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INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2012

The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.



	June 30, 2012
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies	$	11,678	$	741	$	1	$	12,418
Mortgage- and asset-backed securities	852		47		1		898
Public utilities	3,939		73		233		3,779
Sovereign and supranational	2,006		46		65		1,987
Banks/financial institutions	4,226		177		436		3,967
Other corporate	6,217		141		367		5,991
Total yen-denominated	28,918		1,225		1,103		29,040
Dollar-denominated:
U.S. government and agencies	94		22		0		116
Municipalities	1,052		144		7		1,189
Mortgage- and asset-backed securities	296		80		1		375
Public utilities	3,251		572		28		3,795
Sovereign and supranational	473		103		3		573
Banks/financial institutions	3,449		341		41		3,749
Other corporate	9,428		1,555		39		10,944
Total dollar-denominated	18,043		2,817		119		20,741
Total fixed maturities	46,961		4,042		1,222		49,781
Perpetual securities:
Yen-denominated:
Banks/financial institutions	4,634		27		570		4,091
Other corporate	338		4		0		342
Dollar-denominated:
Banks/financial institutions	310		7		18		299
Total perpetual securities	5,282		38		588		4,732
Equity securities	21		4		2		23
Total securities available for sale	$	52,264	$	4,084	$	1,812	$	54,536



	December 31, 2011
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies	$	11,108	$	670	$	0	$	11,778
Mortgage- and asset-backed securities	912		43		1		954
Public utilities	3,850		59		226		3,683
Sovereign and supranational	1,704		87		16		1,775
Banks/financial institutions	4,312		74		359		4,027
Other corporate	6,213		120		459		5,874
Total yen-denominated	28,099		1,053		1,061		28,091
Dollar-denominated:
U.S. government and agencies	31		4		0		35
Municipalities	1,060		107		8		1,159
Mortgage- and asset-backed securities	310		74		0		384
Public utilities	3,052		517		27		3,542
Sovereign and supranational	449		89		5		533
Banks/financial institutions	3,324		223		121		3,426
Other corporate	9,031		1,433		62		10,402
Total dollar-denominated	17,257		2,447		223		19,481
Total fixed maturities	45,356		3,500		1,284		47,572
Perpetual securities:
Yen-denominated:
Banks/financial institutions	6,217		155		604		5,768
Other corporate	344		17		0		361
Dollar-denominated:
Banks/financial institutions	336		3		29		310
Total perpetual securities	6,897		175		633		6,439
Equity securities	22		4		1		25
Total securities available for sale	$	52,275	$	3,679	$	1,918	$	54,036

Held-to-maturity Securities



	June 30, 2012
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies	$	26,927	$	605	$	5	$	27,527
Municipalities	539		37		2		574
Mortgage- and asset-backed securities	115		5		0		120
Public utilities	5,377		214		165		5,426
Sovereign and supranational	3,633		167		102		3,698
Banks/financial institutions	10,957		184		809		10,332
Other corporate	4,865		160		162		4,863
Total yen-denominated	52,413		1,372		1,245		52,540
Total securities held to maturity	$	52,413	$	1,372	$	1,245	$	52,540



	December 31, 2011
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies	$	18,775	$	297	$	1	$	19,071
Municipalities	553		35		4		584
Mortgage- and asset-backed securities	129		5		0		134
Public utilities	5,615		188		166		5,637
Sovereign and supranational	4,200		148		183		4,165
Banks/financial institutions	12,389		170		1,079		11,480
Other corporate	5,348		149		185		5,312
Total yen-denominated	47,009		992		1,618		46,383
Total securities held to maturity	$	47,009	$	992	$	1,618	$	46,383

Investments Classified by Contractual Maturity Date

The contractual maturities of our investments in fixed maturities at June 30, 2012, were as follows:



	Aflac Japan				Aflac U.S.
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale:
Due in one year or less	$	1,980	$	2,012	$	13	$	13
Due after one year through five years	2,455		2,569		352		379
Due after five years through 10 years	4,133		4,447		984		1,138
Due after 10 years	28,095		28,889		7,681		8,919
Mortgage- and asset-backed securities	1,104		1,217		44		57
Total fixed maturities available for sale	$	37,767	$	39,134	$	9,074	$	10,506
Held to maturity:
Due in one year or less	$	412	$	419	$	0	$	0
Due after one year through five years	839		908		0		0
Due after five years through 10 years	3,298		3,635		0		0
Due after 10 years	47,749		47,458		0		0
Mortgage- and asset-backed securities	115		120		0		0
Total fixed maturities held to maturity	$	52,413	$	52,540	$	0	$	0

Economic Maturities of Investments in Perpetual Securities

The economic maturities of our investments in perpetual securities, which were all reported as available for sale at June 30, 2012, were as follows:



	Aflac Japan				Aflac U.S.
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	315	$	317	$	0	$	0
Due after one year through five years	1,289		1,299		5		5
Due after five years through 10 years	457		461		0		0
Due after 10 years	3,047		2,488		169		162
Total perpetual securities available for sale	$	5,108	$	4,565	$	174	$	167

Bank and Financial Institution Investments

Our total investments in the bank and financial institution sector, including those classified as perpetual securities, were as follows:



	June 30, 2012						December 31, 2011
	Total Investments in Banks and Financial Institutions Sector (in millions)			Percentage of Total Investment Portfolio			Total Investments in Banks and Financial Institutions Sector (in millions)			Percentage of Total Investment Portfolio
Fixed maturities:
Amortized cost		$	18,632		18	%		$	20,025		20	%
Fair value		18,048			17			18,933			19
Perpetual securities:
Upper Tier II:
Amortized cost		$	3,311		3	%		$	4,285		5	%
Fair value		3,052			3			4,244			4
Tier I:
Amortized cost		1,633			2			2,268			2
Fair value		1,338			1			1,834			2
Total:
Amortized cost		$	23,576		23	%		$	26,578		27	%
Fair value		22,438			21			25,011			25

Gain (Loss) on Investments

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



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2012			2011			2012			2011
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales	$	19		$	10		$	33		$	36
Gross losses from sales	(35		)	(132		)	(36		)	(319		)
Net gains (losses) from redemptions	2			(1		)	2			6
Other-than-temporary impairment losses	(267		)	(344		)	(330		)	(748		)
Held to maturity:
Net gains (losses) from redemptions	3			0			3			0
Total fixed maturities	(278		)	(467		)	(328		)	(1,025		)
Perpetual securities:
Available for sale:
Gross gains from sales	0			48			70			54
Gross losses from sales	3			(107		)	(62		)	(109		)
Net gains (losses) from redemptions	0			0			60			0
Other-than-temporary impairment losses	(76		)	(184		)	(216		)	(184		)
Total perpetual securities	(73		)	(243		)	(148		)	(239		)
Equity securities:
Other-than-temporary impairment losses	0			0			0			(1		)
Total equity securities	0			0			0			(1		)
Derivatives and other:
Derivative gains (losses)	(67		)	(25		)	13			(55		)
Other	0			67			0			73
Total derivatives and other	(67		)	42			13			18
Total realized investment gains (losses)	$	(418	)	$	(668	)	$	(463	)	$	(1,247	)

Other Than Temporary Impairment Losses on Investment Securities

The following table details our pretax other-than-temporary impairment losses by investment category that resulted from our impairment evaluation process.



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2012			2011			2012			2011
Perpetual securities	$	76		$	184		$	216		$	184
Corporate bonds	120			343			183			740
Mortgage- and asset-backed securities	3			1			3			7
Municipalities	0			0			0			1
Sovereign and supranational	144			0			144			0
Equity securities	0			0			0			1
Total other-than-temporary impairment losses realized	$	343	⁽¹⁾	$	528	⁽²⁾	$	546	⁽¹⁾	$	933	⁽²⁾

⁽¹⁾Includes $267 and $295 for the three- and six-month periods ended June 30, 2012, respectively, for credit-related impairments

and $76 and $251 for the three- and six-month periods ended June 30, 2012, respectively, from change in intent to sell securities

⁽²⁾Consisted completely of credit-related impairments

Net Effect on Shareholders' Equity of Unrealized Gains and Losses from Investment Securities

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



(In millions)	June 30, 2012			December 31, 2011
Unrealized gains (losses) on securities available for sale	$	2,272		$	1,761
Unamortized unrealized gains on securities transferred to held to maturity	26			34
Deferred income taxes	(828		)	(652		)
Shareholders’ equity, unrealized gains (losses) on investment securities	$	1,470		$	1,143

Investments Gross Unrealized Loss Aging

The following tables show the fair value and gross unrealized losses of our available-for-sale and held-to-maturity investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.



	June 30, 2012
	Total				Less than 12 months				12 months or longer
(In millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
Japan government and agencies:
Yen-denominated	$	1,397	$	6	$	1,397	$	6	$	0	$	0
Municipalities:
Dollar-denominated	51		7		19		0		32		7
Yen-denominated	61		2		0		0		61		2
Mortgage- and asset- backed securities:
Dollar-denominated	10		1		10		1		0		0
Yen-denominated	149		1		0		0		149		1
Public utilities:
Dollar-denominated	347		28		210		14		137		14
Yen-denominated	4,810		398		1,822		141		2,988		257
Sovereign and supranational:
Dollar-denominated	57		3		6		0		51		3
Yen-denominated	2,355		167		757		63		1,598		104
Banks/financial institutions:
Dollar-denominated	543		41		230		6		313		35
Yen-denominated	8,450		1,245		1,263		23		7,187		1,222
Other corporate:
Dollar-denominated	680		39		530		13		150		26
Yen-denominated	5,232		529		1,041		55		4,191		474
Total fixed maturities	24,142		2,467		7,285		322		16,857		2,145
Perpetual securities:
Dollar-denominated	126		18		111		9		15		9
Yen-denominated	2,349		570		939		108		1,410		462
Total perpetual securities	2,475		588		1,050		117		1,425		471
Equity securities	10		2		8		1		2		1
Total	$	26,627	$	3,057	$	8,343	$	440	$	18,284	$	2,617



	December 31, 2011
	Total				Less than 12 months				12 months or longer
(In millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
Japan government and agencies:
Yen-denominated	$	940	$	1	$	859	$	1	$	81	$	0
Municipalities:
Dollar-denominated	54		8		22		1		32		7
Yen-denominated	60		4		0		0		60		4
Mortgage- and asset- backed securities:
Yen-denominated	151		1		0		0		151		1
Public utilities:
Dollar-denominated	295		27		110		3		185		24
Yen-denominated	4,995		392		2,404		141		2,591		251
Sovereign and supranational:
Dollar-denominated	66		5		34		2		32		3
Yen-denominated	2,349		199		749		62		1,600		137
Banks/financial institutions:
Dollar-denominated	770		121		391		56		379		65
Yen-denominated	10,175		1,438		1,639		46		8,536		1,392
Other corporate:
Dollar-denominated	834		62		639		27		195		35
Yen-denominated	6,106		644		2,523		110		3,583		534
Total fixed maturities	26,795		2,902		9,370		449		17,425		2,453
Perpetual securities:
Dollar-denominated	217		29		109		4		108		25
Yen-denominated	2,290		604		630		69		1,660		535
Total perpetual securities	2,507		633		739		73		1,768		560
Equity securities	8		1		6		1		2		0
Total	$	29,310	$	3,536	$	10,115	$	523	$	19,195	$	3,013

Bank and Financial Institution Investments in Unrealized Loss Position

The table reflects those securities in that sector that were in an unrealized loss position as a percentage of our total investment portfolio in an unrealized loss position and their respective unrealized losses as a percentage of total unrealized losses.



	June 30, 2012						December 31, 2011
	Percentage of Total Investments in an Unrealized Loss Position			Percentage of Total Unrealized Losses			Percentage of Total Investments in an Unrealized Loss Position			Percentage of Total Unrealized Losses
Fixed maturities		34	%		42	%		37	%		44	%
Perpetual securities:
Upper Tier II		6			10			4			6
Tier I		4			10			5			12
Total perpetual securities		10			20			9			18
Total		44	%		62	%		46	%		62	%

Investments in Variable Interest Entities

The following table details our investments in VIEs.

Investments in Variable Interest Entities



	June 30, 2012				December 31, 2011
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
VIEs:
VIEs - consolidated	$	6,476	$	6,822	$	6,997	$	7,206
VIEs - not consolidated	12,911		12,927		13,753		13,714
Total VIEs	$	19,387	$	19,749	$	20,750	$	20,920

Securities Lending

The following table presents our security loans outstanding and the corresponding collateral held:



(In millions)	June 30, 2012		December 31, 2011
Security loans outstanding, fair value	$	187	$	812
Cash collateral on loaned securities	192		838

The balance of our security loans outstanding was lower at June 30, 2012, compared with that at December 31, 2011, due to our short-term funding needs being met by operational cash flows as of that date.

Perpetual Securities

Schedule of Available-for-sale Securities Reconciliation

Details of our holdings of perpetual securities were as follows:

Perpetual Securities



		June 30, 2012							December 31, 2011
(In millions)	Credit Rating	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Amortized Cost		Fair Value		Unrealized Gain (Loss)
Upper Tier II:
	AA	$	0	$	0	$	0		$	196	$	204	$	8
	A	495		498		3			2,108		2,046		(62		)
	BBB	2,770		2,508		(262		)	1,791		1,804		13
	BB or lower	45		45		0			190		190		0
Total Upper Tier II		3,310		3,051		(259		)	4,285		4,244		(41		)
Tier I:
	A	60		57		(3		)	0		0		0
	BBB	1,325		1,071		(254		)	1,684		1,417		(267		)
	BB or lower	249		211		(38		)	584		417		(167		)
Total Tier I		1,634		1,339		(295		)	2,268		1,834		(434		)
Other subordinated - non-banks	BBB	338		342		4			344		361		17
Total		$	5,282	$	4,732	$	(550	)	$	6,897	$	6,439	$	(458	)