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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2013

The components of net investment income for the years ended December 31 were as follows:



(In millions)	2013			2012			2011
Fixed-maturity securities		$	3,210		$	3,248		$	3,026
Perpetual securities		153			253			274
Equity securities and other		7			17			5
Short-term investments and cash equivalents		1			2			4
Gross investment income		3,371			3,520			3,309
Less investment expenses		78			47			29
Net investment income		$	3,293		$	3,473		$	3,280

Available-for-sale Securities

The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments at December 31 are shown in the following tables.



	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		$	14,936		$	431		$	33		$	15,334
Mortgage- and asset-backed securities		558			29			0			587
Public utilities		2,261			100			18			2,343
Sovereign and supranational		978			85			28			1,035
Banks/financial institutions		2,799			220			242			2,777
Other corporate		3,956			151			185			3,922
Total yen-denominated		25,488			1,016			506			25,998
Dollar-denominated:
U.S. government and agencies		92			10			4			98
Municipalities		992			71			12			1,051
Mortgage- and asset-backed securities		163			21			0			184
Public utilities		4,931			471			183			5,219
Sovereign and supranational		404			85			1			488
Banks/financial institutions		3,318			447			33			3,732
Other corporate		21,123			1,347			1,170			21,300
Total dollar-denominated		31,023			2,452			1,403			32,072
Total fixed maturities		56,511			3,468			1,909			58,070
Perpetual securities:
Yen-denominated:
Banks/financial institutions		2,582			151			217			2,516
Other corporate		209			0			0			209
Dollar-denominated:
Banks/financial institutions		196			35			9			222
Total perpetual securities		2,987			186			226			2,947
Equity securities		17			5			1			21
Total securities available for sale		$	59,515		$	3,659		$	2,136		$	61,038



	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



	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		$	27,362		$	1,347		$	1		$	28,708
Municipalities		399			41			0			440
Mortgage- and asset-backed securities		58			3			0			61
Public utilities		3,900			150			122			3,928
Sovereign and supranational		2,941			171			72			3,040
Banks/financial institutions		6,310			146			328			6,128
Other corporate		3,445			183			87			3,541
Total yen-denominated		44,415			2,041			610			45,846
Total securities held to maturity		$	44,415		$	2,041		$	610		$	45,846



	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

Investments Classified by Contractual Maturity Date

The contractual maturities of our investments in fixed maturities at December 31, 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		$	646		$	653		$	50		$	52
Due after one year through five years		1,820			1,960			474			552
Due after five years through 10 years		9,713			9,657			1,557			1,624
Due after 10 years		32,752			33,514			8,517			9,016
Mortgage- and asset-backed securities		622			664			38			46
Total fixed maturities available for sale		$	45,553		$	46,448		$	10,636		$	11,290
Held to maturity:
Due in one year or less		$	4,547		$	4,547		$	0		$	0
Due after one year through five years		1,473			1,598			0			0
Due after five years through 10 years		1,967			2,062			0			0
Due after 10 years		36,370			37,578			0			0
Mortgage- and asset-backed securities		58			61			0			0
Total fixed maturities held to maturity		$	44,415		$	45,846		$	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 December 31, 2013, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less		$	142		$	128		$	0		$	0
Due after one year through five years		855			829			5			5
Due after five years through 10 years		209			209			0			0
Due after 10 years		1,677			1,673			99			103
Total perpetual securities available for sale		$	2,883		$	2,839		$	104		$	108

Investment Exposures Exceeding 10 Percent Shareholders Equity

Investment exposures that individually exceeded 10% of shareholders' equity as of December 31 were as follows:



	2013			2012
(In millions)	Credit Rating	Amortized Cost	Fair Value	Credit Rating	Amortized Cost	Fair Value
Japan National Government⁽¹⁾	AA	$41,924	$43,619	AA	$44,081	$44,580

⁽¹⁾JGBs or JGB-backed securities

Bank and Financial Institution Investments

Our total investments in the bank and financial institution sector as of December 31, including those classified as perpetual securities, were as follows:



	2013						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		$	12,427		12	%		$	16,292		14	%
Fair value		12,637			12			16,625			14
Perpetual securities:
Upper Tier II:
Amortized cost		$	1,920		2	%		$	2,825		3	%
Fair value		1,913			2			2,919			3
Tier I:
Amortized cost		858			1			1,079			1
Fair value		825			1			1,031			1
Total:
Amortized cost		$	15,205		15	%		$	20,196		18	%
Fair value		15,375			15			20,575			18

Gain (Loss) on Investments

Information regarding pretax realized gains and losses from investments for the years ended December 31 follows:



(In millions)	2013			2012			2011
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales	$	316		$	427		$	992
Gross losses from sales	(87		)	(48		)	(465		)
Net gains (losses) from redemptions	34			2			69
Other-than-temporary impairment losses	(128		)	(734		)	(1,335		)
Held to maturity:
Net gains (losses) from redemptions	0			4			0
Total fixed maturities	135			(349		)	(739		)
Perpetual securities:
Available for sale:
Gross gains from sales	0			127			102
Gross losses from sales	(1		)	(98		)	(109		)
Net gains (losses) from redemptions	0			60			0
Other-than-temporary impairment losses	(70		)	(243		)	(565		)
Total perpetual securities	(71		)	(154		)	(572		)
Equity securities:
Other-than-temporary impairment losses	(1		)	0			(1		)
Total equity securities	(1		)	0			(1		)
Derivatives and other:
Derivative gains (losses)	326			151			(257		)
Other	10			3			17
Total derivatives and other	336			154			(240		)
Total realized investment gains (losses)	$	399		$	(349	)	$	(1,552	)

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 for the years ended December 31.



(In millions)	2013		2012		2011
Perpetual securities	$	70	$	243	$	565
Corporate bonds	102		345		1,316
Mortgage- and asset-backed securities	0		3		17
Municipalities	0		0		2
Sovereign and supranational	26		386		0
Equity securities	1		0		1
Total other-than-temporary impairment losses realized ⁽¹⁾	$	199	$	977	$	1,901

⁽¹⁾Includes $45, $597 and $1,286 for the years ended December 31, 2013, 2012 and 2011, respectively, for credit-related impairments;

$26 and $27 for the years ended December 31, 2013 and 2012, respectively, for impairments due to severity and duration of decline

in fair value; and $128, $353 and $615 for the years ended December 31, 2013, 2012 and 2011, respectively, from change in intent to

sell securities

Unrealized Gain (Loss) on Investments

Information regarding changes in unrealized gains and losses from investments for the years ended December 31 follows:



(In millions)	2013				2012				2011
Changes in unrealized gains (losses):
Fixed maturities:
Available for sale		$	(2,281	)		$	1,624			$	1,963
Transferred to held to maturity		(9		)		(14		)		(101		)
Perpetual securities:
Available for sale		(129		)		547				(143		)
Equity securities		1				0				2
Total change in unrealized gains (losses)		$	(2,418	)		$	2,157			$	1,721

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 at December 31 was as follows:



(In millions)	2013				2012
Unrealized gains (losses) on securities available for sale		$	1,523			$	3,932
Unamortized unrealized gains on securities transferred to held to maturity		11				20
Deferred income taxes		(499		)		(1,382		)
Shareholders’ equity, unrealized gains (losses) on investment securities		$	1,035			$	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 at December 31.



	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		$	8,869		$	34		$	8,869		$	34		$	0		$	0
Municipalities:
Dollar-denominated		177			12			145			8			32			4
Public utilities:
Dollar-denominated		2,023			183			1,740			143			283			40
Yen-denominated		2,519			140			1,816			54			703			86
Sovereign and supranational:
Dollar-denominated		12			1			12			1			0			0
Yen-denominated		1,152			100			791			34			361			66
Banks/financial institutions:
Dollar-denominated		547			33			454			23			93			10
Yen-denominated		4,533			570			2,322			107			2,211			463
Other corporate:
Dollar-denominated		11,588			1,170			8,504			733			3,084			437
Yen-denominated		3,372			272			2,296			152			1,076			120
U.S. government and agencies:
Dollar-denominated		36			4			36			4			0			0
Total fixed maturities		34,828			2,519			26,985			1,293			7,843			1,226
Perpetual securities:
Dollar-denominated		59			9			52			8			7			1
Yen-denominated		1,322			217			748			74			574			143
Total perpetual securities		1,381			226			800			82			581			144
Equity securities		5			1			5			1			0			0
Total		$	36,214		$	2,746		$	27,790		$	1,376		$	8,424		$	1,370



	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 position as of December 31.



	2013									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		25	%		1	%		100	%		43	%		9	%		100	%
Public utilities		13			12			98			11			12			69
Sovereign and supranational		3			4			100			3			6			96
Banks/financial institutions		14			22			64			18			39			76
Other corporate		41			53			91			21			23			72
Total fixed maturities		96	%		92	%					96	%		89	%
Perpetual securities		4			8			90			4			11			100
Total		100	%		100	%					100	%		100	%

Securities Lending

The following table presents our security loans outstanding and the corresponding collateral held as of December 31:



(In millions)	2013			2012
Security loans outstanding, fair value		$	5,656		$	6,122
Cash collateral on loaned securities		5,820			6,277

Perpetual securities

Schedule of Available-for-sale Securities Reconciliation

Details of our holdings of perpetual securities as of December 31 were as follows:

Perpetual Securities



		2013										2012
(In millions)	Credit Rating	Amortized Cost			Fair Value			Unrealized Gain (Loss)				Amortized Cost			Fair Value			Unrealized Gain (Loss)
Upper Tier II:
	A		$	145		$	183		$	38			$	460		$	488		$	28
	BBB		1,563			1,532			(31		)		2,077			2,129			52
	BB or lower		212			198			(14		)		288			302			14
Total Upper Tier II			1,920			1,913			(7		)		2,825			2,919			94
Tier I:
	BBB		746			706			(40		)		966			904			(62		)
	BB or lower		112			119			7				113			127			14
Total Tier I			858			825			(33		)		1,079			1,031			(48		)
Other subordinated - non-banks:
	BBB		0			0			0				309			352			43
	BB or lower		209			209			0				0			0			0
Total other subordinated - non-banks			209			209			0				309			352			43
Total			$	2,987		$	2,947		$	(40	)		$	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 as of December 31.

Investments in Consolidated Variable Interest Entities



	2013						2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,109		$	4,843		$	5,058		$	5,787
Perpetual securities, available for sale		463			468			559			574
Fixed maturities, held to maturity		237			236			289			287
Other assets		106			106			191			191
Total assets of consolidated VIEs		$	4,915		$	5,653		$	6,097		$	6,839
Liabilities:
Other liabilities		$	207		$	207		$	399		$	399
Total liabilities of consolidated VIEs		$	207		$	207		$	399		$	399

Variable Interest Entity, Not Consolidated

Investments in Variable Interest Entities

The table below reflects the amortized cost, fair value and balance sheet caption in which our investment in VIEs not consolidated are reported as of December 31.

Investments in Variable Interest Entities Not Consolidated



	2013						2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	6,724		$	6,916		$	7,738		$	8,350
Perpetual securities, available for sale		370			378			736			751
Fixed maturities, held to maturity		2,949			3,039			3,829			3,922
Total investments in VIEs not consolidated		$	10,043		$	10,333		$	12,303		$	13,023