The Company's freestanding derivative financial instruments have historically consisted of: (1) foreign currency forwards and options used in hedging foreign exchange risk on U.S. dollar-denominated investments in Aflac Japan's portfolio; (2) foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in yen and hedge the Company's long term exposure to a weakening yen; (3) cross-currency interest rate swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures; (4) foreign currency swaps and, in prior periods, credit default swaps that are associated with investments in special-purpose entities, including VIEs where the Company is the primary beneficiary; (5) interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments; and (6) interest rate swaptions used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale fixed-maturity securities. Some of the Company's derivatives are designated as cash flow hedges, fair value hedges or net investment hedges; however, other derivatives do not qualify for hedge accounting or the Company elects not to designate them as accounting hedges.

Foreign currency forwards and options are executed for the Aflac Japan segment in order to hedge the currency risk on the carrying value of certain U.S. dollar-denominated investments. The average maturity of these forwards and options can change depending on factors such as market conditions and types of investments being held. In situations where the maturity of the forwards and options is shorter than the underlying investment being hedged, the Company may enter into new forwards and options near maturity of the existing derivative in order to continue hedging the underlying investment. In forward transactions, Aflac Japan agrees with another party to buy a fixed amount of yen and sell a corresponding amount of U.S. dollars at a specified future date. Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options. In the purchased put transactions, Aflac Japan obtains the option to buy a fixed amount of yen and sell a corresponding amount of U.S. dollars at a specified future date. In the sold call transaction, Aflac Japan agrees to sell a fixed amount of yen and buy a corresponding amount of U.S. dollars at a specified future date. The combination of purchasing the put option and selling the call option results in no net premium being paid (i.e. a costless or zero-cost collar). The foreign currency forwards and options are used in fair value hedging relationships to mitigate the foreign exchange risk associated with U.S. dollar-denominated investments supporting yen- denominated liabilities.

Prior to April 1, 2018, foreign currency forwards and options (through a collar strategy, as discussed above) were used to hedge the currency risk associated with the net investment in Aflac Japan. In these forward transactions, Aflac agreed with another party to buy a fixed amount of U.S. dollars and sell a corresponding amount of yen at a specified price at a specified future date. In the option transactions, the Company used a combination of foreign currency options to protect expected future cash flows by simultaneously purchasing yen put options (options that protect against a weakening yen) and selling yen call options (options that limit participation in a strengthening yen). The combination of these two actions created a zero-cost collar.

The Company enters into foreign currency swaps pursuant to which it exchanges an initial principal amount in one currency for an initial principal amount of another currency, with an agreement to re-exchange the principal amounts at a future date. There may also be periodic exchanges of payments at specified intervals based on the agreed upon rates and notional amounts. Foreign currency swaps are used primarily in the consolidated VIEs in the Company's Aflac Japan portfolio to convert foreign-denominated cash flows to yen, the functional currency of Aflac Japan, in order to minimize cash flow fluctuations. The Company also uses foreign currency swaps to economically convert certain of its U.S. dollar-denominated senior note and subordinated debenture principal and interest obligations into yen-denominated obligations.

Interest rate swaption collars are combinations of two swaption positions. Swaptions are used to mitigate the adverse impact resulting from significant changes in the fair value of U.S. dollar-denominated available-for-sale securities due to fluctuation in interest rates. In order to maximize the efficiency of the collars while minimizing cost, a collar strategy is used whereby the Company purchases a long payer swaption (the Company purchases an option that allows it to enter into a swap where the Company will pay the fixed rate and receive the floating rate of the swap) and sells a short receiver swaption (the Company sells an option that provides the counterparty with the right to enter into a swap where the Company will receive the fixed rate and pay the floating rate of the swap). The combination of purchasing the long payer swaption and selling the short receiver swaption results in no net premium being paid (i.e. a costless or zero-cost collar).

The tables below summarize the balance sheet classification of the Company's derivative fair value amounts, as well as the gross asset and liability fair value amounts, at December 31. The fair value amounts presented do not include income accruals. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of exposure or credit risk.



	2018										2017
(In millions)				Asset Derivatives			Liability Derivatives							Asset Derivatives			Liability Derivatives
Hedge Designation/ Derivative Type	Notional Amount			Fair Value			Fair Value				Notional Amount			Fair Value			Fair Value
Cash flow hedges:
Foreign currency swaps		$	75		$	1		$	(4	)		$	75		$	0		$	(8	)
Total cash flow hedges		75			1			(4		)		75			0			(8		)
Fair value hedges:
Foreign currency forwards		2,086			0			(34		)		7,640			2			(221		)
Foreign currency options		9,070			3			(1		)		7,670			0			(2		)
Interest rate swaptions		500			0			(1		)		0			0			0
Total fair value hedges		11,656			3			(36		)		15,310			2			(223		)
Net investment hedge:
Foreign currency forwards		0			0			0				5			0			0
Foreign currency options		0			0			0				434			12			(1		)
Total net investment hedge		0			0			0				439			12			(1		)
Non-qualifying strategies:
Foreign currency swaps		5,387			284			(230		)		5,386			296			(189		)
Foreign currency forwards		16,057			126			(117		)		3,683			20			(53		)
Foreign currency options		430			0			0				770			0			0
Credit default swaps		0			0			0				88			1			0
Interest rate swaps		4,750			3			0				0			0			0
Total non-qualifying strategies		26,624			413			(347		)		9,927			317			(242		)
Total derivatives		$	38,355		$	417		$	(387	)		$	25,751		$	331		$	(474	)
Balance Sheet Location
Other assets		$	23,713		$	417		$	0			$	10,948		$	331		$	0
Other liabilities		14,642			0			(387		)		14,803			0			(474		)
Total derivatives		$	38,355		$	417		$	(387	)		$	25,751		$	331		$	(474	)

For certain variable-rate U.S. dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the USD variable rate interest and principal payments to fixed rate JPY interest and principal payments. The Company has designated foreign currency swaps as a hedge of the variability in cash flows of a forecasted transaction or of amounts to be received or paid related to a recognized asset (“cash flow” hedge). The remaining maximum length of time for which these cash flows are hedged is seven years. The derivatives in the Company's consolidated VIEs that are not designated as accounting hedges are discussed in the "non-qualifying strategies" section of this note.

The Company designates and accounts for certain foreign currency forwards, options, and interest rate swaptions as fair value hedges when they meet the requirements for hedge accounting. The Company recognizes gains and losses on these derivatives as well as the offsetting gain or loss on the related hedged items in current earnings.

Foreign currency forwards and options hedge the foreign currency exposure of certain U.S. dollar-denominated available-for-sale fixed-maturity investments held in Aflac Japan. The change in the fair value of the foreign currency forwards related to the changes in the difference between the spot rate and the forward price is excluded from the assessment of hedge effectiveness. The change in fair value of the foreign currency option related to the time value of the option is recognized in current earnings and is excluded from the assessment of hedge effectiveness.

Interest rate swaptions hedge the interest rate exposure of certain U.S. dollar-denominated available-for-sale securities held in Aflac Japan. For these hedging relationships, the Company excludes time value from the assessment of hedge effectiveness and recognizes changes in the intrinsic value of the swaptions in current earnings within net investment income. The change in the time value of the swaptions is recognized in other comprehensive income (loss) and amortized into earnings (net investment income) over its legal term.



(In millions)		Hedging Derivatives									Hedged Items
Hedging Derivatives	Hedged Items	Total Gains (Losses)			Gains (Losses) Excluded from Effectiveness Testing⁽²⁾			Gains (Losses) Included in Effectiveness Testing⁽¹⁾			Gains (Losses) ⁽¹⁾			Net Realized Gains (Losses) Recognized for Fair Value Hedge
2018:
Foreign currency forwards	Fixed maturity securities	$	126		$	(104	)	$	230		$	(242	)	$	(12	)
Foreign currency options	Fixed maturity securities	4			4			0			0			0
Interest rate swaptions	Fixed maturity securities	(1		)	(1		)	0			0			0
Total gains (losses)		$	129		$	(101	)	$	230		$	(242	)	$	(12	)
2017:
Foreign currency forwards	Fixed maturity and equity securities	$	98		$	(202	)	$	300		$	(278	)	$	22
Foreign currency options	Fixed maturity securities	21			10			11			(10		)	1
Total gains (losses)		$	119		$	(192	)	$	311		$	(288	)	$	23
2016:
Foreign currency forwards	Fixed maturity and equity securities	$	207		$	(338	)	$	545		$	(566	)	$	(21	)
Foreign currency options	Fixed maturity securities	(95		)	(18		)	(77		)	70			(7		)
Total gains (losses)		$	112		$	(356	)	$	468		$	(496	)	$	(28	)

⁽¹⁾ Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statement of earnings as realized investment gains (losses). For interest rate swaptions and related hedged items, gains and losses included in the hedge assessment are reported within net investment income. For the year ended December 31, 2018, those gains and losses on interest rate swaptions and related hedged items were immaterial.

⁽²⁾ Gains (losses) excluded from effectiveness testing includes the forward point on foreign currency forwards and time value change on foreign currency options which are reported in the consolidated statement of earnings as realized investment gains (losses). It also includes the change in the fair value of the interest rate swaptions related to the time value of the swaptions which is recognized as a component of other comprehensive income (loss).

The Company's investment in Aflac Japan is affected by changes in the yen/dollar exchange rate. To mitigate this exposure, the Parent Company's yen-denominated liabilities (see Note 9) have been designated as non-derivative hedges and, prior to April 1, 2018, foreign currency forwards and options were designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan. The Company designated net investment hedges under this strategy during the years ended December 31, 2018, 2017 and 2016.

For the Company's derivative instruments in consolidated VIEs that do not qualify for hedge accounting treatment, all changes in their fair value are reported in current period earnings within realized investment gains (losses). The amount of gain or loss recognized in earnings for the Company's VIEs is attributable to the derivatives in those investment structures. While the change in value of the swaps is recorded through current period earnings, the change in value of the available-for-sale fixed maturity securities associated with these swaps is recorded through other comprehensive income.

As of December 31, 2018, the Parent Company had cross-currency interest rate swap agreements related to its $350 million senior notes due February 2022, $700 million senior notes due June 2023, $750 million senior notes due November 2024 and $450 million senior notes due March 2025. Changes in the values of these swaps are recorded through current period earnings. For additional information regarding these swaps, see Note 9.

The Company uses foreign exchange forwards and options to economically mitigate the currency risk of some of its U.S. dollar- denominated loan receivables held within the Aflac Japan segment. These arrangements are not designated as accounting hedges, as the foreign currency remeasurement of the loan receivables impacts current period earnings, and generally offsets gains and losses from foreign exchange forwards within realized investment gains (losses). The Company also has certain foreign exchange forwards on U.S. dollar-denominated AFS securities where hedge accounting is not being applied.

In order to economically mitigate currency risk of future yen dividends from Aflac Japan while lowering consolidated hedge costs associated with Aflac Japan's U.S. dollar investment hedging the Parent Company entered into offsetting hedge positions using foreign exchange forwards. This activity is reported in the Corporate and other segment.



	2018									2017									2016
(In millions)	Realized Investment Gains (Losses)					Other Comprehensive Income (Loss)⁽¹⁾				Realized Investment Gains (Losses)					Other Comprehensive Income (Loss)⁽¹⁾				Realized Investment Gains (Losses)					Other Comprehensive Income (Loss)⁽¹⁾
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps		$	0				$	3			$	0				$	1			$	1				$	3
Total cash flow hedges		0			⁽²⁾		3				0			⁽²⁾		1				1			⁽²⁾		3
Fair value hedges:
Foreign currency forwards ⁽³⁾		(116		)							(180		)							(359		)
Foreign currency options ⁽³⁾		4									11									(25		)
Interest rate swaptions ⁽³⁾		0					(1		)		0					0				0					0
Total fair value hedges		(112		)			(1		)		(169		)			0				(384		)			0
Net investment hedge:
Non-derivative hedging instruments		0					(32		)		0					(15		)		0					0
Foreign currency forwards		0					0				0					(25		)		0					(118		)
Foreign currency options		0					(8		)		0					5				0					73
Total net investment hedge		0					(40		)		0					(35		)		0					(45		)
Non-qualifying strategies:
Foreign currency swaps		20									53									117
Foreign currency forwards		(135		)							8									9
Credit default swaps		0									(1		)							2
Interest rate swaps		3									0									0
Total non- qualifying strategies		(112		)							60									128
Total		$	(224	)			$	(38	)		$	(109	)			$	(34	)		$	(255	)			$	(42	)

⁽¹⁾Cash flow hedge items and the change in the fair value of interest rate swaptions related to the time value of the swaptions in fair value hedges are recorded as unrealized gains (losses) on derivatives and net investment hedge items are recorded in the unrealized foreign currency translation gains (losses) line in the consolidated statement of comprehensive income (loss).

⁽²⁾ Impact of cash flow hedges reported as realized investment gains (losses) includes an immaterial amount of gains or losses reclassified from accumulated other comprehensive income (loss) into earnings. It also includes an immaterial amount excluded from effectiveness testing during the years ended December 31, 2018 and 2017 and $1 million during the year ended December 31, 2016.

The impact on earnings from derivatives in cash flow hedge relationships also included a loss of $2 million during the year ended December 31, 2018 and an immaterial amount during the years ended December 31, 2017 and 2016 resulting from reclassifications from accumulated other comprehensive income (loss) to net investment income. There was no gain or loss reclassified from accumulated other comprehensive income (loss) into earnings related to the net investment hedge for the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018, deferred gains and losses on derivative instruments recorded in accumulated other comprehensive income that are expected to be reclassified to earnings during the next twelve months were immaterial.

The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of its senior notes and subordinated debentures; foreign currency forwards; and foreign currency options, and therefore the Company is exposed to credit risk in the event of nonperformance by the counterparties in those contracts. The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet.



	2018										2017
(In millions)	Notional Amount of Derivatives			Asset Derivatives Fair Value			Liability Derivatives Fair Value				Notional Amount of Derivatives			Asset Derivatives Fair Value			Liability Derivatives Fair Value
Counterparties' credit rating:
AA		$	5,399		$	63		$	(23	)		$	4,708		$	52		$	(37	)
A		32,513			350			(311		)		20,604			271			(370		)
BBB		443			4			(53		)		439			8			(67		)
Total		$	38,355		$	417		$	(387	)		$	25,751		$	331		$	(474	)

The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties under International Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the ISDA agreements also include Credit Support Annexes (CSAs) provisions, which generally provide for two-way collateral postings at the first dollar of exposure. The Company mitigates the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally requiring that collateral be posted at the outset of the transaction. In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of Aflac’s financial strength rating. The actual amount of payments that the Company could be required to make depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after the time of the downgrade.

The Company also engages in OTC cleared derivative transactions through regulated central clearing counterparties. These positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to these derivatives.

Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the counterparties. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $139 million and $264 million as of December 31, 2018 and 2017, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on December 31, 2018, the Company estimates that it would be required to post a maximum of $34 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights. (See the Offsetting tables below for collateral posted or received as of the reported balance sheet dates.)

Most of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Parent Company or Aflac and its respective counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements with the master netting arrangements generally provide that the Company will receive or pledge financial collateral at the first dollar of exposure.

The Company has securities lending agreements with unaffiliated financial institutions that post collateral to the Company in return for the use of its fixed maturity and public equity securities (see Note 3). When the Company has entered into securities lending agreements with the same counterparty, the agreements generally provide for net settlement in the event of default by the counterparty. This right of set-off allows the Company to keep and apply collateral received if the counterparty failed to return the securities borrowed from the Company as contractually agreed. For additional information on the Company's accounting policy for securities lending, see Note 1.



2018
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Received				Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	231		$	0		$	231		$	(152	)	$	(23	)		$	(55	)		$	1
OTC - cleared		3			0			3			0			0				(3		)		0
Total derivative assets subject to a master netting agreement or offsetting arrangement		234			0			234			(152		)	(23		)		(58		)		1
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		183						183														183
Total derivative assets not subject to a master netting agreement or offsetting arrangement		183						183														183
Total derivative assets		417			0			417			(152		)	(23		)		(58		)		184
Securities lending and similar arrangements		1,029			0			1,029			0			0				(1,029		)		0
Total		$	1,446		$	0		$	1,446		$	(152	)	$	(23	)		$	(1,087	)		$	184



2017
										Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Assets			Gross Amount Offset in Balance Sheet			Net Amount of Assets Presented in Balance Sheet			Financial Instruments				Securities Collateral			Cash Collateral Received				Net Amount
Derivative assets:
Derivative assets subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	180		$	0		$	180		$	(82	)		$	0		$	(98	)		$	0
Total derivative assets subject to a master netting agreement or offsetting arrangement		180			0			180			(82		)		0			(98		)		0
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		151						151														151
Total derivative assets not subject to a master netting agreement or offsetting arrangement		151						151														151
Total derivative assets		331			0			331			(82		)		0			(98		)		151
Securities lending and similar arrangements		592			0			592			0				0			(592		)		0
Total		$	923		$	0		$	923		$	(82	)		$	0		$	(690	)		$	151



2018
												Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities				Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet				Financial Instruments			Securities Collateral		Cash Collateral Pledged			Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	(285	)		$	0		$	(285	)		$	152	$	37		$	68		$	(28	)
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		(285		)		0			(285		)		152		37			68			(28		)
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		(102		)					(102		)										(102		)
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		(102		)					(102		)										(102		)
Total derivative liabilities		(387		)		0			(387		)		152		37			68			(130		)
Securities lending and similar arrangements		(1,052		)		0			(1,052		)		1,029		0			0			(23		)
Total		$	(1,439	)		$	0		$	(1,439	)		$	1,181	$	37		$	68		$	(153	)



2017
												Gross Amounts Not Offset in Balance Sheet
(In millions)	Gross Amount of Recognized Liabilities				Gross Amount Offset in Balance Sheet			Net Amount of Liabilities Presented in Balance Sheet				Financial Instruments			Securities Collateral		Cash Collateral Pledged			Net Amount
Derivative liabilities:
Derivative liabilities subject to a master netting agreement or offsetting arrangement
OTC - bilateral		$	(346	)		$	0		$	(346	)		$	82	$	245		$	10		$	(9	)
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		(346		)		0			(346		)		82		245			10			(9		)
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		(128		)					(128		)										(128		)
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		(128		)					(128		)										(128		)
Total derivative liabilities		(474		)		0			(474		)		82		245			10			(137		)
Securities lending and similar arrangements		(606		)		0			(606		)		592		0			0			(14		)
Total		$	(1,080	)		$	0		$	(1,080	)		$	674	$	245		$	10		$	(151	)