Financial Analysts Briefing Supplement Fourth Quarter 2017

Transcription

1 Financial Analysts Briefing Supplement Fourth Quarter 2017 This document is a statistical supplement to the Financial Analysts Briefing book. Throughout the presentation, amounts presented may not foot due to rounding. As you review the supplement, please note: The following discussion includes references to Aflac s non-u.s. GAAP performance measures, operating earnings, operating earnings per diluted share, amortized hedge costs, and adjusted book value. These measures are not calculated in accordance with U.S. GAAP. The measures exclude items that the company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations. Management uses operating earnings and operating earnings per diluted share to evaluate the financial performance of Aflac s insurance operations on a consolidated basis and believes that a presentation of these measures is vitally important to an understanding of the underlying profitability drivers and trends of Aflac s insurance business. The company believes that amortized hedge costs, which are a component of operating earnings, measure the periodic currency risk management costs associated with hedging a portion of Aflac Japan s U.S. dollar-denominated investments and are an important component of net investment income. The Company considers adjusted book value important as it excludes accumulated other comprehensive income (AOCI), which fluctuates due to market movements that are outside management s control. Aflac defines these non-u.s.gaap financial measures as follows: Operating earnings includes interest cash flows associated with notes payable and amortized hedge costs related to foreign currency denominated investments, but excludes certain items that cannot be predicted or that are outside of management's control, such as realized investment gains and losses from securities transactions, impairments, change in loan loss reserves and certain derivative and foreign currency activities; nonrecurring items; and other non-operating income (loss) from net earnings. 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. A reconciliation of net earnings to operating earnings is on page 2. Operating earnings per share (basic or diluted) are the operating earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. Amortized hedge costs represent costs incurred in using foreign currency forward contracts to hedge the foreign exchange risk of a portion of U.S. dollar-denominated assets in the company's Japan segment investment portfolio. These amortized hedge costs are derived from the difference between the foreign currency spot rate at time of trade inception and the contractual foreign currency forward rate, recognized on a straight line basis over the term of the hedge. There is no comparable U.S. GAAP financial measure for amortized hedge costs. Adjusted book value is the U.S. GAAP book value, less Accumulated Other Comprehensive Income ( AOCI as recorded on the U.S. GAAP balance sheet). Because a significant portion of the company's business is conducted in Japan and foreign exchange rates are outside of management s control, Aflac believes it is important to understand the impact of translating Japanese yen into U.S. dollars. Operating earnings per diluted share excluding foreign currency impact are computed using the average yen/dollar exchange rate for the comparable prior year period, which eliminates dollar based fluctuations driven solely from currency rate changes. On January 1, 2016, the Company retrospectively adopted revised accounting guidance for Accounting for Costs Associated with Debt Issuance, which resulted in an immaterial decrease to other assets and notes payable. On January 1, 2016, the Company revised its definition of purchases to include the reinvestment of proceeds related to unplanned sale activity. New purchases include all purchases related to fixed maturities and perpetuals, loan receivables, and equities. Securities lending/repurchase agreement activity and capital contributions to alternatives are excluded. The definition of new money yield has also been revised to reflect this change. Yields for equities are based on assumed dividend yield at time of purchase. Historical amounts have been revised to reflect the new definitions. Effective January 1, 2017, operating earnings includes the impact of amortized hedge costs incurred in using foreign currency forward contracts to hedge a portion of the foreign currency exchange risk on the U.S. dollar-denominated assets in Aflac Japan's investment portfolio. Prior period operating earnings have been revised to conform to this change. On January 1, 2017, the Company adopted a policy to classify all foreign currency gains (losses) as components of the Certain derivatives and foreign currency gains (losses) line item of the income statement, which is a component of Realized investment gains (losses). Amounts have been reclassified from Other income and Securities transactions and impairments for all prior periods to be consistent with the current period. Aflac Incorporated Aflac U.S. Aflac Japan Page Share Data... 1 Summary of Operating Results... 2 Statements of Earnings... 3 Analysis of Net Earnings and Net Earnings Per Share... 4 Quarterly Financial Results... 6 Quarterly Book Value Per Share... 7 Currency Impact on Operating Earnings Per Share... 8 Investment Results... 9,10,11 Long-Term Debt Data Statement of Earnings Operating Ratios Sales Results... 17,18 Statement of Earnings... 19,20 Operating Ratios Sales Results... 25,26,27 For more information, contact: David Young Phone Aflacir@aflac.com aflac.com 01/31/2018 DF.1

2 Aflac Incorporated and Subsidiaries Share Data (In Thousands) Beginning Shares Issued Shares Purchased Ending QTD Weighted Avg. Shares YTD Weighted Avg. Shares Shares Stk. Bon. Stk. Opt. Treas. Misc. Shares Avg. Dilutive Avg. Avg. Dilutive Avg. Period Outstanding & DRP & Misc. Shares Purch. (1) Outstanding Shares Shares Diluted Shares Shares Diluted , ,020 9, , ,306 2, , ,306 2, , , , , ,672 2, , ,473 2, , , , , ,735 2, , ,540 2, , , , , ,056 2, , ,654 2, , , , , ,748 2, , ,748 2, , , , , ,853 2, , ,301 2, , , , , ,519 2, , ,023 2, , , , , ,847 2, , ,471 2, , , , , ,130 2, , ,130 2, , , , , ,433 2, , ,768 2, , , , , ,479 2, , ,323 2, , , , , ,159 2, , ,021 2, ,930 (1) Includes swapped shares and/or shares purchased for deferred compensation program 1

3 Aflac Incorporated and Subsidiaries Summary of Operating Results by Business Segment (In Millions, except per-share data and where noted) Years Ended December 31, 3 Months Ended December 31, 12 Months Ended December 31, % % Change Change Aflac Japan $ 3,899 $ 3,604 $ 3,423 $ 3,103 $ 3,148 $ 711 $ $ 3,148 $ 3,054 (3.0) Aflac U.S ,038 1,073 1,101 1, ,208 1, Interest expense, non-insurance operations (184) (198) (198) (146) (128) (38) (33) (128) (122) Parent company, other operations and eliminations (59) (70) (80) (57) (111) (32) (31) (111) (92) Pretax operating earnings 4,653 4,374 4,218 4,001 4, ,117 4,086 (.8) Income taxes 1,559 1,504 1,444 1,377 1, ,426 1,370 (3.9) Operating earnings (1) 3,094 2,870 2,774 2,624 2, ,691 2,716.9 Reconciling items: Securities transactions and impairments (503) (42) 55 (9) Certain derivatives and foreign currency gains (losses) (2) (56) Other and non-recurring income (loss) (2) (7) (233) (137) (137) (31) (137) (69) Income tax benefit (expense) on items excluded from operating earnings 123 (153) (95) (87) (10) tax reform adjustment (3) 1,700 1,700 Net earnings $ 2,866 $ 3,158 $ 2,951 $ 2,533 $ 2,659 $ 751 $ 2, $ 2,659 $ 4, Effective Tax rate 33.4 % 34.4 % 34.3 % 34.4 % 34.6 % 34.6 % (135.3) % 34.5 % (8.8) % Earnings per share of common stock: Net earnings (basic) $ 6.14 $ 6.80 $ 6.54 $ 5.88 $ 6.46 $ 1.85 $ $ 6.46 $ Net earnings (diluted) Operating earnings (basic) (1) $ 6.63 $ 6.18 $ 6.15 $ 6.09 $ 6.54 $ 1.45 $ $ 6.54 $ Operating earnings (diluted) (1) (1) See definition of operating earnings on cover page. All prior period operating earnings have been adjusted for the reclassification of amortized hedge costs for consistency with current period presentation. (2) Foreign currency gains (losses) for all periods have been reclassified from Other and non-recurring income (loss) to Certain derivatives and foreign currency gains (losses). (3) This estimated impact of Tax Reform may be adjusted in future periods, possibly materially, due to, among other things, further refinement of the company s calculations, changes in interpretations and assumptions the company has made, tax guidance that may be issued and actions the company may take as a result of Tax Reform. This is a non-recurring item that is separately identified because as a tax item there is no additional "net of tax" effect. 2

4 Aflac Incorporated and Subsidiaries Consolidated Statements of Earnings - US GAAP (In Millions, except per-share data) Years Ended December 31, 3 Months Ended December 31, 12 Months Ended December 31, % % Change Change Revenues: Net premiums Gross premiums $ 22,168 $ 20,233 $ 19,412 $ 17,904 $ 19,592 $ 4,868 $ 4,665 $ 19,592 $ 18,875 Assumed (ceded) (20) (98) (340) (334) (367) (80) (85) (367) (345) Total net premiums 22,148 20,135 19,072 17,570 19,225 4,778 4,580 (4.1) 19,225 18,531 (3.6) Net investment income 3,473 3,293 3,319 3,135 3, (.1) 3,278 3,220 (1.8) Realized investment gains (losses) (1) (349) (14) (14) (151) Other income (1) Total revenues 25,364 23,939 22,728 20,872 22,559 5,955 5,424 (8.9) 22,559 21,667 (4.0) Benefits and Expenses: Benefits and claims, net Incurred claims -direct 10,378 9,110 8,738 7,952 8,780 2,216 2,182 8,780 8,853 Incurred claims -assumed (ceded) (19) (90) (283) (314) (356) (89) (111) (356) (446) Increase in FPB -direct 4,971 4,798 4,496 4,089 4,460 1, ,460 3,628 Increase in FPB -assumed (ceded) (5) (14) Total net benefits and claims 15,330 13,813 12,937 11,746 12,919 3,262 3,007 (7.8) 12,919 12,181 (5.7) Acquisition and operating expenses: Amortization of D.A.C. 1,117 1,074 1,108 1,066 1, ,141 1,132 Insurance commissions 1,744 1,528 1,436 1,303 1, ,368 1,316 Insurance expenses 2,415 2,222 2,261 2,214 2, ,452 2,780 Interest expense Other expenses Total acquisition and operating expenses 5,732 5,310 5,300 5,264 5,573 1,540 1,418 (7.9) 5,573 5,468 (1.9) Total benefits and expenses 21,062 19,123 18,237 17,010 18,492 4,802 4,425 (7.9) 18,492 17,649 (4.6) Pretax earnings 4,302 4,816 4,491 3,862 4,067 1, ,067 4,018 Income taxes 1,436 1,658 1,540 1,329 1, (1,352) 1,408 (353) Net earnings $ 2,866 $ 3,158 $ 2,951 $ 2,533 $ 2,659 $ 751 $ 2, $ 2,659 $ 4, (1) Foreign currency gains (losses) for all periods have been reclassified from Other income to Realized investment gains (losses) for consistency with current period presentation. 3

5 Aflac Incorporated and Subsidiaries Analysis of Net Earnings and Net Earnings Per Diluted Share (In Millions, except for per-share data) Real. Inv. Gains (Losses) (1) Real. Inv. Gains (Losses) (1) Securities Certain Deriv. Other and Operating Securities Certain Deriv. Other and Non- Operating Net Transactions/ and Foreign Non-Recurring Currency Net Transactions/ and Foreign Recurring Currency Earnings Impairments Currency G/L Items Impact Period Earnings Impairments (3) Currency G/L (3) Items (1)(3)(4) Impact (2) Per Share Per Share (3) Per Share (3) Per Share (1)(3)(4) Per Share (2) ,866 (327) 104 (5) (.70).22 (.01) , (357) (.76) , (117) (.26) , (36) (151) (198) (.08) (.34) (.46) , (89) (.22) ,371 (6) 6 (1,745) (41) (.01).02 (4.37) (.10) (46) (58) (.11) (.13) (150) (59) (.35) (.14) (72) (23) (58) 1.32 (.17) (.05) (.13) (1) (23) (.05) (24) (.06) (7) (128) (.02) (.31) (24) (61) (.06) (.15) (89) (.22) (11) (60) (13) (.03) (.15) (.03) (2) (11) (5) (9) 1.79 (.01) (.03) (.01) (.02) (7) (29) (.02) (.07) 4 2,351 (27) 65 (1,720) (10) 5.95 (.07).16 (4.35) (.03) (1) Items are presented net of tax at a 35% tax rate. (2) See definition of foreign currency impact from cover page (3) Foreign currency gains/(losses) and amortized hedge costs for all periods have been reclassified from Other income to Realized investment gains (losses), and from Certain derivatives and foreign currency gains (losses) to operating income (not disclosed on this page), respectively, for consistency with current period presentation. (4) Includes $1.7 billion in Q related to 2018 tax reform adjustment 4

6 Aflac Incorporated and Subsidiaries Consolidated Balance Sheets (In Millions, except per-share data) December 31, Assets: Investments and cash: Securities available for sale: Fixed Maturities $ 51,466 $ 53,227 $ 61,407 $ 60,795 $ 68,778 $ 77,230 Fixed Maturities - consolidated variable interest entities 5,787 4,843 4,166 4,554 4,982 5,294 Perpetual securities 3,728 2,479 2,240 1,719 1,425 1,574 Perpetual securities - consolidated variable interest Equity securities Equity securities - consolidated variable interest entities 363 1, Securities held to maturity: Fixed Maturities 54,137 44,178 34,159 33,459 33,350 31,430 Fixed Maturities - consolidated variable interest entities Other Investments ,450 3,402 Cash and cash equivalents 2,041 2,543 4,658 4,350 4,859 3,491 Total investments and cash 118, , , , , ,659 Receivables, primarily premiums, net 976 1, Accrued investment income Deferred policy acquisition costs 9,658 8,798 8,273 8,511 8,993 9,505 Property and equipment, net Other assets 798 1,567 2,080 1,948 2,609 2,023 Total assets $ 131,057 $ 121,268 $ 119,727 $ 118,256 $ 129,819 $ 137,217 Liabilities and Shareholders' Equity: Liabilities: Total policy liabilities $ 97,720 $ 89,402 $ 83,933 $ 87,631 $ 93,726 $ 99,147 Notes payable 4,315 4,858 5,242 4,971 5,360 5,289 Income taxes, primarily deferred 3,858 3,718 5,293 4,340 5,387 4,978 Other liabilities 9,186 8,670 6,912 3,606 4,864 3,438 Total liabilities 115, , , , , ,852 Shareholders' equity: Common stock Additional paid-in capital 1,505 1,644 1,711 1,828 1,976 2,120 Retained earnings 17,387 19,885 22,156 24,007 25,981 29,662 Accumulated other comprehensive income (loss): Unrealized foreign currency translation gains (losses) 333 (1,505) (2,541) (2,196) (1,983) (1,750) Unrealized gains (losses) on investment securities 2,570 1,035 4,672 2,986 4,805 5,964 Unrealized gains (losses) on derivatives (5) (12) (26) (26) (24) (23) Pension liability adjustment (183) (81) (126) (139) (168) (163) Treasury stock (5,696) (6,413) (7,566) (8,819) (10,172) (11,512) Total shareholders' equity 15,978 14,620 18,347 17,708 20,482 24,365 Total liabilities & shareholders' equity $ 131,057 $ 121,268 $ 119,727 $ 118,256 $ 129,819 $ 137,217 5

7 Aflac Incorporated and Subsidiaries Quarterly Financial Results (Dollars In Millions, except per-share data) Total Net Net Benefits Acquisitions Total Net EPS Oper. EPS (1) Premium Inv. Total & & Pretax Net Operating Period Income Income Revenues Claims Oper. Exp. Earn. Earn. Earn. (1) Basic Dil. Basic Dil ,148 3,473 25,364 15,330 5,732 4,302 2,866 3, ,135 3,293 23,939 13,813 5,310 4,816 3,158 2, ,072 3,319 22,728 12,937 5,300 4,491 2,951 2, ,570 3,135 20,872 11,746 5,264 3,862 2,533 2, ,225 3,278 22,559 12,919 5,573 4,067 2,659 2, ,531 3,220 21,667 12,181 5,468 4,018 4,371 2, , ,226 2,952 1,261 1, , ,287 2,937 1, , ,040 2,927 1, , ,319 2,930 1,279 1, , ,451 3,025 1,309 1, , ,437 3,254 1, , ,716 3,378 1, , ,955 3,262 1,540 1, , ,309 3,052 1, , ,428 3,039 1,344 1, , ,506 3,083 1,348 1, , ,424 3,007 1, , (1) See definition of operating earnings on cover page. All prior period operating earnings and operating earnings per share have been adjusted for the reclassification of amortized hedge costs for consistency with current period presentation. 6

8 Aflac Incorporated and Subsidiaries Quarterly Book Value Per Share (Dollars In Millions, except per-share data) Adjusted BV Adjusted BV Per Share Incl Equity AOCI Adjusted BV Per Share Incl Foreign Currency BV Per BV Per Adjusted BV Per Share Foreign Currency Translation G/(L) Period Share Share Per Share (1) % Change Translation G/(L) (1) % Change % % (1.23) % % % % % % % % % % % % % (1.6)% % % % % % % % % % % % % % % % % % % % % (1) See definition of Adjusted Book Value on cover page 7

9 Aflac Incorporated and Subsidiaries Currency Impact on Operating Earnings Per Share (1) (Diluted Basis) Change QTD YTD Excluding Excluding Foreign Foreign Foreign Foreign Operating Currency Currency Currency Currency Period EPS (1) Growth Impact (2) Impact (2) Impact (2) Impact 2012 $ % N/A.01 $ % 2013 $ 6.14 (6.8)% N/A (.76) $ % 2014 $ 6.11 (.5)% N/A (.26) $ % 2015 $ 6.06 (.8)% N/A (.46) $ % 2016 $ % N/A.34 $ % 2017 $ % N/A (.10) $ % $ 1.52 (9.6)% (.13) (.13) $ 1.65 (1.8)% (10.8) (.14) (.27) 1.62 (2.3) (.13) (.40) (.05) (.46) $ 6.06 (.8)% $ % $ % $ % (5.5) (10.7) $ % $ % $ 1.67 (.6)% $ 1.66 (1.2)% (.02) (.01) (2.3) (.07) (.08) (.03) (.10) $ % $ % (1) See definition of operating earnings per share from cover page. All prior period operating earnings have been adjusted for the reclassification of amortized hedge costs for consistency with current period presentation. (2) See definition of foreign currency impact from cover page. 8

10 Aflac Incorporated and Subsidiaries Composition of Invested Assets (In Millions) December 31, Debt Securities (1) Fixed Maturities, excluding Bank Loans $ 107,425 $ 100,425 $ 92,126 $ 92,713 $ 97,695 $ 103,165 Fixed Maturities - Bank Loans ,388 2,018 1,935 Perpetual Securities 4,213 2,987 2,440 1,841 1,506 1,462 Total Debt Securities 112, ,913 95,067 95, , ,562 Loan Receivables, net of reserves (1) Middle Market Loans Commercial Mortgage Loans (2) 855 2,143 Total Loan Receivables 118 1,174 3,002 Equity Securities (1) , Alternatives (3) 113 Total Portfolio $ 112,072 $ 103,930 $ 95,086 $ 96,540 $ 103,596 $ 110,523 Unrealized Gains (Losses) on Invested Assets (In Millions) December 31, Debt Securities Available For Sale - Gross Gains $ 4,712 $ 3,654 $ 8,127 $ 6,605 $ 8,608 $ 9,985 Available For Sale - Gross Losses (783) (2,135) (710) (1,792) (1,084) (804) Total Available For Sale 3,929 1,519 7,417 4,813 7,524 9,181 Held to Maturity - Gross Gains 1,213 2,041 4,379 4,278 6,735 6,651 Held to Maturity - Gross Losses (798) (610) (124) (217) (64) (9) Total Held to Maturity 415 1,431 4,255 4,061 6,671 6,642 Loan Receivables Gross Gains 1 1 Gross Losses (33) (16) Total Loan Receivables (32) (15) Equity Securities Gross Gains Gross Losses (1) (1) (4) (8) (3) Total Equities (1) Presented at amortized cost (2) Includes Transitional Real Estate (TRE) loans (3) Presented at carrying value; includes asset classes such as private equity and real estate managed by Global Investments; excludes Corporate driven activity 9

11 Aflac Incorporated and Subsidiaries Supplemental Investment Data by Segment 3 Months Ended December 31, December 31, Aflac Japan: Invested assets (in millions) (1) 8,870,864 9,986,250 10,240,112 10,259,013 10,711,399 11,017,560 10,711,399 11,017,560 Return on average invested assets (2) 2.86 % 2.81 % 2.76 % 2.81 % 2.47 % 2.31% 2.35 % 2.31 % Portfolio book yield at end of period (3) 2.87 % 2.80 % 2.83 % 2.80 % 2.62 % 2.56% 2.62 % 2.56 % Total purchases for period (in millions) (3) 2,248,632 2,002,324 1,037, ,967 1,198,579 1,078, , ,897 New money yield (3)(4) 2.25 % 2.11 % 2.07 % 2.89 % 1.40 % 1.98% 0.88 % 2.33 % Aflac U.S.: Invested assets (in millions) (1) $ 10,629 $ 11,564 $ 12,660 $ 13,661 $ 14,124 $ 13,764 $ 14,124 $ 13,764 Return on average invested assets (2) 6.25 % 5.70 % 5.46 % 5.19 % 5.04 % 5.07% 5.03 % 5.18 % Portfolio book yield at end of period (3) 6.28 % 6.01 % 5.89 % 5.77 % 5.60 % 5.52% 5.60 % 5.52 % Total purchases for period (in millions) (3) $ 1,511 $ 1,038 $ 963 $ 904 $ 1,144 $ 1,434 $ 301 $ 335 New money yield (3)(4) 4.17 % 4.06 % 4.32 % 4.45 % 3.89 % 4.49% 3.79 % 4.80 % Hedge Cost Metrics (5) 3 Months Ended December 31, December 31, FX forward notional at end of period (in USD billions) (6) Weighted average original tenor (in months) (7) Weighted average remaining tenor (in months) (8) Annualized amortized hedge costs (in basis points) (9) Amortized hedge costs for period (in millions) $ (5) $ (24) $ (35) $ (72) $ (186) $ (228) $ (64) $ (60) (1) (2) (3) (4) (5) (6) (7) (8) (9) Invested assets, including cash and short term investments, are stated at amortized cost; except for equities, which are at fair value. Net of investment expenses and amortized hedge costs, year-to-date number reflected on a quarterly average basis Includes fixed maturities and perpetual securities, loan receivables, and equities, and excludes alternative investments in limited partnerships Reported on a gross yield basis; excludes investment expenses, external management fees, and amortized hedge costs See definition of amortized hedge costs on cover page Notional is reported net of any offsetting positions Tenor based on derivative's original execution date to settlement date Tenor based on period reporting date to settlement date Based on annualized amortized hedge costs divided by average FX forward notional for the period 10

12 Aflac Incorporated and Subsidiaries Credit Ratings on Fixed Maturities and Perpetual Securities (At Amortized Cost) December 31, Credit Rating AAA 1.5% 1.4% 1.3% 1.3% 2.0% 1.0% AA A BBB BB or Lower % 100.0% 100.0% 100.0% 100.0% 100.0% Portfolio Allocation by Currency (Dollars In Millions, US GAAP Basis) Amortized Cost December 31, 2017 Japan Segment Fair Value Amortized Cost US Segment Fair Value JGB 48,399 56,532 Other 23,970 27,847 Total yen denominated 72,369 84,379 US dollar denominated 24,082 26,265 12,708 14,449 Total 96, ,644 12,708 14,449 11

13 Aflac Incorporated and Subsidiaries Long-Term Debt Data Adjusted Leverage Ratios (In Millions) 12 Months Ended December 31, December 31, Adjusted debt (1) $ 4,065 $ 4,284 $ 4,992 $ 4,721 $ 4,460 $ 4,460 $ 5,024 Adjusted capitalization (2) 17,478 17,879 18,693 19,143 20,161 20,161 23,448 Adjusted debt to adjusted capitalization 23.3 % 24.0 % 26.7 % 24.7 % 22.1 % 22.1 % 21.4 % Revised adjusted capitalization (3) $ 17,578 $ 19,717 $ 21,610 $ 22,054 $ 22,562 $ 22,562 $ 25,626 Adjusted debt to revised adjusted capitalization 23.1 % 21.7 % 23.1 % 21.4 % 19.8 % 19.8 % 19.6 % Debt Maturities (4) (In Millions) December 31, year 1 > 5 years 5 > 10 years 10 > 20 years 20 years + Total Senior Notes $ $ 944 $ 2,952 $ $ 881 $ 4,777 Subordinated debt Total $ $ 944 $ 2,952 $ $ 1,412 $ 5,308 Ratings December 31, 2017 Financial Strength: Aflac of Columbus Long-Term Senior Debt: Aflac Inc. S&P Moody's AM Best R&I Fitch S&P Moody's AM Best R&I Fitch Rating A+ Aa3 A+ AA- A+ A- A3 a- A A- (1) The debt amount is the sum of the gross notes payable and has been adjusted for 50% of our subordinated debentures. The debt was also adjusted between 2nd quarter of 2013 and 2nd quarter of 2014 for the portion of senior notes designated as pre-funding of 2014 maturities. (2) Adjusted capitalization is the sum of the adjusted debt plus shareholders' equity, excluding the unrealized gains and losses on investment securities and derivatives (3) Revised adjusted capitalization is the sum of debt, excluding pre-funding amounts, plus shareholders' equity excluding AOCI (4) Debt maturity amounts do not include discounts, premiums, deferred charges, or capital lease obligations. 12

14 Aflac U.S. Statements of Pretax Operating Earnings (Before Management Fee) (In Millions) Years Ended December 31, 3 Months Ended December 31, 12 Months Ended December 31, % % Change Change Revenues: Net premiums Gross premiums $ 4,990 $ 5,146 $ 5,206 $ 5,342 $ 5,452 $ 1,360 $ 1,391 $ 5,452 $ 5,563 Assumed (ceded) Total net premiums 4,996 5,153 5,211 5,347 5,454 1,361 1, ,454 5, Net investment income Other income excl. realized foreign exchange gains (losses) Total operating revenues 5,628 5,791 5,859 6,033 6,167 1,543 1, ,167 6, Benefits and expenses: Benefits and claims, net Incurred claims -direct 2,388 2,468 2,477 2,514 2, ,515 2,526 Incurred claims -assumed (ceded) (2) (2) 1 (1) 1 (1) (1) (4) Increase in FPB -direct Increase in FPB -assumed (ceded) 2 Total net benefits and claims 2,834 2,889 2,853 2,873 2, ,869 2,885.6 Amortization of deferred policy acquisition costs General operating expenses 1,397 1,431 1,474 1,571 1, (1.8) 1,593 1, Total benefits and expenses 4,631 4,753 4,786 4,932 4,959 1,281 1, ,959 5, Pretax operating earnings $ 997 $ 1,038 $ 1,073 $ 1,101 $ 1,208 $ 262 $ $ 1,208 $ 1,

15 Aflac U.S. Balance Sheets (In Millions) December 31, Assets: Investments and cash $ 12,420 $ 12,221 $ 14,311 $ 14,340 $ 15,223 $ 15,488 Receivables, principally premiums, net Accrued investment income Deferred policy acquisition costs 2,857 2,979 3,062 3,142 3,228 3,355 Other assets Total assets $ 16,122 $ 16,112 $ 18,383 $ 18,537 $ 19,453 $ 19,893 Liabilities and Shareholders' Equity: Future policy benefits $ 6,931 $ 7,354 $ 7,728 $ 8,087 $ 8,442 $ 8,805 Policy and contract claims 1,278 1,421 1,511 1,609 1,652 1,699 Unearned premium Other policyholders' funds Deferred income taxes 1, Other liabilities 983 1,083 1,353 1,453 1,471 1,625 Shareholders' equity 5,367 5,314 6,720 6,966 7,049 6,674 Total liabilities & shareholders' equity $ 16,122 $ 16,112 $ 18,383 $ 18,537 $ 19,453 $ 19,893 14

16 Aflac U.S. Quarterly Statements of Pretax Operating Earnings and Percentage Changes (Restated to conform to current classifications) (Dollars In Millions) Net Net Total General Total Pretax Earned % Invest. % Operating % Total % % Oper. % Oper. % Oper. % Period Prem. Change Income Change Revenues Change Ben. Change Amort. Change Exp. Change Exp. Change Earn. Change , , , , , , , , , , , , , ,853 (1.2) , , , , , , , , , , , ,869 (.1) , , , , , , , , , , , (1.5) (6.1) 2 1, , (2.0) 3 1, , , , (3.4) , , (2.9) (1.0) , , (.3) 3 1, , (2.7) , , (7.0) , , (.7) (6.7) 2 1, , (3.8) 116 (.9) , , (2.2) 4 1, , (1.8) 558 (.2)

17 Aflac U.S. Operating Ratios (Before Management Fee) Premium Tot. Oper. Combined Pretax Persistency Tot. Ben./ Amort./ Expenses/ Ratio/ Profit Period Rate Premium Premium Total Rev. Total Rev. Margin

18 Aflac U.S. Aflac U.S. Sales Results (Dollars In Millions) Annl. New Annl. Prem. % Prem. % Period In Force Change Sales Change , , , ,424 (4.3) , , , , , ,482 (.3) , , , (.5) 2 5, , , , , , (1.8) 4 5, (2.9) , , , ,

19 Aflac U.S. Aflac U.S. Product Mix (New Annualized Premium Sales, Dollars in Millions) % of % of % of Critical % of Hospital % of Dental/ % of % of Period STD Total Life Total Accident Total Care (1) Total Indemnity Total Vision Total Other Total Aflac U.S. Sales Force Data Average Productivity Weekly (Production/ Recruited Agents Producer Avg. Weekly Period Career Broker Total Equivalents Producers) ,757 5,198 24,955 10, , ,410 4,631 22,041 9, , ,935 3,864 21,799 9, , ,649 2,826 21,475 9, , ,167 2,425 18,592 9, , ,817 3,073 19,890 8, , , ,406 9,019 35, , ,791 9,152 37, , ,418 8,910 37, , ,860 9,927 50, , ,721 9,069 36, , ,957 9,007 38, , ,812 8,678 37, , ,101 9,492 50, , ,059 8,844 37, , ,157 8,749 40, , ,903 8,497 40, ,768 1,001 4,769 9,143 56,302 (1) Includes cancer, critical illness, and hospital intensive care products 18

20 Aflac Japan Statements of Pretax Operating Earnings (Before Management Fee) (In Millions) Years Ended December 31, 3 Months Ended December 31, 12 Months Ended December 31, % % Change Change Revenues: Net premiums Gross premiums 1,370,560 1,471,640 1,499,689 1,520,403 1,534, , ,809 1,534,961 1,493,299 Assumed (ceded) (2,080) (10,508) (36,729) (62,710) (65,456) (16,140) (15,570) (65,456) (62,873) Total net premiums 1,368,480 1,461,132 1,462,960 1,457,693 1,469, , ,239 (3.3) 1,469,505 1,430,426 (2.7) Net investment income: Yen denominated 151, , , , ,180 36,146 36, , ,114 (.7) US$ denominated 75, , , , ,473 32,574 33, , ,168 (.2) Net investment income 227, , , , ,653 68,720 69, , ,282 (.5) Amortized hedge costs on foreign investments (1)(2) (431) (2,319) (3,554) (8,666) (20,804) (6,722) (6,438) (4.2) (20,804) (24,528) 17.9 Net investment income, less amortized hedge costs on foreign investments 226, , , , ,849 61,998 63, , ,754 (2.0) Other income excl. realized foreign currency gains (losses) 4,603 5,322 3,383 3,723 4,297 1,072 1,110 4,297 4,640 Total operating revenues 1,599,861 1,722,897 1,744,201 1,747,607 1,730, , ,826 (2.5) 1,730,651 1,686,820 (2.5) Benefits and expenses: Benefits and claims, net Incurred claims -direct 637, , , , , , , , ,251 Incurred claims -assumed (ceded) (1,395) (8,858) (30,290) (52,915) (56,422) (14,077) (13,953) (56,422) (55,691) Increase in FPB -direct 361, , , , , ,634 91, , ,376 Increase in FPB -assumed (ceded) (487) (1,741) (3,344) (2,602) (578) (265) (2,602) (1,557) Total net benefits and claims 997,209 1,065,175 1,064,301 1,053,474 1,066, , ,636 (7.2) 1,066,905 1,019,378 (4.5) Amortization of deferred policy acquisition costs 57,168 62,623 68,550 69,902 69,839 17,342 17,294 (.3) 69,839 70, General operating expenses 234, , , , ,316 63,032 65, , ,131.3 Total benefits and expenses 1,288,748 1,371,357 1,383,095 1,372,149 1,389, , ,144 (5.0) 1,389,060 1,343,180 (3.3) Pretax operating earnings 311, , , , ,591 77,850 84, , ,640.6 (1) See definition of amortized hedge costs on cover page (2) Amortized hedge costs have been included in operating earnings (as a reduction of net investment income and operating revenues) in accordance with the revised definition of operating earnings. All prior periods have been adjusted for this reclassification for consistency with current period presentation 19

21 Aflac Japan Statements of Pretax Operating Earnings (Before Management Fee) (In Millions) Years Ended December 31, 3 Months Ended December 31, 12 Months Ended December 31, % % Change Change Revenues: Net premiums Gross premiums $ 17,177 $ 15,087 $ 14,206 $ 12,563 $ 14,140 $ 3,507 $ 3,273 $ 14,140 $ 13,312 Assumed (ceded) (26) (105) (345) (517) (603) (147) (138) (603) (561) Total net premiums 17,151 14,982 13,861 12,046 13,537 3,360 3,136 (6.7) 13,537 12,752 (5.8) Net investment income Yen denominated 1,902 1,497 1,429 1,227 1, (2.7) 1,346 1,294 (3.9) US$ denominated 943 1,154 1,233 1,209 1, (.3) 1,208 1,169 (3.2) Net investment income 2,845 2,651 2,662 2,436 2, (1.6) 2,554 2,463 (3.6) Amortized hedge costs on foreign investments (1)(2) (5) (24) (35) (72) (186) (64) (60) (6.3) (186) (228) 22.6 Net investment income, less amortized hedge costs on foreign investments 2,840 2,627 2,627 2,364 2, (1.1) 2,368 2,235 (5.6) Other income excl. realized foreign currency gains (losses) Total operating revenues 20,048 17,664 16,520 14,441 15,945 3,936 3,705 (5.9) 15,945 15,028 (5.8) Benefits and expenses: Benefits and claims, net Incurred claims -direct 7,990 6,641 6,261 5,438 6,265 1,583 1,547 6,265 6,332 Incurred claims -assumed (ceded) (17) (88) (284) (436) (519) (129) (123) (519) (497) Increase in FPB -direct 4,523 4,376 4,123 3,731 4,106 1, ,106 3,265 Increase in FPB -assumed (ceded) (5) (16) (28) (24) (5) (2) (24) (14) Total net benefits and claims 12,496 10,924 10,084 8,705 9,828 2,488 2,227 (10.5) 9,828 9,087 (7.5) Amortization of deferred policy acquisition costs (3.8) (2.0) Operating expenses 2,937 2,495 2,364 2,055 2, ,326 2,257 (3.0) Total benefits and expenses 16,149 14,060 13,097 11,338 12,797 3,224 2,958 (8.3) 12,797 11,974 (6.4) Pretax operating earnings $ 3,899 $ 3,604 $ 3,423 $ 3,103 $ 3,148 $ 711 $ $ 3,148 $ 3,054 (3.0) (1) See definition of amortized hedge costs on cover page (2) Amortized hedge costs have been included in operating earnings (as a reduction of net investment income and operating revenues) in accordance with the revised definition of operating earnings. All prior periods have been adjusted for this reclassification for consistency with current period presentation. 20

22 Aflac Japan Balance Sheets (In Millions) December 31, Assets: Investments and cash 9,070,942 9,956,712 10,957,847 10,763,982 11,463,613 11,854,224 Receivables, principally premiums, net 48,978 77,023 46,498 30,941 24,102 37,692 Accrued investment income 57,900 65,595 70,342 69,957 65,475 64,439 Deferred policy acquisition costs 588, , , , , ,025 Other assets 75, , , , , ,050 Total assets 9,842,269 10,852,349 11,877,192 11,777,043 12,564,392 12,927,431 Liabilities and Shareholders' Equity: Future policy benefits 6,019,908 6,510,973 6,981,769 7,507,247 7,955,244 8,323,560 Policy and contract claims 238, , , , , ,248 Unearned premiums 1,019,848 1,108,717 1,025, , , ,977 Other policyholders' funds 443, , , , , ,117 Income taxes (prim. deferred) 246, , , , , ,747 Other liabilities 696, , , , , ,143 Shareholders' equity 1,177,356 1,299,369 1,769,843 1,637,170 1,900,832 2,245,640 Total liabilities & shareholders' equity 9,842,269 10,852,349 11,877,192 11,777,043 12,564,392 12,927,431 21

23 Aflac Japan Balance Sheets (In Millions) December 31, Assets: Investments and cash $ 104,769 $ 94,475 $ 90,899 $ 89,246 $ 98,409 $ 104,905 Receivables, principally premiums, net Accrued investment income Deferred policy acquisition costs 6,801 5,819 5,211 5,370 5,765 6,151 Other assets 873 1,326 1,445 2,194 2,915 2,443 Total assets $ 113,678 $ 102,973 $ 98,525 $ 97,646 $ 107,858 $ 114,402 Liabilities and Shareholders' Equity: Future policy benefits $ 69,530 $ 61,780 $ 57,916 $ 62,244 $ 68,291 $ 73,660 Policy and contract claims 2,756 2,342 2,120 2,193 2,392 2,692 Unearned premiums 11,779 10,520 8,509 7,739 6,799 5,841 Other policyholders' funds 5,118 5,660 6,030 6,284 6,659 6,939 Income taxes (prim. deferred) 2,850 3,218 4,333 3,948 4,684 4,069 Other liabilities 8,047 7,124 4,936 1,664 2,715 1,328 Shareholders' equity 13,598 12,329 14,681 13,574 16,318 19,873 Total liabilities & shareholders' equity $ 113,678 $ 102,973 $ 98,525 $ 97,646 $ 107,858 $ 114,402 22

24 Aflac Japan Quarterly Statements of Pretax Operating Earnings and Percentage Changes (Yen In Millions) Net NII, less Total General Total Pretax Earned % Hedge % Operating % Total % % Operating % Operating % Oper. % Period Premiums Change Costs (1)(2) Change Revenues (1)(2) Change Benefits Change Amort. Change Expense Change Expense Change Earn. (1)(2) Change ,368, , ,599, , , , , , ,461, , ,722, ,065, , , , , ,462, , ,744, ,064,301 (.1) 68, , , , ,457,693 (.4) 286, ,747, ,053,474 (1.0) 69, ,773 (.6) 318, , ,469, ,849 (10.3) 1,730,651 (1.0) 1,066, ,839 (.1) 252, , ,591 (9.0) ,430,426 (2.7) 251,754 (2.0) 1,686,820 (2.5) 1,019,378 (4.5) 70, , , , , , , , , ,874 (3.0) 77,672 (1.2) 96, ,240 (1.2) 71, ,649 (.3) 263,305 (.3) 17, , , ,861 (4.3) 3 364,280 (.8) 71, , ,589 (4.3) 17, , , , , ,192 (1.9) 437, ,289 (1.1) 17,339 (3.9) 61,838 (7.0) 79,177 (6.3) 95, , ,899 (5.1) 435,899 (.7) 263,632 (.6) 17,453 (1.9) 61, , ,852 (3.4) 2 367, ,166 (8.9) 434, , , , , ,548 (3.7) 3 368, ,787 (14.1) 431,140 (1.4) 266, ,008 (3.4) 63,097 (1.0) 80,105 (1.5) 84,342 (10.6) 4 366, ,998 (12.9) 429,491 (1.9) 271, ,342 63, , ,850 (18.2) ,907 (1.1) 63,648 (6.3) 427,728 (1.9) 260,028 (1.4) 17, , , ,621 (5.6) 2 357,956 (2.7) 62,132 (4.7) 421,222 (3.0) 252,369 (4.9) 18, ,134 (3.3) 80,737 (1.9) 88, ,324 (3.5) 62, ,045 (2.8) 255,345 (4.3) 17, , , ,222 (1.3) 4 354,239 (3.3) 63, ,826 (2.5) 251,636 (7.2) 17,294 (.3) 65, , , (1) See definition of amortized hedge costs on cover page (2) Amortized hedge costs have been included in operating earnings (as a reduction of net investment income and operating revenues) in accordance with the revised definition of operating earnings effective January 1, All prior periods have been adjusted for this reclassification for consistency with current period presentation. 23

25 Aflac Japan Operating Ratios (Before Management Fee) Premium Tot. Ben./ Tot. Oper. Combined Pretax Persistency Tot. Ben./ Premiums Amort./ Expenses/ Ratio/ Profit Period Rate Premium (3rd sector) Premium Total Rev. Total Rev. (2) Margin (1)(2) (1) See definition of amortized hedge costs on cover page (2) Amortized hedge costs have been included in operating earnings (as a reduction of net investment income and operating revenues) in accordance with the revised definition of operating earnings effective January 1, All prior periods have been adjusted for this reclassification for consistency with current period presentation. 24

26 Aflac Japan Aflac Japan Sales Results (Yen In Millions, unless otherwise noted) Annl. Third Sector Prem. New Annl. New Annl. Total In Force % Prem. % Prem. % New % Period (Billions) Change Sales Change Sales Change Premium Change , , ,444 (4.6) 210, , ,155 (29.1) 67, ,308 (29.1) , ,375 (23.3) 71, ,513 (23.3) , , , , ,606.1 (.7) 113,612 (5.9) 83, ,721 (5.9) ,552.2 (3.4) 94,752 (16.6) 87, ,851 (16.6) , ,949 (2.2) 18, ,981 (2.2) 2 1, , , , , , , , , ,619 (5.1) 21,352 (12.7) 31,650 (5.1) , , , , , ,221 (1.1) 22, ,250 (1.1) 3 1, ,494 (16.2) 21, ,513 (16.2) 4 1,606.1 (.7) 25,770 (18.5) 21, ,796 (18.5) ,585.9 (2.0) 22,025 (29.2) 19, ,054 (29.2) 2 1,568.8 (3.3) 25,388 (16.0) 23, ,407 (16.0) 3 1,558.3 (3.7) 23,718 (10.5) 22, ,741 (10.5) 4 1,552.2 (3.4) 23,621 (8.3) 21, ,649 (8.3) 25

27 Aflac Japan Aflac Japan Product Mix (New Annualized Premium Sales, Yen In Billions) % of % of Income % of Child % of % of Ordinary % of % of Period Cancer Total Medical (1) Total Support Total Endowment Total WAYS Total Life Other Total Other Total (1) Includes stand-alone medical and other medical riders, including Rider MAX 26

28 Aflac Japan Aflac Japan Sales Force Data Number of Agencies by Type Sales Contribution by Agency Type Period Individual/ Independent Corporate Affiliated Corporate Bank Total Individual/ Independent Corporate Affiliated Corporate Bank Licensed Sales Associates (1) Recruited Agencies ,703 1, , ,266 3, ,228 1, , ,584 1, ,871 1, , , ,585 1, , , ,560 1, , , ,492 1, , , ,501 1, , , ,218 1, , , ,897 1, , , ,585 1, , , ,334 1, , , ,079 1, , , ,826 1, , , ,560 1, , , ,295 1, , , ,063 1, , , ,781 1, , , ,492 1, , , (1) Excludes Dai-ichi Life, banks, Japan Post Group and Daido Life 27