AFLAC Incorporated
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ITEM 1. BUSINESS
OVERVIEW
Aflac Incorporated (the Parent Company) was incorporated in 1973 under the laws of the state of Georgia. The Parent Company and its subsidiaries (collectively, the Company) provide financial protection to millions of policyholders and customers in Japan and the United States (U.S.). The Company’s principal business is supplemental health and life insurance products with the goal to provide customers the best value in supplemental insurance products in Japan and the U.S. When a policyholder or insured gets sick or hurt, the Company pays cash benefits fairly and promptly for eligible claims. Throughout its 70-year history, the Company’s supplemental insurance policies have given policyholders the opportunity to focus on recovery, not financial stress.
The Company is authorized to conduct insurance business in all 50 states, the District of Columbia, several U.S. territories, and Japan. The Company’s website is: www.aflac.com. Information included on the Company’s website is not incorporated by reference into this filing. The Company makes available free of charge through its website, its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC.
REVENUE-GENERATING ACTIVITIES
The Company's strategy for growth in Japan and the U.S. has remained straightforward and consistent for many years. The Company develops relevant supplemental health insurance products offering financial protection from the rising out-of-pocket expenses associated with medical events that are not covered by the insureds' primary coverage. The Company also offers a complement of other voluntary and employer-paid health and life insurance products to fit the needs of its customers. Additionally, the Company aims to obtain more customers by selling where the customer prefers to purchase protection, whether through an agent or broker, a distribution partner or directly from the Company. To help promote its insurance products, the Company’s marketing campaigns feature the Aflac Duck.
LONG-TERM GROWTH STRATEGY
In 1999, the Company had been running commercials for nearly a decade, but its brand awareness was hovering at about 10%. An innovative marketing campaign with something unique and memorable that would build brand awareness was needed. The Aflac Duck’s first commercial in the U.S., “Park Bench,” aired on January 1, 2000 and taught consumers how to pronounce “Aflac.” The Aflac Duck made its international debut in Japan in 2003. In the time since its U.S. debut, the Aflac Duck has become one of the most familiar advertising icons in the world, appearing in many commercials and countless print ads in both the U.S. and Japan. Celebrating its 25th anniversary in the U.S., the Aflac Duck continues to be a helpmate who increases brand knowledge and connection.
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The Company's insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. The primary insurance subsidiary in the Aflac Japan segment is Aflac Life Insurance Japan Ltd. (ALIJ). Aflac U.S. includes the insurance subsidiaries American Family Life Assurance Company of Columbus (Aflac); Continental American Insurance Company (CAIC), branded as Aflac Group Insurance (AGI); American Family Life Assurance Company of New York (Aflac New York); Tier One Insurance Company (TOIC); and Aflac Benefits Solutions, Inc. (ABS), which provides a platform for Aflac Dental and Vision in the U.S.
For information on the Company's results of operations and financial information by segment, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 2 of the Notes to the Consolidated Financial Statements.
AFLAC JAPAN
Aflac Japan is the principal contributor to the Parent Company's consolidated earnings and the largest insurer in Japan in terms of cancer and medical (third sector insurance products) policies in force. For information on Aflac Japan's operating results, see the Aflac Japan Segment section of Item 7. MD&A.
Insurance Products
Aflac Japan's third sector insurance products are supplemental products designed to help consumers pay for medical and nonmedical costs that are not reimbursed under Japan's national health insurance system. Changes in Japan's economy and an aging population have put increasing pressure on Japan's national health care system. As a result, more costs have been shifted to Japanese consumers, who in turn have become increasingly interested in insurance products that help them manage those costs. Aflac Japan has responded to this consumer need by enhancing existing products and developing new products. Aflac Japan remains focused on maintaining leadership in third sector insurance products that are less interest rate sensitive and have strong and stable margins. At the same time, Aflac Japan complements this core business with similarly profitable first sector products as outlined below.
Third Sector Insurance Products
Cancer
Cancer Insurance Aflac Japan pioneered the cancer insurance market in Japan in 1974, and remains the number one provider of cancer insurance in Japan today. Aflac Japan's cancer insurance products provide a lump-sum benefit upon initial diagnosis of cancer and fixed daily benefits for subsequent hospitalization and outpatient treatments due to cancer, as well as cancer-related surgical and convalescent care benefits. In March 2025, Aflac Japan launched a new cancer insurance product, Miraito, a service-integrated product designed to allow customers the flexibility to choose necessary coverage to meet their individual needs. Aflac Japan continues to provide Yori-sou Cancer Consultation Support, a service that provides comprehensive support from the moment a policyholder suspects cancer through treatment and recovery. This service is provided to all existing policyholders of Aflac Japan cancer insurance products, including Miraito.
Medical and Other Health
Medical Insurance Aflac Japan's medical insurance products provide benefits for hospitalization, surgeries and outpatient treatment of various illnesses, as well as lump sum benefits related to three critical illnesses: cancer, heart attack, and stroke. In December 2025, Aflac Japan launched a new medical insurance product, Anshin Palette, which offers customers the flexibility to choose only the coverage they need from a wide range of options.
Other
Nursing Care Insurance Aflac Japan's Nursing Care Insurance provides coverage for out-of-pocket costs incurred when receiving public nursing care services.
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First Sector Insurance Products
Life
Protection-Type Life Insurance
Whole Life Prepare Smart Whole-Life Insurance is a whole life insurance product with low cash surrender value, which offers non-smoking policyholders further discounted premiums, and it provides beneficiaries, typically a designated family member, with a pre-determined benefit payment upon the death of the insured.
GIFT GIFT is a term life insurance product that provides beneficiaries, typically family members, with a fixed amount of money every month upon a breadwinner’s death or serious disability as family support.
Savings-Type Life Insurance
Tsumitasu Launched in June 2024, Tsumitasu is an insurance product designed primarily for post-retirement preparation, with asset formation features and coverage for nursing care and other benefits.
WAYS and Child Endowment WAYS is an insurance product which has features that allow policyholders to convert a portion of their life insurance to medical, nursing care or fixed annuity benefits at a predetermined age. Aflac Japan's child endowment insurance product offers a death benefit until a child reaches age 18. This product also pays a lump-sum benefit at the time of the child's entry into high school, as well as an educational annuity for each of the four years during his or her college education.
Distribution Channels
Traditional Sales Channel This distribution channel includes individual agencies, independent corporate agencies and affiliated corporate agencies. Aflac Japan was represented by approximately 6,300 sales agencies at the end of 2025, with approximately 112,000 licensed sales associates employed by those agencies, including individual agencies.
Dai-ichi Life Aflac Japan's alliance with Dai-ichi Life was launched in 2001, and approximately 37,000 Dai-ichi Life representatives offer Aflac Japan's cancer products. Dai-ichi Life is included in Aflac Japan's affiliated corporate agencies distribution channel.
Japan Post Group Aflac Japan's alliance with Japan Post Group, which is included in Aflac Japan's affiliated corporate agencies distribution channel, was launched in 2008. After the alliance strengthened in 2013, the number of postal outlets of Japan Post Co. Ltd. (Japan Post Co.) offering Aflac Japan's cancer product increased, with approximately 20,000 postal outlets as of December 31, 2025. Japan Post Insurance Co., Ltd. (Japan Post Insurance) offers Aflac Japan's cancer products through its 76 branches responsible for corporate sales and 626 service departments in charge of individual sales.
Daido Life Aflac Japan's alliance with Daido Life was launched in 2013, and approximately 3,700 Daido Life representatives offer Aflac Japan's cancer products to mainly small and medium-sized business owners, executives and employees. Daido Life is included in Aflac Japan's affiliated corporate agencies distribution channel.
Banks Consumers in Japan rely on banks to provide not only traditional bank services, but also as one key source to provide insurance solutions and other services. At December 31, 2025, Aflac Japan had agreements with approximately 90% of the total number of banks in Japan to sell its products.
Competitive Markets
The Company competes with other insurance carriers through product design, price, policyholder service, and sales efforts. Since the deregulation of the Japan market in 2001, the number of insurance companies offering stand-alone cancer and medical insurance has increased, intensifying competition. However, based on Aflac Japan's size of annualized premiums in force and diversified distribution network, the Company believes it is well-positioned to continue to adapt to increased competition. Furthermore, the Company believes the continued development and maintenance of operating efficiencies will allow Aflac Japan to offer affordable products that appeal to consumers. The Company believes Aflac Japan will remain a leading provider of third sector products such as cancer and medical insurance coverage in Japan, principally due to its experience in the market, well-known brand, low-cost operations, expansive marketing system and product expertise.
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Government Regulation
Financial Services Agency (FSA) The financial and business affairs of Aflac Japan are subject to examination by Japan's FSA. Aflac Japan files annual and interim reports and financial statements for the Japanese insurance operations based on a March 31 fiscal year-end, prepared in accordance with Japanese regulatory accounting practices prescribed or permitted by the FSA. Japanese regulatory basis earnings are determined using accounting principles that differ materially from U.S. generally accepted accounting principles (U.S. GAAP). For additional information, see Note 14 of the Notes to the Consolidated Financial Statements.
Two FSA regulations applicable to Aflac Japan are outlined below.
▪Privacy and Cybersecurity
With regard to personal information obtained from policyholders, the insured, or others, Aflac Japan is regulated in Japan by the Act on the Protection of Personal Information (APPI) and guidelines issued by FSA and other governmental authorities.
•FSA Solvency Standard
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a safe harbor to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. Aflac Incorporated (the Parent Company) and its subsidiaries (collectively with the Parent Company, the Company) desire to take advantage of these provisions. This report contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by Company officials in communications with the financial community and contained in documents filed with or furnished to the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as the ones listed below or similar words, as well as specific projections of future results, generally qualify as forward-looking. The Company undertakes no obligation to update such forward-looking statements, except as may be required by law.
| • expect | • anticipate | • believe | • goal | • objective | • strategy | ||||||||||||
| • may | • should | • estimate | • intend | • project | • future | ||||||||||||
| • will | • assume | • potential | • target | • outlook | • continue |
The Company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:
•difficult conditions in global capital markets and the economy, including inflation
•defaults and credit downgrades of investments
•global fluctuations in interest rates and exposure to significant interest rate risk
•concentration of business in Japan
•limited availability of acceptable Japanese yen-denominated investments
•foreign currency fluctuations in the yen/dollar exchange rate
•differing interpretations applied to investment valuations
•significant valuation judgments in determination of expected credit losses recorded on the Company's investments
•decreases in the Company's financial strength or debt ratings
•decline in creditworthiness of other financial institutions
•the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners
•deviations in actual experience from pricing and reserving assumptions
•ability to continue to develop and implement improvements in information technology systems and on successful execution of revenue growth and expense management initiatives
•interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality, integrity or privacy of sensitive data residing on such systems, and uncertainty regarding the impact of the incident involving unauthorized access to the Company’s network in June 2025
•subsidiaries' ability to pay dividends to the Parent Company
•inherent limitations to risk management policies and procedures
•operational risks of third-party vendors
•tax rates applicable to the Company may change
•failure to comply with restrictions on policyholder privacy and information security
•extensive regulation and changes in law or regulation by governmental authorities
•competitive environment and ability to anticipate and respond to market trends
•catastrophic events, including, but not limited to, epidemics, pandemics, tornadoes, hurricanes, earthquakes, tsunamis, war or other military action, major public health issues, terrorism or other acts of violence, and damage incidental to such events
•ability to protect the Aflac brand and the Company's reputation
•ability to effectively manage key executive succession
•changes in accounting standards
•level and outcome of litigation or regulatory inquiries
•allegations or determinations of worker misclassification in the United States
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MD&A OVERVIEW
MD&A is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the six-month periods ended June 30, 2026 and 2025, respectively. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, the following discussion should be read in conjunction with the consolidated financial statements and notes that are included in the Company's annual report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report). In this MD&A, amounts may not foot due to rounding.
This MD&A is divided into the following sections:
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EXECUTIVE SUMMARY
Company Overview
Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) provide financial protection to millions of policyholders and customers in Japan and the United States (U.S.). The Company’s principal business is supplemental health and life insurance products with the goal to provide customers the best value in supplemental insurance products in Japan and the U.S. The Company's insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. The Parent Company’s primary insurance subsidiaries are Aflac Life Insurance Japan Ltd. in Japan (Aflac Japan) and American Family Life Assurance Company of Columbus (Aflac); Continental American Insurance Company (CAIC), branded as Aflac Group Insurance (AGI); American Family Life Assurance Company of New York (Aflac New York); Tier One Insurance Company (TOIC) and Aflac Benefits Solutions, Inc. (ABS), which provides a platform for Aflac Dental and Vision in the U.S. (collectively, Aflac U.S.). The Parent Company, other operating business units that are not individually reportable, reinsurance activities, including reinsurance activity of Aflac Re Bermuda Ltd. (Aflac Re), and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and other.
Performance Highlights
Total revenues were $4.1 billion in the second quarter of 2026, compared with $4.2 billion in the second quarter of 2025.
Net earnings were $825 million, or $1.63 per diluted share, in the second quarter of 2026, compared with $599 million, or $1.11 per diluted share, in the second quarter of 2025.
Net earnings in the second quarter of 2026 included net investment losses of $153 million, compared with net investment losses of $421 million in the second quarter of 2025. Net investment losses in the second quarter of 2026 included $238 million of net losses from sales and redemptions; an increase in credit loss allowances of $77 million; $11 million of impairments; offset by an $87 million gain from an increase in the fair value of equity securities; and $86 million of net gains from certain derivative and foreign currency gains or losses.
Total revenues were $8.5 billion in the first six months of 2026, compared with $7.6 billion in the first six months of 2025, primarily due to net investment losses of $104 million in the first six months of 2026 compared with net investment losses of $1.4 billion in the first six months of 2025.
Net earnings were $1.8 billion, or $3.61 per diluted share, in the first six months of 2026, compared with $628 million, or $1.16 per diluted share, in the first six months of 2025.
Net earnings in the first six months of 2026 included net investment losses of $104 million, compared with net investment losses of $1.4 billion in the first six months of 2025. Net investment losses in the first six months of 2026 included $254 million of net losses from sales and redemptions; an increase in credit loss allowances of $138 million; $35 million of impairments; offset by $250 million of net gains from certain derivative and foreign currency gains or losses; and a $73 million gain from an increase in the fair value of equity securities.
Adjusted earnings(1) in the second quarter of 2026 were $883 million, or $1.75 per diluted share, compared with $957 million, or $1.78 per diluted share, in the second quarter of 2025. The average yen/dollar exchange rate(2) for the three-month period ended June 30, 2026 was 159.45, or 9.3% weaker than the average rate of 144.60 for the same period in 2025. The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.05.
Adjusted earnings(1) in the first six months of 2026 were $1.8 billion, or $3.50 per diluted share, compared with $1.9 billion, or $3.43 per diluted share, in the first six months of 2025. The average yen/dollar exchange rate(2) for the six-month period ended June 30, 2026 was 158.14, or 6.2% weaker than the average rate of 148.32 for the same period in 2025. The weaker yen/dollar exchange rate negatively impacted adjusted earnings per diluted share by $.07.
Shareholders’ equity was $30.3 billion, or $60.35 per share, at June 30, 2026, compared with $29.5 billion, or $56.85 per share, at December 31, 2025.
Shareholders’ equity at June 30, 2026 included a cumulative increase of $10.4 billion from the effect of changes in discount rate assumptions on insurance reserves, compared with a corresponding cumulative increase of $8.0 billion at December 31, 2025, and a net unrealized loss on investment securities and derivatives of $2.8 billion, compared with a net unrealized loss of $1.8 billion at December 31, 2025. Shareholders’ equity at June 30, 2026 also included an unrealized foreign currency translation loss of $5.0 billion, compared with an unrealized foreign currency translation loss of $4.8 billion at December 31, 2025. The annualized return on average shareholders’ equity in the second quarter of 2026 was 10.9%.
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Shareholders’ equity excluding accumulated other comprehensive income (adjusted book value(1)) was $27.6 billion, or $55.01 per share, at June 30, 2026, compared with $28.0 billion, or $54.06 per share, at December 31, 2025. Adjusted book value excluding foreign currency remeasurement(1) was $20.7 billion, or $41.22 per share, at June 30, 2026, compared with $22.1 billion, or $42.66 per share, at December 31, 2025. The annualized adjusted return on equity excluding foreign currency remeasurement(1) in the second quarter of 2026 was 16.6%.
In the first six months of 2026, Aflac Incorporated repurchased $2.0 billion, or 17.5 million of its common shares. At June 30, 2026, the Company had 96.8 million remaining shares authorized for repurchase.
(1) See the Results of Operations section of this MD&A for a definition of this non-U.S. GAAP financial measure.
(2) Yen/dollar exchange rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).
Cyber Incidents
As previously disclosed, the Company identified an incident involving unauthorized access to a limited number of its systems in the U.S. on June 12, 2025 (the June 2025 U.S. Cyber Incident). The Company remains in communication with regulators and other relevant authorities.
Based on the information currently available, as of the date of this report, the Company does not believe that the June 2025 U.S. Cyber Incident is reasonably likely to have a material impact on the Company’s financial condition or results of operations. The Company continues to assess the financial impact of the June 2025 U.S. Cyber Incident, including how much of the financial impact will be covered by insurance. As a result of the June 2025 U.S. Cyber Incident, the Company has incurred certain costs and may, depending on future developments, incur additional costs, including but not limited to: costs to provide credit monitoring, identity theft protection, and Medical Shield to impacted individuals and maintain a call center related to the provision of such services; incident response costs; expenses arising from litigation, governmental investigations, or potential enforcement actions; expenses related to compliance, finance, and legal advisory services; elevated cybersecurity insurance premiums; and costs incurred in meeting evolving legal and regulatory requirements concerning cybersecurity governance, monitoring, and disclosure. Based on the information currently available, as of the date of this report, the Company believes that the potential amount of loss cannot be reasonably estimated.
As previously disclosed, on June 30, 2026, Aflac Japan issued a press release announcing that, on June 25, 2026, it had detected an unauthorized third-party had accessed certain Aflac Japan systems (the June 2026 Japan Cyber Incident). Upon identifying the unauthorized access, Aflac Japan promptly took steps designed to contain the incident and prevent further access, including suspending certain systems. Notwithstanding the suspension of certain systems, Aflac Japan continues to serve its policyholders as it responds to the June 2026 Japan Cyber Incident and there was no indication of ransomware.
Aflac Japan, with assistance from third-party cybersecurity experts, has completed its investigation. Aflac Japan has determined that certain impacted files contain policy and coverage details, personal information, and bank account information. Aflac Japan has notified the Japan Financial Services Agency and other relevant authorities. As of the date of this report, Aflac Japan has completed the notification process to individuals affected by the June 2026 Japan Cyber Incident. Based on the information currently available, as of the date of this report, the Company believes that the potential amount of loss cannot be reasonably estimated.
The June 2026 Japan Cyber Incident is limited to systems in Japan. The Company’s systems related to its U.S. business were not accessed by the unauthorized third-party. At this time, the full scope and potential ultimate impact of the June 2026 Japan Cyber Incident on the Company are not known. Based on the information currently available, as of the date of this report, the Company does not believe that the June 2026 Japan Cyber Incident is reasonably likely to have a material impact on the Company’s financial condition or results of operations.
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.
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This document includes references to the Company’s financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations.
Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the Japanese yen weakens, translating Japanese yen into U.S. dollars results in fewer U.S. dollars being reported. When the Japanese yen strengthens, translating Japanese yen into U.S. dollars results in more U.S. dollars being reported. Consequently, Japanese yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while Japanese yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company’s business is conducted in Japanese yen and never converted into U.S. dollars but translated into U.S. dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).
The Company defines the non-U.S. GAAP financial measures included in this document as follows:
•Adjusted earnings are adjusted revenues less benefits and adjusted expenses. Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The adjustments to both revenues and expenses account for certain items that are outside of management’s control because they tend to be driven by general economic conditions and events or are related to infrequent activities not directly associated with insurance operations. Adjusted revenues are U.S. GAAP total revenues excluding adjusted net investment gains and losses. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest from derivatives associated with notes payable but excluding any non-recurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance. Management uses adjusted earnings and adjusted earnings per diluted share to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of these financial measures is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The most comparable U.S. GAAP financial measures for adjusted earnings and adjusted earnings per share (basic or diluted) are net earnings and net earnings per share, respectively.
•Adjusted net investment gains and losses are net investment gains and losses adjusted for i) amortized hedge cost/income related to foreign currency exposure management strategies and certain derivative activity, ii) net interest income/expense from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment income and interest expense. The most comparable U.S. GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses.
•Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign currency exchange risks. These amortized hedge costs/income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the contractual term of the derivative. The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/income.
•Adjusted earnings excluding current period foreign currency impact are computed using the average foreign exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding
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diluted shares for the period presented. The Company considers adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact important because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside management’s control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact are net earnings and net earnings per share, respectively.
•Adjusted book value is the U.S. GAAP book value (representing total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S. GAAP balance sheet. Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value and adjusted book value per common share important as they exclude accumulated other comprehensive income, which fluctuates due to market movements that are outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.
•Adjusted book value excluding foreign currency remeasurement is the U.S. GAAP book value (representing total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S. GAAP balance sheet and excluding the cumulative (beginning January 1, 2021) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. Adjusted book value excluding foreign currency remeasurement per common share is adjusted book value excluding foreign currency remeasurement at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share important as they exclude both accumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measures for adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share are total book value and total book value per common share, respectively.
•Adjusted return on equity is annualized adjusted earnings divided by average shareholders’ equity, excluding accumulated other comprehensive income. Management uses adjusted return on equity to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The Company considers adjusted return on equity important as it excludes components of accumulated other comprehensive income, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity is return on equity as determined using annualized net earnings and average total shareholders’ equity.
•Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings divided by average shareholders’ equity, excluding both accumulated other comprehensive income and the cumulative (beginning January 1, 2021) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. The Company considers adjusted return on equity excluding foreign currency remeasurement important because it excludes both accumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity excluding foreign currency remeasurement is return on equity as determined using annualized net earnings and average total shareholders’ equity.
•U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign exchange rate for the comparable prior year period. The Company considers U.S. dollar-denominated investment income excluding foreign currency impact important as it eliminates the impact of foreign currency changes on the Aflac Japan segment results, which are outside management’s control. The most comparable U.S. GAAP financial measure for U.S. dollar-denominated investment income excluding foreign currency impact is the corresponding net investment income amount from the U.S. dollar denominated investments translated to yen.
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The following table is a reconciliation of items impacting adjusted earnings and adjusted earnings per diluted share to the most directly comparable U.S. GAAP financial measures of net earnings and net earnings per diluted share, respectively.
Reconciliation of Net Earnings to Adjusted Earnings
| In Millions | Per Diluted Share | In Millions | Per Diluted Share | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 825 | $ | 599 | $ | 1.63 | $ | 1.11 | $ | 1,844 | $ | 628 | $ | 3.61 | $ | 1.16 | |||||||||||||||||||||||||||||||||
| Items impacting net earnings: | |||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted net investment (gains) losses (1) | 106 | 377 | .21 | .70 | 3 | 1,301 | .01 | 2.40 | |||||||||||||||||||||||||||||||||||||||||
| Other and non-recurring (income) loss | 0 | 0 | .00 | .00 | 0 | 53 | .00 | .10 | |||||||||||||||||||||||||||||||||||||||||
| Income tax (benefit) expense on items excluded from adjusted earnings | (48) | (19) | (.09) | (.04) | (63) | (119) | (.12) | (.22) | |||||||||||||||||||||||||||||||||||||||||
| Adjusted earnings | 883 | 957 | 1.75 | 1.78 | 1,784 | 1,863 | 3.50 | 3.43 | |||||||||||||||||||||||||||||||||||||||||
Current period foreign currency impact (2) | 27 | N/A | .05 | N/A | 35 | N/A | .07 | N/A | |||||||||||||||||||||||||||||||||||||||||
| Adjusted earnings excluding current period foreign currency impact | $ | 910 | $ | 957 | $ | 1.80 | $ | 1.78 | $ | 1,819 | $ | 1,863 | $ | 3.57 | $ | 3.43 | |||||||||||||||||||||||||||||||||
(1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.
(2) Prior period foreign currency impact reflected as “N/A” to isolate change for current period only.
Reconciling Items
Net Investment Gains and Losses
The following table is a reconciliation of items impacting adjusted net investment (gains) losses to the most directly comparable U.S. GAAP financial measure of net investment (gains) losses.
Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net investment (gains) losses | $ | 153 | $ | 421 | $ | 104 | $ | 1,384 | ||||||||||||||||
| Items impacting net investment (gains) losses: | ||||||||||||||||||||||||
| Amortized hedge costs | (12) | (11) | (27) | (18) | ||||||||||||||||||||
| Amortized hedge income | 19 | 30 | 37 | 60 | ||||||||||||||||||||
| Net interest income (expense) from derivatives associated with certain investment strategies | (54) | (64) | (111) | (129) | ||||||||||||||||||||
| Impact of interest from derivatives associated with notes payable | 0 | 0 | 0 | 4 | ||||||||||||||||||||
| Adjusted net investment (gains) losses | $ | 106 | $ | 377 | $ | 3 | $ | 1,301 | ||||||||||||||||
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 profitability. This investment strategy incorporates asset-liability matching to align the expected cash flows of the portfolio to the needs of the Company's liability structure. The Company does not purchase securities with the intent of generating investment gains or losses. However, investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers, tax planning strategies, and/or general portfolio management and rebalancing. The realization of investment gains and losses is independent of the underwriting and administration of the Company's insurance products.
84
Net investment gains and losses excluded from adjusted earnings include the following:
•Securities Transactions
•Credit Losses
•Changes in the Fair Value of Equity Securities
•Certain Derivative and Foreign Currency Activities.
Securities Transactions, Credit Losses and Changes in the Fair Value of Equity Securities
Securities transactions include gains and losses from sales and redemptions of investments where the amount received is different from the amortized cost of the investment. Credit losses include losses for held-to-maturity securities, available-for-sale securities, loan receivables, loan commitments and reinsurance recoverables. Changes in the fair value of equity securities are the result of gains or losses driven by fluctuations in market prices.
Certain Derivative and Foreign Currency Activities
The Company's freestanding derivative instruments include:
•Foreign currency forwards
•Foreign currency options
•Foreign currency swaps
•Cross-currency swaps
•Interest rate swaps
•Interest rate swaptions (swaptions)
•Bond purchase commitments
Gains and losses are recognized as a result of valuing these derivatives, net of the effects of hedge accounting.
The Company also excludes from adjusted earnings the accounting impacts of foreign currency remeasurement associated with changes in the foreign currency exchange rate.
For additional information regarding net investment gains and losses, including details of reported amounts for the periods presented, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements.
Other and Non-recurring Items
The U.S. insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. The system can result in periodic charges to the Company as a result of insolvencies/bankruptcies that occur with other companies in the life insurance industry. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. These charges neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance, but result from external situations not controlled by the Company. The Company excludes any charges associated with U.S. guaranty fund assessments and the corresponding tax benefit or expense from adjusted earnings.
In Japan, the government also requires the insurance industry to contribute to a policyholder protection corporation that provides funds for the policyholders of insolvent insurers; however, these costs are calculated and administered differently than in the U.S. In Japan, these costs are not directly related to specific insolvencies or bankruptcies, but are rather a regular operational cost for an insurance company. Based on this structure, the Company does not remove the Japan policyholder protection expenses from adjusted earnings.
The Company considers the costs associated with the early redemption of its debt to be unrelated to the underlying fundamentals and trends in its insurance operations. Additionally, these costs are driven by changes in interest rates subsequent to the issuance of the debt, and the Company considers these interest rate changes to represent economic conditions not directly associated with its insurance operations.
85
In January 2025, as part of the U.S. defined benefit plan freeze effective January 1, 2024, the Company purchased a nonparticipating single premium group annuity contract from an external insurer to settle its obligations under the plan and paid to the insurer the related annuity premium. As a result, the Company recognized a settlement charge of $55 million in the first quarter of 2025. The settlement charge was both unusual and non-recurring; therefore, the Company excluded the settlement charge from adjusted earnings.
Foreign Currency Translation
Aflac Japan’s premiums and a significant portion of its investment income are received in Japanese yen, and its claims and most expenses are paid in Japanese yen. Aflac Japan purchases Japanese yen-denominated assets and U.S. dollar-denominated assets, which may be hedged to Japanese yen, to support Japanese yen-denominated policy liabilities. Japanese yen-denominated income statement accounts are translated to U.S. dollars using the weighted average yen/dollar foreign exchange rate for the reporting period, except realized gains and losses on securities transactions which are translated at the foreign exchange rate on the trade date of each transaction. Japanese yen-denominated balance sheet accounts are translated to U.S. dollars using the spot yen/dollar exchange rate at the end of the reporting period.
In recent periods, the Japanese yen has weakened against the U.S. dollar. Although the Company is unable to predict the timing or extent of future movements of the yen/dollar exchange rate, the Company maintains hedging strategies (see the Hedging Activities section of this MD&A) that are intended to mitigate the impacts of Japanese yen fluctuation on the Company’s financial position and results of operations. See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate” in Item 1A. Risk Factors of the 2025 Annual Report for more information.
Income Taxes
The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 17.0% for the three-month period ended June 30, 2026, compared with 27.0% for the same period in 2025. The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 16.9% for the six-month period ended June 30, 2026, compared with 35.0% for the same period in 2025. The combined effective tax rate differs from the U.S. statutory rate primarily due to the exclusion of foreign currency translation gains and losses on Aflac Japan U.S. dollar-denominated investments held in the Delaware Statutory Trust.
For additional information, see Note 10 of the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates - Income Taxes section of Item 7. MD&A in the 2025 Annual Report. The effective tax rate continues to be subject to future tax law changes both in the U.S. and in foreign jurisdictions. See the risk factor entitled "Tax rates applicable to the Company may change" in Item 1A. Risk Factors of the 2025 Annual Report for more information.
86
Reconciliation of Book Value to Adjusted Book Value
(Excluding Foreign Currency Remeasurement)
The following table is a reconciliation of items impacting adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share to the most directly comparable U.S. GAAP financial measures of book value and book value per common share, respectively.
| (In millions, except for share and per-share amounts) | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||
| U.S. GAAP book value | $ | 30,312 | $ | 29,490 | ||||||||||||||||||
| Items impacting U.S. GAAP book value: | ||||||||||||||||||||||
| Unrealized foreign currency translation gains (losses) | (5,048) | (4,847) | ||||||||||||||||||||
| Unrealized gains (losses) on securities and derivatives | (2,769) | (1,822) | ||||||||||||||||||||
| Effect of changes in discount rate assumptions | 10,415 | 8,035 | ||||||||||||||||||||
| Pension liability adjustment | 83 | 86 | ||||||||||||||||||||
| Total accumulated other comprehensive income | 2,681 | 1,452 | ||||||||||||||||||||
| Adjusted book value | 27,631 | 28,038 | ||||||||||||||||||||
| Foreign currency remeasurement gains (losses) | 6,927 | 5,910 | ||||||||||||||||||||
| Adjusted book value excluding foreign currency remeasurement | $ | 20,704 | $ | 22,128 | ||||||||||||||||||
| Number of shares outstanding at end of period | 502,257 | 518,690 | ||||||||||||||||||||
| U.S. GAAP book value per common share | $ | 60.35 | $ | 56.85 | ||||||||||||||||||
| Items impacting U.S. GAAP book value per common share: | ||||||||||||||||||||||
| Unrealized foreign currency translation gains (losses) per common share | (10.05) | (9.34) | ||||||||||||||||||||
| Unrealized gains (losses) on securities and derivatives per common share | (5.51) | (3.51) | ||||||||||||||||||||
| Effect of changes in discount rate assumptions per common share | 20.74 | 15.49 | ||||||||||||||||||||
| Pension liability adjustment per common share | .17 | .17 | ||||||||||||||||||||
| Total accumulated other comprehensive income per common share | 5.34 | 2.80 | ||||||||||||||||||||
| Adjusted book value per common share | 55.01 | 54.06 | ||||||||||||||||||||
| Foreign currency remeasurement gains (losses) per common share | 13.79 | 11.39 | ||||||||||||||||||||
| Adjusted book value excluding foreign currency remeasurement per common share | $ | 41.22 | $ | 42.66 | ||||||||||||||||||
87
Reconciliation of Return on Equity to Adjusted Return on Equity
(Excluding Foreign Currency Remeasurement)
The following table is a reconciliation of items impacting adjusted return on equity excluding foreign currency remeasurement to the most directly comparable U.S. GAAP financial measure of return on equity.
| Three Months Ended June 30, | |||||||||||||
| 2026 | 2025 | ||||||||||||
U.S. GAAP return on equity - net earnings (1) | 10.9 | % | 9.0 | % | |||||||||
| Impact of excluding unrealized foreign currency translation gains (losses) | (2.0) | (1.5) | |||||||||||
| Impact of excluding unrealized gains (losses) on securities and derivatives | (1.1) | (.5) | |||||||||||
| Impact of excluding effect of changes in discount rate assumptions | 3.9 | 1.6 | |||||||||||
| Impact of excluding pension liability adjustment | .0 | .0 | |||||||||||
| Impact of excluding accumulated other comprehensive income | .9 | (.4) | |||||||||||
| U.S. GAAP return on equity less accumulated other comprehensive income | 11.9 | 8.6 | |||||||||||
Differences between adjusted earnings and net earnings (2) | .8 | 5.1 | |||||||||||
| Adjusted return on equity - reported | 12.7 | 13.7 | |||||||||||
Impact of excluding gains (losses) associated with foreign currency remeasurement (3) | 3.9 | ||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-08-10 | MOSKOWITZ JOSEPH L | Director | Sell | -600 | $124.10 | -$74,460 |
| 2026-06-22 | MOSKOWITZ JOSEPH L | Director | Sell | -12,370 ×2 | $116.54 | -$1,441,623 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-11-07 10-Q expected by 2026-11-14 (in 73 days)
- ~2027-02-25 10-K expected by 2027-03-03 (in 183 days)
- ~2027-05-08 10-Q expected by 2027-05-15 (in 255 days)
- ~2027-08-09 10-Q expected by 2027-08-16 (in 348 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-08-07 10-Q Quarterly Report
- 2026-08-06 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-06-30 8-K Other Events
- 2026-06-24 S-3ASR S-3ASR
- 2026-05-28 8-K Other Events; Financial Statements and Exhibits
- 2026-05-22 424B2 Prospectus Supplement
- 2026-05-14 8-K Other Events; Financial Statements and Exhibits
- 2026-05-12 424B2 Prospectus Supplement
- 2026-05-06 10-Q Quarterly Report
- 2026-04-29 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-23 S-3 Registration Statement
- 2026-02-25 10-K Annual Report
- 2026-02-04 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-11-05 10-Q Quarterly Report
- 2025-11-04 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits