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INVESTMENTS (Tables)

9 Months Ended

Sep. 30, 2013

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, 2013
(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		$	12,744		$	445		$	22		$	13,167
Mortgage- and asset-backed securities		614			34			0			648
Public utilities		2,816			96			78			2,834
Sovereign and supranational		1,055			82			0			1,137
Banks/financial institutions		3,088			163			322			2,929
Other corporate		4,178			139			247			4,070
Total yen-denominated		24,495			959			669			24,785
Dollar-denominated:
U.S. government and agencies		93			9			3			99
Municipalities		1,016			56			15			1,057
Mortgage- and asset-backed securities		167			17			0			184
Public utilities		5,018			369			206			5,181
Sovereign and supranational		462			82			1			543
Banks/financial institutions		3,527			329			48			3,808
Other corporate		21,633			911			1,278			21,266
Total dollar-denominated		31,916			1,773			1,551			32,138
Total fixed maturities		56,411			2,732			2,220			56,923
Perpetual securities:
Yen-denominated:
Banks/financial institutions		2,811			108			403			2,516
Other corporate		274			0			65			209
Dollar-denominated:
Banks/financial institutions		208			22			14			216
Total perpetual securities		3,293			130			482			2,941
Equity securities		18			5			1			22
Total securities available for sale		$	59,722		$	2,867		$	2,703		$	59,886



	December 31, 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		$	12,612		$	349		$	81		$	12,880
Mortgage- and asset-backed securities		746			40			1			785
Public utilities		3,608			116			72			3,652
Sovereign and supranational		1,404			71			0			1,475
Banks/financial institutions		3,455			233			180			3,508
Other corporate		5,656			241			153			5,744
Total yen-denominated		27,481			1,050			487			28,044
Dollar-denominated:
U.S. government and agencies		93			24			0			117
Municipalities		1,045			156			6			1,195
Mortgage- and asset-backed securities		188			58			0			246
Public utilities		4,204			658			17			4,845
Sovereign and supranational		476			123			2			597
Banks/financial institutions		3,626			506			6			4,126
Other corporate		16,300			1,878			95			18,083
Total dollar-denominated		25,932			3,403			126			29,209
Total fixed maturities		53,413			4,453			613			57,253
Perpetual securities:
Yen-denominated:
Banks/financial institutions		3,635			193			161			3,667
Other corporate		309			43			0			352
Dollar-denominated:
Banks/financial institutions		269			23			9			283
Total perpetual securities		4,213			259			170			4,302
Equity securities		20			4			1			23
Total securities available for sale		$	57,646		$	4,716		$	784		$	61,578

Held-to-maturity Securities



	December 31, 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		$	32,043		$	356		$	67		$	32,332
Municipalities		492			30			2			520
Mortgage- and asset-backed securities		90			4			0			94
Public utilities		4,924			233			106			5,051
Sovereign and supranational		3,209			192			84			3,317
Banks/financial institutions		9,211			211			431			8,991
Other corporate		4,457			187			108			4,536
Total yen-denominated		54,426			1,213			798			54,841
Total securities held to maturity		$	54,426		$	1,213		$	798		$	54,841



	September 30, 2013
(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		$	24,708		$	1,366		$	0		$	26,074
Municipalities		432			49			0			481
Mortgage- and asset-backed securities		66			3			0			69
Public utilities		4,359			168			184			4,343
Sovereign and supranational		3,219			160			104			3,275
Banks/financial institutions		6,905			143			493			6,555
Other corporate		3,918			213			172			3,959
Total yen-denominated		43,607			2,102			953			44,756
Total securities held to maturity		$	43,607		$	2,102		$	953		$	44,756

Investments Classified by Contractual Maturity Date

The contractual maturities of our investments in fixed maturities at September 30, 2013, 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		$	741		$	748		$	56		$	56
Due after one year through five years		2,048			2,141			415			473
Due after five years through 10 years		9,814			9,589			1,458			1,563
Due after 10 years		32,306			32,149			8,555			9,123
Mortgage- and asset-backed securities		684			727			39			47
Total fixed maturities available for sale		$	45,593		$	45,354		$	10,523		$	11,262
Held to maturity:
Due in one year or less		$	139		$	140		$	0		$	0
Due after one year through five years		1,142			1,217			0			0
Due after five years through 10 years		2,275			2,359			0			0
Due after 10 years		39,986			40,971			0			0
Mortgage- and asset-backed securities		65			69			0			0
Total fixed maturities held to maturity		$	43,607		$	44,756		$	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, 2013, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due after one year through five years		$	1,107		$	988		$	5		$	5
Due after five years through 10 years		274			209			0			0
Due after 10 years		1,808			1,639			99			100
Total perpetual securities available for sale		$	3,189		$	2,836		$	104		$	105

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, 2013						December 31, 2012
	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		$	13,520		13	%		$	16,292		14	%
Fair value		13,292			12			16,625			14
Perpetual securities:
Upper Tier II:
Amortized cost		$	2,102		2	%		$	2,825		3	%
Fair value		1,941			2			2,919			3
Tier I:
Amortized cost		917			1			1,079			1
Fair value		791			1			1,031			1
Total:
Amortized cost		$	16,539		16	%		$	20,196		18	%
Fair value		16,024			15			20,575			18

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)	2013			2012			2013			2012
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales	$	92		$	313		$	284		$	346
Gross losses from sales	(24		)	(1		)	(30		)	(37		)
Net gains (losses) from redemptions	4			0			25			2
Other-than-temporary impairment losses	(10		)	(70		)	(64		)	(400		)
Held to maturity:
Net gains (losses) from redemptions	0			0			0			3
Total fixed maturities	62			242			215			(86		)
Perpetual securities:
Available for sale:
Gross gains from sales	0			12			0			82
Gross losses from sales	0			(36		)	(2		)	(98		)
Net gains (losses) from redemptions	0			0			0			60
Other-than-temporary impairment losses	0			(27		)	0			(243		)
Total perpetual securities	0			(51		)	(2		)	(199		)
Equity securities:
Other-than-temporary impairment losses	0			0			(1		)	0
Total equity securities	0			0			(1		)	0
Derivatives and other:
Derivative gains (losses)	(41		)	95			157			108
Other	1			0			10			0
Total derivatives and other	(40		)	95			167			108
Total realized investment gains (losses)	$	22		$	286		$	379		$	(177	)

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)	2013			2012			2013			2012
Perpetual securities	$	0		$	27		$	0		$	243
Corporate bonds	3			70			41			253
Mortgage- and asset-backed securities	0			0			0			3
Sovereign and supranational	7			0			23			144
Equity securities	0			0			1			0
Total other-than-temporary impairment losses realized	$	10	⁽¹⁾	$	97	⁽¹⁾	$	65	⁽¹⁾	$	643	⁽¹⁾

⁽¹⁾Includes $0 and $70 for the three-month periods and $0 and $365 for the nine-month periods ended September 30, 2013 and 2012, respectively, for credit-related impairments; $0 and $27 for the three-month periods and $1 and $27 for the nine-month periods ended September 30, 2013 and 2012, respectively, for impairments due to severity and duration of decline in fair value; and $10 and $0 for the three-month periods and $64 and $251 for the nine-month periods ended September 30, 2013 and 2012, respectively, from change in intent to sell securities

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, 2013				December 31, 2012
Unrealized gains (losses) on securities available for sale		$	164			$	3,932
Unamortized unrealized gains on securities transferred to held to maturity		14				20
Deferred income taxes		(35		)		(1,382		)
Shareholders’ equity, unrealized gains (losses) on investment securities		$	143			$	2,570

Investments Gross Unrealized Loss Aging

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



	September 30, 2013
	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		$	1,933		$	22		$	1,933		$	22		$	0		$	0
Municipalities:
Dollar-denominated		196			15			163			10			33			5
Public utilities:
Dollar-denominated		2,314			206			2,297			203			17			3
Yen-denominated		3,367			262			2,123			134			1,244			128
Sovereign and supranational:
Dollar-denominated		43			1			43			1			0			0
Yen-denominated		935			104			554			25			381			79
Banks/financial institutions:
Dollar-denominated		816			48			784			44			32			4
Yen-denominated		5,455			815			2,704			171			2,751			644
Other corporate:
Dollar-denominated		12,903			1,278			12,532			1,207			371			71
Yen-denominated		3,857			419			2,642			242			1,215			177
U.S. government and agencies:
Dollar-denominated		37			3			37			3			0			0
Total fixed maturities		31,856			3,173			25,812			2,062			6,044			1,111
Perpetual securities:
Dollar-denominated		71			14			51			9			20			5
Yen-denominated		1,916			468			1,362			248			554			220
Total perpetual securities		1,987			482			1,413			257			574			225
Equity securities		5			1			5			1			0			0
Total		$	33,848		$	3,656		$	27,230		$	2,320		$	6,618		$	1,336



	December 31, 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		$	17,342		$	148		$	17,342		$	148		$	0		$	0
Municipalities:
Dollar-denominated		34			6			1			0			33			6
Yen-denominated		56			2			56			2			0			0
Mortgage- and asset- backed securities:
Yen-denominated		136			1			0			0			136			1
Public utilities:
Dollar-denominated		736			17			736			17			0			0
Yen-denominated		3,920			178			1,339			31			2,581			147
Sovereign and supranational:
Dollar-denominated		31			2			0			0			31			2
Yen-denominated		1,244			84			507			13			737			71
Banks/financial institutions:
Dollar-denominated		276			6			180			3			96			3
Yen-denominated		6,918			611			1,935			28			4,983			583
Other corporate:
Dollar-denominated		4,534			95			4,404			86			130			9
Yen-denominated		4,013			261			1,635			40			2,378			221
Total fixed maturities		39,240			1,411			28,135			368			11,105			1,043
Perpetual securities:
Dollar-denominated		136			9			120			0			16			9
Yen-denominated		1,315			161			0			0			1,315			161
Total perpetual securities		1,451			170			120			0			1,331			170
Equity securities		6			1			3			0			3			1
Total		$	40,697		$	1,582		$	28,258		$	368		$	12,439		$	1,214

Investments in Unrealized Loss Position

The following table provides more information on our unrealized loss positions.



		September 30, 2013									December 31, 2012
(In millions)	Percentage of Total Investments in an Unrealized Loss Position			Percentage of Gross Unrealized Losses			Percentage of Gross Unrealized Losses for Investment Grade Securities			Percentage of Total Investments in an Unrealized Loss Position			Percentage of Gross Unrealized Losses			Percentage of Gross Unrealized Losses for Investment Grade Securities
Fixed Maturities:
Japan government and agencies		6	%		1	%		100	%		43	%		9	%		100	%
Public utilities		17			13			88			11			12			69
Sovereign and supranational		3			3			100			3			6			96
Banks/financial institutions		19			24			67			18			39			76
Other corporate		49			46			93			21			23			72
Total fixed maturities		94	%		87	%					96	%		89	%
Perpetual securities		6			13			87			4			11			100
Total		100	%		100	%					100	%		100	%

Securities Lending

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



(In millions)	September 30, 2013			December 31, 2012
Security loans outstanding, fair value		$	613		$	6,122
Cash collateral on loaned securities		628			6,277

The balance of our security loans outstanding was significantly lower at September 30, 2013, compared with that at December 31, 2012, due to the conclusion of 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 Japanese government bonds (JGBs) with maturities that corresponded with the conclusion 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, 2013										December 31, 2012
(In millions)	Credit Rating	Amortized Cost			Fair Value			Unrealized Gain (Loss)				Amortized Cost			Fair Value			Unrealized Gain (Loss)
Upper Tier II:
	A		$	161		$	179		$	18			$	460		$	488		$	28
	BBB		1,686			1,559			(127		)		2,077			2,129			52
	BB or lower		255			203			(52		)		288			302			14
Total Upper Tier II			2,102			1,941			(161		)		2,825			2,919			94
Tier I:
	BBB		804			675			(129		)		966			904			(62		)
	BB or lower		113			116			3				113			127			14
Total Tier I			917			791			(126		)		1,079			1,031			(48		)
Other subordinated - non-banks	BBB		274			209			(65		)		309			352			43
Total			$	3,293		$	2,941		$	(352	)		$	4,213		$	4,302		$	89

Variable Interest Entity, Consolidated

Investments in Variable Interest Entities

The following table presents the amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities



	September 30, 2013						December 31, 2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,598		$	4,974		$	5,058		$	5,787
Perpetual securities, available for sale		504			457			559			574
Fixed maturities, held to maturity		256			254			289			287
Other assets		165			165			191			191
Total assets of consolidated VIEs		$	5,523		$	5,850		$	6,097		$	6,839
Liabilities:
Other liabilities		$	247		$	247		$	399		$	399
Total liabilities of consolidated VIEs		$	247		$	247		$	399		$	399

Variable Interest Entity, Not Consolidated

Investments in Variable Interest Entities

VIEs-Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which our investment in VIEs not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated



	September 30, 2013						December 31, 2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	6,951		$	6,954		$	7,738		$	8,350
Perpetual securities, available for sale		399			389			736			751
Fixed maturities, held to maturity		3,384			3,419			3,829			3,922
Total investments in VIEs not consolidated		$	10,734		$	10,762		$	12,303		$	13,023