Equibles

8-K

Aflac Inc (AFL)

8-K 2022-08-01 For: 2022-08-01
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Added on April 11, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 1, 2022

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Aflac Incorporated

_________________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Georgia 001-07434 58-1167100
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1932 Wynnton Road Columbus Georgia 31999
(Address of principal executive offices) (Zip Code)

706.323.3431

_________________________________________________________________________________________________________________________________________________________

(Registrant’s telephone number, including area code)

_________________________________________________________________________________________________________________________________________________________

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.10 Par Value AFL New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02 Results of Operations and Financial Condition.

Aflac Incorporated (the "Company") is furnishing its press release dated August 1, 2022 in which it reported its 2022 second quarter results herein as Exhibit 99.1 to this report. The Company is also furnishing its second quarter supplemental earnings materials as Exhibit 99.2 to this report.

On August 1, 2022, the Company posted to its investor relations website at investors.aflac.com a video presentation by Max Brodén, the Company's Executive Vice President and Chief Financial Officer, discussing the Company's 2022 second quarter earnings. The Company is furnishing a transcript of Mr. Brodén's comments and a copy of the slides referenced in the presentation as Exhibit 99.3 and Exhibit 99.4, respectively, to this report.

In accordance with General Instruction B.2 of Form 8-K, the information included or incorporated in this report (Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number Exhibit Title or Description
99.1 Press release of Aflac Incorporated dated August 1, 2022
99.2 Financial Analyst Briefing Supplement for Second Quarter 2022
99.3 Transcript of comments in video presentation by Max Brodén, Executive Vice President and Chief Financial Officer of Aflac Incorporated.
99.4 Slides referenced in video presentation by Max Brodén, Executive Vice President and Chief Financial Officer of Aflac Incorporated.
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Aflac Incorporated
August 1, 2022 /s/ June Howard
(June Howard)
Senior Vice President, Financial Services
Chief Accounting Officer

2

Document

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News Release

FOR IMMEDIATE RELEASE

Aflac Incorporated Announces Second Quarter Results,

Reports Second Quarter Net Earnings of $1.4 Billion,

Declares Third Quarter Cash Dividend

COLUMBUS, Ga. - August 1, 2022 - Aflac Incorporated (NYSE: AFL) today reported its second quarter results.

Total revenues were $5.4 billion in the second quarter of 2022, compared with $5.6 billion in the second quarter of 2021. Net earnings were $1.4 billion, or $2.16 per diluted share, compared with $1.1 billion, or $1.62 per diluted share a year ago.

Net earnings in the second quarter of 2022 included net investment gains of $564 million, or $0.88 per diluted share, compared with net investment gains of $89 million, or $0.13 per diluted share a year ago. The net investment gains were driven by net gains from certain derivatives and foreign currency activities of $618 million and net gains from sales and redemptions of $115 million, both driven by foreign exchange. These gains were partially offset by an increase in the allowance associated with the company's estimate of current expected credit losses (CECL) and impairments of $34 million. These net investment gains included a decrease of $135 million in the fair value of equity securities.

Adjusted earnings* in the second quarter were $939 million, compared with $1.1 billion in the second quarter of 2021, reflecting a decrease of 13.1%. Adjusted earnings per diluted share* decreased 8.2% to $1.46 in the quarter. It included variable investment income from alternative investments, which was $0.06 per share above return expectations. Adjusted earnings per diluted share excluded adjusted net investment gains* of $0.88 per share. The weaker yen/dollar exchange rate impacted adjusted earnings per share by $0.09.

The average yen/dollar exchange rate in the second quarter of 2022 was 129.39, or 15.4% weaker than the average rate of 109.48 in the second quarter of 2021. For the first six months, the average exchange rate was 122.79, or 12.2% weaker than the rate of 107.79 a year ago.

Total investments and cash at the end of June 2022 were $121.4 billion, compared with $146.7 billion at June 30, 2021. In the second quarter, Aflac Incorporated deployed $650 million in capital to repurchase 11.2 million of its common shares. At the end of June 2022, the company had 36.6 million remaining shares authorized for repurchase.

Shareholders’ equity was $26.4 billion, or $41.59 per share, at June 30, 2022, compared with $33.7 billion, or $50.20 per share, at June 30, 2021. Shareholders’ equity at the end of the second quarter included a net unrealized gain on investment securities and derivatives of $2.9 billion, compared with a net unrealized gain of $10.0 billion at June 30, 2021. Shareholders’ equity at the end of the second quarter also included an unrealized foreign currency translation loss of $3.3 billion, compared with an unrealized foreign currency translation loss of $1.7 billion at June 30, 2021. The annualized return on average shareholders’ equity in the second quarter was 19.9%.

For the first six months of 2022, total revenues were down 6.7% to $10.7 billion, compared with $11.4 billion in the first half of 2021. Net earnings were $2.4 billion, or $3.73 per diluted share, compared with $2.4 billion, or $3.49 per diluted share, for the first six months of 2021. Adjusted earnings for the first half of 2022 were $1.9 billion, or $2.88 per diluted share, compared with $2.1 billion, or $3.11 per diluted share, in 2021. Excluding the negative impact of $0.15 per share from the weaker yen/dollar exchange rate, adjusted earnings per diluted share decreased 2.9% to $3.02 for the first six months of 2022.

Shareholders’ equity excluding AOCI (or adjusted book value*) was $26.9 billion, or $42.45 per share at June 30, 2022, compared with $25.7 billion, or $38.27 per share, at June 30, 2021. The annualized adjusted return on equity excluding foreign currency impact* in the second quarter was 14.9%.

AFLAC JAPAN

In yen terms, Aflac Japan's net earned premiums were ¥313.2 billion for the quarter, or 4.2% lower than a year ago, mainly due to limited pay products reaching paid-up status and constrained sales from the impact of pandemic conditions. Adjusted net investment income increased 8.4% to ¥94.0 billion, mainly due to higher floating rate income as well as the impact of a weaker yen on the dollar-denominated investment income. Total adjusted revenues in yen declined 1.6% to ¥408.3 billion. Pretax adjusted earnings in yen for the quarter increased 1.6% on a reported basis to ¥111.7 billion, due to higher reserve releases and adjusted net investment income. Pretax adjusted earnings decreased 7.0% on a currency-neutral basis. The pretax adjusted profit margin for the Japan segment increased to 27.4%, compared with 26.5% a year ago.

For the first six months, net earned premiums in yen were ¥629.6 billion, or 4.3% lower than a year ago. Adjusted net investment income increased 7.3% to ¥173.0 billion. Total adjusted revenues in yen were down 2.0% to ¥804.9 billion. Pretax adjusted earnings were ¥211.9 billion, or 4.0% higher than a year ago.

In dollar terms, net earned premiums decreased 19.0% to $2.4 billion in the second quarter. Adjusted net investment income decreased 8.7% to $723 million. Total adjusted revenues declined by 16.8% to $3.2 billion. Pretax adjusted earnings declined 14.3% to $860 million.

For the first six months, net earned premiums in dollars were $5.1 billion, or 15.8% lower than a year ago. Adjusted net investment income decreased 6.3% to $1.4 billion. Total adjusted revenues were down 14.0% to $6.6 billion. Pretax adjusted earnings were $1.7 billion, or 8.9% lower than a year ago.

For the quarter, total new annualized premium sales (sales) decreased 6.4% to ¥12.7 billion, or $98 million, reflecting the January 2021 launch of a new medical product and continued weakness in sales recovery, in part constrained by pandemic conditions. For the first six months, total new sales decreased 10.7% to ¥24.7 billion, or $201 million.

AFLAC U.S.

Aflac U.S. net earned premiums declined 1.0% to $1.4 billion in the second quarter, impacted by lower year-to-date persistency. Adjusted net investment income increased 2.1% to $193 million. Total adjusted revenues were up 0.1% to $1.6 billion. Pretax adjusted earnings were $349 million, 15.5% lower than a year ago, which was driven by higher incurred benefits and elevated expenses reflecting, in part, platform and growth investments. The pretax adjusted profit margin for the U.S. segment was 21.4%, compared with 25.4% a year ago.

For the first six months, net earned premiums declined 0.8% to $2.8 billion. Adjusted net investment income increased 3.0% to $377 million. Total adjusted revenues were up 0.4% to $3.3 billion. Pretax adjusted earnings were $674 million, or 21.5% lower than a year ago.

Aflac U.S. sales increased 15.6% in the quarter to $305 million, reflecting continued investment in growth initiatives as well as productivity gains. For the first half of the year, total new sales increased 17.2% to $604 million.

CORPORATE AND OTHER

For the quarter, total adjusted revenues decreased 16.0% to $42 million. Pretax adjusted earnings were a loss of $75 million, compared with a loss of $76 million a year ago. These results reflect higher adjusted net investment income from higher interest rates offset by lower amortized hedge income and the impact of federal tax credit investments as tax benefits are recognized in a corresponding lower income tax expense. These results also reflect the impact of foreign currency on total net earned premiums and the corresponding benefits.

For the first six months, total adjusted revenues decreased 12.8% to $116 million. Pretax adjusted earnings were a loss of $120 million, compared with a loss of $102 million a year ago.

DIVIDEND

The board of directors declared the third quarter dividend of $0.40 per share, payable on September 1, 2022 to shareholders of record at the close of business on August 24, 2022.

OUTLOOK

Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: "The company generated solid earnings for the first six months, supported in part by the continuation of low benefit ratios associated with pandemic conditions and better-than-expected returns from alternative investments, despite the weakening yen. We continue to remain cautiously optimistic as our efforts focus on growth and efficiency initiatives amid this evolving pandemic backdrop.

"Looking at our operations in Japan, persistency remained strong in the second quarter, but sales were constrained as we continued to operate in evolving pandemic conditions. This impacted our ability to meet face-to-face with customers, which continues to be key to a recovery in sales. Within this context, we continue to expect stronger sales in the second half of the year assuming that those conditions subside, productivity continues to improve at Japan Post, and we execute on our product introduction and refreshment plans.

"In the U.S., I am pleased with the continued momentum in our core voluntary business and contribution from newly acquired growth platforms of dental, vision, and group benefits. We continue to work toward reinforcing our position and generating stronger sales for the year, while we keep an eye on potential headwinds.

"As always, we are committed to prudent liquidity and capital management. We continue to generate strong investment results while remaining in a defensive position as we monitor evolving economic conditions. In addition, we have taken proactive steps in recent years to defend cash flow and deployable capital against a weakening yen. We treasure our 39-year track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we remain in the market repurchasing shares with a tactical approach, focused on integrating the growth investments we have made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership."

*See Non-U.S. GAAP Financial Measures section for an explanation of foreign exchange and its impact on the financial statements and definitions of the non-U.S. GAAP financial measures used in this earnings release, as well as a reconciliation of such non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measures.

ABOUT AFLAC INCORPORATED

Aflac Incorporated (NYSE: AFL) is a Fortune 500 company helping provide protection to more than 50 million people through its subsidiaries in Japan and the U.S., paying cash fast when policyholders get sick or injured. For more than six decades, insurance policies of Aflac Incorporated's subsidiaries have given policyholders the opportunity to focus on recovery, not financial stress. In the U.S., Aflac is the number one provider of supplemental health insurance products1. Aflac Life Insurance Japan is the leading provider of medical and cancer insurance in Japan, where it insures 1 in 4 households. In 2021, Aflac Incorporated was proud to be included as one of the World's Most Ethical Companies by Ethisphere for the 16th consecutive year. Also in 2021, the company was included in the Dow Jones Sustainability North America Index and became a signatory of the Principles for Responsible Investment (PRI). In 2022, Aflac Incorporated was included on Fortune's list of World's Most Admired Companies for the 21st time and Bloomberg's Gender-Equality Index for the third consecutive year. To find out how to get help with expenses health insurance doesn't cover, get to know us at aflac.com or aflac.com/español. Investors may learn more about Aflac Incorporated and its commitment to ESG and social responsibility at investors.aflac.com under "Sustainability."

1 LIMRA 2021 U.S. Supplemental Health Insurance Total Market Report

A copy of Aflac’s Financial Analysts Briefing (FAB) supplement for the quarter can be found on the “Investors” page at aflac.com.

Aflac Incorporated will webcast its quarterly conference call via the “Investors” page of aflac.com at 8:00 a.m. (ET) on Tuesday, August 2, 2022.

Note: Tables within this document may not foot due to rounding.

AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2022 2021 % Change
Total revenues $ 5,400 $ 5,564 (2.9) %
Benefits and claims, net 2,298 2,653 (13.4)
Total acquisition and operating expenses 1,401 1,538 (8.9)
Earnings before income taxes 1,701 1,373 23.9
Income taxes 313 268
Net earnings $ 1,388 $ 1,105 25.6 %
Net earnings per share – basic $ 2.17 $ 1.63 33.1 %
Net earnings per share – diluted 2.16 1.62 33.3
Shares used to compute earnings per share (000):
Basic 640,707 678,050 (5.5) %
Diluted 643,243 680,920 (5.5)
Dividends paid per share $ 0.40 $ 0.33 21.2 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
--- --- --- --- --- --- ---
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2022 2021 % Change
Total revenues $ 10,672 $ 11,433 (6.7) %
Benefits and claims, net 4,785 5,387 (11.2)
Total acquisition and operating expenses 2,910 3,069 (5.2)
Earnings before income taxes 2,977 2,977 —
Income taxes 557 579
Net earnings $ 2,420 $ 2,398 0.9 %
Net earnings per share – basic $ 3.75 $ 3.51 6.8 %
Net earnings per share – diluted 3.73 3.49 6.9
Shares used to compute earnings per share (000):
Basic 645,205 683,464 (5.6) %
Diluted 648,010 686,400 (5.6)
Dividends paid per share $ 0.80 $ 0.66 21.2 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
--- --- --- --- --- --- ---
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
JUNE 30, 2022 2021 % Change
Assets:
Total investments and cash $ 121,415 $ 146,709 (17.2) %
Deferred policy acquisition costs 8,458 9,810 (13.8)
Other assets 5,756 4,973 15.7
Total assets $ 135,629 $ 161,492 (16.0) %
Liabilities and shareholders’ equity:
Policy liabilities $ 90,618 $ 108,286 (16.3) %
Notes payable and lease obligations 7,416 8,121 (8.7)
Other liabilities 11,208 11,350 (1.3)
Shareholders’ equity 26,387 33,735 (21.8)
Total liabilities and shareholders’ equity $ 135,629 $ 161,492 (16.0) %
Shares outstanding at end of period (000) 634,526 671,990 (5.6) %

NON-U.S. GAAP FINANCIAL MEASURES

This document includes references to the Company’s financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations.

Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company’s business is conducted in yen and never converted into dollars but translated into dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

The company defines the non-U.S. GAAP financial measures included in this earnings release as follows:

•Adjusted earnings are adjusted revenues less benefits and adjusted expenses. Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S. GAAP total revenues excluding adjusted net investment gains and losses. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of these financial measures is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The most comparable U.S. GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively.

•Adjusted earnings excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding diluted shares for the period presented. The Company considers adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact important because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside management’s control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact are net earnings and net earnings per share, respectively.

•Adjusted return on equity is adjusted earnings divided by average shareholders’ equity, excluding accumulated other comprehensive income (AOCI). Management uses adjusted return on equity to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The Company considers adjusted return on equity important as it excludes components of AOCI, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity is return on average equity (ROE) as determined using net earnings and average total shareholders’ equity.

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

•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 Corporate and other. These amortized hedge costs/ income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the term of the hedge. The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/ income.

•Adjusted book value is the U.S. GAAP book value (representing total shareholders’ equity), less AOCI as recorded on the U.S. GAAP balance sheet. Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value and adjusted book value per common share important as they exclude AOCI, which fluctuates due to market movements that are outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.

•Adjusted book value including unrealized foreign currency translation gains and losses is adjusted book value plus unrealized foreign currency translation gains and losses. Adjusted book value including unrealized foreign currency translation gains and losses per common share is adjusted book value plus unrealized foreign currency translation gains and losses at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value including unrealized foreign currency translation gains and losses, and its related per share financial measure, important as they exclude certain components of AOCI, which fluctuate due to market movements that are outside management's control; however, it includes the impact of foreign currency as a result of the significance of Aflac’s Japan operation. The most comparable U.S. GAAP financial measures for adjusted book value including unrealized foreign currency translation gains and losses and adjusted book value including unrealized foreign currency translation gains and losses per common share are total book value and total book value per common share, respectively.

•Adjusted net investment income is net investment income adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, and ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are reclassified from net investment gains and losses to net investment income. The Company considers adjusted net investment income important because it provides a more comprehensive understanding of the costs and income associated with the Company’s investments and related hedging strategies. The most comparable U.S. GAAP financial measure for adjusted net investment income is net investment income.

•Adjusted net investment gains and losses are net investment gains and losses adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest cash flows from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense. The most comparable U.S. GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses.

RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2022 2021 % Change
Net earnings $ 1,388 $ 1,105 25.6 %
Items impacting net earnings:
Adjusted net investment (gains) losses (567) (85)
Other and non-recurring (income) loss — 53
Income tax (benefit) expense on items excluded <br>from adjusted earnings 119 7
Adjusted earnings 939 1,080 (13.1) %
Current period foreign currency impact 1 57 N/A
Adjusted earnings excluding current period foreign <br> currency impact 2 $ 996 $ 1,080 (7.8) %
Net earnings per diluted share $ 2.16 $ 1.62 33.3 %
Items impacting net earnings:
Adjusted net investment (gains) losses (0.88) (0.12)
Other and non-recurring (income) loss — 0.08
Income tax (benefit) expense on items excluded <br>from adjusted earnings 0.19 0.01
Adjusted earnings per diluted share 1.46 1.59 (8.2) %
Current period foreign currency impact 1 0.09 N/A
Adjusted earnings per diluted share excluding <br> current period foreign currency impact 2 $ 1.55 $ 1.59 (2.5) %

1    Prior period foreign currency impact reflected as “N/A” to isolate change for current period only.

2    Amounts 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.

RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2022 2021 % Change
Net earnings $ 2,420 $ 2,398 0.9 %
Items impacting net earnings:
Adjusted net investment (gains) losses (701) (388)
Other and non-recurring (income) loss — 59
Income tax (benefit) expense on items excluded <br>from adjusted earnings 147 69
Adjusted earnings 1,866 2,138 (12.7) %
Current period foreign currency impact 1 94 N/A
Adjusted earnings excluding current period foreign <br> currency impact 2 $ 1,960 $ 2,138 (8.3) %
Net earnings per diluted share $ 3.73 $ 3.49 6.9 %
Items impacting net earnings:
Adjusted net investment (gains) losses (1.08) (0.57)
Other and non-recurring (income) loss — 0.09
Income tax (benefit) expense on items excluded <br>from adjusted earnings 0.23 0.10
Adjusted earnings per diluted share 2.88 3.11 (7.4) %
Current period foreign currency impact 1 0.15 N/A
Adjusted earnings per diluted share excluding <br> current period foreign currency impact 2 $ 3.02 $ 3.11 (2.9) %

1 Prior period foreign currency impact reflected as “N/A” to isolate change for current period only.

2    Amounts 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.

RECONCILIATION OF NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS) LOSSES
(UNAUDITED – IN MILLIONS)
THREE MONTHS ENDED JUNE 30, 2022 2021 % Change
Net investment (gains) losses $ (564) $ (89) 533.7 %
Items impacting net investment (gains) losses:
Amortized hedge costs (30) (17)
Amortized hedge income 14 16
Net interest cash flows from derivatives associated<br><br>with certain investment strategies (1) (9)
Interest rate component of the change in fair value of foreign<br><br>currency swaps on notes payable1 12 14
Adjusted net investment (gains) losses $ (567) $ (85) 567.1 %

1    Amounts are included with interest expenses that are a component of adjusted expenses.

RECONCILIATION OF NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT INCOME
(UNAUDITED – IN MILLIONS)
THREE MONTHS ENDED JUNE 30, 2022 2021 % Change
Net investment income $ 937 $ 993 (5.6) %
Items impacting net investment income:
Amortized hedge costs (30) (17)
Amortized hedge income 14 16
Net interest cash flows from derivatives associated<br><br>with certain investment strategies (1) (9)
Adjusted net investment income $ 920 $ 983 (6.4) %
RECONCILIATION OF NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS) LOSSES
--- --- --- --- --- --- ---
(UNAUDITED – IN MILLIONS)
SIX MONTHS ENDED JUNE 30, 2022 2021 % Change
Net investment (gains) losses $ (686) $ (396) 73.2 %
Items impacting net investment (gains) losses:
Amortized hedge costs (55) (36)
Amortized hedge income 25 33
Net interest cash flows from derivatives associated<br><br>with certain investment strategies (10) (17)
Interest rate component of the change in fair value of foreign<br><br>currency swaps on notes payable1 25 27
Adjusted net investment (gains) losses $ (701) $ (388) 80.7 %

1    Amounts are included with interest expenses that are a component of adjusted expenses.

RECONCILIATION OF NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT INCOME
(UNAUDITED – IN MILLIONS)
SIX MONTHS ENDED JUNE 30, 2022 2021 % Change
Net investment income $ 1,840 $ 1,918 (4.1) %
Items impacting net investment income:
Amortized hedge costs (55) (36)
Amortized hedge income 25 33
Net interest cash flows from derivatives associated<br><br>with certain investment strategies (10) (17)
Adjusted net investment income $ 1,800 $ 1,898 (5.2) %
RECONCILIATION OF U.S. GAAP BOOK VALUE TO ADJUSTED BOOK VALUE
--- --- --- --- --- --- ---
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
JUNE 30, 2022 2021 % Change
U.S. GAAP book value $ 26,387 $ 33,735
Less:
Unrealized foreign currency translation gains (losses) (3,289) (1,661)
Unrealized gains (losses) on securities and derivatives 2,901 9,959
Pension liability adjustment (160) (279)
Total AOCI (548) 8,019
Adjusted book value $ 26,935 $ 25,716
Add:
Unrealized foreign currency translation gains (losses) (3,289) (1,661)
Adjusted book value including unrealized foreign currency translation gains (losses) $ 23,646 $ 24,055
Number of outstanding shares at end of period (000) 634,526 671,990
U.S. GAAP book value per common share $ 41.59 $ 50.20 (17.2) %
Less:
Unrealized foreign currency translation gains (losses) per common share (5.18) (2.47)
Unrealized gains (losses) on securities and derivatives per common share 4.57 14.82
Pension liability adjustment per common share (0.25) (0.42)
Total AOCI per common share (0.86) 11.93
Adjusted book value per common share $ 42.45 $ 38.27 10.9 %
Add:
Unrealized foreign currency translation gains (losses) per common share (5.18) (2.47)
Adjusted book value including unrealized foreign currency translation gains (losses) per common share $ 37.27 $ 35.80 4.1 %
RECONCILIATION OF U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED ROE
--- --- --- --- ---
(EXCLUDING IMPACT OF FOREIGN CURRENCY)
THREE MONTHS ENDED JUNE 30, 2022 2021
U.S. GAAP ROE - Net earnings1 19.9 % 13.4 %
Impact of excluding unrealized foreign currency translation gains (losses) (2.2) (0.9)
Impact of excluding unrealized gains (losses) on securities and derivatives 3.4 4.9
Impact of excluding pension liability adjustment (0.1) (0.1)
Impact of excluding AOCI 1.0 3.9
U.S. GAAP ROE - less AOCI 20.8 17.3
Differences between adjusted earnings and net earnings2 (6.7) (0.4)
Adjusted ROE - reported 14.1 16.9
Less: Impact of foreign currency3 (0.9) N/A
Adjusted ROE, excluding impact of foreign currency 14.9 16.9

1    U.S. GAAP ROE is calculated by dividing net earnings (annualized) by average shareholders' equity.

2    See separate reconciliation of net income to adjusted earnings.

3    Impact of foreign currency is calculated by restating all foreign currency components of the income statement to the weighted average foreign currency exchange rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure.

RECONCILIATION OF U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED ROE
(EXCLUDING IMPACT OF FOREIGN CURRENCY)
SIX MONTHS ENDED JUNE 30, 2022 2021
U.S. GAAP ROE - Net earnings1 16.2 % 14.3 %
Impact of excluding unrealized foreign currency translation gains (losses) (1.6) (0.8)
Impact of excluding unrealized gains (losses) on securities and derivatives 3.8 5.7
Impact of excluding pension liability adjustment (0.1) (0.2)
Impact of excluding AOCI 2.1 4.8
U.S. GAAP ROE - less AOCI 18.3 19.1
Differences between adjusted earnings and net earnings2 (4.2) (2.1)
Adjusted ROE - reported 14.1 17.0
Less: Impact of foreign currency3 (0.7) N/A
Adjusted ROE, excluding impact of foreign currency 14.8 17.0

1    U.S. GAAP ROE is calculated by dividing net earnings (annualized) by average shareholders' equity.

2    See separate reconciliation of net income to adjusted earnings.

3    Impact of foreign currency is calculated by restating all foreign currency components of the income statement to the weighted average foreign currency exchange rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure.

EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2022 Including<br>Currency<br>Changes Excluding<br><br>Currency<br><br>Changes2
Net earned premiums3 (13.3) % (3.4) %
Adjusted net investment income4 (6.4) % (1.4)
Total benefits and expenses (10.6) (0.4)
Adjusted earnings (13.1) (7.8)
Adjusted earnings per diluted share (8.2) (2.5)

1Refer to previously defined adjusted earnings and adjusted earnings per diluted share.

2Amounts excluding currency changes were determined using the same foreign currency exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes.

3Net of reinsurance

4Refer to previously defined adjusted net investment income.

EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2022 Including<br>Currency<br>Changes Excluding<br><br>Currency<br><br>Changes2
Net earned premiums3 (11.1) % (3.3) %
Adjusted net investment income4 (5.2) % (1.1)
Total benefits and expenses (8.4) (0.3)
Adjusted earnings (12.7) (8.3)
Adjusted earnings per diluted share (7.4) (2.9)

1Refer to previously defined adjusted earnings and adjusted earnings per diluted share.

2Amounts excluding currency changes were determined using the same foreign currency exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes.

3Net of reinsurance

4Refer to previously defined adjusted net investment income.

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. The company desires to take advantage of these provisions. This document 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 “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target,” "outlook" or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.

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

•difficult conditions in global capital markets and the economy, including those caused by COVID-19

•defaults and credit downgrades of investments

•global fluctuations in interest rates and exposure to significant interest rate risk

•concentration of business in Japan

•limited availability of acceptable yen-denominated investments

•foreign currency fluctuations in the yen/dollar exchange rate

•differing judgments applied to investment valuations

•significant valuation judgments in determination of expected credit losses recorded on the Company's investments

•decreases in the Company's financial strength or debt ratings

•decline in creditworthiness of other financial institutions

•concentration of the Company's investments in any particular single-issuer or sector

•the effects of COVID-19 and its variants (both known and emerging), and any resulting economic effects and government interventions, on the Company's business and financial results

•the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners

•deviations in actual experience from pricing and reserving assumptions

•ability to continue to develop and implement improvements in information technology systems

•interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security,

confidentiality or privacy of sensitive data residing on such systems

•subsidiaries' ability to pay dividends to the Parent Company

•inherent limitations to risk management policies and procedures

•operational risks of third party vendors

•tax rates applicable to the Company may change

•failure to comply with restrictions on policyholder privacy and information security

•extensive regulation and changes in law or regulation by governmental authorities

•competitive environment and ability to anticipate and respond to market trends

•catastrophic events, including, but not limited to, as a result of climate change, epidemics, pandemics (such as COVID-19), tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, terrorism or other acts of violence, and damage incidental to such events

•ability to protect the Aflac brand and the Company's reputation

•ability to effectively manage key executive succession

•changes in accounting standards

•level and outcome of litigation

•allegations or determinations of worker misclassification in the United States

Analyst and investor contact - David A. Young, 706.596.3264 or 800.235.2667 or dyoung@aflac.com

Media contact - Ines Gutzmer, 762.207.7601 or igutzmer@aflac.com

Document

FINAL                    8/1/2022

aflaclogoa01a01a01a33.jpg

Financial Analysts Briefing Supplement

Second Quarter 2022

This document is a statistical supplement to the Financial Analysts Briefing book. Throughout the presentation, amounts presented may not foot due to rounding. As you review the supplement, please note the non-U.S. GAAP financial measures and definitions found at the back of this document.

Aflac Incorporated Page
Share Data 2
Summary of Adjusted Results by Business Segment 3
Statements of Earnings 4
Analysis of Net Earnings and Net Earnings Per Share 5
Balance Sheets 6
Quarterly Financial Results 7
Quarterly Book Value Per Share 8
Return on Equity 9
Adjusted Earnings Per Share Excluding Current Period Foreign Currency Impact 10
Investment Results 11,12,13
Long-Term Debt Data 14
Ratings 15
Aflac U.S.
Statement of Pretax Adjusted Earnings 16
Balance Sheets 17
Quarterly Pretax Adjusted Earnings 18
Operating Ratios 19
Sales 20,21
Aflac Japan
Statement of Pretax Adjusted Earnings 22,23
Balance Sheets 24,25
Quarterly Pretax Adjusted Earnings 26
Operating Ratios 27
Sales 28,29,30
Yen/Dollar Exchange Rates 31
Corporate and Other
Statement of Pretax Adjusted Earnings 32
Non-U.S. GAAP Financial Measures 33

For more information, contact:

David Young

Phone. 706.596.3264

Aflacir@aflac.com

investors.aflac.com

Aflac Incorporated and Subsidiaries
Share Data
(In Thousands)
Beginning Shares Issued Shares Purchased Ending QTD Weighted Avg. Shares YTD Weighted Avg. Shares
Shares Stk. Bon. Stk. Opt. Treas. Misc. Shares Avg. Dilutive Avg. Avg. Dilutive Avg.
Period Outstanding & DRP & Misc. Shares Purch.(1) Outstanding Shares Shares Diluted Shares Shares Diluted
2020 1 726,793 468 1,613 9,984 508 718,382 724,366 3,146 727,512 724,366 3,146 727,512
2 718,382 648 100 5,209 13 713,908 717,889 1,875 719,764 721,128 2,510 723,638
3 713,908 468 134 10,916 20 703,574 711,698 2,095 713,793 717,962 2,372 720,333
4 703,574 437 235 11,791 1 692,454 701,016 2,843 703,859 713,702 2,490 716,192
2021 1 692,454 387 1,684 13,440 378 680,707 688,938 3,002 691,940 688,938 3,002 691,940
2 680,707 330 130 9,174 3 671,990 678,050 2,871 680,921 683,464 2,936 686,400
3 671,990 250 188 9,572 39 662,817 668,762 3,163 671,925 678,509 3,012 681,521
4 662,817 249 224 11,140 18 652,132 659,100 3,412 662,512 673,617 3,112 676,729
2022 1 652,132 259 1,308 8,007 343 645,349 649,753 3,074 652,827 649,753 3,074 652,827
2 645,349 269 101 11,185 8 634,526 640,707 2,536 643,243 645,205 2,805 648,010

(1) Includes previously owned shares used to purchase options (swapped shares) and/or shares purchased for deferred compensation program

Aflac Incorporated and Subsidiaries
Summary of Adjusted Results by Business Segment
(In Millions, except per-share data and where noted)
3 Months Ended June 30, 6 Months Ended June 30,
% %
2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Aflac Japan 3,054 $ 3,208 $ 3,261 $ 3,263 $ 3,754 $ 1,004 $ 860 (14.3) $ 1,891 $ 1,722 (8.9)
Aflac U.S. 1,245 1,285 1,272 1,268 1,478 413 349 (15.5) 859 674 (21.5)
Corporate and other (1) (214) (139) (72) (115) (298) (76) (75) (102) (120)
Pretax adjusted earnings 4,086 4,354 4,461 4,416 4,934 1,341 1,134 (15.4) 2,648 2,276 (14.0)
Income taxes (1) 1,370 1,129 1,147 864 915 262 194 (26.0) 510 409 (19.8)
Adjusted earnings (2) 2,716 3,226 3,314 3,552 4,019 1,080 939 (13.1) 2,138 1,866 (12.7)
Reconciling items:
Adjusted net investment gains (losses) — (297) (15) (229) 462 85 567 388 701
Other and non-recurring income (loss) (3) (69) (75) (1) (28) (73) (53) — (59) —
Income tax benefit (expense) on items excluded from adjusted earnings 24 83 3 72 (83) (7) (119) (69) (147)
Tax reform adjustment (4) 1,933 (18) 4 — — — — — —
Tax valuation allowance release (5) — — — 1,411 — — — — —
Net earnings 4,604 $ 2,920 $ 3,304 $ 4,778 $ 4,325 $ 1,105 $ 1,388 25.6 $ 2,398 $ 2,420 .9
Effective Tax rate (14.6) % 26.7 % 25.7 % (14.9) % 18.7 % 19.5 % 18.4 % 19.4 % 18.7 %
Earnings per share of common stock:
Net earnings (basic) 5.81 $ 3.79 $ 4.45 $ 6.69 $ 6.42 $ 1.63 $ 2.17 33.1 $ 3.51 $ 3.75 6.8
Net earnings (diluted) 5.77 3.77 4.43 6.67 6.39 1.62 2.16 33.3 3.49 3.73 6.9
Adjusted earnings (basic) (2) 3.43 $ 4.20 $ 4.46 $ 4.98 $ 5.97 $ 1.59 $ 1.47 (7.5) $ 3.13 $ 2.89 (7.7)
Adjusted earnings (diluted) (2) 3.40 4.16 4.44 4.96 5.94 1.59 1.46 (8.2) 3.11 2.88 (7.4)
(1) The change in value of federal historic rehabilitation and solar investments in partnerships of 31 and 30 for the three-month periods and 42 and 30 for the six-month periods ended June 30, 2022, and 2021, respectively is included as a reduction to net investment income. Tax credits on these investments of 28 and 12 for the three-month period and 44 and 25 for the six-month periods ended June 30, 2022, and 2021, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.
(2) See non-U.S. GAAP financial measures for definition of adjusted earnings.
(3) Foreign currency gains and losses for all periods have been reclassified from Other and non-recurring income (loss) to Net investment gains and losses.
(4) The impact of Tax Reform was adjusted in 2018 for return-to-provision adjustments, various amended returns filed by the Company, and final true-ups of deferred tax liabilities. Further impacts were recorded in 2019 as a result of additional guidance released by the IRS.
(5) Tax benefit recognized in 2020 represents the release of valuation allowances on deferred tax benefits related to foreign tax credits.

All values are in US Dollars.

Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings - U.S. GAAP
(In Millions, except per-share data)
Years Ended December 31, 3 Months Ended June 30, 6 Months Ended June 30,
% %
2017 2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Revenues:
Net earned premiums
Gross premiums $ 18,875 $ 19,018 $ 19,122 $ 18,955 $ 17,857 $ 4,490 $ 3,877 $ 9,141 $ 8,091
Assumed (ceded) (345) (341) (342) (333) (210) (49) (27) (108) (63)
Total net earned premiums 18,531 18,677 18,780 18,622 17,647 4,441 3,849 (13.3) 9,034 8,028 (11.1)
Net investment income 3,220 3,442 3,578 3,638 3,818 993 937 (5.6) 1,918 1,840 (4.1)
Net investment gains (losses) (1) (151) (430) (135) (270) 468 89 564 396 686
Other income (1) 67 69 84 157 173 41 50 85 118
Total revenues 21,667 21,758 22,307 22,147 22,106 5,564 5,400 (2.9) 11,433 10,672 (6.7)
Benefits and Expenses:
Benefits and claims, net
Incurred claims -direct 8,853 9,121 9,279 9,364 8,947 2,167 1,994 4,562 4,336
Incurred claims -assumed (ceded) (446) (421) (372) (296) (148) (37) (18) (81) (42)
Increase in FPB (2)-direct 3,628 3,167 2,952 2,707 1,759 518 318 897 482
Increase in FPB (2)-assumed (ceded) 146 133 83 21 18 5 4 9 9
Total net benefits and claims 12,181 12,000 11,942 11,796 10,576 2,653 2,298 (13.4) 5,387 4,785 (11.2)
Acquisition and operating expenses:
Amortization of DAC (3) 1,132 1,245 1,282 1,214 1,170 280 268 592 590
Insurance commissions 1,316 1,320 1,321 1,316 1,256 315 279 641 579
Insurance expenses 2,780 2,988 3,089 3,420 3,544 881 799 1,712 1,629
Interest expense 240 222 228 242 238 62 55 124 112
Other expenses — — — — — — — — —
Total acquisition and operating expenses 5,468 5,775 5,920 6,192 6,208 1,538 1,401 (8.9) 3,069 2,910 (5.2)
Total benefits and expenses 17,649 17,775 17,862 17,988 16,784 4,191 3,699 (11.7) 8,456 7,695 (9.0)
Pretax earnings 4,018 3,983 4,445 4,159 5,322 1,373 1,701 2,977 2,977
Income tax expense (benefit) (586) 1,063 1,141 (619) 997 268 313 579 557
Net earnings $ 4,604 $ 2,920 $ 3,304 $ 4,778 $ 4,325 $ 1,105 $ 1,388 25.6 $ 2,398 $ 2,420 .9
(1) Foreign currency gains and losses for all periods have been reclassified from Other income to Net investment gains and losses for consistency with current period presentation.
(2) Future policy benefits
(3) Deferred acquisition costs
Aflac Incorporated and Subsidiaries
--- --- --- --- --- --- --- --- --- --- ---
Analysis of Net Earnings and Net Earnings Per Diluted Share
(In Millions, except for per-share data)
Other and Foreign
Net Other and Non- Foreign Net Net Non-Recurring Currency
Net Investment Recurring Currency Earnings Investment Items Impact
Period Earnings Gains (Losses) (1) Items (1)(3)(4) Impact (2) Per Share Gains (Losses) (1) Per Share (1)(3)(4) Per Share (2)
2017 4,604 — 1,888 (41) 5.77 — 2.37 (.05)
2018 2,920 (230) (76) 28 3.77 (.30) (.09) .04
2019 3,304 (13) 3 15 4.43 (.02) .01 .02
2020 4,778 (181) 1,407 31 6.67 (.25) 1.96 .04
2021 4,325 365 (59) (38) 6.39 .54 (.09) (.06)
2020 1 566 (322) 5 9 .78 (.44) .01 .01
2 805 (116) — 5 1.12 (.16) — .01
3 2,456 45 1,418 3 3.44 .06 1.99 —
4 951 212 (15) 14 1.35 .30 (.02) .02
2021 1 1,293 240 (5) 13 1.87 .35 (.01) .02
2 1,105 67 (42) (6) 1.62 .10 (.06) (.01)
3 888 (136) (7) (14) 1.32 (.20) (.01) (.02)
4 1,039 194 (5) (30) 1.57 .29 (.01) (.05)
2022 1 1,032 106 (1) (37) 1.58 .16 — (.06)
2 1,388 448 — (57) 2.16 .70 — (.09)
(1) Items are presented net of tax.
(2) See non-U.S. GAAP financial measures for definition of adjusted earnings excluding current period foreign currency impact
(3) Foreign currency gains and losses and amortized hedge costs/income for all periods have been reclassified from Other income to Net investment gains and losses for consistency with current period presentation.
(4 )Tax benefit recognized in the third quarter of 2020 represents the release of valuation allowances on deferred tax benefits related to foreign tax credits.
Aflac Incorporated and Subsidiaries
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Consolidated Balance Sheets
(In Millions, except per-share data)
December 31, June 30,
Assets: 2017 2018 2019 2020 2021 2021 2022
Investments and cash:
Securities available for sale:
Fixed maturity securities available for sale, at fair value $ 78,804 $ 78,429 $ 86,950 $ 101,286 $ 94,206 $ 97,791 $ 75,611
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value 5,509 4,466 4,312 4,596 4,490 4,493 3,820
Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses 31,430 30,318 30,085 24,464 22,000 22,891 18,507
Equity securities, at fair value 1,023 987 802 1,283 1,603 1,475 1,149
Commercial mortgage and other loans, net of allowance for credit losses 3,002 6,919 9,569 10,554 11,786 11,332 13,053
Other investments 400 787 1,477 2,429 3,842 3,258 4,102
Cash and cash equivalents 3,491 4,337 4,896 5,141 5,051 5,469 5,173
Total investments and cash 123,659 126,243 138,091 149,753 142,978 146,709 121,415
Receivables, net of allowance for credit losses 827 851 828 796 693 788 687
Accrued investment income 769 773 772 780 737 761 714
Deferred policy acquisition costs 9,505 9,875 10,128 10,441 9,525 9,810 8,458
Property and equipment, net 434 443 581 601 538 563 512
Other assets, net of allowance for credit losses (1) 2,023 2,221 2,368 2,715 3,071 2,861 3,843
Total assets $ 137,217 $ 140,406 $ 152,768 $ 165,086 $ 157,542 $ 161,492 $ 135,629
Liabilities and Shareholders' Equity:
Liabilities:
Total policy liabilities $ 99,147 $ 103,188 $ 106,554 $ 114,391 $ 105,072 $ 108,286 $ 90,618
Notes payable 5,289 5,778 6,569 7,899 7,956 8,121 7,416
Income taxes, primarily deferred 4,745 4,020 5,370 4,661 4,339 4,451 2,275
Other liabilities 3,438 3,958 5,316 4,576 6,922 6,899 8,933
Total liabilities 112,619 116,944 123,809 131,527 124,289 127,757 109,242
Shareholders' equity:
Common stock 135 135 135 135 135 135 135
Additional paid-in capital 2,052 2,177 2,313 2,410 2,529 2,465 2,589
Retained earnings 29,895 31,788 34,291 37,984 41,381 40,162 43,547
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) (1,750) (1,847) (1,623) (1,109) (2,013) (1,661) (3,289)
Unrealized gains (losses) on fixed maturity securities 5,964 4,234 8,548 10,361 9,602 9,992 2,930
Unrealized gains (losses) on derivatives (23) (24) (33) (34) (30) (33) (29)
Pension liability adjustment (163) (212) (277) (284) (166) (279) (160)
Treasury stock (11,512) (12,789) (14,395) (15,904) (18,185) (17,046) (19,336)
Total shareholders' equity 24,598 23,462 28,959 33,559 33,253 33,735 26,387
Total liabilities & shareholders' equity $ 137,217 $ 140,406 $ 152,768 $ 165,086 $ 157,542 $ 161,492 $ 135,629

(1) Includes goodwill of $269 million in 2022, $268 in 2021, $269 in 2020, $140 million in 2019, $67 million in 2018 and $67 million in 2017

Aflac Incorporated and Subsidiaries
Quarterly Financial Results
(Dollars In Millions, except per-share data)
Total
Net Net Benefits Acquisitions Total Net EPS Adj. EPS (1)
Earned Inv. Total & & Pretax Net Adjusted
Period Premiums Income Revenues Claims Adj. Exp. Earn. Earn. Earn. (1) Basic Dil. Basic Dil.
2017 18,531 3,220 21,667 12,181 5,468 4,018 4,604 2,716 5.81 5.77 3.43 3.40
2018 18,677 3,442 21,758 12,000 5,775 3,983 2,920 3,226 3.79 3.77 4.20 4.16
2019 18,780 3,578 22,307 11,942 5,920 4,445 3,304 3,314 4.45 4.43 4.46 4.44
2020 18,622 3,638 22,147 11,796 6,192 4,159 4,778 3,552 6.69 6.67 4.98 4.96
2021 17,647 3,818 22,106 10,576 6,208 5,322 4,325 4,019 6.42 6.39 5.97 5.94
2020 1 4,681 904 5,162 2,939 1,503 720 566 882 .78 .78 1.22 1.21
2 4,664 870 5,407 2,897 1,440 1,070 805 921 1.12 1.12 1.28 1.28
3 4,623 896 5,665 2,985 1,527 1,153 2,456 994 3.45 3.44 1.40 1.39
4 4,653 968 5,913 2,974 1,723 1,216 951 755 1.36 1.35 1.08 1.07
2021 1 4,593 925 5,869 2,735 1,531 1,603 1,293 1,058 1.88 1.87 1.54 1.53
2 4,441 993 5,564 2,653 1,538 1,373 1,105 1,080 1.63 1.62 1.59 1.59
3 4,372 991 5,237 2,609 1,515 1,113 888 1,031 1.33 1.32 1.54 1.53
4 4,242 910 5,433 2,581 1,619 1,233 1,039 850 1.58 1.57 1.29 1.28
2022 1 4,178 903 5,272 2,487 1,509 1,276 1,032 927 1.59 1.58 1.43 1.42
2 3,849 937 5,400 2,298 1,401 1,701 1,388 939 2.17 2.16 1.47 1.46

(1) See non-U.S. GAAP financial measures for definition of adjusted earnings.

Aflac Incorporated and Subsidiaries
Quarterly Book Value Per Share
(Dollars In Millions, except per-share data)
Adjusted BV
Adjusted BV Per Share Incl
Equity AOCI Adjusted BV Per Share Incl Foreign Currency
BV Per BV Per Adjusted BV Per Share Foreign Currency Translation G/(L)
Period Share Share Per Share (1) % Change Translation G/(L)(1) % Change
2017 31.50 5.16 26.34 19.7% 24.10 23.3%
2018 31.06 2.85 28.22 7.1% 25.77 6.9%
2019 39.84 9.10 30.74 8.9% 28.51 10.6%
2020 48.46 12.90 35.56 15.7% 33.96 19.1%
2021 50.99 11.34 39.65 11.5% 36.57 7.7%
2020 1 36.75 5.83 30.92 7.0% 28.77 8.9%
2 41.21 9.45 31.75 7.5% 29.70 7.7%
3 46.16 11.25 34.91 15.7% 33.08 17.4%
4 48.46 12.90 35.56 15.7% 33.96 19.1%
2021 1 47.16 10.00 37.16 20.2% 34.70 20.6%
2 50.20 11.93 38.27 20.5% 35.80 20.5%
3 50.62 11.56 39.06 11.9% 36.41 10.1%
4 50.99 11.34 39.65 11.5% 36.57 7.7%
2022 1 45.75 4.82 40.93 10.1% 37.08 6.9%
2 41.59 (0.86) 42.45 10.9% 37.27 4.1%

(1) See non-U.S. GAAP financial measures for definition of adjusted book value and adjusted book value including unrealized foreign currency translation gains and losses.

Aflac Incorporated and Subsidiaries
Return on Equity
Year ended December 31, 3 months ended June 30, 6 months ended June 30,
2017 2018 2019 2020 2021 2021 2022 2021 2022
U.S. GAAP ROE (1) - Net earnings 20.4 % 12.2 % 12.6 % 15.3 % 12.9 % 13.4 % 19.9 % 14.3 % 16.2 %
Impact of excluding unrealized foreign currency translation gains (losses) (2.0) (1.0) (1.0) (0.9) (0.8) (0.9) (2.2) (0.8) (1.6)
Impact of excluding unrealized gains (losses) on securities and derivatives 5.8 3.0 3.6 6.2 5.1 4.9 3.4 5.7 3.8
Impact of excluding pension liability adjustment (0.2) (0.1) (0.1) (0.2) (0.1) (0.1) (0.1) (0.2) (0.1)
Impact of excluding AOCI 3.6 1.8 2.5 5.1 4.2 3.9 1.0 4.8 2.1
U.S. GAAP ROE - less AOCI 24.0 13.9 15.1 20.3 17.1 17.3 20.8 19.1 18.3
Differences between adjusted earnings and net earnings (2) (9.8) 1.5 0.0 (5.2) (1.2) (0.4) (6.7) (2.1) (4.2)
Adjusted ROE - reported (3) 14.2 15.4 15.2 15.1 15.9 16.9 14.1 17.0 14.1
(1) U.S. GAAP ROE is calculated by dividing net earnings (annualized) by average shareholders' equity.
(2) See separate reconciliation of net income to adjusted earnings.
(3) See non-U.S. GAAP financial measures for definition of adjusted return on equity
Aflac Incorporated and Subsidiaries
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Adjusted Earnings Per Share Excluding Current Period Foreign Currency Impact (1)
(Diluted Basis)
Change
QTD YTD Excluding Excluding
Foreign Foreign Foreign Foreign
Adjusted Currency Currency Currency Currency
Period EPS(1) Growth Impact(1) Impact(1) Impact(1) Impact
2017 $ 3.40 4.6 % N/A (.05) $ 3.45 6.2 %
2018 $ 4.16 22.4 % N/A .04 $ 4.13 21.5 %
2019 $ 4.44 6.7 % N/A .02 $ 4.42 6.3 %
2020 $ 4.96 11.7 % N/A .04 $ 4.92 10.8 %
2021 $ 5.94 19.8 % N/A (.06) $ 6.00 21.0 %
2020 1 $ 1.21 8.0 % .01 .01 $ 1.20 7.1 %
2 1.28 13.3 .01 .02 1.27 12.4
3 1.39 19.8 — .02 1.39 19.8
4 1.07 3.9 .02 .04 1.05 1.9
$ 4.96 11.7 % $ 4.92 10.8 %
2021 1 $ 1.53 26.4 % .02 .02 $ 1.51 24.8 %
2 1.59 24.2 (.01) .01 1.59 24.2
3 1.53 10.1 (.02) (.01) 1.56 12.2
4 1.28 19.6 (.05) (.06) 1.33 24.3
$ 5.94 19.8 % $ 6.00 21.0 %
2022 1 $ 1.42 (7.2) % (.06) (.06) $ 1.48 (3.3) %
2 1.46 (8.2) (.09) — 1.55 (2.5)
$ 2.88 (7.4) % $ 3.02 (2.9) %
(1) See non-U.S.GAAP financial measures for definition of adjusted earnings and adjusted earnings excluding current period foreign currency impact
Aflac Incorporated and Subsidiaries
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Composition of Invested Assets
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Fixed Maturity Securities(1) $ 106,562 $ 107,174 $ 109,456 $ 116,056 $ 107,369 $ 111,353 $ 93,053
Commercial mortgage and other loans, net of allowance for credit losses (1)
Transitional Real Estate (floating rate) 1,235 4,378 5,450 5,231 5,246 5,216 6,059
Middle Market Loans (floating rate) 859 1,478 2,412 3,635 4,601 4,262 4,979
Commercial Mortgage Loans 908 1,063 1,707 1,688 1,874 1,850 1,798
Total Commercial mortgage and other loans, net of allowance for credit losses(1) 3,002 6,919 9,569 10,554 11,721 11,328 12,836
Equity Securities, at FV through net earnings 846 987 802 1,283 1,603 1,475 1,149
Alternatives(2) 113 370 551 919 1,703 1,227 2,008
Total Portfolio $ 110,523 $ 115,450 $ 120,378 $ 128,812 $ 122,396 $ 125,383 $ 109,046
Unrealized Gains (Losses) on Invested Assets
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Fixed Maturity Securities
Available For Sale - Gross Gains $ 9,985 $ 7,733 $ 12,266 $ 14,771 $ 13,566 $ 14,071 $ 7,326
Available For Sale - Gross Losses (804) (1,694) (375) (481) (239) (249) (2,441)
Total Available For Sale 9,181 6,039 11,891 14,290 13,327 13,822 4,885
Held to Maturity - Gross Gains 6,651 6,470 7,519 5,935 4,869 5,263 3,025
Held to Maturity - Gross Losses (9) (66) (10) — — — —
Total Held to Maturity $ 6,642 $ 6,404 $ 7,509 $ 5,935 $ 4,869 $ 5,263 $ 3,025
Credit Ratings on Fixed Maturities
(At Amortized Cost)
December 31,
June 30,
Credit Rating 2017 2018 2019 2020 2021 2021 2022
AAA 1.0 % 1.0 % 1.1 % 1.0 % 1.0 % 1.0 % 1.5 %
AA 3.9 3.9 4.3 4.5 5.1 5.0 5.4
A 65.8 67.9 68.6 69.3 68.9 68.6 67.8
BBB 24.0 23.2 23.1 21.9 22.5 22.2 23.0
BB or Lower 5.3 4.0 2.9 3.3 2.5 3.2 2.3
100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
(1) Presented at amortized cost, net of reserves beginning in 2020
(2) Presented at carrying value; includes asset classes such as private equity and real estate managed by Global Investments; excludes Corporate driven activity
Aflac Incorporated and Subsidiaries
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Supplemental Investment Data by Segment
3 Months Ended 6 Months Ended
December 31, June 30, June 30,
2017 2018 2019 2020 2021 2021 2022 2021 2022
Aflac Japan:
¥ 11,017,560 ¥ 11,442,444 ¥ 11,784,586 ¥ 11,936,087 ¥ 12,405,531 ¥ 12,315,861 ¥ 12,788,885 ¥ 12,315,861 ¥ 12,788,885
2.31 % 2.33 % 2.33 % 2.38 % 2.72 % 2.83 % 2.97 % 2.65 % 2.75 %
2.56 % 2.61 % 2.64 % 2.59 % 2.60 % 2.61 % 2.74 % 2.61 % 2.74 %
¥ 1,078,586 ¥ 1,298,376 ¥ 1,003,885 ¥ 714,124 ¥ 952,038 ¥ 184,717 ¥ 335,615 ¥ 524,107 ¥ 492,313
1.98 % 3.06 % 3.83 % 3.75 % 3.50 % 4.05 % 3.59 % 3.18 % 3.69 %
Aflac U.S.:
$ 13,764 $ 13,798 $ 14,036 $ 14,848 $ 15,841 $ 15,452 $ 16,209 $ 15,452 $ 16,209
5.07 % 5.16 % 5.70 % 4.90 % 4.87 % 4.94 % 4.79 % 4.83 % 4.79 %
5.52 % 5.55 % 5.40 % 5.18 % 4.94 % 5.07 % 5.01 % 5.07 % 5.01 %
$ 1,434 $ 2,155 $ 1,835 $ 1,050 $ 2,130 $ 544 $ 466 $ 919 $ 988
4.49 % 4.55 % 4.51 % 3.04 % 3.41 % 3.63 % 4.10 % 3.47 % 4.37 %
Hedge Costs/Income Metrics (5)(6)
3 Months Ended 6 Months Ended
December 31, June 30, June 30,
2017 2018 2019 2020 2021 2021 2022 2021 2022
Aflac Japan:
FX hedged notional at end of period (in billions)(7) $ 9.3 $ 9.9 $ 8.8 $ 6.0 $ 6.4 $ 6.4 $ 4.5 $ 6.4 $ 4.5
Weighted average remaining tenor (in months)(8) 27.7 21.4 8.5 13.0 2.6 6.6 6.8 6.6 6.8
Amortized hedge costs for period (in millions) $ (228) $ (236) $ (257) $ (206) $ (76) $ (17) $ (30) $ (36) $ (55)
Corporate and Other (Parent Company):
FX hedged notional at end of period (in billions)(7) $ — $ 2.5 $ 4.9 $ 5.0 $ 5.0 $ 5.0 $ 5.0 $ 5.0 $ 5.0
Weighted average remaining tenor (in months)(8) — 16.1 13.7 12.1 11.5 12.6 13.0 12.6 13.0
Amortized hedge income (costs) for period (in millions) $ — $ 36 $ 89 $ 97 $ 57 $ 16 $ 14 $ 33 $ 25
(1) Invested assets, including cash and short term investments, are stated at amortized cost; except for equities, which are at fair value.
(2) Net of investment expenses and amortized hedge costs, year-to-date number reflected on a quarterly average basis
(3) Includes fixed maturity securities, commercial mortgage and other loans, equity securities, and excludes alternative investments in limited partnerships
(4) Reported on a gross yield basis; excludes investment expenses, external management fees, and amortized hedge costs
(5) See non-U.S. GAAP financial measures for definition of amortized hedge costs/income. Further, the metrics in this table are split to show the hedging of the market value of a portion of the investments in Japan Segment’s " Program" in the "Japan Segment Portfolio Allocation by Currency" table on page 13 of this supplement as well as the corporate hedging activities at Aflac Inc.
(6) Aflac Japan and the Parent Company utilize foreign currency forwards and options to hedge foreign currency exchange rate risk. The hedge cost/income on the table above reflects our FX forward protection of the hedged portfolio, and hedge costs on one sided options used as caps, and on tail-risk put options. The table does not include the notional amount and weighted average remaining tenor for these options. At June 30, 2022, Aflac Japan caps and put options notional amount was 13.5 billion with a weighted average remaining tenor of 4.9 months. At June 30, 2022, the Parent Company caps notional amount was 2.0 billion with a weighted average remaining tenor of 7.9 months.
(7) Notional is reported net of any offsetting positions within Aflac Japan or the Parent Company, respectively.
(8) Tenor based on period reporting date to settlement date

All values are in US Dollars.

Aflac Incorporated and Subsidiaries
December 31, 2021 June 30, 2022
Amortized<br>Cost (2) Fair <br>Value Amortized<br>Cost (2) Fair <br>Value
JGB $ 50,186 $ 57,862 $ 41,620 $ 45,262
Other 23,661 27,684 20,309 21,840
Total yen denominated 73,847 85,546 61,929 67,102
Program 28,913 31,946 27,286 29,399
Other 2,236 3,328 2,137 2,915
US dollar denominated 31,149 35,274 29,423 32,314
Total $ 104,996 $ 120,820 $ 91,352 $ 99,416
June 30, 2022
(In millions) Amortized Cost (2) % of <br>Total
Government and agencies $ 42,836 46.0 %
Municipalities 2,557 2.7
Mortgage- and asset-backed securities 1,915 2.1
Public utilities 7,348 7.9
Electric 5,966 6.4
Natural Gas 242 .3
Other 554 .6
Utility/Energy 586 .6
Sovereign and Supranational 1,267 1.4
Banks/financial institutions 9,172 9.8
Banking 5,422 5.8
Insurance 1,757 1.9
Other 1,993 2.1
Other corporate 27,958 30.1
Basic Industry 2,448 2.6
Capital Goods 3,172 3.4
Communications 2,830 3.0
Consumer Cyclical 2,371 2.5
Consumer Non-Cyclical 6,224 6.8
Energy 2,749 3.0
Other 1,312 1.4
Technology 3,722 4.0
Transportation 3,130 3.4
Total fixed maturity securities $ 93,053 100.0 %
(1) The entire U.S. segment investment portfolio is U.S. dollar denominated.
(2) Net of reserves

All values are in US Dollars.

Aflac Incorporated and Subsidiaries
Long-Term Debt Data
Adjusted Leverage Ratios
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Notes payable $ 5,289 $ 5,778 $ 6,569 $ 7,899 $ 7,956 $ 8,121 $ 7,416
50% of subordinated debentures and perpetual bonds (263) (268) (408) (432) (389) (404) (327)
Pre-funding of debt maturities — — (348) — — — —
Adjusted debt (1) 5,026 5,510 5,814 7,467 7,568 7,717 7,089
Total Shareholders' Equity 24,598 23,462 28,959 33,559 33,253 33,735 26,387
Accumulated other comprehensive (income) loss:
Unrealized foreign currency translation (gains) losses 1,750 1,847 1,623 1,109 2,013 1,661 3,289
Unrealized (gains) losses on fixed maturity securities (5,964) (4,234) (8,548) (10,361) (9,602) (9,992) (2,930)
Unrealized (gains) losses on derivatives 23 24 33 34 30 33 29
Pension liability adjustment 163 212 277 284 166 279 160
Adjusted book value (1) 20,570 21,311 22,344 24,625 25,860 25,716 26,935
Adjusted capitalization ex-AOCI (1) (2) $ 25,859 $ 27,089 $ 28,565 $ 32,524 $ 33,816 $ 33,837 $ 34,351
Adjusted debt to adjusted capitalization ex-AOCI 19.4 % 20.3 % 20.4 % 23.0 % 22.4 % 22.8 % 20.6 %
Adjusted capitalization (1) (3) $ 23,946 $ 25,030 $ 26,665 $ 31,131 $ 31,637 $ 31,897 $ 30,902
Adjusted debt to adjusted capitalization 21.0 % 22.0 % 21.8 % 24.0 % 23.9 % 24.2 % 22.9 % Debt Maturities(4)
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
(In Millions)
June 30, 2022
≤ 1 year 1 > 5 years 5 > 10 years 10 > 20 years 20 years + Total
Senior Notes $ — $ 2,466 $ 2,026 $ 1,086 $ 1,096 $ 6,674
Subordinated debt — — — — 658 658
Total $ — $ 2,466 $ 2,026 $ 1,086 $ 1,754 $ 7,332

(1) See non-U.S. GAAP financial measures for definition of: adjusted debt; adjusted book value; adjusted debt, including 50% of subordinated debentures and perpetual bonds; and adjusted book value, including unrealized foreign currency translation gains and losses and pension liability adjustment

(2) Adjusted capitalization ex-AOCI is the sum of adjusted debt, including 50% of subordinated debentures and perpetual bonds, plus adjusted book value

(3)Adjusted capitalization is sum of adjusted debt, including 50% of subordinated debentures and perpetual bonds, plus adjusted book value, including unrealized foreign currency translation gains and losses and pension liability adjustment

(4) Debt maturity amounts do not include discounts, premiums, deferred charges, or capital lease obligations.

Aflac Incorporated and Subsidiaries

Insurer Financial Strength Ratings
AM Best Moody's S&P JCR R&I
U.S. Operating Companies
Aflac of Columbus A+ Aa3 A+ AA AA
Aflac of New York A+ _ A+ _ _
Continental American Insurance Company A+ _ _ _ _
Japan Operating Company
Aflac Life Insurance Japan Ltd. A+ Aa3 A+ AA AA
Issuer Credit Ratings
AM Best Moody's S&P JCR R&I
Aflac Incorporated
Long-term Senior Debt a A3 A- A+ A+
Junior Subordinated Debt a- Baa1 BBB _ A-
Aflac of Columbus
Long-term Senior Debt aa _ A+ AA _
Aflac Life Insurance Japan, Ltd.
Long-term Senior Debt aa _ A+ AA _
Subordinated Bonds _ _ _ AA- _
The outlook for all ratings assigned by A.M. Best, S&P, Moody's, JCR and R&I is stable.
Aflac U.S.
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Statements of Pretax Adjusted Earnings
(Before Management Fee)
(In Millions)
Years Ended December 31, 3 Months Ended June 30, 6 Months Ended June 30,
% %
2017 2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Revenues:
Net earned premiums
Gross premiums $ 5,563 $ 5,711 $ 5,818 $ 5,762 $ 5,540 $ 1,388 $ 1,364 $ 2,793 $ 2,748
Assumed (ceded) — (3) (11) (4) 73 20 30 37 60
Total net earned premiums 5,563 5,708 5,808 5,758 5,614 1,408 1,394 (1.0) 2,830 2,807 (.8)
Adjusted net investment income 721 727 720 705 754 189 193 2.1 366 377 3.0
Other income excl. realized foreign
exchange gains (losses) 5 8 22 102 121 30 41 58 83
Total adjusted revenues 6,289 6,443 6,550 6,565 6,489 1,627 1,628 .1 3,254 3,267 .4
Benefits and claims:
Benefits and claims, net
Incurred claims -direct 2,526 2,560 2,611 2,498 2,174 525 566 1,018 1,157
Incurred claims -assumed (ceded) (4) (4) (5) (1) 89 22 30 41 67
Increase in FPB -direct 363 331 268 271 187 66 38 112 32
Increase in FPB -assumed (ceded) — (1) (2) (3) (3) — (1) (1) (1)
Total net benefits and claims 2,885 2,887 2,871 2,765 2,447 613 633 3.3 1,169 1,255 7.4
Adjusted expenses:
Amortization of deferred policy
acquisition costs 502 534 573 570 517 111 131 18.0 250 299 19.6
Insurance commissions 580 585 590 576 550 136 137 .7 275 277 .7
Insurance and other expenses 1,077 1,152 1,244 1,386 1,498 354 378 6.8 701 762 8.7
Total adjusted expenses 2,159 2,271 2,407 2,532 2,564 601 645 1,226 1,337
Total benefits and adjusted expenses 5,044 5,158 5,279 5,297 5,011 1,213 1,278 5.4 2,396 2,593 8.2
Pretax adjusted earnings $ 1,245 $ 1,285 $ 1,272 $ 1,268 $ 1,478 $ 413 $ 349 (15.5) $ 859 $ 674 (21.5)
Aflac U.S.
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Balance Sheets
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Assets:
Investments and cash $ 15,488 $ 14,518 $ 16,141 $ 17,949 $ 18,324 $ 18,184 $ 16,058
Receivables, net of allowance for credit losses 505 568 662 685 595 658 616
Accrued investment income 184 178 174 172 169 172 172
Deferred policy acquisition costs 3,355 3,491 3,544 3,450 3,292 3,309 3,238
Other assets 361 345 424 608 726 712 744
Total assets $ 19,893 $ 19,100 $ 20,945 $ 22,864 $ 23,106 $ 23,033 $ 20,828
Liabilities and Shareholders' Equity:
Future policy benefits $ 8,806 $ 9,137 $ 9,404 $ 9,674 $ 9,865 $ 9,791 $ 9,897
Policy and contract claims 1,700 1,727 1,779 2,010 1,933 1,904 2,010
Other policy liabilities 119 116 111 126 119 142 135
Deferred income taxes 982 (397) 51 235 187 215 (425)
Other liabilities 1,625 1,577 1,803 2,016 2,034 1,945 2,137
Shareholders' equity 6,661 6,939 7,796 8,803 8,968 9,036 7,074
Total liabilities & shareholders' equity $ 19,893 $ 19,100 $ 20,945 $ 22,864 $ 23,106 $ 23,033 $ 20,828
Aflac U.S.
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Quarterly Statements of Pretax Adjusted Earnings and Percentage Changes
(Restated to conform to current classifications)
(Dollars In Millions)
Net Total Total Pretax
Earned % Adjusted % Adjusted % Total % % Adjusted % Adjusted %
Period Premiums Change NII Change Revenues Change Benefits Change Amort. Change Expenses Change Earn. Change
2017 5,563 2.0 721 2.6 6,289 2.0 2,885 .6 502 1.0 2,159 3.3 1,245 3.1
2018 5,708 2.6 727 .8 6,443 2.4 2,887 .1 534 6.4 2,271 5.2 1,285 3.2
2019 5,808 1.8 720 (1.0) 6,550 1.7 2,871 (.6) 573 7.3 2,407 6.0 1,272 (1.0)
2020 5,758 (.9) 705 (2.1) 6,565 .2 2,765 (3.7) 570 (.5) 2,532 5.2 1,268 (.3)
2021 5,614 (2.5) 754 7.0 6,489 (1.2) 2,447 (11.5) 517 (9.3) 2,564 1.3 1,478 16.6
2020 1 1,483 1.5 177 — 1,687 2.9 713 (1.1) 160 .6 648 8.7 326 .9
2 1,458 (.1) 172 (4.4) 1,656 .9 646 (11.7) 134 2.3 584 2.3 426 26.0
3 1,407 (2.6) 175 (4.4) 1,606 (1.5) 679 (4.4) 141 1.4 597 2.1 329 (1.8)
4 1,410 (2.3) 182 1.1 1,617 (1.3) 727 2.5 135 (6.3) 703 7.5 187 (32.0)
2021 1 1,422 (4.1) 176 (.6) 1,628 (3.5) 556 (22.0) 139 (13.1) 626 (3.4) 445 36.5
2 1,408 (3.4) 189 9.9 1,627 (1.8) 613 (5.1) 111 (17.2) 601 2.9 413 (3.1)
3 1,393 (1.0) 191 9.1 1,616 .6 628 (7.5) 123 (12.8) 629 5.4 358 8.8
4 1,391 (1.3) 197 8.2 1,619 .1 649 (10.7) 143 5.9 709 .9 261 39.6
2022 1 1,413 (.6) 184 4.5 1,639 .7 622 11.9 168 20.9 692 10.5 325 (27.0)
2 1,394 (1.0) 193 2.1 1,628 .1 633 3.3 131 18.0 645 7.3 349 (15.5)

Aflac U.S.

Operating Ratios
(Before Management Fee)
12-Mo. Rolling Total Adjusted Combined Pretax
Premium Tot. Ben./ Amort./ Expenses/ Ratio/ Profit
Period Persistency Premium Premium Total Adj. Rev. Total Adj. Rev. Margin
2017 78.4 51.9 9.0 34.3 80.2 19.8
2018 78.7 50.6 9.4 35.2 80.1 19.9
2019 77.7 49.4 9.9 36.7 80.6 19.4
2020 79.3 48.0 9.9 38.6 80.7 19.3
2021 79.6 43.6 9.2 39.5 77.2 22.8
2022 YTD 77.9 44.7 10.7 40.9 79.4 20.6
2020 1 77.6 48.1 10.8 38.4 80.7 19.3
2 78.3 44.3 9.2 35.3 74.3 25.7
3 78.8 48.3 10.0 37.2 79.5 20.5
4 79.3 51.6 9.6 43.5 88.4 11.6
2021 1 80.0 39.1 9.8 38.5 72.6 27.3
2 80.1 43.5 7.9 36.9 74.6 25.4
3 79.9 45.1 8.8 38.9 77.8 22.2
4 79.6 46.7 10.3 43.8 83.9 16.1
2022 1 78.5 44.0 11.9 42.2 80.2 19.8
2 77.9 45.4 9.4 39.6 78.5 21.4

Aflac U.S.

Aflac U.S. Sales Results
(Dollars In Millions)
Annl. New Annl.
Prem. % Prem. %
Period In Force Change Sales Change
2017 6,052 2.6 1,552 4.7
2018 6,231 3.0 1,601 3.2
2019 6,301 1.1 1,580 (1.3)
2020 6,099 (3.2) 1,093 (30.8)
2021 6,003 (1.6) 1,278 16.9
2020 1 6,224 .7 323 (5.2)
2 6,079 (1.7) 161 (55.6)
3 5,969 (2.9) 221 (35.7)
4 6,099 (3.2) 388 (27.2)
2021 1 6,027 (3.2) 251 (22.1)
2 5,988 (1.5) 264 64.1
3 5,929 (.7) 299 35.0
4 6,003 (1.6) 464 19.6
2022 1 5,942 (1.4) 299 19.0
2 5,926 (1.0) 305 15.6

Aflac U.S.

Aflac U.S. Product Mix
(New Annualized Premium Sales, Dollars in Millions)
% of % of % of Critical % of Hospital % of Dental/ % of
Period Disability Total Life Total Accident Total Care(1) Total Indemnity Total Vision Total Total
2017 356 22.9 78 5.0 456 29.4 354 22.8 229 14.8 79 5.1 1,552
2018 363 22.7 88 5.5 468 29.2 354 22.1 253 15.8 75 4.7 1,601
2019 355 22.5 97 6.1 450 28.5 346 21.9 263 16.6 69 4.4 1,580
2020 243 22.3 80 7.3 285 26.1 242 22.2 197 18.0 45 4.1 1,093
2021 296 23.1 114 9.0 321 25.1 273 21.3 209 16.4 65 5.1 1,278
2020 1 73 22.6 25 7.7 88 27.3 68 21.1 55 16.9 14 4.4 323
2 38 23.9 14 8.6 41 25.7 33 20.6 28 17.1 7 4.1 161
3 54 24.2 16 7.1 58 26.4 45 20.5 37 16.8 11 5.0 221
4 79 20.4 26 6.6 98 25.2 95 24.5 77 20.0 13 3.3 388
2021 1 58 23.1 17 6.7 66 26.3 57 22.6 42 16.7 11 4.6 251
2 60 22.7 19 7.3 72 27.2 56 21.0 43 16.4 14 5.4 264
3 79 26.2 27 9.2 76 25.5 57 19.1 45 15.1 15 4.9 299
4 100 21.4 51 11.0 107 23.1 104 22.3 79 17.0 24 5.2 464
2022 1 70 23.3 24 7.9 75 25.3 63 21.2 50 16.7 17 5.6 299
2 77 25.2 26 8.3 75 24.6 63 20.6 45 14.9 19 6.4 305 Aflac U.S. Sales Force Data
--- --- --- --- --- --- ---
Average Productivity
Weekly (Production/
Recruited Agents Producer Avg. Weekly
Period Career Broker Total Equivalents Producers)
2017 16,817 3,073 19,890 8,808 176,183
2018 15,774 3,380 19,154 8,531 187,720
2019 15,227 3,603 18,830 8,184 193,120
2020 11,826 1,861 13,687 5,918 184,706
2021 10,641 5,445 16,086 5,993 213,235
2020 1 3,436 494 3,930 7,411 43,517
2 2,190 381 2,571 4,252 37,814
3 3,136 486 3,622 5,485 40,367
4 3,064 500 3,564 6,523 59,533
2021 1 2,890 1,063 3,953 5,643 44,530
2 2,754 1,355 4,109 5,925 44,540
3 2,502 1,615 4,117 5,926 50,448
4 2,495 1,412 3,907 6,477 71,723
2022 1 1,987 455 2,442 6,061 49,322
2 2,937 391 3,328 6,067 50,264

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

Aflac Japan

Aflac Japan

Statements of Pretax Adjusted Earnings
(Before Management Fee)
(In Millions)
3 Months Ended June 30, 6 Months Ended June 30,
% %
2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Revenues:
Net earned premiums
Gross premiums 1,493,299 ¥ 1,468,894 ¥ 1,450,586 ¥ 1,409,134 ¥ 1,350,945 ¥ 339,604 ¥ 325,375 ¥ 683,309 ¥ 654,169
Assumed (ceded) (62,873) (60,198) (57,974) (55,926) (50,864) (12,533) (12,189) (25,643) (24,553)
Total net earned premiums 1,430,426 1,408,697 1,392,612 1,353,208 1,300,082 327,071 313,186 (4.2) 657,666 629,615 (4.3)
Net investment income (1)
Yen denominated 145,114 141,575 142,473 138,397 138,513 34,511 34,154 (1.0) 69,241 68,973 (.4)
US denominated 131,168 149,801 157,717 167,541 202,905 53,985 63,292 17.2 96,008 110,461 15.1
Net investment income 276,282 291,377 300,191 305,938 341,419 88,497 97,447 10.1 165,250 179,435 8.6
Amortized hedge costs on foreign investments (2) (24,528) (25,858) (28,938) (22,816) (8,391) (1,816) (3,444) 89.6 (3,948) (6,389) 61.8
Adjusted net investment income 251,754 265,519 271,253 283,122 333,028 86,681 94,004 8.4 161,302 173,046 7.3
Other income excl. realized foreign
currency gains (losses) 4,640 4,636 4,869 4,497 4,512 1,073 1,141 2,363 2,214
Total adjusted revenues 1,686,820 1,678,852 1,668,734 1,640,827 1,637,621 414,825 408,331 (1.6) 821,331 804,876 (2.0)
Benefits and claims:
Benefits and claims, net
Incurred claims -direct 710,251 724,556 727,491 734,471 743,610 180,004 185,927 381,738 389,280
Incurred claims -assumed (ceded) (55,691) (51,892) (45,657) (37,806) (31,801) (7,846) (8,531) (15,773) (16,808)
Increase in FPB -direct 366,376 313,343 292,444 260,200 172,525 49,460 36,178 84,532 55,847
Increase in FPB -assumed (ceded) (1,557) (2,000) (6,497) (11,377) (11,132) (2,827) (2,459) (5,742) (5,021)
Total net benefits and claims 1,019,378 984,007 967,782 945,487 873,202 218,791 211,115 (3.5) 444,756 423,298 (4.8)
Adjusted expenses:
Amortization of deferred policy
acquisition costs 70,670 78,459 77,286 68,818 71,657 18,541 17,747 (4.3) 36,766 35,629 (3.1)
Insurance commissions 82,495 81,045 79,661 79,036 77,449 19,596 18,352 (6.3) 39,354 37,002 (6.0)
Insurance and other expenses 170,636 181,139 189,203 199,606 203,169 47,951 49,404 3.0 96,701 97,080 .4
Total adjusted expenses 323,801 340,643 346,150 347,460 352,275 86,088 85,502 172,820 169,711
Total benefits and adjusted expenses 1,343,180 1,324,651 1,313,932 1,292,947 1,225,477 304,879 296,617 (2.7) 617,576 593,008 (4.0)
Pretax adjusted earnings 343,640 ¥ 354,201 ¥ 354,802 ¥ 347,881 ¥ 412,144 ¥ 109,947 ¥ 111,714 1.6 ¥ 203,755 ¥ 211,868 4.0
(1) Includes the net interest cash flows from derivatives associated with certain investment strategies
(2) See non-U.S. GAAP financial measures for the definition of amortized hedge costs/income

All values are in US Dollars.

Aflac Japan

Statements of Pretax Adjusted Earnings
(Before Management Fee)
(In Millions)
3 Months Ended June 30, 6 Months Ended June 30,
% %
2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Revenues:
Net earned premiums
Gross premiums 13,312 $ 13,307 $ 13,304 $ 13,193 $ 12,317 $ 3,102 $ 2,513 $ 6,349 $ 5,343
Assumed (ceded) (561) (546) (532) (524) (463) (114) (94) (238) (200)
Total net earned premiums 12,752 12,762 12,772 12,670 11,853 2,987 2,419 (19.0) 6,111 5,143 (15.8)
Net investment income (1)
Yen denominated 1,294 1,283 1,307 1,296 1,262 315 264 (16.2) 643 563 (12.4)
US denominated 1,169 1,356 1,446 1,569 1,845 493 489 (.8) 890 895 .6
Net investment income 2,463 2,639 2,753 2,865 3,107 808 752 (6.9) 1,533 1,458 (4.9)
Amortized hedge costs on foreign investments (2) (228) (236) (257) (206) (76) (17) (30) 76.5 (36) (55) 52.8
Adjusted net investment income 2,235 2,403 2,496 2,659 3,031 792 723 (8.7) 1,497 1,402 (6.3)
Other income excl. realized foreign
currency gains (losses) 41 41 45 42 41 10 9 22 18
Total adjusted revenues 15,028 15,206 15,313 15,371 14,925 3,789 3,151 (16.8) 7,630 6,563 (14.0)
Benefits and claims
Benefits and claims, net
Incurred claims -direct 6,332 6,566 6,671 6,875 6,783 1,644 1,435 3,549 3,185
Incurred claims -assumed (ceded) (497) (471) (419) (354) (290) (72) (66) (147) (137)
Increase in FPB -direct 3,265 2,836 2,684 2,437 1,572 452 280 785 450
Increase in FPB -assumed (ceded) (14) (18) (60) (107) (102) (26) (19) (53) (41)
Total net benefits and claims 9,087 8,913 8,877 8,851 7,963 1,998 1,630 (18.4) 4,134 3,457 (16.4)
Adjusted expenses:
Amortization of deferred policy
acquisition costs 630 710 709 644 653 169 137 (18.9) 341 291 (14.7)
Insurance commissions 736 735 731 740 706 179 142 (20.7) 366 302 (17.5)
Insurance and other expenses 1,521 1,640 1,734 1,873 1,849 438 381 (13.0) 898 791 (11.9)
Total adjusted expenses 2,887 3,085 3,174 3,257 3,208 786 660 1,605 1,384
Total benefits and adjusted expenses 11,974 11,998 12,051 12,108 11,171 2,785 2,290 (17.8) 5,739 4,841 (15.6)
Pretax adjusted earnings 3,054 $ 3,208 $ 3,261 $ 3,263 $ 3,754 $ 1,004 $ 860 (14.3) $ 1,891 $ 1,722 (8.9)
(1) Includes the net interest cash flows from derivatives associated with certain investment strategies
(2) See non-U.S. GAAP financial measures for definition of amortized hedge costs/income

All values are in US Dollars.

Aflac Japan

Balance Sheets
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Assets:
Investments and cash ¥ 11,854,224 ¥ 12,031,549 ¥ 12,847,994 ¥ 13,080,154 ¥ 13,645,902 ¥ 13,531,551 ¥ 13,490,630
Receivables, net of allowance for credit losses 37,692 37,083 28,219 20,782 22,439 24,035 24,522
Accrued investment income 64,439 66,350 65,485 62,722 67,493 64,951 76,644
Deferred policy acquisition costs 695,025 708,638 721,341 723,579 716,984 718,883 713,438
Other assets 276,050 292,335 308,411 320,351 331,449 315,390 414,959
Total assets ¥ 12,927,431 ¥ 13,135,956 ¥ 13,971,450 ¥ 14,207,588 ¥ 14,784,268 ¥ 14,654,809 ¥ 14,720,193
Liabilities and Shareholders' Equity:
Future policy benefits ¥ 8,323,560 ¥ 8,637,152 ¥ 8,924,868 ¥ 9,175,501 ¥ 9,336,894 ¥ 9,254,325 ¥ 9,387,222
Policy and contract claims 304,248 317,043 315,477 328,778 333,900 333,555 333,875
Unearned premiums 659,977 552,419 453,133 361,010 284,045 318,231 252,214
Other policyholders' funds 784,117 793,148 801,588 808,429 812,512 813,566 817,092
Income taxes (prim. deferred) 431,949 510,528 618,901 478,969 467,877 466,294 329,722
Other liabilities 150,143 194,949 357,135 253,219 513,580 551,435 815,899
Shareholders' equity 2,273,438 2,130,718 2,500,349 2,801,682 3,035,460 2,917,402 2,784,170
Total liabilities & shareholders' equity ¥ 12,927,431 ¥ 13,135,956 ¥ 13,971,450 ¥ 14,207,588 ¥ 14,784,268 ¥ 14,654,809 ¥ 14,720,193

Aflac Japan

Balance Sheets
(In Millions)
December 31, June 30,
2017 2018 2019 2020 2021 2021 2022
Assets:
Investments and cash $ 104,905 $ 108,392 $ 117,269 $ 126,378 $ 118,639 $ 122,369 $ 98,702
Receivables, net of allowance for credit losses 334 334 258 201 195 217 179
Accrued investment income 570 598 598 606 587 587 561
Deferred policy acquisition costs 6,150 6,384 6,584 6,991 6,233 6,501 5,220
Other assets 2,443 2,634 2,815 3,095 2,882 2,852 3,036
Total assets $ 114,402 $ 118,342 $ 127,523 $ 137,271 $ 128,536 $ 132,527 $ 107,698
Liabilities and Shareholders' Equity:
Future policy benefits $ 73,661 $ 77,812 $ 81,461 $ 88,652 $ 81,176 $ 83,689 $ 68,680
Policy and contract claims 2,692 2,856 2,879 3,177 2,903 3,016 2,443
Unearned premiums 5,840 4,977 4,136 3,488 2,469 2,878 1,845
Other policyholders' funds 6,939 7,145 7,316 7,811 7,064 7,357 5,978
Income taxes (prim. deferred) 3,823 4,601 5,650 4,630 4,067 4,222 2,370
Other liabilities 1,328 1,756 3,260 2,447 4,465 4,987 5,969
Shareholders' equity 20,119 19,194 22,820 27,068 26,391 26,377 20,412
Total liabilities & shareholders' equity $ 114,402 $ 118,342 $ 127,523 $ 137,271 $ 128,536 $ 132,527 $ 107,698

Aflac Japan

Quarterly Statements of Pretax Adjusted Earnings and Percentage Changes
(Yen In Millions)
Net Total Total Pretax
Earned % Adjusted % Adjusted % Total % % Adjusted % Adjusted %
Period Premiums Change NII Change Revenues Change Benefits Change Amort. Change Expense Change Earn. Change
2017 1,430,426 (2.7) 251,754 (2.0) 1,686,820 (2.5) 1,019,378 (4.5) 70,670 1.2 323,801 .5 343,640 .6
2018 1,408,697 (1.5) 265,519 5.5 1,678,852 (.5) 984,007 (3.5) 78,460 11.0 340,642 5.2 354,201 3.1
2019 1,392,612 (1.1) 271,253 2.2 1,668,734 (.6) 967,782 (1.6) 77,286 (1.5) 346,150 1.6 354,802 .2
2020 1,353,208 (2.8) 283,122 4.4 1,640,827 (1.7) 945,487 (2.3) 68,818 (11.0) 347,459 .4 347,881 (2.0)
2021 1,300,082 (3.9) 333,028 17.6 1,637,621 (.2) 873,202 (7.6) 71,657 4.1 352,275 1.4 412,144 18.5
2020 1 343,054 (2.1) 69,812 4.0 414,045 (1.1) 238,148 (1.7) 18,842 (5.9) 82,939 (2.0) 92,958 1.2
2 339,891 (2.5) 68,036 2.0 409,126 (1.8) 237,328 (1.2) 16,697 (14.3) 81,648 (4.1) 90,150 (1.2)
3 336,488 (3.3) 70,219 (.2) 407,874 (2.8) 240,025 (1.4) 16,001 (16.5) 88,661 2.5 79,188 (11.6)
4 333,775 (3.5) 75,054 11.9 409,782 (1.0) 229,986 (4.9) 17,277 (7.2) 94,211 4.9 85,585 4.2
2021 1 330,595 (3.6) 74,621 6.9 406,505 (1.8) 225,965 (5.1) 18,225 (3.3) 86,732 4.6 93,808 .9
2 327,071 (3.8) 86,681 27.4 414,825 1.4 218,791 (7.8) 18,541 11.0 86,088 5.4 109,947 22.0
3 323,072 (4.0) 84,035 19.7 408,185 .1 213,430 (11.1) 17,011 6.3 87,234 (1.6) 107,521 35.8
4 319,344 (4.3) 87,690 16.8 408,105 (.4) 215,016 (6.5) 17,880 3.5 92,221 (2.1) 100,868 17.9
2022 1 316,429 (4.3) 79,042 5.9 396,545 (2.5) 212,182 (6.1) 17,882 (1.9) 84,208 (2.9) 100,154 6.8
2 313,186 (4.2) 94,004 8.4 408,331 (1.6) 211,115 (3.5) 17,747 (4.3) 85,502 (.7) 111,714 1.6

Aflac Japan

Operating Ratios
(Before Management Fee)
12-Mo. Rolling Tot. Ben./ Tot. Adj. Combined Pretax
Premium Tot. Ben./ Premiums Amort./ Expenses/ Ratio/ Profit
Period Persistency(1) Premium (3rd sector) Premium Total Adj. Rev. Total Adj. Rev. Margin
2017 94.9 71.3 60.5 4.9 19.2 79.6 20.4
2018 94.1 69.9 59.2 5.6 20.3 78.9 21.1
2019 94.4 69.5 59.3 5.5 20.7 78.7 21.3
2020 95.1 69.9 59.7 5.1 21.2 78.8 21.2
2021 94.3 67.2 56.6 5.5 21.5 74.8 25.2
2022 YTD 94.3 67.2 56.9 5.7 21.1 73.7 26.3
2020 1 94.5 69.4 59.0 5.5 20.0 77.5 22.5
2 94.8 69.8 59.6 4.9 20.0 78.0 22.0
3 95.0 71.3 61.7 4.8 21.7 80.6 19.4
4 95.1 68.9 58.6 5.2 23.0 79.1 20.9
2021 1 95.0 68.4 58.0 5.5 21.3 76.9 23.1
2 94.7 66.9 56.5 5.7 20.8 73.5 26.5
3 94.5 66.1 55.0 5.3 21.4 73.7 26.3
4 94.3 67.3 57.0 5.6 22.6 75.3 24.7
2022 1 94.3 67.1 56.4 5.7 21.2 74.7 25.3
2 94.3 67.4 57.5 5.7 20.9 72.6 27.4

(1) Premium persistency presented on a 12-month rolling basis for all periods, rather than year to date

Aflac Japan

Aflac Japan Sales Results
(Yen In Millions, unless otherwise noted)
Annl. Third Sector
Prem. New Annl. Total
In Force % Prem. % New Annual. %
Period (Billions) Change Sales Change Premium Sales Change
2017 1,552.2 (3.4) 87,417 4.1 94,851 (16.6)
2018 1,527.1 (1.6) 88,813 1.6 95,894 1.1
2019 1,489.3 (2.5) 72,836 (18.0) 79,697 (16.9)
2020 1,426.5 (4.2) 45,110 (38.1) 50,852 (36.2)
2021 1,360.0 (4.7) 48,977 8.6 54,764 7.7
2020 1 1,474.3 (2.8) 12,486 (26.7) 14,021 (25.4)
2 1,457.7 (3.4) 8,656 (60.9) 9,827 (58.8)
3 1,441.9 (.5) 11,167 (33.7) 12,601 (32.0)
4 1,426.5 (4.2) 12,801 (23.8) 14,404 (22.2)
2021 1 1,410.0 (4.4) 12,492 — 13,998 (.2)
2 1,391.7 (4.5) 12,125 40.1 13,602 38.4
3 1,375.0 (4.6) 11,275 1.0 12,605 —
4 1,360.0 (4.7) 13,084 2.2 14,559 1.1
2022 1 1,345.6 (4.6) 10,679 (19.0) 11,925 (14.8)
2 1,332.0 (4.3) 11,372 (6.2) 12,731 (6.4)

Aflac Japan

Aflac Japan Product Mix
(New Annualized Premium Sales, Yen In Billions)
% of % of Income % of Child % of % of Ordinary % of % of
Period Cancer Total Medical Total Support Total Endowment Total WAYS Total Life Other Total Other Total Total
2017 53.0 55.8 32.4 34.1 2.2 2.3 .5 .5 .6 .6 5.6 6.0 .6 .7 94.9
2018 63.1 65.8 23.9 25.0 1.7 1.8 .3 .3 .5 .5 5.9 6.1 .5 .5 95.9
2019 47.2 59.2 24.6 31.0 1.0 1.2 .2 .2 .4 .5 5.9 7.4 .4 .5 79.7
2020 28.8 56.6 15.9 31.2 .5 1.0 .2 .4 .4 .7 4.8 9.5 .3 .6 50.9
2021 27.0 49.2 20.4 37.2 .3 .5 .2 .3 .4 .8 4.9 9.0 1.6 3.0 54.8
2020 1 7.8 55.5 4.5 32.4 .2 1.2 — .3 .1 .6 1.3 9.3 .1 .7 14.0
2 5.4 54.7 3.2 32.5 .1 .9 — .4 .1 .8 1.0 10.0 — .7 9.8
3 7.0 55.7 4.0 32.0 .1 .9 .1 .4 .1 .8 1.2 9.6 .1 .6 12.6
4 8.6 59.7 4.1 28.4 .1 .8 .1 .3 .1 .8 1.3 9.3 .1 .7 14.4
2021 1 6.4 45.4 6.1 43.3 .1 .6 — .3 .1 .7 1.2 8.9 .1 .8 14.0
2 6.7 48.9 5.4 39.7 .1 .6 — .4 .1 .8 1.2 8.9 .1 .7 13.6
3 6.3 49.9 4.6 36.3 .1 .5 — .3 .1 .7 1.1 9.0 .4 3.3 12.6
4 7.7 52.7 4.4 29.9 .1 .4 — .3 .1 .8 1.2 8.6 1.1 7.3 14.6
2022 1 6.4 53.0 3.8 31.4 .1 1.1 — .3 .1 .7 1.1 9.0 .5 4.5 11.9
2 6.8 53.4 3.8 29.9 .3 2.2 — .2 .1 .8 1.2 9.2 .6 4.3 12.7

Aflac Japan

Aflac Japan Sales Force Data
Number of Agencies by Type Sales Contribution by Agency Type
Period Individual/ Independent Corporate Affiliated<br>Corporate Bank Total Individual/ Independent Corporate Affiliated<br>Corporate Bank Licensed Sales<br>Associates(1) Recruited<br>Agencies
2017 9,492 1,455 374 11,321 42.8 52.0 5.2 109,197 174
2018 8,453 1,392 371 10,216 40.1 55.3 4.6 109,482 85
2019 7,683 1,343 367 9,393 45.7 50.0 4.3 109,265 77
2020 7,231 1,312 361 8,904 52.3 42.6 5.1 111,886 48
2021 6,779 1,283 360 8,422 51.1 43.7 5.2 111,854 62
2020 1 7,537 1,332 364 9,233 52.8 42.7 4.5 110,129 17
2 7,426 1,329 364 9,119 53.8 42.8 3.4 109,850 5
3 7,312 1,317 364 8,993 51.7 41.4 6.9 111,016 19
4 7,231 1,312 361 8,904 51.3 43.4 5.3 111,886 7
2021 1 7,142 1,308 360 8,810 54.3 40.6 5.1 112,252 13
2 7,055 1,305 359 8,719 51.1 44.0 4.9 113,259 22
3 6,898 1,299 360 8,557 49.9 43.8 6.3 112,100 13
4 6,779 1,283 360 8,422 49.2 46.3 4.5 111,854 14
2022 1 6,447 1,266 360 8,073 48.9 46.5 4.6 109,873 6
2 6,335 1,255 359 7,949 48.4 48.1 3.5 110,096 12

(1) Excludes Dai-ichi Life, banks, Japan Post Group and Daido Life

Aflac Japan

Yen/Dollar Exchange Rates
Yearly
Closing Qtr Cum %
Period Rate(1) Avg Avg Change
2017 113.00 N/A 112.16 (3.1)
2018 111.00 N/A 110.39 1.6
2019 109.56 N/A 109.07 1.2
2020 103.50 N/A 106.86 2.1
2021 115.02 N/A 109.79 (2.7)
2020 1 108.83 108.84 108.84 1.3
2 107.74 107.65 108.25 1.7
3 105.80 106.23 107.63 1.4
4 103.50 104.57 106.86 2.1
2021 1 110.71 105.88 105.88 2.8
2 110.58 109.48 107.79 .4
3 111.92 110.11 108.58 (.9)
4 115.02 113.70 109.79 (2.7)
2022 1 122.39 116.18 116.18 (8.9)
2 136.68 129.39 122.79 (12.2)
(1) Closing rate is based on the latest available and published MUFG Bank Ltd. TTM mid-day exchange rate.

Corporate and Other

Statements of Pretax Adjusted Earnings
(Before Management Fee)
(In Millions)
3 Months Ended June 30, 6 Months Ended June 30,
% %
2018 2019 2020 2021 2021 2022 Change 2021 2022 Change
Revenues:
Total net earned premiums $ 216 $ 208 $ 200 $ 194 $ 180 $ 45 $ 36 (20.0) $ 93 $ 77 (17.2)
Net investment income (1) 35 77 88 80 (73) (13) (9) (30.8) 3 (5) (266.7)
Amortized hedge income (2) — 36 89 97 57 16 14 (12.5) 33 25 (24.2)
Adjusted net investment income 35 113 177 177 (16) 3 5 66.7 36 20 (44.4)
Other income 21 18 15 13 11 2 — — 5 18 260.0
Total adjusted revenues 272 339 393 384 175 50 42 (16.0) 133 116 (12.8)
Benefits and expenses:
Total net benefits and claims 209 199 194 180 166 41 34 (17.1) 84 73 (13.1)
Interest expense 122 120 133 164 165 43 40 (7.0) 87 80 (8.0)
Other adjusted expenses 154 159 137 155 142 42 44 4.8 65 84 29.2
Total benefits and adjusted expenses 486 478 464 499 473 126 117 (7.1) 236 237 .4
Pretax adjusted earnings $ (214) $ (139) $ (72) $ (115) $ (298) $ (76) $ (75) 1.3 $ (102) $ (120) (17.6)
(1) The change in value of federal historic rehabilitation and solar investments in partnerships of 31 and 30 for the three-month periods and 42 and 30 for the six-month periods ended June 30, 2022, and 2021, respectively is included as a reduction to net investment income. Tax credits on these investments of 28 and 12 for the three-month period and 44 and 25 for the six-month periods ended June 30, 2022, and 2021, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings.
(2) See non-U.S. GAAP financial measures for the definition of amortized hedge cost/income

All values are in US Dollars.

Non-U.S. GAAP Financial Measures

This document includes references to the Company’s financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations.

Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company’s business is conducted in yen and never converted into dollars but translated into dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

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

• Adjusted book value is the U.S. GAAP book value (representing total shareholders’ equity), less AOCI as recorded on the U.S. GAAP balance sheet. Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value and adjusted book value per common share important as they exclude AOCI, which fluctuates due to market movements that are outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.
• Adjusted book value including unrealized foreign currency translation gains and losses is adjusted book value plus unrealized foreign currency translation gains and losses. Adjusted book value including unrealized foreign currency translation gains and losses per common share is adjusted book value plus unrealized foreign currency translation gains and losses at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value including unrealized foreign currency translation gains and losses, and its related per share financial measure, important as they exclude certain components of AOCI, which fluctuate due to market movements that are outside management's control; however, it includes the impact of foreign currency as a result of the significance of Aflac’s Japan operation. The most comparable U.S. GAAP financial measures for adjusted book value including unrealized foreign currency translation gains and losses and adjusted book value including unrealized foreign currency translation gains and losses per common share are total book value and total book value per common share, respectively.
• Adjusted book value including unrealized foreign currency translation gains and losses and pension liability adjustment is adjusted book value plus unrealized foreign currency translation gains and losses and pension liability adjustment. The Company considers adjusted book value including unrealized foreign currency translation gains and losses and pension liability adjustment important as it excludes certain components of AOCI, which fluctuates due to market movements that are outside management's control; however, it includes the impact of foreign currency as a result of the significance of Aflac’s Japan operation. The most comparable U.S. GAAP financial measure for adjusted book value including unrealized foreign currency translation gains and losses and pension liability adjustment is total book value.
• Adjusted debt is the sum of notes payable, as recorded on the U.S. GAAP balance sheet, excluding 50% of subordinated debentures and perpetual bonds and all pre-funding of debt maturities. The Company considers adjusted debt important as it measures outstanding debt consistently with expectations of the Company’s rating agency stakeholders. The most comparable U.S. GAAP financial measure for adjusted debt is notes payable.
• Adjusted debt including 50% of subordinated debentures and perpetual bonds is the sum of notes payable, as recorded on the U.S. GAAP balance sheet, excluding pre-funding of debt maturities. The Company considers adjusted debt including 50% of subordinated debentures and perpetual bonds important as it measures outstanding debt consistently with expectations of the Company’s rating agency stakeholders. The most comparable U.S. GAAP financial measure for adjusted debt including 50% of subordinated debentures and perpetual bonds is notes payable.
• Adjusted earnings are adjusted revenues less benefits and adjusted expenses. Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S. GAAP total revenues excluding adjusted net investment gains and losses. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of these financial measures is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The most comparable U.S. GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively.
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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. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding diluted shares for the period presented. The Company considers adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact important because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside management’s control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact are net earnings and net earnings per share, respectively.
• 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 Corporate and other. These amortized hedge costs/ income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the term of the hedge. The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/ income.
• Adjusted net investment gains and losses are net investment gains and losses adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest cash flows from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense. The most comparable U.S. GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses.
• Adjusted net investment income is net investment income adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, and ii) net interest cash flows from foreign currency and interest rate derivatives associated with certain investment strategies, which are reclassified from net investment gains and losses to net investment income. The Company considers adjusted net investment income important because it provides a more comprehensive understanding of the costs and income associated with the Company’s investments and related hedging strategies. The most comparable U.S. GAAP financial measure for adjusted net investment income is net investment income.
• Adjusted return on equity is adjusted earnings divided by average shareholders’ equity, excluding accumulated other comprehensive income (AOCI). Management uses adjusted return on equity to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The Company considers adjusted return on equity important as it excludes components of AOCI, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity is return on average equity (ROE) as determined using net earnings and average total shareholders’ equity.

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Second Quarter 2022

Earnings Call

Video Update

Max K. Brodén

August 1, 2022

For more information contact:

Investor and Rating Agency Relations

800.235.2667

aflacir@aflac.com

Aflac Worldwide Headquarters

1932 Wynnton Road

Columbus, GA 31999

Preliminary note: Forward-Looking Information and Non-U.S. GAAP Financial Measures

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. The company desires to take advantage of these provisions. This transcript 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 “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target,” "outlook" or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.

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

•difficult conditions in global capital markets and the economy, including those caused by COVID-19

•defaults and credit downgrades of investments

•global fluctuations in interest rates and exposure to significant interest rate risk

•concentration of business in Japan

•limited availability of acceptable yen-denominated investments

•foreign currency fluctuations in the yen/dollar exchange rate

•differing judgments applied to investment valuations

•significant valuation judgments in determination of expected credit losses recorded on the Company's investments

•decreases in the Company's financial strength or debt ratings

•decline in creditworthiness of other financial institutions

•concentration of the Company's investments in any particular single-issuer or sector

•the effects of COVID-19 and its variants (both known and emerging), and any resulting economic effects and government interventions, on the Company's business and financial results

•the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners

•deviations in actual experience from pricing and reserving assumptions

•ability to continue to develop and implement improvements in information technology systems

•interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems

•subsidiaries' ability to pay dividends to the Parent Company

•inherent limitations to risk management policies and procedures

•operational risks of third party vendors

•tax rates applicable to the Company may change

•failure to comply with restrictions on policyholder privacy and information security

•extensive regulation and changes in law or regulation by governmental authorities

•competitive environment and ability to anticipate and respond to market trends

•catastrophic events, including, but not limited to, as a result of climate change, epidemics, pandemics (such as COVID-19), tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, terrorism or other acts of violence, and damage incidental to such events

•ability to protect the Aflac brand and the Company's reputation

•ability to effectively manage key executive succession

•changes in accounting standards

•level and outcome of litigation

•allegations or determinations of worker misclassification in the United States

Non-U.S. GAAP Financial Measures and Reconciliations

This document includes references to the Company’s financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations.

Definitions of the Company’s non-U.S. GAAP financial measures and applicable reconciliations to the most comparable U.S. GAAP measures are provided in the presentation slides that accompany this transcript.

Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company’s business is conducted in yen and never converted into dollars but translated into dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

Max K. Brodén

2Q22 CFO Video Update

August 1, 2022

Hello, and thank you for joining me as I provide a financial update on Aflac Incorporated’s results for the second quarter of 2022.

For the quarter, adjusted earnings per diluted share decreased 8.2% year over year to $1.46, with a $0.09 negative impact from FX in the quarter. The quarter a year ago benefited from low claims utilization and strong variable investment income. Adjusting for these factors, we view the financial performance in Q2 as solid and on track to meet our full year objectives.

Variable investment income ran $47 million above our long-term return expectations. Adjusted book value per share including foreign currency translation gains and losses grew 4.1%, and the adjusted ROE was a strong 14.1%, or 14.9% excluding the impact of foreign currency, both of which remain a significant spread to our cost of capital.

Starting with our Japan segment, net earned premium for the quarter declined 4.2%, and policies in-force declined 1.8%. Both of these numbers are key metrics for us when analyzing the underlying business.

Japan’s total benefit ratio came in at 67.4% for the quarter, up 50 basis points year over year, and the third sector benefit ratio was 57.5%, up 100 basis points year over year. We continue to experience favorable actual-to-expected incurred claims on our well-priced, large and mature in-force block. With COVID infection rates higher, we did see our medical claims increase as COVID is deemed an infectious disease and insurance companies are required by law to pay out hospitalization benefits even for self-quarantined policyholders diagnosed with COVID. In the quarter, we estimate that this added 190 basis points to the total benefit ratio in the quarter. Adjusting for greater-than-normal IBNR releases and higher-than-normal medical claims, we estimate our normalized benefit ratio for Q2 to be 69.8%

Persistency remained strong with a rate of 94.3%, but was down 40 basis points year over year.

Our expense ratio in Japan was 20.9%, up 10 basis points year over year. Constrained business activity due to pandemic conditions impacted our sales and marketing expenses in Q2, which we expect to be a temporary phenomenon. We anticipate increased spending on key initiatives to continue, especially in the second half of the year as we tend to see some seasonality in spending.

Adjusted net investment income increased 8.4% in yen terms, primarily driven by favorable returns on our growing private equity portfolio and favorable FX translation on our U.S. dollar-denominated investments, partially offset by lower reinvestment yield on our fixed rate yen portfolio.

The pretax margin for Japan in the quarter was 27.4%, up 90 basis points year over year; a very good result for the quarter.

Turning to U.S. results, net earned premium was down 1.0%, as lapses were higher than sales despite an uptick in our new business written. Persistency declined 220 basis points to 77.9%. This is a 12-month rolling metric, and in Q1 we did see a greater movement of the U.S. labor force with a fairly immediate impact on our in-force as individuals shift jobs in between enrollment cycles or move to an employer not offering Aflac. This increase was broad and across the whole book, with no specific concentrations by geography, industry or policyholder duration. In Q2, lapses stabilized to a more normal level, but the 12-month rolling metric continued to decline as previous years' high persistency quarters fell out of the measured window.

Our total benefit ratio came in lower than expected at 45.4%, but 190 basis points higher than Q2 2021. We estimate that the net IBNR adjustments in the quarter and COVID incurred claims had a net 350 basis points favorable impact, leading to an underlying benefit ratio of 48.9%

Our expense ratio in the U.S. was 39.6%, up 270 basis points year over year, primarily driven by higher IT spend and higher DAC amortization as we grow new sales.

Our continued build-out of growth initiatives – group life & disability, network dental and vision and direct to consumer – accounted for 280 basis points of our U.S. expense ratio. We would expect this impact to decrease over time as these businesses grow to scale and improve their profitability.

Adjusted net investment income in the U.S. was up 2.1%, mainly driven by favorable variable investment income in the quarter and floating rate assets.

Profitability in the U.S. segment was solid, with a pretax margin of 21.4% driven primarily by the low benefit ratio.

In our corporate segment, we recorded a pretax loss of $75 million as adjusted net investment income was $2 million greater than last year as higher rates are starting to earn in, but partially offset by the change in value of certain tax credit investments. These tax credit investments run through the net investment income line for U.S. GAAP purposes with an associated credit to the tax line. The net combined impact is a net neutral impact to our P&L bottom line. To date, these investments are performing well and in line with expectations.

Our capital position remains strong, and we ended the quarter with an SMR north of 900% in Japan and a combined RBC north of 600% Unencumbered Holding company liquidity stood at $4.0 billion, $1.6 billion above our minimum balance.

Leverage, which includes the sustainability bond, remains at a comfortable 20.6%, toward the lower end of our leverage corridor of 20% to 25%. In this quarter alone, the weaker yen lowered our leverage by 100 basis points as roughly $4.2 billion of debt is denominated in yen.

I would also note that we recently received ratings upgrades from both A.M. Best and R&I, recognizing our strong enterprise risk management as well as stability in operations and strength in profitability and cash flow generation.

We repurchased $650 million of our own stock and paid dividends of $256 million in Q2, offering good relative IRR on these capital deployments. We will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive strong risk-adjusted ROE with a meaningful spread to our cost of capital.

Finally, I would like to address how we approach and manage FX exposure and hedging, given the recent strength of the USD. We fundamentally believe that the best approach is to strategically hedge our economic exposure to the yen to protect the long-term value of Aflac Japan as well as the dividends the holding company receives, reducing both volatility and the cost of capital.

We do this through holding unhedged U.S. dollar assets in the Japan general account, which stood at about $24.9 billion on an amortized cost basis, entering into FX forwards at the holding company with a notional balance of $5 billion and borrowing in yen, which we have about $4.2 billion of USD equivalent of yen debt outstanding. These are economic hedges on which market value changes do not run through adjusted GAAP EPS, but protect the shareholder from changes in the yen/dollar exchange rate.

Adjusted GAAP EPS is protected by the translation impact from U.S. dollar-denominated net investment income, but not by fair value adjustments of the economic hedge instruments mentioned.

Taking the FX impact in Q2, we would expect every 5 yen move to the dollar to have about a $0.02 to $0.03 impact to our annualized adjusted EPS going forward.

I appreciate your attention, and look forward to discussing our results in further detail on tomorrow's earnings call. Thank you.

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