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

                                                Three Months Ended                Nine Months Ended
                                                   September 30,                    September 30,
(In millions)                                     2020             2019           2020            2019
Fixed maturity securities:
   Other fixed maturity securities        $      166              $  73      $    434           $   947
   Infrastructure debt                             0                  5            20                78
   Collateralized loan obligations                56                  0            67                 0
Equity securities                                  0                 16             5                43

Commercial mortgage and other loans:

   Transitional real estate loans                 43                 82            88               224
   Commercial mortgage loans                       0                 35            37               104
   Middle market loans                            20                 18            63                74
Other investments                                  7                  2            18                10

    Total Aflac U.S. Purchases            $      292              $ 231      $    732           $ 1,480

See Note 3 of the Notes to the Consolidated Financial Statements and Notes 1 and 3 of the Notes to the Consolidated Financial Statements in the 2019 Annual Report for more information regarding loans and loans receivables.

The following table presents the results of Aflac's U.S. investment yields for the periods ended September 30.

                                                        Three Months                       Nine Months
                                                    2020               2019           2020            2019
Total purchases for period (in millions) (1)   $    285               $ 229          $ 714          $ 1,470
New money yield (1), (2)                           2.80        %       4.58   %       3.24     %       4.49     %
Return on average invested assets (3)              4.75                5.09           4.86             5.07
Portfolio book yield, end of period (1)            5.26          %     5.40 

% 5.26 % 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

The decrease in the Aflac U.S. new money yield for the three- and nine-month
periods ended September 30, 2020 was primarily due to lower U.S. interest rates.
See Notes 3 and 5 of the Notes to the Consolidated Financial Statements and the
Analysis of Financial Condition section of this MD&A for additional information
on the Company's investments.

CORPORATE AND OTHER

Changes in the pretax adjusted earnings of Corporate and other are primarily
affected by investment income. The following table presents a summary of results
for Corporate and other.
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                Corporate and Other Summary of Operating Results
                                                          Three Months Ended                   Nine Months Ended
                                                             September 30,                       September 30,
(In millions)                                            2020              2019               2020             2019
Premium income                                       $       49          $   51           $     146          $  151
Net investment income                                        14              23                  59              65
Amortized hedge income related to certain foreign
currency management strategies                               22              21                  78              61
Adjusted net investment income                               36              44                 137             126
Other income                                                  2               2                   9              10
Total adjusted revenues                                      87              97                 292             287
Benefits and claims, net                                     47              49                 134             144
Adjusted expenses:
Interest expense                                             44              33                 120             100
Other adjusted expenses                                      35              32                 107             105
Total adjusted expenses                                      79              65                 227             205
Total benefits and adjusted expenses                        126             114                 361             349
Pretax adjusted earnings                             $      (39)         $  (17)          $     (69)         $  (62)



Adjusted net investment income benefited from the Company's enterprise corporate
hedging program in the three- and nine-month periods ended September 30, 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 the three- and nine-month periods ended September 30, 2020,
as compared to the same periods in 2019, is primarily due to the issuance of
five series of senior notes in March and April 2020. See Note 8 of the Notes to
the Consolidated Financial Statements for more information on these senior
notes.

                                  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.

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The following tables detail investments by segment.

                        Investment Securities by Segment
                                                                     September 30, 2020
                                                                                    Corporate and
(In millions)                            Aflac Japan            Aflac U.S.              Other                Total
Available for sale, fixed maturity
securities,
at fair value                          $     86,536           $    14,630           $     1,962           $ 103,128
Held to maturity, fixed maturity
securities,
  at amortized cost (1)                      23,937                     0                     0              23,937
Equity securities                               624                    68                    83                 775
Commercial mortgage and other loans:
Transitional real estate loans (1)            4,702                   889                     0               5,591
Commercial mortgage loans (1)                 1,279                   425                     0               1,704
Middle market loans (1)                       3,264                   263                     0               3,527
Other investments:
Policy loans                                    244                    17                     0                 261
Short-term investments (2)                      319                   207                   297                 823
Limited partnerships                            657                    73                    65                 795
Other                                             0                    25                     0                  25
   Total investments                        121,562                16,597                 2,407             140,566
Cash and cash equivalents                     1,933                 1,225                 2,405               5,563
       Total investments and cash      $    123,495           $    17,822           $     4,812           $ 146,129


(1) Net of allowance for credit losses
(2) Includes securities lending collateral
                                                                      December 31, 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

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

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

           Composition of Fixed Maturity Securities by Credit Rating
                              September 30, 2020

December 31, 2019

                      Amortized                    Fair                     Amortized                    Fair
                        Cost                       Value                       Cost                      Value
AAA                           1.3  %                    1.2  %                      1.1  %                    1.0  %
AA                            4.1                       4.2                         4.3                       4.4
A                            69.6                      70.3                        68.6                      69.8
BBB                          21.7                      21.3                        23.1                      22.1
BB or lower                   3.3                       3.0                         2.9                       2.7
Total                       100.0  %                  100.0  %                    100.0  %                  100.0  %

As of September 30, 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 September 30, 2020.

                                          Credit            Amortized       

Fair

(In millions)                             Rating              Cost               Value            Unrealized Loss
KLM Royal Dutch Airlines                      B                $ 147            $ 115                       $ (32)
Grenke Finance PLC                           BBB                  66               37                         (29)
Heathrow Funding Ltd.                        BBB                  95               79                         (16)
Lloyds Banking Group PLC                      A                  217              201                         (16)
Investcorp Capital Limited                   BB                  399              385                         (14)
PEMEX Project Funding Master Trust           BB                  284              271                         (13)
Baker Hughes Inc.                             A                  127              114                         (13)
Cenovus Energy Inc.                          BB                   35               24                         (11)
Banco de Chile                                A                  189              178                         (11)
American Airlines                             B                   22               12                         (10)



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

Below-Investment-Grade Securities

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

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                       Below-Investment-Grade Investments
                                                         September 30, 2020
                                                                                  Unrealized
                                          Par        Amortized        Fair           Gain
(In millions)                            Value        Cost (1)        Value         (Loss)
Investcorp Capital Limited             $   400      $      399      $   385      $      (14)
Commerzbank                                378             254          395             141
Pemex Project Funding Master Trust         283             283          271             (12)
KLM Royal Dutch Airlines                   189             147          115             (32)
Telecom Italia SpA                         189             189          242              53
Autostrade Per Litalia Spa                 189             188          181              (7)
Barclays Bank PLC                          189             123          153              30
Apache Corporation                         138             128          133               5
Ovintiv Inc.                               133             136          129              (7)
IKB Deutsche Industriebank AG              123              54           84              30
Other Issuers                              994             844          888              44
     Subtotal (2)                        3,205           2,745        2,976             231
Senior secured bank loans                  269             289          255             (34)
High yield corporate bonds                 708             725          722              (3)
Middle market loans                      3,645           3,527        3,499             (28)
     Grand Total                       $ 7,827      $    7,286      $ 7,452      $      166


(1) Net of allowance for credit losses
(2) Securities initially purchased as investment grade, but have subsequently
been downgraded to below investment grade

The Company invests in senior secured bank loans and middle market loans primarily to U.S. corporate borrowers, most of which have below-investment-grade ratings. The objectives of these programs include enhancing the yield on invested assets, achieving further diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of floating rate assets.

The Company maintains an allocation to higher yielding corporate bonds within
the Aflac Japan and Aflac U.S. portfolios. Most of these securities were rated
below-investment-grade at the time of purchase, but the Company also purchased
several that were rated investment grade which, because of market pricing, offer
yields commensurate with below-investment-grade risk profiles. The objective of
this allocation was to enhance the Company's yield on invested assets and
further diversify credit risk. All investments in this program must have a
minimum rating at purchase of low BB using the Company's above described rating
methodology and are managed by the Company's internal credit portfolio
management team.

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Fixed Maturity Securities by Sector

The Company maintains diversification in investments by sector to avoid concentrations to any one sector, thus managing exposure risk. The following table shows the distribution of fixed maturities by sector classification.

                                                                                                September 30, 2020
                                                                                  Gross
                                                                               Unrealized          Gross Unrealized                                  % of
(In millions)                                   Amortized Cost (1)                Gains                 Losses             Fair Value                Total
Government and agencies                     $                55,860          $      9,878          $         (42)         $   65,696                      49.1  %
Municipalities                                                2,526                   587                     (3)              3,109                       2.2
Mortgage- and asset-backed securities                           681                    38                     (1)                717                        .6
Public utilities                                              8,573                 1,897                    (15)             10,457                       7.6
Electric                                                      6,943                 1,564                    (11)              8,496                       6.1
Natural Gas                                                     308                    59                      0                 368                        .3
Other                                                           537                   114                     (1)                651                        .5
Utility/Energy                                                  785                   160                     (3)                942                        .7
Sovereign and Supranational                                   1,843                   313                    (11)              2,145                       1.6
Banks/financial institutions                                 10,461                 1,421                   (186)             11,697                       9.2
Banking                                                       6,279                   871                    (72)              7,079                       5.5
Insurance                                                     1,988                   402                    (39)              2,351                       1.8
Other                                                         2,194                   148                    (75)              2,267                       1.9
Other corporate                                              33,893                 5,602                   (380)             39,114                      29.7
Basic Industry                                                3,408                   650                    (22)              4,036                       3.0
Capital Goods                                                 3,348                   534                    (18)              3,864                       3.0
Communications                                                4,065                   866                    (34)              4,898                       3.6
Consumer Cyclical                                             3,106                   516                    (24)              3,598                       2.7
Consumer Non-Cyclical                                         6,990                 1,199                    (42)              8,146                       6.1
Energy                                                        4,149                   516                   (126)              4,539                       3.6
Other                                                         1,519                   178                    (10)              1,688                       1.3
Technology                                                    3,402                   338                    (29)              3,710                       3.0
Transportation                                                3,906                   805                    (75)              4,635                       3.4

    Total fixed maturity securities         $               113,837          $     19,736          $        (638)         $  132,935

100.0 %

(1) Net of allowance for credit losses

Securities by Type of Issuance
The Company has investments in both publicly and privately issued securities.
The Company's ability to sell either type of security is a function of overall
market liquidity which is impacted by, among other things, the amount of
outstanding securities of a particular issuer or issuance, trading history of
the issue or issuer, overall market conditions, and idiosyncratic events
affecting the specific issue or issuer.

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The following table details investment securities by type of issuance.

                   Investment Securities by Type of Issuance
                                             September 30, 2020                        December 31, 2019
                                       Amortized             Fair                Amortized              Fair
(In millions)                          Cost (1)              Value                 Cost                Value
Publicly issued securities:
Fixed maturity securities             $  93,654            $ 109,239            $  89,625            $ 105,557
Equity securities                           684                  684                  717                  717
   Total publicly issued                 94,338              109,923               90,342              106,274
Privately issued securities: (2)
Fixed maturity securities (3)            20,183               23,696               19,831               23,299
Equity securities                            91                   91                   85                   85
   Total privately issued                20,274               23,787               19,916               23,384
   Total investment securities        $ 114,612            $ 133,710            $ 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.

                      Reverse-Dual Currency Securities(1)
                                                                 September 30,                      December 31,
(Amortized cost, in millions)                                         2020                              2019
Privately issued reverse-dual currency securities                    $ 5,181                           $ 4,993

Publicly issued collateral structured as reverse-dual currency securities

                                                    1,737                             1,678
Total reverse-dual currency securities                               $ 6,918                           $ 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" in the 2019 Annual Report for more information
about market risk and the Company's use of derivatives.

Derivatives are designed to reduce risk on an economic basis while minimizing the impact on financial results. The Company's derivatives programs vary depending on the type of risk being hedged. See Note 4 of the Notes to the Consolidated Financial Statements for:

•A description of the Company's derivatives, hedging strategies and underlying
risk exposure.
•Information about the notional amount and fair market value of the Company's
derivatives.
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•The unrealized and realized gains and losses impact on adjusted earnings of
derivatives in cash flow, fair value, net investments in foreign operations, or
non-qualifying hedging relationships.

Foreign Currency Exchange Rate Risk Hedge Program
The Company has deployed the following hedging strategies to mitigate exposure
to foreign currency exchange rate risk:
•Aflac Japan hedges U.S. dollar-denominated investments back to yen (see Aflac
Japan'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.
                                                             September 30,                         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) $ 18,868 $ 20,792 $ 18,012 $ 19,542

 Fixed maturity securities - bank loans (floating
rate)                                                      373               331                677               649
Equity securities                                           19                19                 19                19

Commercial mortgage and other loans:

 Transitional real estate loans (floating rate)          4,702             4,584              4,507             4,543
 Commercial mortgage loans                               1,279             1,373              1,308             1,319
 Middle market loans (floating rate)                     3,264             3,244              2,141             2,153
Other investments                                          657               657                496               496
   Total U.S. Dollar Program                            29,162            31,000             27,160            28,721

Available-for-sale securities:

Fixed maturity securities - economically converted to yen

                                                   1,890             2,816              1,700             2,608
   Total U.S. dollar-denominated investments in
Aflac Japan                                          $  31,052          $ 

33,816 $ 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 as certain collars
expired and were not replaced. 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
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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.

As of September 30, 2020, Aflac Japan had $9.2 billion outstanding notional
amounts of foreign currency forwards and $17.9 billion outstanding notional
amounts of foreign currency options, of which none were in-the-money, hedging
its U.S. dollar-denominated investments. The fair value of Aflac Japan's
unhedged U.S. dollar-denominated portfolio was $13.0 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 $2 million and net cash inflows of $31 million for the
three-month periods and net cash outflows of $34 million and net cash outflows
of $8 million for the nine-month periods ended September 30, 2020 and 2019,
respectively, 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 September 30, 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 nine-month periods ended September 30, 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 $22 million and $21 million for
the three-month periods and $78 million and $61 million for the nine-month
periods ended September 30, 2020 and 2019, respectively. This activity is
reported in Corporate and Other. As this program evolves, the Company will
continue to evaluate the program's efficacy. See the Results of Operations
section of this MD&A for the Company's definition of amortized hedge
costs/income.

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

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                    Aflac Japan Hedge Cost/Income Metrics(1)
                                                             Three Months                            Nine Months
                                                         2020                2019             2020                 2019
Aflac Japan:

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

$9.2                $9.5             $9.2                 $9.5
  Weighted average remaining tenor (in months)(3)        10.3                11.4             10.3                 11.4
  Amortized hedge income (cost) for period (in
millions)                                               $(51)               $(66)            $(155)               $(191)

Parent Company:

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

$5.0                $3.5             $5.0                 $3.5
  Weighted average remaining tenor (in months)(3)        12.5                14.6             12.5                 14.6
  Amortized hedge income (cost) for period (in
millions)                                                $22                 $21               $78                 $61


(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 Risk, and the Risk Factor sections titled "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" and "Lack of availability of acceptable yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity" in the 2019 Annual Report.

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

                       DEFERRED POLICY ACQUISITION COSTS

The following table presents deferred policy acquisition costs by segment. (In millions) September 30, 2020

            December 31, 2019                % Change
Aflac Japan                    $  6,851                     $  6,584                        4.1  % (1)
Aflac U.S.                        3,468                        3,544                       (2.1)
Total                          $ 10,319                     $ 10,128                        1.9  %

(1)Aflac Japan's deferred policy acquisition costs increased .5% in yen during the nine months ended September 30, 2020.

See Note 6 of the Notes to the Consolidated Financial Statements in the 2019 Annual Report for additional information on the Company's deferred policy acquisition costs.

                                 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 12 of the accompanying Notes to the Consolidated Financial Statements and Note 14 of the Notes to the Consolidated Financial Statements in the 2019 Annual Report.

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                               POLICY LIABILITIES

The following table presents policy liabilities by segment. (In millions)

                                            September 30, 2020                December 31, 2019                        % Change

Aflac Japan                                                 $ 100,567                         $  95,793                                       5.0  % (1)
Aflac U.S.                                                     11,564                            11,295                                       2.4
Other                                                             262                               223                                      17.5
Intercompany eliminations(2)                                     (806)                             (757)                                      6.5
Total                                                       $ 111,587                         $ 106,554                                       4.7  %


(1) Aflac Japan's policy liabilities increased 1.4% in yen during the nine
months ended September 30, 2020.
(2) Elimination entry necessary due to recapture of a portion of policy
liabilities ceded externally, as a result of the reinsurance retrocession
transaction as described in Note 7 of the Notes to the Consolidated Financial
Statements.

                            POLICYHOLDER PROTECTION

Policyholder Protection Corporation

The Japanese insurance industry has a policyholder protection system that
provides funds for the policyholders of insolvent insurers. Legislation enacted
regarding the framework of the Life Insurance Policyholder Protection
Corporation (LIPPC) included government fiscal measures supporting the LIPPC. In
November 2016, Japan's Diet passed legislation that extended the government's
fiscal support of the LIPPC through March 2022. Effective April 2014, the annual
LIPPC contribution amount for the total life industry was lowered from ¥40
billion to ¥33 billion. Aflac Japan recognized an expense of ¥1.9 billion for
both of the nine-month periods ended September 30, 2020 and 2019 for LIPPC
assessments.

Guaranty Fund Assessments

Under U.S. state guaranty association laws, certain insurance companies can be
assessed (up to prescribed limits) for certain obligations to the policyholders
and claimants of impaired or insolvent insurance companies that write the same
line or similar lines of business. The amount of the guaranty fund assessment
that an insurer is assessed is based on its proportionate share of premiums in
that state. Guaranty fund assessments for the nine-month periods ended
September 30, 2020 and 2019, were immaterial.

                         OFF-BALANCE SHEET ARRANGEMENTS

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

As of September 30, 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 in the 2019 Annual Report for
information on material unconditional purchase obligations that are not recorded
on the Company's balance sheet.

                        LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the ability to generate sufficient cash resources to meet
the payment obligations of the Company. Capital refers to the long-term
financial resources available to support the operations of the businesses, fund
business growth and provide for an ability to withstand adverse circumstances.
Financial leverage (leverage) refers to an investment strategy of using debt to
increase the potential 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.

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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
September 30, 2020, the Company held $5.6 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. For 2020, the Parent
Company anticipates a reduction in the dividends it receives from Aflac Japan
and Aflac U.S. to maintain a strong capital position for its insurance
subsidiaries during the COVID-19 pandemic. 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
nine-month periods ended September 30.

              Liquidity Provided by Subsidiaries to Parent Company
(In millions)                                 2020        2019

Dividends declared or paid by subsidiaries $ 892 $ 2,420 Management fees paid by subsidiaries

           100          108

The following table details Aflac Japan remittances for the nine-month periods ended September 30.

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

2019

Aflac Japan management fees paid to Parent Company                   $   54      $    89
Expenses allocated to Aflac Japan (in dollars)                            0            3

Aflac Japan profit remittances to the Parent Company (in dollars) 667

1,722

Aflac Japan profit remittances to the Parent Company (in yen) ¥ 72.8 ¥ 186.3

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.

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 September 30, 2020, the Parent Company and Aflac
had four lines of credit with third parties as well as seven intercompany lines
of credit. For additional information, see Note 8 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.

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 September 30, 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 3 and 4 of the Notes to the
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Consolidated Financial Statements and Notes 1, 3, and 4 of the Notes to the
Consolidated Financial Statements in the 2019 Annual Report for more information
on the Company's securities lending and derivative activities. With the
exception of disclosed activities in those referenced footnotes and the Risk
Factors in the 2019 Annual Report entitled, "The Company is exposed to foreign
currency fluctuations in the yen/dollar exchange rate" and "Lack of availability
of acceptable yen-denominated investments could adversely affect the Company's
results of operations, financial position or liquidity," the Company does not
have a known trend, demand, commitment, event or uncertainty that would
reasonably result in its liquidity increasing or decreasing by a material
amount.
                            Consolidated Cash Flows
The Company translates cash flows for Aflac Japan's yen-denominated items into
U.S. dollars using weighted-average exchange rates. In periods when the yen
weakens, translating yen into dollars causes fewer dollars to be reported. When
the yen strengthens, translating yen into dollars causes more dollars to be
reported.
The following table summarizes consolidated cash flows by activity for the
nine-month periods ended September 30.
(In millions)                                     2020         2019
Operating activities                            $ 4,601      $ 4,263
Investing activities                             (3,511)      (2,946)
Financing activities                               (431)      (1,429)
Exchange effect on cash and cash equivalents          8           (9)

Net change in cash and cash equivalents $ 667 $ (121)

                              Operating Activities

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

The Company expects its future cash flows from premiums and investment portfolios to be sufficient to meet its cash needs for benefits and expenses.

                              Investing Activities

The Company's investment objectives provide for liquidity primarily through the
purchase of publicly traded investment-grade debt securities. Prudent portfolio
management dictates that the Company attempts to match the duration of its
assets with the duration of its liabilities. Currently, when the Company's fixed
maturity securities mature, the proceeds may be reinvested at a yield below that
required for the accretion of policy benefit liabilities on policies issued in
earlier years. However, the long-term nature of the Company's business and its
strong cash flows provide the Company with the ability to minimize the effect of
mismatched durations and/or yields identified by various asset adequacy
analyses. From time to time or when market opportunities arise, the Company
disposes of selected fixed maturity securities that are available for sale to
improve the duration matching of assets and liabilities, improve future
investment yields, and/or re-balance its portfolio. As a result, dispositions
before maturity can vary significantly from year to year.

As part of its overall corporate strategy, the Company has committed $400
million to Aflac Ventures, LLC (Aflac Ventures), as opportunities emerge. Aflac
Ventures is a subsidiary of Aflac Global Ventures, LLC (Aflac Global Ventures)
which is reported in the Corporate and Other segment. The central mission of
Aflac Global Ventures is to support the organic growth and business development
needs of Aflac Japan and Aflac U.S. with emphasis on digital applications
designed to improve the customer experience, gain efficiencies, and develop new
markets in an effort to enhance and defend long-term shareholder value.
Investments are included in equity securities or the other investments line in
the consolidated balance sheets.

As part of an arrangement with FHLB, Aflac U.S. obtains low-cost funding from
FHLB supported by acceptable forms of collateral pledged by Aflac U.S. In the
first nine months of 2020, Aflac U.S. borrowed and repaid $224 million under
this program. As of September 30, 2020, Aflac U.S. had outstanding borrowings of
$298 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.
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See Note 3 of the Notes to the Consolidated Financial Statements for details on certain investment commitments.

                              Financing Activities

Consolidated cash used by financing activities was $431 million in the first nine months of 2020, compared with consolidated cash used by financing activities of $1.4 billion for the same period of 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.

See Note 8 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 September 30, 2020.

Cash returned to shareholders through treasury stock purchases and dividends was
$1.6 billion during the nine-month period ended September 30, 2020, compared
with $1.7 billion during the nine-month period ended September 30, 2019.

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

                            Treasury Stock Purchased
(In millions of dollars and thousands of shares)     2020         2019
Treasury stock purchases                           $ 1,037      $ 1,157
Number of shares purchased:
Share repurchase program                            26,108       23,126
Other                                                  541          589
  Total shares purchased                            26,649       23,715



                             Treasury Stock Issued

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

  Cash financing                                   $    27      $    38
  Noncash financing                                     40           38
  Total stock issued from treasury                 $    67      $    76
Number of shares issued                              1,884        1,909


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During the first nine months of 2020, the Company repurchased 26.1 million
shares of its common stock for $1.0 billion as part of its share repurchase
program. In August 2020, the Company's board of directors authorized the
purchase of 100 million shares of its common stock, in addition to the 10.9
million shares that remain available for purchase under the August 2017
authorization. As of September 30, 2020, a remaining balance of 110.9 million
shares of the Company's common stock was available for purchase under share
repurchase authorizations by its board of directors. For information on the
impact of COVID-19 on the Company's share repurchase program, see the Executive
Summary section of this MD&A.

Cash dividends paid to shareholders were $.28 per share in the third quarter of
2020, compared with $.27 per share in the third quarter of 2019. The following
table presents the dividend activity for the nine-month periods ended
September 30.
(In millions)                                    2020       2019
Dividends paid in cash                          $ 580      $ 579

Dividends through issuance of treasury shares 22 21 Total dividends to shareholders

$ 602      $ 600



In October 2020, the board of directors declared the fourth quarter cash
dividend of $.28 per share, an increase of 3.7% compared with the same period in
2019. The dividend is payable on December 1, 2020 to shareholders of record at
the close of business on November 18, 2020.

                            Regulatory Restrictions

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its
regulations. Subsequent to the Japan branch conversion to a subsidiary, Aflac
Japan is domiciled in Japan and subject to local regulations. A life insurance
company's statutory capital and surplus is determined according to
rules prescribed by the National Association of Insurance Commissioners (NAIC),
as modified by the insurance department in the insurance company's state of
domicile. Statutory accounting rules are different from U.S. GAAP and are
intended to emphasize policyholder protection and company solvency. Similar laws
apply in New York, the domiciliary jurisdiction of Aflac New York.

The continued long-term growth of the Company's business may require increases
in the statutory capital and surplus of its insurance operations. Aflac's
insurance operations may secure additional statutory capital through various
sources, such as internally generated statutory earnings, reduced dividends paid
to the Parent Company, capital contributions by the Parent Company from funds
generated through debt or equity offerings, or reinsurance transactions. The
NAIC's RBC formula is used by insurance regulators to help identify inadequately
capitalized insurance companies. The RBC formula quantifies insurance risk,
business risk, asset risk and interest rate risk by weighing the types and
mixtures of risks inherent in the insurer's operations. As of September 30,
2020, Aflac's RBC ratio remains high and reflects a strong capital and surplus
position.

The maximum amount of dividends that can be paid to the Parent Company by Aflac,
CAIC and TOIC without prior approval of Nebraska's director of insurance is the
greater of the net income from operations, which excludes net investment gains,
for the previous year determined under statutory accounting principles, or 10%
of statutory capital and surplus as of the previous year-end. Dividends declared
by Aflac during 2020 in excess of $864 million would be considered extraordinary
and require such approval. Similar laws apply in New York, the domiciliary
jurisdiction of Aflac New York.

In addition to limitations and restrictions imposed by U.S. insurance
regulators, the Japan subsidiary is required to meet certain financial criteria
as governed by Japanese corporate law in order to provide dividends to the
Parent Company. Under these criteria, dividend capacity at the Japan subsidiary
is basically defined as total equity excluding common stock, accumulated other
comprehensive income amounts, capital reserves (representing statutorily
required amounts in Japan) but reduced for net after-tax unrealized losses on
available-for-sale securities. These dividend capacity requirements are
generally aligned with the SMR. Japan's FSA maintains its own solvency standard
which is quantified through the SMR. Aflac Japan's SMR is sensitive to interest
rate, credit spread, and foreign exchange rate changes, therefore the Company
continues to evaluate alternatives for reducing this sensitivity, including the
reduction of subsidiary dividends paid to the Parent Company and Parent Company
capital contributions. In the event of a rapid change in market risk conditions
causing SMR to decline, the Company has one senior unsecured revolving credit
facility in the amount of ¥100 billion and a committed reinsurance facility in
the amount of approximately ¥120 billion as a capital contingency plan.
Additionally, the Company could take action to enter into derivatives on
unhedged U.S. dollar-denominated investments
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with foreign currency options or forwards. (See Notes 7 and 8 of the Notes to the Consolidated Financial Statements for additional information.)

The Company has already undertaken various measures to mitigate the sensitivity
of Aflac Japan's SMR. For example, the Company employs policy reserve matching
(PRM) investment strategies, which is a Japan-specific accounting treatment that
reduces SMR interest rate sensitivity since PRM-designated investments are
carried at amortized cost consistent with corresponding liabilities. In order
for a PRM-designated asset to be held at amortized cost, there are certain
criteria that must be maintained. The primary criterion relates to maintaining
the duration of designated assets and liabilities within a specified tolerance
range. If the duration difference is not maintained within the specified range
without rebalancing, then a certain portion of the assets must be re-classified
as available for sale and held at fair value with any associated unrealized gain
or loss recorded in surplus. To rebalance, assets may need to be sold in order
to maintain the duration with the specified range, resulting in realizing a gain
or loss from the sale. For U.S. GAAP, PRM investments are categorized as
available for sale. The Company also uses foreign currency derivatives to hedge
a portion of its U.S. dollar-denominated investments. (See Notes 3, 4 and 8 of
the Notes to the Consolidated Financial Statements in the 2019 Annual Report for
additional information on the Company's investment strategies, hedging
activities, and reinsurance, respectively.)

As of September 30, 2020, Aflac Japan's SMR remains high and reflects a strong
capital and surplus position. The Company is committed to maintaining strong
capital levels throughout the pandemic. For additional information see the
Executive Summary COVID-19 section of this MD&A.

                      Privacy and Cybersecurity Governance

The Company's Board of Directors have 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 regularly communicate 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 13 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.

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                         CRITICAL ACCOUNTING ESTIMATES
The Company prepares its financial statements in accordance with U.S. GAAP.
These principles are established primarily by the FASB. In this MD&A, references
to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards
Codification™ (ASC). The preparation of financial statements in conformity with
U.S. GAAP requires the Company to make estimates based on currently available
information when recording transactions resulting from business operations. The
estimates that the Company deems to be most critical to an understanding of
Aflac's results of operations and financial condition are those related to the
valuation of investments and derivatives, DAC, liabilities for future policy
benefits and unpaid policy claims, and income taxes. The preparation and
evaluation of these critical accounting estimates involve the use of various
assumptions developed from management's analyses and judgments. The application
of these critical accounting estimates determines the values at which 94% of the
Company's assets and 81% of its liabilities are reported as of September 30,
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.

As of September 30, 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.

On September 29, 2020, the U.S. Treasury and Internal Revenue Service issued
Final and Proposed Regulations. Under the guidance of these regulations, the
Company will recognize 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. As a result, adjusted earnings benefited in the
current period from a lower effective tax rate, and 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 and the
effects of the income tax benefit during the period ended September 30, 2020,
see Note 9 of the Notes to the Consolidated Financial Statements presented in
this report.

There have been no changes in the items the Company has identified as critical
accounting estimates during the nine months ended September 30, 2020, with the
exception of the recognition of lifetime credit losses required in accordance
with the adoption of ASC 326 - Financial Instruments - Credit Losses and, as
noted above, the Company's refined valuation model for its private placements
and the recognition of a $1.4 billion income tax benefit as a result of the
issuance of Final and Proposed Regulations by the U.S. Treasury and Internal
Revenue Service. See Note 3 of the Notes to the Consolidated Financial
Statements for further information on the Company's current expected credit loss
estimation methodology. For additional information, see the Critical Accounting
Estimates section of MD&A included in the 2019 Annual Report.
New Accounting Pronouncements
For information on new accounting pronouncements and the impact, if any, on the
Company's financial position or results of operations, see Note 1 of the Notes
to the Consolidated Financial Statements.

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