Aflac (AFL) 10-K risk factor changes: FY2018 vs FY2017

[removed: Difficult] [added: 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 [removed: business.][added: business.]

More recently, global markets have experienced bouts of volatility due to [added: uncertainty surrounding] a British exit from the European [removed: Union (EU) (Brexit), uncertainty surrounding] [added: Union,] Japan’s continued recovery amidst assorted policy changes, [removed: significant declines] [added: volatility] in global commodity prices including oil, divergent monetary policies in the United States versus many other developed [removed: economies and] [added: economies,] heightened concerns surrounding the Chinese [removed: economy.][added: economy and increasing protectionism in U.S. foreign trade policy.]

While capital and market conditions have been generally favorable in the last year, [added: volatility increased in] the [added: fourth quarter and the] prospect for increased volatility remains.

[removed: Recent activity] [added: Activity] by the government of North Korea [removed: has been] [added: in 2018 was] the subject of increasing focus for a number of other governments, including those of the United States and Japan.

[removed: Such] [added: Although hostile rhetoric has decreased, such] North Korean activity and related geopolitical risk could have a significant impact on financial market conditions across the world.

As the Company holds a significant amount of fixed maturity [removed: and perpetual] securities issued by borrowers located in many different parts of the world, including a large portion issued by banks and financial institutions, sovereigns, and other corporate borrowers in the United States and Europe, its financial results are directly influenced by global financial markets.

In [removed: a] December 2014 [removed: snap-election,] [added: and October 2017 snap-elections,] the ruling Liberal Democratic Party (LDP) won [removed: a landslide victory,] [added: decisive victories] further strengthening Mr. Abe's ability to [removed: implement] [added: continue with] economic [removed: reform] [added: reforms] and address key policy challenges.

[removed: More] [added: Most] recently, [removed: as] the Bank of Japan (BoJ) [removed: has] signaled to hold its policy rate at [removed: zero, the Japan Government Bond (JGB)] [added: zero and to continue] yield curve [removed: has steepened producing higher rates on longer maturity Japanese Government bonds.][added: control to maintain a targeted]

Prime Minister Abe’s [removed: victory in the October 2017 elections] [added: election victories] may result in the continuation of current monetary policy, but there can be no guarantee that this is the case.

Government actions to stimulate the economy affect the value of the Company's existing holdings, its reinvestment rate on new investments in JGBs or other yen-denominated assets, and consumer behavior relative to the Company's suite of [added: products.]

The additional government debt from fiscal stimulus actions could [removed: contribute to a weakening of] [added: adversely impact] the Japan sovereign credit [removed: profile and result] [added: profile, which could] in [removed: further rating downgrades at the credit rating agencies.][added: turn lead to volatility in Japanese capital and currency markets.]

For a further description of the Company's liquidity needs, including maturing indebtedness, see [removed: Item 7 of this Form 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations -] [added: the] Capital Resources and [removed: Liquidity.][added: Liquidity section of MD&A in this report.]

The Company is unable to predict the course of the [removed: current recoveries in] global financial markets or the recurrence, duration or severity of disruptions in such markets.

[removed: The] [added: The] Company is exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and [removed: liquidity.][added: liquidity.]

Due to low interest rates, the Company's ability to earn the returns it expects may also influence the Company's ability to develop and price attractive new products and could impact its overall [removed: sales levels.]

The [removed: recent] [added: continuing] negative interest rate imposed by the [removed: Bank of Japan] [added: BoJ] on excess bank reserves could [added: continue to] have a negative impact on the distribution and pricing of these products.

A rise in interest rates could decrease the fair value of the Company's debt [removed: and perpetual] securities.

For regulatory accounting purposes for Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, negatively impacting Aflac Japan's earnings and corresponding [removed: repatriation] [added: dividends] and capital deployment.

[removed: The] [added: The] Company's concentration of business in Japan poses risks to its [removed: operations.][added: operations.]

The Company's operations in Japan, including realized gains and losses on Aflac Japan's investment portfolio, accounted for 70% of the Company's total revenues for [added: both 2018 and] 2017, compared with 71% in [removed: 2016 and 70% in 2015.][added: 2016.]

The Japanese operations accounted for [removed: 83%] [added: 84%] of the Company's total assets at [removed: both] December 31, [removed: 2017 and 2016.][added: 2018, compared with 83% at December 31, 2017.]

[removed: A large portion of] the cash available for reinvestment each year is deployed in yen-denominated instruments and subject to the low level of yen interest rates.

[removed: The Company is] [added: The Company is] exposed to foreign currency fluctuations in the yen/dollar exchange [removed: rate.][added: rate.]

As indicated in the [removed: Business section of] Item 1, [added: Business,] the Company has determined that the unhedged U.S. dollar-denominated investment portfolio acts as a natural economic currency hedge of a portion of the Company’s investment in Aflac Japan against erosion of economic value.

Furthermore, for regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by changes in the rate of exchange between the yen and U.S. dollar and could negatively impact Aflac Japan's earnings and the corresponding [removed: repatriation] [added: dividends] and capital deployment.

This primarily occurs when the Company [removed: repatriates or] dividends funds from Aflac Japan to the Parent Company, but it also has an impact when cash in the form of yen is converted to U.S. dollars for investment into U.S. dollar-denominated assets.

The exchange rates prevailing at the time of [removed: repatriation or] dividend [added: payment] may differ from the exchange rates prevailing at the time the yen profits were earned.

For more information regarding unhedged U.S. dollar-denominated securities, see the risk factor below entitled, “Lack of availability of acceptable yen-denominated investments could adversely affect the Company’s results of operations, [added: financial position or liquidity”.]

[removed: Lack] [added: Lack] of availability of acceptable yen-denominated investments could adversely affect the Company's results of operations, financial position or [removed: liquidity.][added: liquidity.]

The investment in private placements [removed: and legacy perpetual securities] carries risk associated with illiquidity, which is managed and monitored by the Company.

Starting in 2012, Aflac Japan augmented its investment strategy to include U.S. dollar-denominated [removed: investments] [added: investments, some of] which could then be hedged back to yen.

The Company’s foreign exchange derivatives are typically shorter-dated than the underlying U.S. dollar-denominated investments being [removed: hedged.][added: hedged, which creates roll-over risks within the hedging program that could increase the cost of such derivatives.]

If the Company reduces the notional amount of foreign exchange derivatives prior to the maturity of the hedged U.S. dollar-denominated investments, the [removed: respective holding] foreign exchange gains or losses on the U.S. dollar-denominated investments remain economically unrealized.

Since 2012, the cumulative net cash settlements on derivatives hedging currency exposure of Aflac Japan’s [added: U.S.] dollar-denominated investments were an outflow of [removed: $3.6] [added: $3.9] billion as of December 31, [removed: 2017.][added: 2018.]

Furthermore, the settlements include instances where the initial foreign exchange derivative notional amounts were reduced prior to the maturity of the hedged [removed: investments.]

For more information regarding unhedged U.S. dollar-denominated securities, see the risk factor above entitled, “The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate.” For more information regarding [added: Aflac Japan's U.S. dollar-denominated investments and hedging activities, see the Hedging Activities subsection within the Item 7.]

[removed: foreign currency risk, see the Currency Risk subsection within the] Quantitative and Qualitative Disclosures about Market Risk section in this report.

[removed: Failure] [added: U.S. tax audit risk related] to [removed: execute or implement the planned] conversion of the Japan branch to a [removed: legal] subsidiary could adversely [removed: affect] [added: impact] the Company's [removed: business, results of operations, or] financial [removed: position.][added: position.]

[removed: Any of these risks, if realized,] [added: Such liabilities or costs] could [removed: result in] [added: have] a material adverse effect on the Company's business, results of operations [removed: or] [added: and] financial condition.

The [removed: planned] [added: conversion of the] Japan branch [removed: conversion] [added: to a legal subsidiary, which the Company executed in the second quarter of 2018, was a complex, tax-free transaction that] is conditioned on the continued validity of a private letter ruling [removed: that] the Company received from the [removed: U.S.] Internal Revenue Service (IRS).

A recent shift in the global trading policies by the U.S. and subsequent trade conflict with China has raised concerns about a slowdown of the Chinese economy.

In addition, the U.S. and Japan are engaged in discussions regarding changes to tariffs and trade agreements.

While it is not expected that the Company's products would be directly impacted by tariff, any resulting economic downturn could adversely affect the Company.

In September 2018, Mr. Abe won reelection to another three-year term as president of the LDP.

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

yield on the 10-year Japan Government Bond (JGB).

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

sales levels.

As discussed in Item 1.

Business, beginning in 2013, Aflac Japan began to curtail sales of first sector savings-type products due to persistent low interest rates in Japan.

The Company’s floating rate investments typically bear interest based on the London Interbank Offered Rate (LIBOR).

Regulatory and industry initiatives to eliminate LIBOR as an interest rate benchmark may create uncertainty in the valuation of LIBOR-based loans, as well as for other LIBOR-based derivatives and assets.

This may adversely impact both pricing and liquidity in such instruments.

The Company is unable to predict with certainty how LIBOR elimination may impact markets, pricing, liquidity and other factors or the Company's activities.

A large portion of

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

In 2018, the Parent Company entered into forward contracts to

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

accomplish a dual objective of hedging foreign currency exchange rate risk related to dividend payments by Aflac Japan, and reducing enterprise-wide hedge costs.

If the markets experience a significant strengthening of yen, this could cause cash strain at the Parent Company as a result of cash collateral and potentially cash settlement requirements.

Based on the timing and severity of exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent Company could be significant.

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

investments.

MD&A section in this report, and for more information regarding foreign currency risk, see the Currency Risk subsection within the Item 7A.

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

adequate business continuity procedures.

For example, negative publicity or allegations of unfavorable business practices or poor governance can be rapidly and widely shared over social or traditional media or other means, and could reduce demand for the Company's insurance products, reduce the Company's ability to recruit and retain employees, or lead to greater regulatory scrutiny of the Company's operations.

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

From time to time, the Company, its third party providers and participants in the Company’s distribution channels have experienced and will likely continue to experience such events.

It also relies on various parties in its distribution channels including agencies, banks and Japan Post in Japan, as well as sales associates and brokers in the United States, to provide services to prospective and existing customers.

[Item 1A.

Risk Factors](#s7477D2DEC61D533A9232D478F177F672)

From time to time, the Company, its third party providers and participants in the Company’s distribution channels have experienced and will likely continue to experience such events.

The Japanese financial markets reacted with even lower rates on Japanese Government bonds, large increases in Japanese equity market values, and a weakening of the yen relative to the U.S. dollar.

products.

This could lead to additional volatility in Japanese capital and currency markets.

In addition, the NAIC is also considering changes to investment risk factors.

Any negative developments by the NRSROs or NAIC in these areas could result in increased capital requirements for the Company.

Foreign currency translation also impacts the computation of the Company's risk-based capital ratio because Aflac Japan is consolidated in the Company's U.S. statutory filings due to its status as a branch.

The Company's required capital, as determined by the application of risk factors to its assets and liabilities, is sensitive to currency risk.

As a result, when the yen strengthens relative to the dollar, the Company's RBC is suppressed.

financial position or liquidity”.

As of December 31, 2017, Aflac Japan held approximately $24.0 billion in U.S. dollar-denominated investments, at amortized cost.

To hedge foreign currency risk, Aflac Japan held $9.3 billion outstanding notional amounts of foreign currency forwards and $8.4 billion outstanding notional amounts of foreign currency options, of which none were in-the-money.

The implementation of the planned Japan branch conversion to a legal subsidiary is a complex undertaking and involves a number of risks, including increased execution costs, information technology-related delays and problems, personnel loss, regulatory law changes, legal and regulatory requirements, changes to the Company's operations, and management distraction.

Changes in law or regulation before the completion of the transaction could result in significant costs or reduction in capital.

The transaction may entail modifications of certain aspects of the Company's operations, which could result in additional costs or reduce net earnings.

The Company is continuing to review potential impacts as it nears the adoption of those tables in April 2018.

efficient and require an ongoing commitment of significant resources to maintain or upgrade to current standards including adequate business continuity procedures.

potential noncompliance by the Company's business associates.

The changes to tax law included in the Tax Act are complex and are subject to new and changing regulations, interpretations and tax guidance in the future, as well as further refinement of our estimates and calculations and changes in the interpretations and assumptions that the Company has made.

As such, the Company's estimates based upon the changes in the Tax Act may change over time.

While the Company believes that this estimate is reasonable, it is relying upon guidance provided by SEC Staff Accounting Bulletin No. 118 (SAB 118) that provides a measurement period of up to one year from the enactment date of December 22, 2017, in order

to complete the accounting for the effects of the Tax Act.

Therefore, in future periods the Company may reduce or increase the estimated reduction of net deferred tax liability, and any such revision may be material.

The Company's portfolio includes holdings of perpetual securities.

Most of these are issued by global banks and financial institutions.

Following the financial crisis, rating agencies reviewed and, in most cases, modified the rating criteria for financial institutions.

This has caused multiple downgrades of many bank and financial issuers, but perpetual securities have been more negatively impacted as their lower position in the capital structure represents relatively more risk than other more senior obligations of the issuer.

Further downgrades or default of issuers of securities the Company owns will have a negative impact on its portfolio and could reduce the Company's earnings and capital.

investment income available to the Company on new credit investments.

To provide additional alternatives to increase the Company's overall portfolio yield while managing its overall currency risk, starting in 2012, the Company invested a significant portion of the investable cash flow generated by Aflac Japan into U.S. dollar-denominated investments and hedged these investments to yen through the use of currency forward and option contracts.

The derivative forward and option contracts are of a shorter maturity than the hedged investments, which creates roll-over risks within the hedging program.

Due to changes in market environments, there is a risk the hedges become ineffective and lose the corresponding hedge accounting treatment.

At December 31, 2017, the Company held foreign currency forwards and options of approximately $9.3 billion of notional amount associated with Aflac Japan's U.S. dollar-denominated investments referenced above; foreign currency swaps of $2.8 billion of notional amount associated with the Company's notes payable; and foreign currency forwards and options of approximately $439 million of notional amount used to economically hedge profit repatriation.

The FSA may not allow profit repatriations or other transfers from Aflac Japan if they would cause Aflac Japan to lack sufficient financial strength for the protection of Japanese policyholders.

After the planned Japan branch conversion as early as April 1, 2018, the new Japan subsidiary will be required to meet certain financial criteria as governed by Japanese corporate law in order to provide dividends to the Parent Company.

At December 31, 2017, the Company held approximately $48.4 billion at amortized cost, or 45.4% of its total debt and perpetual securities, in JGBs.

JGBs were rated A1/A+/A at December 31, 2017 by Moody's, S&P and Fitch, respectively.

evaluation and assessment of known and inherent risks associated with the respective securities.

The Company's investments in perpetual securities that are rated below investment grade and equity securities are evaluated for other-than-temporary impairment under the Company's equity impairment model.

This impairment model focuses on the severity of a security's decline in fair value coupled with the length of time the fair value of the security has been below cost or amortized cost and the financial condition and near-term prospects of the issuer.

For equity securities, the Company also verifies its intent to hold the securities until they recover in value.

[removed: OPERATIONS][added: OPERATIONS]

[removed: FORWARD-LOOKING INFORMATION][added: FORWARD-LOOKING INFORMATION]

In particular, statements containing words such as [removed: “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target”, "outlook"] [added: the following] or similar words as well as specific projections of future results, generally qualify as forward-looking.

| • | subsidiaries' ability to pay dividends to [removed: Aflac Incorporated] [added: the Parent Company] |

| • | changes in [removed: U.S. and/or Japanese] accounting standards |

[removed: MD&A OVERVIEW][added: MD&A OVERVIEW]

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the three-year period ended December 31, [removed: 2017.][added: 2018.]

[removed: | • | The Company's Business |][added: THE COMPANY'S BUSINESS]

[removed: | • | Performance Highlights |][added: PERFORMANCE HIGHLIGHTS]

[removed: | • | Critical Accounting Estimates |][added: CRITICAL ACCOUNTING ESTIMATES]

[removed: | • | Results of Operations, consolidated and by segment |][added: RESULTS OF OPERATIONS]

[removed: THE COMPANY'S BUSINESS][added: | [The Company’s Business](#sB775FE82B93259C1862002929079653E) | [40](#sB775FE82B93259C1862002929079653E) |]

The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus [removed: (Aflac), which operates] [added: (Aflac)] in the United States (Aflac U.S.) [removed: and as a branch] [added: and, effective April 1, 2018, through Aflac Life Insurance Japan Ltd.] in Japan (Aflac Japan).

The Company's insurance operations in the United States and [removed: its branch in] Japan service the two markets for [removed: its] [added: the Company's] insurance business.

[removed: PERFORMANCE HIGHLIGHTS][added: | [Performance Highlights](#s018C019CAD735CD4862F540AAC74C8CF) | [40](#s018C019CAD735CD4862F540AAC74C8CF) |]

Yen-denominated income statement accounts are translated to U.S. dollars using a weighted-average Japanese yen/U.S. dollar foreign exchange rate, while yen-denominated balance sheet accounts are translated to U.S. dollars using a spot Japanese yen/U.S. dollar foreign exchange [removed: rate.][added: rate*(1)*.]

The spot yen/dollar exchange rate at December 31, [removed: 2017] [added: 2018] was [removed: 113.00,] [added: 111.00,] or [removed: 3.1%] [added: 1.8%] stronger than the spot yen/dollar exchange rate of [removed: 116.49] [added: 113.00] at December 31, [removed: 2016.][added: 2017.]

The weighted-average yen/dollar exchange rate for the year ended December 31, [removed: 2017] [added: 2018] was [removed: 112.16,] [added: 110.39,] or [removed: 3.1% weaker] [added: 1.6% stronger] than the weighted-average yen/dollar exchange rate of [removed: 108.70] [added: 112.16] for the same period in [removed: 2016.][added: 2017.]

[removed: Net] [added: In 2017, net] earnings [removed: in 2017 were $4.6 billion, or $11.54] [added: and net earnings] per diluted [removed: share, compared with $2.7] [added: share included the impact of the estimated $1.9] billion, or [removed: $6.42] [added: $2.42] per diluted share, [removed: in 2016, reflecting the estimated $1.9 billion] benefit as a result of the U.S. Tax Act.

Results for [removed: 2017] [added: 2018] included pretax net realized investment losses of [removed: $151 million ($98 million after-tax),] [added: $430 million,] compared with net realized investment losses of [removed: $14 million ($9] [added: $151] million [removed: after-tax)] in [removed: 2016.][added: 2017.]

In October [removed: 2017,] [added: 2018,] the Parent Company issued [removed: 60.0 billion yen] [added: $550 million] of [removed: subordinated debentures] [added: senior notes] through a U.S. public debt offering.

In November [removed: 2017,] [added: 2018,] the Parent Company used [removed: a portion of] [added: the] net proceeds [added: of the $550 million senior notes] to redeem [removed: $500 million of] the Parent Company's [removed: 5.50% subordinated debentures] [added: 2.40% senior notes] due [removed: 2052.][added: in 2020.]

In [removed: January 2017,] [added: October 2018,] the Parent Company issued [removed: 60.0 billion yen] [added: $550 million] of senior notes through a U.S. public debt offering.

The Company repurchased [removed: 17.8] [added: 28.9] million shares of its common stock in the open market for [removed: $1.35] [added: $1.3] billion under [removed: the Company's] [added: its] share repurchase program in [removed: 2017,] [added: 2018,] compared with the repurchase of [removed: 21.6] [added: 35.5] million shares for [removed: $1.4] [added: $1.35] billion in [removed: 2016.][added: 2017.]

[removed: CRITICAL ACCOUNTING ESTIMATES][added: | [Critical Accounting Estimates](#s60A72D7A8DAD590D8AAC42F9864DADE3) | [42](#s60A72D7A8DAD590D8AAC42F9864DADE3) |]

The Company prepares its financial statements in accordance with U.S. [removed: generally accepted accounting principles (GAAP).][added: GAAP.]

These principles are established primarily by the [removed: Financial Accounting Standards Board (FASB).][added: FASB.]

The application of these critical accounting estimates determines the values at which [removed: 95%] [added: 94%] of the Company's assets and 81% of its liabilities are reported as of December 31, [removed: 2017,] [added: 2018,] and thus has a direct effect on net earnings and shareholders' equity.

[removed: Investments] [added: Investments] and [removed: Derivatives][added: Derivatives]

Aflac's investments, primarily consisting of [removed: debt, perpetual] [added: debt] and equity securities, include both publicly issued and privately issued securities.

The Company's derivative activities include foreign [removed: currency, interest rate and credit default swaps in variable interest entities (VIEs) that are consolidated; foreign] currency [removed: swaps associated with certain senior notes and its subordinated debentures; foreign currency] forwards and options used in hedging foreign exchange risk and [added: interest rate swaps and] options on interest rate swaps (or interest rate swaptions) used in hedging interest rate risk on U.S. dollar-denominated securities in Aflac Japan's portfolio; [removed: and] foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in [removed: yen.][added: yen and hedge the Company's long term exposure to a weakening yen; foreign currency swaps associated with certain senior notes and subordinated debentures; and foreign currency and credit default swaps in variable interest entities (VIEs) that are consolidated.]

Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign [added: currency forward and spot rates, and interest volatility.]

[removed: Deferred] [added: Deferred] Policy Acquisition Costs and Policy [removed: Liabilities][added: 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 [removed: premium-paying periods of the contracts when due from policyholders.][added: premium-]

[removed: Deferred] [added: *Deferred] Policy Acquisition [removed: Costs][added: Costs*]

[removed: Policy Liabilities][added: *Policy Liabilities*]

[removed: Policy Liabilities][added: Policy Liabilities]

| (In millions) | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Future policy benefits | [removed: $] [added: $] | [removed: 73,661] [added: 77,812] | | | $ | [removed: 68,291] [added: 73,661] | |

| Unpaid policy claims | [removed: 2,692] [added: 2,857] | | | | [removed: 2,393] [added: 2,692] | | |

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| • expect | • anticipate | • believe | • goal | • objective |

| • may | • should | • estimate | • intends | • projects |

| • will | • assumes | • potential | • target | • outlook |

| • | U.S. tax audit risk related to conversion of the Japan branch to a subsidiary |

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

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

| • | allegations or determinations of worker misclassification in the United States |

[Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations](#s6AE1B275D67F590E9F15222292704211)

| | Page |

| [Insurance Operations](#s05A6F5C8EA9A5811AF42F8A3C91D90A0) | [51](#s05A6F5C8EA9A5811AF42F8A3C91D90A0) |

| [Analysis of Financial Condition](#sB15D0165CE3D53288B4DA18D5F1CEC3E) | [61](#sB15D0165CE3D53288B4DA18D5F1CEC3E) |

| [Capital Resources and Liquidity](#s1A9B79916B30566B9EB6130FA953903C) | [70](#s1A9B79916B30566B9EB6130FA953903C) |

Prior to April 1, 2018, the Company's insurance business was marketed in Japan as a branch of Aflac.

Total revenues increased .4% to $21.8 billion in 2018, compared with $21.7 billion in 2017.

Net earnings in 2018 were $2.9 billion, or $3.77 per diluted share, compared with $4.6 billion, or $5.77 per diluted share, in 2017.

In the fourth quarter of 2018, the Company recorded an immaterial adjustment to the provisional Japan deferred tax balances and no valuation allowance adjustment related to anticipatory foreign tax credit asset, rendering final values for the Company's deferred tax liability.

Net investment losses in 2018 included $81 million of other-than-temporary impairment losses and changes in loan loss reserves and $234 million in net losses from derivatives and foreign currency gains or losses.

Effective January 1, 2018 upon the adoption of new accounting guidance, changes in fair value of equity securities are recorded in earnings as a component of realized investment gains and losses.

The Company reported net losses on equity securities of $131 million in 2018.

*(1)* *Yen/ U.S dollar exchange rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM)*

[Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations](#s6AE1B275D67F590E9F15222292704211)

On February 13, 2018, the Board of Directors of the Parent Company declared a two-for-one stock split of the Company’s common stock in the form of a 100% stock dividend payable on March 16, 2018 to shareholders of record at the close of business on March 2, 2018.

The stock split was paid in the form of one additional common stock share for every share of common stock held.

All equity and share-based data, including the number of shares outstanding and per share amounts, have been adjusted to reflect the stock split for all periods presented in this Annual Report on Form 10-K.

*Strategic Alliance with Japan Post Holdings*

On December 19, 2018, the Parent Company and Aflac Japan entered into the Basic Agreement with Japan Post Holdings.

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.

Pursuant to the terms of the Shareholders Agreement a voting trust established and funded by Japan Post Holdings (Trust) will use commercially reasonable efforts to acquire, through open market or private block purchases, ownership of approximately 7% of the outstanding shares of the Parent Company’s outstanding common stock within a year after the Trust begins acquiring such stock.

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.

This strategic investment is subject to certain regulatory approvals in Japan and the U.S. The Company anticipates that regulatory approvals will be received in the second half of 2019.

The foregoing summary is subject to and qualified in its entirety by reference to the full text of the Basic Agreement and Letter Agreement, including the forms of Trust Agreement and Shareholders Agreement attached to the Letter Agreement, copies of which are included as Exhibits 10.47 and 10.48 hereto and the terms of which are incorporated herein by reference.

As of December 31, 2018, the Trust owned no shares of the Parent Company’s outstanding stock.

| | |

| --- | --- |

| --- | --- |

| • | failure to execute or implement the conversion of the Japan branch to a legal subsidiary |

| • | governmental actions for the purpose of stabilizing the financial markets |

| • | ongoing changes in the Company's industry |

| • | loss of consumer trust resulting from events external to the Company's operations |

| • | failure of internal controls or corporate governance policies and procedures |

| • | Analysis of Financial Condition, including discussion of market risks of financial instruments |

| • | Capital Resources and Liquidity, including discussion of availability of capital and the sources and uses of cash |

Total revenues decreased 4.0% to $21.7 billion in 2017, compared with $22.6 billion in 2016.

Net investment losses in 2017 consisted of $28 million of net gains ($18 million after-tax) from the sale or redemption of securities; $37 million ($24 million after-tax) of other-than-temporary impairment losses; and $142 million of net losses ($92 million after-tax) from derivatives and foreign currency gains (losses).

The pretax expense due to the early redemption of these notes was $13 million.

In February 2017, the Parent Company extinguished $650 million of 2.65% senior notes upon their maturity.

In 2017, the Parent Company and Aflac renewed a 364-day uncommitted bilateral line of credit with a third party that provides for borrowings in the amount of $100 million and executed two 364-day intercompany uncommitted and revolving lines of credit, one of which provides for borrowings by Aflac in the amount of $250 million, and the other provides for borrowings by the Parent Company in the amount of 37.5 billion yen.

currency forward and spot rates, and interest volatility.

For derivatives associated with VIEs where it is the primary beneficiary, the Company receives valuations from a third party pricing vendor.

Interest rates and credit spreads in both the United States and Japan are not the only factors that impact the Company’s unrealized gain/loss position and the evaluation of a need for a valuation allowance on the Company’s deferred tax asset, but they do have a direct and significant effect on both.

Based on its methodology described above for evaluating the need for a valuation allowance, the Company has determined that it is more likely than not that its deferred tax assets will be realized in the future, therefore the Company has not recorded a valuation allowance as of December 31, 2017.

As such, the estimate may change over time, possibly materially, and the Company may reduce or increase the estimated reduction of net deferred tax liability.

Operating earnings includes interest cash flows associated with notes payable and amortized hedge costs related to foreign currency denominated investments, but excludes certain items that cannot be predicted or that are outside of management's control, such as realized investment gains and losses from securities transactions, impairments, change in loan loss reserves and certain derivative and foreign currency activities; nonrecurring items; and other non-operating income (loss) from net earnings.

eliminates dollar based fluctuations driven solely from currency rate changes.

| Net earnings | $ | 4,604 | | | $ | 2,659 | | | $ | 2,533 | | | $ | 11.54 | | | $ | 6.42 | | | $ | 5.85 | |

| Securities transactions and impairments | 9 | | | | (55 | | ) | | (150 | | ) | | .02 | | | | (.13 | | ) | | (.33 | | ) |

| Operating earnings | 2,716 | | | | 2,691 | | | | 2,624 | | | | 6.81 | | | | 6.50 | | | | 6.06 | | |

(4) Foreign currency gains (losses) for all periods have been reclassified from other income (loss) to realized investment gains (losses) - certain derivative and foreign currency gains (losses) for consistency with current period presentation.

(5) Calculated using a 35% tax rate

(6) This estimated impact of Tax Reform may be adjusted for future periods, possibly materially, due to, among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions the Company has made, tax guidance that may be issued and actions the Company may take as a result of Tax Reform.

Certain Derivative and Foreign Currency Gains (Losses)

Certain derivative and foreign currency gains (losses) exclude amortized hedge costs (see Hedge Cost section below) and the interest rate component of the change in fair value of foreign currency swaps on notes payable that are both classified as operating items.

Prior year operating earnings have been revised to conform to this change.

Beginning in 2016, the Company changed its non-U.S. GAAP reporting for these hedge costs by amortizing them evenly over the life of the foreign currency forward contracts.

In 2016, the Company began increasing the duration of the foreign currency forward contracts used to hedge its U.S. dollar-denominated assets in Aflac Japan's investment portfolio to cover periods extending beyond one year.

Therefore, recognizing these costs over the extended hedging periods provides a better measure of the Company's costs, and better reflects the economics of how hedge costs emerge over the life of the hedge.

Other guaranty fund assessments for the year ended December 31, 2017 were immaterial.

The Company includes the accounting impacts of remeasurement associated with changes in the yen/dollar exchange rate as an other non-operating item.

During 2016, the Company recognized a foreign currency gain of $109 million due to a temporary sizable U.S. dollar cash balance and cash settlements of U.S. dollar-denominated investment transactions within the Japan segment.

The pretax non-operating expense due to the early redemption of these notes was $13 million.

During 2015, the make-whole premium paid to the investors of the Company's 8.50% fixed-rate senior notes for the early redemption of those notes was recorded as a $230 million pretax non-operating loss.

While the Company believes that this estimate is reasonable, it is relying upon guidance provided by SEC Staff Accounting Bulletin No. 118 that provides a measurement period of up to one year from the enactment date of December 22, 2017 in order for the Company to complete the accounting for the effects of the Tax Act.

[removed: Currency Risk][added: *Currency Risk*]

Aflac Japan’s premiums and [removed: approximately half] [added: a significant portion] of its investment income are received in yen, and its claims and most expenses are paid in yen.

This occurs when [removed: the Company repatriates] yen-denominated funds [added: are paid as dividends and management fees] from Aflac Japan to [removed: Aflac U.S] [added: the Parent Company] and with quarterly settlements of its reinsurance retrocession transactions.

The exchange rates prevailing at the time of [removed: profit repatriation] [added: yen payments] will differ from the exchange rates prevailing at the time the yen profits were earned.

A portion of the yen [removed: repatriation] [added: dividend and management fee payments] may be used to service Aflac Incorporated's yen-denominated notes payable with the remainder converted into U.S. dollars.

In addition to [removed: profit repatriation] [added: yen payments] and the reinsurance retrocessions, certain investment activities for Aflac Japan expose the Company to economic currency risk when yen are converted into U.S. dollars.

As previously discussed, for certain of its U.S. dollar-denominated securities, the Company enters into foreign currency forward and option contracts to hedge the currency risk on the fair value of hedged [removed: investments.]

This in turn may reduce Aflac Japan’s [removed: repatriation or] dividend capacity, as well as increase the level of capital needed to support increased SMR volatility.

As the value of the U.S. dollar-denominated investment portfolio in Aflac Japan fluctuates and the Company’s business model evolves, the Company [removed: will] periodically [removed: reevaluate] [added: reevaluates] this size of the unhedged portfolio and may accordingly adjust up or down its currency hedging targets.

[removed: Dollar] [added: Dollar] Value of Yen-Denominated Assets and [removed: Liabilities][added: Liabilities]

[removed: at] [added: at] Selected Exchange [removed: Rates][added: Rates]

| (In millions) | [removed: 2017] | [removed: | | | | | | | | |] [added: 2018] | | [removed: 2016] | | | | | [added: 2017] | | | | | | |

| [removed: Yen/dollar] [added: Yen/dollar] exchange [removed: rates] [added: rates] | [removed: 98.00] [added: 96.00] | | | | [removed: 113.00 (1)] [added: 111.00 (1)] | | | | [removed: 128.00] [added: 126.00] | | | | [removed: 101.49] [added: 98.00] | | | | [removed: 116.49(1)] [added: 113.00*(1)*] | | | | [removed: 131.49] [added: 128.00] | | | |

| [removed: Yen-denominated] [added: Yen-denominated] financial [removed: instruments:] [added: instruments:] | | | | | | | | | | | | | | | | | | | | | | | | |

| Equity securities | [removed: 126] [added: 742] | | | | [removed: 109] [added: 641] | | | | [removed: 96] [added: 565] | | | | [removed: 155] [added: 126] | | | | [removed: 136] [added: 109] | | | | [removed: 120] [added: 96] | | | |

| Equity securities - consolidated variable interest entities | [removed: 675] [added: 0] | | | | [removed: 586] [added: 0] | | | | [removed: 517] [added: 0] | | | | [removed: 653] [added: 675] | | | | [removed: 569] [added: 586] | | | | [removed: 504] [added: 517] | | | |

| Cash and cash equivalents | [removed: 222] [added: 988] | | | | [removed: 193] [added: 855] | | | | [removed: 170] [added: 753] | | | | [removed: 1,013] [added: 222] | | | | [removed: 883] [added: 193] | | | | [removed: 782] [added: 170] | | | |

| Derivatives | [removed: 1,961] [added: 2,712] | | | | [removed: 331] [added: 417] | | | | [removed: 528] [added: 949] | | | | [removed: 2,245] [added: 1,961] | | | | [removed: 1,207] [added: 331] | | | | [removed: 3,515] [added: 528] | | | |

| Other financial instruments | [removed: 228] [added: 253] | | | | [removed: 198] [added: 219] | | | | [removed: 175] [added: 192] | | | | [removed: 206] [added: 228] | | | | [removed: 178] [added: 198] | | | | [removed: 159] [added: 175] | | | |

| Subtotal | [removed: 92,045] [added: 96,291] | | | | [removed: 78,457] [added: 81,350] | | | | [removed: 69,500] [added: 72,247] | | | | [removed: 86,978] [added: 92,045] | | | | [removed: 75,030] [added: 78,457] | | | | [removed: 68,915] [added: 69,500] | | | |

| Notes payable | [removed: 1,535] [added: 2,120] | | | | [removed: 1,331] [added: 1,831] | | | | [removed: 1,175] [added: 1,615] | | | | [removed: 304] [added: 1,535] | | | | [removed: 265] [added: 1,331] | | | | [removed: 235] [added: 1,175] | | | |

| Derivatives | [removed: 516] [added: 1,318] | | | | [removed: 474] [added: 387] | | | | [removed: 2,177] [added: 2,138] | | | | [removed: 1,712] [added: 516] | | | | [removed: 1,998] [added: 474] | | | | [removed: 5,549] [added: 2,177] | | | |

| Subtotal | [removed: 2,051] [added: 3,438] | | | | [removed: 1,805] [added: 2,218] | | | | [removed: 3,352] [added: 3,753] | | | | [removed: 2,016] [added: 2,051] | | | | [removed: 2,263] [added: 1,805] | | | | [removed: 5,784] [added: 3,352] | | | |

| Net yen-denominated financial instruments | [removed: 89,994] [added: 92,853] | | | | [removed: 76,652] [added: 79,132] | | | | [removed: 66,148] [added: 68,494] | | | | [removed: 84,962] [added: 89,994] | | | | [removed: 72,767] [added: 76,652] | | | | [removed: 63,131] [added: 66,148] | | | |

| Other yen-denominated assets | [removed: 9,406] [added: 10,795] | | | | [removed: 8,157] [added: 9,336] | | | | [removed: 7,201] [added: 8,225] | | | | [removed: 8,741] [added: 9,406] | | | | [removed: 7,616] [added: 8,157] | | | | [removed: 6,747] [added: 7,201] | | | |

| Other yen-denominated liabilities | [removed: 107,761] [added: 113,994] | | | | [removed: 93,456] [added: 98,590] | | | | [removed: 82,504] [added: 86,853] | | | | [removed: 102,132] [added: 107,761] | | | | [removed: 88,981] [added: 93,456] | | | | [removed: 78,830] [added: 82,504] | | | |

| Consolidated yen-denominated net assets (liabilities) subject to foreign currency [removed: fluctuation(2)] [added: fluctuation*(2)*] | [removed: $] [added: $] | [removed: (8,361] [added: (10,346] | [removed: )] [added: )] | | [removed: $] [added: $] | [removed: (8,647] [added: (10,122] | [removed: )] [added: )] | | [removed: $] [added: $] | [removed: (9,155] [added: (10,134] | [removed: )] [added: )] | | $ | [removed: (8,429] [added: (8,361] | ) | | $ | [removed: (8,598] [added: (8,647] | ) | | $ | [removed: (8,952] [added: (9,155] | ) | |

[removed: (1) Actual] [added: *(1)* *Actual] period-end exchange [removed: rate][added: rate*]

[removed: (2) Does] [added: *(2)* *Does] not include the U.S. dollar-denominated corporate bonds for which the Company has entered into foreign currency derivatives as discussed in the Aflac Japan Investment subsection of [removed: MD&A][added: MD&A*]

[removed: (3) Does] [added: *(3)* *Does] not include U.S. dollar-denominated bonds that have corresponding cross-currency swaps in consolidated [removed: VIEs][added: VIEs*]

Upon consolidation, the original yen-denominated investment was derecognized and the underlying [removed: fixed-maturity or perpetual] [added: fixed maturity] securities and cross-currency swaps were recognized.

[removed: Interest] [added: *Interest] Rate [removed: Risk][added: Risk*]

The Company's primary interest rate exposure is to the impact of changes in interest rates on the fair value of its investments in debt [removed: and perpetual] securities.

The Company monitors its investment portfolio on a quarterly basis utilizing a full valuation methodology, measuring price volatility, and sensitivity of the fair values of its investments to interest rate changes on the debt [removed: and perpetual] securities the Company owns.

For example, if the current duration of a debt security [removed: or perpetual security] is 10 years, then the fair value of that security will increase by approximately 10% if market interest rates decrease by 100 basis points, assuming all other factors remain constant.

Likewise, the fair value of the debt security [removed: or perpetual security] will decrease by approximately 10% if market interest rates increase by 100 basis points, assuming all other factors remain constant.

The estimated effect of potential increases in interest rates on the fair values of debt [removed: and perpetual] securities the Company owns; derivatives, excluding credit default swaps, and notes payable as of December 31 follows:

[removed: Sensitivity] [added: Sensitivity] of Fair Values of Financial [removed: Instruments][added: Instruments]

[removed: to] [added: to] Interest Rate [removed: Changes][added: Changes]

| | [removed: 2017] [added: 2018] | | | | | | | | [added: 2017] | | | [removed: 2016] | | | | | [added: 2016] | | | | | [added: | | |]

*Aflac Japan*

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

The following table details Aflac Japan's portfolio allocation by currency as of December 31.

Japan Segment Portfolio Allocation by Currency

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

| | | Amortized Cost | | | Fair Value | | | | Amortized Cost | | | Fair Value | | | |

| USD program | | $ | 24,435 | | $ | 24,258 | | | $ | 22,432 | | $ | 23,716 | | |

| Fixed maturity securities - economically converted to yen | | 1,679 | | | 2,269 | | | | 1,650 | | | 2,549 | | | |

| Total dollar-denominated investments | | 26,114 | | | 26,527 | | | | 24,082 | | | 26,265 | | | |

| Total yen-denominated investments | | 74,974 | | | 86,251 | | | | 72,369 | | | 84,379 | | | |

| Total | | $ | 101,088 | | $ | 112,778 | | | $ | 96,451 | | $ | 110,644 | | |

As of December 31, 2018, Aflac Japan had $9.9 billion outstanding notional amounts of foreign currency forwards and $9.5 billion outstanding notional amounts of foreign currency options, of which none were in-the-money, hedging the U.S. dollar-denominated investments (USD Program).

The fair value of Aflac Japan's unhedged U.S. dollar-denominated portfolio was $14.4 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).

*Aflac Inc.*

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

investments.

In 2018, the Parent Company entered into forward contracts to accomplish a dual objective of hedging foreign currency rate risk to dividend payments by Aflac Japan, and reducing enterprise-wide hedge costs.

If the markets experience a significant strengthening of yen, this could cause cash strain at the Parent Company as a result of cash collateral and potentially cash settlement requirements.

Based on the timing and severity of exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent Company could be significant.

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

| (In millions) | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | | |

| Fixed maturity securities (2) | $ | 55,600 | | | $ | 48,086 | | | $ | 42,362 | | | $ | 51,504 | | | $ | 44,666 | | | $ | 39,433 | | |

| Fixed maturity securities - consolidated variable interest entities (3) | 941 | | | | 814 | | | | 717 | | | | 1,089 | | | | 944 | | | | 834 | | | |

| Fixed maturity securities | 35,055 | | | | 30,318 | | | | 26,709 | | | | 36,240 | | | | 31,430 | | | | 27,747 | | | |

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

| | 2018 | | | | | | | | | | | 2017 | | | | | | | | | |

| Yen-denominated | | $ | 85,622 | | | | $ | 73,673 | | | | | $ | 83,682 | | | | $ | 72,146 | | |

| Dollar-denominated | | 33,995 | | | | | 31,327 | | | | | | 38,703 | | | | | 35,518 | | | |

However, the Company does not expect to realize a majority of any unrealized gains or losses.

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

[Item 7A.

Quantitative and Qualitative Disclosures About Market Risk](#s7477D2DEC61D533A9232D478F177F672)

December 31, 2018

Aflac Japan's yen-denominated investments consisted of fixed income securities of $71.8 billion, at amortized cost, and equity securities of $561 million, at cost, at December 31, 2017.

However, Aflac Japan also owns U.S. dollar-denominated investments of $9.3 billion, at cost or amortized cost, whose carrying value is hedged against currency risk using foreign currency forwards and in-the-money foreign currency options and $13.0 billion of investments, at amortized cost, that are not hedged as of December 31, 2017.

Aflac Japan also owns Reverse Dual Currency bonds (RDCs) of $7.1 billion, which provide for coupon payments in fixed U.S. dollar amounts and principal payments in fixed yen amounts.

RDCs expose the Company to changes in foreign exchange rates.

The change in fair value of the yen-denominated securities is accounted for as a component of unrealized gains or losses on available-for-sale securities in accumulated other comprehensive income, while the foreign currency effect on the dollar coupons is realized in earnings.

In order to economically hedge foreign exchange risk for a portion of the profit repatriation received in yen from Aflac Japan, the Company had foreign exchange forwards and options as part of a hedging strategy on 90.9 billion yen received in 2017.

As of December 31, 2017, the Company had foreign exchange forwards and options to economically hedge foreign exchange risk on 49.5 billion yen of future profit repatriation from Aflac Japan.

| Fixed maturities(2) | $ | 49,775 | | | $ | 43,167 | | | $ | 38,109 | | | $ | 41,856 | | | $ | 36,467 | | | $ | 32,306 | | |

| Fixed maturities - consolidated variable interest entities(3) | 841 | | | | 729 | | | | 644 | | | | 783 | | | | 682 | | | | 604 | | | |

| Perpetual securities | 1,729 | | | | 1,499 | | | | 1,324 | | | | 1,557 | | | | 1,357 | | | | 1,202 | | | |

| Perpetual securities - consolidated variable interest entities(3) | 248 | | | | 215 | | | | 190 | | | | 231 | | | | 201 | | | | 178 | | | |

| Fixed maturities | 36,240 | | | | 31,430 | | | | 27,747 | | | | 38,279 | | | | 33,350 | | | | 29,545 | | | |

| Yen-denominated | | $ | 81,968 | | | | $ | 70,573 | | | | | $ | 77,170 | | | | $ | 66,636 | | |

| Dollar-denominated | | 38,628 | | | | | 35,452 | | | | | | 36,611 | | | | | 33,611 | | | |

| Perpetual securities: | | | | | | | | | | | | | | | | | | | | | |

| Yen-denominated | | 1,714 | | | | | 1,573 | | | | | | 1,558 | | | | | 1,434 | | | |

However, the Company does not expect to realize a majority of any unrealized gains or losses because it generally has the intent and ability to hold such securities until a recovery of value, which may be maturity.

| Dollar-denominated debt and perpetual securities | 10 | | | 10 | | |

| | 2017 | | | | | | | | 2016 | | | | | | | | 2015 | | | | | | | |

Over the next two years, the Company has yen-denominated securities that will mature with yields in excess of Aflac Japan's current net investment yield of 1.88%.

These securities total $1.7 billion at amortized cost and have a weighted average yield of 3.57%.

and incorporates the rating methodologies of its specialist external managers in assigning loan ratings to portfolio holdings.

December 31, 2017

| 3 | | Bank of America NA | | 398 | | | | .37 | | | |

| 5 | | Investcorp Capital Limited | | 377 | | | | .35 | | | BB |

| 7 | | Sultanate of Oman | | 310 | | | | .29 | | | BBB |

| 12 | | Barclays Bank PLC | | 280 | | | | .27 | | | |

| | | Barclays Bank PLC | | 157 | | | | .15 | | | BB |

| | | Barclays Bank PLC | | 123 | | | | .12 | | | BBB |

| 13 | | Petroleos Mexicanos (Pemex) | | 278 | | | | .26 | | | |

| | | Pemex Proj FDG Master TR | | 265 | | | | .25 | | | BBB |

| | | Pemex Finance Ltd. | | 13 | | | | .01 | | | A |

| | | Subtotal | | $ | 52,896 | | | 49.64 | % | | |

| | | Total debt and perpetual securities | | $ | 106,562 | | | 100.00 | % | | |

| | 2017 | | | | | | | 2016 | | | | | | |

| Total debt and perpetual securities | $ | 106,562 | | | 100.0 | % | | $ | 101,219 | | | 100.0 | % | |

principal and interest insurance as of December 31, 2017 and 2016.

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) [removed: prepares its] [added: prepare] financial statements in accordance with U.S. generally accepted accounting principles (GAAP).

[removed: General Description][added: General Description]

Its principal business is voluntary supplemental and life insurance, which is marketed and administered through [removed: its subsidiary,] American Family Life Assurance Company of Columbus [removed: (Aflac), which operates] [added: (Aflac)] in the United States (Aflac U.S.) [removed: and as a branch] [added: and, effective April 1, 2018, through Aflac Life Insurance Japan Ltd.] in Japan (Aflac Japan).

[added: Additionally,] Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance.

The Company's insurance operations in the United States and [removed: its branch in] Japan service the two markets for the Company's insurance business.

The [removed: adoption of this new organizational framework is expected to be] [added: transaction was accounted for as] tax-neutral and [added: did] not [removed: to] have a material impact on the daily operations of either Aflac Japan or Aflac U.S. [added: In addition, the Company obtained and expects to continue to obtain enhanced flexibility in capital management and business development] as a result of [removed: this] [added: the] conversion.

[removed: As an interim step, effective] [added: Effective] January 1, 2018, investments of Aflac [removed: U.S.,] [added: U.S.] as well as certain sub-advised assets of Aflac Japan, are managed by the Company’s U.S. asset management subsidiary, Aflac Asset Management LLC (AAM), and investments of Aflac Japan are managed pursuant to an investment advisory agreement [removed: with] [added: between] Aflac Japan [removed: by] [added: and] the [removed: Company’s] [added: Company's] asset management subsidiary in Japan, Aflac Asset Management Japan Ltd. (AAMJ).

[removed: Aflac] [added: The Company] offers voluntary insurance policies in Japan and the United States that provide a layer of financial protection against income and asset loss.

Aflac Japan's revenues, including realized gains and losses on its investment portfolio, accounted for 70% of the Company's total revenues in [removed: 2017,] [added: 2018,] compared with [removed: 71%] [added: 70%] in [removed: 2016] [added: 2017] and [removed: 70%] [added: 71%] in [removed: 2015.][added: 2016.]

The percentage of the Company's total assets attributable to Aflac Japan was [added: 84% and] 83% at [removed: both] December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017, respectively.]

[removed: Reporting Segments][added: Reporting Segments]

[removed: Aflac's] [added: The Company's] insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. Aflac [removed: Japan, which currently operates as a branch of Aflac,] [added: Japan] is the principal contributor to the Parent Company’s consolidated earnings.

The conversion of Aflac Japan to a subsidiary structure [removed: is] [added: did] not [removed: expected to] affect the Company's segment reporting structure.

[removed: Foreign] [added: Foreign] Currency [removed: Translation][added: Translation]

[added: | • | Annualized premiums in force is defined as the amount of gross premium that a policyholder must pay over a full year in order to keep coverage.] The growth of [removed: earned] [added: net] premiums [added: (defined below)] is directly affected by the change in premiums in force and by the change in weighted-average yen/dollar exchange rates. [added: |]

[removed: For additional information on the composition of earned premiums by segment, see] [added: See] Note [removed: 2] [added: 10] of the Notes to the Consolidated Financial Statements [added: presented] in this report.

[removed: Japan][added: Japan]

[removed: U.S.][added: U.S.]

[removed: Insurance Products][added: Insurance Products*(1)*]

| | | [removed: Aflac Japan] [added: Aflac Japan] | | | | [removed: Aflac U.S.] [added: Aflac U.S.] | | | |

| | [removed: Third] [added: Third] Sector [removed: Insurance] [added: Insurance] | | | | | | | Accident | |

| | | Medical | | | | | | Critical Care [removed: (1)] [added: *(2)*] | |

| | [removed: First] [added: First] Sector [removed: Insurance] [added: Insurance] | | | | | | | Dental | |

| | | | Protection | | | | | Life [removed: (Term,] [added: (Term and] Whole) | |

[removed: (1) Includes] [added: *(2)* *Includes] cancer, critical illness, and hospital intensive care [removed: products][added: products*]

[removed: Japan][added: Japan]

[removed: 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.

The foundation of Aflac Japan's product portfolio has been, and continues to be, its third sector [removed: cancer and] [added: products, which include cancer,] medical [added: and income support] insurance products.

The cancer insurance plans the Company offers in Japan provide a lump-sum benefit upon initial diagnosis of internal cancer and benefits for treatment received due to internal cancer such as fixed daily benefits for hospitalization, outpatient services and convalescent care, [removed: and] surgical [removed: benefits.][added: benefits, and outpatient treatments.]

In [removed: September 2014,] [added: April 2018,] Aflac Japan introduced [removed: New Cancer DAYS,] a new cancer insurance [removed: product which provides] [added: product, DAYS 1, with] enhanced [removed: coverage, including outpatient treatments and multiple] cancer [removed: occurrence] benefits.

[removed: In October 2014,] Aflac Japan [removed: introduced] [added: has] a unique Aflac-branded cancer insurance product for Japan's postal system, Japan Post (see the Distribution - Japan section for background information).

[removed: In early 2002,] Aflac [removed: Japan introduced EVER,] [added: Japan's EVER product is] a stand-alone, whole-life medical insurance product which offers a basic level of hospitalization coverage with an affordable premium.

[removed: In June 2015, Aflac Japan upgraded its EVER insurance] [added: The current version of this] product [removed: to include] [added: includes] riders to be associated with three critical illnesses (cancer, heart attack, and stroke) to better respond to [removed: consumer’s] [added: consumers'] needs for coverage of serious illnesses.

[removed: In 2007,] Gentle EVER, Aflac Japan's non-standard medical insurance product, was [removed: introduced.][added: designed to meet the needs of certain consumers who cannot qualify for the base EVER plan.]

In [removed: February] 2017, Aflac Japan revised the EVER product by introducing riders for lump-sum hospitalization benefits and surgeries for female-specific diseases as well as strengthening outpatient benefits and reducing premiums centered on the young- to middle-aged market segments.

[removed: This product] [added: Aflac Japan's Income Support Insurance] provides fixed-benefit amounts in the event that a policyholder is unable to work due to significant illness or injury and was developed to supplement the disability coverage within Japan’s social security system.

Aflac Japan continues to [removed: proactively] sell first sector protection-type products, which include term and whole life, to provide Aflac Japan’s traditional sales channels with a more comprehensive product portfolio to continue to cross-sell with third sector products.

[removed: U.S.][added: U.S.]

[removed: Aflac U.S. individually issued] [added: Individual] policies are [removed: portable and are] typically guaranteed-renewable for the lifetime of the policyholder (to age 75 for short-term disability policies).

These policies are designed to [removed: protect against losses resulting from] [added: pay cash benefits in the event of] critical illnesses such as heart attack, stroke, or cancer.

Prior to April 1, 2018, the Company's insurance business was marketed in Japan as a branch of Aflac.

American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac.

Effective April 1, 2018, the Company converted Aflac Japan from a branch to a subsidiary incorporated as a Japanese stock corporation.

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

Certain Performance Measures

The Company evaluates its premium growth and sales efforts using the following performance measures:

| • | New annualized premium sales (sometimes referred to as new sales or sales) is an operating measure that is not reflected on the Company's financial statements. New annualized premium sales generally represents annual premiums on policies the Company sold and incremental increases from policy conversions, collected over a 12-month period, assuming the policies remain in force. For Aflac Japan, new annualized premium sales are determined by applications submitted during the reporting period. For Aflac U.S., new annualized premium sales are determined by applications that are issued during the reporting period. Conversions are defined as the positive difference in the annualized premium when a policy upgrades in the current reporting period. |

| • | Net premiums (sometimes referred to as net premium income or net earned premiums) is a financial measure that appears on the Company's Consolidated Statements of Earnings and in its segment reporting. This measure reflects collected or due premiums that have been earned ratably on policies in force during the reporting period, reduced by premiums that have been ceded to third parties and increased by premiums assumed through reinsurance. |

*(1)* *Actively marketed as of December 31,* *2018*

As a result, more costs have been shifted to Japanese

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

In addition to providing benefits for hospitalization, outpatient treatment, surgery, radiation therapy and anti-cancer drug treatment, this product was designed to provide benefits to improve quality of life and to cover out-of-pocket expenses not directly related to medical treatment.

At the same time, Aflac Japan introduced DAYS 1 Plus to provide existing holders with up-to-date coverage.

In October 2018, Aflac Japan launched a new type of medical product referred to as Health Promotion Medical Insurance where a policyholder is entitled to a partial refund of the premium if the policyholders' “health age” measured by certain health check items is lower than his or her actual age.

This product is marketed exclusively online and targeted at younger generations.

Beginning in 2013, Aflac Japan began to curtail sales of first sector savings-type products, such as WAYS, child endowment and fixed annuities, due to persistent low interest rates in Japan and, in particular, the relatively large capital commitment required by such products and their lower profitability, in such an environment.

In July 2018, Aflac Japan introduced a first sector protection whole life product with low cash surrender value, which offers non-smoking policyholders further discounted premiums.

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

These policies pay cash benefits in the event of a covered injury.

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

worksites, and some of them are also successful in approaching customers outside their business groups.

Under this contract, Aflac Japan currently distributes its cancer insurance products through 76 of Kampo's directly managed sales offices.

For example, sales of cancer insurance policies by Japan Post constituted approximately 25% of Aflac Japan's third sector sales during the 2018 calendar year.

In December 2018, the Company announced that in a further strengthening of this alliance.

Japan Post Holdings Co., Ltd, a Japanese corporation, (Japan Post Holdings) plans to purchase approximately 7% of the Parent Company's outstanding common shares through a trust using open market and private block purchases.

Like all common shares in the Parent Company, the shares purchased by the trust will be eligible for 10-for-1 voting rights after being held for 48 consecutive months.

In connection with this announcement, on December 19, 2018, the Parent Company and Aflac Japan entered into a Basic Agreement regarding the "Strategic Alliance Based on Capital Relationship" with Japan Post Holdings (Basic Agreement), and the Parent Company entered into a letter agreement with Japan Post Holdings (Letter Agreement).

Under the Letter Agreement, Japan Post Holdings agreed (i) to establish and fund a voting trust in accordance with a trust agreement (Trust Agreement) by no later than February 28, 2019, (ii) upon establishment of the trust, to instruct the trustee and the sole shareholder of the trust to enter into, and to itself enter into, a shareholders agreement with the Parent Company (Shareholders Agreement) providing for, among other things, a cap on share ownership, a minimum holding period and a standstill provision and voting restrictions that effectively limit the trustee's voting rights to no more than 20% of the voting rights of the Parent Company and further restrict the trustee's voting rights with respect to certain change in control transactions.

The terms of the investment do not provide Japan Post Holdings with a right to a board seat on the Parent Company's board of directors or with any other rights to control, manage or intervene in the management of the Parent Company.

This strategic investment is subject to certain regulatory approvals in Japan, and the U.S. The Company anticipates that regulatory approvals will be received in the second half of 2019.

The foregoing summary is subject to and qualified in its entirety by reference to the full text of the Basic Agreement and Letter Agreement, including the forms of Trust Agreement and Shareholders Agreement attached to the Letter Agreement, copies of which are included as Exhibits 10.47 and 10.48 attached hereto and the terms of which are incorporated herein by reference.

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

The Company believes Aflac Japan will remain a leading provider of cancer insurance

[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

On December 2, 2016, the Company publicly announced that it will pursue the conversion of Aflac Japan from a branch structure to a subsidiary structure, with the subsidiary incorporated as a “Kabushiki Kaisha.” While the branch structure remains an acceptable legal form, the subsidiary structure has emerged as the more prevalent structure for both domestic and foreign companies operating in Japan.

In addition, emerging global regulatory standards generally favor the subsidiary structure for foreign insurance and financial service companies.

In addition, the Company expects to obtain enhanced flexibility in capital management and business development as a result of the conversion.

The Company anticipates completion of the conversion as early as April 1, 2018.

Insurance Premiums

Consolidated earned premiums were $18.5 billion in 2017, $19.2 billion in 2016, and $17.6 billion in 2015.

The following table presents the changes in annualized premiums in force for Aflac's insurance business for the years ended December 31.

| | | | | | | | | | | | |

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| (In millions) | 2017 | | | | 2016 | | | | 2015 | | |

| Annualized premiums in force, beginning of year | $ | 19,684 | | | $ | 19,173 | | | $ | 18,894 | |

| New sales, including conversions | 2,398 | | | | 2,527 | | | | 2,484 | | |

| Change in unprocessed new sales | 26 | | | | (46 | | ) | | (41 | | ) |

| Premiums lapsed and surrendered | (2,144 | | ) | | (2,102 | | ) | | (2,104 | | ) |

| Other | (606 | | ) | | (351 | | ) | | (56 | | ) |

| Foreign currency translation adjustment | 429 | | | | 483 | | | | (4 | | ) |

| Annualized premiums in force, end of year | $ | 19,787 | | | $ | 19,684 | | | $ | 19,173 | |

The Company translates Aflac Japan's annualized premiums in force into dollars at the respective end-of-period exchange rates.

Changes in annualized premiums in force are translated at weighted-average exchange rates.

The following table presents the changes in annualized premiums in force for Aflac Japan for the years ended December 31.

| | | | | | | | | | | | | | | | | | | | | |

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| | In Dollars | | | | | | | | | | | | In Yen | | | | | | | |

| (In millions of dollars and billions of yen) | 2017 | | | | 2016 | | | | 2015 | | | | 2017 | | | 2016 | | | 2015 | |

| Annualized premiums in force, beginning of year | $ | 13,788 | | | $ | 13,413 | | | $ | 13,226 | | | 1,606 | | | 1,617 | | | 1,594 | |

| New sales, including conversions | 846 | | | | 1,045 | | | | 997 | | | | 95 | | | 114 | | | 121 | |

| Change in unprocessed new sales | 26 | | | | (46 | | ) | | (41 | | ) | | 3 | | | (5 | ) | | (5 | ) |

| Premiums lapsed and surrendered | (619 | | ) | | (623 | | ) | | (578 | | ) | | (69 | ) | | (68 | ) | | (70 | ) |

| Other | (734 | | ) | | (484 | | ) | | (187 | | ) | | (83 | ) | | (52 | ) | | (23 | ) |

| Foreign currency translation adjustment | 429 | | | | 483 | | | | (4 | | ) | | 0 | | | 0 | | | 0 | |

| Annualized premiums in force, end of year | $ | 13,736 | | | $ | 13,788 | | | $ | 13,413 | | | 1,552 | | | 1,606 | | | 1,617 | |

For further information regarding Aflac Japan's financial results and sales, see the Aflac Japan Segment subsection of MD&A in this report.

The following table presents the changes in annualized premiums in force for Aflac U.S. for the years ended December 31.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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| (In millions) | 2017 | | | | | | 2016 | | | | | | 2015 | | | | |

| Annualized premiums in force, beginning of year | | $ | 5,896 | | | | | $ | 5,760 | | | | | $ | 5,668 | | |

An amended complaint was filed on January 31, 2018.

The SLC issued a third report of its investigation in May 2018 regarding certain additional allegations raised in the amended complaint, in which the SLC also determined that it was not in the best interests of the Company to pursue the action demanded by the shareholders.

On August 31, 2018, the District Court granted the Company's motion and the amended complaint was dismissed.

The plaintiffs have appealed the dismissal to the United States Court of Appeals for the Eleventh Circuit.

[Item 3.

Legal Proceedings](#s7477D2DEC61D533A9232D478F177F672)

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.

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.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: | FORM 10-K |][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| ý | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

For the fiscal year ended December 31, [removed: 2017][added: 2018]

| ¨ | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: ][added: ]

| [removed: Aflac Incorporated] [added: Aflac Incorporated] |

| [removed: Georgia] [added: Georgia] | | [removed: 58-1167100] [added: 58-1167100] |

| [removed: 1932] [added: 1932] Wynnton Road, Columbus, [removed: Georgia] [added: Georgia] | | [removed: 31999] [added: 31999] |

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: [removed: 706.323.3431][added: 706.323.3431]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Non-accelerated filer | ¨ | [removed: (Do not check if smaller reporting company] | | Smaller reporting company | ¨ |

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, [removed: 2017,] [added: 2018,] was [removed: $30,514,042,038.][added: $33,002,565,252.]

The number of shares of the registrant’s common stock outstanding at February [removed: 13, 2018,] [added: 12, 2019,] with $.10 par value, was [removed: 389,682,983.][added: 750,332,375.]

[removed: Documents] [added: Documents] Incorporated By [removed: Reference][added: Reference]

Certain information contained in the Notice and Proxy Statement for the Company’s [added: 2019] Annual Meeting of Shareholders [removed: to be held on May 7, 2018,] is incorporated by reference into Part III hereof.

[removed: Aflac Incorporated][added: Aflac Incorporated]

[removed: Annual] [added: Annual] Report on Form [removed: 10-K][added: 10-K]

[removed: For] [added: For] the Year [removed: Ended December] [added: Ended December] 31, [removed: 2017][added: 2018]

[removed: Table] [added: Table] of [removed: Contents][added: Contents]

| [added: PART I] | | [removed: Page] | [added: Page |]

| [removed: PART I] [added: PART II] | | | [added: |]

| [added: |] Item 1. | [removed: [Business](#s90C0C5D3BFB65E13B41E0F5AE683360E)] [added: [Business](#sDC6ACE78A9F55DA7B17D91C81344FB20)] | [removed: [1](#s90C0C5D3BFB65E13B41E0F5AE683360E)] [added: [1](#sDC6ACE78A9F55DA7B17D91C81344FB20)] |

| [added: |] Item 1A. | [Risk [removed: Factors](#s007D408696135BC5BCB90060011F54EC)] [added: Factors](#sC5C044BA8FCD5E629F198AE6DD5C850A)] | [removed: [14](#s007D408696135BC5BCB90060011F54EC)] [added: [15](#sC5C044BA8FCD5E629F198AE6DD5C850A)] |

| [added: |] Item 1B. | [Unresolved Staff [removed: Comments](#sAC3AD72FA7BD53CA84217DA59742437D)] [added: Comments](#sA651BBDEF10C59F3817B4D962F461558)] | [removed: [30](#sAC3AD72FA7BD53CA84217DA59742437D)] [added: [32](#sA651BBDEF10C59F3817B4D962F461558)] |

| [added: |] Item 2. | [removed: [Properties](#sDA2172771A105E848F7D2EC88BC46DD0)] [added: [Properties](#s9915D8C4C3A55B9787BD81651E4B0C09)] | [removed: [30](#sDA2172771A105E848F7D2EC88BC46DD0)] [added: [32](#s9915D8C4C3A55B9787BD81651E4B0C09)] |

| [added: |] Item 3. | [Legal [removed: Proceedings](#s574D0546907D563ABFA95FEB1ABC8101)] [added: Proceedings](#s1B5ACF52ACFC5D0290C394896CB8E354)] | [removed: [30](#s574D0546907D563ABFA95FEB1ABC8101)] [added: [32](#s1B5ACF52ACFC5D0290C394896CB8E354)] |

| [added: |] Item 4. | [Mine Safety [removed: Disclosures](#s4A7CEEA6592C58DBB3B6B85F72BCEC85)] [added: Disclosures](#s92CB2512C2BF54E48A20892CE8E10105)] | [removed: [31](#s4A7CEEA6592C58DBB3B6B85F72BCEC85)] [added: [33](#s92CB2512C2BF54E48A20892CE8E10105)] |

| [removed: PART II] [added: PART IV] | | | [added: |]

| [added: |] Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sCFCC034597EF538A97DE1E0E8A36F95E)] [added: Securities](#s39C628CC6D3658869706B0F613E321E4)] | [removed: [32](#sCFCC034597EF538A97DE1E0E8A36F95E)] [added: [34](#s39C628CC6D3658869706B0F613E321E4)] |

| [added: |] Item 6. | [Selected Financial [removed: Data](#s43EB4DED8A2A5CB4A5CBA6DF9A093D8D)] [added: Data](#sA85F4DF65E1359C291EF85DBE4DCB0DF)] | [removed: [35](#s43EB4DED8A2A5CB4A5CBA6DF9A093D8D)] [added: [37](#sA85F4DF65E1359C291EF85DBE4DCB0DF)] |

| [added: |] Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s523A12DC03105142AE9D31252DCB6B36)] [added: Operations](#s375BAD20A0665AD08FD6DC4605711E2D)] | [removed: [37](#s523A12DC03105142AE9D31252DCB6B36)] [added: [39](#s375BAD20A0665AD08FD6DC4605711E2D)] |

| [added: |] Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s7F58256DB01E5AA49F2B2D1E3F61A5C9)] [added: Risk](#s73C36B41009452698100FAAEB0E4A8DF)] | [removed: [72](#s7F58256DB01E5AA49F2B2D1E3F61A5C9)] [added: [77](#s73C36B41009452698100FAAEB0E4A8DF)] |

| [added: |] Item 8. | [Financial Statements and Supplementary [removed: Data](#s453BF909B905549D87CEC1A8CB22B016)] [added: Data](#s38B45232131158248AFBA56FEC143950)] | [removed: [79](#s453BF909B905549D87CEC1A8CB22B016)] [added: [86](#s38B45232131158248AFBA56FEC143950)] |

| [added: |] Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#sF0DE26C7C5E95FCCBAC8FA43E1898EDF)] [added: Disclosure](#sBFE0838505505908A26DC97B68B73001)] | [removed: [170](#sF0DE26C7C5E95FCCBAC8FA43E1898EDF)] [added: [179](#sBFE0838505505908A26DC97B68B73001)] |

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[Item 1.

Business](#s7477D2DEC61D533A9232D478F177F672)

10-K 1 afl12311710k.htm 10-K

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PART I

Aflac leases office space in Columbia, South Carolina, which houses the Company's CAIC [removed: subsidiary.][added: subsidiary (branded as Aflac Group Insurance).]

The second campus comprises leased space, which serves as Aflac Japan's headquarters and houses administrative and investment support [removed: functions for the Japan branch.][added: functions.]

[removed: PART II][added: PART II]

[Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#s7477D2DEC61D533A9232D478F177F672)

[removed: PURCHASES] [added: PURCHASES] OF EQUITY [removed: SECURITIES][added: SECURITIES]

[removed: Market Information][added: Market Information]

Aflac Incorporated's stock is also listed on the Tokyo Stock [removed: Exchange.][added: Exchange under designator 8686.]

[removed: Holders][added: Holders]

As of February [removed: 13, 2018,] [added: 12, 2019,] there were [removed: 85,593] [added: 86,621] holders of record of the Company's common stock.

[removed: Stock] [added: Stock] Performance [removed: Graph][added: Graph]

[removed: ][added: ]

[removed: Performance] [added: Performance] Graphic [removed: Index][added: Index]

[removed: December 31,][added: December 31,]

| | [removed: 2012 | | |] 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | [added: | 2018 | |]

Copyright© [removed: 2018] [added: 2019] Standard & Poor’s, a division of S&P Global.

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

During the year ended December 31, [removed: 2017,] [added: 2018,] we repurchased shares of Aflac common stock as follows:

| [removed: Period] [added: Period] | [removed: Total] [added: Total] Number of Shares [removed: Purchased] [added: Purchased] | | | | | [removed: Average] [added: Average] Price Paid Per [removed: Share] [added: Share] | | | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs] [added: Programs] | | | | | [removed: Maximum] [added: Maximum] Number of Shares that May Yet Be Purchased Under the Plans or [removed: Programs] [added: Programs] | | | | |

[removed: (2)During] [added: *(1)During] the year [removed: ended December] [added: ended* *December] 31, [removed: 2017, 156,456 shares] [added: 2018,* *96,912* *shares] were purchased in connection with income tax withholding obligations related to the vesting of restricted-share-based awards during the [removed: period.][added: period.*]

Stock Split

On February 13, 2018, the Board of Directors of the Parent Company declared a two\-for-one stock split of the Company’s common stock in the form of a 100% stock dividend payable on March 16, 2018 to shareholders of record at the close of business on March 2, 2018.

The stock split was payable in the form of one additional common stock share for every share of common stock held.

All equity and share-based data, including the number of shares outstanding and per share amounts, have been adjusted to reflect the stock split for all periods presented in this Annual Report on Form 10-K.

[Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#s7477D2DEC61D533A9232D478F177F672)

| Aflac Incorporated | 100.00 | | | 93.72 | | | 94.20 | | | 112.20 | | | 144.74 | | | 153.73 | |

| S&P 500 | 100.00 | | | 113.69 | | | 115.26 | | | 129.05 | | | 157.22 | | | 150.33 | |

| S&P Life & Health Insurance | 100.00 | | | 101.95 | | | 95.51 | | | 119.26 | | | 138.85 | | | 110.01 | |

[Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#s7477D2DEC61D533A9232D478F177F672)

| January 1 - January 31 | | 2,370,284 | | | | | $ | 44.31 | | | | | 2,370,284 | | | | | 95,626,488 | | | |

| February 1 - February 28 | | 2,349,600 | | | | | 44.70 | | | | | | 2,349,600 | | | | | 93,276,888 | | | |

| March 1 - March 31 | | 1,937,161 | | | | | 44.49 | | | | | | 1,920,400 | | | | | 91,356,488 | | | |

| April 1 - April 30 | | 2,082,500 | | | | | 44.62 | | | | | | 2,082,500 | | | | | 89,273,988 | | | |

| May 1 - May 31 | | 2,558,472 | | | | | 45.17 | | | | | | 2,542,900 | | | | | 86,731,088 | | | |

| June 1 - June 30 | | 2,175,100 | | | | | 44.99 | | | | | | 2,175,100 | | | | | 84,555,988 | | | |

| July 1 - July 31 | | 2,008,123 | | | | | 43.52 | | | | | | 1,994,900 | | | | | 82,561,088 | | | |

| August 1 - August 31 | | 2,358,317 | | | | | 46.64 | | | | | | 2,352,500 | | | | | 80,208,588 | | | |

| September 1 - September 30 | | 2,668,990 | | | | | 47.20 | | | | | | 2,654,401 | | | | | 77,554,187 | | | |

| October 1 - October 31 | | 2,817,600 | | | | | 44.78 | | | | | | 2,817,600 | | | | | 74,736,587 | | | |

| November 1 - November 30 | | 2,337,607 | | | | | 44.44 | | | | | | 2,336,400 | | | | | 72,400,187 | | | |

| December 1 - December 31 | | 3,382,043 | | | | | 44.03 | | | | | | 3,352,300 | | | | | 69,047,887 | | | |

| Total | | 29,045,797 | | | *(1)* | | $ | 44.93 | | | | | 28,948,885 | | | | | 69,047,887 | | | |

As of December 31, 2018, a remaining balance of 69.0 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its Board of Directors.

[Item 6.

Selected Financial Data](#s7477D2DEC61D533A9232D478F177F672)

The quarterly high and low market prices for the Company's common stock, as reported on the New York Stock Exchange for the two years ended December 31 were as follows:

Quarterly Common Stock Prices

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| 2017 | High | | | | | | Low | | | | |

| 4th Quarter | | $ | 89.81 | | | | | $ | 81.41 | | |

| 3rd Quarter | | 84.51 | | | | | | 76.62 | | | |

| 2nd Quarter | | 79.86 | | | | | | 72.08 | | | |

| 1st Quarter | | 73.33 | | | | | | 66.50 | | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| 2016 | High | | | | | | Low | | | | |

| 4th Quarter | | $ | 73.95 | | | | | $ | 67.50 | | |

| 3rd Quarter | | 74.50 | | | | | | 71.02 | | | |

| 2nd Quarter | | 72.17 | | | | | | 62.59 | | | |

| 1st Quarter | | 64.33 | | | | | | 54.57 | | | |

Dividends

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| | 2017 | | | | | | 2016 | | | | |

| 4th Quarter | | $ | .45 | | | | | $ | .43 | | |

| 3rd Quarter | | .43 | | | | | | .41 | | | |

| 2nd Quarter | | .43 | | | | | | .41 | | | |

| 1st Quarter | | .43 | | | | | | .41 | | | |

In January 2018, the board of directors announced a 15.6% increase in the quarterly cash dividend, effective with the first quarter of 2018.

The first quarter 2018 cash dividend of $.52 per share is payable on March 1, 2018, to shareholders of record at the close of business on February 21, 2018.

The declaration and payment of future dividends to holders of the Company's common stock will be at the discretion of the board of directors and will depend upon many factors, including the Company's financial condition, earnings, capital requirements of its operating subsidiaries, legal requirements, regulatory constraints and other factors as the board of directors deems relevant.

There can be no assurance that the Company will declare and pay any additional or future dividends.

For information concerning dividend restrictions, see Regulatory Restrictions in the Capital Resources and Liquidity section of MD&A and Note 13 of the Notes to the Consolidated Financial Statements presented in this report.

| Aflac Incorporated | 100.00 | | | 128.91 | | | 120.81 | | | 121.44 | | | 144.65 | | | 186.59 | |

| S&P 500 | 100.00 | | | 132.39 | | | 150.51 | | | 152.59 | | | 170.84 | | | 208.14 | |

| S&P Life & Health Insurance | 100.00 | | | 163.48 | | | 166.66 | | | 156.14 | | | 194.96 | | | 226.98 | |

| January 1 - January 31 | | 3,819,299 | | | | | $ | 69.94 | | | | | 3,819,299 | | | | | 22,934,155 | | | |

| February 1 - February 28 | | 1,988,420 | | | | | 70.03 | | | | | | 1,853,000 | | | | | 21,081,155 | | | |

| March 1 - March 31 | | 2,825,614 | | | | | 72.12 | | | | | | 2,821,009 | | | | | 18,260,146 | | | |

| April 1 - April 30 | | 1,764,523 | | | | | 73.70 | | | | | | 1,764,523 | | | | | 16,495,623 | | | |

| May 1 - May 31 | | 501 | | | | | 74.84 | | | | | | 0 | | | | | 16,495,623 | | | |

[removed: Aflac] [added: Aflac] Incorporated and [removed: Subsidiaries][added: Subsidiaries]

[removed: Years] [added: Years] Ended December [removed: 31,][added: 31,]

| (In millions, except for share and per-share amounts) | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Net premiums, principally supplemental health insurance | [removed: $] [added: $] | [removed: 18,531] [added: 18,677] | | | $ | [removed: 19,225] [added: 18,531] | | | $ | [removed: 17,570] [added: 19,225] | | | $ | [removed: 19,072] [added: 17,570] | | | $ | [removed: 20,135] [added: 19,072] | |

| Net investment income | [removed: 3,220] [added: 3,442] | | | | [removed: 3,278] [added: 3,220] | | | | [removed: 3,135] [added: 3,278] | | | | [removed: 3,319] [added: 3,135] | | | | [removed: 3,293] [added: 3,319] | | |

| Realized investment gains (losses) | [added: (430 | | ) | |] (151 | | ) | | (14 | | ) | | 106 | | | | 282 | | | [removed: | 426 | | |]

| Other income | [removed: 67] [added: 69] | | | | [removed: 70] [added: 67] | | | | [removed: 61] [added: 70] | | | | [removed: 55] [added: 61] | | | | [removed: 85] [added: 55] | | |

| Total revenues | [removed: 21,667] [added: 21,758] | | | | [removed: 22,559] [added: 21,667] | | | | [removed: 20,872] [added: 22,559] | | | | [removed: 22,728] [added: 20,872] | | | | [removed: 23,939] [added: 22,728] | | |

| Benefits and claims, net | [removed: 12,181] [added: 12,000] | | | | [removed: 12,919] [added: 12,181] | | | | [removed: 11,746] [added: 12,919] | | | | [removed: 12,937] [added: 11,746] | | | | [removed: 13,813] [added: 12,937] | | |

| Expenses | [removed: 5,468] [added: 5,775] | | | | [removed: 5,573] [added: 5,468] | | | | [removed: 5,264] [added: 5,573] | | | | [removed: 5,300] [added: 5,264] | | | | [removed: 5,310] [added: 5,300] | | |

| Total benefits and expenses | [removed: 17,649] [added: 17,775] | | | | [removed: 18,492] [added: 17,649] | | | | [removed: 17,010] [added: 18,492] | | | | [removed: 18,237] [added: 17,010] | | | | [removed: 19,123] [added: 18,237] | | |

| Pretax earnings | [removed: 4,018] [added: 3,983] | | | | [removed: 4,067] [added: 4,018] | | | | [removed: 3,862] [added: 4,067] | | | | [removed: 4,491] [added: 3,862] | | | | [removed: 4,816] [added: 4,491] | | |

| Income taxes | [added: 1,063 | | | |] (586 | | ) | | 1,408 | | | | 1,329 | | | | 1,540 | | | [removed: | 1,658 | | |]

| Net earnings | [removed: $] [added: $] | [removed: 4,604] [added: 2,920] | | | $ | [removed: 2,659] [added: 4,604] | | | $ | [removed: 2,533] [added: 2,659] | | | $ | [removed: 2,951] [added: 2,533] | | | $ | [removed: 3,158] [added: 2,951] | |

| [removed: Share] [added: Share] and Per-Share [removed: Amounts] [added: Amounts] | | | | | | | | | | | | | | | | | | | |

| [removed: Supplemental Data] [added: Supplemental Data] | | | | | | | | | | | | | | | | | | | |

| Yen/dollar exchange rate at year-end (yen) | [removed: 113.00] [added: 111.00] | | | | [removed: 116.49] [added: 113.00] | | | | [removed: 120.61] [added: 116.49] | | | | [removed: 120.55] [added: 120.61] | | | | [removed: 105.39] [added: 120.55] | | |

| Weighted-average yen/dollar exchange rate (yen) | [removed: 112.16] [added: 110.39] | | | | [removed: 108.70] [added: 112.16] | | | | [removed: 120.99] [added: 108.70] | | | | [removed: 105.46] [added: 120.99] | | | | [removed: 97.54] [added: 105.46] | | |

[removed: Aflac] [added: Aflac] Incorporated and [removed: Subsidiaries][added: Subsidiaries]

[removed: December 31,][added: December 31,]

| (In millions) | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Investments and cash | [removed: $] [added: $] | [removed: 123,659] [added: 126,243] | | | $ | [removed: 116,361] [added: 123,659] | | | $ | [removed: 105,897] [added: 116,361] | | | $ | [removed: 107,341] [added: 105,897] | | | $ | [removed: 108,459] [added: 107,341] | |

| Other | [removed: 13,558] [added: 14,163] | | | | [removed: 13,458] [added: 13,558] | | | | [removed: 12,359] [added: 13,458] | | | | [removed: 12,386] [added: 12,359] | | | | [removed: 12,809] [added: 12,386] | | |

| Total assets | [removed: $] [added: $] | [removed: 137,217] [added: 140,406] | | | $ | [removed: 129,819] [added: 137,217] | | | $ | [removed: 118,256] [added: 129,819] | | | $ | [removed: 119,727] [added: 118,256] | | | $ | [removed: 121,268] [added: 119,727] | |

| Policy liabilities | [removed: $] [added: $] | [removed: 99,147] [added: 103,188] | | | $ | [removed: 93,726] [added: 99,147] | | | $ | [removed: 87,631] [added: 93,726] | | | $ | [removed: 83,933] [added: 87,631] | | | $ | [removed: 89,402] [added: 83,933] | |

| Income taxes | [removed: 4,745] [added: 4,020] | | | | [removed: 5,387] [added: 4,745] | | | | [removed: 4,340] [added: 5,387] | | | | [removed: 5,293] [added: 4,340] | | | | [removed: 3,718] [added: 5,293] | | |

| Notes payable | [removed: 5,289] [added: 5,778] | | | | [removed: 5,360] [added: 5,289] | | | | [removed: 4,971] [added: 5,360] | | | | [removed: 5,242] [added: 4,971] | | | | [removed: 4,858] [added: 5,242] | | |

| Other liabilities | [removed: 3,438] [added: 3,958] | | | | [removed: 4,864] [added: 3,438] | | | | [removed: 3,606] [added: 4,864] | | | | [removed: 6,912] [added: 3,606] | | | | [removed: 8,670] [added: 6,912] | | |

| Shareholders’ equity | [removed: 24,598] [added: 23,462] | | | | [removed: 20,482] [added: 24,598] | | | | [removed: 17,708] [added: 20,482] | | | | [removed: 18,347] [added: 17,708] | | | | [removed: 14,620] [added: 18,347] | | |

| Total liabilities and shareholders’ equity | [removed: $] [added: $] | [removed: 137,217] [added: 140,406] | | | $ | [removed: 129,819] [added: 137,217] | | | $ | [removed: 118,256] [added: 129,819] | | | $ | [removed: 119,727] [added: 118,256] | | | $ | [removed: 121,268] [added: 119,727] | |

[removed: Prior-year] [added: *Prior-year] amounts have been adjusted for the adoption of accounting guidance on January 1, 2016 related to debt issuance [removed: costs.][added: costs.*]

| Net earnings (basic) | $ | 3.79 | | | $ | 5.81 | | | $ | 3.23 | | | $ | 2.94 | | | $ | 3.27 | |

| Net earnings (diluted) | 3.77 | | | | 5.77 | | | | 3.21 | | | | 2.92 | | | | 3.25 | | |

| Cash dividends paid | 1.04 | | | | .87 | | | | .83 | | | | .79 | | | | .75 | | |

| Cash dividends declared | 1.04 | | | | .87 | | | | .83 | | | | .79 | | | | .75 | | |

| Weighted-average common shares used for basic EPS (In thousands) | 769,588 | | | | 792,042 | | | | 822,942 | | | | 861,307 | | | | 902,408 | | |

| Weighted-average common shares used for diluted EPS (In thousands) | 774,650 | | | | 797,861 | | | | 827,841 | | | | 866,344 | | | | 907,999 | | |

*Prior-year amounts have been adjusted for the* *two\-for-one stock split of the Company’s common stock in March 2018.*

[Item 6.

Selected Financial Data](#s7477D2DEC61D533A9232D478F177F672)

[Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations](#s6AE1B275D67F590E9F15222292704211)

| Net earnings (basic) | $ | 11.63 | | | $ | 6.46 | | | $ | 5.88 | | | $ | 6.54 | | | $ | 6.80 | |

| Net earnings (diluted) | 11.54 | | | | 6.42 | | | | 5.85 | | | | 6.50 | | | | 6.76 | | |

| Cash dividends paid | 1.74 | | | | 1.66 | | | | 1.58 | | | | 1.50 | | | | 1.42 | | |

| Cash dividends declared | 1.74 | | | | 1.66 | | | | 1.58 | | | | 1.50 | | | | 1.42 | | |

| Weighted-average common shares used for basic EPS (In thousands) | 396,021 | | | | 411,471 | | | | 430,654 | | | | 451,204 | | | | 464,502 | | |

| Weighted-average common shares used for diluted EPS (In thousands) | 398,930 | | | | 413,921 | | | | 433,172 | | | | 454,000 | | | | 467,408 | | |

[removed: Management's] [added: Management's] Annual Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.

Based on our evaluation under this framework, management has concluded that our internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] which is included herein.

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Opinion] [added: *Opinion] on Internal Control Over Financial [removed: Reporting][added: Reporting*]

We have audited Aflac Incorporated and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.