Item 3. LEGAL PROCEEDINGS

On December 14, 2017, three former independent sales contractors filed a shareholders derivative complaint in the U.S. District Court for the Southern District of New York naming the Parent Company as nominal defendant and the Parent Company’s Chairman and Chief Executive Officer, several of its directors, and a former officer and director as defendants. The complaint alleges breaches of fiduciary duty, misstatements and omissions in the Company’s public disclosures, and insider trading. The Company’s Board of Directors had previously established a special litigation committee (SLC) in July 2017 to investigate certain allegations underlying the derivative action. The SLC issued a report of its investigation in September 2017 and another report in February 2018, each of which determined that it was not in the best interests of the Company to pursue the action demanded by the shareholders. On February 12, 2018, this litigation was transferred to the U.S. District Court for the Middle District of Georgia. The Company intends to file a motion to dismiss based upon the conclusions of the special committee in these two reports. An amended complaint was filed on January 31, 2018, and the SLC is investigating certain additional allegations raised in the new filing. The Company believes the outcome of this litigation will not have a material adverse effect on its financial position, results of operation or cash flows.

On February 9, 2018, a putative class action complaint was filed in the U.S. District Court for the Middle District of Georgia, purportedly on behalf of purchasers of Aflac Incorporated stock between February 27, 2013 and January 11, 2018. The complaint names the Parent Company and certain officers as defendants and alleges the Company’s public disclosures were misleading in relation to purported recruiting practices, misclassification of independent contractors, manipulation of a sales

metric, and failure to adhere to the Company’s Code of Business Conduct and Ethics and corporate social responsibility standards. The complaint seeks class action certification, an unspecified amount for compensatory damages and interest, costs and expenses, and other unspecified equitable or injunctive relief. The Company believes that this lawsuit is without merit. The Company intends to vigorously defend against the allegations made in the complaint and to file a motion to dismiss the action.

The Company is a defendant in various lawsuits considered to be in the normal course of business. Members of the Company's senior legal and financial management teams review litigation on a quarterly and annual basis. The final results of any litigation cannot be predicted with certainty. Although some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will not have a material adverse effect on its financial position, results of operations, or cash flows.