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). Additionally, the Company enters into purchased options, acting as caps to protect the downside of the sold call options beyond a specified level. As opposed to the collar strategies which are fair value hedges, these sold call option caps are classified as non-qualifying hedges.

From time to time, the Company may also enter into foreign currency forwards and options to hedge the currency risk associated with the net investment in Aflac Japan. In these forward transactions, Aflac agrees 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 may use 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 create a zero-cost collar. Additionally, the Company enters into purchased options to hedge cash flows from the net investment in Aflac Japan.

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.

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 a payer swaption, the Company pays a premium to obtain the right, but not the obligation, to enter into a swap contract where it will pay a fixed rate and receive a floating rate. Interest rate swaption collars are combinations of two swaption positions. 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 table below summarizes the balance sheet classification of the Company's derivative fair value amounts, as well as the gross asset and liability fair value amounts. The fair value amounts presented do not include income accruals. Derivative assets are included in “Other Assets,” while derivative liabilities are included in “Other Liabilities” within the Company’s Consolidated Balance Sheets. 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.



		March 31, 2020									December 31, 2019
(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 - VIE		$	75		$	0		$	11		$	75		$	0		$	8
Total cash flow hedges		75			0			11			75			0			8
Fair value hedges:
Foreign currency forwards		63			0			1			964			0			38
Foreign currency options		8,809			12			23			11,573			0			5
Interest rate swaptions		243			0			0			243			0			0
Total fair value hedges		9,115			12			24			12,780			0			43
Net investment hedge:
Foreign currency forwards		4,985			85			6			4,952			72			2
Foreign currency options		2,040			7			0			2,000			0			0
Total net investment hedge		7,025			92			6			6,952			72			2
Non-qualifying strategies:
Foreign currency swaps		2,250			66			38			2,800			72			78
Foreign currency swaps - VIE		2,587			89			224			2,587			169			118
Foreign currency forwards		20,614			184			420			19,821			166			337
Foreign currency options		9,248			8			0			9,553			0			0
Interest rate swaps		2,370			21			0			7,120			3			0
Interest rate swaptions		7			0			0			7			0			0
Total non-qualifying strategies		37,076			368			682			41,888			410			533
Total derivatives		$	53,291		$	472		$	723		$	61,695		$	482		$	586

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 approximately 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.

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.



(In millions)		Hedging Derivatives									Hedged Items
Hedging Derivatives	Hedged Items	Total Gains (Losses)			Gains (Losses) Excluded from Effectiveness Testing⁽¹⁾			Gains (Losses) Included in Effectiveness Testing⁽²⁾			Gains (Losses)⁽²⁾			Net Investment Gains (Losses) Recognized for Fair Value Hedge
Three Months Ended March 31, 2020:
Foreign currency forwards	Fixed maturity securities	$	(16	)	$	(7	)	$	(9	)	$	10		$	1
Total gains (losses)		$	(16	)	$	(7	)	$	(9	)	$	10		$	1
Three Months Ended March 31, 2019:
Foreign currency forwards	Fixed maturity securities	$	9		$	(10	)	$	19		$	(18	)	$	1
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)		$	4		$	(15	)	$	19		$	(18	)	$	1

⁽¹⁾ 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 net 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).

⁽²⁾ Gains and losses on foreign currency forwards and options and related hedged items are reported in the consolidated statement of earnings as net investment gains (losses). For interest rate swaptions and related hedged items, gains and losses included in the hedge assessment, premium amortization and time value amortization while the hedge items are still outstanding are reported within net investment income. The time value gains and losses for interest rate swaptions when the related hedged items are redeemed are reported in net investment gains and losses consistent with the impact of the hedged item. For the three-month periods ended March 31, 2020 and 2019, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

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 8) have been designated as non-derivative hedges. Beginning in July 2019, certain foreign currency forwards and options were designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan. Prior to April 1, 2018, foreign currency forwards and options were also designated as derivative hedges of the foreign currency exposure of the Company's net investment in Aflac Japan.

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 net 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 March 31, 2020, the Parent Company had $2.3 billion notional amount of cross-currency interest rate swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S dollar to Japanese yen. Changes in the values of these swaps are recorded through current period earnings. For additional information regarding these swaps, see Note 9 of the Notes to the Consolidated Financial Statements in the 2019 Annual Report.

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 net investment gains (losses). The Company also has certain foreign exchange forwards on U.S. dollar-denominated available-for-sale securities where hedge accounting is not being applied.

Prior to July 2019, 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. As of July 1, 2019, the Parent Company designates these foreign exchange forward contracts as accounting hedges of its net investment in Aflac Japan.



	Three Months Ended March 31,
	2020														2019
(In millions)	Net Investment Income⁽¹⁾				Net Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾				Net Investment Income⁽¹⁾				Net Investment Gains (Losses)						Other Comprehensive Income (Loss)⁽²⁾
Qualifying hedges:
Cash flow hedges:
Foreign currency swaps - VIE		$	(1	)		$	0					$	(4	)		$	(1	)		$	0					$	(2	)
Total cash flow hedges		(1		)		0			⁽³	⁾		(4		)		(1		)		0			⁽³	⁾		(2		)
Fair value hedges:
Foreign currency forwards⁽³⁾						(6		)												(9		)
Foreign currency options⁽³⁾						0														(4		)
Interest rate swaptions⁽³⁾		0				0						0				0				0						(1		)
Total fair value hedges		0				(6		)				0				0				(13		)				(1		)
Net investment hedge:
Non-derivative hedging instruments						0						6								0						0
Foreign currency forwards						51						(25		)						0						0
Foreign currency options						6						0								0						0
Total net investment hedge						57						(19		)						0						0
Non-qualifying strategies:
Foreign currency swaps						50														44
Foreign currency swaps - VIE						(195		)												(16		)
Foreign currency forwards						(36		)												(21		)
Foreign currency options						(2		)												0
Interest rate swaps						47														6
Total non-qualifying strategies						(136		)												13
Total		$	(1	)		$	(85	)				$	(23	)		$	(1	)		$	0					$	(3	)

⁽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 net 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 three-month periods ended March 31, 2020 and 2019, respectively.

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, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet.

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 $348 million and $301 million as of March 31, 2020, and December 31, 2019, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on March 31, 2020, the Company estimates that it would be required to post a maximum of $171 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 its subsidiaries and the 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.

Offsetting of Financial Assets and Derivative Assets



March 31, 2020
										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		$	362		$	0		$	362		$	(229	)	$	(7	)		$	(121	)		$	5
OTC - cleared		21			0			21			0			0				(11		)		10
Total derivative assets subject to a master netting agreement or offsetting arrangement		383			0			383			(229		)	(7		)		(132		)		15
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		89						89														89
Total derivative assets not subject to a master netting agreement or offsetting arrangement		89						89														89
Total derivative assets		472			0			472			(229		)	(7		)		(132		)		104
Securities lending and similar arrangements		2,952			0			2,952			0			0				(2,952		)		0
Total		$	3,424		$	0		$	3,424		$	(229	)	$	(7	)		$	(3,084	)		$	104



December 31, 2019
										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		$	310		$	0		$	310		$	(190	)	$	(7	)		$	(113	)		$	0
OTC - cleared		3			0			3			0			0				0				3
Total derivative assets subject to a master netting agreement or offsetting arrangement		313			0			313			(190		)	(7		)		(113		)		3
Derivative assets not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		169						169														169
Total derivative assets not subject to a master netting agreement or offsetting arrangement		169						169														169
Total derivative assets		482			0			482			(190		)	(7		)		(113		)		172
Securities lending and similar arrangements		1,860			0			1,860			0			0				(1,860		)		0
Total		$	2,342		$	0		$	2,342		$	(190	)	$	(7	)		$	(1,973	)		$	172



March 31, 2020
										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		$	488		$	0		$	488		$	(229	)	$	(175	)		$	(2	)		$	82
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		488			0			488			(229		)	(175		)		(2		)		82
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		235						235														235
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		235						235														235
Total derivative liabilities		723			0			723			(229		)	(175		)		(2		)		317
Securities lending and similar arrangements		2,969			0			2,969			(2,952		)	0				0				17
Total		$	3,692		$	0		$	3,692		$	(3,181	)	$	(175	)		$	(2	)		$	334



December 31, 2019
										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		$	459		$	0		$	459		$	(190	)	$	(222	)		$	(32	)		$	15
OTC - cleared		1			0			1			0			0				(1		)		0
Total derivative liabilities subject to a master netting agreement or offsetting arrangement		460			0			460			(190		)	(222		)		(33		)		15
Derivative liabilities not subject to a master netting agreement or offsetting arrangement
OTC - bilateral		126						126														126
Total derivative liabilities not subject to a master netting agreement or offsetting arrangement		126						126														126
Total derivative liabilities		586			0			586			(190		)	(222		)		(33		)		141
Securities lending and similar arrangements		1,876			0			1,876			(1,860		)	0				0				16
Total		$	2,462		$	0		$	2,462		$	(2,050	)	$	(222	)		$	(33	)		$	157