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INVESTMENTS (Tables)

9 Months Ended

12 Months Ended

Sep. 30, 2012

Dec. 31, 2011

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.



	September 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	$	14,059	$	488	$	6	$	14,541
Mortgage- and asset-backed securities	853		51		1		903
Public utilities	4,026		107		142		3,991
Sovereign and supranational	2,050		53		109		1,994
Banks/financial institutions	4,473		194		369		4,298
Other corporate	6,307		214		256		6,265
Total yen-denominated	31,768		1,107		883		31,992
Dollar-denominated:
U.S. government and agencies	93		25		0		118
Municipalities	1,049		152		5		1,196
Mortgage- and asset-backed securities	235		67		0		302
Public utilities	3,620		699		3		4,316
Sovereign and supranational	476		121		4		593
Banks/financial institutions	3,526		476		17		3,985
Other corporate	11,883		1,902		39		13,746
Total dollar-denominated	20,882		3,442		68		24,256
Total fixed maturities	52,650		4,549		951		56,248
Perpetual securities:
Yen-denominated:
Banks/financial institutions	4,214		139		281		4,072
Other corporate	345		26		0		371
Dollar-denominated:
Banks/financial institutions	269		19		12		276
Total perpetual securities	4,828		184		293		4,719
Equity securities	22		4		2		24
Total securities available for sale	$	57,500	$	4,737	$	1,246	$	60,991



	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



	September 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	$	34,792	$	715	$	6	$	35,501
Municipalities	550		42		0		592
Mortgage- and asset-backed securities	109		5		0		114
Public utilities	5,494		328		66		5,756
Sovereign and supranational	3,712		230		79		3,863
Banks/financial institutions	10,425		272		399		10,298
Other corporate	4,972		239		78		5,133
Total yen-denominated	60,054		1,831		628		61,257
Total securities held to maturity	$	60,054	$	1,831	$	628	$	61,257



	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 September 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	$	1,812	$	1,837	$	53	$	54
Due after one year through five years	2,519		2,645		336		373
Due after five years through 10 years	4,792		5,177		1,004		1,186
Due after 10 years	32,928		34,042		7,980		9,568
Mortgage- and asset-backed securities	1,044		1,148		44		56
Total fixed maturities available for sale	$	43,095	$	44,849	$	9,417	$	11,237
Held to maturity:
Due in one year or less	$	6,575	$	6,580	$	0	$	0
Due after one year through five years	819		885		0		0
Due after five years through 10 years	3,371		3,778		0		0
Due after 10 years	49,180		49,900		0		0
Mortgage- and asset-backed securities	109		114		0		0
Total fixed maturities held to maturity	$	60,054	$	61,257	$	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 September 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	$	322	$	325	$	0	$	0
Due after one year through five years	1,251		1,304		5		5
Due after five years through 10 years	468		498		0		0
Due after 10 years	2,623		2,422		159		165
Total perpetual securities available for sale	$	4,664	$	4,549	$	164	$	170

Bank and Financial Institution Investments

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



	September 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		$	18,424		15	%		$	20,025		20	%
Fair value		18,581			15			18,933			19
Perpetual securities:
Upper Tier II:
Amortized cost		$	3,189		3	%		$	4,285		5	%
Fair value		3,165			3			4,244			4
Tier I:
Amortized cost		1,294			1			2,268			2
Fair value		1,183			1			1,834			2
Total:
Amortized cost		$	22,907		19	%		$	26,578		27	%
Fair value		22,929			19			25,011			25

Gain (Loss) on Investments

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



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2012			2011			2012			2011
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales	$	313		$	354		$	346		$	458
Gross losses from sales	(1		)	(56		)	(37		)	(375		)
Net gains (losses) from redemptions	0			9			2			15
Other-than-temporary impairment losses	(70		)	(44		)	(400		)	(793		)
Held to maturity:
Net gains (losses) from redemptions	0			0			3			0
Total fixed maturities	242			263			(86		)	(695		)
Perpetual securities:
Available for sale:
Gross gains from sales	12			0			82			54
Gross losses from sales	(36		)	0			(98		)	(109		)
Net gains (losses) from redemptions	0			0			60			0
Other-than-temporary impairment losses	(27		)	(122		)	(243		)	(306		)
Total perpetual securities	(51		)	(122		)	(199		)	(361		)
Equity securities:
Other-than-temporary impairment losses	0			0			0			(1		)
Total equity securities	0			0			0			(1		)
Derivatives and other:
Derivative gains (losses)	95			(224		)	108			(291		)
Other	0			0			0			18
Total derivatives and other	95			(224		)	108			(273		)
Total realized investment gains (losses)	$	286		$	(83	)	$	(177	)	$	(1,330	)

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 September 30,						Nine Months Ended September 30,
(In millions)	2012			2011			2012			2011
Perpetual securities	$	27		$	122		$	243		$	306
Corporate bonds	70			43			253			783
Mortgage- and asset-backed securities	0			1			3			9
Municipalities	0			0			0			1
Sovereign and supranational	0			0			144			0
Equity securities	0			0			0			1
Total other-than-temporary impairment losses realized	$	97	⁽¹⁾	$	166	⁽²⁾	$	643	⁽¹⁾	$	1,100	⁽²⁾

⁽¹⁾Includes $70 and $365 for the three- and nine-month periods ended September 30, 2012, respectively, for credit-related impairments;

$0 and $251 for the three- and nine-month periods ended September 30, 2012, respectively, from change in intent to sell securities; and $27 for the three- and nine-month periods ended September 30, 2012 for impairments due to severity and duration of decline in fair value

⁽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)	September 30, 2012			December 31, 2011
Unrealized gains (losses) on securities available for sale	$	3,491		$	1,761
Unamortized unrealized gains on securities transferred to held to maturity	24			34
Deferred income taxes	(1,255		)	(652		)
Shareholders’ equity, unrealized gains (losses) on investment securities	$	2,260		$	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.



	September 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	$	7,617	$	12	$	7,617	$	12	$	0	$	0
Municipalities:
Dollar-denominated	33		5		0		0		33		5
Mortgage- and asset- backed securities:
Dollar-denominated	10		0		10		0		0		0
Yen-denominated	152		1		0		0		152		1
Public utilities:
Dollar-denominated	185		3		145		2		40		1
Yen-denominated	4,030		208		642		24		3,388		184
Sovereign and supranational:
Dollar-denominated	37		4		6		0		31		4
Yen-denominated	1,796		188		913		104		883		84
Banks/financial institutions:
Dollar-denominated	304		17		99		1		205		16
Yen-denominated	6,408		768		189		5		6,219		763
Other corporate:
Dollar-denominated	1,334		39		1,225		24		109		15
Yen-denominated	4,652		334		765		7		3,887		327
Total fixed maturities	26,558		1,579		11,611		179		14,947		1,400
Perpetual securities:
Dollar-denominated	133		12		118		2		15		10
Yen-denominated	1,751		281		126		2		1,625		279
Total perpetual securities	1,884		293		244		4		1,640		289
Equity securities	8		2		5		1		3		1
Total	$	28,450	$	1,874	$	11,860	$	184	$	16,590	$	1,690



	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. The table also reflects the respective unrealized losses in this sector as a percentage of total unrealized losses in our investment portfolio.



	September 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		24	%		42	%		37	%		44	%
Perpetual securities:
Upper Tier II		4			7			4			6
Tier I		2			9			5			12
Total perpetual securities		6			16			9			18
Total		30	%		58	%		46	%		62	%

Investments in Variable Interest Entities

The following table details our investments in VIEs.

Investments in Variable Interest Entities



	September 30, 2012				December 31, 2011
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
VIEs:
VIEs - consolidated	$	6,285	$	6,920	$	6,997	$	7,206
VIEs - not consolidated	13,340		13,976		13,753		13,714
Total VIEs	$	19,625	$	20,896	$	20,750	$	20,920

Securities Lending

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



(In millions)	September 30, 2012		December 31, 2011
Security loans outstanding, fair value	$	6,436	$	812
Cash collateral on loaned securities	6,591		838

The balance of our security loans outstanding was higher at September 30, 2012, compared with that at December 31, 2011, due to a six-month securities lending program that began in the third quarter of 2012. For this particular securities lending program, we invested the cash collateral in JGBs with maturities that correspond with the termination of the program.

Perpetual Securities

Schedule of Available-for-sale Securities Reconciliation

Details of our holdings of perpetual securities were as follows:

Perpetual Securities



		September 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	504		524		20			2,108		2,046		(62		)
	BBB	2,317		2,263		(54		)	1,791		1,804		13
	BB or lower	368		378		10			190		190		0
Total Upper Tier II		3,189		3,165		(24		)	4,285		4,244		(41		)
Tier I:
	A	60		59		(1		)	0		0		0
	BBB	1,009		856		(153		)	1,684		1,417		(267		)
	BB or lower	225		268		43			584		417		(167		)
Total Tier I		1,294		1,183		(111		)	2,268		1,834		(434		)
Other subordinated - non-banks	BBB	345		371		26			344		361		17
Total		$	4,828	$	4,719	$	(109	)	$	6,897	$	6,439	$	(458	)