Document
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 September 30, 2016
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
aflaclogoa01a01a01a07.jpg
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
 
October 27, 2016
Common Stock, $.10 Par Value
 
408,102,088


Aflac Incorporated and Subsidiaries
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2016
Table of Contents
 
 
 
Page
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
  Three Months Ended September 30, 2016, and 2015
  Nine Months Ended September 30, 2016 and 2015

 
 
 
 
  Three Months Ended September 30, 2016, and 2015
  Nine Months Ended September 30, 2016 and 2015

 
 
 
 
  September 30, 2016 and December 31, 2015
 
 
 
 
  Nine Months Ended September 30, 2016, and 2015
 
 
 
 
  Nine Months Ended September 30, 2016, and 2015
 
 
 
 
 
 
 
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 September 30, 2016, and 2015, 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 accompanying consolidated balance sheet of Aflac Incorporated and subsidiaries (the Company) as of September 30, 2016, and the related consolidated statements of earnings, and comprehensive income (loss), for the three-month and nine-month periods ended September 30, 2016, and 2015, and the consolidated statements of shareholders' equity and cash flows for the nine-month periods ended September 30, 2016 and 2015. These consolidated financial statements are the responsibility of the Company's management.

We conducted our review 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 review, 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, 2015, and the related consolidated statements of earnings, comprehensive income (loss), shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2016, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2015, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ KPMG LLP

Atlanta, Georgia
November 4, 2016


2

Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
(In millions, except for share and per-share amounts - Unaudited)
2016
2015
2016
2015
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Net premiums, principally supplemental health insurance
 
$
5,022

 
 
$
4,380

 
 
$
14,447

 
 
$
13,176

 
Net investment income
 
842

 
 
784

 
 
2,465

 
 
2,343

 
Realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment losses realized
 
(22
)
 
 
(137
)
 
 
(69
)
 
 
(143
)
 
Sales and redemptions
 
(17
)
 
 
26

 
 
87

 
 
186

 
Derivative and other gains (losses)
 
(107
)
 
 
(3
)
 
 
(278
)
 
 
(17
)
 
Total realized investment gains (losses)
 
(146
)
 
 
(114
)
 
 
(260
)
 
 
26

 
Other income (loss)
 
(2
)
 
 
(10
)
 
 
(48
)
 
 
8

 
Total revenues
 
5,716

 
 
5,040

 
 
16,604

 
 
15,553

 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and claims, net
 
3,378

 
 
2,927

 
 
9,657

 
 
8,816

 
Acquisition and operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred policy acquisition costs
 
282

 
 
258

 
 
858

 
 
790

 
Insurance commissions
 
353

 
 
326

 
 
1,031

 
 
981

 
Insurance expenses
 
625

 
 
554

 
 
1,801

 
 
1,634

 
Interest expense
 
65

 
 
67

 
 
196

 
 
224

 
Other expenses
 
50

 
 
44

 
 
147

 
 
356

(1) 
Total acquisition and operating expenses
 
1,375

 
 
1,249

 
 
4,033

 
 
3,985

 
Total benefits and expenses
 
4,753

 
 
4,176

 
 
13,690

 
 
12,801

 
Earnings before income taxes
 
963

 
 
864

 
 
2,914

 
 
2,752

 
Income taxes
 
334

 
 
297

 
 
1,006

 
 
949

 
Net earnings
 
$
629

 
 
$
567

 
 
$
1,908

 
 
$
1,803

 
Net earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.54

 
 
$
1.32

 
 
$
4.62

 
 
$
4.17

 
Diluted
 
1.53

 
 
1.32

 
 
4.59

 
 
4.14

 
Weighted-average outstanding common shares used in
computing earnings per share (In thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
408,519

 
 
428,735

 
 
413,023

 
 
432,540

 
Diluted
 
411,140

 
 
431,102

 
 
415,446

 
 
435,064

 
Cash dividends per share
 
$
.41

 
 
$
.39

 
 
$
1.23

 
 
$
1.17

 
(1) Includes expense of $230 for the make-whole payment associated with the early extinguishment of debt
See the accompanying Notes to the Consolidated Financial Statements.

3

Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions - Unaudited)
2016
2015
2016
2015
Net earnings
 
$
629

 
 
$
567

 
 
$
1,908

 
 
$
1,803

 
Other comprehensive income (loss) before income taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized foreign currency translation gains (losses) during
period
 
195

 
 
186

 
 
1,783

 
 
25

 
Unrealized gains (losses) on investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on investment securities during
period
 
(527
)
 
 
(401
)
 
 
4,855

 
 
(2,266
)
 
Reclassification adjustment for realized (gains) losses on
investment securities included in net earnings
 
33

 
 
138

 
 
(33
)
 
 
20

 
Unrealized gains (losses) on derivatives during period
 
0

 
 
(1
)
 
 
11

 
 
(3
)
 
Pension liability adjustment during period
 
0

 
 
0

 
 
(6
)
 
 
1

 
Total other comprehensive income (loss) before income taxes
 
(299
)
 
 
(78
)
 
 
6,610

 
 
(2,223
)
 
Income tax expense (benefit) related to items of other comprehensive
income (loss)
 
(231
)
 
 
(99
)
 
 
1,871

 
 
(772
)
 
Other comprehensive income (loss), net of income taxes
 
(68
)
 
 
21

 
 
4,739

 
 
(1,451
)
 
Total comprehensive income (loss)
 
$
561

 
 
$
588

 
 
$
6,647

 
 
$
352

 
See the accompanying Notes to the Consolidated Financial Statements.

4

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets
(In millions)
September 30,
 2016
(Unaudited)
 
December 31,
2015
Assets:
 
 
 
 
 
 
 
Investments and cash:
 
 
 
 
 
 
 
Securities available for sale, at fair value:
 
 
 
 
 
 
 
Fixed maturities (amortized cost $66,059 in 2016 and $56,903 in 2015)
 
$
75,033

 
 
 
$
60,795

 
Fixed maturities - consolidated variable interest entities (amortized
cost $4,870 in 2016 and $3,739 in 2015)
 
5,494

 
 
 
4,554

 
Perpetual securities (amortized cost $1,677 in 2016 and $1,586 in 2015)
 
1,775

 
 
 
1,719

 
Perpetual securities - consolidated variable interest entities
(amortized cost $273 in 2016 and $255 in 2015)
 
219

 
 
 
228

 
Equity securities (cost $233 in 2016 and $117 in 2015)
 
264

 
 
 
135

 
Equity securities - consolidated variable interest entities
(cost $1,036 in 2016 and $363 in 2015)
 
1,014

 
 
 
363

 
Securities held to maturity, at amortized cost:
 
 
 
 
 
 
 
Fixed maturities (fair value $47,937 in 2016 and $37,520 in 2015)
 
38,772

 
 
 
33,459

 
Other investments
 
1,094

 
 
 
294

 
Cash and cash equivalents
 
5,270

 
 
 
4,350

 
Total investments and cash
 
128,935

 
 
 
105,897

 
Receivables
 
689

 
 
 
705

 
Accrued investment income
 
776

 
 
 
768

 
Deferred policy acquisition costs
 
9,759

 
 
 
8,511

 
Property and equipment, at cost less accumulated depreciation
 
476

 
 
 
427

 
Other (1)
 
3,466

 
 
 
1,948

 
Total assets
 
$
144,101

 
 
 
$
118,256

 
(1) Includes $168 in 2016 and $102 in 2015 of derivatives from consolidated variable interest entities
Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2016 related to debt issuance 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)
September 30,
2016
(Unaudited)
 
December 31,
2015
Liabilities and shareholders’ equity:
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Policy liabilities:
 
 
 
 
 
 
 
Future policy benefits
 
$
85,163

 
 
 
$
69,687

 
Unpaid policy claims
 
4,346

 
 
 
3,802

 
Unearned premiums
 
8,401

 
 
 
7,857

 
Other policyholders’ funds
 
7,646

 
 
 
6,285

 
Total policy liabilities
 
105,556

 
 
 
87,631

 
Income taxes
 
6,247

 
 
 
4,340

 
Payables for return of cash collateral on loaned securities
 
1,053

 
 
 
941

 
Notes payable
 
5,765

 
 
 
4,971

 
Other (2)
 
2,695

 
 
 
2,665

 
Total liabilities
 
121,316

 
 
 
100,548

 
Commitments and contingent liabilities (Note 11)
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
Common stock of $.10 par value. In thousands: authorized 1,900,000
shares in 2016 and 2015; issued 670,984 shares in 2016 and 669,723
shares in 2015
 
67

 
 
 
67

 
Additional paid-in capital
 
1,936

 
 
 
1,828

 
Retained earnings
 
25,404

 
 
 
24,007

 
Accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized foreign currency translation gains (losses)
 
(594
)
 
 
 
(2,196
)
 
Unrealized gains (losses) on investment securities
 
6,120

 
 
 
2,986

 
Unrealized gains (losses) on derivatives
 
(19
)
 
 
 
(26
)
 
Pension liability adjustment
 
(143
)
 
 
 
(139
)
 
Treasury stock, at average cost
 
(9,986
)
 
 
 
(8,819
)
 
Total shareholders’ equity
 
22,785

 
 
 
17,708

 
Total liabilities and shareholders’ equity
 
$
144,101

 
 
 
$
118,256

 
(2) Includes $124 in 2016 and $293 in 2015 of derivatives from consolidated variable interest entities
Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2016 related to debt issuance costs.
See the accompanying Notes to the Consolidated Financial Statements.



6

Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity
  
Nine Months Ended
September 30,
(In millions - Unaudited)
 
2016
 
 
 
2015
 
Common stock:
 
 
 
 
 
 
 
Balance, beginning of period
 
$
67

 
 
 
$
67

 
Balance, end of period
 
67

 
 
 
67

 
Additional paid-in capital:
 
 
 
 
 
 
 
Balance, beginning of period
 
1,828

 
 
 
1,711

 
Exercise of stock options
 
38

 
 
 
41

 
Share-based compensation
 
41

 
 
 
27

 
Gain (loss) on treasury stock reissued
 
29

 
 
 
28

 
Balance, end of period
 
1,936

 
 
 
1,807

 
Retained earnings:
 
 
 
 
 
 
 
Balance, beginning of period
 
24,007

 
 
 
22,156

 
Net earnings
 
1,908

 
 
 
1,803

 
Dividends to shareholders
 
(511
)
 
 
 
(508
)
 
Balance, end of period
 
25,404

 
 
 
23,451

 
Accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
Balance, beginning of period
 
625

 
 
 
1,979

 
Unrealized foreign currency translation gains (losses) during
period, net of income taxes
 
1,602

 
 
 
8

 
Unrealized gains (losses) on investment securities during period,
net of income taxes and reclassification adjustments
 
3,134

 
 
 
(1,458
)
 
Unrealized gains (losses) on derivatives during period, net of
income taxes
 
7

 
 
 
(2
)
 
Pension liability adjustment during period, net of income taxes
 
(4
)
 
 
 
1

 
Balance, end of period
 
5,364

 
 
 
528

 
Treasury stock:
 
 
 
 
 
 
 
Balance, beginning of period
 
(8,819
)
 
 
 
(7,566
)
 
Purchases of treasury stock
 
(1,222
)
 
 
 
(1,081
)
 
Cost of shares issued
 
55

 
 
 
49

 
Balance, end of period
 
(9,986
)
 
 
 
(8,598
)
 
Total shareholders’ equity
 
$
22,785

 
 
 
$
17,255

 
See the accompanying Notes to the Consolidated Financial Statements.

7

Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
  
Nine Months Ended September 30,
(In millions - Unaudited)
2016
 
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
Net earnings
 
$
1,908

 
 
 
$
1,803

 
Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 
 
 
Change in receivables and advance premiums
 
41

 
 
 
98

 
Increase in deferred policy acquisition costs
 
(186
)
 
 
 
(152
)
 
Increase in policy liabilities
 
2,329

 
 
 
2,696

 
Change in income tax liabilities
 
(365
)
 
 
 
(43
)
 
Realized investment (gains) losses
 
260

 
 
 
(26
)
 
Other, net
 
133

 
 
 
394

(1) 
Net cash provided (used) by operating activities
 
4,120

 
 
 
4,770

 
Cash flows from investing activities:
 
 
 
 
 
 
 
Proceeds from investments sold or matured:
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Fixed maturities sold
 
978

 
 
 
1,829

 
Fixed maturities matured or called
 
774

 
 
 
705

 
Perpetual securities matured or called
 
234

 
 
 
394

 
Equity securities sold
 
173

 
 
 
1

 
Securities held to maturity:
 
 
 
 
 
 
 
Fixed maturities matured or called
 
946

 
 
 
678

 
Costs of investments acquired:
 
 
 
 
 
 
 
Available-for-sale fixed maturities acquired
 
(4,871
)
 
 
 
(3,919
)
 
Equity securities acquired
 
(868
)
 
 
 
(67
)
 
Other investments, net
 
(801
)
 
 
 
(27
)
 
Settlement of derivatives, net
 
1,203

 
 
 
(2,242
)
 
Cash received (pledged or returned) as collateral, net
 
(350
)
 
 
 
(1,404
)
 
Other, net
 
(56
)
 
 
 
(31
)
 
Net cash provided (used) by investing activities
 
(2,638
)
 
 
 
(4,083
)
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Purchases of treasury stock
 
(1,222
)
 
 
 
(1,081
)
 
Proceeds from borrowings
 
988

 
 
 
998

 
Principal payments under debt obligations
 
(232
)
 
 
 
(1,272
)
 
Dividends paid to shareholders
 
(492
)
 
 
 
(489
)
 
Change in investment-type contracts, net
 
117

 
 
 
213

 
Treasury stock reissued
 
37

 
 
 
28

 
Other, net
 
(31
)

 
 
(223
)
(1) 
Net cash provided (used) by financing activities
 
(835
)
 
 
 
(1,826
)
 
Effect of exchange rate changes on cash and cash equivalents
 
273

 
 
 
1

 
Net change in cash and cash equivalents
 
920

 
 
 
(1,138
)
 
Cash and cash equivalents, beginning of period
 
4,350

 
 
 
4,658

 
Cash and cash equivalents, end of period
 
$
5,270

 
 
 
$
3,520

 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
Income taxes paid
 
$
1,594

 
 
 
$
996

 
Interest paid
 
155

 
 
 
188

 
Noncash interest
 
41

 
 
 
36

 
Impairment losses included in realized investment losses
 
69

 
 
 
143

 
Noncash financing activities:
 
 
 
 
 
 
 
Capital lease obligations
 
2

 
 
 
2

 
Treasury stock issued for:
 
 
 
 
 
 
 
   Associate stock bonus
 
24

 
 
 
26

 
   Shareholder dividend reinvestment
 
19

 
 
 
19

 
   Share-based compensation grants
 
4

 
 
 
4

 
(1) Operating activities excludes and financing activities includes a cash outflow of $230 for the make-whole payment associated with the early extinguishment of debt
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). 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. 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 74% and 70% of the Company's total revenues in the nine-month periods ended September 30, 2016, and 2015, respectively. The percentage of the Company's total assets attributable to Aflac Japan was 84% at September 30, 2016, compared with 83% at December 31, 2015.

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 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 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 unaudited 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 September 30, 2016 and December 31, 2015, the consolidated statements of earnings and comprehensive income (loss) for the three- and nine-month periods ended September 30, 2016, and 2015, and the consolidated statements of shareholders' equity and cash flows for the nine-month periods ended September 30, 2016 and 2015. 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, 2015.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments: In September 2015, the FASB issued guidance requiring that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustments are determined. In the same period’s financial statements, the acquirer is required to record income effects of the adjustments as if the accounting had been completed at the acquisition date. The acquirer is also required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the

9

acquisition date. We adopted this guidance as of January 1, 2016. The adoption of this guidance did not have a significant impact on our financial position or results of operations.

Fair Value Measurement - Disclosures for investments in certain entities that calculate net asset value per share (or its equivalent): In May 2015, the FASB issued updated guidance that removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. We adopted this guidance as of January 1, 2016. The adoption of this guidance did not have a significant impact on our financial position, results of operations, or disclosures.

Interest - Imputation of Interest - Simplifying the presentation of debt issuance costs: In April 2015, the FASB issued updated guidance to simplify presentation of debt issuance costs. The updated guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this amendment. In August 2015, the FASB issued updated Securities and Exchange Commission (SEC) Staff guidance pertaining to the presentation of debt issuance costs related to line-of-credit arrangements. The guidance states that an entity may defer and present debt issuance costs as an asset, subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We retrospectively adopted this guidance as of January 1, 2016. The retrospective adoption of this accounting standard resulted in a $40 million reduction to notes payable and other assets as of December 31, 2015, the earliest balance sheet date presented in the period of adoption.

Consolidation - Amendments to the consolidation analysis: In February 2015, the FASB issued updated guidance that affects evaluation of whether limited partnerships and similar legal entities (limited liability corporations and securitization structures, etc.) are variable interest entities (VIEs), evaluation of whether fees paid to a decision maker or a service provider are a variable interest, and evaluation of the effect of fee arrangements and the effect of related parties on the determination of the primary beneficiary under the VIE model for consolidation. The updated guidance eliminates the presumption that a general partner should consolidate a limited partnership. Limited partnership and similar legal entities that provide partners with either substantive kick-out rights or substantive participating rights over the general partner will now be evaluated under the voting interest model rather than the VIE model for consolidation. In situations where no single party has a controlling financial interest in a VIE, the related party relationships under common control should be considered in their entirety in determining whether that common control group has a controlling financial interest in the VIE. We adopted this guidance as of January 1, 2016. The adoption of this guidance impacted our footnote disclosures, but did not have a significant impact on our financial position or results of operations.

Derivatives and Hedging - Determining whether the host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or equity: In November 2014, the FASB issued guidance to clarify how to evaluate the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The guidance also clarifies that an entity should assess the substance of the relevant terms and features when considering how to weight those terms and features. We adopted this guidance as of January 1, 2016. The adoption of this guidance did not have a significant impact on our financial position or results of operations.

Compensation - Stock Compensation - Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period: In June 2014, the FASB issued this amendment that provides guidance on certain share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance to awards with performance conditions that affect vesting to account for such awards. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. We adopted this guidance as of January 1, 2016. The adoption of this guidance did not have a significant impact on our financial position or results of operations.

10


Accounting Pronouncements Pending Adoption

Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory: In October 2016, the FASB issued amendments that require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. We are evaluating the impact of adoption of this guidance on our financial position, results of operations and disclosures.

Consolidation - Interests Held through Related Parties That Are Under Common Control: In October 2016, the FASB issued amendments which clarify the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a significant impact on our financial position, results of operations or disclosures.

Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments: In August 2016, the FASB issued amendments that provide guidance on eight specific statement of cash flows classification issues. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for any interim or annual period. The adoption of this guidance is not expected to have a significant impact on our financial position, results of operations, or statements of cash flows.

Financial Instruments - Measurement of Credit Losses on Financial Instruments: In June 2016, the FASB issued amendments that require a financial asset (or a group of financial assets) measured on an amortized cost basis to be presented net of an allowance for credit losses in order to reflect the amount expected to be collected on the financial asset(s). The measurement of expected credit losses is amended by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform about a credit loss. Credit losses on available-for-sale debt securities will continue to be measured in a manner similar to current GAAP. However, the amendments require that credit losses be presented as an allowance rather than as a writedown. Other amendments include changes to the balance sheet presentation and interest income recognition of purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The amendments are effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Companies may early adopt this guidance as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are evaluating the impact of adoption of this guidance on our financial position, results of operations and disclosures.

Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting: In March 2016, the FASB issued amendments which simplify several aspects for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equities, and classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period.

The amendment requires prospective recognition of excess tax benefits and deficiencies in the income statement, rather than in paid-in capital. As a result of applying this requirement, we estimate recognition of excess tax benefits to be in a range of $2 million to $11 million in income tax expense for the year ending December 31, 2017 (estimates will vary from actual based on changes in actual share price).

The amendment also requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The guidance requires modified retrospective transition for settlements on all outstanding awards (both historical and future) that did not give rise to an excess benefit to be recorded through retained earnings on a cumulative-effect basis. We estimate that the adoption of these amendments in the guidance will not have a significant impact on our financial position or results of operations.

Additionally, the amendment requires that the minimum statutory tax withholding for all outstanding liability awards be reclassified at the date of adoption to equity (assuming equity classification results from the guidance change), and record

11

a cumulative-effect adjustment to equity on a modified retrospective basis. We are currently evaluating this requirement for impact on our financial position or results of operations.

The guidance requires certain reclassifications of balances on the statement of cash flows to or from operating and financing activities. The reclassification guidance will not have a significant impact on our statement of cash flows.

The amendment allows an entity to elect whether to use estimates of forfeitures, or to account for forfeitures as they occur, using modified retrospective application. We estimate that the election and adoption of this amendment in the guidance will not have a significant impact on our financial position or results of operations.

Investments - Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting: In March 2016, the FASB issued amendments which eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Per the amendments, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on our financial position or results of operations.

Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments: In March 2016, the FASB issued amendments which clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a significant impact on our financial position or results of operations.

Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships: In March 2016, the FASB issued amendments which clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a significant impact on our financial position or results of operations.

Leases: In February 2016, the FASB issued updated guidance for accounting for leases. Per the amendments, lessees will be required to recognize all leases on the balance sheet, with the exception of short-term leases. A lease liability will be recorded for the obligation of a lessee to make lease payments arising from a lease. A right-of-use asset, will be recorded which represents the lessee’s right to use, or to control the use of, a specified asset for a lease term. Under the new guidance, lessor accounting is largely unchanged. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of this guidance on our financial position, results of operations or disclosures.


12

Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities: In January 2016, the FASB issued guidance to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require that equity investments be measured at fair value with changes recognized in net income; that changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option be recognized in other comprehensive income; and that entities would make the assessment of the ability to realize a deferred tax asset (DTA) related to an available-for-sale (AFS) debt security in combination with the entity's other DTAs. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted, with the exception of the own credit provision if an entity has elected to measure a liability at fair value. We are evaluating whether the adoption of this guidance will have a significant impact on our financial position, results of operations or disclosures.

Financial Services - Insurance - Disclosures about Short-Duration Contracts: In May 2015, the FASB issued updated guidance requiring enhanced disclosures by all insurance entities that issue short-duration contracts. The amendments require insurance entities to disclose for annual reporting periods information about the liability for unpaid claims and claim adjustment expenses. The amendments also require insurance entities to disclose information about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claim adjustment expenses. In addition, the amendments require insurance entities to disclose for annual and interim reporting periods a roll-forward of the liability for unpaid claims and claim adjustment expenses. For health insurance claims, the amendments require the disclosure of the total of incurred-but-not-reported liabilities and expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses. The amendments are effective for public business entities for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. Early application of the amendments is permitted. The adoption of this guidance will not have a significant impact on our financial position or results of operations.

Presentation of Financial Statements - Going Concern - Disclosure of uncertainties about an entity’s ability to continue as a going concern: In August 2014, the FASB issued this amendment that provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendment is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this guidance will not have a significant impact on our financial position or results of operations.

Revenue from contracts with customers: In May 2014, the FASB issued updated guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date for this standard to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Other updates related to the new guidance, which are effective as of the same reporting period, pertain to identifying performance obligations and licensing, and principal versus agent considerations. Early application is not permitted. We are currently evaluating the impact of this guidance on our financial position, results of operations or disclosures.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material 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, 2015.


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 and business activities, including reinsurance retrocession activities, not included in Aflac Japan or Aflac U.S. are included in the "Other business segments" category.

13


We do not allocate corporate overhead expenses to business segments. Consistent with U.S. GAAP accounting guidance for segment reporting, we evaluate and manage our business segments using a financial performance measure called pretax operating earnings. Our definition of operating earnings includes interest cash flows associated with notes payable and 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), nonrecurring items and other non-operating income (loss). We then exclude income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment follows:

  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
(In millions)
2016
 
2015
 
2016
 
2015
 
Revenues:
 
 
 
 
 
 
 
 
Aflac Japan:
 
 
 
 
 
 
 
 
   Net earned premiums
$
3,596

 
$
2,980

 
$
10,177

 
$
9,036

 
   Net investment income
661

 
606

 
1,925

 
1,824

 
   Other income
11

 
8

 
29

 
23

 
               Total Aflac Japan
4,268

 
3,594

 
12,131

 
10,883

 
Aflac U.S.:
 
 
 
 
 
 
 
 
   Net earned premiums
1,365

 
1,345

 
4,093

 
4,016

 
   Net investment income
176

 
173

 
526

 
507

 
   Other income
1

 
2

 
5

 
6

 
               Total Aflac U.S.
1,542

 
1,520

 
4,624

 
4,529

 
Other business segments
70

 
67

 
206

 
159

 
               Total business segment revenues
5,880

 
5,181

 
16,961

 
15,571

 
Realized investment gains (losses) (1)
(166
)
 
(136
)
 
(324
)
 
(36
)
 
Corporate
72

 
73

 
209

 
242

 
Intercompany eliminations
(52
)
 
(51
)
 
(145
)
 
(185
)
 
Other non-operating income (loss)
(18
)
 
(27
)
(2) 
(97
)
 
(39
)
(2) 
           Total revenues
$
5,716

 
$
5,040

 
$
16,604

 
$
15,553

 
(1) Excluding a gain of $20 and $22 for the three-month periods and $64 and $62 for the nine-month periods ended September 30, 2016, and 2015, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations
(2) Includes a loss of $14 for the three- and nine-month periods ended September 30, 2015, related to the change in value of yen
repatriation received in advance of settlement of certain foreign currency derivatives. This loss was offset by derivative gains included in realized investment gains (losses).

14

  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
(In millions)
2016
 
2015
 
2016
 
2015
 
Pretax earnings:
 
 
 
 
 
 
 
 
Aflac Japan
$
882

 
$
789

 
$
2,559

 
$
2,365

 
Aflac U.S.
323

 
286

 
946

 
864

 
Other business segments
4

 
5

 
12

 
10

 
    Total business segment pretax operating earnings
1,209

 
1,080

 
3,517

 
3,239

 
Interest expense, noninsurance operations
(31
)
 
(30
)
 
(90
)
 
(117
)
 
Corporate and eliminations
(31
)
 
(23
)
 
(91
)
 
(64
)
 
    Pretax operating earnings
1,147

 
1,027

 
3,336

 
3,058

 
Realized investment gains (losses) (1)
(166
)
 
(136
)
 
(324
)
 
(36
)
 
Other non-operating income (loss)
(18
)
 
(27
)
(2) 
(98
)
 
(270
)
(2),(3) 
    Total earnings before income taxes
$
963

 
$
864

 
$
2,914

 
$
2,752

 
Income taxes applicable to pretax operating earnings
$
399

 
$
355

 
$
1,154

 
$
1,057

 
Effect of foreign currency translation on after-tax operating
earnings
61

 
(58
)
 
110

 
(175
)
 
(1) Excluding a gain of $20 and $22 for the three-month periods and $64 and $62 for the nine-month periods ended September 30, 2016, and 2015, respectively, related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations
(2) Includes a loss of $14 for the three- and nine-month periods ended September 30, 2015, related to the change in value of yen
repatriation received in advance of settlement of certain foreign currency derivatives. This loss was offset by derivative gains included in realized investment gains (losses).
(3) Includes a cash outflow of $230 for the make-whole payment associated with the early extinguishment of debt


Assets were as follows:
(In millions)
September 30,
2016
 
December 31,
2015
Assets:
 
 
 
 
 
 
 
Aflac Japan
 
$
121,677

 
 
 
$
97,646

 
Aflac U.S.
 
20,126

 
 
 
18,537

 
Other business segments
 
270

 
 
 
188

 
    Total business segment assets
 
142,073

 
 
 
116,371

 
Corporate
 
29,617

 
 
 
23,375

 
Intercompany eliminations
 
(27,589
)
 
 
 
(21,490
)
 
    Total assets
 
$
144,101

 
 
 
$
118,256

 
Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2016 related to debt issuance 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.

15

  
September 30, 2016
(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
 
$
22,563

 
 
 
$
4,700

 
 
 
$
23

 
 
 
$
27,240

 
Municipalities
 
223

 
 
 
44

 
 
 
2

 
 
 
265

 
Mortgage- and asset-backed securities
 
969

 
 
 
45

 
 
 
3

 
 
 
1,011

 
Public utilities
 
1,667

 
 
 
371

 
 
 
0

 
 
 
2,038

 
Sovereign and supranational
 
943

 
 
 
205

 
 
 
0

 
 
 
1,148

 
Banks/financial institutions
 
2,752

 
 
 
411

 
 
 
99

 
 
 
3,064

 
Other corporate
 
4,072

 
 
 
686

 
 
 
43

 
 
 
4,715

 
Total yen-denominated
 
33,189

 
 
 
6,462

 
 
 
170

 
 
 
39,481

 
  Dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
150

 
 
 
16

 
 
 
0

 
 
 
166

 
Municipalities
 
929

 
 
 
162

 
 
 
3

 
 
 
1,088

 
Mortgage- and asset-backed securities
 
202

 
 
 
15

 
 
 
0

 
 
 
217

 
Public utilities
 
5,721

 
 
 
804

 
 
 
54

 
 
 
6,471

 
Sovereign and supranational
 
355

 
 
 
95

 
 
 
0

 
 
 
450

 
Banks/financial institutions
 
2,754

 
 
 
537

 
 
 
11

 
 
 
3,280

 
Other corporate
 
27,629

 
 
 
2,424

 
 
 
679

 
 
 
29,374

 
Total dollar-denominated
 
37,740

 
 
 
4,053

 
 
 
747

 
 
 
41,046

 
Total fixed maturities
 
70,929

 
 
 
10,515

 
 
 
917

 
 
 
80,527

 
Perpetual securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Yen-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Banks/financial institutions
 
1,679

 
 
 
138

 
 
 
126

 
 
 
1,691

 
Other corporate
 
218

 
 
 
8

 
 
 
0

 
 
 
226

 
  Dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Banks/financial institutions
 
53

 
 
 
24

 
 
 
0

 
 
 
77

 
Total perpetual securities
 
1,950

 
 
 
170

 
 
 
126

 
 
 
1,994

 
Equity securities:
 


 
 
 


 
 
 


 
 
 


 
      Yen-denominated
 
724

 
 
 
32

 
 
 
42

 
 
 
714

 
      Dollar-denominated
 
545

 
 
 
28

 
 
 
9

 
 
 
564

 
Total equity securities
 
1,269

 
 
 
60

 
 
 
51

 
 
 
1,278

 
Total securities available for sale
 
$
74,148

 
 
 
$
10,745

 
 
 
$
1,094

 
 
 
$
83,799

 

16

  
September 30, 2016
(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
 
$
23,852

 
 
 
$
7,241

 
 
 
$
0

 
 
 
$
31,093

 
Municipalities
 
404

 
 
 
145

 
 
 
0

 
 
 
549

 
Mortgage- and asset-backed securities
 
37

 
 
 
2

 
 
 
0

 
 
 
39

 
Public utilities
 
3,687

 
 
 
525

 
 
 
14

 
 
 
4,198

 
Sovereign and supranational
 
2,998

 
 
 
402

 
 
 
6

 
 
 
3,394

 
Banks/financial institutions
 
4,544

 
 
 
271

 
 
 
25

 
 
 
4,790

 
Other corporate
 
3,250

 
 
 
634

 
 
 
10

 
 
 
3,874

 
Total yen-denominated
 
38,772

 
 
 
9,220

 
 
 
55

 
 
 
47,937

 
Total securities held to maturity
 
$
38,772

 
 
 
$
9,220

 
 
 
$
55

 
 
 
$
47,937

 

17

  
December 31, 2015
(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
 
$
17,293

 
 
 
$
1,862

 
 
 
$
0

 
 
 
$
19,155

 
Municipalities
 
128

 
 
 
9

 
 
 
0

 
 
 
137

 
Mortgage- and asset-backed securities
 
322

 
 
 
33

 
 
 
0

 
 
 
355

 
Public utilities
 
1,400

 
 
 
210

 
 
 
10

 
 
 
1,600

 
Sovereign and supranational
 
791

 
 
 
180

 
 
 
0

 
 
 
971

 
Banks/financial institutions
 
2,321

 
 
 
325

 
 
 
105

 
 
 
2,541

 
Other corporate
 
3,337

 
 
 
448

 
 
 
33

 
 
 
3,752

 
Total yen-denominated
 
25,592

 
 
 
3,067

 
 
 
148

 
 
 
28,511

 
  Dollar-denominated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
 
110

 
 
 
11

 
 
 
0

 
 
 
121

 
Municipalities
 
926

 
 
 
151

 
 
 
6

 
 
 
1,071

 
Mortgage- and asset-backed securities
 
200

 
 
 
27

 
 
 
0

 
 
 
227

 
Public utilities
 
5,464

 
 
 
636

 
 
 
221

 
 
 
5,879

 
Sovereign and supranational
 
331

 
 
 
105

 
 
 
0

 
 
 
436

 
Banks/financial institutions
 
2,865

 
 
 
634

 
 
 
21

 
 
 
3,478

 
Other corporate
 
25,154

 
 
 
1,774

 
 
 
1,302

 
 
 
25,626

 
Total dollar-denominated
 
35,050

 
 
 
3,338

 
 
 
1,550

 
 
 
36,838

 
Total fixed maturities
 
60,642

 
 
 
6,405

 
 
 
1,698

 
 
 
65,349

 
Perpetual securities: