POLICY LIABILITIES

12 Months Ended

Dec. 31, 2011

POLICY LIABILITIES

7. POLICY LIABILITIES

Policy liabilities primarily include future policy benefits and unpaid policy claims, which accounted for 84% and 4% of total policy liabilities at December 31, 2011, respectively. We regularly review the adequacy of our policy liabilities in total and by component. The liability for future policy benefits as of December 31 consisted of the following:

			Liability Amounts				Interest Rates
(In millions)	Policy Issue Year		2011		2010		Year of Issue			In 20 Years
Health insurance:
Japan:		2005 - 2011	$	2,441	$	1,577		1.5 - 2.75	%		1.5 - 2.75	%
		1974 - 2011		18,777		13,034		3.0			3.0
		1997 - 1999		3,885		3,942		3.5			3.5
		1994 - 1996		4,749		6,083		4.0 - 4.5			4.0 - 4.5
		1987 - 1994		24,607		24,420		5.25 - 5.5			5.25 - 5.5
		1978 - 1986		5,761		5,634		6.5 - 6.75			5.5
		1974 - 1979		0		993		7.0			5.0
U.S.:		2005 - 2011		2,713		2,293		4.75 - 5.5			4.75 - 5.5
		1998 - 2004		1,148		1,123		7.0			7.0
		1988 - 2004		777		845		8.0			6.0
		1986 - 2004		1,328		1,337		6.0			6.0
		1985 - 1986		23		24		6.5			6.5
		1981 - 1986		181		188		7.0			5.5
		Other		24		26
Life insurance:
Japan:		2011		122		0		2.0			2.0
		2009 - 2010		823		262		2.25			2.25
		2007 - 2011		896		503		2.75			2.75
		2005 - 2011		1,079		753		2.5			2.5
		2001 - 2011		1,501		1,163		1.65 - 1.85			1.65 - 1.85
		1985 - 2011		5,795		2,543		3.0			3.0
		1996 - 2009		962		904		3.5			3.5
		1994 - 1996		1,395		1,334		4.0 - 4.5			4.0 - 4.5
		1985 - 1993		0		2,877		5.25 - 5.65			5.25 - 5.65
U.S.:		1956 - 2011		291		245		4.0 - 6.0			4.0 - 6.0
Total			$	79,278	$	72,103

The weighted-average interest rates reflected in the consolidated statements of earnings for future policy benefits for Japanese policies were 4.0% in 2011, 4.4% in 2010 and 4.5% in 2009; and for U.S. policies, 6.0% in 2011 and 2010 and 6.1% in 2009. The decline in Aflac Japan’s interest rates from 2010 to 2011 was the result of the strengthening of future policy benefit reserves primarily for a closed block of cancer policies and a block of care policies.

Changes in the liability for unpaid policy claims were as follows for the years ended December 31:

(In millions)	2011			2010			2009
Unpaid supplemental health claims, beginning of year	$	3,524		$	3,105		$	2,959
Add claims incurred during the year related to:
Current year		7,703			7,262			6,864
Prior years		(256	)		(332	)		(398	)
Total incurred		7,447			6,930			6,466
Less claims paid during the year on claims incurred during:
Current year		5,401			5,003			4,683
Prior years		1,944			1,787			1,618
Total paid		7,345			6,790			6,301
Effect of foreign exchange rate changes on unpaid claims		123			279			(19	)
Unpaid supplemental health claims, end of year		3,749			3,524			3,105
Unpaid life claims, end of year		232			195			165
Total liability for unpaid policy claims	$	3,981		$	3,719		$	3,270

The incurred claims development related to prior years reflects favorable development in the unpaid policy claims liability previously provided for. There are no additional or return of premium considerations associated with that development.