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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2017

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



(In millions)	2017			2016			2015
Fixed-maturity securities		$	3,094		$	3,214		$	3,094
Perpetual securities		79			94			114
Equity securities		42			35			3
Other investments		94			31			15
Short-term investments and cash equivalents		25			11			4
Gross investment income		3,334			3,385			3,230
Less investment expenses		114			107			95
Net investment income		$	3,220		$	3,278		$	3,135

Available-for-sale Securities

The amortized cost for the Company's 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.



	2017
(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		$	27,980		$	3,363		$	271		$	31,072
Municipalities		314			28			12			330
Mortgage- and asset-backed securities		242			29			0			271
Public utilities		1,635			352			6			1,981
Sovereign and supranational		1,380			190			1			1,569
Banks/financial institutions		3,521			524			26			4,019
Other corporate		3,890			771			7			4,654
Total yen-denominated		38,962			5,257			323			43,896
U.S. dollar-denominated:
U.S. government and agencies		146			13			1			158
Municipalities		872			168			0			1,040
Mortgage- and asset-backed securities		161			12			0			173
Public utilities		5,116			884			27			5,973
Sovereign and supranational		267			73			0			340
Banks/financial institutions		2,762			604			8			3,358
Other corporate		25,384			2,620			418			27,586
Total U.S. dollar-denominated		34,708			4,374			454			38,628
Total fixed maturities		73,670			9,631			777			82,524
Perpetual securities:
Yen-denominated:
Banks/financial institutions		1,221			287			27			1,481
Other corporate		195			38			0			233
U.S. dollar-denominated:
Banks/financial institutions		46			29			0			75
Total perpetual securities		1,462			354			27			1,789
Equity securities:
Yen-denominated		561			135			1			695
U.S. dollar-denominated		285			45			2			328
Total equity securities		846			180			3			1,023
Total securities available for sale		$	75,978		$	10,165		$	807		$	85,336



	2016
(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		$	22,857		$	3,359		$	160		$	26,056
Municipalities		246			29			8			267
Mortgage- and asset-backed securities		1,096			33			8			1,121
Public utilities		1,533			318			3			1,848
Sovereign and supranational		862			186			5			1,043
Banks/financial institutions		2,673			403			74			3,002
Other corporate		3,192			623			3			3,812
Total yen-denominated		32,459			4,951			261			37,149
U.S dollar-denominated:
U.S. government and agencies		148			10			0			158
Municipalities		894			142			8			1,028
Mortgage- and asset-backed securities		196			20			0			216
Public utilities		5,205			690			60			5,835
Sovereign and supranational		335			91			0			426
Banks/financial institutions		2,570			507			16			3,061
Other corporate		24,556			2,021			690			25,887
Total U.S. dollar-denominated		33,904			3,481			774			36,611
Total fixed maturities		66,363			8,432			1,035			73,760
Perpetual securities:
Yen-denominated:
Banks/financial institutions		1,266			128			49			1,345
Other corporate		189			24			0			213
U.S. dollar-denominated:
Banks/financial institutions		51			24			0			75
Total perpetual securities		1,506			176			49			1,633
Equity securities:
Yen-denominated		624			83			2			705
Dollar-denominated		579			31			6			604
Total equity securities		1,203			114			8			1,309
Total securities available for sale		$	69,072		$	8,722		$	1,092		$	76,702

Held-to-maturity Securities



	2016
(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		$	20,702		$	5,338		$	0		$	26,040
Municipalities		350			107			0			457
Mortgage- and asset-backed securities		30			2			0			32
Public utilities		3,201			358			23			3,536
Sovereign and supranational		2,602			283			8			2,877
Banks/financial institutions		3,731			195			26			3,900
Other corporate		2,734			452			7			3,179
Total yen-denominated		33,350			6,735			64			40,021
Total securities held to maturity		$	33,350		$	6,735		$	64		$	40,021



	2017
(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		$	21,331		$	5,160		$	0		$	26,491
Municipalities		357			105			0			462
Mortgage- and asset-backed securities		26			1			0			27
Public utilities		3,300			398			0			3,698
Sovereign and supranational		1,523			312			0			1,835
Banks/financial institutions		2,206			190			9			2,387
Other corporate		2,687			485			0			3,172
Total yen-denominated		31,430			6,651			9			38,072
Total securities held to maturity		$	31,430		$	6,651		$	9		$	38,072

Investments Classified by Contractual Maturity Date

The contractual maturities of the Company's investments in fixed maturities at December 31, 2017, 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		$	234		$	243		$	86		$	89
Due after one year through five years		7,155			7,391			508			542
Due after five years through 10 years		7,812			8,385			2,726			2,946
Due after 10 years		45,028			51,269			8,482			9,927
Mortgage- and asset-backed securities		283			322			40			41
Total fixed maturities available for sale		$	60,512		$	67,610		$	11,842		$	13,545
Held to maturity:
Due in one year or less		$	885		$	903		$	0		$	0
Due after one year through five years		434			455			0			0
Due after five years through 10 years		1,634			1,802			0			0
Due after 10 years		28,451			34,885			0			0
Mortgage- and asset-backed securities		26			27			0			0
Total fixed maturities held to maturity		$	31,430		$	38,072		$	0		$	0

Economic Maturities of Investments in Perpetual Securities

The economic maturities of the Company's investments in perpetual securities, which were all reported as available for sale at December 31, 2017, 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		$	194		$	233		$	0		$	0
Due after 10 years		1,229			1,495			39			61
Total perpetual securities available for sale		$	1,423		$	1,728		$	39		$	61

Investment Exposures Exceeding 10 Percent Shareholders Equity

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



	2017			2016
(In millions)	Credit Rating	Amortized Cost	Fair Value	Credit Rating	Amortized Cost	Fair Value
Japan National Government⁽¹⁾	A	$48,399	$56,532	A	$42,931	$51,345

⁽¹⁾Japan Government Bonds (JGBs) or JGB-backed securities

Gain (Loss) on Investments

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



(In millions)	2017			2016			2015
Realized investment gains (losses):
Fixed maturities:
Available for sale:
Gross gains from sales	$	36		$	77		$	224
Gross losses from sales	(82		)	(134		)	(8		)
Net gains (losses) from redemptions	(23		)	112			51
Other-than-temporary impairment losses	(7		)	(24		)	(152		)
Total fixed maturities	(76		)	31			115
Perpetual securities:
Available for sale:
Net gains (losses) from redemptions	4			64			35
Other-than-temporary impairment losses	0			(2		)	0
Total perpetual securities	4			62			35
Equity securities:
Gross gains from sales	104			0			0
Gross losses from sales	(11		)	0			0
Net gains (losses) from redemptions	0			22			0
Other-than-temporary impairment losses	(22		)	(57		)	(1		)
Total equity securities	71			(35		)	(1		)
Loan loss reserves	(8		)	(2		)	(1		)
Derivatives and other:
Derivative gains (losses)	(109		)	(255		)	(10		)
Foreign currency gains (losses)	(33		)	185			(32		)
Total derivatives and other	(142		)	(70		)	(42		)
Total realized investment gains (losses)	$	(151	)	$	(14	)	$	106

Unrealized Gain (Loss) on Investments

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



(In millions)	2017			2016			2015
Changes in unrealized gains (losses):
Fixed maturities:
Available for sale		$	1,457		$	2,690		$	(2,481	)
Perpetual securities:
Available for sale		200			21			(123		)
Equity securities		71			88			9
Total change in unrealized gains (losses)		$	1,728		$	2,799		$	(2,595	)

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)	2017				2016
Unrealized gains (losses) on securities available for sale		$	9,358			$	7,630
Deferred income taxes⁽¹⁾		(3,394		)		(2,825		)
Shareholders’ equity, unrealized gains (losses) on investment securities		$	5,964			$	4,805

⁽¹⁾ See Note 10 for discussion of the accounting treatment of tax on amounts recorded in accumulated other comprehensive income pursuant to the Tax Act.

Investments Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of the Company's 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.



	2017
	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:
U.S. government and agencies:
U.S. dollar-denominated		$	74		$	1		$	74		$	1		$	0		$	0
Japan government and agencies:
Yen-denominated		5,255			271			1,264			9			3,991			262
Municipalities:
Yen-denominated		129			12			10			0			119			12
Public utilities:
U.S. dollar-denominated		785			27			221			3			564			24
Yen-denominated		83			6			0			0			83			6
Sovereign and supranational:
Yen-denominated		309			1			309			1			0			0
Banks/financial institutions:
U.S. dollar-denominated		362			8			316			5			46			3
Yen-denominated		1,162			35			394			4			768			31
Other corporate:
U.S. dollar-denominated		7,741			418			2,839			50			4,902			368
Yen-denominated		440			7			349			4			91			3
Total fixed maturities		16,340			786			5,776			77			10,564			709
Perpetual securities:
Yen-denominated		345			27			0			0			345			27
Total perpetual securities		345			27			0			0			345			27
Equity securities:
U.S. dollar-denominated		41			2			21			0			20			2
Yen-denominated		40			1			39			1			1			0
Total equity securities		81			3			60			1			21			2
Total		$	16,766		$	816		$	5,836		$	78		$	10,930		$	738



	2016
	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		$	3,958		$	160		$	3,958		$	160		$	0		$	0
Municipalities:
U.S. dollar-denominated		44			8			0			0			44			8
Yen-denominated		105			8			105			8			0			0
Mortgage- and asset- backed securities:
Yen-denominated		713			8			713			8			0			0
Public utilities:
U.S. dollar-denominated		1,265			60			790			32			475			28
Yen-denominated		635			26			347			14			288			12
Sovereign and supranational:
Yen-denominated		244			13			38			5			206			8
Banks/financial institutions:
U.S. dollar-denominated		268			16			238			10			30			6
Yen-denominated		1,521			100			636			19			885			81
Other corporate:
U.S. dollar-denominated		10,462			690			7,252			346			3,210			344
Yen-denominated		321			10			321			10			0			0
Total fixed maturities		19,536			1,099			14,398			612			5,138			487
Perpetual securities:
Yen-denominated		479			49			85			1			394			48
Total perpetual securities		479			49			85			1			394			48
Equity securities:
U.S. dollar-denominated		211			6			211			6			0			0
Yen-denominated		49			2			49			2			0			0
Total equity securities		260			8			260			8			0			0
Total		$	20,275		$	1,156		$	14,743		$	621		$	5,532		$	535

Other Investments

The table below reflects the composition of the carrying value for other investments as of December 31.



(In millions)	2017			2016
Other investments:
Transitional real estate loans		$	1,235		$	0
Commercial mortgage loans		908			855
Middle market loans		859			319
Policy loans		210			184
Short-term investments		57			89
Other		133			3
Total other investments		$	3,402		$	1,450

Securities Lending Transactions Accounted for as Secured Borrowings

Details of our securities lending activities as of December 31 were as follows:



Securities Lending Transactions Accounted for as Secured Borrowings
2017
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total
Securities lending transactions:
Japan government and agencies	$	0	$	49	$	49
Public utilities	73		0		73
Banks/financial institutions	54		0		54
Other corporate	415		0		415
Equity securities	15		0		15
Total borrowings	$	557	$	49	$	606
Gross amount of recognized liabilities for securities lending transactions					$	606
Amounts related to agreements not included in offsetting disclosure in Note 4					$	0

⁽¹⁾These securities are pledged as collateral under the Company's U.S. securities lending program and can be called at its discretion; therefore, they are classified as Overnight and Continuous.



Securities Lending Transactions Accounted for as Secured Borrowings
2016
Remaining Contractual Maturity of the Agreements
(In millions)	Overnight and Continuous⁽¹⁾		Up to 30 days		Total
Securities lending transactions:
Public utilities	$	62	$	0	$	62
Banks/financial institutions	34		0		34
Other corporate	430		0		430
Total borrowings	$	526	$	0	$	526
Gross amount of recognized liabilities for securities lending transactions					$	526
Amounts related to agreements not included in offsetting disclosure in Note 4					$	0

⁽¹⁾These securities are pledged as collateral under the Company's U.S. securities lending program and can be called at its discretion; therefore, they are classified as Overnight and Continuous.

Variable Interest Entity, Consolidated

Investments in Variable Interest Entities

The following table presents the cost or 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



	2017						2016
(In millions)	Cost or Amortized Cost			Fair Value			Cost or Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,300		$	5,294		$	4,168		$	4,982
Perpetual securities, available for sale		238			215			237			208
Equity securities		606			753			972			1,044
Other investments ⁽¹⁾		2,341			2,328			819			789
Other assets ⁽²⁾		151			151			127			127
Total assets of consolidated VIEs		$	7,636		$	8,741		$	6,323		$	7,150
Liabilities:
Other liabilities ⁽²⁾		$	128		$	128		$	146		$	146
Total liabilities of consolidated VIEs		$	128		$	128		$	146		$	146

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 the Company's investment in VIEs not consolidated are reported as of December 31.

Investments in Variable Interest Entities Not Consolidated



	2017						2016
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,827		$	5,506		$	4,729		$	5,261
Perpetual securities, available for sale		177			218			172			200
Fixed maturities, held to maturity		2,549			2,929			2,563			2,948
Other investments		55			55			1			1
Total investments in VIEs not consolidated		$	7,608		$	8,708		$	7,465		$	8,410