10-Q 1 afl09301710q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
or
[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-07434
aflaclogoa01a01a01a11.jpg
Aflac Incorporated
_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Georgia
 
58-1167100
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
1932 Wynnton Road, Columbus, Georgia
 
31999
(Address of principal executive offices)
 
(ZIP Code)
706.323.3431
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ  Yes  ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).            þ  Yes  ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
   Large accelerated filer  þ
 
Accelerated filer ¨
   Non-accelerated filer    ¨ (Do not check if a smaller reporting company)
 
Smaller reporting company  ¨
 
 
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨  Yes  þ  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
October 25, 2017
Common Stock, $.10 Par Value
 
393,149,620


Aflac Incorporated and Subsidiaries
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2017
Table of Contents
 
 
 
Page
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
  Three Months Ended September 30, 2017 and 2016
  Nine Months Ended September 30, 2017 and 2016
 
 
 
 
  Three Months Ended September 30, 2017 and 2016
  Nine Months Ended September 30, 2017 and 2016
 
 
 
 
  September 30, 2017, and December 31, 2016
 
 
 
 
  Nine Months Ended September 30, 2017 and 2016
 
 
 
 
  Nine Months Ended September 30, 2017 and 2016
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
Item 2.
 
 
 
Item 6.
Items other than those listed above are omitted because they are not required or are not applicable.


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Review by Independent Registered Public Accounting Firm

The September 30, 2017, and 2016, consolidated financial statements included in this filing have been reviewed by KPMG LLP, an independent registered public accounting firm, in accordance with established professional standards and procedures for such a review.

The report of KPMG LLP commenting upon its review is included on the following page.

1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Aflac Incorporated:

We have reviewed the consolidated balance sheet of Aflac Incorporated and subsidiaries (the Company) as of September 30, 2017, the related consolidated statements of earnings, and comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2017 and 2016, and the related consolidated statements of shareholders' equity, and cash flows for the nine-month periods ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Aflac Incorporated and subsidiaries as of December 31, 2016, and the related consolidated statements of earnings, comprehensive income (loss), shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ KPMG LLP

Atlanta, Georgia
November 2, 2017


2

Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
(In millions, except for share and per-share amounts - Unaudited)
2017
2016
2017
2016
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Net premiums, principally supplemental health insurance
 
$
4,648

 
 
$
5,022

 
 
$
13,951

 
 
$
14,447

 
Net investment income
 
811

 
 
842

 
 
2,408

 
 
2,465

 
Realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment losses realized
 
(8
)
 
 
(23
)
 
 
(27
)
 
 
(71
)
 
Sales and redemptions
 
61

 
 
(14
)
 
 
60

 
 
100

 
Derivative and other gains (losses)
 
(23
)
 
 
(127
)
 
 
(199
)
 
 
(387
)
 
Total realized investment gains (losses)
 
30

 
 
(164
)
 
 
(166
)
 
 
(358
)
 
Other income (loss)
 
17

 
 
16

 
 
50

 
 
50

 
Total revenues
 
5,506

 
 
5,716

 
 
16,243

 
 
16,604

 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and claims, net
 
3,083

 
 
3,378

 
 
9,174

 
 
9,657

 
Acquisition and operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred policy acquisition costs
 
271

 
 
282

 
 
848

 
 
858

 
Insurance commissions
 
332

 
 
353

 
 
996

 
 
1,031

 
Insurance and other expenses
 
686

 
 
675

 
 
2,025

 
 
1,948

 
Interest expense
 
59

 
 
65

 
 
181

 
 
196

 
Total acquisition and operating expenses
 
1,348

 
 
1,375

 
 
4,050

 
 
4,033

 
Total benefits and expenses
 
4,431

 
 
4,753

 
 
13,224

 
 
13,690

 
Earnings before income taxes
 
1,075

 
 
963

 
 
3,019

 
 
2,914

 
Income taxes
 
359

 
 
334

 
 
998

 
 
1,006

 
Net earnings
 
$
716

 
 
$
629

 
 
$
2,021

 
 
$
1,908

 
Net earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.81

 
 
$
1.54

 
 
$
5.09

 
 
$
4.62

 
Diluted
 
1.80

 
 
1.53

 
 
5.05

 
 
4.59

 
Weighted-average outstanding common shares used in
computing earnings per share (In thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
394,479

 
 
408,519

 
 
397,323

 
 
413,023

 
Diluted
 
397,381

 
 
411,140

 
 
400,241

 
 
415,446

 
Cash dividends per share
 
$
.43

 
 
$
.41

 
 
$
1.29

 
 
$
1.23

 
See the accompanying Notes to the Consolidated Financial Statements.

3

Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions - Unaudited)
2017
2016
2017
2016
Net earnings
 
$
716

 
 
$
629

 
 
$
2,021

 
 
$
1,908

 
Other comprehensive income (loss) before income taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized foreign currency translation gains (losses) during
period
 
(58
)
 
 
195

 
 
325

 
 
1,783

 
Unrealized gains (losses) on investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on investment securities during
period
 
457

 
 
(527
)
 
 
1,006

 
 
4,855

 
Reclassification adjustment for realized (gains) losses on
investment securities included in net earnings
 
(50
)
 
 
33

 
 
(33
)
 
 
(33
)
 
Unrealized gains (losses) on derivatives during period
 
(1
)
 
 
0

 
 
0

 
 
11

 
Pension liability adjustment during period
 
1

 
 
0

 
 
(1
)
 
 
(6
)
 
Total other comprehensive income (loss) before income taxes
 
349

 
 
(299
)
 
 
1,297

 
 
6,610

 
Income tax expense (benefit) related to items of other comprehensive
income (loss)
 
219

 
 
(231
)
 
 
396

 
 
1,871

 
Other comprehensive income (loss), net of income taxes
 
130

 
 
(68
)
 
 
901

 
 
4,739

 
Total comprehensive income (loss)
 
$
846

 
 
$
561

 
 
$
2,922

 
 
$
6,647

 
See the accompanying Notes to the Consolidated Financial Statements.

4

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets
(In millions)
September 30, 2017
(Unaudited)
 
December 31,
2016
Assets:
 
 
 
 
 
 
 
Investments and cash:
 
 
 
 
 
 
 
Securities available for sale, at fair value:
 
 
 
 
 
 
 
Fixed maturities (amortized cost $67,970 in 2017 and $62,195 in 2016)
 
$
75,191

 
 
 
$
68,778

 
Fixed maturities - consolidated variable interest entities (amortized
cost $4,274 in 2017 and $4,168 in 2016)
 
5,224

 
 
 
4,982

 
Perpetual securities (amortized cost $1,310 in 2017 and $1,269 in 2016)
 
1,652

 
 
 
1,425

 
Perpetual securities - consolidated variable interest entities
(amortized cost $239 in 2017 and $237 in 2016)
 
211

 
 
 
208

 
Equity securities (cost $216 in 2017 and $231 in 2016)
 
238

 
 
 
265

 
Equity securities - consolidated variable interest entities
(cost $595 in 2017 and $972 in 2016)
 
690

 
 
 
1,044

 
Securities held to maturity, at amortized cost:
 
 
 
 
 
 
 
Fixed maturities (fair value $38,599 in 2017 and $40,021 in 2016)
 
31,998

 
 
 
33,350

 
Other investments (1)
 
2,358

 
 
 
1,450

 
Cash and cash equivalents
 
4,927

 
 
 
4,859

 
Total investments and cash
 
122,489

 
 
 
116,361

 
Receivables
 
937

 
 
 
669

 
Accrued investment income
 
730

 
 
 
754

 
Deferred policy acquisition costs
 
9,413

 
 
 
8,993

 
Property and equipment, at cost less accumulated depreciation
 
439

 
 
 
433

 
Other (2)
 
2,075

 
 
 
2,609

 
Total assets
 
$
136,083

 
 
 
$
129,819

 
(1) Includes $1,500 in 2017 and $819 in 2016 of loan receivables and limited partnerships from consolidated variable interest entities
(2) Includes $148 in 2017 and $127 in 2016 of derivatives from consolidated variable interest entities
See the accompanying Notes to the Consolidated Financial Statements.



(continued)

5

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets (continued)
(In millions, except for share and per-share amounts)
September 30, 2017
(Unaudited)
 
December 31,
2016
Liabilities and shareholders’ equity:
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Policy liabilities:
 
 
 
 
 
 
 
Future policy benefits
 
$
81,116

 
 
 
$
76,106

 
Unpaid policy claims
 
4,368

 
 
 
4,045

 
Unearned premiums
 
6,262

 
 
 
6,916

 
Other policyholders’ funds
 
6,967

 
 
 
6,659

 
Total policy liabilities
 
98,713

 
 
 
93,726

 
Income taxes
 
6,195

 
 
 
5,387

 
Payables for return of cash collateral on loaned securities
 
522

 
 
 
526

 
Notes payable
 
5,248

 
 
 
5,360

 
Other (3)
 
3,428

 
 
 
4,338

 
Total liabilities
 
114,106

 
 
 
109,337

 
Commitments and contingent liabilities (Note 12)
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
Common stock of $.10 par value. In thousands: authorized 1,900,000
shares in 2017 and 2016; issued 672,669 shares in 2017 and 671,249
shares in 2016
 
67

 
 
 
67

 
Additional paid-in capital
 
2,077

 
 
 
1,976

 
Retained earnings
 
27,489

 
 
 
25,981

 
Accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized foreign currency translation gains (losses)
 
(1,715
)
 
 
 
(1,983
)
 
Unrealized gains (losses) on investment securities
 
5,437

 
 
 
4,805

 
Unrealized gains (losses) on derivatives
 
(23
)
 
 
 
(24
)
 
Pension liability adjustment
 
(168
)
 
 
 
(168
)
 
Treasury stock, at average cost
 
(11,187
)
 
 
 
(10,172
)
 
Total shareholders’ equity
 
21,977

 
 
 
20,482

 
Total liabilities and shareholders’ equity
 
$
136,083

 
 
 
$
129,819

 
(3) Includes $132 in 2017 and $146 in 2016 of derivatives from consolidated variable interest entities
See the accompanying Notes to the Consolidated Financial Statements.



6

Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity
  
Nine Months Ended
September 30,
(In millions - Unaudited)
 
2017
 
 
 
2016
 
Common stock:
 
 
 
 
 
 
 
Balance, beginning of period
 
$
67

 
 
 
$
67

 
Balance, end of period
 
67

 
 
 
67

 
Additional paid-in capital:
 
 
 
 
 
 
 
Balance, beginning of period
 
1,976

 
 
 
1,828

 
Exercise of stock options
 
33

 
 
 
38

 
Share-based compensation
 
38

 
 
 
41

 
Gain (loss) on treasury stock reissued
 
30

 
 
 
29

 
Balance, end of period
 
2,077

 
 
 
1,936

 
Retained earnings:
 
 
 
 
 
 
 
Balance, beginning of period
 
25,981

 
 
 
24,007

 
Net earnings
 
2,021

 
 
 
1,908

 
Dividends to shareholders
 
(513
)
 
 
 
(511
)
 
Balance, end of period
 
27,489

 
 
 
25,404

 
Accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
Balance, beginning of period
 
2,630

 
 
 
625

 
Unrealized foreign currency translation gains (losses) during
period, net of income taxes
 
268

 
 
 
1,602

 
Unrealized gains (losses) on investment securities during period,
net of income taxes and reclassification adjustments
 
632

 
 
 
3,134

 
Unrealized gains (losses) on derivatives during period, net of
income taxes
 
1

 
 
 
7

 
Pension liability adjustment during period, net of income taxes
 
0

 
 
 
(4
)
 
Balance, end of period
 
3,531

 
 
 
5,364

 
Treasury stock:
 
 
 
 
 
 
 
Balance, beginning of period
 
(10,172
)
 
 
 
(8,819
)
 
Purchases of treasury stock
 
(1,053
)
 
 
 
(1,222
)
 
Cost of shares issued
 
38

 
 
 
55

 
Balance, end of period
 
(11,187
)
 
 
 
(9,986
)
 
Total shareholders’ equity
 
$
21,977

 
 
 
$
22,785

 
See the accompanying Notes to the Consolidated Financial Statements.

7

Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
  
Nine Months Ended September 30,
(In millions - Unaudited)
2017
 
2016
Cash flows from operating activities:
 
 
 
 
 
 
 
Net earnings
 
$
2,021

 
 
 
$
1,908

 
Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 
 
 
Change in receivables and advance premiums
 
(32
)
 
 
 
41

 
Increase in deferred policy acquisition costs
 
(229
)
 
 
 
(186
)
 
Increase in policy liabilities
 
2,137

 
 
 
2,329

 
Change in income tax liabilities
 
323

 
 
 
(365
)
 
Realized investment (gains) losses
 
166

 
 
 
358

 
Other, net
 
210

 
 
 
35

 
Net cash provided (used) by operating activities
 
4,596

 
 
 
4,120

 
Cash flows from investing activities:
 
 
 
 
 
 
 
Proceeds from investments sold or matured:
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Fixed maturities sold
 
2,633

 
 
 
978

 
Fixed maturities matured or called
 
740

 
 
 
774

 
Perpetual securities matured or called
 
9

 
 
 
234

 
Equity securities sold
 
755

 
 
 
173

 
Securities held to maturity:
 
 
 
 
 
 
 
Fixed maturities matured or called
 
1,714

 
 
 
946

 
Costs of investments acquired:
 
 
 
 
 
 
 
Available-for-sale fixed maturities acquired
 
(6,827
)
 
 
 
(4,871
)
 
Available-for-sale equity securities acquired
 
(391
)
 
 
 
(868
)
 
Other investments, net
 
(949
)
 
 
 
(801
)
 
Settlement of derivatives, net
 
(240
)
 
 
 
1,203

 
Cash received (pledged or returned) as collateral, net
 
(273
)
 
 
 
(350
)
 
Other, net
 
(58
)
 
 
 
(56
)
 
Net cash provided (used) by investing activities
 
(2,887
)
 
 
 
(2,638
)
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Purchases of treasury stock
 
(1,053
)
 
 
 
(1,222
)
 
Proceeds from borrowings
 
524

 
 
 
988

 
Principal payments under debt obligations
 
(660
)
 
 
 
(232
)
 
Dividends paid to shareholders
 
(491
)
 
 
 
(492
)
 
Change in investment-type contracts, net
 
39

 
 
 
117

 
Treasury stock reissued
 
23

 
 
 
37

 
Other, net
 
5


 
 
(31
)
 
Net cash provided (used) by financing activities
 
(1,613
)
 
 
 
(835
)
 
Effect of exchange rate changes on cash and cash equivalents
 
(28
)
 
 
 
273

 
Net change in cash and cash equivalents
 
68

 
 
 
920

 
Cash and cash equivalents, beginning of period
 
4,859

 
 
 
4,350

 
Cash and cash equivalents, end of period
 
$
4,927

 
 
 
$
5,270

 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
Income taxes paid
 
$
693

 
 
 
$
1,594

 
Interest paid
 
144

 
 
 
155

 
Noncash interest
 
38

 
 
 
41

 
Impairment losses included in realized investment losses
 
27

 
 
 
71

 
Noncash financing activities:
 
 
 
 
 
 
 
Capital lease obligations
 
7

 
 
 
2

 
Treasury stock issued for:
 
 
 
 
 
 
 
   Associate stock bonus
 
22

 
 
 
24

 
   Shareholder dividend reinvestment
 
22

 
 
 
19

 
   Share-based compensation grants
 
1

 
 
 
4

 
See the accompanying Notes to the Consolidated Financial Statements.

8

Aflac Incorporated and Subsidiaries
Notes to the Consolidated Financial Statements
(Interim period data – 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 and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac), which operates in the United States (Aflac U.S.) and as a branch in Japan (Aflac Japan). 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. Additionally, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. The Company's insurance operations in the United States and its branch in Japan service the two markets for the Company's insurance business. Aflac Japan's revenues, including realized gains and losses on its investment portfolio, accounted for 69% and 74% of the Company's total revenues in the nine-month periods ended September 30, 2017 and 2016, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 83% at both September 30, 2017, and December 31, 2016.

Basis of Presentation

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (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 unpaid policy claims, and income taxes. These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, mortality, morbidity, commission and other acquisition expenses, and terminations by policyholders. As additional information becomes available, or actual amounts are determinable, the recorded estimates will be revised and reflected in operating results. Although some variability is inherent in these estimates, the Company believes the amounts provided are adequate.

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 September 30, 2017, and December 31, 2016, the consolidated statements of earnings and comprehensive income (loss) for the three- and nine-month periods ended September 30, 2017 and 2016, and the consolidated statements of shareholders' equity and cash flows for the nine-month periods ended September 30, 2017 and 2016. 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, 2016 (2016 Annual Report).

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.

Prior year foreign currency transaction gains and losses have been reclassified from Other income (loss) to Realized investment gains (losses) - Derivative and other gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity. This change in classification was made to reflect that the major source of the Company's foreign currency transaction gains and losses is directly or indirectly a result of its investment activity.


9

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Consolidation - Interests Held through Related Parties That Are under Common Control: In October 2016, the FASB issued amendments which clarify the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting: In March 2016, the FASB issued amendments which simplify several aspects for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equity, and classification on the statement of cash flows. The Company adopted this guidance as of January 1, 2017.

The amendment requires prospective recognition of excess tax benefits and deficiencies in the income statement, rather than in paid-in capital. As a result of applying this requirement, the Company believes that recognition of excess tax benefits will increase volatility in its statement of operations, but the adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures. 

The amendment also requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The guidance requires modified retrospective transition for settlements on all outstanding awards (both historical and future) that did not give rise to an excess benefit to be recorded through retained earnings on a cumulative-effect basis. The adoption of these amendments in the guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Additionally, the amendment requires that the minimum statutory tax withholding for all outstanding liability awards be reclassified at the date of adoption to equity (assuming equity classification results from the guidance change), and as a cumulative-effect adjustment to equity be recorded on a modified retrospective basis. The adoption of these amendments in the guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

The guidance requires certain reclassifications of balances on the statement of cash flows to or from operating and financing activities. The reclassification guidance did not have a significant impact on the Company's statement of cash flows.

The amendment allows an entity to elect whether to use estimates of forfeitures, or to account for forfeitures as they occur, using modified retrospective application. The Company made an entity-wide accounting policy election to estimate the number of awards that are expected to vest (consistent with the Company's prior policy). The election and adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Investments - Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting: In March 2016, the FASB issued amendments which eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Per the amendments, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments: In March 2016, the FASB issued amendments which clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is

10

related to interest rates or credit risks. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships: In March 2016, the FASB issued amendments which clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The Company adopted this guidance as of January 1, 2017. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations, or disclosures.

Accounting Pronouncements Pending Adoption

Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities: In August 2017, FASB issued guidance which improves and simplifies the accounting rules around hedge accounting and will create more transparency around how economic results are presented on financial statements. Issues addressed in this new guidance include: 1) risk component hedging, 2) accounting for the hedged item in fair value hedges of interest rate risk, 3) recognition and presentation of the effects of hedging instruments, and 4) amounts excluded from the assessment of hedge effectiveness. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the guidance. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

Compensation-Stock Compensation: Scope of Modification Accounting: In May 2017, the FASB issued amendments to provide guidance clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. An entity should apply modification accounting if the fair value, vesting conditions or classification of the award (as an equity instrument or liability instrument) changes as a result of the change in terms or conditions of the award. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

Receivables-Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities: In March 2017, the FASB issued amendments to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an 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.

Compensation-Retirement Benefit: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost: In March 2017, the FASB issued amendments requiring that an employer report the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic pension cost and net periodic postretirement benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, disclosures, or statements of cash flows.

Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets: In February 2017, the FASB issued amendments that clarify the scope and accounting guidance for the derecognition of a nonfinancial asset or a financial asset that meets the definition of an "in substance nonfinancial asset." The amendments define an "in substance nonfinancial asset" and provide additional accounting guidance for partial sales of nonfinancial assets. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim

11

periods within those fiscal years. Earlier adoption is permitted for fiscal years beginning after December 15, 2016, including interim periods therein. An entity is required to apply the amendments at the same time that it applies the FASB amendments for Revenue from Contracts with Customers. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, disclosures, and statements of cash flows.

Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment: In January 2017, the FASB issued amendments simplifying the subsequent measurement of goodwill. An entity, under this update, is no longer required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, the entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendments are effective for public business entities that are U.S. Securities and Exchange Commission (SEC) filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for any goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, or disclosures.

Business Combinations - Clarifying the Definition of a Business: In January 2017, the FASB issued amendments clarifying when a set of assets and activities is a business. The amendments provide a screen to exclude transactions where substantially all the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. The amendments are effective for public business entities beginning after December 15, 2017, including interim periods within those periods. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, or disclosures.

Statement of Cash Flows - Restricted Cash: In November 2016, the FASB issued amendments requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a significant impact on its financial position, results of operations, disclosures, or statement of cash flows.

Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory: In October 2016, the FASB issued amendments that require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is evaluating the impact of adoption of this guidance on its financial position, results of operations, and disclosures.

Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments: In August 2016, the FASB issued amendments that provide guidance on eight specific statement of cash flows classification issues. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for any interim or annual period. The adoption of this guidance is not expected to have a significant impact on the Company's financial position, results of operations, disclosures, or statements of cash flows.

Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments: In June 2016, the FASB issued amendments that require a financial asset (or a group of financial assets) measured on an amortized cost basis to be presented net of an allowance for credit losses in order to reflect the amount expected to be collected on the financial asset(s). The measurement of expected credit losses is amended by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform about a credit loss. Credit losses on available-for-sale debt securities will continue to be measured in a manner similar to current U.S. GAAP. However, the amendments require that credit losses be presented as an allowance rather than as a writedown. Other amendments include changes to the balance sheet presentation and interest income recognition of purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The amendments are effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Companies may early adopt this guidance as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has identified certain financial instruments in scope of this guidance to include certain fixed maturity securities, loans and loan receivables and reinsurance recoverables (See Notes 3 and 7 for current balances of instruments in scope). The Company continues to evaluate the impact of adoption of this guidance on its financial position, results of operations, and disclosures.

12


Leases: In February 2016, the FASB issued updated guidance for accounting for leases. Per the amendments, lessees will be required to recognize all leases on the balance sheet with the exception of short-term leases. A lease liability will be recorded for the obligation of a lessee to make lease payments arising from a lease. A right-of-use asset will be recorded which represents the lessee’s right to use, or to control the use of, a specified asset for a lease term. Under the new guidance, lessor accounting is largely unchanged. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has identified certain operating leases in scope of this guidance to include office space and equipment leases (See Note 15 of the Notes to the Consolidated Financial Statements in the 2016 Annual Report for current balances of leases in scope). The leases within scope of this guidance will increase the Company's right-of-use assets and lease liabilities recorded on its statement of financial position, however the Company estimates leases within scope of the guidance to represent less than 1% of its total assets as of September 30, 2017. The Company estimates that the adoption of this guidance will not have a significant impact on its financial position, results of operations, and disclosures.

Financial Instruments - Overall - Recognition and Measurement of Financial Assets and Financial Liabilities: In January 2016, the FASB issued guidance to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require that equity investments be measured at fair value with changes recognized in net income; that changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option be recognized in other comprehensive income; and that entities would make the assessment of the ability to realize a deferred tax asset (DTA) related to an available-for-sale (AFS) debt security in combination with the entity's other DTAs. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted, with the exception of the own credit provision if an entity has elected to measure a liability at fair value. The Company has identified certain financial instruments in scope of this guidance to include certain fixed maturity securities, perpetual securities and equity securities (See Note 3 for current balances of instruments in scope). The Company estimates that the impact of this guidance will increase volatility in its statement of operations and the Company continues to evaluate the impact of this guidance on its statement of financial position, results of operations, and disclosures.

Revenue from Contracts with Customers: In May 2014, the FASB issued updated guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date for this standard to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods. The Company has identified revenue in scope of this guidance to include certain revenues associated with affiliated entities in support of its operations. The Company estimates the revenue within scope of the guidance to represent less than 1% of its total revenues as of September 30, 2017. The Company estimates that the adoption of this guidance will not have a significant impact on its financial position, results of operations, and 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 or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements in the 2016 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. Operating business segments that are not individually reportable and business activities, including reinsurance retrocession activities, not included in Aflac Japan or Aflac U.S. are included in the "Other business segments" category.

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 operating earnings. The Company's definition of operating earnings includes interest

13

cash flows associated with notes payable and amortized hedge costs related to foreign currency denominated investments, but excludes certain items that cannot be predicted or that are outside of management's control, such as realized investment gains and losses from securities transactions, impairments, change in loan loss reserves and certain derivative and foreign currency activities; nonrecurring items; and other non-operating income (loss) from net earnings. Nonrecurring and other non-operating items consist of infrequent events and activity not associated with the normal course of the Company’s insurance operations and do not reflect Aflac’s underlying business performance. The Company excludes income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment follows:
  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
(In millions)
2017
 
2016
 
2017
 
2016
 
Revenues:
 
 
 
 
 
 
 
 
Aflac Japan:
 
 
 
 
 
 
 
 
   Net earned premiums
$
3,200

 
$
3,596

 
$
9,616

 
$
10,177

 
   Net investment income, less amortized hedge costs (1)
561

 
607

 
1,676

 
1,802

 
   Other income
11

 
10

 
31

 
29

 
               Total Aflac Japan
3,772

 
4,213

 
11,323

 
12,008

 
Aflac U.S.:
 
 
 
 
 
 
 
 
   Net earned premiums
1,393

 
1,365

 
4,172

 
4,093

 
   Net investment income
181

 
176

 
539

 
526

 
   Other income
1

 
1

 
3

 
5

 
               Total Aflac U.S.
1,575

 
1,542

 
4,714

 
4,624

 
Other business segments
69

 
71

 
204

 
207

 
               Total business segment revenues
5,416

 
5,826

 
16,241

 
16,839

 
Corporate and eliminations
19

 
20

 
59

 
63

 
             Total operating revenues
5,435

 
5,846

 
16,300

 
16,902

 
Realized investment gains (losses) (1), (2), (3)
71

 
(130
)
 
(57
)
 
(298
)
 
           Total revenues
$
5,506

 
$
5,716

 
$
16,243

 
$
16,604

 
(1) Amortized hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60 and $54 for the three-month periods and $168 and $123 for the nine-month periods ended September 30, 2017, and 2016, respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from net investment income when analyzing segment operations to conform to current year reporting.
(2) Excluding a gain of $19 and $20 for the three-month periods and $60 and $64 for the nine-month periods ended September 30, 2017, and 2016, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations
(3) Prior year foreign currency transaction gains and losses have been reclassified from other non-operating income (loss) to realized investment gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on total revenues.

14

  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
(In millions)
2017
 
2016
 
2017
 
2016
 
Pretax earnings:
 
 
 
 
 
 
 
 
Aflac Japan (1)
$
748

 
$
827

 
$
2,308

 
$
2,436

 
Aflac U.S.
316

 
323

 
956

 
946

 
Other business segments
5

 
4

 
9

 
12

 
    Total business segment pretax operating earnings
1,069

 
1,154

 
3,273

 
3,394

 
Interest expense, noninsurance operations
(30
)
 
(31
)
 
(89
)
 
(90
)
 
Corporate and eliminations
(25
)
 
(31
)
 
(70
)
 
(91
)
 
    Pretax operating earnings
1,014

 
1,092

 
3,114

 
3,213

 
Realized investment gains (losses) (1), (2), (3)
71

 
(130
)
 
(57
)
 
(298
)
 
Other non-operating income (loss) (3)
(10
)
 
1

 
(38
)
 
(1
)
 
    Total earnings before income taxes
$
1,075

 
$
963

 
$
3,019

 
$
2,914

 
Income taxes applicable to pretax operating earnings
$
338

 
$
379

 
$
1,031

 
$
1,112

 
Effect of foreign currency translation on after-tax
operating earnings
(29
)
 
61

 
(31
)
 
110

 
(1) Amortized hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $60 and $54 for the three-month periods and $168 and $123 for the nine-month periods ended September 30, 2017, and 2016, respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from pretax operating earnings when analyzing segment operations to conform to current year reporting.
(2) Excluding a gain of $19 and $20 for the three-month periods and $60 and $64 for the nine-month periods ended September 30, 2017, and 2016, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations
(3) Prior year foreign currency transaction gains and losses have been reclassified from other non-operating income (loss) to realized investment gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on total earnings before income taxes.

Assets were as follows:
(In millions)
September 30,
2017
 
December 31,
2016
Assets:
 
 
 
 
 
 
 
Aflac Japan
 
$
113,625

 
 
 
$
107,858

 
Aflac U.S.
 
20,348

 
 
 
19,453

 
Other business segments
 
513

 
 
 
270

 
    Total business segment assets
 
134,486

 
 
 
127,581

 
Corporate and eliminations
 
1,597

 
 
 
2,238

 
    Total assets
 
$
136,083

 
 
 
$
129,819

 


15

3.
INVESTMENTS
Investment Holdings
The amortized cost for the Company's investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.
  
September 30, 2017
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale, carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
27,027

 
 
 
$
3,272

 
 
 
$
423

 
 
 
$
29,876

 
Municipalities
 
315

 
 
 
26

 
 
 
15

 
 
 
326

 
Mortgage- and asset-backed securities
 
248

 
 
 
29

 
 
 
0

 
 
 
277

 
Public utilities
 
1,643

 
 
 
369

 
 
 
7

 
 
 
2,005

 
Sovereign and supranational
 
1,428

 
 
 
190

 
 
 
3

 
 
 
1,615

 
Banks/financial institutions
 
3,307

 
 
 
494

 
 
 
59

 
 
 
3,742

 
Other corporate
 
3,811

 
 
 
771

 
 
 
25

 
 
 
4,557

 
Total yen-denominated
 
37,779

 
 
 
5,151

 
 
 
532

 
 
 
42,398

 
  U.S. dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
150

 
 
 
12

 
 
 
0

 
 
 
162

 
Municipalities
 
818

 
 
 
148

 
 
 
0

 
 
 
966

 
Mortgage- and asset-backed securities
 
166

 
 
 
13

 
 
 
0

 
 
 
179

 
Public utilities
 
5,231

 
 
 
813

 
 
 
34

 
 
 
6,010

 
Sovereign and supranational
 
325

 
 
 
89

 
 
 
0

 
 
 
414

 
Banks/financial institutions
 
2,683

 
 
 
592

 
 
 
7

 
 
 
3,268

 
Other corporate
 
25,092

 
 
 
2,388

 
 
 
462

 
 
 
27,018

 
Total U.S. dollar-denominated
 
34,465

 
 
 
4,055

 
 
 
503

 
 
 
38,017

 
Total fixed maturities
 
72,244

 
 
 
9,206

 
 
 
1,035

 
 
 
80,415

 
Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Banks/financial institutions
 
1,308

 
 
 
277

 
 
 
32

 
 
 
1,553

 
Other corporate
 
195

 
 
 
41

 
 
 
0

 
 
 
236

 
  U.S. dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Banks/financial institutions
 
46

 
 
 
28

 
 
 
0

 
 
 
74

 
Total perpetual securities
 
1,549

 
 
 
346

 
 
 
32

 
 
 
1,863

 
Equity securities:
 


 
 
 


 
 
 


 
 
 


 
      Yen-denominated
 
555

 
 
 
95

 
 
 
2

 
 
 
648

 
      U.S. dollar-denominated
 
256

 
 
 
30

 
 
 
6

 
 
 
280

 
Total equity securities
 
811

 
 
 
125

 
 
 
8

 
 
 
928

 
Total securities available for sale
 
$
74,604

 
 
 
$
9,677

 
 
 
$
1,075

 
 
 
$
83,206

 

16

  
September 30, 2017
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair  
Value  
Securities held to maturity, carried at amortized cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
21,385

 
 
 
$
5,070

 
 
 
$
0

 
 
 
$
26,455

 
Municipalities
 
359

 
 
 
104

 
 
 
0

 
 
 
463

 
Mortgage- and asset-backed securities
 
27

 
 
 
2

 
 
 
0

 
 
 
29

 
Public utilities
 
3,308

 
 
 
426

 
 
 
0

 
 
 
3,734

 
Sovereign and supranational
 
1,527

 
 
 
319

 
 
 
0

 
 
 
1,846

 
Banks/financial institutions
 
2,700

 
 
 
205

 
 
 
18

 
 
 
2,887

 
Other corporate
 
2,692

 
 
 
493

 
 
 
0

 
 
 
3,185

 
Total yen-denominated
 
31,998

 
 
 
6,619

 
 
 
18

 
 
 
38,599

 
Total securities held to maturity
 
$
31,998

 
 
 
$
6,619

 
 
 
$
18

 
 
 
$
38,599

 

17

  
December 31, 2016
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale, carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies
 
$
22,857

 
 
 
$
3,359

 
 
 
$
160

 
 
 
$
26,056

 
Municipalities
 
246

 
 
 
29

 
 
 
8

 
 
 
267

 
Mortgage- and asset-backed securities
 
1,096

 
 
 
33

 
 
 
8

 
 
 
1,121

 
Public utilities
 
1,533

 
 
 
318

 
 
 
3

 
 
 
1,848

 
Sovereign and supranational
 
862

 
 
 
186

 
 
 
5

 
 
 
1,043

 
Banks/financial institutions
 
2,673

 
 
 
403

 
 
 
74

 
 
 
3,002

 
Other corporate
 
3,192

 
 
 
623

 
 
 
3

 
 
 
3,812

 
Total yen-denominated
 
32,459

 
 
 
4,951

 
 
 
261

 
 
 
37,149

 
  U.S dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
148

 
 
 
10

 
 
 
0

 
 
 
158

 
Municipalities
 
894

 
 
 
142

 
 
 
8

 
 
 
1,028

 
Mortgage- and asset-backed securities
 
196

 
 
 
20

 
 
 
0

 
 
 
216

 
Public utilities
 
5,205

 
 
 
690

 
 
 
60

 
 
 
5,835

 
Sovereign and supranational
 
335

 
 
 
91

 
 
 
0

 
 
 
426

 
Banks/financial institutions
 
2,570

 
 
 
507

 
 
 
16

 
 
 
3,061

 
Other corporate
 
24,556

 
 
 
2,021

 
 
 
690

 
 
 
25,887

 
Total U.S. dollar-denominated
 
33,904

 
 
 
3,481

 
 
 
774

 
 
 
36,611

 
Total fixed maturities
 
66,363

 
 
 
8,432

 
 
 
1,035

 
 
 
73,760

 
Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Banks/financial institutions
 
1,266

 
 
 
128

 
 
 
49

 
 
 
1,345

</