AFL 10-K & 10-Q changes, risk factors and insider trading

The Company faces a wide range of risks, and its continued success depends on its ability to identify, prioritize, and appropriately manage enterprise risk exposures. Readers should carefully consider each of the following risks and all of the other information set forth in this Form 10-K. These risks and other factors may affect forward-looking statements, including those in this document or made by the Company elsewhere, such as in earnings release webcasts, investor conference presentations or press releases. The risks and uncertainties described herein may not be the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial may also adversely affect its business. If any of the following risks and uncertainties develops into actual events, there could be a material impact on the Company.Company's business, results of operations, financial condition and liquidity.

The Company's results of operations are materially affected by conditions in the global capital markets and the global economy generally, including in its two primary operating markets of the U.S. and Japan. HighInflation ratesglobally remains elevated but continues to trend downwards after monetary tightening, recovery of inflation globally from 2022 continued to be reduced due to monetary tightening in many countries and normalization of certain trends after COVID-19, including supply chain recoverychains, and phasing out of extraordinary fiscal support. In the U.S. and other regions, inflation rates reduced to a level that supported monetary loosening by central banks, but the risk of a return to increasing inflation remains alongside risks of weakening economic conditions. The Bank of Japan remains an exception to the major central bank loosening trends, ending a prolonged period of negative interest rates on bank reserves in March 2024. Continuing geopolitical tensions, including armed conflicts in Ukraine and theregime Middle Eastchanges, exacerbate uncertainty and havecan contributedcontribute to volatility inacross energyboth physical and otherfinancial commodityasset prices.classes. Economic uncertainty is also drivenimpacted by potential policy changes from a new presidential administration in the U.S.U.S., including proposalsproposed todomestic imposeregulations focused on consumer pricing, trade tariffs and the potential for retaliatory tariffs from other countries, as well as increasing trade restrictions driven by security concerns.concerns and broader geopolitical tensions. Continuing higher interest rates and softer economic conditions could impact the creditworthiness and value of the Company's existing investment portfolio, influence opportunities for new investments and have a negative impact on the Company's results of operations and financial positions.

The Company's investments are vulnerable to adverse market developments such as asset price volatility, lack of market liquidity, credit rating downgrades, payment defaults, asset restructurings, increased losses, and other risks. The Company has evaluated its holdings and identified investments in areas such as commercial real estate and highly leveraged companies as the most exposed to continued high interest rates and an economic downturn. These investments are experiencing and may continue to experience higher credit losses, credit rating downgrades and/or defaults and a deterioration in the value of collateral in the case of secured investments. The Company has examined in each case whether a reduction in size of the holdings is appropriate. The Company has identified assets impacted or expected to be impacted by continued high interest rates and economic contraction, but other investments not identified to date may also be impacted. The availability of new investments in certain private market asset classes has been and may continue to be limited. The Company may need to adjust its investment strategy and/or be forced to liquidate investments to pay claims. In addition, the continuing difference between interest rates in the U.S. and Japan contributed to a weakening of the yen over 2024, which had the effect of suppressing the Company's current period results in relation to the comparable prior period. The continuing difference between U.S. dollar and Japanese yen interest rates also contributes to costs of hedging foreign currency exchange risk of U.S. dollar-denominated investments held by Aflac Japan. The Company is not able to predict the ultimate impact of inflation, interest rate changes, interest rate differences and other changing market conditions on the Company’s investments and hedging programs. See the risk factor below entitled, “The Company is exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and liquidity” for additional information. See the Investments and Results of Operations by Segment sections of Item 7. MD&A, for additional information.

As the Company holds a significant amount of fixed maturity securities issued by borrowers located in many different parts of the world, its financial results are directly influenced by global financial markets. RecentPotential weakness in global capital markets could adversely affect the Company's financial condition, including its capital position and overall profitability. Market volatility and recessionary pressures could result in significant realized or unrealized losses due to severe price declines driven by high interest rates or increases in credit spreads, defaults in payment of principal or interest, or credit rating downgrades.

Japan is the largest market for the Company's insurance products, and the Company owns substantial holdings in Japan Government Bonds (JGBs). Government actions to stimulate the economy affect the value of the Company's existing Item 1A. Risk Factors holdings, its reinvestment rate on new investments in JGBs or other Japanese yen-denominated assets, and consumer behavior relative to the Company's suite of insurance products. The additional government debt from fiscal stimulus Item 1A. Risk Factors actions could adversely impact the Japan sovereign credit profile, which could in turn lead to volatility in Japanese capital and currency markets. The Bank of Japan ended its policy of negative interest rates in March 2024, and uncertainty about future Japan interest rate changes and the impact of increased rates on the Japanese economy could also contribute to volatility in Japanese markets.

Most of the Company's investments carry a rating by one or more of the Nationally Recognized Statistical Rating Organizations (NRSROs or rating agencies). Any change in the rating agencies' approach to evaluating credit and assigning an opinion could negatively impact the fair value of the Company's portfolio. Any expected or sustained credit deterioration of the Company's investments will negatively impact the Company's net income and capital position through credit impairment and other credit related losses. Credit related losses that are not temporary in nature would also affect the Company's solvency ratios in the U.S., Japan and Bermuda. Aflac Japan has certain regulatory accounting requirements for realizing impairments that could be triggered by credit-related losses, which may be different from U.S. GAAP and statutory requirements. These impairment losses could negatively impact Aflac Japan's earnings, and the Item 1A. Risk Factors corresponding dividends and capital deployment. The Company is also subject to the risk that any collateral providing credit enhancement to the Company's investments could deteriorate.

The Company's exposure to interest rate risk relates primarily to the ability to invest future cash flows to support the interest rate assumption made at the time of the establishment of the Company's product pricing and reserving. Low levels of interest rates on investments experienced in Japan and the U.S. over the last decade have also reduced the level of investment income earned by the Company. In spite of recent decreases in interest rates in the U.S. and other regions and interest rate increases in Japan, interest rates in Japan remain lower than in the U.S., and the Company's overall level of investment income will continue to be negatively impacted from Japan’s low interest rates from investments made in prior periods at lower rates and from decreasing rates in the U.S. While the Company generally seeks to maintain a diversified portfolio of fixed-income investments that reflects the cash flow and duration characteristics of the liabilities it supports, the Company may not be able to fully mitigate the interest rate risk of its assets relative to its liabilities. Prolonged periods of low interest rates also heighten the risk associated with future increases in interest rates because an increasing proportion of the Company's investment portfolio include investments that bear lower rates of return than the embedded book yield of the investment portfolio. The Company’s current interest rate hedging programs are primarily focused on addressing risks of floating rate investments and are not designed to fully protect against the impact of interest rate changes on the Company. In addition, uncertainty regarding the timing, pace and magnitude of future interest rate changes could further increase fluctuations in the value of the Company’s assets and liabilities and adversely affect its capital position and liquidity.

Conversely and concurrently, a rise in interest rates would improve the Company's ability to earn higher rates of return on future investments, as well as floating rate investments held in its investment portfolio. A rise in interest rates also decreases the LFPB, which could result in increases to the Company's overall equity. However, rising interest rates negatively impact the fair values of the Company's fixed maturity investments which could result in reductions to the Company's overall equity. Portfolio management considerations, the availability of investments, as well as declines in fair value may constrain the ability of the Company to transition its investments to higher rate securities. Significant increases in interest rates could cause declines in the values of the Company's investment portfolio which have a secondary impact on the Company's overall evaluation of its deferred tax asset position. An increase in the differential of short-term U.S. and Japan interest rates would also increase the cost of hedging a portion of the U.S. dollar-denominated assets inheld theby Aflac Japan segmentinto intoJapanese yen, which could have a material adverse effect on the Company's business, results of operations or financial condition. Further, some of the insurance products that Aflac sells in the U.S. and Japan provide cash surrender values, and a rise in interest rates could trigger significant policy surrenders, which might require the Company to sell investment assets and recognize unrealized losses. Rising interest rates also negatively impact capital ratios in certain jurisdictions because unrealized losses on the available-for-sale investment portfolio factor into the ratio. In addition to the unrealized losses negatively impacting capital ratios, significant unrealized losses could impact the amount of dividends Item 1A. Risk Factors that could be paid under local regulations, including in Japan. For Aflac Japan, rising interest rates and widening credit Item 1A. Risk Factors spreads, which reduce the fair value of Aflac Japan’s fixed-maturity investments, when combined with a strengthening Japanese yen, and the resulting decrease in the Japanese yen value of Aflac Japan’s U.S. dollar-denominated fixed-maturity investments, have a negative impact on Aflac Japan's regulatory capital. For regulatory accounting purposes for Aflac Japan, there are also certain requirements for realizing impairments that could be triggered by rising interest rates, negatively impacting Aflac Japan's regulatory earnings and corresponding dividends and capital deployment.

Any potential deterioration in Japan's credit quality or access to markets, the overall economy of Japan, or an increase in Japanese market volatility could adversely impact Aflac Japan's operations and its financial condition and thereby Aflac's overall financial performance. Further, because of the concentration of the Company's business in Japan and its need for long-dated Japanese yen-denominated assets, the Company has a substantial concentration of JGBs in its investment portfolio exposing the Company to credit deterioration and potential downgrades of JGBs. See the risk factor entitled “Any decrease in the Company's financial strength or debt ratings may have an adverse effect on its competitive position and access to liquidity and capital” for additional information.

The Company seeks to match investment currency and interest rate risk to its Japanese yen liabilities. The low interest rates on Japanese yen-denominated securities has a negative effect on overall net investment income. A large portion of the cash available for reinvestment each year is deployed in Japanese yen-denominated instruments and subject to the low level of Japanese yen interest rates.

Lack of availability of acceptable Japanese yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity.

The Company aims to match both the duration and currency of its assets with its liabilities. This is very difficult for Aflac Japan and Aflac Re due to the lack of available long-dated Japanese yen-denominated fixed income instruments beyond JGBs.

Aflac Japan’s investment strategy includes U.S. dollar-denominated investments. This program includes public investment-grade bonds as well as U.S. dollar-denominated investment-grade commercial mortgage loans, middle market loans, infrastructure debt, collateralized loan obligations and other loan types, high yield bond and public and private equities. The Company plans to continue adding other instruments denominated in U.S. dollars, including floating rate investments, to improve the portfolio diversification and/or return profile. Some of the U.S. dollar-denominated asset classes that the Company has added, and anticipates continuing to add, have less liquidity than investment-grade corporate bonds.bonds and in periods of market stress, certain of these U.S. dollar-denominated asset classes may experience significantly reduced liquidity, increased valuation uncertainty or wider bid-ask spreads. Aflac Re's investment strategy also includes U.S. dollar-denominated investments that are presently comprised exclusively of public investment-grade bonds.

Investing in U.S. dollar-denominated investments in Aflac Japan and Aflac Re creates an unmatched foreign currency exposure and related capital ratio volatility, as both Aflac Japan and Aflac Re insurance liabilities are Japanese yen-denominated. Although the Company engages in certain foreign exchange hedging activities to partially mitigate this risk, and such hedged assets may be used to satisfy Japanese yen-denominated insurance liabilities and other business obligations, important risks remain.

Further, foreign exchangecurrency derivatives used for hedging are periodically settled, which results in cash receipt or payment at inception, maturity or early termination. Cumulative net cash settlements on derivatives hedging currency exposure of Item 1A. Risk Factors Aflac Japan's U.S. dollar-denominated investments are associated with existing U.S. dollar-denominated investments that continue to be hedged, previously hedged investments that continue to be held but are no longer hedged, and investments previously Item 1A. Risk Factors hedged that have since been sold, matured or redeemed and may or may not have not been converted to Japanese yen. The Company’s foreign exchange derivatives are typically shorter-dated than the underlying U.S. dollar-denominated investments being hedged, which creates roll-over risks within the hedging program that could increase the cost of such derivatives. If the Company reduces the notional amount of foreign exchange derivatives prior to the maturity of the hedged U.S. dollar-denominated investments, the foreign exchange gains or losses on the U.S. dollar-denominated investments remain economically unrealized. These foreign currency gains or losses on the investments are only economically realized, or monetized, through sale, maturity or redemption of the investments and concurrent conversion to Japanese yen. However, the Company may not realize the benefit of offsetting adverse cash settlements on hedging derivatives with cash receipts on the U.S. dollar-denominated investments if the currencyforeign exchange rates move in an adverse direction before the investments are converted to Japanese yen, or if the investments are never converted to Japanese yen. As an example of the latter, if the Company’s actual insurance risk experience in Japan is as expected or more favorable than expected, the need for Japanese yen to pay expenses and claims would correspondingly remain at or below expected levels, thereby diminishing operational requirements to convert U.S. dollar-denominated investments to Japanese yen. The settlement of the foreign exchangecurrency derivatives is reportedincluded in settlement of derivatives, net in the investing activities section of the Company’s consolidated statements of cash flows in the line item settlement of derivatives, net.flows.

See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the Japanese yen/U.S. dollar (yen/dollar) exchange rate”, the Hedging Activities subsection of Item 7. MD&A, and the Currency Risk subsection of Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.

Due to the size of Aflac Japan, where functional currency is the Japanese yen, fluctuations in the foreign exchange rate between the Japanese yen and the U.S. dollar canhave havehad, and may continue to have, a significant effect on the Company's reported financial position and results of operations. Aflac Japan's premiums and a significant portion of its investment income are received in Japanese yen, and its claims and almost all expenses are paid in Japanese yen. AflacIn Japanaccordance purchaseswith U.S. GAAP, the Company translates its Japanese yen-denominated assetsfinancial andstatement U.S. dollar-denominated assets, which may be hedged to yen, to support yen-denominated policy liabilities. Certain unhedged U.S. dollar denominated assets and liabilities held by Aflac Japan are re-measured to yen with the volatility reported in earnings. Furthermore, the yen-denominated balance sheet of Aflac Japan is translatedaccounts into U.S. dollars for financial reporting purposes with the resulting foreign exchangecurrency impacttranslation reflectedadjustments included in equity. Accordingly, fluctuations in theJapanese yen/dollar exchange rate can have a significant effect on the Company's reported financial position and results of operations. Yen weakening has the effect of suppressing current year results in relation to the prior year, whileincluding the resulting negative impact on equity. Japanese yen strengthening has the effect of magnifying current year results in relation to the prior year.year, In addition,including the weakening of the yen relative to the U.S. dollar will generally adversely affect the value of the Company's yen-denominated investments in U.S. dollar terms. When the yen strengthens in relation to the U.S. dollar, the yen value of Aflac Japan's unhedged U.S. dollar-denominated investments decreases, resulting in a decrease in Aflac Japan regulatory capital. Further, unhedged U.S. dollar-denominated securities held by Aflac Japan are exposed to foreign exchange fluctuations, which alsopositive impact Aflac Japan regulatory capital. As a result, periods of unusually volatile currency exchange rates could result in limitations on dividends available to the Parent Company.equity.

For regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by changes in the rate ofyen/dollar exchange between the yen and U.S. dollarrate and could negatively impact Aflac Japan's earnings and the corresponding dividends and capital deployment.

Additionally, the Parent Company utilizes forward contracts as part of its Enterprise Corporate Hedging Program to protect the economic value of Aflac Japan in U.S. dollar terms by hedging foreign currency exchange risk related to dividend payments by Aflac Japan. The Company is exposed to currency risk when Japanese yen cash flows are converted into U.S. dollars, resulting in changes in the Company's U.S. dollar-denominated cash flows and earnings when foreign currency exchange gains or losses, respectively, are realized. This primarily occurs when Aflac Japan pays dividends in Japanese yen to the Parent Company, but it also Item 1A. Risk Factors has an impact when cash in the form of Japanese yen is converted to U.S. dollars for investment into U.S. dollar-denominated assets. The foreign exchange rates prevailing at the time of dividend payment may differ from the foreign exchange rates prevailing at the time the Japanese yen profits were earned. The Parent Company utilizes forward contracts to accomplish a dual objective of hedging foreign currency exchange rate risk related to dividend payments by Aflac Japan, and reducing enterprise-wide hedge costs. However, ifIf the markets experience a significant strengthening of Japanese yen, this could cause cash strain at the Parent Company as a result of cash collateral and potentially cash settlement requirements. Based on the timing and severity of foreign exchange rate fluctuations combined with the level of outstanding activity in this program, the cash strain at the Parent Company could be significant.

For additional information regarding unhedged U.S. dollar-denominated securities, see the risk factor above entitled, “Lack of availability of acceptable Japanese yen-denominated investments could adversely affect the Company’s results of operations, financial position or liquidity”. See the Currency Risk subsection of Item 7A. Quantitative and Qualitative Disclosures about Market Risk for additional information.

The Company reports a significant amount of its fixed maturity securities and other investments at fair value. As such, valuations may include inputs and assumptions that are less observable or require greater estimation and valuation methods that are more sophisticated, thereby resulting in values that may be greater or less than the value at which the investments may be ultimately sold. Volatility in interest rates and foreign exchange markets, including changes in yield curves and discount rates, may increase the sensitivity of the Company's investment and derivative valuations to changes in market assumptions. Rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within the Company's consolidated financial statements and the period-to-period changes in fair value could vary significantly.

Valuations of the Company's derivatives fluctuate with changes in underlying market variables, such as interest rates and foreign currency exchange rates. During periods of market turbulence created by political instability, economic uncertainty, government interventions or other factors, the Company may experience significant changes in the volatility of its derivative valuations. Extreme market conditions can also affect the liquidity of such instruments creating marked differences in transaction levels and counterparty valuations. Depending on the severity and direction of the movements in its derivative valuations, the Company will face increases in the amount of collateral required to be posted with its counterparties. Liquidity stresses to the Company may also occur if the required collateral amounts increase significantly over a very short period of time. Conversely, the Company may be exposed to an increase in counterparty credit risk for short periods of time while calling collateral from its counterparties.

The Company estimates an expectedallowance lifetimefor credit losslosses on investments measured at amortized cost including held-to-maturity fixed maturity securities, loan receivables and loan commitments. For collateral dependent financial assets, including loans where foreclosure is probable, expectedthe allowance for credit losses areis based on the fair value of the underlying collateral. For the Company’s available-for-sale fixed maturity securities, the Company evaluates estimatedan estimate for credit losses only when the fair value of the available-for-sale fixed maturity security is below its amortized cost basis.

The Company’s approach to estimating an allowance for credit losses is complex and incorporates significant judgments. In addition to a security, or an asset class, or issuer-specific credit fundamentals, it considers relevant historical information Item 1A. Risk Factors (e.g. loss statistics), current market conditions and reasonable and supportable micro and macroeconomic forecasts. The Company's management updates its expected credit loss assumptions regularly as conditions change and as new information becomes available and reflects expected credit losses in the Company's earnings when considered necessary. Furthermore, additional credit losses may need to be taken in the future. Historical trends may not be indicative of future expectations of credit losses. See Note 3 of the Notes to the Consolidated Financial Statements for additional information.

For regulatory accounting purposes for Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, credit-related losses, or changes in foreign exchange,exchange rates, negatively impacting Aflac Japan's earnings and corresponding dividend and capital deployment.

The Company's sales, results of operations and financial condition could be materially adversely affected if its sales networks deteriorate or if the Company does not adequately provide support, training and education for its existing network of sales associates, brokers, other distribution partners and employees. In the U.S., competition exists for sales associates and brokers with demonstrated ability. Further, low rates of unemployment, such as those currently reflected in the U.S. employment market, tend to make it more difficult for Aflac U.S. to maintain its network of sales associates. In Japan, the Company's sales results are dependent upon its relationship with sales associates and other distribution partners, includingsuch as Japan Post Group, which in recent periods has accounted for a significant portion of Aflac Japan's total sales.

The Company competes with other insurers and financial institutions primarily on the basis of its products, compensation, support services and financial rating. The Company's sales associates, brokers and other distribution partners are independent contractors and may sell products of its competitors. If the Company's competitors offer products that are more attractive, or pay highermore competitive commissions than the Company does, any or all of these distribution partners may concentrate their efforts on selling the Company's competitors' products instead of the Company's. In addition to the Company's commissioned sales force in the U.S., Aflac has expanded its sales leadership team to include a salaried sales force of over 200 market directors and broker sales professionals. The Company's inability to attract and retain qualified sales associates, brokers and other distribution partners, including its alliance partners in Japan, could have a material adverse effect on the Company's sales, results of operations and financial condition.

Additionally, as the Japan and U.S. employment markets continue to evolve, there is risk that the Company's practices regarding attracting, developing, and retaining employees may not be fully effective. Employees may leave the Company or choose other employers over the Company due to various factors, including a competitive labor market. Although Aflac U.S. has not experienced any material labor shortage to date, it has experienced elevated levels of workforce turnover and there has been an overall tightening of, and increased competition within, the U.S. labor market. These conditions, together with higher levels of inflation may result in increased operating expenses. A sustained labor shortage or continuing increasedelevated turnover rates within the Aflac U.S. workforce, due to labor market factors or the state of the U.S. economy, could lead to increased costs of the day-to-day operation of the Aflac U.S. business, the inability to hire and retain employees, or the outsourcing of certain operations. Failure to successfully meet and maintain sufficient levels of employees may diminish the Company's ability to achieve its financial and compliance objectives, both of which are time consuming and personnel-intensive.

The assumptions and estimates that the Company uses in establishing premiums and reserves depend on the Company's judgment regarding the likelihood of future events and are inherently uncertain. Many factors can cause actual outcomes to deviate from these assumptions and estimates, such as changes in incidence rates, economic conditions, changes in government healthcare policy, advances in medical technology, changes in treatment patterns, and changes in average lifespan. Accordingly, the Company cannot determine with precision the ultimate amounts that it will pay for, or the timing of payment of, actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level the Company assumes prior to payment of benefits or claims. If the Company's actual experience is different from its assumptions or estimates, the Company's premiums and reserves may prove inadequate. Reserve assumptions are Item 1A. Risk Factors regularly reviewed by the Company and may be revised if future expectations change. These experience deviations and assumption updates could have a material adverse effect on the Company's business, results of operations and financial condition.

The Company stores confidential policyholder, employee, agent, broker, and other proprietary information on its information technology systems. The Company also depends heavily on its telecommunication, information technology and other operational systems and on the integrity and timeliness of data it uses to run its businesses and service its customers. The Company’s information technology and other systems, as well as those of third-party providers and participants in the Company’s distribution channels, have been and will likely continue to be subject to physical or electronic break-ins, unauthorized tampering, security breaches, social engineering, phishing, web application attacks, computer viruses or other malicious codes, or other cyber-related attacks, that may result in the failure to adequately maintain the security, confidentiality, integrity, or privacy of sensitive data, including personal information relating to customers and prospective customers, or in the misappropriation of the Company's intellectual property or proprietary information. The risk of a cybercybersecurity incident impacting business operations has grown as third parties continue to develop new and highly sophisticated methods of attack. The Companyrapid evolution and itsincreased third-partiesadoption orof vendorsartificial haveintelligence andtechnologies may continuealso to experience outages or cyberattacks that disrupt the operations or impact the confidentiality, availability or integrity of information, which may result in operational, legal, regulatory or financial harm. Furthermore, depending upon the type of attack, it could impact the confidentiality, integrity and/or availability of IT systems and data, disrupting business operations and resulting in the loss of consumer confidence. Although the Company attempts to manage its exposure to such events through the purchase of cyber liability insurance, such events are inherently unpredictable, and insurance may not be sufficient to protect the Company against all losses. As a result, events such as these could adversely affectheighten the Company's financialcybersecurity conditionrisks orby resultsmaking ofcyber-attacks operation.more Although the minor data leakage issues the Company has experienceddifficult to datedetect, have not had a material effect on its business, there is no assurance that the Company's security systems or processes will prevent or mitigate future break-ins, tampering, security breaches or other cyber-related attacks. As the Company pursues IT transformationcontain, and increased cloud adoption, it inherently exposes the Company to potential cyber related attacks.mitigate.

Aflac is domiciled in Nebraska and is subject to insurance regulations that impose certain limitations and restrictions on payments of dividends, management fees, loans and advances by Aflac to the Parent Company. The Nebraska insurance statutes require prior approval for dividend distributions that exceed the greater of the net income from operations, which excludes net realized investment gains, for the previous year determined under statutory accounting principles, or 10% of statutory capital and surplus as of the previous year-end. The Nebraska insurance department also must approve service arrangements and other transactions within the affiliated group of companies. After the Japan branch conversion, the Nebraska insurance department and the FSA approved their respective domiciled insurance company service arrangements and transactions. The FSA does not allow dividends or other payments from Aflac Japan unless it meets certain financial criteria as governed by Japanese corporate law. Under these criteria, dividend capacity at the Japan subsidiary will beis defined as retainedtotal earningsequity plusexcluding othercommon stock and capital reservereserves lessbut reduced for net after-tax net unrealized losses on available-for-sale securities.

The ability of Aflac and Aflac Japan to pay dividends or make other payments to the Parent Company could also be constrained by the Company's dependency on financial strength ratings from independent rating agencies. The Company's ratings from these agencies depend to a large extent on Aflac's capitalization level. Any inability of Aflacthe Company's subsidiaries to pay dividends or make other payments to the Parent Company could have a material adverse effect on the Company's financial condition and results of operations.

Many of the Company's risk management strategies or techniques are based upon historical customer and market behavior and all such strategies and techniques are based to some degree on management’s subjective judgment. The Item 1A. Risk Factors Company cannot provide assurance that its risk management framework, including the underlying assumptions or strategies, will be accurate and effective.

Management of operational, legal and regulatory risks requires, among other things, policies, procedures and controls to record properly and verify a large number of transactions and events, and these policies, procedures and controls may not be fully effective. The Company's businesses and corporate areas primarily use models to project future cash flows associated with pricing products, calculating reserves and valuing assets, and evaluating risk and determining capital requirements, among other uses. These models are utilized under a risk management policy approved by the Company's executive risk management committees, however, the models may not operate properly and rely on assumptions and projections that are inherently uncertain. As the Company's businesses continue to grow and evolve, the number and Item 1A. Risk Factors complexity of models the Company utilizes expands, increasing the Company's exposure to error in the design, implementation or use of models, including the associated input data and assumptions.

Various state laws in the U.S. address the unauthorized access and acquisition of personal information and the use and disclosure of individually identifiable health data. HIPAA requires the Company to impose privacy and security requirements on its business associates (as such term is defined in the HIPAA regulations). SeveralA number of states, including California and New York, have madeadopted changesand continue to expand their privacy orand cybersecurity laws orand regulations in recent years. Additionally, the U.S. Congress and many states are considering new privacy and security requirements that would apply to the Company's business. Compliance with new privacy and security laws, requirements, and new regulations may result in cost increases due to necessary systems changes, new limitations or constraints on the Company's business models, the development of new administrative processes, and the effects of potential noncompliance by the Company's business associates. They also may impose further restrictions on the Company's collection, disclosure and use of customer identifiable data that are housed in one or more of the Company's administrative databases. Noncompliance with any privacy laws or any security breach involving the misappropriation, loss, theft or other unauthorized disclosure of sensitive or confidential customer information, whether by the Company or by one of its third parties, could have a material adverse effect on the Company's business, reputation, brand and results of operations, including: material fines and penalties; compensatory, special, punitive and statutory damages; consent orders regarding the Company's privacy and security practices; adverse actions against the Company's licenses to do business; and injunctive relief.

Catastrophic events, including those as a result of climate change or major public health issues,events could adversely affect the Company's financial condition and results of operations as well as the availability of the Company’s infrastructure and systems.

Additionally, the Company's operations, as well as those of its vendors, service providers and counterparties, may be adversely affected by such catastrophic events to the extent they disrupt the Company's physical infrastructure, human resources or systems that support its businesses and customers. Although the Company has a global crisis management framework to minimize the business disruption from a catastrophic event, such framework may not be effective to avoid an adverse impact to the Company from such an event. While the assessment of risks related to climate change are part of the Company's credit review process, climate change-related risks may adversely impact the value of the securities that Item 1A. Risk Factors the Company holds. Climate change may increase the frequency and severity of natural disasters such as hurricanes, tornadoes, floods and forest fires. Further, the Company cannot predict the effects that any legal or regulatory changes made in response to climate change concerns or major public health issues would have on the Company's business.

For the full year of 2024,2025, total revenues were updown 1.2%9.3% to $18.9$17.2 billion, compared with $18.7$18.9 billion for the full year of 2023.2024, primarily due to net investment losses of $572 million in 2025 compared with net investment gains of $1.3 billion in 2024. Net earnings were $3.6 billion, or $6.82 per diluted share, for the full year of 2025, compared with $5.4 billion, or $9.63 per diluted share, for the full year of 2024, compared with $4.7 billion, or $7.78 per diluted share, for the full year of 2023.2024.

Net earnings in 20242025 included net investment gainslosses of $1.3$572 billion,million, compared with net investment gains of $590$1.3 millionbillion in 2023.2024. Net investment gainslosses in 20242025 included an increase in credit loss allowances of $256$467 million; $1.1 billion of net gainslosses from certain derivative and foreign currency gains or losses; $140an increase in credit loss allowances of $191 million and $6 million of netimpairments; gainsoffset onby a $72 million gain from an increase in the fair value of equity securities; and $259$20 million of net gains from sales and redemptions.

The average yen/dollar exchange rate(1) in 20242025 was 150.97,149.32, or 6.9%1.1% weakerstronger than the rate of 140.57150.97 in 2023.2024.

Adjusted earnings(2) for the full year of 20242025 were $4.0 billion, or $7.49 per diluted share, compared with $4.1 billion, or $7.21 per diluted share, compared with $3.7 billion, or $6.23 per diluted share, in 2023.2024. The weakerstronger yen/dollar exchange rate negativelypositively impacted adjusted earnings per diluted share by $.18.$.04.

Shareholders’ equity was $29.5 billion, or $56.85 per share, at December 31, 2025, compared with $26.1 billion, or $47.45 per share, at December 31, 2024, compared with $22.0 billion, or $38.00 per share, at December 31, 2023.2024. Shareholders’ equity at December 31, 20242025 included a cumulative increase of $2.0$8.0 billion from the effect of changes in discount rate assumptions on insurance contracts,reserves, compared with a corresponding cumulative decreaseincrease of $2.6$2.0 billion at December 31, 2023,2024, and a net unrealized gainloss on investment securities and derivatives of $4$1.8 million,billion, compared with a net unrealized gain of $1.1$4 billionmillion at December 31, 2023.2024. Shareholders’ equity at December 31, 20242025 also included an unrealized foreign currency translation loss of $5.0$4.8 billion, compared with an unrealized foreign currency translation loss of $4.1$5.0 billion at December 31, 2023.2024. The annualized return on average shareholders’ equity in 20242025 was 22.6%.13.1%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI)(2) (adjusted book value(2)) was $28.0 billion, or $54.06 per share, at December 31, 2025, compared with $29.1 billion, or $52.87 per share, at December 31, 2024, compared with $27.5 billion, or $47.55 per share, at December 31, 2023.2024. Adjusted book value excluding foreign currency remeasurement(2) was $22.1 billion, or $42.66 per share, at December 31, 2025, compared with $23.4 billion, or $42.46 per share, at December 31, 2024, compared with $23.8 billion, or $41.15 per share, at December 31, 2023.2024. The annualized adjusted return on equity excluding foreign currency remeasurement(2) in 20242025 was 17.3%.17.6%.

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

With Japan’s aging population and the rise in healthcare costs, supplemental health care insurance products remain attractive. Additionally, as Japan enters an era of 100-year lifespans, customers' needs for asset formation and retirement coverage, including nursing care, are increasing. Japan’s existing customers and potential customers seek products that are easily understood, cost-effectiveaffordable and canaccessible bevia accesseddigital through technology-enabled devices.platforms.

Customer demographics continue to evolveshift, andgenerating new opportunities presentacross themselvesvarious inconsumer differentgroups, customerincluding segments such as the millennialmillennials and multiculturaldiverse markets.cultural Customercommunities. As customer expectations and preferences arechange, changing. Trendstrends indicate that both existing customers and potential customers seek cost-effectiveaffordable solutionsoptions that are easily understood and canaccessible bevia accesseddigital throughplatforms. technology-enabled devices. Additionally, income protection and the health needs of retiring baby boomers are continuing to shapeFurthermore, the insurance industry.industry continues to be impacted by the financial security requirements and healthcare demands of the aging baby boomer generation.

The Company’s strategy to drive long-term shareholder value is to pursue growth and strongmaintain solid pretax profit margins andwhile to exerciseexercising tactical capital deployment. The Company's approach to pursue growth is through product development and distribution expansionexpansion, along with enhanced efficiency through technological upgrades and tooperational achieve efficiencies by modernizing its technology and streamlining its operations.refinement.

The Company's objectives in 20252026 include maintainingpreserving strongsolid pretax profit margins with increased sales production achieved through productthe refreshmentsongoing promotional efforts for products launched in 2025 in Aflac Japan and continued growth initiatives inacross both its Aflac Japan and Aflac U.S. segments. For Aflac Japan, this includes continuing to focus on third sector products as well as introducing policies to new and younger customers. For Aflac U.S., this includes continuing to focus on realizing benefits from its buy to build initiatives and other platform investments, maintaining strong expense management discipline and strengthening the number of career agents for Aflac U.S. The Company believes that itsthis strategy ofpositions positioning itselfit for future growth Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and efficiency while defending and leveraging its market-leading position, powerful brand recognition and varied distribution in Japan and the U.S. will provide support toward these objectives.

In DecemberNovember 2024,2025, the board of directors announced a 16.0%5.2% increase in the quarterly cash dividend, effective with the first quarter of 2025.2026. The Company intends to maintain strong capital ratios in Aflac Japan and Aflac U.S. in support of its commitment to shareholder dividends while remaining tactical in its deployment of capital in the form of share repurchases and opportunistic investments. The Company's target range for economic solvency ratio (ESR) target range is 170% to 230% for Aflac Japan and a target combined RBC range of 350% to 450%, over time, for Aflac U.S., which isare consistent with the Company's risk management practices.

For Aflac Japan,2026, the Company anticipatesexpects thatAflac Japan to generate a benefit ratio in the range of 60% to 63% driven by favorable trends in morbidity experienceexperience, new product launches featuring lower benefit ratios, and the premium shift in premiums over the last severalrecent years from first sector savings products to third sector cancer and medical productsproducts, andas well as first sector protection productsproducts. willThe resultCompany inexpects stableAflac benefitJapan ratiosto generate an expense ratio in the Aflacrange Japanof segment20% withto a slightly higher expense ratio23% reflecting continued growth and strategic initiatives. The Company also expects that benefit and expense ratios will continue to experience some level of revenue pressure due to the impact of paid uppaid-up policies and internal reinsurance transactions. For the 2025 through 2027 period, the Company expects Aflac Japan to generate a benefit ratio in the range of 64% to 66% and an expense ratio in the range of 20% to 23%. For 2025, the Company expects the benefit ratio to be toward the higher end of the 64% to 66% range and the expense ratio to be on the lower end of the 20% to 23% range.

The Company's objectives for Corporate and other in 20252026 include maintainingachieving strongsolid pretax adjusted earnings as compared with 2024,earnings, assuming that U.S. interest rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense.

Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the Japanese yen weakens, translating Japanese yen into U.S. dollars results in fewer U.S. dollars being reported. When the Japanese yen strengthens, translating Japanese yen into U.S. dollars results in more U.S. dollars being reported. Consequently, Japanese yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while Japanese yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company’s business is conducted in Japanese yen and never converted into U.S. dollars but translated into U.S. dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company defines the non-U.S. GAAP financial measures included in this document as follows:

•Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign currency exchange risks in the Company's Japan segment or in Corporate and other. These amortized hedge costs/income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the contractual term of the derivative. The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/income.

•Adjusted earnings excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. Adjusted earnings per diluted share excluding current period foreign currency impact is adjusted earnings excluding current period foreign currency impact divided by the weighted average outstanding diluted shares for the period presented. The Company considers adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact important because a significant portion of the Company's business is conducted in Japan and foreign exchange rates are outside management’s control; therefore, the Company believes it is important to understand the impact of translating foreign currency (primarily Japanese yen) into U.S. dollars. The most comparable U.S. GAAP financial measures for adjusted earnings excluding current period foreign currency impact and adjusted earnings per diluted share excluding current period foreign currency impact are net earnings and net earnings per share, respectively.

•Adjusted book value is the U.S. GAAP book value (representing total shareholders’ equity), less AOCIaccumulated other comprehensive income as recorded on the U.S. GAAP balance sheet. Adjusted book value per common share is adjusted book value at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value and adjusted book value per common share important Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations as they exclude AOCI,accumulated other comprehensive income, which fluctuates due to market movements that are outside management’s control. The most comparable U.S. GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.

•Adjusted book value excluding foreign currency remeasurement is the U.S. GAAP book value (representing total shareholders’ equity), less AOCIaccumulated other comprehensive income as recorded on the U.S. GAAP balance sheet and excluding the cumulative [(beginning January 1, 2021]) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. Adjusted book value excluding foreign currency remeasurement per common share is adjusted book value excluding foreign currency remeasurement at the period end divided by the ending outstanding common shares for the period presented. The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share important as they exclude both AOCIaccumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measures for adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share are total book value and total book value per common share, respectively.

•Adjusted return on equity is annualized adjusted earnings divided by average shareholders’ equity, excluding AOCI.accumulated other comprehensive income. Management uses adjusted return on equity to evaluate the financial performance of the Company’s insurance operations on a consolidated basis and believes that a presentation of this financial measure is vitally important to an understanding of the underlying profitability drivers and trends of the Company’s insurance business. The Company considers adjusted return on equity important as it excludes components of AOCI,accumulated other comprehensive income, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity is return on average equity (ROE) as determined using annualized net earnings and average total shareholders’ equity.

•Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings divided by average shareholders’ equity, excluding both AOCIaccumulated other comprehensive income and the cumulative [(beginning January 1, 2021]) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. The Company considers adjusted return on equity excluding foreign currency remeasurement important because it excludes both AOCIaccumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control. The most comparable U.S. GAAP financial measure for adjusted return on equity excluding foreign currency remeasurement is ROEreturn on equity as determined using annualized net earnings and average total shareholders’ equity.

•U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign currency exchange rate for the comparable prior year period. The Company considers U.S. dollar-denominated investment income excluding foreign currency impact important as it eliminates the impact of foreign currency changes on the Aflac Japan segment results, which are outside management’s control. The most comparable U.S. GAAP financial measure for U.S. dollar-denominated investment income excluding foreign currency impact is the corresponding net investment income amount from the U.S. dollar denominated investments translated to yen.

The following table is a reconciliation of items impacting adjusted net investment (gains) losses to the most directly comparable U.S. GAAP financial measuresmeasure of net investment (gains) losses for the years ended December 31.

The Company's investment strategy is to invest primarily in fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s profitability. This investment strategy incorporates asset-liability matching (ALM) to align the expected cash flows of the portfolio to the needs of the Company's liability structure. The Company does not purchase securities with the intent of generating investment gains or losses. However, investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers, tax planning strategies, and/or general portfolio management and rebalancing. The realization of investment gains and losses is independent of the underwriting and administration of the Company's insurance products.

Securities transactions include gains and losses from sales and redemptions of investments where the amount received is different from the amortized cost of the investment. Credit losses include losses for held-to-maturity fixed maturity securities, available-for-sale fixed maturity securities, loan receivables, loan commitments and reinsurance recoverables. Changes in the fair value of equity securities are the result of gains or losses driven by fluctuations in market prices.

•foreign currency forwards and options used in hedging foreign currency exchange risk on U.S. dollar-denominated investments inheld by Aflac Japan's portfolio,Japan, with options used on a standalone basis and/or in a collar strategy;

•foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in Japanese yen and hedge the Company's long termlong-term exposure to a weakening Japanese yen;

•cross-currency interest rate swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures;

•interest rate swaptions (swaptions) used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities; and

The Company also excludes from adjusted earnings the accounting impacts of foreign currency remeasurement associated with changes in the foreign currency exchange rate.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2024,2025, as part of the U.S. defined benefit plan freeze,freeze effective January 1, 2024, the Company offeredpurchased lumpa sumnonparticipating paymentssingle premium group annuity contract from an external insurer to certainsettle participants.its Theobligations lump sum payments were distributed inunder the fourth quarter of 2024plan and resultedpaid into the insurer the related annuity premium. As a result, the Company recognized a settlement charge of $18$55 million in 2024 due to the payments being greater than the settlement threshold.2025. The settlement charge was both unusual and non-recurring and unrelated to other recurring benefit costs associated with the plan; therefore, the Company excluded the settlement charge from adjusted earnings.

In June2024, 2023,as thepart Company amendedof the U.S. defined benefit plan to freeze future benefits under the plan for all participants effective January 1, 2024, whichthe Company offered lump sum payments to certain participants. The lump sum payments were distributed in the fourth quarter of 2024 and resulted in the Company recognizing a curtailmentsettlement gaincharge of approximately $49$18 million in 2023.2024 due to the payments being greater than the settlement threshold. The curtailmentsettlement gaincharge was both unusual and non-recurring and unrelated to other recurring benefit costs associated with the plan; therefore, the Company excluded the curtailmentsettlement gaincharge from adjusted earnings.

Aflac Japan’s premiums and a significant portion of its investment income are received in Japanese yen, and its claims and most expenses are paid in Japanese yen. Aflac Japan purchases Japanese yen-denominated assets and U.S. dollar-denominated assets, which may be hedged to Japanese yen, to support Japanese yen-denominated policy liabilities. Yen-denominatedJapanese yen-denominated income statement accounts are translated to U.S. dollars using the weighted average Japanese yen/U.S. dollar foreign exchange rate for the reporting period, except realized gains and losses on securities transactions which are translated at the foreign exchange rate on the trade date of each transaction. Yen-denominatedJapanese yen-denominated balance sheet accounts are translated to U.S. dollars using the spot Japanese yen/U.S. dollar foreign exchange rate at the end of the reporting period.

In recent periods, the Japanese yen has weakened against the U.S. dollar. Although the Company is unable to predict the timing or extent of future movements of the Japanese yen/U.S. dollar foreign exchange rate, the Company maintains hedging strategies (see the Hedging Activities section of this MD&A) that are intended to mitigate the impacts of Japanese yen fluctuation on the Company’s financial position and results of operations. See the risk factor entitled “The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate” in Part I, Item 1A. Risk Factors for more information.

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 19.6% in 2025 and 15.2% in 2024 and 11.5% in 2023.2024. The combined effective tax rate differs from the U.S. statutory rate primarily due to the impact of tax credits from federal historic rehabilitation and solar taxinvestments creditsin partnerships and the exclusion of foreign currency translation gains and losses on certain Aflac Japan U.S. dollar-denominated assetsinvestments held in the Delaware Statutory Trust (DST).Trust. Total income taxes were $887 million in 2025 and $974 million in 2024 and $603 million in 2023.2024. Japanese income taxes on Aflac Japan's results account for most of the Company's consolidated income tax expense.

The following table is a reconciliation of items impacting adjusted book value excluding foreign currency remeasurement and adjusted book value per diluted share excluding foreign currency remeasurement per common share to the most directly comparable U.S. GAAP financial measures of book value and book value per dilutedcommon share, respectively, for the years ended December 31.

(3) Impact of gains/losses associated with foreign currency remeasurement is calculated by excluding the cumulative [(beginning January 1, 2021]) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets. The impact is the difference of adjusted return on equity - reported compared with adjusted return on equity, excluding from shareholders' equity, gains/losses associated with foreign currency remeasurement.

U.S. GAAP financial reporting requires that a company report financial and descriptive information about operating segments in its annual and interim period financial statements. Furthermore, the Company is required to report a measure of segment profit or loss, certain revenue and expense items,items and segment assets. The Company's insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan is the principal contributor to consolidated earnings. In addition, the Parent Company, other business units that are not individually reportable, and businessreinsurance activities, including internal reinsurance activities,activity with Aflac Re, and other business activities not included in Aflac Japan or Aflac U.S.U.S., as well as intercompany eliminations, are included in Corporate and other. See Item 1. Business for a summary of each segment's products and distribution channels.

(1) Includes a gain (loss) of $(8152) and $20$(81) in 20242025 and 2023,2024, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

In 2024,2025, operating results in Japanese yen terms compared to the previous year were as follows:

•Net earned premiums decreased primarily due to approximately ¥2921 billion related to the internal cancer reinsurance transactionstransaction with Aflac Re established in the fourth quarter of 2024 and 2023, approximately ¥2015 billion from limited-pay products reaching premium paid-up statusstatus. andNet earned premiums also reflect a remeasurement loss of approximately ¥118 billion related to theassumption remeasurementupdates of the deferred profit liability for limited-paylimited-payment contracts in the third quarter of 2025, compared to a remeasurement loss of approximately ¥11 billion in the third quarter of 2024.

•Adjusted net investment income increaseddecreased primarily due to higherlower variablefloating net investmentrate income of ¥18 billion, the weakening of the yen onfrom U.S. dollardollar-denominated investments of ¥17 billion and lower amortized hedge cost of ¥16 billion.investments.

•PretaxTotal adjusted earningsrevenues increaseddecreased primarily due to the decreasedecreases in bothnet totalearned benefitspremiums and claims and total adjusted expenses,net partiallyinvestment offset by the decrease in total adjusted revenues.income.

MD&A is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, the following discussion should be read in conjunction with the consolidated financial statements and notes that are included in the Company's annual report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report). In this MD&A, amounts may not foot due to rounding.

NetTotal earningsrevenues were $1.0$4.1 billion, or $1.98 per diluted share,billion in the firstsecond quarter of 2026, compared with $29$4.2 million, or $.05 per diluted share,billion in the firstsecond quarter of 2025.

Shareholders’Net equityearnings waswere $30.0$825 billion,million, or $58.69$1.63 per diluted share, atin Marchthe 31,second quarter of 2026, compared with $29.5$599 billion,million, or $56.85$1.11 per diluted share, atin Decemberthe 31,second quarter of 2025.

Shareholders’ equity at MarchJune 31,30, 2026 included a cumulative increase of $9.5$10.4 billion from the effect of changes in discount rate assumptions on insurance reserves, compared with a corresponding cumulative increase of $8.0 billion at December 31, 2025, and a net unrealized loss on investment securities and derivatives of $2.7$2.8 billion, compared with a net unrealized loss of $1.8 billion at December 31, 2025. Shareholders’ equity at MarchJune 31,30, 2026 also included an unrealized foreign currency translation loss of $5.0 billion, compared with an unrealized foreign currency translation loss of $4.8 billion at December 31, 2025. The annualized return on average shareholders’ equity in the firstsecond quarter of 2026 was 13.7%.10.9%.

Shareholders’ equity excluding accumulated other comprehensive income (adjusted book value(1)) was $28.1$27.6 billion, or $54.96$55.01 per share, at MarchJune 31,30, 2026, compared with $28.0 billion, or $54.06 per share, at December 31, 2025. Adjusted book value excluding foreign currency remeasurement(1) was $21.8$20.7 billion, or $42.71$41.22 per share, at MarchJune 31,30, 2026, compared with $22.1 billion, or $42.66 per share, at December 31, 2025. The annualized adjusted return on equity excluding foreign currency remeasurement(1) in the firstsecond quarter of 2026 was 16.4%.16.6%.

In the first threesix months of 2026, Aflac Incorporated repurchased $1.0$2.0 billion, or 9.017.5 million of its common shares. At MarchJune 31,30, 2026, the Company had 105.396.8 million remaining shares authorized for repurchase.

Cyber IncidentIncidents

As previously disclosed, the Company identified an incident involving unauthorized access to a limited number of its systems in the U.S. on June 12, 2025.2025 (the June 2025 U.S. Cyber Incident). The Company promptlyremains initiatedin itscommunication cybersecuritywith incident response protocolsregulators and believesother itrelevant contained the unauthorized access within hours. The Company's systems were not affected by ransomware, and the Company remained able to serve its policyholders and underwrite policies, review claims, and otherwise service customers as usual.authorities.

Based on the information currently available, as of the date of this report, the Company does not believe that the incidentJune 2025 U.S. Cyber Incident is reasonably likely to have a material impact on the Company’s financial condition or results of operations. The Company continues to assess the financial impact of the cybersecurityJune incident,2025 U.S. Cyber Incident, including how much of the financial impact will be covered by insurance. As a result of the cybersecurityJune incident,2025 U.S. Cyber Incident, the Company has incurred certain costs and may, depending on future developments, incur additional costs, including but not limited to: costs to provide credit monitoring, identity theft protection, and Medical Shield to impacted individuals and maintain a call center related to the provision of such services; incident response costs; expenses arising from potential litigation, governmental investigations, or potential enforcement actions; expenses related to compliance, finance, and legal advisory services; elevated cybersecurity insurance premiums; and costs incurred in meeting evolving legal and regulatory requirements concerning cybersecurity governance, monitoring, and disclosure. Based on the information currently available, as of the date of this report, the Company believes that the potential amount of loss cannot be reasonably estimated.

•Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign currency exchange risks in the Company's Japan segment or in Corporate and other.risks. These amortized hedge costs/income are estimated at the inception of the derivatives based on the specific terms of each contract and are recognized on a straight-line basis over the contractual term of the derivative. The Company believes that amortized hedge costs/income measure the periodic currency risk management costs/income related to hedging certain foreign currency exchange risks and are an important component of net investment income. There is no comparable U.S. GAAP financial measure for amortized hedge costs/income.

The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 16.8%17.0% for the three-month period ended MarchJune 31,30, 2026, compared with 80.3%27.0% for the same period in 2025. The Company's combined U.S. and Japanese effective income tax rate on pretax earnings was 16.9% for the six-month period ended June 30, 2026, compared with 35.0% for the same period in 2025. The combined effective tax rate differs from the U.S. statutory rate primarily due to the exclusion of foreign currency translation gains and losses on certain Aflac Japan U.S. dollar-denominated investments held in the Delaware Statutory Trust.

(1) Includes a gain (loss) of an immaterial amount for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

(2) Net interest income/expense from derivatives associated with certain investment strategies of $(5349) and $(5859) for the three-month periods and $(102) and $(117) for the six-month periods ended MarchJune 31,30, 2026 and 2025, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended MarchJune 31,30, 2026, operating results in yen terms compared to the same period in the previous year were as follows:

•Adjusted net investment income increaseddecreased primarily due to lower call income and lower U.S. dollar-denominated floating rate income, partially offset by higher income on U.S. dollar-denominated assets due to the weakening of the yen and higher fixed rate income from U.S. dollar-denominated investments and higher variable net investment income.investments.

•Total adjusted revenues decreased primarily due to the decreasedecreases in net earned premiums,premiums partially offset by the increase inand adjusted net investment income.

•Total benefits and claims decreased primarily reflecting the impact of annual cash flow assumption updates performed in the third quarter of 2025 and higher reserve remeasurement gains.

•Total adjusted expenses decreased primarily due to an increase in the capitalization of deferred policy acquisition costs resulting from higher sales.costs.

Annualized premiums in force decreased 2.5%2.7% to ¥1.171.16 trillion as of MarchJune 31,30, 2026, compared with ¥1.201.19 trillion as of MarchJune 31,30, 2025. The decrease in annualized premiums in force in yen was driven primarily by limited-pay products reaching premium paid-up status. Annualized premiums in force, translated into U.S. dollars at respective period-end foreign exchange rates, were $7.3$7.2 billion at MarchJune 31,30, 2026, compared with $8.0$8.2 billion at MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, Aflac Japan had approximately 22 million individual policies in force in Japan, including approximately 14 million cancer policies in force.

For the Periods Ended MarchJune 31,30,

The following table presents a summary of operating ratios in Japanese yen terms for Aflac Japan followed by a discussion of the significant drivers of changes in operating ratios in Japanese yen compared to the same periodperiods in the previous year.

•For the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026, the total benefits and claims to total premiums ratio decreased primarily due to lower benefits reflecting the impact of annual cash flow assumption updates performed in the third quarter of 2025 and higher reserve remeasurement gains. For the full year of 2026, the Company now expects Aflac Japan to generate a benefit ratio at the high end of the range of 60% to 63%, excluding the annual actuarial assumption review in the third quarter.

•For the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026, the total adjusted expense ratio decreased slightly primarily due to the decrease in total adjusted expenses, mostly offset by the decrease in total adjusted revenues.

•In total, the pretax adjusted profit margin increased in the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026 primarily due to the lower benefit ratio.

The following table presents Aflac Japan's premium persistency on a 12-month rolling basis as of MarchJune 31.30.

The following table presents Aflac Japan’s new annualized premium sales for the periods ended MarchJune 31.30.

The following table details the contributions to Aflac Japan's new annualized premium sales by major insurance product for the periods ended MarchJune 31.30.

The following table details the contributions to Aflac Japan's new annualized premium sales by agency type for the three-month periods ended MarchJune 31.30.

During the three-month period ended MarchJune 31,30, 2026, Aflac Japan recruited 82139 new sales agencies. At MarchJune 31,30, 2026, Aflac Japan was represented by approximately 6,200 sales agencies, with approximately 111,000 licensed sales associates employed by those agencies. The number of sales agencies has declined in recent years due to Aflac Japan's focus on supporting agencies with strong management frameworks, high productivity and more producing agents.

At MarchJune 31,30, 2026, Aflac Japan had agreements to sell its products at 357356 banks, approximately 90% of the total number of banks in Japan.

The following table presents the results of Aflac Japan’s investment yields for the periods ended and as of MarchJune 31.30.

The increasedecrease in the Aflac Japan new money yield in the three-month period ended MarchJune 31,30, 2026 was primarily due to higher allocations to higherlower yielding asset classes. The increase in the Aflac Japan new money yield in the six-month period ended June 30, 2026 was primarily due to higher Japanese yen interest rates. See Notes 3, 4 and 5 of the Notes to the Consolidated Financial Statements and the Investments and Hedging Activities sections of this MD&A for additional information on the Company's investments and hedging strategies.

(1) Net interest income/expense from derivatives associated with certain investment strategies of $(5) and $(6) for the three-month periods and $(10) and $(12) for the six-month periods ended MarchJune 31,30, 2026 and 2025, respectively, have been reclassified from net investment gains (losses) and included in adjusted earnings as a component of net investment income.

For the three-month period ended MarchJune 31,30, 2026, operating results compared to the same period in the previous year were as follows:

•Net earned premiums increased primarily due to improved sales.sales and continued strong persistency.

•Adjusted net investment income decreasedwas slightlyrelatively primarily due to lower floating rate income.flat.