Item 1. Financial Statements.

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Item 1. Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Earnings


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except for share and per-share amounts - Unaudited)	2023			2022			2023			2022
Revenues:
Net earned premiums, principally supplemental health insurance		$	3,573		$	3,764		$	7,262		$	7,844
Net investment income		999			937			1,942			1,840
Net investment gains (losses)		555			564			678			686
Other income (loss)		45			50			90			118
Total revenues		5,172			5,315			9,972			10,488
Benefits and expenses:
Benefits and claims, excluding reserve remeasurement		2,152			2,299			4,354			4,816
Reserve remeasurement (gains) losses		(54)			(25)			(107)			(59)
Total benefits and claims, net		2,098			2,274			4,247			4,757
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs		202			197			407			405
Insurance commissions		268			279			547			579
Insurance and other expenses		728			802			1,505			1,633
Interest expense		51			55			99			112
Total acquisition and operating expenses		1,249			1,333			2,558			2,729
Total benefits and expenses		3,347			3,607			6,805			7,486
Earnings before income taxes		1,825			1,708			3,167			3,002
Income taxes		191			314			345			561
Net earnings		$	1,634		$	1,394		$	2,822		$	2,441
Net earnings per share:
Basic		$	2.72		$	2.18		$	4.66		$	3.78
Diluted		2.71			2.17			4.64			3.77
Weighted-average outstanding common shares used in computing earnings per share (In thousands):
Basic		600,742			640,707			605,945			645,205
Diluted		602,929			643,243			608,411			648,010
Cash dividends per share		$	.42		$	.40		$	.84		$	.80

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions - Unaudited)	2023			2022			2023			2022
Net earnings		$	1,634		$	1,394		$	2,822		$	2,441
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period		(439)			(751)			(482)			(1,203)
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities during period		890			(3,503)			3,468			(8,254)
Reclassification adjustment for (gains) losses on fixed maturity securities included in net earnings		(27)			(114)			(84)			(192)
Unrealized gains (losses) on derivatives during period		1			0			2			1
Effect of changes in discount rate assumptions during period		(209)			6,462			(3,745)			11,809
Pension liability adjustment during period		58			5			67			8
Total other comprehensive income (loss) before income taxes		274			2,099			(774)			2,169
Income tax expense (benefit) related to items of other comprehensive income (loss)		334			628			135			738
Other comprehensive income (loss), net of income taxes		(60)			1,471			(909)			1,431
Total comprehensive income (loss)		$	1,574		$	2,865		$	1,913		$	3,872

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Balance Sheets


(In millions, except for share and per-share amounts - Unaudited)	June 30, 2023			December 31, 2022
Assets:
Investments and cash:
Fixed maturity securities available for sale, at fair value, (no allowance for credit losses in 2023 and 2022, amortized cost $67,927 in 2023 and $72,246 in 2022)		$	70,739		$	71,936
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value (amortized cost $2,922 in 2023 and $3,223 in 2022)		3,766			3,805
Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses of $5 in 2023 and $7 in 2022 (fair value $19,938 in 2023 and $21,210 in 2022)		17,436			19,056
Equity securities, at fair value		965			1,091
Commercial mortgage and other loans, net of allowance for credit losses of $225 in 2023 and $192 in 2022 (includes $10,652 in 2023 and $10,832 in 2022 of consolidated variable interest entities)		13,346			13,496
Other investments (includes $2,163 in 2023 and $1,909 in 2022 of consolidated variable interest entities)		5,491			4,070
Cash and cash equivalents		4,720			3,943
Total investments and cash		116,463			117,397
Receivables		755			647
Accrued investment income		719			745
Deferred policy acquisition costs		8,860			9,239
Property and equipment, at cost less accumulated depreciation		500			530
Other		3,329			3,180
Total assets		$	130,626		$	131,738
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	85,904		$	88,241
Unpaid policy claims		244			201
Unearned premiums		1,544			1,825
Other policyholders’ funds		6,115			6,643
Total policy liabilities		93,807			96,910
Income taxes		343			698
Payables for return of cash collateral on loaned securities		4,679			1,809
Notes payable and lease obligations		7,087			7,442
Other		4,271			4,739
Total liabilities		110,187			111,598
Commitments and contingent liabilities (Note 13)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2023 and 2022; issued 1,355,227 shares in 2023 and 1,354,079 shares in 2022		136			135
Additional paid-in capital		2,697			2,641
Retained earnings		46,937			44,367
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)		(4,249)			(3,564)
Unrealized gains (losses) on fixed maturity securities		1,978			(702)
Unrealized gains (losses) on derivatives		(25)			(27)
Effect of changes in discount rate assumptions		(5,059)			(2,100)
Pension liability adjustment		17			(36)
Treasury stock, at average cost		(21,993)			(20,574)
Total shareholders’ equity		20,439			20,140
Total liabilities and shareholders’ equity		$	130,626		$	131,738

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity


(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2022	$	135	$	2,641	$	44,367	$	(6,429)	$	(20,574)	$	20,140
Net earnings	0		0		1,188		0		0		1,188
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(54)		0		(54)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		1,991		0		1,991
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		(2,794)		0		(2,794)
Pension liability adjustment during period, net of income taxes	0		0		0		7		0		7
Dividends to shareholders (1) ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		3		0		0		0		3
Share-based compensation	0		14		0		0		0		14
Purchases of treasury stock	0		0		0		0		(732)		(732)
Treasury stock reissued	0		7		0		0		13		20
Balance at March 31, 2023	$	135	$	2,665	$	45,555	$	(7,278)	$	(21,293)	$	19,784
Net earnings	0		0		1,634		0		0		1,634
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(631)		0		(631)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		689		0		689
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		(165)		0		(165)
Pension liability adjustment during period, net of income taxes	0		0		0		46		0		46
Dividends to shareholders (1) ($.42 per share)	0		0		(252)		0		0		(252)
Exercise of stock options	0		5		0		0		0		5
Share-based compensation	1		17		0		0		0		18
Purchases of treasury stock	0		0		0		0		(708)		(708)
Treasury stock reissued	0		10		0		0		8		18
Balance at June 30, 2023	$	136	$	2,697	$	46,937	$	(7,338)	$	(21,993)	$	20,439

(1) Dividends to shareholders are recorded in the period in which they are declared.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity (continued)


(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2021	$	135	$	2,529	$	40,963	$	(8,411)	$	(18,185)	$	17,031
Net earnings	0		0		1,047		0		0		1,047
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(453)		0		(453)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		(3,815)		0		(3,815)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		4,224		0		4,224
Pension liability adjustment during period, net of income taxes	0		0		0		3		0		3
Dividends to shareholders (1) ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		6		0		0		0		6
Share-based compensation	0		13		0		0		0		13
Purchases of treasury stock	0		0		0		0		(523)		(523)
Treasury stock reissued	0		12		0		0		14		26
Balance at March 31, 2022	$	135	$	2,560	$	42,010	$	(8,451)	$	(18,694)	$	17,560
Net earnings	0		0		1,394		0		0		1,394
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(780)		0		(780)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		(2,857)		0		(2,857)
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		0		0		0
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		5,105		0		5,105
Pension liability adjustment during period, net of income taxes	0		0		0		3		0		3
Dividends to shareholders (1) ($.40 per share)	0		0		(254)		0		0		(254)
Exercise of stock options	0		1		0		0		0		1
Share-based compensation	0		19		0		0		0		19
Purchases of treasury stock	0		0		0		0		(650)		(650)
Treasury stock reissued	0		9		0		0		8		17
Balance at June 30, 2022	$	135	$	2,589	$	43,150	$	(6,980)	$	(19,336)	$	19,558

(1) Dividends to shareholders are recorded in the period in which they are declared.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Cash Flows


	Six Months Ended June 30,
(In millions - Unaudited)	2023			2022
Cash flows from operating activities:
Net earnings		$	2,822		$	2,441
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Change in receivables and advance premiums		(35)			(27)
Capitalization of deferred policy acquisition costs		(525)			(509)
Amortization of deferred policy acquisition costs		407			405
Increase in policy liabilities		(37)			509
Change in income tax liabilities		(420)			57
Net investment (gains) losses		(678)			(686)
Other, net		(447)			(420)
Net cash provided (used) by operating activities		1,087			1,770
Cash flows from investing activities:
Proceeds from investments sold or matured:
Available-for-sale fixed maturity securities		1,548			2,164
Equity securities		244			398
Held-to-maturity fixed maturity securities		2			2
Commercial mortgage and other loans		728			1,270
Costs of investments acquired:
Available-for-sale fixed maturity securities		(1,817)			(2,395)
Equity securities		(191)			(320)
Commercial mortgage and other loans		(588)			(2,537)
Other investments, net		(1,247)			(180)
Settlement of derivatives, net		(289)			(330)
Cash received (pledged or returned) as collateral, net		3,427			1,839
Other, net		(84)			172
Net cash provided (used) by investing activities		1,733			83
Cash flows from financing activities:
Purchases of treasury stock		(1,400)			(1,150)


Dividends paid to shareholders		(491)			(498)
Change in investment-type contracts, net		(64)			(41)
Treasury stock reissued		5			10
Other, net		6			35
Net cash provided (used) by financing activities		(1,944)			(1,644)
Effect of exchange rate changes on cash and cash equivalents		(99)			(87)
Net change in cash and cash equivalents		777			122
Cash and cash equivalents, beginning of period		3,943			5,051
Cash and cash equivalents, end of period		$	4,720		$	5,173
Supplemental disclosures of cash flow information:
Income taxes paid		$	765		$	505
Interest paid		94			104
Noncash interest		6			8
Noncash financing activities:
Lease obligations		43			66
Treasury stock issued for:
Associate stock bonus		9			8
Shareholder dividend reinvestment		19			19
Share-based compensation grants		5			6

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States (U.S.) and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the U.S. and through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan. The Company’s operations consist of two reportable business segments: Aflac U.S., which includes Aflac, and Aflac Japan, which includes ALIJ. American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac. Most of Aflac's policies are individually underwritten and marketed through independent agents. With the exception of dental and vision products administered by Aflac Benefits Solutions, Inc. (ABS) and certain group life insurance products, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. Additionally, Aflac U.S. markets its consumer markets products through Tier One Insurance Company (TOIC). The Company's insurance operations in the U.S. and Japan service the two markets for the Company's insurance business. The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 64% and 69% of the Company's total revenues in the six-month periods ended June 30, 2023 and 2022, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 80% at June 30, 2023, compared with 80% at December 31, 2022.

In 2022, the Company established Aflac Re Bermuda Ltd. (Aflac Re), a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices. Financial results from Aflac Re are included in Corporate and other.

Basis of Presentation

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to the Consolidated Financial Statements, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards CodificationTM (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The most significant items on the Company's balance sheet that involve a greater degree of accounting estimates and actuarial determinations subject to changes in the future are the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits and income taxes. These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, interest rates, mortality, morbidity, commission and other acquisition expenses and terminations by policyholders. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised and reflected in the consolidated financial statements. Although some variability is inherent in these estimates, the Company believes the amounts provided are reasonable and reflective of the best estimates of management.

The unaudited consolidated financial statements include the accounts of the Parent Company, its subsidiaries and those entities required to be consolidated under applicable accounting standards. All material intercompany accounts and transactions have been eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of June 30, 2023 and December 31, 2022, the consolidated statements of earnings and comprehensive income (loss) for the three- and six-month periods ended June 30, 2023 and 2022, the consolidated statements of shareholders' equity for the three-month periods ended March 31, 2023 and 2022 and June 30, 2023 and 2022, and the consolidated statements of cash flows for the six-month periods ended June 30, 2023 and 2022. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these financial statements should be read

in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report).

Significant Accounting Policies

The Company revised the following accounting policies as a result of the adoption of amended accounting guidance effective January 1, 2023 and certain reclassifications. Refer to Recently Adopted Accounting Pronouncements below for details of the adoption of Accounting Standards Update (ASU) 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts. In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the deferred profit liability on products with limited payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statement of earnings. This reclassification had no impact on net earnings. The change in presentation has been made for all comparative periods presented. All other categories of significant accounting policies remain unchanged from the 2022 Annual Report.

Insurance Revenue and Expense Recognition: Substantially all of the supplemental health and life insurance policies the Company issues are classified as long-duration contracts. The contract provisions generally cannot be changed or canceled during the contract period; however, the Company may adjust premiums for supplemental health policies issued in the U.S. within prescribed guidelines and with the approval of state insurance regulatory authorities.

Insurance premiums for most of the Company's health and life policies, including cancer, accident, hospital, critical illness, supplemental dental and vision, term life, whole life, long-term care and disability, are recognized as earned premiums over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the related amounts of benefits and expenses are charged against such revenues. This association is accomplished by means of annual increases or decreases to the liability for future policy benefits (LFPB) and the deferral and subsequent amortization of policy acquisition costs.

Premiums from the Company's products with limited-pay features, including cancer, medical and nursing care, term life, whole life, WAYS, and child endowment, are collected over a significantly shorter period than the contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net premium is deferred and recorded as a deferred profit liability, which is subsequently amortized in net earned premiums such that profits are recognized in a constant relationship with insurance in force. Benefits are recorded as an expense when they are incurred. An LFPB is recorded when premiums are recognized using the net premium method.

Policyholders also have an option to pay discounted advanced premiums for certain of the Company's products. Advanced premiums are deferred and recognized when due from policyholders over the otherwise required contractual premium payment period.

Benefit expense is bifurcated between benefits and claims and reserve remeasurement (gains) losses. The net premium ratio (NPR) is used to measure benefit expense and is calculated as the ratio of the present value of actual and future expected benefits and expenses to the present value of actual and future expected gross premiums. A revised NPR is calculated as of the beginning of each reporting period using updated future cash flow expectations.

Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the beginning of the current reporting period using the same locked-in discount rates. One reserve measure uses the NPR as of the end of the prior reporting period, and the second uses the revised NPR. Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates. The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original discount rate used at contract issue date.

Advertising expense is reported as incurred in insurance and other expenses in the consolidated statement of earnings.

Deferred Policy Acquisition Costs: Certain direct and incremental costs of acquiring insurance contracts are deferred and amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level basis. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount, and insurance in force, respectively. For life and health products issued in the U.S., the constant-level basis used is face amount and number of policies in force, respectively. Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination assumptions that are used in computing the LFPB, and these assumptions are reviewed and updated at least annually. The effects of changes in assumptions are recognized

prospectively over the remaining contract term as a revision of the future amortization pattern, while current period amortization is calculated based on the actual experience during the quarter. Deferred costs include the excess of current-year commissions over ultimate renewal-year commissions and certain incremental direct policy issue, underwriting and sales expenses directly related to successful policy acquisition.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. The Company performs a two-stage analysis of the internal replacements to determine if the modification is substantive to the base policy. The stages of evaluation are as follows: 1) determine if the modification is integrated with the base policy, and 2) if it is integrated, determine if the resulting contract is substantially changed.

For internal replacement transactions where the resulting contract is substantially unchanged, unamortized deferred acquisition costs from the original policy continue to be amortized over the expected life of the cohort, and the costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred.

For an internal replacement transaction that results in a policy that is substantially changed, the policy is treated as lapsed for amortization purposes, and the costs of acquiring the new policy are capitalized and amortized in accordance with the Company's accounting policies for deferred acquisition costs.

Riders can be considered internal replacements that are either integrated or non-integrated resulting in either substantially changed or substantially unchanged treatment. Riders are evaluated based on the specific facts and circumstances of the rider and are considered an expansion of the existing benefits with additional premium required. Non-integrated riders to existing contracts do not change the Company's profit expectations for the related products and are treated as a new policy establishment for incremental coverage.

Policy Liabilities: For long-duration insurance contracts, the Company calculates an integrated reserve that represents all payments under the contract including future expected claims and unpaid policy claims and related expenses. The liability for future policy benefits is measured using the net level premium method.

Long-duration insurance contracts issued by the Company are grouped into annual calendar-year cohorts based on the contract issue date, reportable segment, legal entity and product type. Limited-pay contracts are grouped into separate cohorts from other traditional products in the same manner and are further separated based on their premium payment structures.

The LFPB is determined as the present value of future policy benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of future net premiums receivable under the Company’s insurance contracts, where future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

Future policy benefits are calculated using assumptions and estimates including mortality, morbidity, termination (also referred to as lapses), expense and discount rates. The assumptions and estimates that the Company uses depend on its judgment regarding the likelihood of future events and are inherently uncertain.

Cash flow assumptions (mortality, morbidity, and termination) are established at policy inception and are evaluated each quarter to determine if an update is needed. To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the beginning of the reporting period and are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings. Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of paid claims. These expense assumptions are locked-in and remain unchanged over the term of the insurance policy. Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings.

Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense in the consolidated statement of earnings. Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheet are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI).

The Company has designed its discount rate methodology for the U.S. and Japan insurance business. The methodology incorporates constructing a discount rate curve separately for discounting cash flows used to calculate the U.S. and Japan LFPBs, reflective of the characteristics of the insurance liabilities, such as currency and tenor. Discount rates comprising each curve are determined by reference to upper-medium grade (low credit risk) fixed-income instrument yields that reflect the duration characteristics of the corresponding insurance liabilities. The Company uses for these yields single-A rated fixed income instruments with credit ratings based on international rating standards. Where only local ratings are available, the Company selects the fixed-income instruments with local ratings that are equivalent to a single-A rating based on international rating standards. The methodology is designed to prioritize observable inputs based on market data available in the local debt markets where the respective policies were issued in the currency in which the policies are denominated. For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company uses various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to: (i) for tenors where there is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-specific single-A credit spreads and applying them to risk-free government rates; (ii) for tenors where there is very limited or no observable single-A or similar market data, interpolation and extrapolation techniques.

The locked-in discount rate used for the computation of interest accretion on LFPBs is determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income instrument forward curves in the calendar year, determined using the methodology described above and weighted using issued annualized premiums for each issue month. The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent net premium ratio to the forward curve and will remain unchanged after the calendar year of issue.

Unearned premiums consist primarily of discounted advance premiums on deposit from policyholders in conjunction with their purchase of certain Aflac Japan limited-pay insurance products. These advanced premiums are deferred upon collection and recognized as earned premiums over the contractual premium payment period.

The other policyholders’ funds liability consists primarily of the fixed annuity line of business in Aflac Japan which has fixed benefits and premiums.

For internal replacements that are determined to be substantially changed, policy liabilities related to the original policy that was replaced are immediately released, and policy liabilities are established for the new insurance contract. The policy reserves are evaluated based on the new policy features, and changes are recognized at the date of contract change/modification. For internal replacements that are substantially unchanged, no changes to the reserves are recognized. For modifications that are not integrated with the base policy, new coverage is recognized as a separately issued contract within the current cohort.

Reclassifications: Certain reclassifications have been made to prior-year amounts to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

ASU 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by:

ASU 2019-09 Financial Services - Insurance: Effective Date

ASU 2020-11 Financial Services - Insurance: Effective Date and Early Application

In August 2018, the FASB issued amendments that significantly changed how insurers account for long-duration contracts. The Company adopted the standard on January 1, 2023 using a modified retrospective transition method which resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021 transition date (Transition Date). The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date. On the Transition Date, the Company calculated the ratio of the present value of future expected benefits and expenses less existing carrying values to the present value of future expected gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date. The Company capped the Transition Date NPR at 100% for any cohorts with a Transition Date NPR greater than 100%. The Company calculated the LFPB using the Transition Date NPR (capped at 100% if required) and two different discount rates: (i) the discount rate used immediately before the Transition Date, and (ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit

risk) fixed income instruments (as of December 31, 2020). For cohorts with their Transition Date NPR capped at 100%, the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the Transition Date. For all cohorts on the Transition Date, the Company recorded in AOCI net of tax, the difference in the LFPB calculated using the two different discount rates (i.e., the discount rate used immediately before the Transition Date and the updated discount rate as of the Transition Date).

Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods presented (years 2021 and 2022) following the updated standard. Based upon the modified retrospective transition method, the Transition Date impact from adoption resulted in a decrease in AOCI of approximately $18.6 billion and a decrease in retained earnings (RE) of approximately $0.3 billion.

See Note 6 and Note 7 of the Notes to the Consolidated Financial Statements for expanded disclosures for DAC and future policy benefits, respectively, required as a result of the amended guidance.

Transition Impact to Shareholder's Equity

The following table presents the cumulative transition impact as of January 1, 2021 to the Company’s Shareholder’s Equity as a result of the adoption of ASU 2018-12, using the modified retrospective transition method.


(In millions - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2020	$	135	$	2,410	$	37,984	$	8,934	$	(15,904)	$	33,559
Cumulative effect of change in accounting principle, ASU 2018-12, net of income taxes	0		0		(324)		(18,570)		0		(18,894)
Balance at January 1, 2021	$	135	$	2,410	$	37,660	$	(9,636)	$	(15,904)	$	14,665

The following table presents the transition impacts as of January 1, 2021 to the Company's AOCI and RE as a result of the adoption of ASU 2018-12 by reporting segment and disaggregated by product type, using the modified retrospective transition method.


(In millions - Unaudited)	Impact to Retained Earnings			Impact to AOCI
Transition impacts:
Aflac Japan
Cancer		$	0		$	14,529
Medical and other health		1			2,382
Life insurance		0			3,314
Other (1)		398			433
Aflac U.S.
Accident		0			92
Disability		0			149
Critical care		4			2,258
Hospital indemnity		0			223
Dental/vision		0			65
Life insurance		5			149
Other		2			218
Reinsurance		0			(305)
Transition impact before income taxes		410			23,507
Less: income taxes		86			4,937
Total transition impact, net of income taxes		$	324		$	18,570

(1) Impact to retained earnings is driven primarily by capping the Transition Date NPR on Care products.

Transition Impact on the Liability for Future Policy Benefits

The Company adopted ASU 2018-12 using the modified retrospective transition method. The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present value of expected net premiums and the present value of expected future policy benefits as of the Transition Date and the LFPB rollforward for the year ended December 31, 2021. The locked-in discount rates on the policies held at the Transition Date reflect the locked-in rates in existence immediately before the Transition Date. See Note 7 of the Notes to the Consolidated Financial Statements for additional information.

Under the modified retrospective transition method, the NPR for future policy benefits existing as of the Transition Date considers the carryover basis of those liabilities, which equals the future policy benefits and unpaid policy claims balance as of December 31, 2020. If the revised Transition Date NPR for a cohort is greater than 100%, the Company capped the Transition Date NPR at 100% and increased the LFPB with an offsetting decrease to opening retained earnings.

The LFPB recorded in the consolidated balance sheet includes the deferred profit liability for limited-payment contracts. This deferred profit liability is not included in the Transition Date and LFPB rollforwards. For products with limited-payment features, to the extent the transition date adjustment related to updating cash flow assumptions is favorable, the Company increased the deferred profit liability.

The following table presents the transition impacts to the present value of expected net premiums by reporting segment and disaggregated by product type due to the cumulative effect of the change in accounting principle as a result of the adoption of ASU 2018-12 using the modified retrospective transition method.


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2020	$	25,601	$	21,270	$	12,440	$	2,080	$	3,350	$	1,921	$	5,898	$	1,376	$	281	$	710	$	154
Impact to retained earnings from capping Transition Date NPR	0		(1)		0		(398)		0		0		(4)		0		0		(5)		(2)
Impact of deferred profit liability	15		7		36		26		0		0		0		0		0		0		0
Beginning balance at original discount rate	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of change in discount rate assumptions	3,982		2,598		908		148		479		197		1,048		154		41		78		27
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179

The following table presents the changes in the present value of expected net premiums by reporting segment and disaggregated by product type for the year ended December 31, 2021.


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179
Beginning balance at original discount rate (1)	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of changes in cash flow assumptions	32		88		40		1		(163)		(129)		(302)		0		(26)		31		0
Effect of actual variances from expected experience	(134)		(449)		(135)		(11)		(109)		(38)		(290)		(32)		(14)		34		(3)
Adjusted beginning of period balance	25,514		20,915		12,381		1,698		3,078		1,754		5,302		1,344		241		770		149
Issuances	1,116		1,132		284		55		365		345		552		263		39		112		0
Interest accrual	586		439		202		27		116		61		210		45		10		25		6
Net premium earned (2)	(2,206)		(1,692)		(1,609)		(151)		(552)		(393)		(665)		(268)		(47)		(124)		(19)
Foreign currency translation	(2,539)		(2,111)		(1,194)		(167)		0		0		0		0		0		0		0
Other	(1)		(2)		0		(1)		(8)		(7)		(8)		(4)		(2)		(3)		(1)
Ending balance at original discount rate	22,470		18,681		10,064		1,461		2,999		1,760		5,391		1,380		241		780		135
Effect of changes in discount rate assumptions	3,423		2,493		783		125		284		102		632		87		23		54		18
Balance at December 31, 2021	$	25,893	$	21,174	$	10,847	$	1,586	$	3,283	$	1,862	$	6,023	$	1,467	$	264	$	834	$	153

(1) Includes the adjustment for capping the Transition Date NPR.

(2) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

The following table presents the transition impacts to the present value of expected future policy benefits by reporting segment and disaggregated by product type due to the cumulative effect of the change in accounting principle as a result of the adoption of ASU 2018-12 using the modified retrospective transition method.


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at December 31, 2020	$	64,056	$	34,638	$	43,729	$	7,620	$	3,818	$	2,919	$	13,427	$	2,258	$	599	$	1,562	$	661
Effect of change in discount rate assumptions	18,511		4,980		4,222		581		571		346		3,306		377		106		227		245
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906

The following table presents the changes in the present value of expected future policy benefits by reporting segment and disaggregated by product type for the year ended December 31, 2021.


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906
Beginning balance at original discount rate	64,056		34,638		43,729		7,620		3,818		2,919		13,427		2,258		599		1,562		661
Effect of changes in cash flow assumptions	24		85		31		(11)		(178)		(143)		(326)		(3)		(29)		31		0
Effect of actual variances from expected experience	(149)		(458)		(139)		(15)		(115)		(41)		(304)		(36)		(15)		34		(3)
Adjusted beginning of period balance	63,931		34,265		43,621		7,594		3,525		2,735		12,797		2,219		555		1,627		658
Issuances	1,133		1,155		287		62		372		355		563		271		40		115		0
Interest accrual	2,014		769		833		129		137		100		553		85		23		58		33
Benefit payments	(3,894)		(1,313)		(1,373)		(238)		(439)		(520)		(834)		(275)		(69)		(107)		(46)
Foreign currency translation	(6,377)		(3,478)		(4,366)		(760)		0		0		0		0		0		0		0
Other	0		0		0		0		(1)		0		0		0		0		1		0
Ending balance at original discount rate	56,807		31,398		39,002		6,787		3,594		2,670		13,079		2,300		549		1,694		645
Effect of changes in discount rate assumptions	15,940		4,623		3,718		535		355		201		2,309		252		67		149		192
Balance at December 31, 2021	72,747		36,021		42,720		7,322		3,949		2,871		15,388		2,552		616		1,843		837
Net liability for future policy benefits	46,854		14,847		31,873		5,736		666		1,009		9,365		1,085		352		1,009		684
Less: reinsurance recoverable	0		2,150		0		0		0		0		0		0		0		10		0
Net liability for future policy benefits after reinsurance recoverable	$	46,854	$	12,697	$	31,873	$	5,736	$	666	$	1,009	$	9,365	$	1,085	$	352	$	999	$	684

The following table presents a reconciliation of the rollforwards by reporting segment and disaggregated by product type for the year ended December 31, 2021 to the liability for future policy benefits as of December 31, 2021 under the amended guidance. The deferred profit liability for limited-payment contracts and reinsurance is presented together with the LFPB in the Consolidated Balance Sheets and has been included as a reconciling item in the table below.


(In millions)	December 31, 2021
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer		$	46,854
Medical and other health		14,847
Life insurance		31,873
Other		5,736
Aflac U.S.
Accident		666
Disability		1,009
Critical care		9,365
Hospital indemnity		1,085
Dental/vision		352
Life insurance		1,009
Other		684
Corporate and other		30
Deferred profit liability - limited-payment contracts		1,595
Deferred profit liability - reinsurance		859
Total		$	115,964

The adoption of ASU 2018-12 did not have an impact on the Company's balance for deferred policy acquisition costs upon adoption.

Accounting Pronouncements Pending Adoption

ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

In March 2023, the FASB issued amendments to permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).

The amendments are effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted and if an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period.

The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations or disclosures.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company's business.

For additional information on new accounting pronouncements and recent accounting guidance and their impact, if any, on the Company's financial position, results of operations or disclosures, see Note 1 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

2. BUSINESS SEGMENT INFORMATION

The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. In addition, the Parent Company, other operating business units that are not individually reportable and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other.

The Company does not allocate corporate overhead expenses to business segments. Consistent with U.S. GAAP accounting guidance for segment reporting, the Company evaluates and manages its business segments using a financial performance measure called pretax adjusted earnings. Adjusted earnings are adjusted revenues less benefits and adjusted expenses. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S. GAAP total revenues excluding net investment gains and losses, except for amortized hedge costs/income related to foreign currency exposure management strategies and net interest cash flows from derivatives associated with certain investment strategies. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company's underlying business performance. The Company excludes income taxes related to operations to arrive at pretax adjusted earnings. Information regarding operations by reportable segment and Corporate and other, follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022
Revenues:
Aflac Japan:
Net earned premiums	$	2,064	$	2,334	$	4,234	$	4,959



Adjusted net investment income (1),(2)	637		723		1,248		1,402
Other income	9		9		18		18
Total adjusted revenue Aflac Japan	2,710		3,066		5,500		6,379
Aflac U.S.:
Net earned premiums	1,425		1,394		2,853		2,807







Adjusted net investment income (3)	203		193		400		377
Other income	35		41		70		83
Total adjusted revenue Aflac U.S.	1,663		1,628		3,323		3,267
Corporate and other (4),(5)	140		42		268		116
Total adjusted revenues	4,513		4,736		9,091		9,762
Net investment gains (losses) (1),(2),(3),(4)	659		579		881		726
Total revenues	$	5,172	$	5,315	$	9,972	$	10,488

(1) Amortized hedge costs of $63 and $30 for the three-month periods and $122 and $55 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(2) Net interest cash flows from derivatives associated with certain investment strategies of $(73) and $(2) for the three-month periods and $(135) and $(12) for the six-month periods ended June 30, 2023, and 2022, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(3) Net interest cash flows from derivatives associated with certain investment strategies of $(8) and $1 for the three-month periods and $(15) and $2 for the six-month periods ended June 30, 2023, and 2022, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income when analyzing operations.

(4) Amortized hedge income of $38 and $14 for the three-month periods and $67 and $25 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase to net investment income when analyzing operations.

(5) The change in value of federal historic rehabilitation and solar investments in partnerships of $53 and $31 for the three-month periods and $105 and $42 for the six-month periods ended June 30, 2023, and 2022, respectively, is included as a reduction to net investment income. Tax credits on these investments of $56 and $28 for the three-month periods and $108 and $44 for the six-month periods ended June 30, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022
Pretax earnings:
Aflac Japan (1),(2)	$	822	$	873	$	1,610	$	1,743
Aflac U.S. (3)	369		343		721		675
Corporate and other (4),(5),(6)	(52)		(75)		(58)		(117)
Pretax adjusted earnings (7)	1,139		1,141		2,273		2,301
Net investment gains (losses) (1),(2),(3),(4),(5)	651		567		859		701
Other income (loss)	35		0		35		0
Total earnings before income taxes	$	1,825	$	1,708	$	3,167	$	3,002
Income taxes applicable to pretax adjusted earnings	$	186	$	195	$	366	$	414
Effect of foreign currency translation on after-tax adjusted earnings	(25)		(59)		(66)		(94)

(1) Amortized hedge costs of $63 and $30 for the three-month periods and $122 and $55 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies have been reclassified from net investment gains (losses) and reported as a deduction from net investment income when analyzing operations.

(4) Amortized hedge income of $38 and $14 for the three-month periods and $67 and $25 for the six-month periods ended June 30, 2023, and 2022, respectively, related to certain foreign currency exposure management strategies has been reclassified from net investment gains (losses) and reported as an increase in net investment income when analyzing operations.

(5) A gain of $12 and $12 for the three-month periods and $24 and $25 for the six-month periods ended June 30, 2023, and 2022, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable has been reclassified from net investment gains (losses) and included in adjusted earnings when analyzing operations.

(6) The change in value of federal historic rehabilitation and solar investments in partnerships of $53 and $31 for the three-month periods and $105 and $42 for the six-month periods ended June 30, 2023, and 2022, respectively, is included as a reduction to net investment income. Tax credits on these investments of $56 and $28 for the three-month periods and $108 and $44 for the six-month periods ended June 30, 2023, and 2022, respectively, have been recorded as an income tax benefit in the consolidated statement of earnings. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on these investments.

(7) Includes $36 and $41 for the three-month periods and $70 and $82 for the six-month periods ended June 30, 2023, and 2022, respectively, of interest expense on debt.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

Assets were as follows:


(In millions)	June 30, 2023			December 31, 2022
Assets:
Aflac Japan		$	103,972		$	105,734
Aflac U.S.		20,932			21,002
Corporate and other		5,722			5,002
Total assets		$	130,626		$	131,738

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

3. INVESTMENTS

Investment Holdings

The amortized cost for the Company's investments in fixed maturity securities, the cost for equity securities and the fair values of these investments are shown in the following tables.


	June 30, 2023
(In millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale, carried at fair value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies	$	23,313	$	0	$	1,435	$	975	$	23,773
Municipalities	946		0		150		35		1,061
Mortgage- and asset-backed securities	213		0		8		6		215
Public utilities	3,665		0		367		51		3,981
Sovereign and supranational	498		0		34		4		528
Banks/financial institutions	5,767		0		349		309		5,807
Other corporate	5,947		0		745		280		6,412
Total yen-denominated	40,349		0		3,088		1,660		41,777
U.S. dollar-denominated:
U.S. government and agencies	187		0		0		7		180
Municipalities	1,251		0		62		51		1,262
Mortgage- and asset-backed securities	2,521		0		189		70		2,640
Public utilities	3,384		0		347		143		3,588
Sovereign and supranational	122		0		34		10		146
Banks/financial institutions	2,766		0		346		70		3,042
Other corporate	20,269		0		2,396		795		21,870
Total U.S. dollar-denominated	30,500		0		3,374		1,146		32,728
Total securities available for sale	$	70,849	$	0	$	6,462	$	2,806	$	74,505


	December 31, 2022
(In millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale, carried at fair value through other comprehensive income:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies	$	25,418	$	0	$	1,259	$	1,724	$	24,953
Municipalities	1,034		0		124		61		1,097
Mortgage- and asset-backed securities	241		0		8		12		237
Public utilities	3,932		0		301		108		4,125
Sovereign and supranational	659		0		24		5		678
Banks/financial institutions	6,348		0		324		531		6,141
Other corporate	6,288		0		555		408		6,435
Total yen-denominated	43,920		0		2,595		2,849		43,666
U.S. dollar-denominated:
U.S. government and agencies	169		0		0		8		161
Municipalities	1,269		0		43		89		1,223
Mortgage- and asset-backed securities	1,926		0		67		84		1,909
Public utilities	3,481		0		240		180		3,541
Sovereign and supranational	133		0		35		12		156
Banks/financial institutions	2,992		0		271		105		3,158
Other corporate	21,579		0		1,549		1,201		21,927
Total U.S. dollar-denominated	31,549		0		2,205		1,679		32,075
Total securities available for sale	$	75,469	$	0	$	4,800	$	4,528	$	75,741


	June 30, 2023
(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies	$	16,717	$	2	$	16,715	$	2,387	$	0	$	19,102
Municipalities	261		0		261		53		0		314

Public utilities	35		0		35		4		0		39
Sovereign and supranational	411		3		408		54		0		462

Other corporate	17		0		17		4		0		21
Total yen-denominated	17,441		5		17,436		2,502		0		19,938
Total securities held to maturity	$	17,441	$	5	$	17,436	$	2,502	$	0	$	19,938


	December 31, 2022
(In millions)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Yen-denominated:
Japan government and agencies	$	18,269	$	2	$	18,267	$	2,045	$	0	$	20,312
Municipalities	287		0		287		48		0		335
Public utilities	38		1		37		4		0		41
Sovereign and supranational	450		4		446		54		0		500
Other corporate	19		0		19		3		0		22
Total yen-denominated	19,063		7		19,056		2,154		0		21,210
Total securities held to maturity	$	19,063	$	7	$	19,056	$	2,154	$	0	$	21,210


(In millions)	June 30, 2023			December 31, 2022
Equity securities, carried at fair value through net earnings:	Fair Value			Fair Value
Equity securities:
Yen-denominated		$	703		$	670
U.S. dollar-denominated		218			374
Other currencies		44			47
Total equity securities		$	965		$	1,091

The methods of determining the fair values of the Company's investments in fixed maturity securities and equity securities are described in Note 5.

During the first six months of 2023 and 2022, respectively, the Company did not reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

The contractual and economic maturities of the Company's investments in fixed maturity securities at June 30, 2023, were as follows:


(In millions)	Amortized Cost (1)			Fair Value
Available for sale:
Due in one year or less		$	1,808		$	1,896
Due after one year through five years		6,636			7,114
Due after five years through 10 years		16,133			17,931
Due after 10 years		43,538			44,709
Mortgage- and asset-backed securities		2,734			2,855
Total fixed maturity securities available for sale		$	70,849		$	74,505
Held to maturity:
Due in one year or less		$	0		$	0
Due after one year through five years		37			39
Due after five years through 10 years		9,300			10,414
Due after 10 years		8,099			9,485
Mortgage- and asset-backed securities		0			0
Total fixed maturity securities held to maturity		$	17,436		$	19,938

(1) Net of allowance for credit losses

Economic maturities are used for certain debt instruments with no stated maturity where the expected maturity date is based on the combination of features in the financial instrument such as the right to call or prepay obligations or changes in coupon rates.

Investment Concentrations

The Company's process for investing in credit-related investments begins with an independent approach to underwriting each issuer's fundamental credit quality. The Company evaluates independently those factors that it believes could influence an issuer's ability to make payments under the contractual terms of the Company's instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). The Company further evaluates the investment considering broad business and portfolio management objectives, including asset/liability needs, portfolio diversification, and expected income.

Investment exposures that individually exceeded 10% of shareholders' equity were as follows:


	June 30, 2023			December 31, 2022
(In millions)	Credit Rating	Amortized Cost	Fair Value	Credit Rating	Amortized Cost	Fair Value
Japan National Government(1)	A+	$39,043	$41,826	A+	$42,618	$44,178

*(1)*Japan Government Bonds (JGBs) or JGB-backed securities

Net Investment Gains and Losses

Information regarding pretax net gains and losses from investments is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022
Net investment gains (losses):
Sales and redemptions:
Fixed maturity securities available for sale:
Gross gains from sales	$	7	$	15	$	8	$	85
Gross losses from sales	(6)		(23)		(9)		(26)
Foreign currency gains (losses)	26		123		85		133
Other investments:
Gross gains (losses) from sales	(3)		0		(3)		9
Total sales and redemptions	24		115		81		201
Equity securities	(9)		(135)		(12)		(291)


Credit losses:

Fixed maturity securities held to maturity	0		0		1		0
Commercial mortgage and other loans	(2)		(12)		(33)		4
Impairment losses	0		(17)		0		(17)
Loan commitments	1		(5)		4		2
Reinsurance recoverables and other	0		0		(3)		2
Total credit losses	(1)		(34)		(31)		(9)
Derivatives and other:
Derivative gains (losses)	(594)		(558)		(577)		(1,024)
Foreign currency gains (losses)	1,135		1,176		1,217		1,809
Total derivatives and other	541		618		640		785
Total net investment gains (losses)	$	555	$	564	$	678	$	686

The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the three-month period ended June 30, 2023, that relate to equity securities still held at the June 30, 2023 reporting date, were $16 million. The unrealized holding losses, net of gains, recorded as a component of net investment gains and losses for the six-month period ended June 30, 2023, that relate to equity securities still held at the June 30, 2023 reporting date, were $21 million.

Unrealized Investment Gains and Losses

Effect on Shareholders’ Equity

The net effect on shareholders’ equity of unrealized gains and losses from fixed maturity securities was as follows:


(In millions)	June 30, 2023			December 31, 2022
Unrealized gains (losses) on securities available for sale		$	3,656		$	272
Deferred income taxes		(1,678)			(974)
Shareholders’ equity, unrealized gains (losses) on fixed maturity securities		$	1,978		$	(702)

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's available-for-sale investments for the periods ended June 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


	June 30, 2023
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed maturity securities available for sale:
U.S. government and agencies:
U.S. dollar-denominated		$	179		$	7		$	97		$	3		$	82		$	4
Japan government and agencies:
Yen-denominated		8,274			975			529			102			7,745			873
Municipalities:
U.S. dollar-denominated		700			51			96			6			604			45
Yen-denominated		283			35			0			0			283			35
Mortgage- and asset- backed securities:
U.S. dollar-denominated		1,057			70			753			55			304			15
Yen-denominated		61			6			0			0			61			6
Public utilities:
U.S. dollar-denominated		1,296			143			690			58			606			85
Yen-denominated		710			51			57			2			653			49
Sovereign and supranational:
U.S. dollar-denominated		33			10			0			0			33			10
Yen-denominated		63			4			0			0			63			4
Banks/financial institutions:
U.S. dollar-denominated		857			70			387			13			470			57
Yen-denominated		3,626			309			425			9			3,201			300
Other corporate:
U.S. dollar-denominated		7,385			795			2,691			118			4,694			677
Yen-denominated		1,818			280			412			13			1,406			267
Total		$	26,342		$	2,806		$	6,137		$	379		$	20,205		$	2,427


	December 31, 2022
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed maturity securities available for sale:
U.S. government and agencies:
U.S. dollar-denominated		$	159		$	8		$	85		$	3		$	74		$	5
Japan government and agencies:
Yen-denominated		8,856			1,724			3,733			580			5,123			1,144
Municipalities:
U.S. dollar-denominated		854			89			735			57			119			32
Yen-denominated		286			61			150			26			136			35
Mortgage- and asset- backed securities:
U.S. dollar-denominated		936			84			640			42			296			42
Yen-denominated		62			12			38			6			24			6
Public utilities:
U.S. dollar-denominated		1,852			180			1,667			144			185			36
Yen-denominated		880			108			576			61			304			47
Sovereign and supranational:
U.S. dollar-denominated		30			12			0			0			30			12
Yen-denominated		71			5			34			4			37			1
Banks/financial institutions:
U.S. dollar-denominated		1,147			105			786			58			361			47
Yen-denominated		3,957			531			1,760			174			2,197			357
Other corporate:
U.S. dollar-denominated		10,529			1,201			8,636			785			1,893			416
Yen-denominated		2,090			408			1,507			273			583			135
Total		$	31,709		$	4,528		$	20,347		$	2,213		$	11,362		$	2,315

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on the Company's fixed maturity securities investments have been primarily related to general market changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal. In the first six months of 2023, the decrease in unrealized losses has been driven by improvements in credit spreads, which have been partially offset by interest rates which have increased along all durations in both the U.S. and Japan.

For any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent rise in interest rates, or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company‘s resources to securities with real credit-related concerns that could impact ultimate collection of principal and interest. For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers' specific credit profile.

For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other

relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal.

Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company. Further, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit-related factors and as a result, a credit allowance will be estimated. Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities had not incurred a credit loss and therefore, should not have a credit loss allowance as of June 30, 2023. Refer to the Allowance for Credit Losses section below for additional information.

As of June 30, 2023 and December 31, 2022, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

Commercial Mortgage and Other Loans

The Company classifies its transitional real estate loans (TREs), commercial mortgage loans (CMLs) and middle market loans (MMLs) as held-for-investment and includes them in the commercial mortgage and other loans line on the consolidated balance sheets. The Company carries them on the balance sheet at amortized cost less an estimated allowance for credit losses.

The following table reflects the composition of the carrying value for commercial mortgage and other loans by property type as of the periods presented.


(In millions)	June 30, 2023				December 31, 2022
	Amortized Cost		% of Total		Amortized Cost		% of Total
Commercial Mortgage and other loans:
Transitional real estate loans:
Office	$	2,162	15.9	%	$	2,158	15.8	%
Retail	468		3.4		493		3.6
Apartments/Multi-Family	2,642		19.5		2,701		19.7
Industrial	449		3.3		123		.9
Hospitality	812		6.0		803		5.9
Other	242		1.8		231		1.7
Total transitional real estate loans	6,775		49.9		6,509		47.6
Commercial mortgage loans:
Office	378		2.8		388		2.8
Retail	306		2.3		310		2.3
Apartments/Multi-Family	607		4.5		630		4.6
Industrial	465		3.4		694		5.1


Total commercial mortgage loans	1,756		13.0		2,022		14.8
Middle market loans	5,040		37.1		5,157		37.6
Total commercial mortgage and other loans	$	13,571	100.0	%	$	13,688	100.0	%
Allowance for credit losses	(225)				(192)
Total net commercial mortgage and other loans	$	13,346			$	13,496

CMLs and TREs were secured by properties entirely within the U.S. (with the largest concentrations in California (20%), Texas (12%) and Florida (10%)). MMLs are issued only to companies domiciled within the U.S. and Canada.

Transitional Real Estate Loans

TREs are commercial mortgage loans that are typically relatively short-term floating rate instruments secured by a first lien on the property. These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date.

As of June 30, 2023, the Company had $792 million in outstanding commitments to fund TREs. These commitments are contingent on the final underwriting and due diligence to be performed.

Commercial Mortgage Loans

CMLs are typically fixed rate loans on commercial real estate with partial repayment of principal over the life of the loan with the remaining outstanding principal being repaid upon maturity. This loan portfolio is generally considered higher quality investment grade loans.

Middle Market Loans

MMLs are typically first lien senior secured cash flow loans to small to mid-size companies for working capital, refinancing, acquisition, and recapitalization. These loans are generally considered to be below investment grade. The carrying value for MMLs included $26 million and $28 million for a short term credit facility that is reflected in other liabilities on the consolidated balance sheets, as of June 30, 2023, and December 31, 2022, respectively.

As of June 30, 2023, the Company had commitments of approximately $726 million to fund future MMLs. These commitments are contingent upon the availability of MMLs that meet the Company's underwriting criteria.

Credit Quality Indicators

For TREs, the Company’s key credit quality indicator is loan-to-value (LTV), which is calculated by dividing the current outstanding loan balance by the estimated property value at origination. Given that TREs involve properties undergoing a repositioning of their commercial profile, LTV provides the most insight into the credit risk of the loan. The Company monitors the performance of the loans periodically, but not less frequently than quarterly. The monitoring process also focuses on higher risk loans, which include those that are delinquent or for which foreclosure or deed-in-lieu of foreclosure is anticipated.

For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR). DSCR is the most recently available operating income of the underlying property compared to the required debt service of the loan.

For MMLs and held-to-maturity fixed maturity securities, the Company’s key credit quality indicator is credit ratings. The Company’s held-to-maturity portfolio is composed of investment grade securities that are senior unsecured instruments, while its MMLs generally have below-investment-grade ratings but are typically senior secured instruments. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

For the Company’s reinsurance recoverable balance, the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty. The Company uses external credit ratings focused on the reinsurer’s financial strength and credit worthiness. As of June 30, 2023, the Company's reinsurance counterparties were rated A+. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

The following tables present as of June 30, 2023 the amortized cost basis of TREs, CMLs and MMLs by year of origination and credit quality indicator.


Transitional Real Estate Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Total
Loan-to-Value Ratio:
0%-59.99%	$	116	$	653	$	598	$	36	$	153	$	10	$	1,566
60%-69.99%	42		733		751		136		497		382		2,541
70%-79.99%	0		868		918		100		365		146		2,397
80% or greater	0		108		163		0		0		0		271
Total	$	158	$	2,362	$	2,430	$	272	$	1,015	$	538	$	6,775


Commercial Mortgage Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Total		Weighted-Average DSCR
Loan-to-Value Ratio:
0%-59.99%	$	0	$	0	$	298	$	46	$	504	$	617	$	1,465	2.53
60%-69.99%	0		0		15		0		45		124		184		1.82
70%-79.99%	0		0		0		0		39		20		59		1.18
80% or greater	0		0		0		0		0		48		48		2.67
Total	$	0	$	0	$	313	$	46	$	588	$	809	$	1,756	2.42

Weighted Average DSCR	0.00		0.00		2.93		1.98		2.44		2.23


Middle Market Loans
(In millions)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Credit Ratings:
BBB	$	7	$	58	$	147	$	68	$	37	$	27	$	145	$	489
BB	31		340		458		299		170		126		392		1,816
B	22		236		624		381		445		344		287		2,339
CCC	0		0		21		39		104		156		50		370
CC	0		0		0		0		7		10		0		17
C and lower	0		0		0		0		0		6		3		9
Total	$	60	$	634	$	1,250	$	787	$	763	$	669	$	877	$	5,040

Loan Modifications

The Company granted certain loan modifications in its MML and TRE portfolios during the first six months of 2023. As of June 30, 2023, these loan modifications did not have a material impact on the Company’s results of operations.

Past Due and Nonaccrual Loans

The Company designates nonaccrual status for a nonperforming loan or debt security or a loan that is not generating its stated interest rate because of nonpayment of periodic interest or principal by the borrower. The Company applies the cash basis method to record any payments received on nonaccrual assets. The Company resumes the accrual of interest on fixed maturity securities and loans that are currently making contractual payments or for those that are not current where the borrower has paid timely (less than 30 days outstanding).

The following table presents an aging of past due and nonaccrual loans at amortized cost, before allowance for credit losses, as of the period presented.


	June 30, 2023
(In millions)	Current		Less Than 90 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Total Loans		Nonaccrual Status
Transitional Real Estate Loans	$	6,141	$	207	$	427	$	634	$	6,775	$	612
Commercial Mortgage Loans	1,756		0		0		0		1,756		0
Middle Market Loans	4,997		0		43		43		5,040		43
Total	$	12,894	$	207	$	470	$	677	$	13,571	$	655

(1) As of June 30, 2023, there were no loans that were 90 days or more past due that continued to accrue interest

For the three-month and six-month periods ended June 30, 2023, the Company recognized no interest income for TREs, CMLs, or MMLs on nonaccrual status. Of these loans, TREs with an amortized cost of $218 million had no credit loss allowance as of June 30, 2023, because these loans are collateral dependent assets for which the estimated fair values are in excess of amortized cost. As of June 30, 2023, there were no MMLs on nonaccrual status without an allowance for credit losses.

As of December 31, 2022, the Company had an immaterial amount of loans on nonaccrual status.

Allowance for Credit Losses

The Company calculates its allowance for credit losses for held-to-maturity fixed maturity securities, loan receivables, loan commitments and reinsurance recoverable by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset. For held-to-maturity fixed maturity securities, MMLs, and MML commitments, the Company groups assets by credit ratings, industry, and country.

The Company groups CMLs and TREs and respective loan commitments by property type, property location and the property’s LTV and DSCR. On a quarterly basis, CMLs and TREs within a portfolio segment that share similar risk characteristics are pooled for calculation of credit loss allowance. On an ongoing basis, TREs and CMLs with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss. For example, the credit loss allowance for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the credit loss allowance which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).

The credit allowance for the reinsurance recoverable balance is estimated using a probability-of-default (PD) / loss-given-default (LGD) method. The credit allowance for held-to-maturity fixed maturity securities and loan receivables is estimated using a PD / LGD method, discounted for the time value of money. For held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities and loan receivables, the Company includes the change in present value due to the passage of time in the change in the allowance for credit losses. The Company’s methodology for estimating credit losses utilizes the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment (such as prepayment options, renewal options, call options, or extension options). The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD/LGD over a two-year period for held-to-maturity fixed maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period. For the CML and TRE portfolio, the Company applies reasonable and supportable forecasts of macroeconomic variables as well as national and local real-estate market factors to estimate future credit losses where the market factors revert back to historical levels over time with the period being dependent on current market conditions, projected market conditions and difference in the current and historical market levels for each factor. The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in underwriting practices and significant events or conditions and makes adjustments as necessary.

The Company’s held-to-maturity fixed maturity portfolio includes Japan Government and Agency securities of $16.6 billion amortized cost as of June 30, 2023 that meet the requirements for zero-credit-loss expectation and therefore these asset classes have been excluded from the current expected credit loss measurement.

An investment in an available-for-sale fixed maturity security may be impaired if the fair value falls below amortized cost. The Company regularly reviews its fixed maturity security investments portfolio for declines in fair value. The Company's debt impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost. The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective securities. Such evaluations and assessments are revised as conditions change and new information becomes available.

When determining the Company's intention to sell a security prior to recovery of its fair value to amortized cost, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings. The Company performs ongoing analyses of its liquidity needs, which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow and liquidity needs.

The Company’s methodology for estimating credit losses for available-for-sale fixed maturity securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the fixed maturity securities. In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.

The following table presents the roll forward of the allowance for credit losses by portfolio segment.


(In millions)	Transitional Real Estate Loans		Commercial Mortgage Loans		Middle Market Loans		Held to Maturity Securities		Available for Sale Securities		Reinsurance Recoverables
Three Months Ended June 30, 2023:
Balance at March 31, 2023	$	(65)	$	(9)	$	(149)	$	(6)	$	0	$	(11)
(Addition to) release of allowance for credit losses	(11)		0		9		0		0		0
Write-offs, net of recoveries	0		0		0		0		0		0
Change in foreign exchange	0		0		0		1		0		1
Balance at June 30, 2023	$	(76)	$	(9)	$	(140)	$	(5)	$	0	$	(10)
Three Months Ended June 30, 2022:
Balance at March 31, 2022	$	(52)	$	(8)	$	(98)	$	(8)	$	0	$	(9)
(Addition to) release of allowance for credit losses	(1)		0		(16)		0		0		0
Write-offs, net of recoveries	0		0		5		0		0		0
Change in foreign exchange	0		0		0		1		0		1
Balance at June 30, 2022	$	(53)	$	(8)	$	(109)	$	(7)	$	0	$	(8)
Six Months Ended June 30, 2023:
Balance at December 31, 2022	$	(54)	$	(9)	$	(129)	$	(7)	$	0	$	(8)
(Addition to) release of allowance for credit losses	(22)		0		(11)		1		0		(2)
Write-offs, net of recoveries	0		0		0		0		0		0
Change in foreign exchange	0		0		0		1		0		0
Balance at June 30, 2023	$	(76)	$	(9)	$	(140)	$	(5)	$	0	$	(10)
Six Months Ended June 30, 2022:
Balance at December 31, 2021	$	(68)	$	(10)	$	(96)	$	(8)	$	0	$	(13)
(Addition to) release of allowance for credit losses	15		2		(18)		0		0		2
Write-offs, net of recoveries	0		0		5		0		0		0
Change in foreign exchange	0		0		0		1		0		3
Balance at June 30, 2022	$	(53)	$	(8)	$	(109)	$	(7)	$	0	$	(8)

During the first six months of 2023, the Company identified certain TREs collateralized with commercial real estate properties with an amortized cost of $626 million in anticipation of potential foreclosure or deed-in lieu foreclosure transactions. As of June 30, 2023, the Company established a credit allowance of $21 million for those amortized loans of $365 million for which the fair value of the collateral was below the amortized cost of the loans.

For assets that are subject to the credit loss measurement, the change in credit loss allowance will be significantly impacted by purchases and sales in those assets during the period as well as entering into new non-cancelable loan commitments. The estimate of credit losses for loan commitments as of June 30, 2023 was $20 million.

Other Investments

The table below reflects the composition of the carrying value for other investments as of the periods presented.


(In millions)	June 30, 2023			December 31, 2022
Other investments:
Policy loans		$	202		$	214
Short-term investments (1)		2,706			1,532
Limited partnerships		2,551			2,290

Other		32			34
Total other investments		$	5,491		$	4,070

(1) Includes securities lending collateral

The Parent Company invests in partnerships that specialize in rehabilitating historic structures or the installation of solar equipment in order to receive federal historic rehabilitation and solar tax credits. These investments are classified as limited partnerships and included in other investments in the consolidated balance sheet. The change in value of each investment is recorded as a reduction to net investment income. Tax credits generated by these investments are recorded as an income tax benefit in the consolidated statement of earnings.

As of June 30, 2023, the Company had $2.3 billion in outstanding commitments to fund alternative investments in limited partnerships.

Variable Interest Entities (VIEs)

As a condition of its involvement or investment in a VIE, the Company enters into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of the Company's investment or its beneficial interest in the VIE.

For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature. The Company is not, nor has it been, required to purchase any securities issued in the future by these VIEs.

The Company's ownership interest in VIEs is limited to holding the obligations issued by them. The Company has no direct or contingent obligations to fund the limited activities of these VIEs, nor does it have any direct or indirect financial guarantees related to the limited activities of these VIEs. The Company has not provided any assistance or any other type of financing support to any of the VIEs it invests in, nor does it have any intention to do so in the future. For those VIEs in which the Company holds debt obligations, the weighted-average lives of the Company's notes are very similar to the underlying collateral held by these VIEs where applicable.

The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related investments held in the VIE.

VIEs - Consolidated

The following table presents the cost or amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities


	June 30, 2023						December 31, 2022
(In millions)	Amortized Cost (1)			Fair Value			Amortized Cost (1)			Fair Value
Assets:
Fixed maturity securities, available for sale		$	2,922		$	3,766		$	3,223		$	3,805

Commercial mortgage and other loans		10,652			10,605			10,832			10,762
Other investments (2)		2,163			2,163			1,909			1,909
Other assets (3)		61			61			62			62
Total assets of consolidated VIEs		$	15,798		$	16,595		$	16,026		$	16,538
Liabilities:
Other liabilities (3)		$	450		$	450		$	390		$	390
Total liabilities of consolidated VIEs		$	450		$	450		$	390		$	390

(1) Net of allowance for credit losses

(2) Consists entirely of alternative investments in limited partnerships

(3) Consists entirely of derivatives

The Company is substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, the Company has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and is therefore considered to be the primary beneficiary of the VIEs that it consolidates. The Company also participates in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding invested assets and foreign currency swaps, as appropriate, and utilizing the cash flows from these securities to service its investment. Neither the Company nor any of its creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event. For those VIEs that contain a swap, the Company is not a direct counterparty to the swap contracts and has no control over them. The Company's loss exposure to these VIEs is limited to its original investment. The Company's consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable. With the exception of its investment in unit trust structures, the underlying collateral assets and funding of the Company's consolidated VIEs are generally static in nature.

Investments in Unit Trust Structures

The Company also utilizes unit trust structures in its Aflac Japan segment to invest in various asset classes. As the sole investor of these VIEs, the Company is required to consolidate these trusts under U.S. GAAP.

VIEs - Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which the Company's investment in VIEs not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated


	June 30, 2023						December 31, 2022
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturity securities, available for sale		$	3,522		$	3,924		$	3,998		$	4,259
Other investments (1)		388			388			381			381
Total investments in VIEs not consolidated		$	3,910		$	4,312		$	4,379		$	4,640

(1) Consists entirely of alternative investments in limited partnerships

Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents or sponsors. These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. The Company does not have the power to direct the activities that most significantly impact the entity's economic performance,

nor does it have the obligation to absorb losses of the entity or the right to receive benefits from the entity. As such, the Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them.

The Company holds alternative investments in limited partnerships that have been determined to be VIEs. These partnerships invest in private equity and structured investments. The Company’s maximum exposure to loss on these investments is limited to the amount of its investment. The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The Company classifies these investments as Other investments in the consolidated balance sheets.

Securities Lending and Pledged Securities

The Company lends fixed maturity and public equity securities to financial institutions in short-term security-lending transactions. These short-term security-lending arrangements increase investment income with minimal risk. The Company receives cash or other securities as collateral for such loans. The Company's security lending policy requires that the fair value of the securities received as collateral be 102% or more of the fair value of the loaned securities and that unrestricted cash received as collateral be 100% or more of the fair value of the loaned securities. The securities loaned continue to be carried as investment assets on the Company's balance sheet during the terms of the loans and are not reported as sales. For loans involving unrestricted cash or securities as collateral, the collateral is reported as an asset with a corresponding liability for the return of the collateral. For loans where the Company receives as collateral securities that the Company is not permitted to sell or repledge, the collateral is not reflected on the consolidated financial statements.

Details of collateral by loaned security type and remaining maturity of the agreements were as follows:


Securities Lending Transactions Accounted for as Secured Borrowings
Remaining Contractual Maturity of the Agreements
	June 30, 2023								December 31, 2022
(In millions)	Overnight and Continuous(1)		Up to 30 days		30-90 days		Total		Overnight and Continuous(1)		Up to 30 days		Total
Securities lending transactions:
Fixed maturity securities:
Japan government and agencies	$	0	$	3,784	$	566	$	4,350	$	0	$	1,087	$	1,087

Public utilities	6		0		0		6		12		0		12

Banks/financial institutions	38		0		0		38		89		0		89
Other corporate	285		0		0		285		621		0		621

Total borrowings	$	329	$	3,784	$	566	$	4,679	$	722	$	1,087	$	1,809
Gross amount of recognized liabilities for securities lending transactions							$	4,679					$	1,809

(1) The related loaned security, under the Company's U.S. securities lending program, can be returned to the Company at the transferee's discretion; therefore, they are classified as Overnight and Continuous.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $5.0 billion and $6.8 billion at June 30, 2023 and December 31, 2022, respectively, which may not be sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected on the consolidated financial statements.

The Company did not have any repurchase agreements or repurchase-to-maturity transactions outstanding as of June 30, 2023, and December 31, 2022, respectively.

Certain fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements on certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.

4. DERIVATIVE INSTRUMENTS

The Company's freestanding derivative financial instruments have historically consisted of:

foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio, with options used on a standalone basis and/or in a collar strategy;
foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in yen and hedge the Company's long term exposure to a weakening yen;
cross-currency interest rate swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures;
foreign currency swaps that are associated with variable interest entity (VIE) bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary;
interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments;
interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities; and
bond purchase commitments at the inception of investments in consolidated VIEs.

Some of the Company's derivatives are designated as cash flow hedges, fair value hedges or net investment hedges; however, other derivatives do not qualify for hedge accounting or the Company elects not to designate them as accounting hedges.

Derivative Types

Foreign currency forwards and options are executed for the Aflac Japan segment in order to hedge the currency risk on the carrying value of certain U.S. dollar-denominated investments. The average maturity of these forwards and options can change depending on factors such as market conditions and types of investments being held. In situations where the maturity of the forwards and options is shorter than the underlying investment being hedged, the Company may enter into new forwards and options near maturity of the existing derivative in order to continue hedging the underlying investment. In forward transactions, Aflac Japan agrees with another party to buy a fixed amount of yen and sell a corresponding amount of U.S. dollars at a specified future date. The Company also uses one-sided foreign currency put options to mitigate the settlement risk on U.S. dollar-denominated assets related to extreme foreign currency rate changes. From time to time, Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options. In the purchased put transactions, Aflac Japan obtains the option to buy a fixed amount of yen and sell a corresponding amount of U.S. dollars at a specified future date. In the sold call transactions, Aflac Japan agrees to sell a fixed amount of yen and buy a corresponding amount of U.S. dollars at a specified future date. The combination of purchasing the put option and selling the call option results in no net premium being paid (i.e. a costless or zero-cost collar).

From time to time, the Company may also enter into foreign currency forwards and options to hedge the currency risk associated with the net investment in Aflac Japan. In these forward transactions, the Company agrees with another party to buy a fixed amount of U.S. dollars and sell a corresponding amount of yen at a specified price at a specified future date. In the option transactions, the Company may use a combination of foreign currency options to protect expected future cash flows by simultaneously purchasing yen put options (options that protect against a weakening yen) and selling yen call options (options that limit participation in a strengthening yen). The combination of these two actions create a zero-cost collar. Additionally, the Company enters into purchased options to hedge cash flows from the net investment in Aflac Japan.

The Company enters into foreign currency swaps pursuant to which it exchanges an initial principal amount in one currency for an initial principal amount of another currency, with an agreement to re-exchange the principal amounts at a future date. There may also be periodic exchanges of payments at specified intervals based on the agreed upon rates and notional amounts. Foreign currency swaps are used primarily in the consolidated VIEs in the Company's Aflac Japan portfolio to convert foreign-denominated cash flows to yen, the functional currency of Aflac Japan, in order to minimize cash flow fluctuations. The Company also uses foreign currency swaps to economically convert certain of its U.S. dollar-denominated senior note and subordinated debenture principal and interest obligations into yen-denominated obligations.

In order to reduce investment income volatility from its variable-rate investments, the Company enters into receive–fixed, pay–floating interest rate swaps. These derivatives are cleared and settled through a central clearinghouse.

Swaptions are used to mitigate the adverse impact resulting from significant changes in the fair value of U.S. dollar-denominated available-for-sale securities due to fluctuation in interest rates. In a payer swaption, the Company pays a premium to obtain the right, but not the obligation, to enter into a swap contract where it will pay a fixed rate and receive a floating rate. Interest rate swaption collars are combinations of two swaption positions. In order to maximize the efficiency of the collars while minimizing cost, a collar strategy is used whereby the Company purchases a long payer swaption (the Company purchases an option that allows it to enter into a swap where the Company will pay the fixed rate and receive the floating rate of the swap) and sells a short receiver swaption (the Company sells an option that provides the counterparty with the right to enter into a swap where the Company will receive the fixed rate and pay the floating rate of the swap). The combination of purchasing the long payer swaption and selling the short receiver swaption results in no net premium being paid (i.e. a costless or zero-cost collar).

Bond purchase commitments result from repackaged bond structures that are consolidated VIEs whereby there is a delay in the trade date and settlement date of the bond within the structure to ensure completion of all necessary legal agreements to support the consolidated VIE that issues the repackaged bond. Since the Company has a commitment to purchase the underlying bond at a specified price, the agreement meets the definition of a derivative where the value is derived based on the current market value of the bond compared to the fixed purchase price to be paid on the settlement date.

Derivative Balance Sheet Classification

The table below summarizes the balance sheet classification of the Company's derivative fair value amounts, as well as the gross asset and liability fair value amounts. The fair value amounts presented do not include income accruals. Derivative assets are included in “Other Assets,” while derivative liabilities are included in “Other Liabilities” within the Company’s Consolidated Balance Sheets. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of exposure or credit risk.


		June 30, 2023									December 31, 2022
(In millions)				Asset Derivatives			Liability Derivatives						Asset Derivatives			Liability Derivatives
Hedge Designation/ Derivative Type	Notional Amount			Fair Value			Fair Value			Notional Amount			Fair Value			Fair Value
Cash flow hedges:
Foreign currency swaps - VIE		$	18		$	0		$	4		$	18		$	0		$	3
Total cash flow hedges		18			0			4			18			0			3
Fair value hedges:

Foreign currency options		8,241			0			0			7,940			45			0

Total fair value hedges		8,241			0			0			7,940			45			0
Net investment hedge:
Foreign currency forwards		5,002			552			0			4,982			383			85
Foreign currency options		2,368			0			0			2,630			7			0
Total net investment hedge		7,370			552			0			7,612			390			85
Non-qualifying strategies:
Foreign currency swaps		1,200			46			0			1,900			66			0
Foreign currency swaps - VIE		3,510			61			446			3,420			62			387
Foreign currency forwards		3,701			0			440			5,049			17			640
Foreign currency options		5,221			0			0			5,521			30			0

Interest rate swaps		25,860			9			591			17,730			7			583


Total non-qualifying strategies		39,492			116			1,477			33,620			182			1,610
Total derivatives		$	55,121		$	668		$	1,481		$	49,190		$	617		$	1,698

Cash Flow Hedges

For certain variable-rate U.S. dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the U.S. Dollar (USD) variable rate interest and principal payments to fixed rate Japanese Yen (JPY) interest and principal payments. The Company has designated foreign currency swaps as a hedge of the variability in cash flows of a forecasted transaction or of amounts to be received or paid related to a recognized asset (“cash flow” hedge). The remaining maximum length of time for which these cash flows are hedged is approximately three years. The derivatives in the Company's consolidated VIEs that are not designated as accounting hedges are discussed in the "Non-qualifying Strategies" section of this note.

Fair Value Hedges

The Company designates and accounts for certain foreign currency forwards, options, and interest rate swaptions as fair value hedges when they meet the requirements for hedge accounting. The Company recognizes gains and losses on these derivatives as well as the offsetting gain or loss on the related hedged items in current earnings.

Foreign currency forwards and options hedge the foreign currency exposure of certain U.S. dollar-denominated available-for-sale fixed-maturity investments held in Aflac Japan. The change in the fair value of the foreign currency forwards related to the changes in the difference between the spot rate and the forward price is excluded from the assessment of hedge effectiveness. The change in fair value of the foreign currency option related to the time value of the option is recognized in current earnings and is excluded from the assessment of hedge effectiveness.

Interest rate swaptions hedge the interest rate exposure of certain U.S. dollar-denominated available-for-sale securities held in Aflac Japan. For these hedging relationships, the Company excludes time value from the assessment of hedge effectiveness and recognizes changes in the intrinsic value of the swaptions in current earnings within net investment income. The change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into earnings (net investment income) over its legal term.

The following table presents the gains and losses on derivatives and the related hedged items in fair value hedges.

Fair Value Hedging Relationships


(In millions)		Hedging Derivatives						Hedged Items
Hedging Derivatives	Hedged Items	Total Gains (Losses)		Gains (Losses) Excluded from Effectiveness Testing(1)		Gains (Losses) Included in Effectiveness Testing(2)		Gains (Losses)(2)		Net Investment Gains (Losses) Recognized for Fair Value Hedge
Three Months Ended June 30, 2023:

Foreign currency options	Fixed maturity securities	$	(25)	$	(25)	$	0	$	0	$	0

Total gains (losses)		$	(25)	$	(25)	$	0	$	0	$	0
Six Months Ended June 30, 2023:

Foreign currency options	Fixed maturity securities	$	(64)	$	(64)	$	0	$	0	$	0

Total gains (losses)		$	(64)	$	(64)	$	0	$	0	$	0
Three Months Ended June 30, 2022:

Foreign currency options	Fixed maturity securities	$	(11)	$	(11)	$	0	$	0	$	0

Total gains (losses)		$	(11)	$	(11)	$	0	$	0	$	0
Six Months Ended June 30, 2022:

Foreign currency options	Fixed maturity securities	$	(26)	$	(26)	$	0	$	0	$	0

Total gains (losses)		$	(26)	$	(26)	$	0	$	0	$	0

(1) Gains (losses) excluded from effectiveness testing includes the forward point on foreign currency forwards and time value change on foreign currency options which are reported in the consolidated statement of earnings as net investment gains (losses). It also includes the change in the fair value of the interest rate swaptions related to the time value of the swaptions which is recognized as a component of other comprehensive income (loss).

(2) Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statement of earnings as net investment gains (losses). For interest rate swaptions and related hedged items, gains and losses included in the hedge assessment, premium amortization and time value amortization while the hedge items are still outstanding are reported within net investment income. The time value gains and losses for interest rate swaptions when the related hedged items are redeemed are reported in net investment gains (losses) consistent with the impact of the hedged item. For the three- and six-month periods ended June 30, 2023 and 2022, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

The following table shows the carrying amounts of assets designated and qualifying as hedged items in fair value hedges of interest rate risk and the related cumulative hedge adjustment included in the carrying amount. The Company had no fair value hedges of interest rate risk as of June 30, 2023 and December 31, 2022; therefore, the amounts presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.


(In millions)	Carrying Amount of the Hedged Assets/(Liabilities)(1)					Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets/(Liabilities)
		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Fixed maturity securities		$	1,892	$	2,360	$	182	$	189

(1) The balance includes hedging adjustment on discontinued hedging relationships of $182 in 2023 and $189 in 2022.

Net Investment Hedge

The Company's investment in Aflac Japan is affected by changes in the yen/dollar exchange rate. To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 9) have been designated as non-derivative hedges and certain foreign currency forwards and options have been designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.

The Company's net investment hedge was effective during the three- and six-month periods ended June 30, 2023 and 2022, respectively.

Non-qualifying Strategies

For the Company's derivative instruments in consolidated VIEs that do not qualify for hedge accounting treatment, all changes in their fair value are reported in current period earnings within net investment gains (losses). The amount of gain or loss recognized in earnings for the Company's VIEs is attributable to the derivatives in those investment structures. While the change in value of the swaps is recorded through current period earnings, the change in value of the available-for-sale fixed maturity securities associated with these swaps is recorded through other comprehensive income.

As of June 30, 2023, the Parent Company had $1.2 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S. dollar to Japanese yen. Changes in the values of these swaps are recorded through current period earnings. For additional information regarding these swaps, see Note 9 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

The Company uses foreign exchange forwards and options to economically mitigate the currency risk of some of its U.S. dollar-denominated loan receivables held within the Aflac Japan segment. These arrangements are not designated as accounting hedges, as the foreign currency remeasurement of the loan receivables impacts current period earnings, and substantially offsets gains and losses from foreign exchange forwards within net investment gains (losses). The Company also has certain foreign exchange forwards on U.S. dollar-denominated available-for-sale securities where hedge accounting is not being applied.

The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on certain variable-rate investments.

Impact of Derivatives and Hedging Instruments

The following table summarizes the impact to earnings and other comprehensive income (loss) from all derivatives and hedging instruments.


	Three Months Ended June 30,
	2023										2022
(In millions)	Net Investment Income (1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)			Net Investment Income (1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	0		$	(1)			$	1		$	0		$	(1)			$	0
Total cash flow hedges		0			(1)		(3)		1			0			(1)		(3)		0
Fair value hedges:

Foreign currency options					(25)										(11)

Total fair value hedges					(25)										(11)
Net investment hedge:
Non-derivative hedging instruments					0				313						0				324

Foreign currency forwards					37				393						(25)				522
Foreign currency options					(5)				0						0				0
Total net investment hedge					32				706						(25)				846
Non-qualifying strategies:
Foreign currency swaps					2										107
Foreign currency swaps - VIE					(63)										(39)
Foreign currency forwards					(331)										(473)
Foreign currency options					(18)										(3)

Interest rate swaps					(189)										(110)
Forward bond purchase commitment - VIE					(1)										(3)
Total non- qualifying strategies					(600)										(521)
Total		$	0		$	(594)			$	707		$	0		$	(558)			$	846

(1) Interest expense/income on cash flow hedges are recorded in net investment income. For interest rate swaptions classified as fair value hedges, the change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into net investment income over its legal term. If the swaption is early terminated but the hedge item is still outstanding, the amortization of disposal amount of the swaptions is recorded in net investment income over the remaining life of the hedged items.

(2) Gains and losses on cash flow hedges and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses). Gains and losses on net investment hedges related to changes in foreign currency spot rates are recorded in the unrealized foreign currency translation gains (losses) line in the consolidated statement of comprehensive income (loss).

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the three-month period ended June 30, 2023, and $1 of losses during the three-month period ended June 30, 2022**.**


	Six Months Ended June 30,
	2023										2022
(In millions)	Net Investment Income(1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)			Net Investment Income(1)			Net Investment Gains (Losses)				Other Comprehensive Income (Loss)(2)
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	0		$	(2)			$	2		$	0		$	(2)			$	1
Total cash flow hedges		0			(2)		(3)		2			0			(2)		(3)		1
Fair value hedges:

Foreign currency options					(64)										(26)

Total fair value hedges					(64)										(26)
Net investment hedge:
Non-derivative hedging instruments					0				338						0				523
Foreign currency forwards					127				422						(101)				823
Foreign currency options					(8)				0						(1)				0
Total net investment hedge					119				760						(102)				1,346
Non-qualifying strategies:
Foreign currency swaps					3										135
Foreign currency swaps - VIE					(90)										(16)
Foreign currency forwards					(382)										(714)
Foreign currency options					(37)										(13)
Interest rate swaps					(120)										(266)
Forward bond purchase commitment - VIE					(4)										(20)
Total non-qualifying strategies					(630)										(894)
Total		$	0		$	(577)			$	762		$	0		$	(1,024)			$	1,347

(3) Impact of cash flow hedges reported as net investment gains (losses) includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the six-month period ended June 30, 2023, and $1 of losses during the six-month period ended June 30, 2022**.**

As of June 30, 2023, $5 million of deferred losses on derivative instruments recorded in accumulated other comprehensive income are expected to be reclassified into earnings during the next twelve months.

Credit Risk Assumed through Derivatives

For the foreign currency swaps associated with the Company's VIE investments for which it is the primary beneficiary, the Company bears the risk of loss due to counterparty default even though it is not a direct counterparty to those contracts.

The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of its senior notes and subordinated debentures; foreign currency forwards; and foreign currency options, and therefore the Company is exposed to credit risk in the event of nonperformance by the counterparties in those contracts. The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet.

As of June 30, 2023, all of the Company's derivative agreement counterparties were investment grade.

The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties under International Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the ISDA agreements also include Credit Support Annexes (CSAs) provisions, which generally provide for two-way collateral postings at the first dollar of exposure. The Company mitigates the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally requiring that collateral be posted at the outset of the transaction. In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of the Company's financial strength rating. The actual amount of payments that the Company could be required to make depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after the time of the downgrade.

The Company also engages in OTC cleared derivative transactions through regulated central clearing counterparties. These positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to these derivatives.

Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the counterparties. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $1.2 billion and $1.3 billion as of June 30, 2023, and December 31, 2022, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on June 30, 2023, the Company estimates that it would be required to post a maximum of $162 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights. (See the Offsetting tables below for collateral posted or received as of the reported balance sheet dates.)

Offsetting of Financial Instruments and Derivatives

Most of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Parent Company or its subsidiaries and the respective counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements with the master netting arrangements generally provide that the Company will receive or pledge financial collateral at the first dollar of exposure.

The Company has securities lending agreements with unaffiliated financial institutions that post collateral to the Company in return for the use of its fixed maturity and public equity securities (see Note 3). When the Company has entered into securities lending agreements with the same counterparty, the agreements generally provide for net settlement in the event of default by the counterparty. This right of set-off allows the Company to keep and apply collateral received if the counterparty failed to return the securities borrowed from the Company as contractually agreed.

The tables below summarize the Company's derivatives and securities lending transactions, and as reflected in the tables, in accordance with U.S. GAAP, the Company's policy is to not offset these financial instruments in the Consolidated Balance Sheets.

Offsetting of Financial Assets and Derivative Assets


June 30, 2023
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments			Securities Collateral		Cash Collateral Received			Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	598		$	0		$	598		$	(1)	$	(70)		$	(527)		$	0
OTC - cleared		9			0			9			(9)		0			0			0
Total derivative assets subject to a master netting agreement or offsetting arrangement		607			0			607			(10)		(70)			(527)			0
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		61						61											61

Total derivative assets not subject to a master netting agreement or offsetting arrangement		61						61											61
Total derivative assets		668			0			668			(10)		(70)			(527)			61
Securities lending and similar arrangements		4,654			0			4,654			0		0			(4,654)			0
Total		$	5,322		$	0		$	5,322		$	(10)	$	(70)		$	(5,181)		$	61


December 31, 2022
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments			Securities Collateral		Cash Collateral Received			Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	548		$	0		$	548		$	(167)	$	(60)		$	(320)		$	1
OTC - cleared		7			0			7			(7)		0			0			0
Total derivative assets subject to a master netting agreement or offsetting arrangement		555			0			555			(174)		(60)			(320)			1
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		62						62											62

Total derivative assets not subject to a master netting agreement or offsetting arrangement		62						62											62
Total derivative assets		617			0			617			(174)		(60)			(320)			63
Securities lending and similar arrangements		1,788			0			1,788			0		0			(1,788)			0
Total		$	2,405		$	0		$	2,405		$	(174)	$	(60)		$	(2,108)		$	63

Offsetting of Financial Liabilities and Derivative Liabilities


June 30, 2023
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities			Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet			Financial Instruments			Securities Collateral		Cash Collateral Pledged			Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	440		$	0		$	440		$	(1)	$	(395)		$	(39)		$	5
OTC - cleared		591			0			591			(9)		(25)			(557)			0
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		1,031			0			1,031			(10)		(420)			(596)			5
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		450						450											450

Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		450						450											450
Total derivative liabilities		1,481			0			1,481			(10)		(420)			(596)			455
Securities lending and similar arrangements		4,679			0			4,679			(4,654)		0			0			25
Total		$	6,160		$	0		$	6,160		$	(4,664)	$	(420)		$	(596)		$	480


December 31, 2022
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities			Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet			Financial Instruments			Securities Collateral		Cash Collateral Pledged			Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	725		$	0		$	725		$	(167)	$	(506)		$	(52)		$	0
OTC - cleared		583			0			583			(7)		0			(577)			(1)
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		1,308			0			1,308			(174)		(506)			(629)			(1)
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		390						390											390

Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		390						390											390
Total derivative liabilities		1,698			0			1,698			(174)		(506)			(629)			389
Securities lending and similar arrangements		1,809			0			1,809			(1,788)		0			0			21
Total		$	3,507		$	0		$	3,507		$	(1,962)	$	(506)		$	(629)		$	410

For additional information on the Company's financial instruments, see the accompanying Notes 3 and 5 and Notes 1, 3 and 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

5. FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels. Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets. Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets. Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active market.

The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and carried at fair value on a recurring basis.


	June 30, 2023
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies		$	23,022		$	931		$	0		$	23,953
Municipalities		0			2,323			0			2,323
Mortgage- and asset-backed securities		0			2,203			652			2,855
Public utilities		0			7,267			302			7,569
Sovereign and supranational		0			642			32			674
Banks/financial institutions		0			8,780			69			8,849
Other corporate		0			27,710			572			28,282
Total fixed maturity securities		23,022			49,856			1,627			74,505
Equity securities		752			0			213			965
Other investments		2,706			0			0			2,706
Cash and cash equivalents		4,720			0			0			4,720
Other assets:
Foreign currency swaps		0			107			0			107
Foreign currency forwards		0			552			0			552
Foreign currency options		0			0			0			0
Interest rate swaps		0			9			0			9


Total other assets		0			668			0			668
Total assets		$	31,200		$	50,524		$	1,840		$	83,564
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	450		$	0		$	450
Foreign currency forwards		0			440			0			440

Interest rate swaps		0			591			0			591


Total liabilities		$	0		$	1,481		$	0		$	1,481


	December 31, 2022
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies		$	24,158		$	956		$	0		$	25,114
Municipalities		0			2,320			0			2,320
Mortgage- and asset-backed securities		0			1,803			343			2,146
Public utilities		0			7,169			497			7,666
Sovereign and supranational		0			797			37			834
Banks/financial institutions		0			9,140			159			9,299
Other corporate		0			27,620			742			28,362
Total fixed maturity securities		24,158			49,805			1,778			75,741
Equity securities		822			60			209			1,091
Other investments		1,532			0			0			1,532
Cash and cash equivalents		3,943			0			0			3,943
Other assets:
Foreign currency swaps		0			128			0			128
Foreign currency forwards		0			400			0			400
Foreign currency options		0			82			0			82
Interest rate swaps		0			7			0			7
Total other assets		0			617			0			617
Total assets		$	30,455		$	50,482		$	1,987		$	82,924
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	390		$	0		$	390
Foreign currency forwards		0			725			0			725
Interest rate swaps		0			583			0			583


Total liabilities		$	0		$	1,698		$	0		$	1,698

The following tables present the carrying amount and fair value categorized by fair value hierarchy level for the Company's financial instruments that are not carried at fair value.


	June 30, 2023
(In millions)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies		$	16,715		$	18,932		$	170		$	0		$	19,102
Municipalities		261			0			314			0			314

Public utilities		35			0			39			0			39
Sovereign and supranational		408			0			462			0			462

Other corporate		17			0			21			0			21
Commercial mortgage and other loans		13,346			0			0			13,014			13,014
Other investments (1)		32			0			32			0			32
Total assets		$	30,814		$	18,932		$	1,038		$	13,014		$	32,984
Liabilities:
Other policyholders’ funds		$	6,115		$	0		$	0		$	6,020		$	6,020
Notes payable (excluding leases)		6,941			0			5,887			735			6,622
Total liabilities		$	13,056		$	0		$	5,887		$	6,755		$	12,642

(1) Excludes policy loans of $202 and equity method investments of $2,551, at carrying value


	December 31, 2022
(In millions)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies		$	18,267		$	20,132		$	180		$	0		$	20,312
Municipalities		287			0			335			0			335

Public utilities		37			0			41			0			41
Sovereign and supranational		446			0			500			0			500

Other corporate		19			0			22			0			22
Commercial mortgage and other loans		13,496			0			0			13,212			13,212
Other investments (1)		34			0			34			0			34
Total assets		$	32,586		$	20,132		$	1,112		$	13,212		$	34,456
Liabilities:
Other policyholders’ funds		$	6,643		$	0		$	0		$	6,543		$	6,543
Notes payable (excluding leases)		7,295			0			6,024			802			6,826
Total liabilities		$	13,938		$	0		$	6,024		$	7,345		$	13,369

(1) Excludes policy loans of $214 and equity method investments of $2,290, at carrying value

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

Fair Value of Financial Instruments

Fixed maturity and equity securities

The Company determines the fair values of fixed maturity securities and public equity securities using the following approaches or techniques: price quotes and valuations from third party pricing vendors (including quoted market prices readily available from public exchange markets), in-house valuations and non-binding price quotes the Company obtains from outside brokers.

The fair values of the Company’s public fixed maturity securities are generally based on prices provided by third-party pricing vendors. The Company utilizes internally generated valuations or broker quotes for privately-issued fixed maturity securities or fixed maturity securities where there is no price available from a third-party pricing vendor. For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor. The models and associated processes and controls are executed by Company personnel.

These models are discounted cash flow (DCF) valuation models but also use information from related markets, specifically public bond markets and the credit default swap (CDS) market, to estimate expected cash flows. The models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve using the most appropriate comparable security(ies) of the issuer and issuer-specific CDS spreads. This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the security by discounting those loss adjusted cash flows. In cases where a credit curve cannot be developed from market information for the specific issuer, the valuation methodology takes into consideration other market observable inputs, including:

1)the most appropriate comparable security(ies) of a guarantor and/or parent

2)CDS spreads of a guarantor and/or parent

3)bonds of comparable issuers with similar characteristics such as rating, geography, or sector

4)CDS spreads of an appropriate index or of comparable issuers with similar characteristics such as rating, geography, or sector

5)bond indices that are comparative in rating, industry, maturity, and region.

Prices for public equity securities are readily available and are acquired from independent market data providers or established security dealer associations.

The pricing data and market quotes the Company obtains from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the provider. Additionally, the Company may compare the inputs to relevant market indices and other performance measurements. Based on management's analysis, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data. The Company has performed verification of the inputs and calculations in any valuation models, including independent validations and back testing, to confirm that the valuations represent reasonable estimates of fair value.

For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

The following tables present the pricing sources for the fair values of the Company's fixed maturity and equity securities.


	June 30, 2023
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	23,022		$	572		$	0		$	23,594
Internal		0			359			0			359

Total government and agencies		23,022			931			0			23,953
Municipalities:
Third party pricing vendor		0			2,030			0			2,030
Internal		0			293			0			293

Total municipalities		0			2,323			0			2,323
Mortgage- and asset-backed securities:
Third party pricing vendor		0			2,193			0			2,193
Internal		0			10			82			92
Broker/other		0			0			570			570
Total mortgage- and asset-backed securities		0			2,203			652			2,855
Public utilities:
Third party pricing vendor		0			3,778			0			3,778
Internal		0			3,460			0			3,460
Broker/other		0			29			302			331
Total public utilities		0			7,267			302			7,569
Sovereign and supranational:
Third party pricing vendor		0			215			0			215
Internal		0			427			0			427
Broker/other		0			0			32			32
Total sovereign and supranational		0			642			32			674
Banks/financial institutions:
Third party pricing vendor		0			4,502			0			4,502
Internal		0			4,278			63			4,341
Broker/other		0			0			6			6
Total banks/financial institutions		0			8,780			69			8,849
Other corporate:
Third party pricing vendor		0			22,151			0			22,151
Internal		0			5,460			204			5,664
Broker/other		0			99			368			467
Total other corporate		0			27,710			572			28,282
Total securities available for sale		$	23,022		$	49,856		$	1,627		$	74,505
Equity securities, carried at fair value:
Third party pricing vendor		$	752		$	0		$	0		$	752

Broker/other		0			0			213			213
Total equity securities		$	752		$	0		$	213		$	965


	June 30, 2023
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	18,932		$	170		$	0		$	19,102

Total government and agencies		18,932			170			0			19,102
Municipalities:
Third party pricing vendor		0			314			0			314

Total municipalities		0			314			0			314




Public utilities:
Third party pricing vendor		0			39			0			39


Total public utilities		0			39			0			39
Sovereign and supranational:
Third party pricing vendor		0			229			0			229
Internal		0			233			0			233

Total sovereign and supranational		0			462			0			462




Other corporate:
Third party pricing vendor		0			21			0			21


Total other corporate		0			21			0			21
Total securities held to maturity		$	18,932		$	1,006		$	0		$	19,938


	December 31, 2022
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities available for sale, carried at fair value:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	24,158		$	582		$	0		$	24,740
Internal		0			374			0			374
Total government and agencies		24,158			956			0			25,114
Municipalities:
Third party pricing vendor		0			2,021			0			2,021
Internal		0			299			0			299
Total municipalities		0			2,320			0			2,320
Mortgage- and asset-backed securities:
Third party pricing vendor		0			1,798			0			1,798
Internal		0			3			0			3
Broker/other		0			2			343			345
Total mortgage- and asset-backed securities		0			1,803			343			2,146
Public utilities:
Third party pricing vendor		0			3,786			0			3,786
Internal		0			3,383			0			3,383
Broker/other		0			0			497			497
Total public utilities		0			7,169			497			7,666
Sovereign and supranational:
Third party pricing vendor		0			232			0			232
Internal		0			565			0			565
Broker/other		0			0			37			37
Total sovereign and supranational		0			797			37			834
Banks/financial institutions:
Third party pricing vendor		0			4,622			0			4,622
Internal		0			4,518			105			4,623
Broker/other		0			0			54			54
Total banks/financial institutions		0			9,140			159			9,299
Other corporate:
Third party pricing vendor		0			22,268			0			22,268
Internal		0			5,352			200			5,552
Broker/other		0			0			542			542
Total other corporate		0			27,620			742			28,362
Total securities available for sale		$	24,158		$	49,805		$	1,778		$	75,741
Equity securities, carried at fair value:
Third party pricing vendor		$	822		$	60		$	0		$	882
Broker/other		0			0			209			209
Total equity securities		$	822		$	60		$	209		$	1,091


	December 31, 2022
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturity securities:
Government and agencies:
Third party pricing vendor		$	20,132		$	180		$	0		$	20,312
Total government and agencies		20,132			180			0			20,312
Municipalities:
Third party pricing vendor		0			335			0			335
Total municipalities		0			335			0			335




Public utilities:
Third party pricing vendor		0			41			0			41
Total public utilities		0			41			0			41
Sovereign and supranational:
Third party pricing vendor		0			242			0			242
Broker/other		0			258			0			258
Total sovereign and supranational		0			500			0			500



Other corporate:
Third party pricing vendor		0			22			0			22

Total other corporate		0			22			0			22
Total securities held to maturity		$	20,132		$	1,078		$	0		$	21,210

The following is a discussion of the determination of fair value of the Company's remaining financial instruments.

Derivatives

The Company uses derivative instruments to manage the risk associated with certain assets. However, the derivative instrument may not be classified in the same fair value hierarchy level as the associated asset. The significant inputs to pricing derivatives are generally observable in the market or can be derived by observable market data. When these inputs are observable, the derivatives are classified as Level 2.

The Company uses present value techniques to value non-option based derivatives. It also uses option pricing models to value option based derivatives. Key inputs are as follows:


Instrument Type						Level 2
Interest rate derivatives						Swap yield curves Basis curves Interest rate volatility (1)
Foreign currency exchange rate derivatives - Non-VIES (forwards, swaps and options)						Foreign currency forward rates Swap yield curves Basis curves Foreign currency spot rates Cross foreign currency basis curves Foreign currency volatility (1)
Foreign currency exchange rate derivatives - VIEs (swaps)						Foreign currency spot rates Swap yield curves Credit default swap curves Basis curves Recovery rates Foreign currency forward rates Foreign cross currency basis curves

(1) Option-based only

The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are classified as Level 2.

The Parent Company has cross-currency swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S. dollar to Japanese yen. Their fair values are based on observable market inputs, therefore they are classified as Level 2.

To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract, the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange since it maintains a daily margin to mitigate counterparties' credit risk. These derivatives are priced using observable inputs, accordingly, they are classified as Level 2.

For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct counterparty to the swap contracts. Nevertheless, the Company has full transparency into the contracts to properly value the swaps for reporting purposes. For these derivatives, the Company utilizes valuation models developed by independent valuation analytics providers. The models are market standard DCF models and all associated processes and controls are executed by Company personnel. These models take into consideration any unique characteristics of the derivatives in determining the appropriate valuation methodology to estimate expected cash flows. The fair values of these swaps are based on observable market inputs and are classified as Level 2 within the fair value hierarchy.

For forward bond purchase commitments with VIEs, the fair value of the derivative is based on the difference in the fixed purchase price and the current market value of the related bond prior to the settlement date. Since the bond is typically a public bond with readily available pricing, the derivatives associated with the forward purchase commitment are classified as Level 2 within the fair value hierarchy.

Commercial mortgage and other loans

Commercial mortgage and other loans include TREs, CMLs and MMLs. The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or floating-rate benchmark yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore, these investments are classified as Level 3 within the fair value hierarchy.

Other investments

Other investments includes short-term investments that are measured at fair value where amortized cost approximates fair value.

Other policyholders' funds

The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified this valuation as Level 3.

Notes payable

The fair values of the Company's publicly issued notes payable are determined by utilizing available sources of observable inputs from third party pricing vendors and are classified as Level 2. The fair values of the Company's yen-denominated loans approximate their carrying values and are classified as Level 3.

Transfers between Hierarchy Levels and Level 3 Rollforward

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

The following tables present the changes in fair value of the Company's investments carried at fair value classified as Level 3.


Three Months Ended June 30, 2023
	Fixed Maturity Securities										Equity Securities
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Total
Balance, beginning of period	$	418	$	350	$	37	$	161	$	753	$	221	$	1,940
Net investment gains (losses) included in earnings	0		0		0		0		0		(8)		(8)
Unrealized gains (losses) included in other comprehensive income (loss)	(13)		(16)		(3)		2		(22)		0		(52)
Purchases, issuances, sales and settlements:
Purchases	136		0		0		0		37		0		173
Issuances	0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0
Settlements	(13)		(2)		(2)		(7)		(1)		0		(25)
Transfers into Level 3	124		0		0		0		0		0		124
Transfers out of Level 3	0		(30)		0		(87)		(195)		0		(312)
Balance, end of period	$	652	$	302	$	32	$	69	$	572	$	213	$	1,840
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0	$	0	$	0	$	0	$	(8)	$	(8)


Three Months Ended June 30, 2022
	Fixed Maturity Securities										Equity Securities
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Total
Balance, beginning of period	$	318	$	585	$	41	$	60	$	290	$	166	$	1,460
Net investment gains (losses) included in earnings	0		1		0		0		0		(6)		(5)
Unrealized gains (losses) included in other comprehensive income (loss)	(54)		(44)		(5)		(2)		(37)		0		(142)
Purchases, issuances, sales and settlements:
Purchases	90		19		0		33		122		33		297
Issuances	0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0
Settlements	(36)		(24)		0		0		(1)		0		(61)
Transfers into Level 3	0		0		0		0		258		0		258
Transfers out of Level 3	(7)		0		0		0		0		(3)		(10)
Balance, end of period	$	311	$	537	$	36	$	91	$	632	$	190	$	1,797
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0	$	0	$	0	$	0	$	(6)	$	(6)


Six Months Ended June 30, 2023
	Fixed Maturity Securities										Equity Securities
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Total
Balance, beginning of period	$	343	$	497	$	37	$	159	$	742	$	209	$	1,987
Net investment gains (losses) included in earnings	0		0		0		0		0		(6)		(6)
Unrealized gains (losses) included in other comprehensive income (loss)	(10)		(6)		(3)		4		8		0		(7)
Purchases, issuances, sales and settlements:
Purchases	328		0		0		0		112		10		450
Issuances	0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0
Settlements	(133)		(9)		(2)		(7)		(3)		0		(154)
Transfers into Level 3	124		18		0		0		0		0		142
Transfers out of Level 3	0		(198)		0		(87)		(287)		0		(572)
Balance, end of period	$	652	$	302	$	32	$	69	$	572	$	213	$	1,840
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0	$	0	$	0	$	0	$	(5)	$	(5)


Six Months Ended June 30, 2022
	Fixed Maturity Securities										Equity Securities
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Total
Balance, beginning of period	$	291	$	493	$	43	$	45	$	426	$	173	$	1,471
Net investment gains (losses) included in earnings	0		1		0		0		0		1		2
Unrealized gains (losses) included in other comprehensive income (loss)	(69)		(81)		(7)		(2)		(55)		0		(214)
Purchases, issuances, sales and settlements:
Purchases	166		28		0		33		122		43		392
Issuances	0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0
Settlements	(38)		(32)		0		(3)		(2)		(7)		(82)
Transfers into Level 3	0		128		0		18		282		0		428
Transfers out of Level 3	(39)		0		0		0		(141)		(20)		(200)
Balance, end of period	$	311	$	537	$	36	$	91	$	632	$	190	$	1,797
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	1	$	0	$	0	$	0	$	(2)	$	(1)

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments carried at fair value. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.


June 30, 2023
(In millions)	Fair Value			Valuation Technique(s)	Unobservable Input	Range				Weighted Average
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Mortgage- and asset-backed securities		$	652	Consensus pricing	Offered quotes	81.82	-	107.45	(a)	98.37
Public utilities		302		Discounted cash flow	Credit spreads	160 bps	-	298 bps	(b)	213 bps
Sovereign and supranational		32		Consensus pricing	Offered quotes	N/A			(c)	N/A
Banks/financial institutions		69		Discounted cash flow	Credit spreads	N/A			(c)	N/A
Other corporate		572		Discounted cash flow	Credit spreads	67 bps	-	294 bps	(b)	196 bps
Equity securities		213		Adjusted cost	Private financials	N/A			(d)	N/A












Total assets		$	1,840

(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques.

(b) Actual or equivalent credit spreads in basis points.

(c) Category represents a single security; range not applicable.

(d) Prices do not utilize credit spreads; therefore, range is not applicable.


December 31, 2022
(In millions)	Fair Value			Valuation Technique(s)	Unobservable Input	Range				Weighted Average
Assets:
Securities available for sale, carried at fair value:
Fixed maturity securities:
Mortgage- and asset-backed securities		$	343	Consensus pricing	Offered quotes	97.38	-	106.71	(a)	102.98
Public utilities		497		Discounted cash flow	Credit spreads	128 bps	-	286 bps	(b)	192 bps
Sovereign and supranational		37		Consensus pricing	Offered quotes	N/A			(c)	N/A
Banks/financial institutions		159		Discounted cash flow	Credit spreads	67 bps	-	188 bps	(b)	113 bps
Other corporate		742		Discounted cash flow	Credit spreads	66 bps	-	647 bps	(b)	191 bps
Equity securities		209		Adjusted cost	Private financials	N/A			(d)	N/A









Total assets		$	1,987

(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques.

(b) Actual or equivalent credit spreads in basis points.

(c) Category represents a single security; range not applicable.

(d) Prices do not utilize credit spreads; therefore, range is not applicable

The following is a discussion of the significant unobservable inputs or valuation techniques used in determining the fair value of securities classified as Level 3.

Credit Spreads

The Company holds certain assets that are of a unique, specialized, and/or securitized nature that do not trade on a regular basis in an active market, which makes their fair values difficult to estimate. Most of these assets are managed by external asset managers and the Company utilizes these managers for their expertise when evaluating various inputs used to determine the fair values for these assets, including identifying the appropriate credit or risk spread over risk-free interest rates that incorporates the unique nature or structure of the asset in the valuations. For those assets of a similar nature but not managed by external asset managers, the Company internally estimates the spreads and risk adjustments over risk-free interest rates that reflect the unique nature or structure of the asset as well as the current pricing environment and market conditions for comparable or related investments. Credit or risk spreads are an important input needed to complete the discounted cash flow analyses used to estimate an investment’s fair value. Credit or risk spreads underlying these fair values are a significant, unobservable input whose derivation is based on the Company’s evaluation of a combination of the external manager’s expertise and knowledge, the current pricing environment, and market conditions for the specific asset.

Offered Quotes

In circumstances where the Company's valuation model price is overridden because it implies a value that is not consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company also receives unadjusted prices from brokers for certain of its mortgage and asset-backed securities. These quotes are non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial institutions, certain other corporate, and equity securities investments.

Private Financials

The Company invests in the debt and equity securities of private companies operating in the cancer, healthtech, insurtech, finance, internet of things, big data and analytics sectors. Due to their private and often small, startup nature, these companies rely on capital provided by institutional and private equity investors for their ongoing operations. They do not have public securities that trade on a regular basis in an active market, which makes their fair values difficult to estimate. The Company values these investments on a cost basis with appropriate adjustments made based on monitoring private financial information provided by these companies. Adjustments to valuations are generally made as new funding tranches are executed or if the financial information provided significantly changes indicating the need for impairment. This private financial information is unobservable and is a significant determinant in the fair value of these corporate venture investments.

For additional information on the Company's investments and financial instruments, see the accompanying Notes 3 and 4 and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

6. DEFERRED POLICY ACQUISITION COSTS

The following tables present a rollforward of deferred policy acquisition costs by reporting segment and disaggregated by product type.


	June 30, 2023
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other		Total
Deferred policy acquisition costs:
Balance at December 31, 2022	$	3,035	$	2,161	$	525	$	55	$	904	$	613	$	1,304	$	418	$	88	$	135	$	1	$	9,239
Capitalization	153		63		18		5		76		59		80		39		5		27		0		525
Amortization expense	(94)		(54)		(18)		(2)		(69)		(56)		(67)		(32)		(6)		(11)		2		(407)

Foreign currency translation and other	(262)		(185)		(44)		(4)		0		0		0		0		0		0		(2)		(497)
Balance at June 30, 2023	$	2,832	$	1,985	$	481	$	54	$	911	$	616	$	1,317	$	425	$	87	$	151	$	1	$	8,860


	December 31, 2022
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other		Total
Deferred policy acquisition costs:
Balance at December 31, 2021	$	3,464	$	2,372	$	595	$	51	$	887	$	604	$	1,270	$	399	$	90	$	115	$	1	$	9,848
Capitalization	291		161		33		12		147		117		160		80		11		40		0		1,052
Amortization expense	(188)		(112)		(35)		(3)		(130)		(108)		(126)		(61)		(13)		(20)		4		(792)

Foreign currency translation and other	(532)		(260)		(68)		(5)		0		0		0		0		0		0		(4)		(869)
Balance at December 31, 2022	$	3,035	$	2,161	$	525	$	55	$	904	$	613	$	1,304	$	418	$	88	$	135	$	1	$	9,239

The Company uses the following constant level bases to amortize deferred policy acquisition costs:


Policy Type						Constant-level Basis
Life Products (U.S.)						Face Amount
Health Products (U.S.)						Number of Policies in Force
Health & Life Products (Japan)						Units in Force

Face amount is the stated dollar amount that the policy’s beneficiaries receive upon the death of the insured. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount and insurance in force, respectively. Future DAC amortization is impacted by persistency.

There were no changes to the inputs, judgements, assumptions and methods used to determine amortization amounts during the six-month periods ended June 30, 2023 and 2022.

See Note 1 of the Notes to the Consolidated Financial Statements for more information on deferred policy acquisition costs.

7. POLICY LIABILITIES

Future Policy Benefits

The liability for future policy benefits is determined as the present value of future benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of future net premiums receivable under the Company's insurance contracts, where future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

The following tables present the changes in the present value of expected net premiums and the present value of expected future policy benefits by reporting segment and disaggregated by product type.


	June 30, 2023
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2022	$	19,298	$	16,714	$	7,485	$	1,256	$	2,534	$	1,635	$	4,486	$	1,220	$	211	$	724	$	110
Beginning balance at original discount rate	18,221		16,195		7,284		1,242		2,760		1,775		5,050		1,365		231		799		118
Effect of changes in cash flow assumptions	0		0		0		0		0		0		0		0		0		0		0
Effect of actual variances from expected experience	(198)		(61)		(22)		(5)		(51)		(15)		(139)		(44)		(11)		(9)		0
Adjusted beginning of period balance	18,023		16,134		7,262		1,237		2,709		1,760		4,911		1,321		220		790		118
Issuances	498		204		198		14		185		204		291		153		20		90		55
Interest accrual	218		180		66		11		51		30		94		23		4		14		3
Net premiums earned (1)	(824)		(673)		(549)		(60)		(237)		(193)		(298)		(127)		(20)		(65)		(8)
Foreign currency translation	(1,521)		(1,348)		(597)		(104)		0		0		0		0		0		0		0
Other	0		0		0		0		(3)		(3)		(2)		(1)		2		2		9
Ending balance at original discount rate	16,394		14,497		6,380		1,098		2,705		1,798		4,996		1,369		226		831		177
Effect of changes in discount rate assumptions	1,579		1,135		335		47		(201)		(129)		(497)		(129)		(17)		(68)		(8)
Balance at June 30, 2023	$	17,973	$	15,632	$	6,715	$	1,145	$	2,504	$	1,669	$	4,499	$	1,240	$	209	$	763	$	169
Present value of expected future policy benefits:
Balance at December 31, 2022	$	54,766	$	27,419	$	31,954	$	5,582	$	3,098	$	2,445	$	11,489	$	2,074	$	488	$	1,526	$	622
Beginning balance at original discount rate	47,677		27,566		32,800		5,940		3,391		2,636		12,846		2,300		532		1,778		624
Effect of changes in cash flow assumptions	0		0		0		0		0		0		0		0		0		0		0
Effect of actual variances from expected experience	(232)		(65)		(26)		(2)		(65)		(23)		(166)		(58)		(14)		(12)		(1)
Adjusted beginning of period balance	47,445		27,501		32,774		5,938		3,326		2,613		12,680		2,242		518		1,766		623
Issuances	509		211		201		17		194		212		302		162		23		94		55
Interest accrual	779		323		329		53		63		48		267		43		10		33		16
Benefit payments	(1,592)		(647)		(808)		(107)		(225)		(233)		(446)		(137)		(30)		(56)		(23)
Foreign currency translation	(4,000)		(2,323)		(2,759)		(500)		0		0		0		0		0		0		0
Other	0		0		0		0		0		0		0		0		2		4		9
Ending balance at original discount rate	43,141		25,065		29,737		5,401		3,358		2,640		12,803		2,310		523		1,841		680
Effect of changes in discount rate assumptions	8,551		1,462		670		(25)		(264)		(176)		(1,166)		(201)		(39)		(228)		6
Balance at June 30, 2023	51,692		26,527		30,407		5,376		3,094		2,464		11,637		2,109		484		1,613		686
Net liability for future policy benefits	33,719		10,895		23,692		4,231		590		795		7,138		869		275		850		517
Less: reinsurance recoverable	2,130		1,580		0		0		0		0		0		0		0		11		1
Net liability for future policy benefits after reinsurance recoverable	$	31,589	$	9,315	$	23,692	$	4,231	$	590	$	795	$	7,138	$	869	$	275	$	839	$	516

(1) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.


	December 31, 2022
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2021	$	25,893	$	21,174	$	10,847	$	1,586	$	3,283	$	1,862	$	6,023	$	1,467	$	264	$	834	$	153
Beginning balance at original discount rate	22,470		18,681		10,064		1,461		2,999		1,760		5,391		1,380		241		780		135
Effect of changes in cash flow assumptions	(639)		317		(494)		25		(52)		5		(38)		42		10		(1)		(12)
Effect of actual variances from expected experience	(284)		61		(81)		(10)		(152)		(43)		(421)		(111)		(20)		(16)		6
Adjusted beginning of period balance	21,547		19,059		9,489		1,476		2,795		1,722		4,932		1,311		231		763		129
Issuances	947		639		221		62		355		384		537		273		33		146		0
Interest accrual	459		364		146		22		105		57		193		45		9		27		5
Net premiums earned (1)	(1,734)		(1,376)		(1,229)		(123)		(496)		(382)		(612)		(261)		(42)		(131)		(17)
Foreign currency translation	(2,997)		(2,488)		(1,343)		(195)		0		0		0		0		0		0		0
Other	(1)		(3)		0		0		1		(6)		0		(3)		0		(6)		1
Ending balance at original discount rate	18,221		16,195		7,284		1,242		2,760		1,775		5,050		1,365		231		799		118
Effect of changes in discount rate assumptions	1,077		519		201		14		(226)		(140)		(564)		(145)		(20)		(75)		(8)
Balance at December 31, 2022	$	19,298	$	16,714	$	7,485	$	1,256	$	2,534	$	1,635	$	4,486	$	1,220	$	211	$	724	$	110
Present value of expected future policy benefits:
Balance at December 31, 2021	$	72,747	$	36,021	$	42,720	$	7,322	$	3,949	$	2,871	$	15,388	$	2,552	$	616	$	1,843	$	837
Beginning balance at original discount rate	56,807		31,398		39,002		6,787		3,594		2,670		13,079		2,300		549		1,694		645
Effect of changes in cash flow assumptions	(721)		352		(550)		96		(70)		5		(43)		40		13		(1)		(15)
Effect of actual variances from expected experience	(333)		83		(91)		(10)		(177)		(48)		(465)		(130)		(23)		(21)		7
Adjusted beginning of period balance	55,753		31,833		38,361		6,873		3,347		2,627		12,571		2,210		539		1,672		637
Issuances	960		646		222		68		364		397		550		282		34		149		0
Interest accrual	1,599		642		670		106		128		94		539		85		21		62		32
Benefit payments	(3,050)		(1,375)		(1,248)		(202)		(456)		(483)		(823)		(277)		(62)		(103)		(45)
Foreign currency translation	(7,585)		(4,180)		(5,205)		(905)		0		0		0		0		0		0		0
Other	0		0		0		0		8		1		9		0		0		(2)		0
Ending balance at original discount rate	47,677		27,566		32,800		5,940		3,391		2,636		12,846		2,300		532		1,778		624
Effect of changes in discount rate assumptions	7,089		(147)		(846)		(358)		(293)		(191)		(1,357)		(226)		(44)		(252)		(2)
Balance at December 31, 2022	54,766		27,419		31,954		5,582		3,098		2,445		11,489		2,074		488		1,526		622
Net liability for future policy benefits	35,468		10,705		24,469		4,326		564		810		7,003		854		277		802		512
Less: reinsurance recoverable	0		1,579		0		0		0		0		0		0		0		9		0
Net liability for future policy benefits after reinsurance recoverable	$	35,468	$	9,126	$	24,469	$	4,326	$	564	$	810	$	7,003	$	854	$	277	$	793	$	512

(1) Net premiums earned represent the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

The following tables present the weighted-average interest rates and weighted-average liability duration (calculated using the original discount rate) by reporting segment and disaggregated by product type.


	June 30, 2023
	Aflac Japan				Aflac U.S.
	Cancer	Medical and Other Health	Life Insurance	Other	Accident	Disability	Critical Care	Hospital Indemnity	Dental/Vision	Life Insurance	Other
Weighted-average interest, original discount rate (1)	3.9 %	2.5 %	2.1 %	1.8 %	3.9 %	4.2 %	4.6 %	4.4 %	4.3 %	3.7 %	5.4 %
Weighted-average interest, current discount rate (1)	1.6 %	2.1 %	1.6 %	1.9 %	5.2 %	5.3 %	5.2 %	5.2 %	5.2 %	5.2 %	5.2 %
Weighted-average liability duration (years)	13.6	26.4	17.1	17.8	8.4	5.6	11.8	9.5	8.0	12.8	9.4

(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.


	December 31, 2022
	Aflac Japan				Aflac U.S.
	Cancer	Medical and Other Health	Life Insurance	Other	Accident	Disability	Critical Care	Hospital Indemnity	Dental/Vision	Life Insurance	Other
Weighted-average interest, original discount rate (1)	4.1 %	2.6 %	2.1 %	1.8 %	3.8 %	4.2 %	4.6 %	4.4 %	4.3 %	3.7 %	5.4 %
Weighted-average interest, current discount rate (1)	1.6 %	2.2 %	1.6 %	1.9 %	4.8 %	4.7 %	4.8 %	4.8 %	4.8 %	4.8 %	4.8 %
Weighted-average liability duration (years)	13.7	26.9	17.3	18.2	8.5	5.6	12.0	9.4	8.1	13.1	9.6

(1) The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.

The following table presents a reconciliation of the disaggregated rollforwards above to the ending future policy benefits presented in the Consolidated Balance Sheets. The deferred profit liability for limited-payment contracts and the deferred profit liability for reinsurance is presented together with the liability for future policy benefits in the Consolidated Balance Sheets and has been included as a reconciling item in the table below.


(In millions)	June 30, 2023			December 31, 2022
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer		$	33,719		$	35,468
Medical and other health		10,895			10,705
Life insurance		23,692			24,469
Other		4,231			4,326
Aflac U.S.
Accident		590			564
Disability		795			810
Critical care		7,138			7,003
Hospital indemnity		869			854
Dental/vision		275			277
Life insurance		850			802
Other		517			512
Corporate and other		2,696			686
Deferred profit liability - limited-payment contracts		1,697			1,740
Deferred profit liability - reinsurance		620			692
Intercompany eliminations (1)		(2,680)			(667)
Total		$	85,904		$	88,241

(1) Elimination entry necessary due to the internal reinsurance transaction with Aflac Re and to recapture of a portion of policy liabilities ceded externally as a result of the reinsurance retrocession transaction. See Note 8 of the Notes to the Consolidated Financial Statements.

Discount rates are determined using upper-medium grade (low-credit-risk) fixed-income instrument yields that reflect the duration characteristics of the liability. Locked-in discount rates are determined as a weighted average of monthly upper-medium grade (low-credit-risk) fixed-income instrument forward curves, where the weights are the annualized premiums issued for each month of the cohort. Discount rates are updated each reporting period and require estimation techniques (e.g., interpolation, extrapolation) for determination of points on the curve for which there is limited or no observable market data.

More specifically, the Company constructs a discount rate curve separately for discounting cash flows used to calculate each of the Japan and U.S. liabilities for future policy benefits, reflective of the characteristics of the corresponding insurance liabilities, such as currency and tenor.

In the Aflac Japan segment, all long-duration insurance policies are denominated in yen. A significant portion of policies are characterized by tenors exceeding the availability of liquid market data in Japan for single-A rated (as a proxy for upper-medium grade) corporate yen-denominated debt. The discount rate curve is designed to prioritize the observable inputs where available, while past the last liquid point, the data is derived based on estimation techniques consistent with the fair value guidance in ASC 820. The Aflac Japan segment curve utilizes liquid market indices tracking publicly traded yen-denominated single-A corporate debt for the initial 10-year tenor. For the bonds within these market indices where only local ratings are available, the Company prioritizes the bonds with local ratings that are equivalent to a single-A rating based on international rating standards.

For the discount rates applicable to tenors for which the Japan single-A debt market is not liquid but there is sufficient observable market data and/or the observable market data is available for similar instruments (between 10 and 30 years), the Company estimates tenor-specific single-A credit spreads and applies them to risk-free government rates. Lastly, for the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30 years), the discount curve is derived by extrapolation of risk free rates beyond their last liquid point following the Smith-Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate. The ultimate

forward rate is based on the economic value-based solvency regime, which is consistent with the International Association of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (which is expected to be introduced in Japan in 2025), and is adjusted for credit and inflation components.

For the Aflac U.S. segment where all long-duration insurance policies are denominated in U.S. dollar and substantially all have cash flow duration within 30 years, for which the U.S. upper-medium grade fixed-income market is liquid and observable, the Company uses data from a liquid fixed-income market index tracking single-A U.S. corporate debt. For the insignificant portion of the policies with cash flow tenors exceeding 30 years, the discount curve beyond that tenor is extrapolated following the Smith-Wilson method from year 30 to the same ultimate forward rate calculated for the Japan discount curve at year 60 and held constant thereafter. The use of the same ultimate rate for U.S. and Japan segments is based on the assumption of long-term global economic convergence.

For the three-month periods ended June 30, 2023 and 2022, the Company recognized $(165) million and $5.1 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions. For the six-month periods ended June 30, 2023 and 2022, the Company recognized $(3.0) billion and $9.3 billion in other comprehensive income (loss) net of tax, respectively, due to changes in the future policy benefits estimate from updating the discount rate assumptions. There were no changes to the methods used to determine the discount rates during the six-month periods ended June 30, 2023 and 2022.

For the year ended December 31, 2022, the Company recognized $13.7 billion in other comprehensive income (loss) net of tax, due to changes in the future policy benefits estimate from updating the discount rate assumptions. There were no changes to the methods used to determine the discount rates during the year ended December 31, 2022.

Mortality rate assumptions are based on industry tables and adjusted for the Company's actual or expected experience where credible or appropriate. These assumptions typically will vary by age, gender, and other demographic characteristics such as smoking status.

Morbidity assumptions are based on the Company's internal data and consider emerging experience. These assumptions are reflective of the coverage and benefits provided and generally vary by age, gender, duration, and any other material policyholder characteristics. In cases where a calendar-year trend is significant, future cash flow projections may include a trend adjustment.

In Japan, separate lapse assumptions are set based on actual or expected experience. These lapse and total termination rate assumptions will vary by line of business and with policyholder characteristics such as duration. In the U.S., the majority of the future cash flows are modeled using total termination rates (which include both lapse and mortality) and are adjusted for actual experience. Policy provisions, such as reaching premium paid-up status, are taken into account when setting assumptions.

During the three-month periods ended June 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $54 million and $25 million in the consolidated statement of earnings, respectively. During the six-month periods ended June 30, 2023 and 2022, the Company's adjustment for actual variances from expected experience resulted in reserve remeasurement gains of $107 million and $59 million in the consolidated statement of earnings, respectively. For the three- and six-month periods ended June 30, 2023 and 2022, the variance of actual experience from expected experience was primarily due to favorable variances in morbidity assumptions as compared to actual experience. There were no changes to the inputs, judgments, assumptions and methods used in measuring the liability for future policy benefits during the six-month periods ended June 30, 2023 and 2022.

In 2022, the Company's annual review process resulted in favorable changes to its morbidity assumptions due to favorable claims experience, primarily. This, together with the variance of actual experience from expected experience, resulted in reserve remeasurement gains of $215 million in the consolidated statement of earnings for the year ended December 31, 2022.

The following table summarizes the amount of net earned premiums recognized in the Consolidated Statements of Earnings by reporting segment and disaggregated by product type.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022
Net earned premiums:
Aflac Japan
Cancer	$	1,054	$	1,193	$	2,149	$	2,528
Medical and other health	672		735		1,377		1,563
Life insurance	390		459		812		983
Other	38		42		77		85
Aflac U.S.
Accident	322		329		652		665
Disability	318		295		627		591
Critical care	439		439		882		885
Hospital indemnity	182		183		367		368
Dental/vision	53		50		107		99
Life insurance	115		99		228		197
Other	9		9		19		19
Corporate and other	84		36		175		82
Reinsurance ceded	(103)		(105)		(210)		(221)
Total	$	3,573	$	3,764	$	7,262	$	7,844

The following table summarizes the amount of interest expense related to insurance contracts recognized in total benefits and claims, net in the Consolidated Statements of Earnings by reporting segment and disaggregated by product type.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022
Interest expense:
Aflac Japan
Cancer	$	276	$	296	$	561	$	626
Medical and other health	72		73		143		151
Life insurance	130		136		263		285
Other	20		21		42		45
Aflac U.S.
Accident	6		5		12		12
Disability	10		9		18		19
Critical care	86		86		173		172
Hospital indemnity	10		10		20		20
Dental/vision	3		3		6		7
Life insurance	10		8		19		17
Other	6		7		13		13

Total	$	629	$	654	$	1,270	$	1,367

The following tables summarize the amount of undiscounted expected future gross premiums and expected future benefits and expenses and discounted (discounted at the current period discount rate) expected future gross premiums and expected future benefits and expenses by reporting segment and disaggregated by product type. Future gross premiums represent the expected amount of future premiums to be received. For limited-payment policies, the premiums are collected over a shorter period than the policy term over which benefits are provided. As a result, once the policy reaches premium paid-up status, the future gross premiums can be significantly less than the future benefit payments. Further, benefits and expenses are generally greater in the later years of a policy. These are the primary factors that result in future gross premiums lower than future benefit and expense payments for certain lines of business of the Company.


	June 30, 2023						December 31, 2022
(In millions)	Gross Premiums			Benefits and Expenses			Gross Premiums			Benefits and Expenses
Undiscounted expected future gross premiums and expected future benefits and expenses:
Aflac Japan
Cancer		$	74,340		$	83,000		$	75,529		$	84,246
Medical and other health		49,626			50,445			50,720			50,778
Life insurance		16,406			52,836			16,946			53,271
Other		2,279			9,337			2,322			9,433
Aflac U.S.
Accident		9,408			4,602			9,481			4,636
Disability		5,886			3,288			5,858			3,267
Critical care		21,050			22,022			21,069			22,113
Hospital indemnity		5,199			3,359			5,164			3,338
Dental/vision		1,180			749			1,208			759
Life insurance		2,502			2,926			2,375			2,787
Other		429			1,222			333			1,147
Total		$	188,305		$	233,786		$	191,005		$	235,775


	June 30, 2023						December 31, 2022
(In millions)	Gross Premiums			Benefits and Expenses			Gross Premiums			Benefits and Expenses
Discounted expected future gross premiums and expected future benefits and expenses:
Aflac Japan
Cancer		$	49,689		$	51,692		$	53,278		$	54,766
Medical and other health		32,246			26,527			34,693			27,419
Life insurance		11,730			30,407			12,951			31,954
Other		1,570			5,376			1,697			5,582
Aflac U.S.
Accident		6,494			3,094			6,510			3,098
Disability		4,493			2,464			4,468			2,445
Critical care		12,785			11,637			12,659			11,489
Hospital indemnity		3,532			2,109			3,483			2,074
Dental/vision		805			484			821			488
Life insurance		1,757			1,613			1,663			1,526
Other		292			686			228			622
Total		$	125,393		$	136,089		$	132,451		$	141,463

Loss expense as a result of net premium ratio capping for the three- and six-month periods ended June 30, 2023 and 2022 was immaterial.

Other Policyholders' Funds

As of June 30, 2023 and December 31, 2022, the largest component of the other policyholders' funds liability was the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums.

The following table presents the changes in other policyholders’ funds.


(In millions)	June 30, 2023		December 31, 2022
Other policyholders' funds:
Fixed annuities account balance, beginning of period (1)	$	6,423	$	7,410
Premiums received	65		150
Transfers from WAYS conversions	107		214
Surrenders and withdrawals	(27)		(52)
Benefit payments	(187)		(367)
Interest credited	26		57
Foreign currency translation and other	(543)		(989)
Fixed annuities account balance, end of period	5,864		6,423
Other deposit type reserves	251		220
Total	$	6,115	$	6,643

(1) Aflac Japan fixed annuities

The following table presents other policyholders’ funds balances by range of guaranteed crediting rates.


	June 30, 2023			December 31, 2022
(In millions)	Range of Guaranteed Minimum Crediting Rates (2)	At Guaranteed Minimum	Cash Surrender Value	Range of Guaranteed Minimum Crediting Rates (2)	At Guaranteed Minimum	Cash Surrender Value
Fixed annuities (1)	0.5% - 2.3%	$5,864	$5,771	0.5% - 2.3%	$6,423	$6,326

(1) Aflac Japan fixed annuities

(2) Weighted-average crediting rate of 1.5% at June 30, 2023 and December 31, 2022.

Aflac Japan’s fixed annuities have guaranteed fixed crediting rates which results in the policyholders' funds balances being able to cover all guaranteed benefit amounts. The reserves are adequate to fully fund future benefits at any given time.

See Note 1 of the Notes to the Consolidated Financial Statements for additional information on policy liabilities.

8. REINSURANCE

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits are reported net of insurance ceded.

In January 2023, ALIJ entered into a coinsurance transaction whereby it ceded 28% of the liabilities associated with certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $2.1 billion of reserves associated with these policies. Approximately $1.9 billion of assets were transferred from ALIJ to Aflac Re as consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

In January 2023, ALIJ also entered into an external coinsurance transaction to cede 1.5% of the liabilities associated with the same cancer insurance policies and riders, in connection with which ALIJ transferred cash consideration to the reinsurer.

The Company has recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of $620 million and $692 million as of June 30, 2023 and December 31, 2022, respectively, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies. The Company has also recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $998 million and $912 million as of June 30, 2023 and December 31, 2022, respectively.

The following table reconciles direct premiums and direct benefits and claims to net amounts after the effect of reinsurance and the elimination of inter-segment amounts associated with affiliated reinsurance.


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2023			2022			2023			2022
Direct earned premiums		$	3,623		$	3,792		$	7,361		$	7,907
Ceded to other companies:
Ceded Aflac Japan closed blocks		(80)			(87)			(165)			(185)
Other		(23)			(18)			(45)			(36)
Assumed from other companies:
Retrocession activities		30			36			64			77
Other		23			41			47			81
Net earned premiums		$	3,573		$	3,764		$	7,262		$	7,844

Direct benefits and claims, excluding reserve remeasurement		$	2,182		$	2,317		$	4,438		$	4,851
Reserve remeasurement (gains) losses		(54)			(25)			(107)			(59)
Total direct benefits and claims		2,128			2,292			4,331			4,792
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks		(74)			(77)			(151)			(165)
Eliminations		70			4			83			9
Other		(64)			(14)			(104)			(20)
Assumed from other companies:
Retrocession activities		20			39			61			78
Eliminations		(47)			(10)			(76)			(17)
Other		65			40			103			80
Total benefits and claims, net		$	2,098		$	2,274		$	4,247		$	4,757

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, the Company remains liable for the reinsured claims.

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015, with reserves of approximately ¥120 billion as of June 30, 2023. This reinsurance facility agreement was renewed in 2022 and is effective until December 31, 2023. There are also additional commitment periods of a one-year duration, each of which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration. The reinsurer can withdraw from the committed facility if Aflac's Standard and Poor's (S&P) rating drops below BBB-. As of June 30, 2023, the Company has not executed a reinsurance treaty under this committed reinsurance facility.

9. NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations follows:


(In millions)	June 30, 2023			December 31, 2022
1.125% senior sustainability notes due March 2026		$	398		$	397
2.875% senior notes due October 2026		298			298
3.60% senior notes due April 2030		992			992
6.90% senior notes due December 2039		221			221
6.45% senior notes due August 2040		254			254
4.00% senior notes due October 2046		394			394
4.750% senior notes due January 2049		542			541
Yen-denominated senior notes and subordinated debentures:
.300% senior notes due September 2025 (principal amount ¥12.4 billion)		85			93
.932% senior notes due January 2027 (principal amount ¥60.0 billion)		412			450
1.075% senior notes due September 2029 (principal amount ¥33.4 billion)		229			250
.500% senior notes due December 2029 (principal amount ¥12.6 billion)		87			95
.550% senior notes due March 2030 (principal amount ¥13.3 billion)		91			99
1.159% senior notes due October 2030 (principal amount ¥29.3 billion)		201			220
.633% senior notes due April 2031 (principal amount ¥30.0 billion)		206			225
.843% senior notes due December 2031 (principal amount ¥9.3 billion)		64			70
.750% senior notes due March 2032 (principal amount ¥20.7 billion)		142			155
1.320% senior notes due December 2032 (principal amount ¥21.1 billion)		145			158
.844% senior notes due April 2033 (principal amount ¥12.0 billion)		82			90
1.488% senior notes due October 2033 (principal amount ¥15.2 billion)		104			114
.934% senior notes due December 2034 (principal amount ¥9.8 billion)		67			73
.830% senior notes due March 2035 (principal amount ¥10.6 billion)		72			79
1.039% senior notes due April 2036 (principal amount ¥10.0 billion)		68			75
1.594% senior notes due September 2037 (principal amount ¥6.5 billion)		44			49
1.750% senior notes due October 2038 (principal amount ¥8.9 billion)		61			66
1.122% senior notes due December 2039 (principal amount ¥6.3 billion)		43			47
1.264% senior notes due April 2041 (principal amount ¥10.0 billion)		68			75
2.108% subordinated debentures due October 2047 (principal amount ¥60.0 billion)		410			448
.963% subordinated bonds due April 2049 (principal amount ¥30.0 billion)		207			226
1.560% senior notes due April 2051 (principal amount ¥20.0 billion)		137			149
2.144% senior notes due September 2052 (principal amount ¥12.0 billion)		82			90
Yen-denominated loans:
Variable interest rate loan due August 2027 (.35% in 2023 and .33% in 2022, principal amount ¥11.7 billion)		80			88
Variable interest rate loan due August 2029 (.45% in 2023 and .43% in 2022, principal amount ¥25.3 billion)		174			190
Variable interest rate loan due August 2032 (.60% in 2023 and .58% in 2022, principal amount ¥70.0 billion)		481			524
Finance lease obligations payable through 2030		7			8
Operating lease obligations payable through 2049		139			139
Total notes payable and lease obligations		$	7,087		$	7,442

Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the life of the notes.

A summary of the Company's lines of credit as of June 30, 2023 follows:


Borrower(s)	Type	Term	Expiration Date	Capacity	Amount Outstanding	Interest Rate on Borrowed Amount	Maturity Period	Commitment Fee	Business Purpose
Aflac Incorporated and Aflac	uncommitted bilateral	364 days	December 28, 2023	$100 million	$0 million	The rate quoted by the bank and agreed upon at the time of borrowing	Up to 3 months	None	General corporate purposes
Aflac Incorporated	unsecured revolving	5 years	May 9, 2027, or the date commitments are terminated pursuant to an event of default	¥100.0 billion	¥0.0 billion	A rate per annum equal to (a) Tokyo Interbank Market Rate (TIBOR) plus, the alternative applicable TIBOR margin during the availability period from the closing date to the commitment termination date or (b) the TIBOR rate offered by the agent to major banks in yen for the applicable period plus, the applicable alternative TIBOR margin during the term out period	No later than May 10, 2027	.28% to .45%, depending on the Parent Company's debt ratings as of the date of determination	General corporate purposes, including a capital contingency plan for the operations of the Parent Company
Aflac Incorporated and Aflac	unsecured revolving	5 years	November 15, 2027, or the date commitments are terminated pursuant to an event of default	$1.0 billion	$0.0 billion	A rate per annum equal to, at the Company's option, either, (a) Secured Overnight Financing Rate (SOFR) for U.S. dollar denominated borrowings or TIBOR for Japanese yen denominated borrowings, in either case adjusted for certain costs, or (b) a base rate determined by reference to the highest of (1) the federal funds rate plus 1/2 of 1%, (2) the rate of interest for such day announced by the agent as its prime rate, or (3) SOFR for an interest period of one month plus 1.00%, in each case plus an applicable margin	No later than November 15, 2027	.08% to .20%, depending on the Parent Company's debt ratings as of the date of determination	General corporate purposes, including a capital contingency plan for the operations of the Parent Company
Aflac Incorporated and Aflac	uncommitted bilateral	None specified	None specified	$50 million	$0 million	A rate per annum equal to, at the Parent Company's option, either (a) a rate determined by reference to SOFR for the interest period relevant to such borrowing or (b) the base rate determined by reference to the highest of (1) the lender's USD short-term commercial loan rate and (2) the federal funds rate plus 1/2 of 1%	Up to 3 months	None	General corporate purposes
Aflac(1)	uncommitted revolving	364 days	November 30, 2023	$250 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum	No later than December 1, 2023	None	General corporate purposes
Aflac Incorporated(1) (Tranche 1)	uncommitted revolving	364 days	November 27, 2023	¥50.0 billion	¥0.0 billion	Three-month yen TIBOR plus 45 basis points per annum	No later than November 28, 2023	None	General corporate purposes
Aflac Incorporated(1) (Tranche 2)	uncommitted revolving	364 days	November 27, 2023	¥50.0 billion	¥0.0 billion	Three-month yen TIBOR plus 45 basis points per annum	No later than November 28, 2023	None	General corporate purposes
Aflac New York(1)	uncommitted revolving	364 days	April 8, 2024	$25 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum	No later than April 9, 2024	None	General corporate purposes
CAIC(1)	uncommitted revolving	364 days	March 21, 2024	$15 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum	No later than March 22, 2024	None	General corporate purposes

(1) Intercompany credit agreement

(continued)


Borrower(s)	Type	Term	Expiration Date	Capacity	Amount Outstanding	Interest Rate on Borrowed Amount	Maturity Period	Commitment Fee	Business Purpose
Tier One Insurance Company(1)	uncommitted revolving	364 days	March 21, 2024	$0.3 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum	No later than March 22, 2024	None	General corporate purposes
Hatch Healthcare K.K.(1)	uncommitted revolving	364 days	January 3, 2024	¥900 million	¥0 million	A rate per annum equal to the short-term prime lending rates of banks appearing on the website for the Bank of Japan on the first day of the applicable period	No later than January 4, 2024	None	General corporate purposes
Aflac Digital Services Co., Ltd. (formerly known as Hatch Insight K.K.)(1)	uncommitted revolving	364 days	January 3, 2024	¥600 million	¥0 million	A rate per annum equal to the short-term prime lending rates of banks appearing on the website for the Bank of Japan on the first day of the applicable period	No later than January 4, 2024	None	General corporate purposes
Aflac GI Holdings LLC(1),(2)	uncommitted revolving	364 days	July 17, 2023	$30 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 75 basis points per annum	No later than July 18, 2023	None	General corporate purposes
Aflac Incorporated(1)	uncommitted revolving	364 days	January 2, 2024	$400 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 97 basis points per annum for U.S. dollar denominated borrowings or three-month TIBOR plus 97 basis points per annum for Japanese yen denominated borrowings	No later than January 3, 2024	None	General corporate purposes
Aflac Re Bermuda Ltd.(1)	uncommitted revolving	364 days	January 2, 2024	$400 million	$0 million	Three-month term SOFR plus a 10 basis point SOFR adjustment and an additional 68 basis points per annum for U.S. dollar denominated borrowings or three-month TIBOR plus 68 basis points per annum for Japanese yen denominated borrowings	No later than January 3, 2024	None	General corporate purposes

(1) Intercompany credit agreement

(2) Renewed in July 2023 with an expiration date of July 16, 2024

The Company was in compliance with all of the covenants of its notes payable and lines of credit at June 30, 2023. No events of default or defaults occurred during the six-month period ended June 30, 2023.

For additional information, see Notes 4 and 9 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

10. SHAREHOLDERS’ EQUITY

The following table is a reconciliation of the number of shares of the Company's common stock for the six-month periods ended June 30.


(In thousands of shares)	2023	2022
Common stock - issued:
Balance, beginning of period	1,354,079	1,352,739
Exercise of stock options and issuance of restricted shares	1,148	1,132
Balance, end of period	1,355,227	1,353,871
Treasury stock:
Balance, beginning of period	738,823	700,607
Purchases of treasury stock:
Share repurchase program	20,809	19,192
Other	354	351
Dispositions of treasury stock:
Shares issued to AFL Stock Plan	(498)	(528)
Exercise of stock options	(52)	(62)
Other	(178)	(215)
Balance, end of period	759,258	719,345
Shares outstanding, end of period	595,969	634,526

Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic earnings per share (EPS). The following table presents the approximate number of share-based awards to purchase shares, on a weighted-average basis, that were considered to be anti-dilutive and were excluded from the calculation of diluted EPS for the following periods.


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Anti-dilutive share-based awards		39		171		102		210

Share Repurchase Program

During the first six months of 2023, the Company repurchased 20.8 million shares of its common stock for $1.4 billion as part of its share repurchase program. During the first six months of 2022, the Company repurchased 19.2 million shares of its common stock for $1.2 billion as part of its share repurchase program. As of June 30, 2023, a remaining balance of 95.8 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

Reclassifications from Accumulated Other Comprehensive Income

The tables below are reconciliations of accumulated other comprehensive income by component for the following periods.

Changes in Accumulated Other Comprehensive Income


Three Months Ended June 30, 2023
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at March 31, 2023		$	(3,618)		$	1,289		$	(26)		$	(4,894)		$	(29)		$	(7,278)
Other comprehensive income (loss) before reclassification		(631)			710			0			(165)			45			(41)
Amounts reclassified from accumulated other comprehensive income (loss)		0			(21)			1			0			1			(19)
Net current-period other comprehensive income (loss)		(631)			689			1			(165)			46			(60)
Balance at June 30, 2023		$	(4,249)		$	1,978		$	(25)		$	(5,059)		$	17		$	(7,338)

All amounts in the table above are net of tax.


Three Months Ended June 30, 2022
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at March 31, 2022		$	(2,438)		$	5,787		$	(29)		$	(11,608)		$	(163)		$	(8,451)
Other comprehensive income (loss) before reclassification		(780)			(2,767)			(1)			5,105			(1)			1,556
Amounts reclassified from accumulated other comprehensive income (loss)		0			(90)			1			0			4			(85)
Net current-period other comprehensive income (loss)		(780)			(2,857)			0			5,105			3			1,471
Balance at June 30, 2022		$	(3,218)		$	2,930		$	(29)		$	(6,503)		$	(160)		$	(6,980)

All amounts in the table above are net of tax.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.


Six Months Ended June 30, 2023
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at December 31, 2022		$	(3,564)		$	(702)		$	(27)		$	(2,100)		$	(36)		$	(6,429)


Other comprehensive income (loss) before reclassification		(685)			2,746			1			(2,959)			52			(845)
Amounts reclassified from accumulated other comprehensive income (loss)		0			(66)			1			0			1			(64)
Net current-period other comprehensive income (loss)		(685)			2,680			2			(2,959)			53			(909)
Balance at June 30, 2023		$	(4,249)		$	1,978		$	(25)		$	(5,059)		$	17		$	(7,338)

All amounts in the table above are net of tax.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.


Six Months Ended June 30, 2022
(In millions)	Unrealized Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Fixed Maturity Securities			Unrealized Gains (Losses) on Derivatives			Effect of Changes in Discount Rate Assumptions			Pension Liability Adjustment			Total
Balance at December 31, 2021		$	(1,985)		$	9,602		$	(30)		$	(15,832)		$	(166)		$	(8,411)


Other comprehensive income (loss) before reclassification		(1,233)			(6,520)			0			9,329			(3)			1,573
Amounts reclassified from accumulated other comprehensive income (loss)		0			(152)			1			0			9			(142)
Net current-period other comprehensive income (loss)		(1,233)			(6,672)			1			9,329			6			1,431
Balance at June 30, 2022		$	(3,218)		$	2,930		$	(29)		$	(6,503)		$	(160)		$	(6,980)

All amounts in the table above are net of tax.

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

The tables below summarize the amounts reclassified from each component of accumulated other comprehensive income into net earnings for the following periods.

Reclassifications Out of Accumulated Other Comprehensive Income


(In millions)	Three Months Ended June 30, 2023
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	27	Net investment gains (losses)
		(6)		Tax (expense) or benefit(1)
		$	21	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(1)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Total reclassifications for the period		$	19	Net of tax

(1) Based on 21% tax rate

(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 12 for additional details).


(In millions)	Three Months Ended June 30, 2022
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	114	Net investment gains (losses)
		(24)		Tax (expense) or benefit(1)
		$	90	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(5)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		1		Tax (expense) or benefit(1)
		$	(4)	Net of tax
Total reclassifications for the period		$	85	Net of tax

(1) Based on 21% tax rate

(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 12 for additional details).


(In millions)	Six Months Ended June 30, 2023
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	84	Net investment gains (losses)
		(18)		Tax (expense) or benefit(1)
		$	66	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(1)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Total reclassifications for the period		$	64	Net of tax

(1) Based on 21% tax rate

(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 12 for additional details).


(In millions)	Six Months Ended June 30, 2022
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statements of Earnings
Unrealized gains (losses) on available-for-sale securities		$	192	Net investment gains (losses)
		(40)		Tax (expense) or benefit(1)
		$	152	Net of tax
Unrealized gains (losses) on derivatives		$	(1)	Net investment gains (losses)
		0		Tax (expense) or benefit(1)
		$	(1)	Net of tax
Amortization of defined benefit pension items:
Actuarial gains (losses)		$	(11)	Acquisition and operating expenses(2)
Prior service (cost) credit		0		Acquisition and operating expenses(2)
		2		Tax (expense) or benefit(1)
		$	(9)	Net of tax
Total reclassifications for the period		$	142	Net of tax

(1) Based on 21% tax rate

(2) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 12 for additional details).

11. SHARE-BASED COMPENSATION

As of June 30, 2023, the Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (As Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan). Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors.

The Plan, allows for a maximum number of shares issuable over its term of 75 million shares including 38 million shares that may be awarded in respect of awards other than options or stock appreciation rights. If any awards granted under the

Plan are forfeited or are terminated before being exercised or settled for any reason other than tax forfeiture, then the shares underlying the awards will again be available under the Plan.

The Plan allows awards to Company employees for incentive stock options (ISOs), non-qualifying stock options (NQSOs), restricted stock, restricted stock units, and stock appreciation rights. Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights. As of June 30, 2023, approximately 34.7 million shares were available for future grants under this plan. The ISOs and NQSOs have a term of 10 years, and the share-based awards generally vest upon time-based conditions or time and performance-based conditions. Time-based vesting generally occurs after three years. Performance-based vesting conditions generally include the attainment of goals related to Company financial performance. As of June 30, 2023, the only performance-based awards issued and outstanding were restricted stock awards and units.

Stock options and stock appreciation rights granted under the amended Plan have an exercise price of at least the fair market value of the underlying stock on the grant date and have an expiration date no later than 10 years from the grant date. Time-based restricted stock awards, restricted stock units and stock options granted after January 1, 2017 generally vest on a ratable basis over three years, and awards granted prior to the amendment vest on a cliff basis over three years. The Compensation Committee of the Board of Directors has the discretion to determine vesting schedules.

Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while those issued to Japan-based grantees are settled with treasury shares.

The following table provides information on stock options outstanding and exercisable at June 30, 2023.


	Stock Option Shares (in thousands)		Weighted-Average Remaining Term (in years)		Aggregate Intrinsic Value (in millions)			Weighted-Average Exercise Price Per Share
Outstanding		1,231		2.6		$	46		$	32.78
Exercisable		1,231		2.6		46			32.78

The Company received cash from the exercise of stock options in the amount of $10 million during the first six months of 2023, compared with $9 million in the first six months of 2022. The tax benefit realized as a result of stock option exercises and restricted stock releases was $19 million in the first six months of 2023, compared with $17 million in the first six months of 2022.

As of June 30, 2023, total compensation cost not yet recognized in the Company's consolidated financial statements related to restricted stock awards and units was $61 million, of which $33 million (1.8 million shares) was related to restricted stock awards and units with a performance-based vesting condition. The Company expects to recognize these amounts over a weighted-average period of approximately 1.7 years. There are no other contractual terms covering restricted stock awards once vested.

The following table summarizes restricted stock activity during the six-month period ended June 30, 2023.


(In thousands of shares)	Shares	Weighted-Average Grant-Date Fair Value Per Share
Restricted stock at December 31, 2022	2,414		$	56.21
Granted in 2023	1,120		70.50
Canceled in 2023	(59)		59.72
Vested in 2023	(1,133)		52.81
Restricted stock at June 30, 2023	2,342		$	62.60

In February 2023, the Company granted 454 thousand performance-based stock awards and units, which are contingent on the achievement of the Company's financial performance metrics and its market-based conditions. On the date of grant, the Company estimated the fair value of restricted stock awards and units with market-based conditions using a Monte Carlo simulation model. The model discounts the value of the stock at the assumed vesting date based on the risk-free interest rate. Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter.

The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, a Monte Carlo simulation model. The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards.

For additional information on the Company's long-term share-based compensation plans and the types of share-based awards, see Note 12 of the Notes to the Consolidated Financial Statements included in the 2022 Annual Report.

12. BENEFIT PLANS

The Company has funded defined benefit plans in Japan and the U.S., however the U.S. plan was frozen to new participants effective October 1, 2013. On June 9, 2023, the Company amended the U.S. defined benefit plan to freeze future benefits under the plan for all participants effective January 1, 2024, which resulted in the Company recognizing a curtailment gain of $49 million in the second quarter of 2023. U.S. employees who are not participants in the defined benefit plan currently receive a nonelective 401(k) employer contribution. Effective January 1, 2024, the nonelective 401(k) employer contribution will be extended to U.S. employees who are current participants in the defined benefit plan.

The Company also maintains non-qualified, unfunded supplemental retirement plans that provide defined pension benefits in excess of limits imposed by federal tax law for certain Japanese, U.S. and former employees, however the Company's Supplemental Executive Retirement Plan was frozen to new participants effective January 1, 2015. On June 9, 2023, the Company amended the Supplemental Executive Retirement Plan and the Retirement Plan for Senior Officers to freeze future benefits under these plans for all participants effective January 1, 2024.

The Company provides certain health care benefits for eligible U.S. retired employees, their beneficiaries and covered dependents (other postretirement benefits). The health care plan is contributory and unfunded. Effective January 1, 2014, employees eligible for benefits included the following: (1) active employees whose age plus service, in years, equaled or exceeded 80 (rule of 80); (2) active employees who were age 55 or older and have met the 15 years of service requirement; (3) active employees who would meet the rule of 80 in the next five years; (4) active employees who were age 55 or older and who would meet the 15 years of service requirement within the next five years; and (5) current retirees. For certain employees and former employees, additional coverage is provided for all medical expenses for life.

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statements of earnings, which includes other components of net periodic pension cost and postretirement costs (other than service costs) of $(45) million and $2 million for the three-month periods and $(43) million and $6 million for the six-month periods ended June 30, 2023 and 2022, respectively. Total net periodic benefit cost includes the following components:


	Three Months Ended June 30,
	Pension Benefits												Other
	Japan						U.S.						Postretirement Benefits
(In millions)	2023			2022			2023			2022			2023			2022
Components of net periodic benefit cost:
Service cost		$	3		$	5		$	3		$	7		$	0		$	0
Interest cost		2			1			10			8			1			0
Expected return on plan assets		(1)			(2)			(9)			(10)			0			0
Amortization of net actuarial loss		0			0			0			5			1			0

Curtailment (gain) loss		0			0			(49)			0			0			0
Net periodic (benefit) cost		$	4		$	4		$	(45)		$	10		$	2		$	0


	Six Months Ended June 30,
	Pension Benefits												Other
	Japan						U.S.						Postretirement Benefits
(In millions)	2023			2022			2023			2022			2023			2022
Components of net periodic benefit cost:
Service cost		$	7		$	10		$	7		$	13		$	0		$	0
Interest cost		4			3			21			17			1			0
Expected return on plan assets		(3)			(4)			(18)			(21)			0			0
Amortization of net actuarial loss		0			0			0			10			1			1

Curtailment (gain) loss		0			0			(49)			0			0			0
Net periodic (benefit) cost		$	8		$	9		$	(39)		$	19		$	2		$	1

During the six months ended June 30, 2023, Aflac Japan contributed approximately $12 million (using the weighted-average yen/dollar exchange rate for the six-month period ended June 30, 2023) to the Japanese funded defined benefit plan, and Aflac U.S. did not make a contribution to the U.S. funded defined benefit plan.

For additional information regarding the Company's Japanese and U.S. benefit plans, see Note 14 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report.

13. COMMITMENTS AND CONTINGENT LIABILITIES

In February 2023, the Company renewed an outsourcing agreement with a management consulting and technology services company to provide application maintenance and development services for Aflac Japan. As of June 30, 2023, the agreement has a remaining term of five years and an aggregate remaining cost of ¥20.1 billion ($138 million using the June 30, 2023 exchange rate).

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

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

Guaranty Fund Assessments

The U.S. insurance industry has a policyholder protection system that is monitored and regulated by state insurance departments. These life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association. Under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business.

Guaranty fund assessments for the three- and six-month periods ended June 30, 2023 and 2022 were immaterial.

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