Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States (U.S.) and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the U.S. and through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan. The Company’s operations consist of two reportable business segments: Aflac U.S., which includes Aflac, and Aflac Japan, which includes ALIJ. American Family Life Assurance Company of New York (Aflac New York) is a wholly owned subsidiary of Aflac. Most of Aflac's policies are individually underwritten and marketed through independent agents. With the exception of dental and vision products administered by Aflac Benefits Solutions, Inc. (ABS) and certain group life insurance products, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. Additionally, Aflac U.S. markets its consumer markets products through Tier One Insurance Company (TOIC). The Company's insurance operations in the U.S. and Japan service the two markets for the Company's insurance business. The Parent Company, other operating business units that are not individually reportable, and business activities, including reinsurance activities, not included in Aflac Japan or Aflac U.S. are included in Corporate and other. Aflac Japan's revenues, including net gains and losses on its investment portfolio, accounted for 64% and 69% of the Company's total revenues in the six-month periods ended June 30, 2023 and 2022, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 80% at June 30, 2023, compared with 80% at December 31, 2022.

In 2022, the Company established Aflac Re Bermuda Ltd. (Aflac Re), a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. Aflac Re is subject to regulation in Bermuda, where the Bermuda Monetary Authority (BMA) has broad administrative powers relating to granting and revoking licenses to transact reinsurance business, approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices. Financial results from Aflac Re are included in Corporate and other.

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to the Consolidated Financial Statements, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards CodificationTM (ASC). The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates based on currently available information when recording transactions resulting from business operations. The most significant items on the Company's balance sheet that involve a greater degree of accounting estimates and actuarial determinations subject to changes in the future are the valuation of investments and derivatives, deferred policy acquisition costs (DAC), liabilities for future policy benefits and income taxes. These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, interest rates, mortality, morbidity, commission and other acquisition expenses and terminations by policyholders. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised and reflected in the consolidated financial statements. Although some variability is inherent in these estimates, the Company believes the amounts provided are reasonable and reflective of the best estimates of management.

In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of June 30, 2023 and December 31, 2022, the consolidated statements of earnings and comprehensive income (loss) for the three- and six-month periods ended June 30, 2023 and 2022, the consolidated statements of shareholders' equity for the three-month periods ended March 31, 2023 and 2022 and June 30, 2023 and 2022, and the consolidated statements of cash flows for the six-month periods ended June 30, 2023 and 2022. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these financial statements should be read

The Company revised the following accounting policies as a result of the adoption of amended accounting guidance effective January 1, 2023 and certain reclassifications. Refer to Recently Adopted Accounting Pronouncements below for details of the adoption of Accounting Standards Update (ASU) 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts. In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the deferred profit liability on products with limited payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statement of earnings. This reclassification had no impact on net earnings. The change in presentation has been made for all comparative periods presented. All other categories of significant accounting policies remain unchanged from the 2022 Annual Report.

Insurance Revenue and Expense Recognition: Substantially all of the supplemental health and life insurance policies the Company issues are classified as long-duration contracts. The contract provisions generally cannot be changed or canceled during the contract period; however, the Company may adjust premiums for supplemental health policies issued in the U.S. within prescribed guidelines and with the approval of state insurance regulatory authorities.

Insurance premiums for most of the Company's health and life policies, including cancer, accident, hospital, critical illness, supplemental dental and vision, term life, whole life, long-term care and disability, are recognized as earned premiums over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the related amounts of benefits and expenses are charged against such revenues. This association is accomplished by means of annual increases or decreases to the liability for future policy benefits (LFPB) and the deferral and subsequent amortization of policy acquisition costs.

Premiums from the Company's products with limited-pay features, including cancer, medical and nursing care, term life, whole life, WAYS, and child endowment, are collected over a significantly shorter period than the contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net premium is deferred and recorded as a deferred profit liability, which is subsequently amortized in net earned premiums such that profits are recognized in a constant relationship with insurance in force. Benefits are recorded as an expense when they are incurred. An LFPB is recorded when premiums are recognized using the net premium method.

Benefit expense is bifurcated between benefits and claims and reserve remeasurement (gains) losses. The net premium ratio (NPR) is used to measure benefit expense and is calculated as the ratio of the present value of actual and future expected benefits and expenses to the present value of actual and future expected gross premiums. A revised NPR is calculated as of the beginning of each reporting period using updated future cash flow expectations.

Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the beginning of the current reporting period using the same locked-in discount rates. One reserve measure uses the NPR as of the end of the prior reporting period, and the second uses the revised NPR. Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates. The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original discount rate used at contract issue date.

Deferred Policy Acquisition Costs: Certain direct and incremental costs of acquiring insurance contracts are deferred and amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level basis. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for face amount, and insurance in force, respectively. For life and health products issued in the U.S., the constant-level basis used is face amount and number of policies in force, respectively. Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination assumptions that are used in computing the LFPB, and these assumptions are reviewed and updated at least annually. The effects of changes in assumptions are recognized

prospectively over the remaining contract term as a revision of the future amortization pattern, while current period amortization is calculated based on the actual experience during the quarter. Deferred costs include the excess of current-year commissions over ultimate renewal-year commissions and certain incremental direct policy issue, underwriting and sales expenses directly related to successful policy acquisition.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. The Company performs a two-stage analysis of the internal replacements to determine if the modification is substantive to the base policy. The stages of evaluation are as follows: 1) determine if the modification is integrated with the base policy, and 2) if it is integrated, determine if the resulting contract is substantially changed.

Riders can be considered internal replacements that are either integrated or non-integrated resulting in either substantially changed or substantially unchanged treatment. Riders are evaluated based on the specific facts and circumstances of the rider and are considered an expansion of the existing benefits with additional premium required. Non-integrated riders to existing contracts do not change the Company's profit expectations for the related products and are treated as a new policy establishment for incremental coverage.

Cash flow assumptions (mortality, morbidity, and termination) are established at policy inception and are evaluated each quarter to determine if an update is needed. To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the beginning of the reporting period and are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings. Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of paid claims. These expense assumptions are locked-in and remain unchanged over the term of the insurance policy. Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are recognized in reserve remeasurement (gains) losses in the consolidated statement of earnings.

Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense in the consolidated statement of earnings. Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheet are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is recognized in accumulated other comprehensive income (loss) (AOCI).

The Company has designed its discount rate methodology for the U.S. and Japan insurance business. The methodology incorporates constructing a discount rate curve separately for discounting cash flows used to calculate the U.S. and Japan LFPBs, reflective of the characteristics of the insurance liabilities, such as currency and tenor. Discount rates comprising each curve are determined by reference to upper-medium grade (low credit risk) fixed-income instrument yields that reflect the duration characteristics of the corresponding insurance liabilities. The Company uses for these yields single-A rated fixed income instruments with credit ratings based on international rating standards. Where only local ratings are available, the Company selects the fixed-income instruments with local ratings that are equivalent to a single-A rating based on international rating standards. The methodology is designed to prioritize observable inputs based on market data available in the local debt markets where the respective policies were issued in the currency in which the policies are denominated. For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company uses various estimation techniques consistent with the fair value guidance in ASC 820, which include, but are not limited to: (i) for tenors where there is less observable market data and/or the observable market data is available for similar instruments, estimating tenor-specific single-A credit spreads and applying them to risk-free government rates; (ii) for tenors where there is very limited or no observable single-A or similar market data, interpolation and extrapolation techniques.

The locked-in discount rate used for the computation of interest accretion on LFPBs is determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income instrument forward curves in the calendar year, determined using the methodology described above and weighted using issued annualized premiums for each issue month. The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent net premium ratio to the forward curve and will remain unchanged after the calendar year of issue.

For internal replacements that are determined to be substantially changed, policy liabilities related to the original policy that was replaced are immediately released, and policy liabilities are established for the new insurance contract. The policy reserves are evaluated based on the new policy features, and changes are recognized at the date of contract change/modification. For internal replacements that are substantially unchanged, no changes to the reserves are recognized. For modifications that are not integrated with the base policy, new coverage is recognized as a separately issued contract within the current cohort.

In August 2018, the FASB issued amendments that significantly changed how insurers account for long-duration contracts. The Company adopted the standard on January 1, 2023 using a modified retrospective transition method which resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021 transition date (Transition Date). The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date. On the Transition Date, the Company calculated the ratio of the present value of future expected benefits and expenses less existing carrying values to the present value of future expected gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date. The Company capped the Transition Date NPR at 100% for any cohorts with a Transition Date NPR greater than 100%. The Company calculated the LFPB using the Transition Date NPR (capped at 100% if required) and two different discount rates: (i) the discount rate used immediately before the Transition Date, and (ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit

risk) fixed income instruments (as of December 31, 2020). For cohorts with their Transition Date NPR capped at 100%, the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the Transition Date. For all cohorts on the Transition Date, the Company recorded in AOCI net of tax, the difference in the LFPB calculated using the two different discount rates (i.e., the discount rate used immediately before the Transition Date and the updated discount rate as of the Transition Date).

Upon adoption, the Company adjusted opening equity for the Transition Date impacts to AOCI and retained earnings and adjusted prior periods presented (years 2021 and 2022) following the updated standard. Based upon the modified retrospective transition method, the Transition Date impact from adoption resulted in a decrease in AOCI of approximately $18.6 billion and a decrease in retained earnings (RE) of approximately $0.3 billion.


(In millions - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2020	$	135	$	2,410	$	37,984	$	8,934	$	(15,904)	$	33,559
Cumulative effect of change in accounting principle, ASU 2018-12, net of income taxes	0		0		(324)		(18,570)		0		(18,894)
Balance at January 1, 2021	$	135	$	2,410	$	37,660	$	(9,636)	$	(15,904)	$	14,665


(In millions - Unaudited)	Impact to Retained Earnings			Impact to AOCI
Transition impacts:
Aflac Japan
Cancer		$	0		$	14,529
Medical and other health		1			2,382
Life insurance		0			3,314
Other (1)		398			433
Aflac U.S.
Accident		0			92
Disability		0			149
Critical care		4			2,258
Hospital indemnity		0			223
Dental/vision		0			65
Life insurance		5			149
Other		2			218
Reinsurance		0			(305)
Transition impact before income taxes		410			23,507
Less: income taxes		86			4,937
Total transition impact, net of income taxes		$	324		$	18,570

The Company adopted ASU 2018-12 using the modified retrospective transition method. The tables below present the disaggregated transition impacts to the Company’s LFPB as a result of adoption, split between the changes in the present value of expected net premiums and the present value of expected future policy benefits as of the Transition Date and the LFPB rollforward for the year ended December 31, 2021. The locked-in discount rates on the policies held at the Transition Date reflect the locked-in rates in existence immediately before the Transition Date. See Note 7 of the Notes to the Consolidated Financial Statements for additional information.

Under the modified retrospective transition method, the NPR for future policy benefits existing as of the Transition Date considers the carryover basis of those liabilities, which equals the future policy benefits and unpaid policy claims balance as of December 31, 2020. If the revised Transition Date NPR for a cohort is greater than 100%, the Company capped the Transition Date NPR at 100% and increased the LFPB with an offsetting decrease to opening retained earnings.

The LFPB recorded in the consolidated balance sheet includes the deferred profit liability for limited-payment contracts. This deferred profit liability is not included in the Transition Date and LFPB rollforwards. For products with limited-payment features, to the extent the transition date adjustment related to updating cash flow assumptions is favorable, the Company increased the deferred profit liability.


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at December 31, 2020	$	25,601	$	21,270	$	12,440	$	2,080	$	3,350	$	1,921	$	5,898	$	1,376	$	281	$	710	$	154
Impact to retained earnings from capping Transition Date NPR	0		(1)		0		(398)		0		0		(4)		0		0		(5)		(2)
Impact of deferred profit liability	15		7		36		26		0		0		0		0		0		0		0
Beginning balance at original discount rate	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of change in discount rate assumptions	3,982		2,598		908		148		479		197		1,048		154		41		78		27
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected premiums:
Balance at January 1, 2021	$	29,598	$	23,874	$	13,384	$	1,856	$	3,829	$	2,118	$	6,942	$	1,530	$	322	$	783	$	179
Beginning balance at original discount rate (1)	25,616		21,276		12,476		1,708		3,350		1,921		5,894		1,376		281		705		152
Effect of changes in cash flow assumptions	32		88		40		1		(163)		(129)		(302)		0		(26)		31		0
Effect of actual variances from expected experience	(134)		(449)		(135)		(11)		(109)		(38)		(290)		(32)		(14)		34		(3)
Adjusted beginning of period balance	25,514		20,915		12,381		1,698		3,078		1,754		5,302		1,344		241		770		149
Issuances	1,116		1,132		284		55		365		345		552		263		39		112		0
Interest accrual	586		439		202		27		116		61		210		45		10		25		6
Net premium earned (2)	(2,206)		(1,692)		(1,609)		(151)		(552)		(393)		(665)		(268)		(47)		(124)		(19)
Foreign currency translation	(2,539)		(2,111)		(1,194)		(167)		0		0		0		0		0		0		0
Other	(1)		(2)		0		(1)		(8)		(7)		(8)		(4)		(2)		(3)		(1)
Ending balance at original discount rate	22,470		18,681		10,064		1,461		2,999		1,760		5,391		1,380		241		780		135
Effect of changes in discount rate assumptions	3,423		2,493		783		125		284		102		632		87		23		54		18
Balance at December 31, 2021	$	25,893	$	21,174	$	10,847	$	1,586	$	3,283	$	1,862	$	6,023	$	1,467	$	264	$	834	$	153


	Transition Impact at January 1, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at December 31, 2020	$	64,056	$	34,638	$	43,729	$	7,620	$	3,818	$	2,919	$	13,427	$	2,258	$	599	$	1,562	$	661
Effect of change in discount rate assumptions	18,511		4,980		4,222		581		571		346		3,306		377		106		227		245
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906


	December 31, 2021
	Aflac Japan								Aflac U.S.
(In millions)	Cancer		Medical and Other Health		Life Insurance		Other		Accident		Disability		Critical Care		Hospital Indemnity		Dental/Vision		Life Insurance		Other
Present value of expected future policy benefits:
Balance at January 1, 2021	$	82,567	$	39,618	$	47,951	$	8,201	$	4,389	$	3,265	$	16,733	$	2,635	$	705	$	1,789	$	906
Beginning balance at original discount rate	64,056		34,638		43,729		7,620		3,818		2,919		13,427		2,258		599		1,562		661
Effect of changes in cash flow assumptions	24		85		31		(11)		(178)		(143)		(326)		(3)		(29)		31		0
Effect of actual variances from expected experience	(149)		(458)		(139)		(15)		(115)		(41)		(304)		(36)		(15)		34		(3)
Adjusted beginning of period balance	63,931		34,265		43,621		7,594		3,525		2,735		12,797		2,219		555		1,627		658
Issuances	1,133		1,155		287		62		372		355		563		271		40		115		0
Interest accrual	2,014		769		833		129		137		100		553		85		23		58		33
Benefit payments	(3,894)		(1,313)		(1,373)		(238)		(439)		(520)		(834)		(275)		(69)		(107)		(46)
Foreign currency translation	(6,377)		(3,478)		(4,366)		(760)		0		0		0		0		0		0		0
Other	0		0		0		0		(1)		0		0		0		0		1		0
Ending balance at original discount rate	56,807		31,398		39,002		6,787		3,594		2,670		13,079		2,300		549		1,694		645
Effect of changes in discount rate assumptions	15,940		4,623		3,718		535		355		201		2,309		252		67		149		192
Balance at December 31, 2021	72,747		36,021		42,720		7,322		3,949		2,871		15,388		2,552		616		1,843		837
Net liability for future policy benefits	46,854		14,847		31,873		5,736		666		1,009		9,365		1,085		352		1,009		684
Less: reinsurance recoverable	0		2,150		0		0		0		0		0		0		0		10		0
Net liability for future policy benefits after reinsurance recoverable	$	46,854	$	12,697	$	31,873	$	5,736	$	666	$	1,009	$	9,365	$	1,085	$	352	$	999	$	684

The following table presents a reconciliation of the rollforwards by reporting segment and disaggregated by product type for the year ended December 31, 2021 to the liability for future policy benefits as of December 31, 2021 under the amended guidance. The deferred profit liability for limited-payment contracts and reinsurance is presented together with the LFPB in the Consolidated Balance Sheets and has been included as a reconciling item in the table below.


(In millions)	December 31, 2021
Balances included in future policy benefits rollforward:
Aflac Japan
Cancer		$	46,854
Medical and other health		14,847
Life insurance		31,873
Other		5,736
Aflac U.S.
Accident		666
Disability		1,009
Critical care		9,365
Hospital indemnity		1,085
Dental/vision		352
Life insurance		1,009
Other		684
Corporate and other		30
Deferred profit liability - limited-payment contracts		1,595
Deferred profit liability - reinsurance		859
Total		$	115,964

In March 2023, the FASB issued amendments to permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).