POLICY LIABILITIES

12 Months Ended

Dec. 31, 2012

Policy liabilities [Abstract]

POLICY LIABILITIES

POLICY LIABILITIES

Policy liabilities consist of future policy benefits, unpaid policy claims, unearned premiums, and other policyholders' funds, which accounted for 78%, 4%, 2%, and 16% of total policy liabilities at December 31, 2012, respectively. We regularly review the adequacy of our policy liabilities in total and by component.

The liability for future policy benefits as of December 31 consisted of the following:

		Liability Amounts				Interest Rates
(In millions)	Policy Issue Year	2012		2011		Year of Issue		In 20 Years
Health insurance:
Japan:	1974 - 2012	$	7,142	$	2,441	1.5 - 2.75	%	1.5 - 2.75	%
	1998 - 2012	13,685		18,777		3.0		3.0
	1997 - 1999	3,482		3,885		3.5		3.5
	1994 - 1996	4,261		4,749		4.0 - 4.5		4.0 - 4.5
	1987 - 1994	21,866		24,607		5.25 - 5.5		5.25 - 5.5
	1978 - 1986	5,009		5,761		6.5 - 6.75		5.5
U.S.:	2012	127		0		3.75		3.8
	2005 - 2011	2,977		2,713		4.75 - 5.5		4.75 - 5.5
	1998 - 2004	1,200		1,148		7.0		7.0
	1988 - 2004	748		777		8.0		6.0
	1986 - 2004	1,317		1,328		6.0		6.0
	1985 - 1986	23		23		6.5		6.5
	1981 - 1986	175		181		7.0		5.5
	Other	23		24
Life insurance:
Japan:	2001 - 2012	2,238		1,501		1.65 - 1.85		1.65 - 1.85
	2011 - 2012	733		122		2.0		2.0
	2009 - 2011	1,374		823		2.25		2.25
	2005 - 2011	1,231		1,079		2.5		2.5
	1985 - 2006	2,791		0		2.7		2.25
	2007 - 2011	1,049		896		2.75		2.75
	1999 - 2011	2,547		5,795		3.0		3.0
	1996 - 2009	872		962		3.5		3.5
	1994 - 1996	1,250		1,395		4.0 - 4.5		4.0 - 4.5
U.S.:	1956 - 2012	343		291		4.0 - 6.0		4.0 - 6.0
Total		76,463		79,278

The weighted-average interest rates reflected in the consolidated statements of earnings for future policy benefits for Japanese policies were 4.0% in 2012 and 2011 and 4.4% in 2010; and for U.S. policies, 6.0% in 2012, 2011 and 2010. The decline in Aflac Japan's interest rates from 2010 to 2011 was the result of the strengthening of future policy benefit reserves primarily for a closed block of cancer policies and a block of care policies.

Changes in the liability for unpaid policy claims were as follows for the years ended December 31:

(In millions)	2012				2011				2010
Unpaid supplemental health claims, beginning of year		$	3,749			$	3,524			$	3,105
Add claims incurred during the year related to:
Current year		8,013				7,703				7,262
Prior years		(173		)		(256		)		(332		)
Total incurred		7,840				7,447				6,930
Less claims paid during the year on claims incurred during:
Current year		5,453				5,401				5,003
Prior years		2,082				1,944				1,787
Total paid		7,535				7,345				6,790
Effect of foreign exchange rate changes on unpaid claims		(283		)		123				279
Reinsurance recoverables		10				0				0
Unpaid supplemental health claims, end of year		3,781				3,749				3,524
Unpaid life claims, end of year		253				232				195
Total liability for unpaid policy claims		$	4,034			$	3,981			$	3,719

The incurred claims development related to prior years reflects favorable development in the unpaid policy claims liability. This favorable development is primarily in our Japanese medical and cancer lines of business. This is consistent with the trends in hospitalization patterns over the past few years. There are no additional or return of premium considerations associated with that development.

As of December 31, 2012 and 2011, other policyholders' funds consisted primarily of discounted advance premiums on deposit from policyholders in conjunction with their purchase of certain Aflac Japan limited-pay insurance products. These advanced premiums are deferred upon collection and recognized as premium revenue over the contractual premium payment period. Advanced premiums represented 64% and 50% of the December 31, 2012 and 2011 other policyholders' funds balances, respectively.