BUSINESS SEGMENT AND FOREIGN INFORMATION

The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. Operating business segments that are not individually reportable and business activities, including reinsurance retrocession activities, not included in Aflac Japan or Aflac U.S. are included in the "Other business segments" category.

The Company does not allocate corporate overhead expenses to business segments. Consistent with U.S. GAAP accounting guidance for segment reporting, the Company evaluates and manages its business segments using a financial performance measure called pretax operating earnings. The Company's definition of operating earnings includes interest cash flows associated with notes payable and amortized hedge costs related to foreign currency denominated investments, but excludes certain items that cannot be predicted or that are outside of the management's control, such as realized investment gains and losses from securities transactions, impairments, change in loan loss reserves and certain derivative and foreign currency activities; nonrecurring items; and other non-operating income (loss) from net earnings. Nonrecurring and other non-operating items consist of infrequent events and activity not associated with the normal

course of the Company’s insurance operations and do not reflect Aflac’s underlying business performance. The Company excludes income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment for the years ended December 31 follows:



(In millions)	2017			2016			2015
Revenues:
Aflac Japan:
Net earned premiums:
Cancer		$	5,612		$	5,639		$	4,933
Medical and other health		3,379			3,429			3,092
Life insurance		3,761			4,469			4,021
Net investment income, less amortized hedge costs ⁽¹⁾		2,235			2,368			2,364
Other income		41			40			31
Total Aflac Japan		15,028			15,945			14,441
Aflac U.S.:
Net earned premiums:
Accident/disability		2,537			2,469			2,391
Cancer		1,308			1,299			1,293
Other health		1,445			1,415			1,395
Life insurance		273			271			268
Net investment income		721			703			678
Other income		5			10			8
Total Aflac U.S.		6,289			6,167			6,033
Other business segments		140			275			225
Total business segment revenues		21,457			22,387			20,699
Corporate and eliminations		210			85			79
Total operating revenues		21,667			22,472			20,778
Realized investment gains (losses)^{(1), (2), (3)}		0			87			94
Total revenues		$	21,667		$	22,559		$	20,872

⁽¹⁾Amortized hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $228, $186 and $72 for 2017, 2016 and 2015, respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from net investment income when analyzing segment operations to conform to current year reporting.

⁽²⁾Excluding a gain of $77 in 2017 and $85 in both 2016 and 2015 related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations

⁽³⁾ Prior year foreign currency transaction gains and losses have been reclassified from other non-operating income (loss) to realized investment gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on total revenues.



(In millions)	2017				2016				2015
Pretax earnings:
Aflac Japan ⁽¹⁾		$	3,054			$	3,148			$	3,103
Aflac U.S.		1,245				1,208				1,101
Other business segments		11				18				14
Total business segment pretax operating earnings		4,310				4,374				4,218
Interest expense, noninsurance operations		(122		)		(128		)		(146		)
Corporate and eliminations		(101		)		(129		)		(71		)
Pretax operating earnings		4,087				4,117				4,001
Realized investment gains (losses) ^{(1), (2), (3)}		0				87				94
Other non-operating income (loss)^{(3), (4)}		(69		)		(137		)		(233		)
Total earnings before income taxes		$	4,018			$	4,067			$	3,862
Income taxes applicable to pretax operating earnings		$	1,370			$	1,426			$	1,377
Effect of foreign currency translation on after-tax operating earnings		(41		)		141				(198		)

⁽¹⁾Amortized hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $228, $186 and $72 for 2017, 2016 and 2015 respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from pretax operating earnings when analyzing segment operations to conform to current year reporting.

⁽³⁾Prior year foreign currency transaction gains and losses have been reclassified from other non-operating income (loss) to realized investment gains (losses) to conform to current-year reporting classifications. These reclassifications had no impact on total earnings before income taxes.

⁽⁴⁾ Includes expense of $13 in 2017, $137 in 2016 and $230 in 2015 for the early extinguishment of debt

Assets as of December 31 were as follows:



(In millions)	2017			2016			2015
Assets:
Aflac Japan		$	114,402		$	107,858		$	97,646
Aflac U.S.		19,893			19,453			18,537
Other business segments		547			270			188
Total business segment assets		134,842			127,581			116,371
Corporate and eliminations		2,375			2,238			1,885
Total assets		$	137,217		$	129,819		$	118,256

Amounts prior to 2016 have been adjusted for the adoption of the accounting guidance on January 1, 2016 related to debt issuance costs.

Yen-Translation Effects: The following table shows the yen/dollar exchange rates used for or during the periods ended December 31. Exchange effects were calculated using the same yen/dollar exchange rate for the current year as for each respective prior year.



	2017				2016				2015
Statements of Earnings:
Weighted-average yen/dollar exchange rate		112.16				108.70				120.99
Yen percent strengthening (weakening)		(3.1		)%		11.3		%		(12.8		)%
Exchange effect on pretax operating earnings (in millions)		$	(63	)		$	218			$	(288	)



	2017				2016
Balance Sheets:
Yen/dollar exchange rate at December 31		113.00				116.49
Yen percent strengthening (weakening)		3.1		%		3.5		%
Exchange effect on total assets (in millions)		$	2,593			$	2,820
Exchange effect on total liabilities (in millions)		2,848				3,109

Transfers of funds from Aflac Japan: Aflac Japan makes payments to the Parent Company for management fees and to Aflac U.S. for allocated expenses and profit repatriations. Information on transfers for each of the years ended December 31 is shown below. See Note 13 for information concerning restrictions on transfers from Aflac Japan.



(In millions)	2017			2016			2015
Management fees		$	93		$	79		$	53
Allocated expenses		109			106			101
Profit repatriation		1,150			1,286			2,139
Total transfers from Aflac Japan		$	1,352		$	1,471		$	2,293

Property and Equipment: The costs of buildings, furniture and equipment are depreciated principally on a straight-line basis over their estimated useful lives (maximum of 50 years for buildings and 20 years for furniture and equipment). Expenditures for maintenance and repairs are expensed as incurred; expenditures for betterments are capitalized and depreciated. Classes of property and equipment as of December 31 were as follows:



(In millions)	2017			2016
Property and equipment:
Land		$	168		$	166
Buildings		441			421
Equipment and furniture		372			355
Total property and equipment		981			942
Less accumulated depreciation		547			509
Net property and equipment		$	434		$	433

Receivables: Receivables consist primarily of monthly insurance premiums due from individual policyholders or their employers for payroll deduction of premiums, net of an allowance for doubtful accounts. At December 31, 2017, $334 million, or 40.4% of total receivables, were related to Aflac Japan's operations, compared with $207 million, or 30.9%, at December 31, 2016.