INCOME TAXES

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of pretax earnings for the year ended December 31, 2025 were as follows:

(In millions)	Foreign			U.S.			Total
2025:
Pretax earnings		$	3,321		$	1,212		$	4,533

The Company elected a prospective implementation for the adoption of ASU 2023-09 Income Taxes (Topic 740). See Note 1 for additional information.

The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as follows:

(In millions)	Foreign			U.S.			Total
2025:
Current		$	785		$	330		$	1,115
Deferred		217			(445)			(228)
Total income tax expense		$	1,002		$	(115)		$	887
2024:
Current		$	1,196		$	134		$	1,330
Deferred		159			(515)			(356)
Total income tax expense		$	1,355		$	(381)		$	974
2023:
Current		$	1,275		$	388		$	1,663
Deferred		(160)			(900)			(1,060)
Total income tax expense		$	1,115		$	(512)		$	603

The Japan income tax rate for the fiscal years 2025, 2024 and 2023 was 28.0%. The Japan income tax rate will increase to 28.9% beginning April 1, 2026. The Bermuda corporate income tax rate for the 2025 fiscal year was 15%.

Aflac Japan holds certain U.S. dollar-denominated assets in a Delaware Statutory Trust (DST). These assets are mostly comprised of various U.S. dollar-denominated commercial mortgage loans. The functional currency of the DST for U.S. tax purposes was historically the Japanese yen. In 2022, the Company requested a change in tax accounting method through the Internal Revenue Service's automatic consent procedures to change the functional currency of the DST for U.S. tax purposes to the U.S. dollar. As a result, foreign currency translation gains or losses on assets held in the DST are no longer recognized for U.S. tax purposes. The non-taxable foreign currency translation gain/loss resulting from the method change resulted in the Company recognizing an income tax expense of $23 million in 2025. The Company recognized an income tax benefit of $208 million in 2024 and $174 million in 2023.

Income tax expense in the accompanying consolidated statements of earnings varies from the amount computed by applying the expected U.S. tax rate of 21% to pretax earnings.

The principal reasons for the differences and the related tax effects for the year ended December 31, 2025 were as follows:

(In millions)	2025
Income taxes based on U.S. statutory rates		$	952	21.0	%
Domestic federal reconciling items:
Tax credits
Solar tax credits		(54)		(1.2)
Other tax credits		(41)		(.9)
Nontaxable and nondeductible items
DST functional currency change		23		.5
Other nontaxable and nondeductible items, net		23		.5
Effects of cross-border tax laws
U.S. effects of foreign branch		(184)		(4.0)
Changes in tax law		(112)		(2.5)
Other, net		(19)		(.4)
Foreign reconciling items:
Japan:
Japan federal rate differential		69		1.5
Japan local rate differential		151		3.3
Changes in tax law		112		2.5
Other foreign tax effects, Japan		3		.1
Bermuda:
Bermuda corporate income tax credit		(26)		(.6)
Bermuda rate differential		(10)		(.2)
Income tax expense		$	887	19.6	%

For the year ended December 31, 2025, applicable U.S. state income taxes were immaterial.

The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:

(In millions)	2024			2023
Income taxes based on U.S. statutory rates		$	1,348		$	1,105
DST functional currency change		(208)			(174)
Solar and historic tax credits, net of amortization		(164)			(348)
Other, net		(2)			20
Income tax expense		$	974		$	603

(In millions)	2025			2024			2023
Statements of earnings		$	887		$	974		$	603
Other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) during   period		(6)			160			140
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity   securities during period		(489)			(265)			520
Reclassification adjustment for (gains) losses   on fixed maturity securities included in net earnings		(1)			(41)			(35)
Unrealized gains (losses) on derivatives during period		2			1			1
Effect of changes in discount rate assumptions during period		1,603			1,214			(122)
Pension liability adjustment during period		21			5			7
Total income tax expense (benefit) related to items of   other comprehensive income (loss)		1,130			1,074			511
Total income taxes		$	2,017		$	2,048		$	1,114

The components of income taxes paid, net of refunds received for the year ended December 31, 2025 were as follows:

(In millions)	2025
U.S. federal	$	104
Foreign:
Japan federal	970
Other foreign taxes	91
Total income taxes paid, net of refunds	$	1,165

The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of December 31 were as follows:

(In millions)	2025			2024
Deferred income tax liabilities:
Deferred policy acquisition costs		$	2,695		$	2,637
Unrealized gains and other basis differences on investments		0			615
Foreign currency gain on Aflac Japan		0			1
Premiums receivable		36			43
Policy benefit reserves		6,585			2,509
Other		237			54
Total deferred income tax liabilities		9,553			5,859
Deferred income tax assets:
Unfunded retirement benefits		4			4
Other accrued expenses		40			32
Policy and contract claims		504			514
Foreign currency loss on Aflac Japan		7			0
Deferred compensation		0			31
Depreciation		295			255
Anticipatory foreign tax credit		4,966			3,262
Deferred foreign tax credit and carryforward		1,098			1,428
Unrealized losses and other basis differences in investments		1,360			0
Total deferred income tax assets		8,274			5,526
Net deferred income tax (asset) liability		1,279			333
Current income tax (asset) liability		89			240
Total income tax liability		$	1,368		$	573

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. The Company has determined no valuation allowance against its anticipatory foreign tax credits is necessary. The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan deferred tax liabilities in the future. Deferred foreign tax credits are foreign tax credits generated in the current tax year by the Japanese life company, but are unable to be utilized until 2026 due to Japan's current tax year not closing until March 31, 2026. Based upon a review of the Company's anticipated future taxable income, and including all other available evidence, both positive and negative, the Company's management has concluded that it is more likely than not that all other deferred tax assets will be realized.

Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income each year. For current U.S. income tax purposes, as of December 31, 2025, there were non-life operating loss carryforwards of $26 million available to offset against future taxable income, which expire after December 31, 2040, and there were life operating loss carryforwards available to offset against future taxable income of $106 million, which do not expire. The Company has no capital loss carryforwards available to offset capital gains. The Company has a foreign tax credit carryforward of $296 million as of December 31, 2025, which expires after December 31, 2034.

The Company files federal income tax returns in the U.S., Japan, and Bermuda as well as state or prefecture income tax returns in various jurisdictions in the two countries. The 2023 U.S. federal consolidated tax return is currently under examination. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax returns for years before 2022 are no longer subject to examination. Japan corporate income tax returns for years before the tax year ended March 2023 are no longer subject to examination. Management believes it has established adequate tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's consolidated financial statements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31:

(In millions)	2025		2024
Balance, beginning of year	$	0	$	1
Reductions for tax positions of prior years	0		(1)
Balance, end of year	$	0	$	0

Included in the balance of the liability for unrecognized tax benefits at December 31, 2025 and 2024, were no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. As of December 31, 2025, the Company did not have an accrual for permanent uncertainties and therefore did not have an effect on the annual effective rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognized no interest and penalties in 2025, and an immaterial amount of interest and penalties in 2024 and 2023.