REINSURANCE

3 Months Ended

Mar. 31, 2022

REINSURANCEThe Company periodically enters into fixed quota-share coinsurance agreements with other companies in the normal course of business. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in

accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits are reported net of insurance ceded.

The Company has recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of $793 million and $859 million as of March 31, 2022 and December 31, 2021, respectively, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies. The Company has also recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $883 million and $937 million as of March 31, 2022 and December 31, 2021, respectively. The spot yen/dollar exchange rate weakened by approximately 6.0% and ceded reserves decreased approximately 5.7% from December 31, 2021 to March 31, 2022.

The following table reconciles direct premiums and direct benefits and claims to net amounts after the effect of reinsurance which also includes the elimination of inter-segment amounts associated with affiliated reinsurance.


	Three Months Ended March 31,
(In millions)		2022	2021
Direct earned premiums				$	4,214	$	4,652
Ceded to other companies:
Ceded Aflac Japan closed blocks				(98)		(114)
Other				(19)		(19)
Assumed from other companies:
Retrocession activities				41		48
Other				40		26
Net earned premiums				$	4,178	$	4,593

Direct benefits and claims				$	2,505	$	2,776
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks				(91)		(99)
Eliminations				6		8
Other				(4)		(8)
Assumed from other companies:
Retrocession activities				38		42
Eliminations				(6)		(8)
Other				39		24
Benefits and claims, net				$	2,487	$	2,735

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, the Company remains liable for the reinsured claims.

As a part of its capital contingency plan, the Company entered into a committed reinsurance facility agreement on December 1, 2015, with reserves of approximately ¥120 billion as of March 31, 2022. This reinsurance facility agreement was renewed in 2021 and is effective until December 31, 2022. There are also additional commitment periods of a one-year duration, each of which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration. The reinsurer can withdraw from the committed facility if Aflac's Standard and Poor's (S&P) rating drops below BBB-. As of March 31, 2022, the Company has not executed a reinsurance treaty under this committed reinsurance facility.