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

                                 MD&A OVERVIEW

The following financial review provides a discussion of the Company's results of
operations and financial condition, as well as a summary of the Company's
critical accounting estimates. This section should be read in conjunction with
Part I - Item 1. Business and the audited consolidated financial statements and
accompanying notes included in Part II - Item 8. Financial Statements and
Supplementary Data of this report. This MD&A is divided into the following
sections:
                                      Page
  Executive Summary                   35
  Industry Trends                     35
  Outlook                             36
  Results of Operations               37
  Investments                         49
  Policy Liabilities                  57
  Benefit Plans                       57
  Policyholder Protection             57
  Off Balance Sheet Arrangements      57
  Liquidity and Capital Resources     58
  Critical Accounting Estimates       64



The Company elected to omit discussion on the earliest of the three years
covered by the consolidated financial statements presented in Item 8. Financial
Statements and Supplementary Data. Readers should refer to Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations located
in the Company's   Annual Report on Form 10-K for the year ended December 31,
2018  , filed on February 25, 2019, for reference to discussion of the year
ended December 31, 2017, the earliest of the three years presented. Amounts
reported in this MD&A may not add due to rounding.


                                       34

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


                               EXECUTIVE SUMMARY

For the full year of 2019, total revenues were up 2.5% to $22.3 billion,
compared with $21.8 billion for the full year of 2018. Net earnings were $3.3
billion, or $4.43 per diluted share, compared with $2.9 billion, or $3.77 per
diluted share, for the full year of 2018.

Results for 2019 included pretax net realized investment losses of $135 million,
compared with net realized investment losses of $430 million in 2018. Net
investment losses in 2019 included $31 million of other-than-temporary
impairment losses and changes in loan loss reserves; $236 million in net losses
from certain derivatives and foreign currency gains or losses; $101 million of
net gains on equity securities; and $31 million of net gains from sales and
redemptions.

The average yen/dollar exchange rate(1) in 2019 was 109.07, or 1.2% stronger than the rate of 110.39 in 2018.



Adjusted earnings(2) for the full year of 2019 were $3.3 billion, or $4.44 per
diluted share, compared with $3.2 billion, or $4.16 per diluted share, in 2018.
The stronger yen/dollar exchange rate impacted adjusted earnings per diluted
share by $.02.

Total investments and cash at the end of December 2019 were $138.1 billion,
compared with $126.2 billion at December 31, 2018. In 2019, Aflac Incorporated
repurchased $1.6 billion, or 32.0 million of its common shares. At the end of
December, the Company had 37.1 million remaining shares authorized for
repurchase.

Shareholders' equity was $29.0 billion, or $39.84 per share, at December 31,
2019, compared with $23.5 billion, or $31.06 per share, at December 31, 2018.
Shareholders' equity at December 31, 2019 included a net unrealized gain on
investment securities and derivatives of $8.5 billion, compared with a net
unrealized gain of $4.2 billion at December 31, 2018. Shareholders' equity at
December 31, 2019 also included an unrealized foreign currency translation loss
of $1.6 billion, compared with an unrealized foreign currency translation loss
of $1.8 billion at December 31, 2018. The annualized return on average
shareholders' equity in 2019 was 12.6%.

Shareholders' equity excluding accumulated other comprehensive income (AOCI)(2)
(adjusted book value) was $22.3 billion, or $30.74 per share at December 31,
2019, compared with $21.3 billion, or $28.22 per share, at December 31, 2018.
The annualized adjusted return on equity excluding foreign currency impact(2) in
2019 was 15.1%.

                                INDUSTRY TRENDS

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

Financial and Economic Environment



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

Demographics



Japan Business - With Japan's aging population and the rise in healthcare costs,
supplemental health care insurance products remain attractive. However, due to
the aging population and decline in birthrate, new opportunities for customer
demographics are not as readily available. Japan's existing customers and
potential customers seek products that are easily understood, cost-effective and
can be accessed through technology-enabled devices.
(1) Yen/U.S. dollar exchange rates are based on the published MUFG Bank, Ltd.
telegraphic transfer middle rate (TTM).
(2) See the Results of Operations section of this MD&A for a definition of this
non-U.S. GAAP financial measure.

                                       35

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

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

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

Regulatory Environment

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

Competitive Environment



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

                                  2020 OUTLOOK

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

The Company's objectives in 2020 are to maintain strong pre-tax margins in its
Aflac Japan and Aflac U.S. segments through disciplined product pricing, stable
investment returns and leveraging a period of favorable benefit ratios to invest
in its platform for future growth and efficiency. The Company believes that its
market-leading position, powerful brand recognition and diverse distribution in
Japan and the U.S. will provide support toward these objectives.

The Company believes that its efforts will support its prudent strategies for
capital deployment in the form of dividends, share repurchases, and
opportunistic investments that enhance the Company's business with a focus on
digital distribution and leveraging the Company's brand, distribution and scale.
The Company has stated that the dividend payout ratio from its Aflac Japan
segment is likely to be to 100% of FSA earnings from Aflac Japan and 100% of
U.S. statutory earnings from Aflac U.S. In its Aflac U.S. segment, the Company
plans to maintain a risk-based capital (RBC) ratio in the 500% range for 2020.

Aflac Japan Segment
In Japan, the Company anticipates that the shift in earned premium from first
sector savings products to third sector cancer and medical products and first
sector protection products, will continue to result in moderately lower benefit
ratios in the Aflac Japan segment. The Company also expects this shift in
business mix, plus continued investment in IT and digital advancements, to
result in moderately higher expense ratios for Aflac Japan. The Company
anticipates the Japan segment will face revenue challenges in 2020 due to the
run-off and paid-up status of first sector savings and third sector products.
The Company expects a decline in the range of .7% in third sector and first
sector protection earned premium for 2020. In addition, net investment income is
expected to decline modestly as compared to 2019, due in part to the low
interest rate environment in Japan and de-risking of the portfolio, partially
offset by lower hedge cost as a result of a reduction in the hedge ratio in the
fourth quarter of 2019.

Aflac U.S. Segment
The Company expects the profit margins for the Aflac U.S. segment to remain
strong, providing a prudent opportunity to reinvest profits back into the U.S.
business. The Company anticipates that in 2020, benefit ratios in the U.S. will
remain stable and that expense ratios will continue to be elevated in light of
investments into U.S. platforms in both the individual and group channels. The
Company expects Aflac U.S. to generate earned premium growth in the range of 1%
in 2020. Net investment income is expected to decline modestly, primarily as the
result of the Company's implemented U.S. capital and RBC draw-down plan.

Corporate and Other Segment
The Company expects corporate segment results to benefit from net investment
income driven by increased capital and liquidity held at the Parent Company, as
well as the increase in size of the Company's enterprise currency hedging
strategy. The anticipated increase in investment income is expected to be
partially offset by increased costs associated with continued investment in
Aflac Corporate Ventures initiatives.

                                       36

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




For important disclosures applicable to statements made in this 2020 Outlook,
please see the Risk Factors section and the statement on Forward-Looking
Information at the beginning of Item 1. Business, the Risk Factors identified in
Item 1A. and Item 7. Management Discussion and Analysis.

                             RESULTS OF OPERATIONS

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

Yen-denominated income statement accounts are translated to U.S. dollars using a
weighted average Japanese yen/U.S. dollar foreign exchange rate, except realized
gains and losses on security transactions which are translated at the exchange
rate on the trade date of each transaction. Yen-denominated balance sheet
accounts are translated to U.S. dollars using a spot Japanese yen/U.S. dollar
foreign exchange rate.

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

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

• Adjusted earnings are the profits derived from operations.The most

comparable U.S. GAAP measure is net earnings. Adjusted earnings are

adjusted revenues less benefits and adjusted expenses. The adjustments to

both revenues and expenses account for certain items that cannot be

predicted or that are outside management's control. Adjusted revenues are

U.S. GAAP total revenues excluding realized investment gains and losses,

except for amortized hedge costs/income related to foreign currency

exposure management strategies and net interest cash flows from

derivatives associated with certain investment strategies. Adjusted

expenses are U.S. GAAP total acquisition and operating expenses including


       the impact of interest cash flows from derivatives associated with notes
       payable but excluding any nonrecurring or other items not associated with
       the normal course of the Company's insurance operations and that do not
       reflect the Company's underlying business performance.


• Adjusted earnings per share (basic or diluted) are adjusted earnings for

the period divided by the weighted average outstanding shares (basic or

diluted) for the period presented. The most comparable U.S. GAAP measure


       is net earnings per share.


• Amortized hedge costs/income represent costs/income incurred or recognized

in using foreign currency forward




contracts to hedge certain foreign exchange risks in the Company's Japan segment
(costs) or in the Corporate and Other segment (income). These amortized hedge
costs/income are derived from the difference between the foreign currency spot
rate at time of trade inception and the contractual foreign currency forward
rate, recognized on a straight line basis over the term of the hedge. There is
no comparable U.S. GAAP financial measure for amortized hedge costs/income.

• Adjusted earnings and adjusted earnings per diluted share excluding

current period foreign currency impact are computed using the average


       yen/dollar exchange rate for the comparable prior year period, which
       eliminates fluctuations driven solely by yen-to-dollar currency rate
       changes.




                                       37

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

• Amounts excluding foreign currency impact on U.S. dollar-denominated

investment income were determined using the average dollar/yen exchange


       rate for the comparable prior year period.



•      Adjusted book value is the U.S. GAAP book value (representing total

shareholders' equity), less AOCI as recorded on the U.S. GAAP balance

sheet. The Company considers adjusted book value important as it excludes


       AOCI, which fluctuates due to market movements that are outside
       management's control.



•      Adjusted return on equity (ROE) excluding foreign currency impact is

calculated using adjusted earnings excluding the impact of the yen/dollar

exchange rate, as reconciled with total U.S. GAAP net earnings, divided by

average shareholders' equity, excluding AOCI. The most comparable U.S.

GAAP financial measure is return on average equity as determined using net

earnings and average total shareholders' equity.





The following table is a reconciliation of items impacting adjusted earnings and
adjusted earnings per diluted share to the most directly comparable U.S. GAAP
measures of net earnings and net earnings per diluted share, respectively, for
the years ended December 31.
            Reconciliation of Net Earnings to Adjusted Earnings(1)
                                                         In Millions              Per Diluted Share
                                                     2019          2018           2019           2018
Net earnings                                       $ 3,304       $ 2,920      $    4.43        $ 3.77
Items impacting net earnings:
Realized investment (gains) losses (2),(3),(4),(5)      15           297            .02           .38
Other and non-recurring (income) loss                    1            75            .00           .10
Income tax (benefit) expense on items
excluded from adjusted earnings                         (3 )         (83 )          .00          (.11 )
Tax reform adjustment (6)                               (4 )          18           (.01 )         .02
Adjusted earnings                                    3,314         3,226           4.44          4.16
Current period foreign currency impact (7)             (15 )         N/A           (.02 )         N/A
Adjusted earnings excluding current period
foreign currency impact                            $ 3,299       $ 3,226

$ 4.42 $ 4.16




(1) Amounts may not foot due to rounding.
(2) Amortized hedge costs of $257 in 2019 and $236 in 2018, related to certain
foreign currency exposure management strategies have been reclassified from
realized investment gains (losses) and included in adjusted earnings as a
decrease to net investment income. See "Hedge Costs/Income" discussion below for
further information.
(3)Amortized hedge income of $89 in 2019 and $36 in 2018, related to certain
foreign currency exposure management strategies have been reclassified from
realized investment gains (losses) and included in adjusted earnings as an
increase to net investment income. See "Hedge Costs/Income" discussion below for
further information.
(4) Net interest cash flows from derivatives associated with certain investment
strategies of $(17) in 2019 and an immaterial amount for 2018 have been
reclassified from realized investment gains (losses) and included in adjusted
earnings as a component of net investment income.
(5) A gain of $66 in 2019 and $67 in 2018, respectively, related to the interest
rate component of the change in fair value of foreign currency swaps on notes
payable have been reclassified from realized investment gains (losses) and
included in adjusted earnings as a component of interest expense.
(6) 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 a result of
additional guidance released by the IRS.
(7) Prior period foreign currency impact reflected as "N/A" to isolate change
for current period only.

Reconciling Items

Realized Investment Gains and Losses



The Company's investment strategy is to invest primarily in fixed maturity
securities to provide a reliable stream of investment income, which is one of
the drivers of the Company's growth and profitability. This investment strategy
incorporates asset-liability matching (ALM) to align the expected cash flows of
the portfolio to the needs of the Company's liability structure. The Company
does not purchase securities with the intent of generating capital gains or
losses. However, investment gains and losses may be realized as a result of
changes in the financial markets and the creditworthiness of specific issuers,
tax planning strategies, and/or general portfolio management and rebalancing.
The realization of investment gains and losses is independent of the
underwriting and administration of the Company's insurance products. Realized
investment gains and

                                       38

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

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



losses include securities transactions, impairments, changes in loan loss
reserves, derivative and foreign currency activities and changes in fair value
of equity securities.
Securities Transactions, Impairments, and Gains (Losses) on Equity Securities

Securities transactions include gains and losses from sales and redemptions of
investments where the amount received is different from the amortized cost of
the investment. Impairments include other-than-temporary-impairment losses on
investment securities as well as changes in loan loss reserves for loan
receivables. Starting in the first quarter of 2018, gains and losses from
changes in fair value of equity securities are recorded in earnings.
Certain Derivative and Foreign Currency Gains (Losses)

The Company's derivative activities include foreign currency forwards and
options on certain fixed maturity securities; foreign currency forwards and
options that economically hedge certain portions of forecasted cash flows
denominated in yen and hedge the Company's long-term exposure to a weakening
yen; foreign currency swaps associated with certain senior notes and
subordinated debentures; foreign currency swaps and credit defaults swaps held
in consolidated variable interest entities (VIEs); interest rate swaps used to
economically hedge interest rate fluctuations in certain variable-rate
investments; and interest rate swaptions to hedge changes in the fair value
associated with interest rate changes for certain dollar-denominated
available-for-sale securities. Gains and losses are recognized as a result of
valuing these derivatives, net of the effects of hedge accounting. The Company
also excludes the accounting impacts of remeasurement associated with changes in
the yen/dollar exchange rate from adjusted earnings. Amortized hedge costs/
income related to certain foreign currency exposure management strategies (see
Amortized Hedge Cost/Income section below), and net interest cash flows from
derivatives associated with certain investment strategies and notes payable are
reclassified from realized investment gains (losses) and included in adjusted
earnings.

Amortized hedge costs/income can fluctuate based upon many factors, including
the derivative notional amount, the length of time of the derivative contract,
changes in both U.S. and Japan interest rates, and supply and demand for dollar
funding. Amortized hedge costs and income have fluctuated in recent periods due
to changes in the previously mentioned factors. For additional information
regarding foreign currency hedging, refer to Hedging Activities in the
Investments section of this MD&A.

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

Other and Non-recurring Items



The U.S. insurance industry has a policyholder protection system that provides
funds for the policyholders of insolvent insurers. The system can result in
periodic charges to the Company as a result of insolvencies/bankruptcies that
occur with other companies in the life insurance industry. Some states permit
member insurers to recover assessments paid through full or partial premium tax
offsets. These charges neither relate to the ordinary course of the Company's
business nor reflect the Company's underlying business performance, but result
from external situations not controlled by the Company. The Company excludes any
charges associated with U.S. guaranty fund assessments and the corresponding tax
benefit or expense from adjusted earnings.

In Japan, the government also requires the insurance industry to contribute to a
policyholder protection corporation that provides funds for the policyholders of
insolvent insurers; however, these costs are calculated and administered
differently than in the U.S. In Japan, these costs are not directly related to
specific insolvencies or bankruptcies, but are rather a regular operational cost
for an insurance company. Based on this structure, the Company does not remove
the Japan policyholder protection expenses from adjusted earnings.

Nonrecurring items also include conversion costs related to legally converting
the Company's Japan business to a subsidiary; these costs primarily consist of
expenditures for legal, accounting, consulting, integration of systems and
processes and other similar services. These Japan branch conversion costs were
an immaterial amount for the year-ended December 31, 2019 and $75 million for
the year-ended December 31, 2018.

Income Taxes



The Company's combined U.S. and Japanese effective income tax rate on pretax
earnings was 25.7% in 2019 and 26.7% in 2018. The decrease in the U.S. federal
statutory corporate income tax rate from 35% to 21% effective January 1, 2018
drove the reduction in the effective tax rate for 2019 and 2018. Total income
taxes were $1.1 billion in both 2019 and 2018. Japanese income taxes on Aflac
Japan's results account for most of the Company's consolidated income tax
expense.

                                       39

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



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

Foreign Currency Translation



Aflac Japan's premiums and a significant portion of its investment income are
received in yen, and its claims and most expenses are paid in yen. Aflac Japan
purchases yen-denominated assets and U.S. dollar-denominated assets, which may
be hedged to yen, to support yen-denominated policy liabilities. These and other
yen-denominated financial statement items are, however, translated into dollars
for financial reporting purposes. The Company translates Aflac Japan's
yen-denominated income statement into dollars using the average exchange rate
for the reporting period, and the Company translates its yen-denominated balance
sheet using the exchange rate at the end of the period.

Due to the size of Aflac Japan, whose functional currency is the Japanese yen,
fluctuations in the yen/dollar exchange rate can have a significant effect on
the Company's reported results. In periods when the yen weakens, translating yen
into dollars results in fewer dollars being reported. When the yen strengthens,
translating yen into dollars results in more dollars being reported.
Consequently, yen weakening has the effect of suppressing current period results
in relation to the comparable prior period, while yen strengthening has the
effect of magnifying current period results in relation to the comparable prior
period. Management evaluates the Company's financial performance both including
and excluding the impact of foreign currency translation to monitor,
respectively, cumulative currency impacts on book value and the currency-neutral
operating performance over time.
                        RESULTS OF OPERATIONS BY SEGMENT
U.S. GAAP financial reporting requires that a company report financial and
descriptive information about operating segments in its annual and interim
period financial statements. Furthermore, the Company is required to report a
measure of segment profit or loss, certain revenue and expense items, and
segment assets. Aflac's insurance business consists of two segments: Aflac Japan
and Aflac U.S. Aflac Japan is the principal contributor to consolidated
earnings. Businesses that are not individually reportable, such as the Parent
Company, asset management subsidiaries and business activities, including
reinsurance retrocession activities are included in the Corporate and other
segment. See the Item 1. Business section of this Form 10-K for a summary of
each segment's products and distribution channels, and a discussion of the
conversion of Aflac Japan from a branch to a subsidiary and the creation of
asset management subsidiaries in 2018. Consistent with U.S. GAAP guidance for
segment reporting, pretax adjusted earnings is the Company's U.S. GAAP measure
of segment performance. See Note 2 of the Notes to the Consolidated Financial
Statements for the reconciliation of segment results to the Company's
consolidated U.S. GAAP results and additional information.

                              AFLAC JAPAN SEGMENT

Aflac Japan Pretax Adjusted Earnings



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


                                       40

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



                    Aflac Japan Summary of Operating Results
(In millions)                                               2019        2018
Net premium income                                        $ 12,772    $ 12,762
Net investment income:
Yen-denominated investment income                            1,307       

1,283

U.S. dollar-denominated investment income                    1,446       

1,356


Net investment income                                        2,753       

2,639

Amortized hedge costs related to certain foreign currency exposure management strategies

                                 257         

236


Net investment income, less amortized hedge costs            2,496       2,403
Other income (loss)                                             45          41
Total adjusted revenues                                     15,313      15,206
Benefits and claims, net                                     8,877       8,913
Adjusted expenses:
Amortization of deferred policy acquisition costs              709         710
Insurance commissions                                          731         735
Insurance and other expenses                                 1,734       1,640
Total adjusted expenses                                      3,174       3,085
Total benefits and adjusted expenses                        12,051      

11,998


Pretax adjusted earnings                                  $  3,261    $  

3,208


Weighted-average yen/dollar exchange rate                   109.07      

110.39




                                          In Dollars           In Yen

Percentage change over previous period: 2019 2018 2019 2018 Net premium income

                        .1 %    .1 %   (1.1 )%   (1.5 )%

Net investment income, less amortized


 hedge costs                             3.9     7.5      2.2       5.5
Total adjusted revenues                   .7     1.2      (.6 )     (.5 )
Pretax adjusted earnings                 1.7     5.0       .2       3.1


In yen terms, Aflac Japan's net premium income decreased in 2019, primarily due
to limited-pay products reaching paid-up status. Net investment income, net of
amortized hedge costs, increased in 2019 primarily due to increased investments
in U.S. dollar-denominated floating rate assets and $25 million of income
related to a partial call of a concentrated yen-denominated exposure.

Annualized premiums in force at December 31, 2019, were ¥1.49 trillion, compared
with ¥1.53 trillion in 2018. The decrease in annualized premiums in force in yen
of 2.5% in 2019 and 1.6% in 2018 was driven primarily by limited-pay products
reaching paid up status. Annualized premiums in force, translated into dollars
at respective year-end exchange rates, were $13.6 billion in 2019 and $13.8
billion in 2018.

Aflac Japan's investment portfolios include U.S. dollar-denominated securities
and reverse-dual currency securities (yen-denominated debt securities with
dollar coupon payments). In years when the yen strengthens in relation to the
dollar, translating Aflac Japan's U.S. dollar-denominated investment income into
yen lowers growth rates for net investment income, total adjusted revenues, and
pretax adjusted earnings in yen terms. In years when the yen weakens,
translating U.S. dollar-denominated investment income into yen magnifies growth
rates for net investment income, total adjusted revenues, and pretax adjusted
earnings in yen terms.
The following table illustrates the effect of translating Aflac Japan's U.S.
dollar-denominated investment income and related items into yen by comparing
certain segment results with those that would have been reported had dollar/yen
exchange rates remained unchanged from the prior year. Amounts excluding foreign
currency impact on U.S. dollar-denominated investment income, a non-U.S. GAAP
financial measure, were determined using the average dollar/yen exchange rate
for the comparable prior year period. See non-U.S. GAAP financial measures
defined above.

                                       41

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



                 Aflac Japan Percentage Changes Over Prior Year
                            (Yen Operating Results)
                        For the Years Ended December 31,
                               Including Foreign         Excluding Foreign
                               Currency Changes          Currency Changes
                              2019         2018         2019         2018
Net investment income, less
amortized hedge costs         2.2  %       5.5  %       2.9  %       6.4  %
Total adjusted revenues       (.6 )        (.5 )        (.5 )        (.3 )
Pretax adjusted earnings       .2          3.1           .7          3.7


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

                 2019     2018
Benefits and claims, net                          58.0 %   58.6 %
Adjusted expenses:
Amortization of deferred policy acquisition costs  4.6      4.7
Insurance commissions                              4.8      4.8
Insurance and other expenses                      11.3     10.8
Total adjusted expenses                           20.7     20.3
Pretax adjusted earnings                          21.3     21.1
Ratios to total premiums:
Benefits and claims, net                          69.5 %   69.9 %
Adjusted expenses:
Amortization of deferred policy acquisition costs  5.5      5.6



In 2019, the benefit ratio decreased, compared to the prior year, primarily due
to the continued change in mix of first and third sector business as first
sector products become paid-up. In 2019, the adjusted expense ratio increased
mainly due to lower premium income from paid-up first sector products and higher
expenses for advanced technology implementation. In total for 2019, the pretax
adjusted profit margin (calculated by dividing adjusted earnings by adjusted
revenues) increased reflecting continued strength in benefit ratios and
favorable net investment income. For 2020, the Company anticipates the Aflac
Japan pretax adjusted profit margin (calculated by dividing adjusted earnings by
adjusted revenues) to remain stable. For further information, see the 2020
Outlook section of this MD&A.

Aflac Japan Sales

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


                                                  In Dollars               In Yen
(In millions of dollars and billions of yen)   2019       2018       2019   

2018


New annualized premium sales                 $  731      $ 869     ¥ 79.7  

¥ 95.9 Increase (decrease) over prior period (15.9 )% 2.7 % (16.9 )% 1.1 %

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


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



                         2019      2018
Cancer                   59.2 %    65.8 %
Medical                  31.0      25.0
Income support            1.2       1.8
Ordinary life:
WAYS                       .5        .5
Child endowment            .2        .3
Other ordinary life (1)   7.4       6.1
Other                      .5        .5
  Total                 100.0 %   100.0 %


(1) Includes term and whole life



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

Sales of protection-type first sector and third sector products on a yen basis
decreased 16.8% in 2019, compared with 2018. Earned premium growth for third and
first sector protection products was 1.3%, which was consistent with the
Company's expectation. The decline in sales primarily reflected reduced sales of
cancer insurance through the Japan Post channel following the 2018 launch of
Aflac Japan's revised cancer insurance product. In addition, the approach to
refreshing the medical insurance product in 2019 took a rider versus whole
policy approach. This was designed for improved economics but naturally resulted
in lower reported sales. Additional factors include a change in corporate tax
law, which slowed the pace of certain third sector medical products and some
cancer products in both our associate channel and the bank channel, as well as
increased competition from large life insurers who are increasing their focus on
the third sector.

Sales of Aflac Japan cancer products in the Japan Post Group channel experienced
a material decline beginning in August 2019 which has continued into 2020. For
2019, sales in the Japan Post Group channel declined by approximately 50.0%
compared with 2018. The Company expects very little sales production in the
Japan Post channel during the first half of 2020 and is uncertain with regard to
production during the second half of the year. See the 2020 Outlook section of
this MD&A for information on Aflac Japan earned premium expectations.

Independent corporate agencies and individual agencies contributed 45.7% of
total new annualized premium sales for Aflac Japan in 2019, compared with 40.1%
in 2018. Affiliated corporate agencies, which include Japan Post, contributed
50.0% of total new annualized premium sales in 2019, compared with 55.3% in
2018. Japan Post offers Aflac's cancer insurance products in more than 20,000
postal outlets. Notwithstanding the recent reduction in sales of Aflac Japan's
cancer products in the Japan Post channel, the Company believes this alliance
with Japan Post has and will benefit its cancer insurance sales over the long
term. In 2019, Aflac Japan recruited 77 new sales agencies. At December 31,
2019, Aflac Japan was represented by more than 9,000 sales agencies, with more
than 109,000 licensed sales associates employed by those agencies.

At December 31, 2019, Aflac Japan had agreements to sell its products at 367
banks, approximately 90% of the total number of banks in Japan. Bank channel
sales accounted for 4.3% of new annualized premium sales in 2019 for Aflac
Japan, compared with 4.6% in 2018.

Strategic Alliance with Japan Post Holdings



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


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



On February 28, 2019, the Parent Company entered a Shareholders Agreement with
Japan Post Holdings, J&A Alliance Holdings Corporation, a Delaware corporation,
solely in its capacity as trustee of J&A Alliance Trust, a New York voting trust
(Trust), and General Incorporated Association J&A Alliance, a Japanese general
incorporated association. Pursuant to the terms of the Shareholders Agreement,
the Trust will use commercially reasonable efforts to acquire, through open
market or private block purchases in the U.S., beneficial ownership of
approximately 7% of the outstanding shares of the Parent Company's common stock
within a period of 12 months following the date the Trust begins acquiring such
stock. On May 7, 2019, a press release issued by Japan Post Holdings announced
that purchases of shares of the Parent Company's common stock commenced on April
29, 2019 through the Trust and that it planned to complete such purchases within
Japan Post's fiscal year 2019 (which ends March 31, 2020).

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

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

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

Aflac Japan Investments



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

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

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



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

(In millions)                             2019       2018
Yen-denominated:
 Fixed maturity securities:

Japan government and agencies $ 583 $ 3,895


   Private placements                     1,122       1,185

Other fixed maturity securities 542 796


 Equity securities                          212         221
    Total yen-denominated               $ 2,459    $  6,097

U.S. dollar-denominated:
 Fixed maturity securities:

Other fixed maturity securities $ 2,767 $ 1,299


   Infrastructure debt                       66           0
   Bank loans                                 0         346
 Equity securities                           58         120

Commercial mortgage and other loans:

Transitional real estate loans 1,846 3,168


   Commercial mortgage loans                565          13
   Middle market loans                    1,442         839
 Other investments                          145         314
    Total dollar-denominated            $ 6,889    $  6,099
      Total Aflac Japan purchases       $ 9,348    $ 12,196

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



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

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


                                                                 2019       

2018


Total purchases for the period (in millions) (1)               $ 9,203     $ 11,882
New money yield (1),(2)                                           3.83 %       3.06 %
Return on average invested assets (3)                             2.33      

2.33

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

                                    2.64 %    

2.61 %




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

The increase in the Aflac Japan new money yield in 2019 was primarily due to decreased allocations to lower yielding yen-denominated asset classes.



See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and
the Investments section of this MD&A for additional information on the Company's
investments and hedging strategies.


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


                               AFLAC U.S. SEGMENT

Aflac U.S. Pretax Adjusted Earnings



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

(In millions)                                        2019        2018
Net premium income                                $ 5,808      $ 5,708
Net investment income                                 720          727
Other income                                           22            8
Total adjusted revenues                             6,550        6,443
Benefits and claims                                 2,871        2,887

Adjusted expenses: Amortization of deferred policy acquisition costs 573 534 Insurance commissions

                                 590          585
Insurance and other expenses                        1,244        1,152
Total adjusted expenses                             2,407        2,271
Total benefits and adjusted expenses                5,279        5,158
Pretax adjusted earnings                          $ 1,272      $ 1,285
Percentage change over previous period:
Net premium income                                    1.8  %       2.6 %
Net investment income                                (1.0 )         .8
Total adjusted revenues                               1.7          2.4
Pretax adjusted earnings                             (1.0 )        3.2



Annualized premiums in force increased 1.1% in 2019 and 3.0% in 2018. Annualized
premiums in force at December 31 were $6.3 billion in 2019, compared with $6.2
billion in 2018.

The following table presents a summary of operating ratios for Aflac U.S. for
the years ended December 31.
Ratios to total adjusted revenues:                 2019     2018
Benefits and claims                               43.8 %   44.8 %
Adjusted expenses:
Amortization of deferred policy acquisition costs  8.7      8.3
Insurance commissions                              9.0      9.1
Insurance and other expenses                      19.0     17.9
Total adjusted expenses                           36.7     35.2
Pretax adjusted earnings                          19.4     19.9
Ratios to total premiums:
Benefits and claims                               49.4     50.6
Adjusted expenses:
Amortization of deferred policy acquisition costs  9.9      9.4



The benefit ratio decreased in 2019, compared with 2018, primarily due to
somewhat elevated lapses and a change in business mix from higher loss ratio,
reserve building products to lower loss ratio, guaranteed issue products. The
adjusted expense ratio increased in 2019, compared with 2018, primarily due to
deferred policy acquisition costs (DAC) capitalization related to lower than
anticipated sales as well as anticipated spending increases reflecting ongoing
investments in the U.S. platform, distribution, and customer experience. Both
the lower benefit and higher DAC amortization ratios were also impacted by
increases in lapses as a result of large case volatility and replacement of an
administrative partner. These items impacted persistency in the short-term but
are expected to drive profitable earned premium growth in future periods. The
pretax adjusted

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



profit margin declined in 2019 when compared with 2018, due to higher expense
ratios, offset somewhat by lower benefit ratios. For expectations for 2020, see
the 2020 Outlook section of this MD&A.

Aflac U.S. Sales



The following table presents Aflac's U.S. new annualized premium sales for the
years ended December 31.
(In millions)                            2019        2018

New annualized premium sales $ 1,580 $ 1,601 Increase (decrease) over prior period (1.3 )% 3.2 %

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


                       2019      2018
Accident               28.5 %    29.2 %

Short-term disability 22.5 22.7


  Critical care (1)    21.9      22.1
Hospital indemnity     16.6      15.8
Dental/vision           4.4       4.7
Life                    6.1       5.5
Total                 100.0 %   100.0%


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



New annualized premium sales for accident insurance, the Aflac U.S. leading
product category, decreased 3.8%, short-term disability sales decreased 2.4%,
critical care insurance sales (including cancer insurance) decreased 2.4%, and
hospital indemnity insurance sales increased 3.7% in 2019, compared with 2018.
While overall sales decreased in 2019, net earned premium increased 1.8%.
In 2019, the Aflac U.S. sales forces included an average of approximately 8,200
U.S. agents, including brokers, who were actively producing business on a weekly
basis. The Company believes that this average weekly producer equivalent metric
allows sales management to monitor progress and needs.

In November 2019, the Company acquired Argus Holdings, LLC and its subsidiary
Argus Dental & Vision, Inc. (Argus), a benefits management organization and
national network dental and vision company, which provides a platform for Aflac
Dental and Vision. This transaction represents a commitment of $75 million in
capital at closing and an additional $21 million in consideration paid over
three years based on the achievement by Argus of certain performance targets.
Tampa, Florida will serve as the home for Aflac Dental and Vision. This
acquisition is a strategic entry point into the network dental and vision market
and is expected to provide opportunities for sales growth, improved account
penetration and distribution productivity.
Aflac U.S. Investments
The level of investment income is affected by available cash flow from
operations, the timing of investing the cash flow, yields on new investments,
and other factors.

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

The following table details the investment purchases for Aflac U.S. as of December 31.


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



(In millions)                            2019       2018

Fixed maturity securities:

Other fixed maturity securities $ 1,032 $ 1,068


   Infrastructure debt                     119         97
Equity securities                           58         76

Commercial mortgage and other loans:

Transitional real estate loans 423 610


   Commercial mortgage loans               104        163
   Middle market loans                      99        141
Other investments                           16         44

Total Aflac U.S. Purchases $ 1,851 $ 2,199





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

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


                                               2019        2018

Total purchases for period (in millions) (1) $ 1,835 $ 2,155 New money yield (1), (2)

                        4.51 %      4.55 %
Return on average invested assets (3)           5.07        5.16

Portfolio book yield, end of period (1) 5.40 % 5.55 %




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

See Note 3 of the Notes to the Consolidated Financial Statements and the Market Risks of Financial Instruments - Credit Risk subsection of MD&A for more information regarding the sector concentrations of the Company's investments.




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


                              CORPORATE AND OTHER

Changes in the pretax adjusted earnings of Corporate and other are primarily
affected by investment income. The following table presents a summary operating
results for Corporate and other for the years ended December 31.

                Corporate and Other Summary of Operating Results
(In millions)                                               2019       2018
Premium income                                             $ 200     $  208
Net investment income                                         88         77

Amortized hedge income related to certain foreign currency


  management strategies                                       89         36
Net investment income, including amortized hedge income      177        113
Other income                                                  15         18
Total adjusted revenues                                      393        339
Benefits and claims, net                                     194        199
Adjusted expenses:
Interest expense                                             133        120
Other adjusted expenses                                      137        159
Total adjusted expenses                                      270        279
Total benefits and adjusted expenses                         464        478
Pretax adjusted earnings                                   $ (72 )   $ (139 )



Net investment income benefited from the Company's enterprise corporate hedging
program for the years ended December 31, 2019 and 2018, respectively. See the
Hedging Activities subsection of this MD&A for further information on the
enterprise corporate hedging program.

In December 2018, the Parent Company invested $20 million in Singapore Life Pte.
Ltd. (Singapore Life), a digitally-focused life insurance company based in
Singapore. The Parent Company made an additional investment of $16 million in
the second quarter of 2019, bringing the total investment to $36 million. As
part of the relationship, Aflac entered into a reinsurance agreement on certain
protection products with Singapore Life in September 2019. However, the Company
does not currently expect the equity investment or the reinsurance agreement to
have a material impact on its financial position or results of operations.

                                  INVESTMENTS

The Company's investment strategy utilizes disciplined asset and liability
management while seeking long-term risk-adjusted investment returns and the
delivery of stable income within regulatory and capital objectives, and
preserving shareholder value. In attempting to optimally balance these
objectives, the Company seeks to maintain on behalf of Aflac Japan a diversified
portfolio of yen-denominated investment assets, a U.S. dollar-denominated
investment portfolio hedged back to yen and a portfolio of unhedged U.S.
dollar-denominated assets. As part of the Company's portfolio management and
asset allocation process, Aflac U.S. invests in fixed maturity investments and
growth assets, including public equity securities and alternative investments in
limited partnerships. Aflac U.S. invests in both publicly traded and privately
originated investment-grade and below-investment-grade fixed maturity securities
and loans.

For additional information concerning the Company's investments, see Notes 3, 4, and 5 of the Notes to the Consolidated Financial Statements.


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

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



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

(1) Includes securities lending collateral



                                                                2018
                                                                      Corporate and
(In millions)                     Aflac Japan        Aflac U.S.           Other            Total
Available for sale, fixed
maturity securities,
  at fair value                 $      69,409      $     12,132      $       1,354      $   82,895
Held to maturity, fixed
maturity securities,
  at amortized cost                    30,318                 0                  0          30,318
Equity securities                         806               137                 44             987
Commercial mortgage and other
loans:
Transitional real estate loans          3,621               756                  0           4,377
Commercial mortgage loans                 763               301                  0           1,064
Middle market loans                     1,144               334                  0           1,478
Other investments:
Policy loans                              219                13                  0             232
Short-term investments (1)                  0               141                 11             152
Limited partnerships                      333                37                  7             377
Other                                       0                26                  0              26
   Total investments                  106,613            13,877              1,416         121,906
Cash and cash equivalents               1,779               641              1,917           4,337
       Total investments and
cash                            $     108,392      $     14,518      $       3,333      $  126,243

(1) Includes securities lending collateral



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

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

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



           Composition of Fixed Securities Portfolio by Credit Rating
                       2019                         2018
             Amortized        Fair        Amortized        Fair
                Cost         Value           Cost         Value
AAA              1.1 %         1.0 %          1.0 %          .9 %
AA               4.3           4.4            3.9           4.0
A               68.6          69.8           67.9          69.9
BBB             23.1          22.1           23.2          21.6
BB or lower      2.9           2.7            4.0           3.6
Total          100.0 %       100.0 %        100.0 %       100.0 %


As of December 31, 2019, the Company's direct and indirect exposure to securities in its investment portfolio that were guaranteed by third parties was immaterial both individually and in the aggregate.

The following table presents the 10 largest unrealized loss positions in the Company's portfolio as of December 31, 2019.


                                   Credit      Amortized       Fair        

Unrealized


(In millions)                      Rating        Cost          Value        

Loss


Diamond Offshore Drilling Inc.       CCC        $    64        $ 32         $     (32 )
AXA                                  BBB            296         271               (25 )
Transocean Inc.                      CCC             50          37               (13 )
Intesa Sanpaolo Spa                  BBB            142         132               (10 )
Baker Hughes Inc.                     A             123         114                (9 )
Kommunal Landspensjonskasse (KLP)    BBB            137         129                (8 )
Mirvac Group Finance Ltd.             A              91          84                (7 )
Autostrade Per Litalia Spa           BBB            182         175                (7 )
Downer Group Finance Pty LTD         BBB             91          85                (6 )
Chevron Corp.                        AA             148         142                (6 )



Generally, declines in fair values can be a result of changes in interest rates,
yen/dollar exchange rate, and changes in net spreads driven by a broad market
move or a change in the issuer's underlying credit quality. As the Company
believes these issuers have the ability to continue making timely payments of
principal and interest, the Company views these changes in fair value to be
temporary. See the Unrealized Investment Gains and Losses section in Note 3 of
the Notes to the Consolidated Financial Statements for further discussions of
unrealized losses related to financial institutions and other corporate
investments.
Below-Investment-Grade Securities
The Company's portfolio of below-investment-grade securities includes debt
securities purchased while the issuer was rated investment grade plus other
loans and bonds purchased as part of an allocation to that segment of the
market. The following is the Company's below-investment-grade exposure.


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



                       Below-Investment-Grade Investments
                                                         December 31, 2019
                                                                               Unrealized
                                           Par       Amortized       Fair         Gain
(In millions)                             Value         Cost        Value        (Loss)
Investcorp Capital Limited               $   388    $       388    $   452    $      64
Republic of South Africa                     365            365        372            7
Barclays Bank PLC                            183            115        157           42
KLM Royal Dutch Airlines                     183            136        143            7
Telecom Italia SpA                           183            183        241           58
IKB Deutsche Industriebank AG                118             51        102           51
Arconic Inc.                                 100             85        111           26
EMC Corp.                                     80             80         82            2
Generalitat de Catalunya                      73             27         80           53
Teva Pharmaceuticals                          68             66         61           (5 )
Other Issuers                                456            436        420          (16 )
     Subtotal (1)                          2,197          1,932      2,221          289
Senior secured bank loans                    462            480        459          (21 )
High yield corporate bonds                   726            723        755           32

Middle market loans, net of reserves (2) 2,455 2,412 2,420


          8
     Grand Total                         $ 5,840    $     5,547    $ 5,855    $     308


(1) Securities initially purchased as investment grade, but have subsequently
been downgraded to below investment grade
(2) Middle market loans are carried at amortized cost

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



The Company maintains an allocation to higher yielding corporate bonds within
the Aflac Japan and Aflac U.S. portfolios. Most of these securities were rated
below-investment-grade at the time of purchase, but the Company also purchased
several that were rated investment grade which, because of market pricing, offer
yields commensurate with below-investment-grade risk profiles. The objective of
this allocation was to enhance the Company's yield on invested assets and
further diversify credit risk. All investments in this program must have a
minimum rating at purchase of low BB using the Company's above described rating
methodology and are managed by the Company's internal credit portfolio
management team.
Fixed Maturity Securities by Sector
The Company maintains diversification in investments by sector to avoid
concentrations to any one sector, thus managing exposure risk. The following
table shows the distribution of fixed maturities by sector classification as of
December 31.


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

                                                     2019
                                           Amortized             % of
(In millions)                                 Cost              Total
Government and agencies                 $       53,463             48.8 %
Municipalities                                   2,414              2.2
Mortgage- and asset-backed securities              394               .4
Public utilities                                 8,194              7.5
Electric                                         6,471              5.9
Natural Gas                                        303               .3
Other                                              695               .6
Utility/Energy                                     725               .7
Sovereign and Supranational                      2,042              1.9
Banks/financial institutions                     9,947              9.1
Banking                                          6,029              5.5
Insurance                                        1,948              1.8
Other                                            1,970              1.8
Other corporate                                 33,002             30.1
Basic Industry                                   3,484              3.2
Capital Goods                                    3,187              2.9
Communications                                   4,057              3.7
Consumer Cyclical                                3,271              3.0
Consumer Non-Cyclical                            6,280              5.7
Energy                                           4,281              3.9
Other                                            1,464              1.3
Technology                                       3,129              2.9
Transportation                                   3,849              3.5
    Total fixed maturity securities     $      109,456            100.0 %


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


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

The following table details investment securities by type of issuance as of December 31.



                   Investment Securities by Type of Issuance
                                                  2019                                       2018
                                      Amortized                Fair               Amortized           Fair
(In millions)                            Cost                 Value                 Cost             Value
Publicly issued securities:
Fixed maturity securities          $  89,625              $ 105,557              $  83,482         $  93,255
Equity securities                        717                    717                    936               936
   Total publicly issued              90,342                106,274                 84,418            94,191
Privately issued securities: (1)
Fixed maturity securities             19,831   (2  )         23,299   (2  )         23,692            26,362
Equity securities                         85                     85                     51                51
   Total privately issued             19,916                 23,384                 23,743            26,413
   Total investment securities     $ 110,258              $ 129,658              $ 108,161         $ 120,604

(1) Primarily consists of securities owned by Aflac Japan (2) Excludes Rule 144A securities starting in the first quarter of 2019

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

Reverse-Dual Currency Securities(1)
(Amortized cost, in millions)                               2019            

2018

Privately issued reverse-dual currency securities $ 4,993 $ 5,120 Publicly issued collateral structured as reverse-dual currency securities

                                         1,678           

1,657


Total reverse-dual currency securities                   $  6,671          $  6,777
Reverse-dual currency securities as a percentage of
total investment
securities                                                    6.1 %             6.3 %

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



Aflac Japan has a portfolio of privately issued securities to better match
liability characteristics and secure higher yields than those available on
Japanese government or other public corporate bonds. Aflac Japan's investments
in yen-denominated privately issued securities consist primarily of non-Japanese
issuers, are rated investment grade at purchase and have longer maturities,
thereby allowing the Company to improve asset/liability matching and overall
investment returns. These securities are generally either privately negotiated
arrangements or issued under medium-term note programs and have standard
documentation commensurate with credit ratings of the issuer, except when
internal credit analysis indicates that additional protective and/or event-risk
covenants were required. Many of these investments have protective covenants
appropriate to the specific investment. These may include a prohibition of
certain activities by the borrower, maintenance of certain financial measures,
and specific conditions impacting the payment of the Company's notes.

                               HEDGING ACTIVITIES

The Company uses derivative contracts to hedge foreign currency exchange rate
risk and interest rate risk. The Company uses various strategies, including
derivatives, to manage these risks. See item "7A. Quantitative and Qualitative
Disclosures About Market Risk" for more information about Market risk and the
Company's use of derivatives.

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



•      A description of the Company's derivatives, hedging strategies and
       underlying risk exposure.


•      Information about the notional amount and fair market value of the
       Company's derivatives.

• The unrealized and realized gains and losses impact on adjusted earnings


       of derivatives in cash flow, fair value, net investments in foreign
       operations, or non-qualifying hedging relationships.





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

Foreign Currency Exchange Rate Risk Hedge Program

The Company has deployed the following hedging strategies to mitigate exposure to foreign currency exchange rate risk:



•      Aflac Japan hedges U.S. dollar-denominated investments back to yen (see
       Aflac Japan's U.S. Dollar-Denominated Hedge Program below).


• Aflac Japan maintains certain unhedged U.S. dollar-denominated securities,

which serve as an economic currency hedge of a portion of the Company's


       investment in Aflac Japan (see Aflac Japan's U.S. Dollar-Denominated Hedge
       Program below).


The Parent Company designates yen-denominated liabilities (notes payable

and loans) as non-derivative hedging instruments and designates certain

foreign currency forwards and options as derivative hedges of the

Company's net investment in Aflac Japan (see Enterprise Corporate Hedging


       Program below).


The Parent Company enters into forward and option contracts to accomplish

a dual objective of hedging foreign currency exchange rate risk related to

dividend payments by its subsidiary, ALIJ, and reducing enterprise-wide

hedge costs. (see Enterprise Corporate Hedging Program below).

Aflac Japan's U.S. Dollar-Denominated Hedge Program



Aflac Japan buys U.S. dollar-denominated investments, typically corporate bonds,
and hedges them back to yen with foreign currency forwards and options to hedge
foreign currency exchange rate risk. This economically creates yen assets that
match yen liabilities during the life of the derivative and provides capital
relief. The currency risk being hedged is generally based on fair value of
hedged investments. The following table summarizes the U.S. dollar-denominated
investments held by Aflac Japan as of December 31.
                                                      2019                        2018
                                              Amortized      Fair         Amortized      Fair
(In millions)                                   Cost         Value          Cost         Value
Available-for-sale securities:
 Fixed maturity securities (excluding bank
loans)                                      $    18,012   $  19,542     $   

17,101 $ 17,003


 Fixed maturity securities - bank loans
(floating rate)                                     677         649           1,296       1,238
Equity securities                                    19          19             177         177
Commercial mortgage and other loans:
 Transitional real estate loans (floating
rate)                                             4,507       4,543         

3,621 3,625


 Commercial mortgage loans                        1,308       1,319         

763 736


 Middle market loans (floating rate)              2,141       2,153           1,144       1,146
Other investments                                   496         496             333         333
   Total U.S. Dollar Program                     27,160      28,721          24,435      24,258
Available-for-sale securities:
 Fixed maturity securities - economically
converted to yen                                  1,700       2,608         

1,679 2,269


   Total U.S. dollar-denominated
investments in Aflac Japan                  $    28,860   $  31,329     $    26,114   $  26,527



U.S. Dollar Program includes all U.S. dollar-denominated investments in Aflac
Japan other than the investments in certain consolidated VIEs where the
instrument is economically converted to yen as a result of a derivative in the
consolidated variable interest entity. As of December 31, 2019, Aflac Japan had
$8.8 billion outstanding notional amounts of foreign currency forwards and $21.1
billion outstanding notional amounts of foreign currency options, of which none
were in-the-money, hedging the U.S. dollar-denominated investments. The fair
value of Aflac Japan's unhedged U.S. dollar-denominated portfolio was $19.9
billion (excluding certain U.S. dollar-denominated assets shown in the table
above as a result of consolidation that have been economically converted to yen
using derivatives).

Foreign exchange derivatives used for hedging are periodically settled, which
results in cash receipt or payment at maturity or early termination. The Company
had net cash outflows of $20 million in 2019, net cash inflows of $272 million
in

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

2018 and net cash outflows of $747 million in 2017, associated with the currency derivatives used for hedging Aflac Japan's U.S. dollar-denominated investments.

Enterprise Corporate Hedging Program



The Company has designated certain yen-denominated liabilities and foreign
currency forwards and options of the Parent Company as accounting hedges of its
net investment in Aflac Japan. The Company's consolidated yen-denominated net
asset position was partially hedged at $9.1 billion as of December 31, 2019,
compared with $1.8 billion as of December 31, 2018.

The Company makes its accounting designation of net investment hedge at the
beginning of each quarter. If the total of the designated Parent Company
non-derivative and derivative notional is equal to or less than the Company's
net investment in Aflac Japan, the hedge is deemed to be effective, and the
currency exchange effect on the yen-denominated liabilities and the change in
estimated fair value of the derivatives are reported in the unrealized foreign
currency component of other comprehensive income. The Company's net investment
hedge was effective during the years ended December 31, 2019 and 2018,
respectively. For additional information on the Company's net investment hedging
strategy, see Note 4 of the Notes to the Consolidated Financial Statements.

In order to economically mitigate risks associated with the enterprise-wide
exposure to the yen and the level and volatility of hedge costs, the Parent
Company enters into foreign exchange forward and option contracts. By buying
U.S. dollars and selling yen, the Parent Company is effectively lowering its
overall economic exposure to the yen, while Aflac Japan's U.S dollar exposure
remains reduced as a result of Aflac Japan's U.S. dollar-denominated hedge
program that economically creates yen assets. Among other objectives, this
strategy is intended to offset the enterprise-wide amortized hedge costs by
generating amortized hedge income. The portion of the enterprise-wide amortized
hedge income contributed by this strategy was $89 million in 2019 and $36
million in 2018. This activity is reported in Corporate and Other. As this
program evolves, the Company will continue to evaluate the program's efficacy.
See the Results of Operations section of this MD&A for the Company's definition
of amortized hedge costs/income.

The following table presents metrics related to Aflac Japan amortized hedge
costs and the Parent Company amortized hedge income for the years ended December
31.

                       Aflac Japan Hedge Cost Metrics(1)
                                                                 2019       2018
Aflac Japan:

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

$8.8

$9.9


  Weighted average remaining tenor (in months)(3)                 8.5       

21.4

Amortized hedge income (cost) for period (in millions) $(257) $(236) Parent Company:

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

$4.9

$2.5


  Weighted average remaining tenor (in months)(3)                13.7       

16.1

Amortized hedge income (cost) for period (in millions) $89

$36




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

Interest Rate Risk Hedge Program

Aflac Japan and Aflac U.S. use interest rate swaps to mitigate the risk of investment income volatility for certain variable-rate investments. Additionally, to manage interest rate risk associated with its U.S. dollar-denominated investments held by Aflac Japan, the Company utilizes interest rate swaptions.



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


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

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


                               POLICY LIABILITIES

The following table presents policy liabilities by segment and in total for the
years ended December 31.
(In millions)                                2019         2018
Japan segment:
Future policy benefits                    $  81,462    $  77,812
Unpaid policy claims                          2,879        2,857
Other policy liabilities                     11,452       12,122
Total Japan policy liabilities               95,793       92,791
U.S. segment:
Future policy benefits                        9,405        9,137
Unpaid policy claims                          1,779        1,727
Other policy liabilities                        111          117
Total U.S. policy liabilities                11,295       10,981

Consolidated:


Future policy benefits                       90,335       86,368
Unpaid policy claims                          4,659        4,584
Other policy liabilities                     11,560       12,236

Total consolidated policy liabilities (1) $ 106,554 $ 103,188

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

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


                                 BENEFIT PLANS

Aflac Japan and Aflac U.S. have various benefit plans. For additional information on the Company's Japanese and U.S. plans, see Note 14 of the Notes to the Consolidated Financial Statements.


                            POLICYHOLDER PROTECTION

Policyholder Protection Corporation



The Japanese insurance industry has a policyholder protection system that
provides funds for the policyholders of insolvent insurers. Legislation enacted
regarding the framework of the Life Insurance Policyholder Protection
Corporation (LIPPC) included government fiscal measures supporting the LIPPC. In
November 2016, Japan's Diet passed legislation that again extends the
government's fiscal support of the LIPPC through March 2022. Effective April
2014, the annual LIPPC contribution amount for the total life industry was
lowered from ¥40 billion to ¥33 billion. Aflac Japan recognized an expense of
¥1.9 billion and ¥2.0 billion for the years ended December 31, 2019 and 2018,
respectively, for LIPPC assessments.

Guaranty Fund Assessments



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

                         OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2019, the Company had no material letters of credit, standby
letters of credit, guarantees or standby repurchase obligations. See Note 15 of
the Notes to the Consolidated Financial Statements for information on material
unconditional purchase obligations that are not recorded on the Company's
balance sheet.

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


                        LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the ability to generate sufficient cash resources to meet
the payment obligations of the Company. Capital refers to the long-term
financial resources available to support the operations of the businesses, fund
business growth and provide for an ability to withstand adverse circumstances.
Financial leverage (leverage) refers to an investment strategy of using debt to
increase the potential return on equity. The Company targets and actively
manages liquidity, capital and leverage in the context of a number of
considerations, including:

• business investment and growth needs

• strategic growth objectives

• financial flexibility and obligations

• capital support for hedging activity

• a constantly evolving business and economic environment

• a balanced approach to capital allocation and shareholder deployment.

The governance framework supporting liquidity, capital and leverage includes global senior management and board committees that review and approve all significant capital related decisions.



The Company's cash and cash equivalents include unrestricted cash on hand, money
market instruments, and other debt instruments with a maturity of 90 days or
less when purchased, all of which has minimal market, settlement or other risk
exposure. The target minimum amount for the Parent Company's cash and cash
equivalents is approximately $2.0 billion to provide available capital and
liquidity support at the holding company. Aflac Japan and Aflac U.S. provide the
primary sources of liquidity to the Parent Company through the payment of
dividends and management fees. The following table presents the amounts provided
to the Parent Company for the years ended December 31.
              Liquidity Provided by Subsidiaries to Parent Company
(In millions)                                2019       2018

Dividends declared or paid by subsidiaries $ 3,466 $ 1,817 Management fees paid by subsidiaries

           151        204


The decline in dividends during 2018 was driven by a change in the dividend
regulatory approval process subsequent to the conversion of Aflac Japan from a
branch to a subsidiary on April 1, 2018. The Company resumed dividend payments
from Aflac Japan in the fourth quarter of 2018. Management fees decreased during
2019 and 2018, compared to prior years, due to changes in the administration of
intercompany expenses between legal entities subsequent to the conversion, as
well.

Prior to the Aflac Japan branch conversion, Aflac Japan paid allocated expenses
and profit remittances to Aflac U.S. The following table details Aflac Japan
remittances for the years ended December 31.

                            Aflac Japan Remittances
(In millions of dollars and billions of yen)                      2019      

2018


Aflac Japan management fees paid to Parent Company              $    75       $  136
Expenses allocated to Aflac Japan (in dollars)                        4     

24

Aflac Japan profit remittances to the Parent Company or Aflac U.S. (in dollars)

                                                 2,070     

808


Aflac Japan profit remittances to the Parent Company or Aflac
U.S. (in yen)                                                   ¥ 225.2       ¥ 89.7



In 2018, the Company announced a change in its internal dividend policy which
allows the Company to increase the proportion of regulatory earnings transferred
from Aflac U.S. and Aflac Japan to the Parent Company. The Company intends to
maintain higher than historical levels of capital and liquidity at the Parent
Company with the goals of addressing the Company's hedge costs and related
potential need for collateral and mitigating against long-term weakening of the
Japanese yen. Further, the Company plans to continue to maintain a portfolio of
unhedged U.S. dollar based investments at Aflac Japan and consider whether the
amount of such investments should be increased or decreased relative to the
Company's view of economic equity surplus in Aflac Japan in light of potentially
rising hedge costs and other factors. See the "Hedging Activity" subsection in
this MD&A for more information.


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



In addition to cash and equivalents, the Company also maintains credit
facilities, both intercompany and with external partners, and a number of other
available tools to support liquidity needs on a global basis. In September 2018,
the Parent Company filed a shelf registration statement with the SEC that allows
the Company to issue an indefinite amount of debt securities, in one or more
series, from time to time until September 2021. In August 2018, the Parent
Company filed a shelf registration with Japanese regulatory authorities that
allows the Parent Company to conduct public offerings of bonds in Japan,
including yen-denominated Samurai notes, up to ¥200 billion or its equivalent
through August 2020. The shelf registration statement is for possible public
offerings in Japan, but the bonds issued under the shelf may be transferred by
the bondholders to U.S. persons in compliance with U.S. law. The Company
believes outside sources for additional debt and equity capital, if needed, will
continue to be available. Additionally, as of December 31, 2019, the Parent
Company and Aflac had four lines of credit with third parties and three
intercompany lines of credit. For additional information, see Note 9 of the
Notes to the Consolidated Financial Statements.

The primary uses of cash by the Parent Company are shareholder dividends, the
repurchase of its common stock and interest on its outstanding indebtedness and
operating expenses.

                         Major Contractual Obligations

The following table presents the estimated payments by period of the Company's
major contractual obligations as of December 31, 2019. The Company translated
its yen-denominated obligations using the December 31, 2019, exchange rate.
Actual future payments as reported in dollars will fluctuate with changes in the
yen/dollar exchange rate.
                       Distribution of Payments by Period
                                                                    Less
                                  Total               Total         Than           One to           Four to           After
(In millions)                  Liability(1)         Payments      One Year       Three Years       Five Years       Five Years
Future policy benefits
liability (Note 7)(2)        $       90,335        $ 244,884     $   9,221     $      18,151     $     18,224     $    199,288
Unpaid policy claims
liability (Note 7)(3)                 4,659            4,660         2,985               980              394              301
Other policyholders' funds
(Note 7)(3)                           7,317            9,902           341               389              706            8,466
Long-term debt - principal
(Note 9)                              6,408            6,458             0               350            1,450            4,658
Long-term debt - interest
(Note 9)                                 44            2,036           171               320              262            1,283
Cash collateral on loaned
securities (Note 3)                   1,876            1,876         1,876                 0                0                0
Operating service agreements
(Note 15)                               N/A   (4)        463           179               279                5                0
Operating lease obligations
(Note 9)                                149              159            49                68               20               22
Finance lease obligations
(Note 9)                                 12               12             4                 5                3                0
Total contractual
obligations                  $      110,800        $ 270,450     $  14,826     $      20,542     $     21,064     $    214,018


Liabilities for unrecognized tax benefits in the amount of $17 have been
excluded from the tabular disclosure above because the timing of cash payment is
not reasonably estimable.
(1)Liability amounts are those reported on the consolidated balance sheet as of
December 31, 2019.
(2)The estimated payments due by period reflect future estimated cash payments
to be made to policyholders and others for future policy benefits. These
projected cash outflows are based on assumptions for future policy persistency,
mortality, morbidity, and other assumptions comparable with the Company's
experience, consider future premium receipts on current policies in force, and
assume market growth and interest crediting consistent with assumptions used in
amortizing deferred acquisition costs. These cash outflows are undiscounted with
respect to interest and, as a result, the sum of the cash outflows shown for all
years in the table of $244,884 exceeds the corresponding liability amount of
$90,335. The Company has made significant assumptions to determine the future
estimated cash outflows related to the underlying policies and contracts. Due to
the significance of the assumptions used, actual cash outflow amounts and timing
will differ, possibly materially, from these estimates.
(3)Includes assumptions as to the timing of policyholders reporting claims for
prior periods and the amount of those claims. Actual amounts and timing of
unpaid policy claims payments may differ significantly from the estimates above.
(4)Not applicable

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



The Company's financial statements convey its financing arrangements during the
periods presented. The Company has not engaged in material intra-period
short-term financings during the periods presented that are not otherwise
reported in its balance sheet or disclosed therein. The Company was in
compliance with all of the covenants of its notes payable and lines of credit at
December 31, 2019. The Company has not entered into transactions involving the
transfer of financial assets with an obligation to repurchase financial assets
that have been accounted for as a sale under applicable accounting standards,

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



including securities lending transactions. See Notes 1, 3, and 4 of the Notes to
the Consolidated Financial Statements for more information on the Company's
securities lending and derivative activities. With the exception of disclosed
activities in those referenced footnotes and the Risk Factors entitled, "The
Company is exposed to foreign currency fluctuations in the yen/dollar exchange
rate" and "Lack of availability of acceptable yen-denominated investments could
adversely affect the Company's results of operations, financial position or
liquidity," the Company is not aware of a trend, demand, commitment, event or
uncertainty that would likely result in its liquidity increasing or decreasing
by a material amount.
                            Consolidated Cash Flows

The Company translates cash flows for Aflac Japan's yen-denominated items into
U.S. dollars using weighted-average exchange rates. In years when the yen
weakens, translating yen into dollars causes fewer dollars to be reported. When
the yen strengthens, translating yen into dollars causes more dollars to be
reported.

The following table summarizes consolidated cash flows by activity for the years
ended December 31.
(In millions)                                  2019        2018
Operating activities                         $ 5,455     $ 6,014
Investing activities                          (3,171 )    (3,582 )
Financing activities                          (1,713 )    (1,616 )

Exchange effect on cash and cash equivalents (12 ) 30 Net change in cash and cash equivalents $ 559 $ 846


                              Operating Activities
The principal cash inflows for the Company's insurance activities come from
insurance premiums and investment income. The principal cash outflows are the
result of policy claims, operating expenses, income tax, as well as interest
expense. As a result of policyholder aging, claims payments are expected to
gradually increase over the life of a policy. Therefore, future policy benefit
reserves are accumulated in the early years of a policy and are designed to help
fund future claims payments.
The Company expects its future cash flows from premiums and its investment
portfolio to be sufficient to meet its cash needs for benefits and expenses.
Consolidated cash flow from operations decreased 9.3% in 2019, compared with
2018.



                              Investing Activities



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

As part of its overall corporate strategy, the Company has announced an increase
in its commitment to the Aflac Ventures Fund from $250 million to $400 million,
as opportunities emerge. These investments are included in equity securities or
the other investments line in the consolidated balance sheets. The Aflac
Ventures Fund is a subsidiary of Aflac Corporate Ventures which is reported in
the Corporate and other segment. The central mission of Aflac Corporate Ventures
is to support the organic growth and business development needs of Aflac Japan
and Aflac U.S. with emphasis on digital applications designed to improve the
customer experience, gain efficiencies, and develop new markets in an effort to
enhance and defend long-term shareholder value.

As part of an arrangement with Federal Home Loan Bank of Atlanta (FHLB), Aflac
U.S. obtains low-cost funding from FHLB supported by acceptable forms of
collateral pledged by Aflac U.S. Aflac U.S. borrowed and repaid $217 million
under this program during 2019. As of December 31, 2019, Aflac U.S. had
outstanding borrowings of $403 million reported in its balance sheet.


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

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


                              Financing Activities

Consolidated cash used by financing activities was $1.7 billion in 2019 and $1.6 billion in 2018.



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

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

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

In October 2018, the Parent Company issued $550 million of senior notes through
a U.S. public debt offering. The notes bear interest at a fixed rate of 4.750%
per annum, payable semi-annually, and will mature in January 2049. These notes
are redeemable at the Parent Company's option in whole at any time or in part
from time to time at a redemption price equal to the greater of: (i) the
aggregate principal amount of the notes to be redeemed or (ii) the amount equal
to the sum of the present values of the remaining scheduled payments for
principal of and interest on the notes to be redeemed, not including any portion
of the payments of interest accrued as of such redemption date, discounted to
such redemption date on a semiannual basis at the yield to maturity for a
U.S.Treasury security with a maturity comparable to the remaining term of the
notes, plus 25 basis points, plus in each case, accrued and unpaid interest on
the principal amount of the notes to be redeemed to, but excluding, such
redemption date.

In October 2018, the Parent Company issued three series of senior notes totaling
¥53.4 billion through a public debt offering under its U.S. shelf registration
statement. The first series, which totaled ¥29.3 billion, bears interest at a
fixed rate of 1.159% per annum, payable semi-annually, and will mature in
October 2030. The second series, which totaled ¥15.2 billion, bears interest at
a fixed rate of 1.488% per annum, payable semi-annually, and will mature in
October 2033. The third series, which totaled ¥8.9 billion, bears interest at a
fixed rate of 1.750% per annum, payable semi-annually, and will mature in
October 2038. These notes may only be redeemed before maturity, in whole but not
in part, upon the occurrence of certain changes affecting U.S. taxation, as
specified in the indenture governing the terms of the issuance.

In November 2018, the Parent Company used the net proceeds from the October 2018 issuance of its senior notes to redeem $550 million of the Parent Company's 2.40% senior notes due in 2020.

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

The Company was in compliance with all of the covenants of its notes payable and lines of credit at December 31, 2019.

Cash returned to shareholders through treasury stock purchases and dividends was $2.4 billion in 2019, compared with $2.1 billion in 2018.

The following tables present a summary of treasury stock activity during the years ended December 31.



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


                            Treasury Stock Purchased
(In millions of dollars and thousands of shares)   2019       2018
Treasury stock purchases                         $ 1,627    $ 1,301
Number of shares purchased:
Share repurchase program                          31,994     28,949
Other                                                592        392
  Total shares purchased                          32,586     29,341



                             Treasury Stock Issued

(In millions of dollars and thousands of shares) 2019 2018 Stock issued from treasury:


  Cash financing                                 $   49    $   58
  Noncash financing                                  50        17
  Total stock issued from treasury               $   99    $   75
Number of shares issued                           2,324     1,939



Under share repurchase authorizations from the Company's board of directors, the
Company purchased 32.0 million shares of its common stock in 2019, compared with
28.9 million shares in 2018. As of December 31, 2019, a remaining balance of
37.1 million shares of the Company's common stock was available for purchase
under share repurchase authorizations by its board of directors. The Company
currently plans to repurchase $1.3 billion to $1.7 billion of its common stock
in 2020, assuming stable capital conditions and absent compelling alternatives.
See Note 11 of the Notes to the Consolidated Financial Statements for additional
information.

Cash dividends paid to shareholders in 2019 of $1.08 per share increased 3.8%
over 2018. The following table presents the dividend activity for the years
ended December 31.

                         Dividends Paid to Shareholders
(In millions)                                  2019     2018
Dividends paid in cash                        $ 771    $ 793

Dividends through issuance of treasury shares 30 8 Total dividends to shareholders

$ 801    $ 801



In January 2020, the board of directors announced a 3.7% increase in the
quarterly cash dividend, effective with the first quarter of 2020. The first
quarter 2020 cash dividend of $.28 per share is payable on March 2, 2020, to
shareholders of record at the close of business on February 19, 2020.

                            Regulatory Restrictions

Aflac, CAIC and TOIC are domiciled in Nebraska and are subject to its
regulations. Subsequent to the Japan branch conversion to a subsidiary, Aflac
Japan is domiciled in Japan and subject to local regulations. The Nebraska
Department of Insurance imposes certain limitations and restrictions on payments
of dividends, management fees, loans and advances to the Parent Company. Under
Nebraska insurance law, prior approval of the Nebraska Department of Insurance
is required for dividend distributions that exceed the greater of the net income
from operations, which excludes net realized investment gains, for the previous
year determined under statutory accounting principles, or 10% of statutory
capital and surplus as of the previous year-end. In addition, the Nebraska
insurance department must approve service arrangements and other transactions
within the affiliated group of companies. These regulatory limitations are not
expected to affect the level of management fees or dividends paid to the Parent
Company. (See below for discussion of restrictions imposed by Japanese insurance
regulators.) A life insurance company's statutory capital and surplus is
determined according to rules prescribed by the NAIC, as modified by the
insurance department in the insurance company's state of domicile. Statutory
accounting rules are different from U.S. GAAP and are intended to emphasize
policyholder protection and company solvency. Similar laws apply in New York,
the domiciliary jurisdiction of Aflac New York.


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



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

Aflac's company action level RBC ratio was 539% as of December 31, 2019,
compared with 560% at December 31, 2018. Aflac's RBC ratio remains high and
reflects a strong capital and surplus position. As of December 31, 2019, Aflac's
total adjusted capital of $2.2 billion exceeded the company action level
required capital and surplus of $.4 billion by $1.8 billion. With the
announcement of the Japan branch conversion to a subsidiary, we had announced
our intention to remove excess capital out of Aflac, targeting a 500% RBC by the
end of 2019. As of December 31, 2019, the Company has completed the RBC drawdown
plan and has moved $1.75 billion of capital from Aflac to the Parent Company,
supporting the Company's capital deployment and risk management activities.

The maximum amount of dividends that can be paid to the Parent Company by Aflac,
CAIC and TOIC without prior approval of Nebraska's director of insurance is the
greater of the net income from operations, which excludes net realized
investment gains, for the previous year determined under statutory accounting
principles, or 10% of statutory capital and surplus as of the previous year-end.
Dividends declared by Aflac during 2020 in excess of $864 million would be
considered extraordinary and require such approval. Following the Japan branch
conversion to a subsidiary, the Company used extraordinary dividends as needed
to actively manage to appropriate RBC levels that are lower yet sufficient to
maintain ratings and support prudent capital management. Similar laws apply in
New York, the domiciliary jurisdiction of Aflac New York. See Note 13 of the
Notes to the Consolidated Financial Statements for information regarding the
impact of permitted practices by the Nebraska Department of Insurance on the
Company's statutory capital and surplus.

The NAIC considers its Solvency Modernization Initiative (SMI) process relating
to updating the U.S. insurance solvency regulation framework to be ongoing. The
SMI has focused on key issues such as capital requirements, governance and risk
management, group supervision, reinsurance, statutory accounting and financial
reporting matters. Many of these key issues have been finalized and/or are near
completion; however, the NAIC still has some ongoing initiatives related to SMI,
such as monitoring the international efforts on group capital requirements as
well as RBC. In addition, the NAIC is also considering changes to investment
risk factors. Any negative developments by the NAIC in these areas could result
in increased capital requirements for the Company.

Aflac is subject to the NAIC's Own Risk and Solvency Assessment (ORSA). Through
the ORSA requirements, Aflac is expected to regularly, no less than annually,
conduct an ORSA to assess the adequacy of its risk management framework, and its
current and estimated projected future solvency position; internally document
the process and results of the assessment; and provide a confidential high-level
ORSA Summary Report annually to the lead state commissioner if the insurer is a
member of an insurance group. In November 2019, Aflac filed its ORSA report with
the Nebraska Department of Insurance.

In addition to limitations and restrictions imposed by U.S. insurance
regulators, after the Japan branch conversion on April 1, 2018, the new Japan
subsidiary is required to meet certain financial criteria as governed by
Japanese corporate law in order to provide dividends to the Parent Company.
Under these criteria, dividend capacity at the Japan subsidiary is basically
defined as total equity excluding common stock, accumulated other comprehensive
income amounts, capital reserves (representing statutorily required amounts in
Japan) but reduced for net after-tax unrealized losses on available-for-sale
securities. These dividend capacity requirements are generally aligned with the
SMR. Japan's FSA maintains its own solvency standard which is quantified through
the SMR. Aflac Japan's SMR is sensitive to interest rate, credit spread, and
foreign exchange rate changes, therefore the Company continues to evaluate
alternatives for reducing this sensitivity. In the event of a rapid change in
market risk conditions causing SMR to decline, the Company has one senior
unsecured revolving credit facility in the amount of ¥100 billion and a
committed reinsurance facility in the amount of approximately ¥110 billion as a
capital contingency plan. Additionally, the Company could take action to enter
into derivatives on unhedged U.S. dollar-denominated investments with foreign
currency options or forwards. See Notes 8 and 9 of the Notes to the Consolidated
Financial Statements for additional information.

The Company has already undertaken various measures to mitigate the sensitivity
of Aflac Japan's SMR. For example, the Company employs policy reserve matching
(PRM) investment strategies, which is a Japan-specific accounting treatment that
reduces SMR interest rate sensitivity since PRM-designated investments are
carried at amortized cost consistent with corresponding liabilities. In order
for a PRM-designated asset to be held at amortized cost, there are certain
criteria that must be maintained. The primary criteria relates to maintaining
the duration of designated assets and liabilities within a specified tolerance
range. If the duration difference is not maintained within the specified range
without rebalancing, then a certain

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



portion of the assets must be re-classified as available for sale and held at
fair value with any associated unrealized gain or loss recorded in surplus. To
rebalance, assets may need to be sold in order to maintain the duration with the
specified range, resulting in realizing a gain or loss from the sale. For U.S.
GAAP, PRM investments are categorized as available for sale. The Company also
uses foreign currency derivatives to hedge a portion of its U.S.
dollar-denominated investments. (See Notes 3, 4 and 8 of the Notes to the
Consolidated Financial Statements for additional information on the Company's
investment strategies, hedging activities, and reinsurance, respectively.)

Aflac's SMR ratio remains high and reflects a strong capital and surplus
position. As of December 31, 2019, Aflac Japan's SMR was 1,043%, compared with
965% at December 31, 2018. As part of the conversion of Aflac Japan from a
branch to a subsidiary on April 1, 2018, the Company experienced an
accounting-driven decline in the SMR of approximately 130 points, compared with
the SMR as of December 31, 2017. The Company expects to be able to pay dividends
out of certain accounts, thus restoring this accounting impact over an estimated
three-year period.

The FSA has been conducting field testing with the insurance industry concerning
the introduction of an economic value-based solvency regime. The field testing
will assist the FSA in determining if an economic value-based solvency regime in
Japan will be appropriate for the insurance industry.

                      Privacy and Cybersecurity Governance

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

                                     Other

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


                             Additional Information

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

                         CRITICAL ACCOUNTING ESTIMATES

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

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

of December 31, 2019, and thus has a direct effect on net earnings and shareholders' equity. Subsequent experience or use of other assumptions could produce significantly different results.

Valuation of Investments, Including Derivatives, and Recognition of Other-than-Temporary Impairments



Aflac's investments, primarily consisting of debt and equity securities, include
both publicly issued and privately issued securities. For publicly issued
securities, the Company determines the fair values from quoted market prices
readily available from public exchange markets and price quotes and valuations
from third party pricing vendors. For the majority of privately issued
securities within the Company's investment portfolio, a third party pricing
vendor has developed valuation models that the Company utilizes to determine
fair values. For the remaining privately issued securities, the Company uses
non-binding price quotes from outside brokers.

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

The Company routinely reviews its investments that have experienced declines in
fair value to determine if the decline is other than temporary. The
identification of distressed investments, the determination of fair value if not
publicly traded and the assessment of whether a decline is other than temporary
involve significant management judgment. The Company must apply considerable
judgment in determining the likelihood of the security recovering in value while
the Company owns it. Factors that may influence this include the Company's
assessment of the issuer's ability to continue making timely payments of
interest and principal, the overall level of interest rates and credit spreads,
and other factors. This process requires consideration of risks, which can be
controlled to a certain extent, such as credit risk, and risks which cannot be
controlled, such as interest rate risk. Management updates its evaluations
regularly and reflects impairment losses in the Company's net earnings or other
comprehensive income, depending on the nature of the loss, as such evaluations
are revised.

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

Deferred Policy Acquisition Costs and Policy Liabilities



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

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

Deferred Policy Acquisition Costs



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

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




Policy Liabilities

The Company's policy liabilities, which are determined in accordance with applicable guidelines as defined under U.S. GAAP and Actuarial Standards of Practice, include two components that involve analysis and judgment: future policy benefits and unpaid policy claims, which accounted for 85% and 4% of total policy liabilities as of December 31, 2019, respectively.



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

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

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

As a part of its established financial reporting and accounting practices and
controls, the Company performs detailed annual actuarial reviews of its
policyholder liabilities (gross premium valuation analysis) and reflects the
results of those reviews in its results of operations and financial condition as
required by U.S. GAAP. For Aflac Japan, the Company's annual reviews in 2019 and
2018 indicated no need to strengthen liabilities associated with policies in
Japan. For Aflac U.S., the Company's annual reviews in 2019 and 2018 indicated
no need to strengthen liabilities associated with policies in the U.S.

The table below reflects the growth of the future policy benefits liability for the years ended December 31.


                             Future Policy Benefits
(In millions of dollars and billions of yen)    2019         2018
Aflac U.S.                                   $  9,405     $  9,137
Growth rate                                       2.9 %        3.8 %
Aflac Japan                                  $ 81,462     $ 77,812
Growth rate                                       4.7 %        5.6 %
Consolidated                                 $ 90,335     $ 86,368
Growth rate                                       4.6 %        5.5 %
Yen/dollar exchange rate (end of period)       109.56       111.00
Aflac Japan                                  ¥  8,925     ¥  8,637
Growth rate                                       3.3 %        3.8 %



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

In computing the estimate of unpaid policy claims, the Company considers many
factors, including the benefits and amounts available under the policy; the
volume and demographics of the policies exposed to claims; and internal business
practices, such as incurred date assignment and current claim administrative
practices. The Company monitors these conditions closely and make adjustments to
the liability as actual experience emerges. Claim levels are generally stable
from period to period; however, fluctuations in claim levels may occur. In
calculating the unpaid policy claim liability, the Company

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



does not calculate a range of estimates. The following table shows the expected
sensitivity of the unpaid policy claims liability as of December 31, 2019, to
changes in severity and frequency of claims.
                 Sensitivity of Unpaid Policy Claims Liability
(In millions)                                 Total Severity
                  Decrease       Decrease                       Increase       Increase
Total Frequency    by 2%          by 1%         Unchanged        by 1%          by 2%
Increase by 2%     $   0          $  25          $   50          $  76          $  101
Increase by 1%       (25 )            0              25             50              76
Unchanged            (49 )          (25 )             0             25              50
Decrease by 1%       (73 )          (49 )           (25 )            0              25
Decrease by 2%       (97 )          (73 )           (49 )          (25 )             0



Other policy liabilities, which accounted for 11% of total policy liabilities as
of December 31, 2019, consisted primarily of annuity and unearned premium
reserves, and discounted advance premiums on deposit from policyholders in
conjunction with their purchase of certain Aflac Japan insurance products. These
advanced premiums are deferred upon collection and recognized as premium revenue
over the contractual premium payment period. Advanced premiums represented 24%
and 29% of the December 31, 2019 and 2018 other policy liabilities balances,
respectively. See the Aflac Japan segment subsection of this MD&A for further
information.

Income Taxes

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

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

For additional information on income tax, see Note 10 of the Notes to the Consolidated Financial Statements presented in this report.


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

Future Adoption of Accounting Standard for Long-Duration Insurance Contracts



In August 2018, the FASB issued ASU 2018-12, "Financial Services - Insurance,
Targeted Improvements to the Accounting for Long-Duration Contracts." The
update, which is expected to significantly change how insurers account for
long-duration contracts, amends existing recognition, measurement, presentation,
and disclosure requirements applicable to the Company. Issues addressed in the
new guidance include: 1) a requirement to review and, if there is a change,
update cash flow assumptions for the liability for future policy benefits at
least annually, and to update the discount rate assumption quarterly, 2)
accounting for market risk benefits at fair value, 3) simplified amortization
for deferred acquisition costs, and 4) enhanced financial statement presentation
and disclosures. In November 2019, the FASB issued ASU 2019-09, "Financial
Services - Insurance (Topic 944): Effective Date", which defers the effective
date of ASU 2018-12 for all entities. The amendments are effective for public
business entities that meet the definition of an SEC filer, excluding entities
eligible to be smaller reporting companies as defined by the SEC,for fiscal
years, and interim periods within those fiscal years, beginning after December
15, 2021. Early application of the amendments is permitted, however, the Company
does not expect to early adopt the updated standard.

The Company is thoroughly evaluating the impact of ASU 2018-12 adoption and
expects it will have a significant impact on the Company's reported financial
position, results of operations, and disclosures under U.S. GAAP accounting. The
Company anticipates that the requirement to update assumptions for liability for
future policy benefits will have a significant impact on its results of
operations, systems, processes and controls while the requirement to update the
discount rate will have a significant impact on its AOCI and equity. The Company
currently has no products with market risk benefits.

There are two permitted transition methods upon adoption. The default transition
method is a modified retrospective approach or companies may elect to apply the
amendments using a full retrospective approach.

Under the modified retrospective method, the opening reserve balance at the transition date, January 1, 2020, would generally be the same as the closing balance before transition; however, it would be updated for changes in the discount rate required under the new guidance.



Regardless of the transition method selected, the new guidance requires that
discount rates used for discounting of insurance liabilities be initially
adjusted on the adoption date and subsequently at each reporting period to the
market levels for the upper-medium-grade (low credit risk) fixed income
instrument yields (single-A in the currency of the underlying insurance
contract) reflecting the duration of the company's insurance liabilities. Long
duration of the Company's third-sector insurance liabilities in Japan coupled
with limited-to-no-liquidity of the Japanese long-dated fixed-income market
creates challenges in application of the market-based discount rate guidance and
will require the Company to apply significant judgments in designing discount
rate methodologies for its Japanese third-sector liabilities. The update of the
discount rate would be recognized in AOCI under both transition methods.

Under the full retrospective method, the Company would restate all historical
periods based upon actual historical experience as of contract inception and its
updated view of the contractual cash flow projections at transition. A
cumulative catch-up adjustment to opening retained earnings would be recognized
to reflect the actual experience and updated projections. Companies are
permitted to apply a full retrospective transition approach if actual historical
information is available for all contracts that will be affected by the new
guidance.

The Company has selected the modified retrospective transition method.



The Company expects that under either transition method, the impact to its
reported financial statements under U.S. GAAP will be greatly influenced by the
nature of the Company's business model. Adoption of the new guidance will
reflect the Company's concentration in Japan third-sector business, in
particular cancer insurance, with respect to which the duration of liabilities
is materially longer than asset durations, while Japan's aggregate block of
business continues to see favorable experience from mortality, morbidity, and
expenses. Under the modified retrospective method, the impact of a low discount
rate applied to long-duration third sector liabilities is recognized at
adoption, while associated favorable morbidity margins are recognized over time
thus driving a pronounced timing impact to U.S. GAAP equity. In addition, with
respect to the Japan segment, the Company maintains a large portfolio of assets
designated as held-to-maturity (HTM) as a strategy to reduce capital (solvency
margin ratio or SMR) volatility. In a low interest rate environment, such as
presently exists in Japan, assets designated as HTM that were purchased in a
higher interest rate environment have significant embedded gains not reflected
in AOCI (HTM securities are carried at amortized cost under U.S. GAAP), which
serves as an economic offset to a low discount rate applied to policy
liabilities. At December 31, 2019, the Company's HTM portfolio was $30.1 billion
at amortized cost and had $7.5 billion in net unrealized gains. Pursuant to the
implementation of ASU 2019-04, "Codification Improvements to Topic 326,
Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and
Topic 825, Financial

                                       68

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



Instruments" (see Note 1 for additional details of this ASU), effective on
January 1, 2020, the Company anticipates the reclassification of approximately
$6.9 billion (at amortized cost) of pre-payable fixed maturity securities from
the HTM to the available-for-sale (AFS) category. This reclassification is
expected to result in recording in AOCI a net unrealized gain of approximately
$800 million on an after-tax basis based on the securities' fair values on the
reclassification date. After adoption of ASU 2018-12, the Company also expects
net earnings and net earnings per share (which were $3.3 billion and $4.43 per
diluted share, respectively, in 2019) to reflect larger quarterly fluctuations
due to the new requirement to update assumptions for liability for future policy
benefits.

As an example of the potential impact of the new guidance, and for illustrative
purposes only, under the modified retrospective method and in a low interest
rate environment, the Company would expect AOCI (which was $6.6 billion at
December 31, 2019) to significantly decline upon adoption and to thereafter
reflect larger quarterly fluctuations due to the new requirement to quarterly
adjust discount rates. Conversely, in a higher interest rate environment, and
assuming adoption of the modified retrospective method, the Company would expect
AOCI to decline less or even increase (depending on the specifics of the
interest rate environment), as well as to reflect quarterly fluctuations. Under
the full retrospective method, the Company would expect lesser declines or
increases in total equity upon adoption compared to the modified retrospective
method due to the potential offsetting effect from updating experience and cash
flow projections.

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

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

New Accounting Pronouncements



During the last three years, various accounting standard-setting bodies have
been active in soliciting comments and issuing statements, interpretations and
exposure drafts. For information on new accounting pronouncements and the
impact, if any, on the Company's financial position or results of operations,
see Note 1 of the Notes to the Consolidated Financial Statements.

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