BUSINESS SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2018

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 "Corporate and other" 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 adjusted earnings. Adjusted earnings are adjusted revenues less benefits and adjusted expenses. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management’s control. Adjusted revenues are U.S. GAAP total revenues excluding realized investment gains and losses, except for amortized hedge costs related to foreign currency exposure management strategies and net interest cash flows from derivatives associated with certain investment strategies. Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect Aflac’s underlying business performance. The Company excludes income taxes related to operations to arrive at pretax adjusted earnings. Information regarding operations by segment follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2018		2017		2018		2017
Revenues:
Aflac Japan:
Net earned premiums	$	3,159	$	3,200	$	9,649	$	9,616
Net investment income, less amortized hedge costs	606		561		1,801		1,676
Other income	10		11		31		31
Total Aflac Japan	3,775		3,772		11,481		11,323
Aflac U.S.:
Net earned premiums	1,426		1,393		4,280		4,172
Net investment income	187		181		544		539
Other income	3		1		7		3
Total Aflac U.S.	1,616		1,575		4,831		4,714
Corporate and other	82		69		245		204
Total adjusted revenues	5,473		5,416		16,557		16,241
Realized investment gains (losses) ^(1),(2),(3)	104		90		75		2
Total revenues	$	5,577	$	5,506	$	16,632	$	16,243

⁽¹⁾Amortized hedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $59 and $60 for the three- month periods and $168 and for both the nine-month periods ended September 30, 2018, and 2017, respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from net investment income when analyzing segment operations.

⁽²⁾ Amortized hedge costs in Aflac Japan were partially offset by derivatives entered into as part of corporate activities and resulted in a benefit of $9 for the three-month period and $18 for the nine-month period ended September 30, 2018, respectively, which has been reclassified from realized investment gains (losses) and reported as an increase in net investment income when analyzing operations.

⁽³⁾ An immaterial amount of net interest cash flows from derivatives associated with certain investment strategies in the three- and nine-month periods ended September 30, 2018, were reclassified from realized investment gains (losses) into net investment income when analyzing operations.



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017
Pretax earnings:
Aflac Japan	$	756		$	748		$	2,411		$	2,308
Aflac U.S.	334			316			1,011			956
Corporate and other	(29		)	(50		)	(113		)	(150		)
Pretax adjusted earnings	1,061			1,014			3,309			3,114
Realized investment gains (losses) ^{(1),(2),(3),(4)}	88			71			25			(57		)
Other income (loss)	(3		)	(10		)	(73		)	(38		)
Total earnings before income taxes	$	1,146		$	1,075		$	3,261		$	3,019
Income taxes applicable to pretax adjusted earnings	$	270		$	338		$	862		$	1,031
Effect of foreign currency translation on after-tax adjusted earnings	(1		)	(29		)	27			(31		)

⁽¹⁾Amortizedhedge costs related to hedging U.S. dollar-denominated investments held in Aflac Japan were $59 and $60 for the three- month periods and $168 for both the nine-month periods ended September 30, 2018, and 2017, respectively, and have been reclassified from realized investment gains (losses) and reported as a deduction from pretax adjusted earnings when analyzing segment operations.

⁽²⁾ Amortized hedge costs in Aflac Japan were partially offset by derivatives entered into as part of corporate activities and resulted in a benefit of $9 for the three-month period and $18 for the nine-month period ended September 30, 2018 which has been reclassified from realized investment gains (losses) and reported as an increase in pretax adjusted earnings when analyzing operations.

⁽⁴⁾Excluding a gain of $17 and $19 for the three-month periods and $50 and $60 for the nine-month periods ended September 30, 2018, and 2017, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is included in adjusted earnings when analyzing segment operations

Assets were as follows:



(In millions)	September 30, 2018			December 31, 2017
Assets:
Aflac Japan		$	116,181		$	114,402
Aflac U.S.		19,585			19,893
Corporate and other		2,175			2,922
Total assets		$	137,941		$	137,217