AFL-3.31.2012_10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
or
[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     

Commission File Number: 001-07434
Aflac Incorporated
_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Georgia
 
58-1167100
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
1932 Wynnton Road, Columbus, Georgia
 
31999
(Address of principal executive offices)
 
(ZIP Code)
706.323.3431
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.            þ  Yes  ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).            þ  Yes  ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
   Large accelerated filer  þ
 
Accelerated filer ¨
   Non-accelerated filer    ¨ (Do not check if a smaller reporting company)
 
Smaller reporting company  ¨
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
¨  Yes  þ  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
April 27, 2012
Common Stock, $.10 Par Value
 
467,628,735


Aflac Incorporated and Subsidiaries
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2012
Table of Contents
 
 
 
Page
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
  Three Months Ended March 31, 2012 and 2011
 
 
 
 
  Three Months Ended March 31, 2012, and 2011
 
 
 
 
  March 31, 2012 and December 31, 2011
 
 
 
 
  Three Months Ended March 31, 2012, and 2011
 
 
 
 
  Three Months Ended March 31, 2012, and 2011
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
Item 2.
 
 
 
Item 6.
Items other than those listed above are omitted because they are not required or are not applicable.


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Review by Independent Registered Public Accounting Firm

The March 31, 2012, and 2011, consolidated financial statements included in this filing have been reviewed by KPMG LLP, an independent registered public accounting firm, in accordance with established professional standards and procedures for such a review.

The report of KPMG LLP commenting upon its review is included on the following page.

1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Aflac Incorporated:

We have reviewed the consolidated balance sheet of Aflac Incorporated and subsidiaries (the Company) as of March 31, 2012, and the related consolidated statements of earnings, comprehensive income (loss), shareholders' equity and cash flows for the three-month periods ended March 31, 2012 and 2011. These consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Aflac Incorporated and subsidiaries as of December 31, 2011, and the related consolidated statements of earnings, shareholders' equity, cash flows and comprehensive income (loss) for the year then ended (not presented herein); and in our report dated February 24, 2012, we expressed an unqualified opinion on those consolidated financial statements. Our report refers to a change in the method of evaluating the consolidation of variable interest entities (VIEs) and qualified special purpose entities (QSPEs) in 2010 and a change in the method of evaluating other-than-temporary impairments of debt securities in 2009. As described in Note 1, on January 1, 2012, the Company adopted amended accounting guidance on accounting for costs associated with acquiring or renewing insurance contracts on a retrospective basis resulting in a revision of the December 31, 2011, consolidated balance sheet. We have not audited and reported on the revised balance sheet reflecting the adoption of this new guidance.


Atlanta, Georgia
May 4, 2012


2

Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings
  
Three Months Ended
March 31,
(In millions, except for share and per-share amounts - Unaudited)
2012
 
2011
Revenues:
 
 
 
Premiums, principally supplemental health insurance
$
5,378

 
$
4,872

Net investment income
882

 
794

Realized investment gains (losses):
 
 
 
Other-than-temporary impairment losses realized
(203
)
 
(405
)
Sales and redemptions
78

 
(144
)
Derivative and other gains (losses)
80

 
(30
)
Total realized investment gains (losses)
(45
)
 
(579
)
Other income
25

 
30

Total revenues
6,240

 
5,117

Benefits and expenses:
 
 
 
Benefits and claims
3,646

 
3,222

Acquisition and operating expenses:
 
 
 
Amortization of deferred policy acquisition costs
287

 
261

Insurance commissions
435

 
422

Insurance expenses
564

 
534

Interest expense
57

 
45

Other operating expenses
49

 
42

Total acquisition and operating expenses
1,392

 
1,304

Total benefits and expenses
5,038

 
4,526

Earnings before income taxes
1,202

 
591

Income taxes
417

 
202

Net earnings
$
785

 
$
389

Net earnings per share:
 
 
 
Basic
$
1.68

 
$
.83

Diluted
1.68

 
.83

Weighted-average outstanding common shares used in computing earnings per share (In thousands):
 
 
 
Basic
465,887

 
468,012

Diluted
468,533

 
472,104

Cash dividends per share
$
.33

 
$
.30

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.

3

Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
  
Three Months Ended
March 31,
(In millions - Unaudited)
2012
 
2011
Net earnings
$
785

 
$
389

Other comprehensive income (loss) before income taxes:
 
 
 
Unrealized foreign currency translation gains (losses) during period
(100
)
 
4

Unrealized gains (losses) on investment securities:
 
 
 
Unrealized holding gains (losses) on investment securities during period
324

 
(609
)
Reclassification adjustment for realized (gains) losses on investment securities
included in net earnings
129

 
527

Unrealized gains (losses) on derivatives during period
(12
)
 
(55
)
Pension liability adjustment during period
5

 
4

Total other comprehensive income (loss) before income taxes
346

 
(129
)
Income tax expense (benefit) related to items of other comprehensive income
(loss)
311

 
9

Other comprehensive income (loss), net of income taxes
35

 
(138
)
Total comprehensive income (loss)
$
820

 
$
251

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.

4

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets
(In millions - Unaudited)
March 31, 2012
 
December 31, 2011
 
Assets:
 
 
 
 
Investments and cash:
 
 
 
 
Securities available for sale, at fair value:
 
 
 
 
Fixed maturities (amortized cost $39,423 in 2012 and $40,534 in 2011)
$
41,276

 
$
42,222

 
Fixed maturities - consolidated variable interest entities (amortized
cost $4,714 in 2012 and $4,822 in 2011)
5,246

 
5,350

 
Perpetual securities (amortized cost $4,299 in 2012 and $5,365 in 2011)
4,159

 
5,149

 
Perpetual securities - consolidated variable interest entities
(amortized cost $1,223 in 2012 and $1,532 in 2011)
1,193

 
1,290

 
Equity securities (cost $21 in 2012 and $22 in 2011)
25

 
25

 
Securities held to maturity, at amortized cost:
 
 
 
 
Fixed maturities (fair value $47,943 in 2012 and $45,817 in 2011)
48,226

 
46,366

 
Fixed maturities - consolidated variable interest entities (fair value
$501 in 2012 and $566 in 2011)
608

 
643

 
Other investments
161

 
168

 
Cash and cash equivalents
2,210

 
2,249

 
Total investments and cash
103,104

 
103,462

 
Receivables
744

 
680

 
Accrued investment income
746

 
802

 
Deferred policy acquisition costs
9,542

 
9,789


Property and equipment, at cost less accumulated depreciation
591

 
617

 
Other
825

(1) 
887

(1) 
Total assets
$
115,552

 
$
116,237


(1) Includes $271 in 2012 and $375 in 2011 of derivatives from consolidated variable interest entities
Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.

(continued)

5


Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets (continued)
(In millions, except for share and per-share amounts - Unaudited)
March 31, 2012
 
December 31, 2011
 
Liabilities and shareholders’ equity:
 
 
 
 
Liabilities:
 
 
 
 
Policy liabilities:
 
 
 
 
Future policy benefits
$
76,332

 
$
79,278

 
Unpaid policy claims
3,885

 
3,981

 
Unearned premiums
1,854

 
1,704

 
Other policyholders’ funds
10,933

 
9,630

 
Total policy liabilities
93,004

 
94,593

 
Notes payable
3,964

 
3,285

 
Income taxes
2,599

 
2,308

 
Payables for return of cash collateral on loaned securities
193

 
838

 
Other
2,149

(2) 
2,267

(2) 
Commitments and contingent liabilities (Note 10)

 

 
Total liabilities
101,909

 
103,291

 
Shareholders’ equity:
 
 
 
 
Common stock of $.10 par value. In thousands: authorized 1,900,000
shares in 2012 and 2011; issued 664,437 shares in 2012 and 663,639
shares in 2011
66

 
66

 
Additional paid-in capital
1,433

 
1,408

 
Retained earnings
15,779

 
15,148


Accumulated other comprehensive income (loss):
 
 
 
 
Unrealized foreign currency translation gains
718

 
984


Unrealized gains (losses) on investment securities:
 
 
 
 
Unrealized gains (losses) on securities not other-than-temporarily
impaired
1,448

 
1,143

 
Unrealized gains (losses) on derivatives
1

 
9

 
Pension liability adjustment
(167
)
 
(171
)
 
Treasury stock, at average cost
(5,635
)
 
(5,641
)
 
Total shareholders’ equity
13,643

 
12,946


Total liabilities and shareholders’ equity
$
115,552

 
$
116,237


(2) Includes $419 in 2012 and $531 in 2011 of derivatives from consolidated variable interest entities
Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.

6

Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity
  
Three Months Ended March 31,
(In millions - Unaudited)
2012
 
2011
Common stock:
 
 
 
Balance, beginning of period
$
66

 
$
66

Balance, end of period
66

 
66

Additional paid-in capital:
 
 
 
Balance, beginning of period
1,408

 
1,320

Exercise of stock options
13

 
12

Share-based compensation
5

 
8

Gain (loss) on treasury stock reissued
7

 
10

Balance, end of period
1,433

 
1,350

Retained earnings:
 
 
 
Balance, beginning of period
15,148

 
13,787

Net earnings
785

 
389

Dividends to shareholders
(154
)
 
(141
)
Balance, end of period
15,779

 
14,035

Accumulated other comprehensive income (loss):
 
 
 
Balance, beginning of period
1,965

 
753

Unrealized foreign currency translation gains (losses) during period, net of
income taxes:
 
 
 
Change in unrealized foreign currency translation gains (losses) during
period, net of income taxes
(266
)
 
(55
)
Unrealized gains (losses) on investment securities during period, net of
income taxes and reclassification adjustments:
 
 
 
Change in unrealized gains (losses) on investment securities not other-
than-temporarily impaired, net of income taxes
305

 
(52
)
Change in unrealized gains (losses) on other-than-temporarily impaired
investment securities, net of income taxes
0

 
3

Unrealized gains (losses) on derivatives during period, net of income taxes
(8
)
 
(36
)
Pension liability adjustment during period, net of income taxes
4

 
2

Balance, end of period
2,000

 
615

Treasury stock:
 
 
 
Balance, beginning of period
(5,641
)
 
(5,386
)
Purchases of treasury stock
(10
)
 
(184
)
Cost of shares issued
16

 
14

Balance, end of period
(5,635
)
 
(5,556
)
Total shareholders’ equity
$
13,643

 
$
10,510

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.

7

Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
  
Three Months Ended March 31,
(In millions - Unaudited)
2012
 
2011
Cash flows from operating activities:
 
 
 
Net earnings
$
785

 
$
389

Adjustments to reconcile net earnings to net cash provided by operating
activities:
 
 
 
Change in receivables and advance premiums
1,587

 
461

Increase in deferred policy acquisition costs
(141
)
 
(99
)
Increase in policy liabilities
1,292

 
951

Change in income tax liabilities
(20
)
 
(152
)
Realized investment (gains) losses
45

 
579

Other, net
8

 
38

Net cash provided (used) by operating activities
3,556

 
2,167

Cash flows from investing activities:
 
 
 
Proceeds from investments sold or matured:
 
 
 
Securities available for sale:
 
 
 
Fixed maturities sold
226

 
891

Fixed maturities matured or called
705

 
556

Perpetual securities sold
552

 
61

Perpetual securities matured or called
378

 
0

Securities held to maturity:
 
 
 
Fixed maturities matured or called
536

 
127

Costs of investments acquired:
 
 
 
Securities available for sale:
 
 
 
Fixed maturities acquired
(1,025
)
 
(2,914
)
Securities held to maturity:
 
 
 
Fixed maturities acquired
(5,133
)
 
(769
)
Cash received (posted) as collateral on loaned securities, net
(645
)
 
54

Other, net
(30
)
 
(19
)
Net cash provided (used) by investing activities
(4,436
)
 
(2,013
)
Cash flows from financing activities:
 
 
 
Purchases of treasury stock
(10
)
 
(184
)
Proceeds from borrowings
749

 
0

Principal payments under debt obligations
(1
)
 
(1
)
Dividends paid to shareholders
(148
)
 
(135
)
Change in investment-type contracts, net
297

 
124

Treasury stock reissued
5

 
16

Other, net
9

 
9

Net cash provided (used) by financing activities
901

 
(171
)
Effect of exchange rate changes on cash and cash equivalents
(60
)
 
(16
)
Net change in cash and cash equivalents
(39
)
 
(33
)
Cash and cash equivalents, beginning of period
2,249

 
2,121

Cash and cash equivalents, end of period
$
2,210

 
$
2,088

Supplemental disclosures of cash flow information:
 
 
 
Income taxes paid
$
356

 
$
234

Interest paid
43

 
12

Impairment losses included in realized investment losses
203

 
405

Noncash financing activities:
 
 
 
Capitalized lease obligations
1

 
1

Treasury stock issued for:
 
 
 
   Associate stock bonus
8

 
0

   Shareholder dividend reinvestment
6

 
6

   Share-based compensation grants
4

 
2

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
See the accompanying Notes to the Consolidated Financial Statements.


8

Aflac Incorporated and Subsidiaries
Notes to the Consolidated Financial Statements
(Interim period data – Unaudited)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business 

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States and Japan. The Company's insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac), which operates in the United States (Aflac U.S.) and as a branch in Japan (Aflac Japan). Most of Aflac's policies are individually underwritten and marketed through independent agents. Additionally, Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC), branded as Aflac Group Insurance. Our insurance operations in the United States and our branch in Japan service the two markets for our insurance business. Aflac Japan's revenues, including realized gains and losses on its investment portfolio, accounted for 77% and 74% of the Company's total revenues in the three-month periods ended March 31, 2012, and 2011, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 87% at March 31, 2012, and December 31, 2011.

Basis of Presentation

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

The consolidated financial statements include the accounts of the Parent Company, its subsidiaries and those entities required to be consolidated under applicable accounting standards. All material intercompany accounts and transactions have been eliminated.

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 March 31, 2012, and December 31, 2011, and the consolidated statements of earnings, comprehensive income (loss), shareholders' equity and cash flows for the three-month periods ended March 31, 2012, and 2011. 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 in conjunction with the financial statements and notes thereto included in our annual report to shareholders for the year ended December 31, 2011.

Significant Accounting Policies
    
We have revised the accounting policy for deferred policy acquisition costs as a result of the adoption of amended accounting guidance effective January 1, 2012, and we have updated the accounting policy for income taxes. All other categories of significant accounting policies remain unchanged from our annual report to shareholders for the year ended December 31, 2011.

Deferred Policy Acquisition Costs: Certain direct and incremental costs of acquiring new business are deferred and amortized with interest over the premium payment periods in proportion to the ratio of annual premium income to total anticipated premium income. Anticipated premium income is estimated by using the same mortality, persistency and interest assumptions used in computing liabilities for future policy benefits. In this manner, the related acquisition expenses are matched with revenues. Deferred costs include the excess of current-year commissions over ultimate renewal-year commissions and certain incremental direct policy issue, underwriting and sales expenses. All of these incremental costs are directly related to successful policy acquisition.

9


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. For internal replacement transactions where the resulting contract is substantially unchanged, the policy is accounted for as a continuation of the replaced contract. Unamortized deferred acquisition costs from the original policy continue to be amortized over the expected life of the new policy, and the costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred. Internal replacement transactions that result in a policy that is not substantially unchanged are accounted for as an extinguishment of the original policy and the issuance of a new policy. Unamortized deferred acquisition costs on the original policy that was replaced are immediately expensed, and the costs of acquiring the new policy are capitalized and amortized in accordance with our accounting policies for deferred acquisition costs.
Income Taxes: Income tax provisions are generally based on pretax earnings reported for financial statement purposes, which differ from those amounts used in preparing our income tax returns. Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities, based on enacted tax laws and statutory tax rates applicable to the periods in which we expect the temporary differences to reverse. We record deferred tax assets for tax positions taken based on our assessment of whether the tax position is more likely than not to be sustained upon examination by taxing authorities. A valuation allowance is established for deferred tax assets when it is more likely than not that an amount will not be realized.

As discussed in the Translation of Foreign Currencies section in Note 1 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2011, Aflac Japan maintains a dollar-denominated investment portfolio on behalf of Aflac U.S. While there are no translation effects to record in other comprehensive income, the deferred tax expense or benefit associated with foreign exchange gains or losses on the portfolio is recognized in other comprehensive income until the securities mature or are sold. Total income tax expense (benefit) related to items of other comprehensive income (loss) included tax expense of $157 million and $51 million during the three-month periods ended March 31, 2012 and 2011, respectively, for this dollar-denominated portfolio. Excluding these amounts from total taxes on other comprehensive income would result in an effective income tax rate on pretax other comprehensive income (loss) of 44.5% and 32.4% in the three-month periods ended March 31, 2012 and 2011, respectively.

New Accounting Pronouncements
Recently Adopted Accounting Pronouncements

Presentation of comprehensive income: In June 2011, the FASB issued guidance to amend the presentation of comprehensive income. The amendment requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We adopted this guidance as of January 1, 2012 and elected the option to report comprehensive income in two separate but consecutive statements. The adoption of this guidance did not have an impact on our financial position or results of operations. The amendment also requires reclassification adjustments for items that are reclassified from other comprehensive income to net income to be presented in the statements where the components of net income and the components of other comprehensive income are presented; however, in December 2011, the FASB issued guidance to temporarily defer the effective date of this additional requirement.

Fair value measurements and disclosures: In May 2011, the FASB issued guidance to amend the fair value measurement and disclosure requirements. Most of the amendments are clarifications of the FASB's intent about the application of existing fair value measurement and disclosure requirements. Other amendments change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements. The new fair value measurement disclosures include additional quantitative and qualitative disclosures for Level 3 measurements, including a qualitative sensitivity analysis of fair value to changes in unobservable inputs, and categorization by fair value hierarchy level for items for which the fair value is only disclosed. We adopted this guidance as of January 1, 2012. The adoption of this guidance impacted our financial statement disclosures, but it did not affect our financial position or results of operations.

Accounting for costs associated with acquiring or renewing insurance contracts: In October 2010, the FASB issued amended accounting guidance on accounting for costs associated with acquiring or renewing insurance contracts. Under the previous guidance, costs that varied with and were primarily related to the acquisition of a policy were

10

deferrable. Under the amended guidance, only incremental direct costs associated with the successful acquisition of a new or renewal contract may be capitalized, and direct-response advertising costs may be capitalized only if they meet certain criteria. This guidance is effective on a prospective or retrospective basis for interim and annual periods beginning after December 15, 2011. We retrospectively adopted this guidance as of January 1, 2012. The retrospective adoption of this accounting standard resulted in an after-tax cumulative reduction to retained earnings of $408 million and an after-tax cumulative reduction to unrealized foreign currency translation gains in accumulated other comprehensive income of $108 million, resulting in a total reduction to shareholders' equity of $516 million as of December 31, 2010. The adoption of this accounting standard had an immaterial impact on net income in 2011 and for all preceding years.

Recent accounting guidance not discussed above is not applicable or did not have an impact to our business.

For additional information on new accounting pronouncements and recent accounting guidance and their impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2011.

2.  BUSINESS SEGMENT INFORMATION

The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. Operating business segments that are not individually reportable are included in the "Other business segments" category.

We do not allocate corporate overhead expenses to business segments. We evaluate and manage our business segments using a financial performance measure called pretax operating earnings. Our definition of operating earnings excludes the following items from net earnings on an after-tax basis: realized investment gains/losses (securities transactions, impairments, and the impact of derivative and hedging activities) and nonrecurring items. We then exclude income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment follows:

  
Three Months Ended
March 31,
(In millions)
2012
 
2011
Revenues:
 
 
 
Aflac Japan:
 
 
 
   Earned premiums
$
4,148

 
$
3,702

   Net investment income
730

 
649

   Other income
16

 
20

     Total Aflac Japan
4,894

 
4,371

Aflac U.S.:
 
 
 
   Earned premiums
1,231

 
1,169

   Net investment income
152

 
144

   Other income
2

 
3

     Total Aflac U.S.
1,385

 
1,316

Other business segments
14

 
15

     Total business segment revenues
6,293

 
5,702

Realized investment gains (losses)
(45
)
 
(579
)
Corporate
68

 
61

Intercompany eliminations
(76
)
 
(67
)
      Total revenues
$
6,240

 
$
5,117


 

11

  
Three Months Ended
March 31,
(In millions)
2012
 
2011
Pretax earnings:
 
 
 
Aflac Japan
$
1,040

 
$
974

Aflac U.S.
271

 
251

Other business segments
0

 
0

    Total business segment pretax operating earnings
1,311

 
1,225

Interest expense, noninsurance operations
(44
)
 
(41
)
Corporate and eliminations
(20
)
 
(14
)
    Pretax operating earnings
1,247

 
1,170

Realized investment gains (losses)
(45
)
 
(579
)
    Total earnings before income taxes
$
1,202

 
$
591

Income taxes applicable to pretax operating earnings
$
433

 
$
405

Effect of foreign currency translation on operating earnings
20

 
49

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.

Assets were as follows:
 
March 31,
 
December 31,
(In millions)
2012
 
2011
Assets:
 
 
 
Aflac Japan
$
100,133

 
$
101,692

Aflac U.S.
14,207

 
13,942

Other business segments
159

 
160

    Total business segment assets
114,499

 
115,794

Corporate
18,322

 
16,182

Intercompany eliminations
(17,269
)
 
(15,739
)
    Total assets
$
115,552

 
$
116,237

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2012 related to deferred policy acquisition costs.
3.   INVESTMENTS
Investment Holdings
The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.
 

12

  
March 31, 2012
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale,
  carried at fair value:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Japan government and agencies
$
10,007

 
$
604

 
$
0

 
$
10,611

Mortgage- and asset-backed securities
846

 
37

 
1

 
882

Public utilities
3,933

 
65

 
220

 
3,778

Sovereign and supranational
1,612

 
69

 
19

 
1,662

Banks/financial institutions
4,163

 
202

 
287

 
4,078

Other corporate
5,998

 
165

 
359

 
5,804

Total yen-denominated
26,559

 
1,142

 
886

 
26,815

  Dollar-denominated:
 
 
 
 
 
 
 
U.S. government and agencies
100

 
18

 
0

 
118

Municipalities
1,061

 
110

 
8

 
1,163

Mortgage- and asset-backed securities
307

 
75

 
0

 
382

Public utilities
3,130

 
452

 
25

 
3,557

Sovereign and supranational
454

 
93

 
4

 
543

Banks/financial institutions
3,410

 
266

 
45

 
3,631

Other corporate
9,116

 
1,249

 
52

 
10,313

Total dollar-denominated
17,578

 
2,263

 
134

 
19,707

Total fixed maturities
44,137

 
3,405

 
1,020

 
46,522

Perpetual securities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Banks/financial institutions
4,879

 
110

 
301

 
4,688

Other corporate
326

 
25

 
0

 
351

  Dollar-denominated:
 
 
 
 
 
 
 
Banks/financial institutions
317

 
13

 
17

 
313

Total perpetual securities
5,522

 
148

 
318

 
5,352

Equity securities
21

 
4

 
0

 
25

Total securities available for sale
$
49,680

 
$
3,557

 
$
1,338

 
$
51,899


13

  
March 31, 2012
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair  
Value  
Securities held to maturity,
  carried at amortized cost:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Japan government and agencies
$
22,783

 
$
287

 
$
3

 
$
23,067

Municipalities
522

 
31

 
3

 
550

Mortgage- and asset-backed securities
117

 
4

 
0

 
121

Public utilities
5,189

 
175

 
157

 
5,207

Sovereign and supranational
3,970

 
149

 
166

 
3,953

Banks/financial institutions
11,559

 
174

 
855

 
10,878

Other corporate
4,694

 
148

 
174

 
4,668

Total yen-denominated
48,834

 
968

 
1,358

 
48,444

Total securities held to maturity
$
48,834

 
$
968

 
$
1,358

 
$
48,444

  
December 31, 2011
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
  Fair
  Value
Securities available for sale,
  carried at fair value:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Japan government and agencies
$
11,108

 
$
670

 
$
0

 
$
11,778

Mortgage- and asset-backed securities
912

 
43

 
1

 
954

Public utilities
3,850

 
59

 
226

 
3,683

Sovereign and supranational
1,704

 
87

 
16

 
1,775

Banks/financial institutions
4,312

 
74

 
359

 
4,027

Other corporate
6,213

 
120

 
459

 
5,874

Total yen-denominated
28,099

 
1,053

 
1,061

 
28,091

  Dollar-denominated:
 
 
 
 
 
 
 
U.S. government and agencies
31

 
4

 
0

 
35

Municipalities
1,060

 
107

 
8

 
1,159

Mortgage- and asset-backed securities
310

 
74

 
0

 
384

Public utilities
3,052

 
517

 
27

 
3,542

Sovereign and supranational
449

 
89

 
5

 
533

Banks/financial institutions
3,324

 
223

 
121

 
3,426

Other corporate
9,031

 
1,433

 
62

 
10,402

Total dollar-denominated
17,257

 
2,447

 
223

 
19,481

Total fixed maturities
45,356

 
3,500

 
1,284

 
47,572

Perpetual securities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Banks/financial institutions
6,217

 
155

 
604

 
5,768

Other corporate
344

 
17

 
0

 
361

  Dollar-denominated:
 
 
 
 
 
 
 
Banks/financial institutions
336

 
3

 
29

 
310

Total perpetual securities
6,897

 
175

 
633

 
6,439

Equity securities
22

 
4

 
1

 
25

Total securities available for sale
$
52,275

 
$
3,679

 
$
1,918

 
$
54,036



14

  
December 31, 2011
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities held to maturity,
  carried at amortized cost:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
Japan government and agencies
$
18,775

 
$
297

 
$
1

 
$
19,071

Municipalities
553

 
35

 
4

 
584

Mortgage- and asset-backed securities
129

 
5

 
0

 
134

Public utilities
5,615

 
188

 
166

 
5,637

Sovereign and supranational
4,200

 
148

 
183

 
4,165

Banks/financial institutions
12,389

 
170

 
1,079

 
11,480

Other corporate
5,348

 
149

 
185

 
5,312

Total yen-denominated
47,009

 
992

 
1,618

 
46,383

Total securities held to maturity
$
47,009

 
$
992

 
$
1,618

 
$
46,383


The methods of determining the fair values of our investments in debt securities, perpetual securities and equity securities are described in Note 5.

During the first three months of 2012, we reclassified one investment from the held-to-maturity portfolio to the available-for-sale portfolio as a result of a significant decline in the issuer's credit worthiness. At the time of transfer, the security had an amortized cost of $122 million and an unrealized loss of $23 million. This investment was issued by Energias de Portugal SA (EDP), an integrated electric utility domiciled in Portugal.

During the first three months of 2011, we reclassified eight investments from the held-to-maturity portfolio to the available-for-sale portfolio as a result of a significant decline in the issuers' credit worthiness.  At the time of the transfer, the securities had an aggregate amortized cost of $1.6 billion and an aggregate unrealized loss of $270 million.  The securities transferred included our investments in the Republic of Tunisia that had an aggregate amortized cost of $769 million and four securities associated with financial institutions in Portugal and Ireland with an aggregate amortized cost of $631 million.  The investments from the financial institutions in Portugal were subsequently sold by the end of the third quarter of 2011.
Contractual and Economic Maturities
The contractual maturities of our investments in fixed maturities at March 31, 2012, were as follows:
 

15

  
Aflac Japan
 
Aflac U.S.
(In millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair  
Value  
Available for sale:
 
 
 
 
 
 
 
Due in one year or less
$
2,123

 
$
2,168

 
$
13

 
$
13

Due after one year through five years
2,223

 
2,330

 
358

 
387

Due after five years through 10 years
3,940

 
4,201

 
894

 
1,036

Due after 10 years
25,754

 
26,463

 
7,559

 
8,523

Mortgage- and asset-backed securities
1,108

 
1,209

 
45

 
56

Total fixed maturities available for sale
$
35,148

 
$
36,371

 
$
8,869

 
$
10,015

Held to maturity:
 
 
 
 
 
 
 
Due in one year or less
$
460

 
$
463

 
$
0

 
$
0

Due after one year through five years
1,085

 
1,161

 
0

 
0

Due after five years through 10 years
3,226

 
3,544

 
0

 
0

Due after 10 years
43,946

 
43,155

 
0

 
0

Mortgage- and asset-backed securities
117

 
121

 
0

 
0

Total fixed maturities held to maturity
$
48,834

 
$
48,444

 
$
0

 
$
0


At March 31, 2012, the Parent Company had a portfolio of investment-grade available-for-sale fixed-maturity securities totaling $120 million at amortized cost and $136 million at fair value, which is not included in the table above.

Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.

The majority of our perpetual securities are subordinated to other debt obligations of the issuer, but rank higher than the issuer's equity securities. Perpetual securities have characteristics of both debt and equity investments, along with unique features that create economic maturity dates for the securities. Although perpetual securities have no contractual maturity date, they have stated interest coupons that were fixed at their issuance and subsequently change to a floating short-term interest rate of 125 to more than 300 basis points above an appropriate market index, generally by the 25th year after issuance, thereby creating an economic maturity date. The economic maturities of our investments in perpetual securities, which were all reported as available for sale at March 31, 2012, were as follows:

  
Aflac Japan
 
Aflac U.S.
(In millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair  
Value  
Due in one year or less
$
304

 
$
308

 
$
0

 
$
0

Due after one year through five years
1,167

 
1,223

 
5

 
5

Due after five years through 10 years
521

 
551

 
0

 
0

Due after 10 years
3,353

 
3,089

 
172

 
176

Total perpetual securities available for sale
$
5,345

 
$
5,171

 
$
177

 
$
181


Investment Concentrations

Our investment discipline begins with a top-down approach for each investment opportunity we consider. Consistent with that approach, we first approve each country in which we invest. In our approach to sovereign analysis, we consider the political, legal and financial context of the sovereign entity in which an issuer is domiciled and operates. Next we approve the issuer's industry sector, considering such factors as the stability of results and the importance of the sector to the overall economy. Specific credit names within approved countries and industry sectors are evaluated for their market position and specific strengths and potential weaknesses. Structures in which we invest are chosen for specific portfolio management purposes, including asset/liability management, portfolio diversification and net investment income.


16

Banks and Financial Institutions

After Japan government bonds (JGBs), our second largest investment concentration as of March 31, 2012, was banks and financial institutions. Within the countries we approve for investment opportunities, we primarily invest in financial institutions that are strategically crucial to each approved country's economy. The bank and financial institution sector is a highly regulated industry and plays a strategic role in the global economy. We achieve some degree of diversification in the bank and financial institution sector through a geographically diverse universe of credit exposures. Within this sector, the more significant concentration of our credit risk by geographic region or country of issuer at March 31, 2012, based on amortized cost, was: Europe, excluding the United Kingdom (35%); United States (23%); United Kingdom (9%); Japan (8%); and other (25%).

Our total investments in the bank and financial institution sector, including those classified as perpetual securities, were as follows:
  
March 31, 2012
 
December 31, 2011
  
Total Investments in
Banks and Financial
Institutions Sector
(in millions)
 
Percentage of
Total Investment
Portfolio
 
Total Investments in
Banks and Financial
Institutions Sector
(in millions)
 
Percentage of
Total Investment    
Portfolio
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
$
19,132

 
 
 
19
%
 
 
 
$
20,025

 
 
 
20
%
 
Fair value
 
18,587

 
 
 
19

 
 
 
18,933

 
 
 
19

 
Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upper Tier II:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
$
3,251

 
 
 
3
%
 
 
 
$
4,285

 
 
 
5
%
 
Fair value
 
3,193

 
 
 
3

 
 
 
4,244

 
 
 
4

 
Tier I:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
1,945

 
 
 
2

 
 
 
2,268

 
 
 
2

 
Fair value
 
1,808

 
 
 
2

 
 
 
1,834

 
 
 
2

 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
$
24,328

 
 
 
24
%
 
 
 
$
26,578

 
 
 
27
%
 
Fair value
 
23,588

 
 
 
24

 
 
 
25,011

 
 
 
25

 

Derisking

During the three-month period ended March 31, 2012, we continued our efforts which began in the first quarter of 2011 of pursuing strategic investment activities to lower the risk profile of our investment portfolio. Our primary focus during the first quarter of 2012 was on reducing our exposure to perpetual and other subordinated securities of European issuers, particularly in the financial sector. See further details in the Realized Investment Gains and Losses section below.

Realized Investment Gains and Losses

Information regarding pretax realized gains and losses from investments is as follows:



17

  
Three Months Ended
March 31,
(In millions)
2012
 
2011
Realized investment gains (losses) on securities:
 
 
 
Fixed maturities:
 
 
 
Available for sale:
 
 
 
Gross gains from sales
$
14

 
$
26

Gross losses from sales
(1
)
 
(187
)
Net gains (losses) from redemptions
0

 
7

Other-than-temporary impairment losses
(63
)
 
(404
)
Total fixed maturities
(50
)
 
(558
)
Perpetual securities:
 
 
 
Available for sale:
 
 
 
Gross gains from sales
70

 
6

Gross losses from sales
(65
)
 
(2
)
 Net gains (losses) from redemptions
60

 
0

Other-than-temporary impairment losses
(140
)
 
0

Total perpetual securities
(75
)
 
4

Equity securities:
 
 
 
Other-than-temporary impairment losses
0

 
(1
)
Total equity securities
0

 
(1
)
Derivatives and other:
 
 
 
Derivative gains (losses)
80

 
(30
)
Other
0

 
6

Total derivatives and other
80

 
(24
)
Total realized investment gains (losses)
$
(45
)
 
$
(579
)

During the three-month period ended March 31, 2012, sales and redemptions of securities generated a net realized investment gain. This net gain primarily resulted from both the redemption of a previously impaired perpetual security and sales related to our implemented plan to reduce the risk exposure in our investment portfolio (see the Investment Concentrations section above for more information). The other-than-temporary losses that we recognized were largely composed of impairments for two Tier I securities that were sold subsequent to the end of the quarter.

During the three-month period ended March 31, 2011, we recognized other-than-temporary impairment losses and realized investment losses from the sale of securities, primarily a result of an implemented plan to reduce the risk exposure in our investment portfolio coupled with the continued decline in the credit worthiness of certain issuers.

Other-than-temporary Impairment

The fair value of our debt and perpetual security investments fluctuates based on changes in credit spreads in the global financial markets. Credit spreads are most impacted by market rates of interest, the general and specific credit environment and global market liquidity. We believe that fluctuations in the fair value of our investment securities related to changes in credit spreads have little bearing on whether our investment is ultimately recoverable. Generally, we consider such declines in fair value to be temporary even in situations where an investment remains in an unrealized loss position for a year or more.

However, in the course of our credit review process, we may determine that it is unlikely that we will recover our investment in an issuer due to factors specific to an individual issuer, as opposed to general changes in global credit spreads. In this event, we consider such a decline in the investment's fair value, to the extent below the investment's cost or amortized cost, to be an other-than-temporary impairment of the investment and write the investment down to its fair value.
 
In addition to the usual investment risk associated with a debt instrument, our perpetual security holdings may be

18

subject to the risk of nationalization of their issuers in connection with capital injections from an issuer's sovereign government. We cannot be assured that such capital support will extend to all levels of an issuer's capital structure. In addition, certain governments or regulators may consider imposing interest and principal payment restrictions on issuers of hybrid securities to preserve cash and build capital. In addition to the cash flow impact that additional deferrals would have on our portfolio, such deferrals could result in ratings downgrades of the affected securities, which in turn could impair the fair value of the securities and increase our regulatory capital requirements. We take factors such as these into account in our credit review process.

When determining our intention to sell a security prior to recovery of its fair value to amortized cost, we evaluate facts and circumstances such as, but not limited to, decisions to reposition our security portfolio and sales of securities to meet cash flow needs. We perform ongoing analyses of our liquidity needs, which includes cash flow testing of our policy liabilities, debt maturities, projected dividend payments and other cash flow and liquidity needs. Our cash flow testing includes extensive duration matching of our investment portfolio and policy liabilities. Based on our analyses, we have concluded that we have sufficient excess cash flows to meet our liquidity needs without liquidating any of our investments prior to their maturity. In years prior to 2011, provided that our credit review process resulted in a conclusion that we would collect all of our cash flows and recover our investment in an issuer and the investment was within our investment risk exposure guidelines, we generally did not sell investments prior to their maturity. However, starting in the fourth quarter of 2011, we determined that certain securities were no longer within our investment risk exposure guidelines and have started to reposition our security portfolio in an effort to enhance diversification and our credit profile by reducing our risk exposure through opportunistic investment transactions.

The following table details our pretax other-than-temporary impairment losses by investment category that resulted from our impairment evaluation process.
  
Three Months Ended
March 31,
 
(In millions)
2012
 
2011
 
Perpetual securities
$
140

 
$
0

 
Corporate bonds
63

 
397

 
Mortgage- and asset-backed securities
0

 
6

 
Municipalities
0

 
1

 
Equity securities
0

 
1

 
Total other-than-temporary impairment losses realized
$
203

(1) 
$
405

(2) 
(1) Includes $28 for credit-related impairments and $175 from change in intent to sell securities
(2) Consisted completely of credit-related impairments


Unrealized Investment Gains and Losses
Effect on Shareholders’ Equity
The net effect on shareholders’ equity of unrealized gains and losses from investment securities was as follows:
(In millions)
March 31,
2012
 
December 31,
2011
Unrealized gains (losses) on securities available for sale
$
2,219

 
$
1,761

Unamortized unrealized gains on securities transferred to held to maturity
29

 
34

Deferred income taxes
(800
)
 
(652
)
Shareholders’ equity, unrealized gains (losses) on investment securities
$
1,448

 
$
1,143

Gross Unrealized Loss Aging
The following tables show the fair value and gross unrealized losses of our available-for-sale and held-to-maturity investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


19

  
March 31, 2012
  
Total
 
Less than 12 months
 
12 months or longer
(In millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies:
 
 
 
 
 
 
 
 
 
 
 
Yen-denominated
$
3,674

 
$
3

 
$
3,597

 
$
2

 
$
77

 
$
1

Municipalities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
60

 
8

 
29

 
1

 
31

 
7

Yen-denominated
58

 
3

 
0

 
0

 
58

 
3

Mortgage- and asset- backed
securities:
 
 
 
 
 
 
 
 
 
 
 
Yen-denominated
143

 
1

 
0

 
0

 
143

 
1

Public utilities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
439

 
25

 
284

 
11

 
155

 
14

Yen-denominated
4,779

 
377

 
2,094

 
131

 
2,685

 
246

Sovereign and supranational:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
68

 
4

 
17

 
0

 
51

 
4

Yen-denominated
2,589

 
185

 
592

 
17

 
1,997

 
168

Banks/financial institutions:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
593

 
45

 
219

 
9

 
374

 
36

Yen-denominated
9,247

 
1,142

 
926

 
11

 
8,321

 
1,131

Other corporate:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
1,286

 
52

 
1,112

 
28

 
174

 
24

Yen-denominated
5,523

 
533

 
1,606

 
69

 
3,917

 
464

Total fixed maturities
28,459

 
2,378

 
10,476

 
279

 
17,983

 
2,099

Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
116

 
17

 
60

 
0

 
56

 
17

Yen-denominated
2,036

 
301

 
619

 
42

 
1,417

 
259

Total perpetual securities
2,152

 
318

 
679

 
42

 
1,473

 
276

Equity securities
4

 
0

 
2

 
0

 
2

 
0

Total
$
30,615

 
$
2,696

 
$
11,157

 
$
321

 
$
19,458

 
$
2,375



20

  
December 31, 2011
  
Total
 
Less than 12 months
 
12 months or longer
(In millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
Japan government and agencies:
 
 
 
 
 
 
 
 
 
 
 
Yen-denominated
$
940

 
$
1

 
$
859

 
$
1

 
$
81

 
$
0

Municipalities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
54

 
8

 
22

 
1

 
32

 
7

Yen-denominated
60

 
4

 
0

 
0

 
60

 
4

Mortgage- and asset- backed
securities:
 
 
 
 
 
 
 
 
 
 
 
Yen-denominated
151

 
1

 
0

 
0

 
151

 
1

Public utilities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
295

 
27

 
110

 
3

 
185

 
24

Yen-denominated
4,995

 
392

 
2,404

 
141

 
2,591

 
251

Sovereign and supranational:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
66

 
5

 
34

 
2

 
32

 
3

Yen-denominated
2,349

 
199

 
749

 
62

 
1,600

 
137

Banks/financial institutions:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
770

 
121

 
391

 
56

 
379

 
65

Yen-denominated
10,175

 
1,438

 
1,639

 
46

 
8,536

 
1,392

Other corporate:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
834

 
62

 
639

 
27

 
195

 
35

Yen-denominated
6,106

 
644

 
2,523

 
110

 
3,583

 
534

Total fixed maturities
26,795

 
2,902

 
9,370

 
449

 
17,425

 
2,453

Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
Dollar-denominated
217

 
29

 
109

 
4

 
108

 
25

Yen-denominated
2,290

 
604

 
630

 
69

 
1,660

 
535

Total perpetual securities
2,507

 
633

 
739

 
73

 
1,768

 
560

Equity securities
8

 
1