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INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2014

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, 2014
(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		$	18,356		$	810		$	1		$	19,165
Municipalities		30			0			0			30
Mortgage- and asset-backed securities		438			36			0			474
Public utilities		2,160			132			8			2,284
Sovereign and supranational		951			165			0			1,116
Banks/financial institutions		3,070			286			187			3,169
Other corporate		4,113			298			115			4,296
Total yen-denominated		29,118			1,727			311			30,534
Dollar-denominated:
U.S. government and agencies		865			18			0			883
Municipalities		1,004			128			3			1,129
Mortgage- and asset-backed securities		185			20			0			205
Public utilities		5,268			671			57			5,882
Sovereign and supranational		386			86			0			472
Banks/financial institutions		3,316			590			9			3,897
Other corporate		23,407			1,861			441			24,827
Total dollar-denominated		34,431			3,374			510			37,295
Total fixed maturities		63,549			5,101			821			67,829
Perpetual securities:
Yen-denominated:
Banks/financial institutions		2,684			229			180			2,733
Other corporate		217			40			0			257
Dollar-denominated:
Banks/financial institutions		140			39			1			178
Total perpetual securities		3,041			308			181			3,168
Equity securities		17			6			0			23
Total securities available for sale		$	66,607		$	5,415		$	1,002		$	71,020



	December 31, 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

Held-to-maturity Securities



	December 31, 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



	June 30, 2014
(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		$	23,819		$	2,004		$	0		$	25,823
Municipalities		413			55			0			468
Mortgage- and asset-backed securities		57			3			0			60
Public utilities		4,054			283			58			4,279
Sovereign and supranational		3,057			246			28			3,275
Banks/financial institutions		6,152			209			177			6,184
Other corporate		3,582			299			12			3,869
Total yen-denominated		41,134			3,099			275			43,958
Total securities held to maturity		$	41,134		$	3,099		$	275		$	43,958

Investments Classified by Contractual Maturity Date

The contractual maturities of our investments in fixed maturities at June 30, 2014, 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		$	510		$	520		$	52		$	53
Due after one year through five years		1,992			2,135			626			740
Due after five years through 10 years		12,602			12,835			1,497			1,604
Due after 10 years		36,658			38,973			8,706			9,990
Mortgage- and asset-backed securities		503			550			38			46
Total fixed maturities available for sale		$	52,265		$	55,013		$	10,919		$	12,433
Held to maturity:
Due in one year or less		$	102		$	102		$	0		$	0
Due after one year through five years		1,561			1,713			0			0
Due after five years through 10 years		2,360			2,569			0			0
Due after 10 years		37,054			39,514			0			0
Mortgage- and asset-backed securities		57			60			0			0
Total fixed maturities held to maturity		$	41,134		$	43,958		$	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, 2014, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less		$	364		$	354		$	0		$	0
Due after one year through five years		673			664			5			5
Due after five years through 10 years		217			257			0			0
Due after 10 years		1,744			1,831			38			57
Total perpetual securities available for sale		$	2,998		$	3,106		$	43		$	62

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, 2014						December 31, 2013
	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		$	12,538		11	%		$	12,427		12	%
Fair value		13,250			11			12,637			12
Perpetual securities:
Upper Tier II:
Amortized cost		$	1,996		2	%		$	1,920		2	%
Fair value		2,084			2			1,913			2
Tier I:
Amortized cost		828			1			858			1
Fair value		827			1			825			1
Total:
Amortized cost		$	15,362		14	%		$	15,205		15	%
Fair value		16,161			14			15,375			15

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)	2014			2013			2014			2013
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales	$	92		$	73		$	127		$	192
Gross losses from sales	0			0			(1		)	(6		)
Net gains (losses) from redemptions	4			15			11			21
Other-than-temporary impairment losses	(28		)	0			(31		)	(54		)
Held to maturity:
Net gains (losses) from redemptions	1			0			1			0
Total fixed maturities	69			88			107			153
Perpetual securities:
Available for sale:
Gross losses from sales	0			(2		)	0			(2		)
Total perpetual securities	0			(2		)	0			(2		)
Equity securities:
Other-than-temporary impairment losses	0			0			0			(1		)
Total equity securities	0			0			0			(1		)
Derivatives and other:
Derivative gains (losses)	33			111			(50		)	198
Other	0			4			(1		)	9
Total derivatives and other	33			115			(51		)	207
Total realized investment gains (losses)	$	102		$	201		$	56		$	357

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)	2014		2013		2014		2013
Corporate bonds	$	28	$	0	$	31	$	38
Sovereign and supranational	0		0		0		16
Equity securities	0		0		0		1
Total other-than-temporary impairment losses realized ⁽¹⁾	$	28	$	0	$	31	$	55

⁽¹⁾Includes $0 and $1 for the six-month periods ended June 30, 2014 and 2013, respectively, for impairments due to severity and duration of decline in fair value; and $28 and $0 for the three-month periods and $31 and $54 for the six-month periods ended June 30, 2014 and 2013, 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)	June 30, 2014			December 31, 2013
Unrealized gains (losses) on securities available for sale	$	4,413			$	1,523
Unamortized unrealized gains on securities transferred to held to maturity	10				11
Deferred income taxes	(1,508		)		(499		)
Shareholders’ equity, unrealized gains (losses) on investment securities	$	2,915			$	1,035

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.



	June 30, 2014
	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		$	273		$	1		$	273		$	1		$	0		$	0
Municipalities:
Dollar-denominated		33			3			0			0			33			3
Public utilities:
Dollar-denominated		1,512			57			133			1			1,379			56
Yen-denominated		1,837			66			696			23			1,141			43
Sovereign and supranational:
Yen-denominated		416			28			0			0			416			28
Banks/financial institutions:
Dollar-denominated		329			9			51			0			278			9
Yen-denominated		3,364			364			388			6			2,976			358
Other corporate:
Dollar-denominated		10,540			441			970			13			9,570			428
Yen-denominated		2,043			127			146			2			1,897			125
Total fixed maturities		20,347			1,096			2,657			46			17,690			1,050
Perpetual securities:
Dollar-denominated		7			1			0			0			7			1
Yen-denominated		1,295			180			71			1			1,224			179
Total perpetual securities		1,302			181			71			1			1,231			180
Total		$	21,649		$	1,277		$	2,728		$	47		$	18,921		$	1,230



	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

Investments in Unrealized Loss Position

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



		June 30, 2014									December 31, 2013
(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		1	%		0	%		100	%		25	%		1	%		100	%
Public utilities		16			10			96			13			12			98
Sovereign and supranational		2			2			100			3			4			100
Banks/financial institutions		17			29			53			14			22			64
Other corporate		58			45			85			41			53			91
Total fixed maturities		94	%		86	%					96	%		92	%
Perpetual securities		6			14			90			4			8			90
Total		100	%		100	%					100	%		100	%

Securities Lending

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



(In millions)	June 30, 2014		December 31, 2013
Security loans outstanding, fair value	$	2,907		$	5,656
Cash collateral on loaned securities	2,972			5,820

Perpetual securities:

Schedule of Available-for-sale Securities Reconciliation

Details of our holdings of perpetual securities were as follows:

Perpetual Securities



		June 30, 2014										December 31, 2013
(In millions)	Credit Rating	Amortized Cost			Fair Value			Unrealized Gain (Loss)				Amortized Cost			Fair Value			Unrealized Gain (Loss)
Upper Tier II:
	A		$	151		$	193		$	42			$	145		$	183		$	38
	BBB		1,625			1,689			64				1,563			1,532			(31		)
	BB or lower		220			202			(18		)		212			198			(14		)
Total Upper Tier II			1,996			2,084			88				1,920			1,913			(7		)
Tier I:
	BBB		776			753			(23		)		746			706			(40		)
	BB or lower		52			74			22				112			119			7
Total Tier I			828			827			(1		)		858			825			(33		)
Other subordinated - non-banks:	BB or lower		217			257			40				209			209			0
Total			$	3,041		$	3,168		$	127			$	2,987		$	2,947		$	(40	)

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



	June 30, 2014						December 31, 2013
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	3,469		$	4,246		$	4,109		$	4,843
Perpetual securities, available for sale		481			511			463			468
Fixed maturities, held to maturity		99			95			237			236
Other assets		146			146			106			106
Total assets of consolidated VIEs		$	4,195		$	4,998		$	4,915		$	5,653
Liabilities:
Other liabilities		$	136		$	136		$	207		$	207
Total liabilities of consolidated VIEs		$	136		$	136		$	207		$	207

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



	June 30, 2014						December 31, 2013
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	6,831		$	7,407		$	6,724		$	6,916
Perpetual securities, available for sale		385			410			370			378
Fixed maturities, held to maturity		3,065			3,297			2,949			3,039
Total investments in VIEs not consolidated		$	10,281		$	11,114		$	10,043		$	10,333