AFLAC INC

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 Japan and the United States (U.S.). The Company's insurance business is marketed and administered through Aflac Life Insurance Japan Ltd. (ALIJ) in Japan and through American Family Life Assurance Company of Columbus (Aflac), American Family Life Assurance Company of New York (Aflac New York), Continental American Insurance Company (CAIC), Tier One Insurance Company (TOIC) and Aflac Benefits Solutions, Inc. (ABS) in the U.S. The Company’s operations consist oftwo reportable business segments: Aflac Japan, which includes ALIJ, and Aflac U.S., which includes Aflac, Aflac New York, CAIC, TOIC, and ABS. Aflac New York is a wholly owned subsidiary of Aflac. Most of the Aflac U.S. policies are individually underwritten and marketed through independent agents. With the exception of dental and vision products administered by ABS, and certain group life insurance products, Aflac U.S. markets and administers group products through CAIC, branded as Aflac Group Insurance. Additionally, Aflac U.S. markets its consumer markets products through TOIC. The Company's insurance operations in the U.S. and Japan service the two markets for the Company's insurance business. The Parent Company, other operating business units that are not individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re Bermuda Ltd. (Aflac Re), and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and other.

Basis of Presentation

The Company prepares its financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to the Consolidated Financial Statements, references to U.S. GAAP issued by the FASB are derived from the FASB Accounting Standards Codification TM (ASC). 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.

Use of Estimates

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

Significant Accounting Policies

Foreign Currency Translation and Remeasurement: The functional currency of Aflac Japan is the Japanese yen. The Company translates its Japanese yen-denominated financial statement accounts into U.S. dollars as follows.

•Assets and liabilities are translated at end-of-period foreign exchange rates.

•Realized gains and losses on security transactions are translated at the foreign exchange rate on the trade date of each transaction.

•Other revenues, expenses, and cash flows are translated using average foreign exchange rates for the period.

The resulting foreign currency translation adjustments are included in accumulated other comprehensive income.

Foreign currency gains and losses resulting from the remeasurement of foreign currency and realized foreign currency exchange gains and losses are included in net investment gains (losses) in the consolidated statements of earnings.

The Parent Company has designated a majority of its Japanese yen-denominated liabilities (Japanese yen-denominated notes payable and Japanese yen-denominated loans) as non-derivative hedges and foreign currency forwards and options as derivative hedges of the foreign currency exposure of the Parent Company's net investment in Aflac Japan. The gains or losses on hedging derivative instruments and the foreign currency remeasurement gains or losses on the non-derivative hedging instruments that are designated as, and are effective as, an economic hedge of the net investment in Aflac Japan are reported as unrealized foreign currency translation gains (losses) in other comprehensive income and are included in accumulated other comprehensive income.

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

Insurance premiums for most of the Company's health and life insurance policies are recognized as earned premiums over the premium-paying periods of the contracts when due from policyholders. When earned premiums are reported, the related amounts of benefits and expenses are charged against such revenues. This association is accomplished by means of annual increases or decreases to the LFPB and the deferral and subsequent amortization of policy acquisition costs.

Premiums from the Company's products with limited-pay features are collected over a significantly shorter period than the contract term (i.e., the period during which benefits are provided). Premiums for these products are recognized as earned premiums over the premium-paying periods when due from policyholders. Any gross premium in excess of the net premium is deferred and reported as a deferred profit liability, which is subsequently amortized in net earned premiums such that profits are recognized in a constant relationship with insurance in force.

Net premium is calculated as gross premium multiplied by the net premium ratio (NPR) and represents the portion of gross premium required to provide for benefits and expenses. Benefits are recorded as an expense when they are incurred and LFPB is recorded when premiums are recognized using the net premium method.

Policyholders also have an option to pay discounted advanced premiums for certain of the Company's products. Advanced premiums are deferred and recognized when due from policyholders over the otherwise required contractual premium payment period.

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

Benefits and claims represent the difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates.

Reserve remeasurement (gains) losses represent the difference between two reserve measures both calculated as of the beginning of the current reporting period using the same locked-in discount rates. One reserve measure uses the NPR as of the end of the prior reporting period, and the second uses the revised NPR.

The locked-in interest accretion rate utilized for accretion of interest expense on insurance reserves is the original discount rate used at contract issue date.

Advertising expense is reported as incurred and included in insurance and other expenses in the consolidated statements of earnings. For the years ended December 31, 2025, 2024 and 2023, advertising expense was $160 million, $181 million and $188 million, respectively.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, money market instruments, and other debt instruments with a maturity of 90 days or less when purchased.

Investments:

Fixed Maturity and Equity Securities

The Company's fixed maturity securities are classified as either held-to-maturity or available-for-sale. Fixed maturity securities classified as held-to-maturity are securities that the Company has the ability and intent to hold to maturity or redemption and are carried at amortized cost, net of allowance for credit losses.

All other fixed maturity securities are classified as available-for-sale and are carried at fair value. If the fair value is higher than the amortized cost, the excess is an unrealized gain, and if lower than cost, the difference is an unrealized loss. The net unrealized gains and losses on securities available-for-sale, less related deferred income taxes, are reported in other comprehensive income and included in accumulated other comprehensive income.

Amortized cost of fixed maturity securities is based on the Company's purchase price adjusted for accrual of discount, or amortization of premium, and recognition of impairment charges, if any. The amortized cost of fixed maturity securities the Company purchases at a discount or premium will equal the face or par value at maturity or the call date, if applicable. Interest is reported as net investment income when earned and is adjusted for the amortization of any premium or discount.

For mortgage- and asset-backed securities, the Company recognizes income using a constant effective yield, which is based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments.

The Company has investments in marketable equity securities which are carried at fair value. Changes in the fair value of equity securities are included in net investment gains (losses) in the consolidated statements of earnings. Dividends are included in net investment income when declared.

The Company uses the specific identification method to determine the gain or loss from securities transactions. The realized gain or loss is included in net investment gains (losses) in the consolidated statements of earnings. Securities transactions are accounted for based on values as of the trade date of the transaction.

Commercial Mortgage and Other Loans

Commercial mortgage and other loans include transitional real estate loans (TREs), commercial mortgage loans (CMLs), middle market loans (MMLs), and other loans. The Company's investments in TREs, CMLs, MMLs, and other loans are accounted for as loan receivables and are reported at amortized cost on the acquisition date. The Company has the intent and ability to hold these loan receivables for the foreseeable future or until they mature; therefore, they are considered held for investment and are carried at amortized cost, net of allowance for credit losses, and included in commercial mortgage and other loans in the consolidated balance sheets. Income on commercial mortgage and other loans is recognized using the interest method and included in net investment income in the consolidated statements of earnings.

The Company designates nonaccrual status for a nonperforming fixed maturity security or loan receivable or a fixed maturity security or loan receivable that is not generating its stated interest rate because of nonpayment of periodic interest or principal by the borrower. The Company applies the cash basis method to record any payments received on nonaccrual assets. The Company resumes the accrual of interest on fixed maturity securities and loan receivables that are currently making contractual payments or for those that are not current where the borrower has paid timely (less than 30 days outstanding).

Other Investments

Other investments include limited partnerships, real estate owned (REO), short-term investments with maturities at the time of purchase of one year or less, but greater than 90 days, and policy loans.

Limited partnerships are accounted for using the equity method of accounting. Under the equity method of accounting, the Company reports its proportionate share of the investee's earnings or losses as a component of net investment income in the consolidated statements of earnings. The underlying investments held by the Company’s limited partnerships primarily consist of private equity and real estate.

In addition, the Company invests in partnerships that primarily specialize in rehabilitating historic structures or the installation of solar equipment that are tax equity investments. These investments derive investment returns in the form of income tax credits or other tax incentives. Beginning January 1, 2024, tax equity investments that meet certain criteria are accounted for using the proportional amortization method, where the initial cost of the investment is amortized in proportion to the tax credits received and recognized as a component of income tax expense (benefit). Tax equity investments that do not meet the qualification criteria for the proportional amortization method are accounted for using the equity method of accounting.

REO represents commercial properties obtained through foreclosure or deed in lieu of foreclosure of certain of the Company's loan receivables. REO is classified as held-and-used for the production of income or held-for-sale. When held-and-used for the production of income, REO is recorded at fair value upon acquisition, which establishes the property’s initial cost basis. Thereafter, it is carried at cost less accumulated depreciation and written down to fair value for impairment losses. When held-for-sale, REO is initially recorded at fair value less costs to sell and is subsequently carried at the lower of the initial carrying value or fair value less costs to sell and is not depreciated.

REO depreciation is recorded on a straight-line basis over the estimated useful life of the asset and is included in net investment income. A review for impairment is performed whenever events or circumstances indicate that the carrying value may not be recoverable. An impairment loss is included in net investment gains (losses) when the carrying value of the property exceeds the expected undiscounted cash flows generated from the property. Net operating income earned on REO is included in net investment income in the consolidated statements of earnings.

Short-term investments are reported at amortized cost, which approximates fair value.

Variable Interest Entities (VIEs)

The Company has investments in VIEs, which consist of fixed maturity securities, loan receivables, limited partnerships and derivative instruments. The Company is the primary beneficiary of the VIE if the Company has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. If the Company determines that it is the primary beneficiary of the VIE, it consolidates these entities in its consolidated financial statements. Consolidated VIEs are segregated by the caption "consolidated variable interest entities" in the consolidated balance sheets.

While the consolidated VIEs generally operate within a defined set of contractual terms, there are certain powers that are retained by the Company that are considered significant in the conclusion that the Company is the primary beneficiary. These powers vary by structure but generally include:

•the initial selection of the underlying collateral;

•the ability to obtain the underlying collateral in the event of default; and

•the ability to appoint or dismiss key parties in the structure.

The Company's powers surrounding the underlying collateral were the most significant powers considered due to the impact these powers have on the economics of the VIE. The Company has no obligation to provide any continuing financial support to any of the entities in which it is the primary beneficiary. The Company's maximum loss is limited to its original investment and, in certain cases, to any unfunded commitment held in the VIE. Neither the Company nor any of its creditors have the ability to obtain the underlying collateral, nor does the Company have control over the instruments held in VIEs, unless there is an event of default.

Securities Lending and Pledged Assets

The Company lends fixed maturity securities and, from time to time, public equity securities to financial institutions in short-term security-lending transactions. These short-term securities lending arrangements are primarily used to earn investment income. These securities continue to be reported as investment assets in the consolidated balance sheets during the terms of the loans and are not reported as sales. The Company receives cash or other securities as collateral for such loans. When the Company obtains non-cash collateral it amounts to 102% or more of the fair value of the loaned securities. When unrestricted cash is received as collateral it is equivalent to 100% or more of the fair value of the loaned securities. For loans involving unrestricted cash or securities as collateral, the collateral is reported as an asset with a corresponding liability for the return of the collateral. For loans where the Company receives as collateral securities that the Company is not permitted to sell or repledge, the collateral is not reflected in the consolidated financial statements.

Allowance for Credit Losses: The Company estimates an allowance for credit losses on the following financial assets:

•Fixed maturity securities

◦Available-for-sale securities

◦Held-to-maturity securities

•Loan receivables and loan commitments

•Short-term receivables

•Premiums receivable

•Reinsurance recoverables

For available-for-sale and held-to-maturity securities, loan receivables, including collateral dependent assets and certain loan commitments, changes in the allowance for credit losses are included in net investment gains (losses) in the consolidated statements of earnings. Write-offs and partial write-offs are reported as a reduction to the amortized cost of the fixed maturity security or loan receivable with a corresponding reduction to the allowance for credit losses.

For available-for-sale securities, the Company evaluates estimated credit losses only when the fair value of the available-for-sale security is below its amortized cost basis.

The Company’s off-balance sheet credit exposure is primarily attributable to loan commitments that are not unconditionally cancellable. The allowance for credit losses for these loan commitments is included in other liabilities in the consolidated balance sheets.

For premiums receivable, changes in the allowance for credit losses are included in net earned premiums in the consolidated statements of earnings. The Company estimates an allowance for credit losses for premiums receivable utilizing an aging methodology based on historical loss information, adjusted for current conditions and reasonable and supportable forecasts. Premiums receivable are reported net of the allowance for credit losses and included in receivables in the consolidated balance sheets.

For reinsurance recoverables, changes in the allowance for credit losses are included in net investment gains (losses) in the consolidated statements of earnings. Reinsurance recoverables are reported net of the allowance for credit losses and included in other assets in the consolidated balance sheets.

The Company has elected not to estimate an allowance for credit losses on accrued interest income for all asset types. The Company writes off accrued interest when it is more than ninety days past due by reducing interest income, which is included in net investment income in the consolidated statements of earnings.

For additional information on the Company's methodology for calculating allowance for credit losses, see Notes 3 and 8.

Derivatives and Hedging:

Freestanding Derivative Instruments

Freestanding derivative instruments are reported at fair value and included in other assets and other liabilities in the consolidated balance sheets. These instruments may include foreign currency forwards, foreign currency options, foreign currency swaps, interest rate swaps and interest rate swaptions. These derivative instruments are typically used to reduce exposure to risks such as foreign currency exchange or interest rate. The Company does not use derivatives for trading purposes.

Changes in the fair value of derivative instruments not designated as an accounting hedge or that do not qualify for hedge accounting are included in net investment gains (losses) in the consolidated statements of earnings.

Accruals on derivatives are included in other assets or other liabilities in the consolidated balance sheets.

Hedge Accounting

From time to time, the Company designates as hedging instruments derivative and non-derivative instruments that meet the requirements for hedge accounting. To qualify for hedge accounting, the instrument must be highly effective in mitigating the designated risk attributable to the hedged item.

At the inception of hedging relationships, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking the respective hedging relationship. The Company also documents its hedge accounting designation and the methodology that will be used to assess the effectiveness of the hedging relationship at and after hedge inception. The documentation process includes linking derivatives and non-derivative financial instruments that are designated in hedging relationships with specific assets or groups of assets or liabilities in the consolidated balance sheets or to specific forecasted transactions, as well as defining the effectiveness testing methods to be used.

The Company formally assesses whether the derivatives and non-derivative financial instruments used in hedging activities have been, and are expected to continue to be, highly effective in offsetting their designated risk. Hedge effectiveness is formally assessed at inception and on a quarterly basis throughout the life of the hedging relationship using qualitative and quantitative methods. Qualitative methods may include the comparison of critical terms of the derivative to the hedged item. Quantitative methods may include regression, dollar offset, or other statistical analysis of changes in fair value or cash flows associated with the hedging relationship.

The assessment of hedge effectiveness determines the accounting treatment of changes in fair value.

Hedge accounting designations are cash flow hedge, fair value hedge, or net investment hedge.

Cash Flow Hedge

A cash flow hedge is a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability or the hedge of a forecasted transaction.

For derivative instruments that are designated in cash flow hedging relationships, the gain or loss on the portion of the hedging instrument included in the assessment of effectiveness is included in unrealized gains (losses) on derivatives in the consolidated statements of comprehensive income (loss). Amounts included in accumulated other comprehensive income are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and are included in the same line item in the consolidated statements of earnings as the hedged item.

Fair Value Hedge

A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability, attributable to a particular risk.

For derivative instruments that are designated in highly effective fair value hedge relationships, the effective portion of the gain or loss of the hedging instrument included in the assessment of effectiveness is included in the line item of the consolidated statements of earnings in which gain or loss on the hedged item is included.

Net Investment Hedge

A net investment hedge is a hedge of foreign currency exposure of a net investment in a foreign operation. The Company designates and accounts for certain foreign currency forwards and options as net investment hedges of the Company's net investment in Aflac Japan when they meet the requirements for hedge accounting. The Company also designates the Parent Company’s Japanese yen-denominated liabilities as a non-derivative net investment hedge of the Company's net investment in Aflac Japan. For additional information on the Parent Company’s Japanese yen-denominated liabilities, see Note 9.

At the beginning of each quarter, the Company makes its net investment hedge designation for foreign currency derivatives and Japanese yen-denominated liabilities. For foreign currency derivatives designated as net investment hedges, the Company assesses hedge effectiveness using the spot-rate method. According to this method, the change in fair value of the hedging instrument due to fluctuations in the spot exchange rate is included in unrealized foreign currency translation gains (losses) in the statements of comprehensive income (loss). For Japanese-yen denominated liabilities designated as net investment hedges, the foreign currency translation gain or loss determined by references to the spot foreign exchange rate is also included in unrealized foreign currency translation gains (losses) in the statements of comprehensive income (loss).

Amounts included in accumulated other comprehensive income are reclassified to earnings only when the hedged net investment is sold or when a liquidation of the respective net investment in the foreign entity is substantially completed. When a sale or liquidation occurs, the deferred gain or loss is reclassified to earnings and included in the same line item in the consolidated statements of earnings as the gain or loss on the sale of the hedged net investment.

All other changes in fair value of the foreign currency derivatives designated as net investment hedges are excluded from the assessment of hedge effectiveness and are included in net investment gains (losses) in the consolidated statements of earnings.

Should these designated net investment hedge positions exceed the Company's net investment in Aflac Japan, the foreign currency exchange effect on the excess portion is included in net investment gains (losses) in the consolidated statements of earnings.

Hedge Accounting Termination

The Company discontinues hedge accounting prospectively when (1) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated cash flows or fair value of a hedged item; (2) the derivative is de-designated as a hedging instrument; or (3) the derivative expires or is sold, terminated or exercised.

When hedge accounting is discontinued on a cash flow or fair value hedge, the derivative is reported at fair value in the consolidated balance sheets, with changes in the fair value included in net investment gains (losses) in the consolidated statements of earnings. For discontinued cash flow hedges, including those where the derivative is sold, terminated or exercised, changes in the fair value included in accumulated other comprehensive income are reclassified to earnings when earnings are impacted by the cash flow of the hedged item.

Embedded Derivatives

The Company may purchase certain investments or enter into contracts that contain embedded derivatives. The Company assesses whether an embedded derivative is clearly and closely related to its host contract. If the Company determines that the embedded derivative is not clearly and closely related to the host contract, and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from that contract and reported at fair value with the host instrument in the consolidated balance sheets. Changes in the fair value are included in current period earnings. If the Company has elected the fair value option, the embedded derivative is not bifurcated, and the entire investment is held at fair value with changes in fair value included in current period earnings.

Pledged Collateral

The Company receives and pledges cash or other securities as collateral on open derivative positions.

Cash received as collateral is reported as an asset with a corresponding liability for the return of the collateral. Cash pledged as collateral is recorded as a reduction to cash, and a corresponding receivable is recognized for the return of the cash collateral.

The Company generally can repledge or resell collateral obtained from counterparties, although the Company does not typically exercise such rights. Securities received as collateral are not recognized unless the Company were to exercise its right to sell that collateral or exercise remedies on that collateral upon a counterparty default. Securities that the Company has pledged as collateral continue to be carried as investment assets in the consolidated balance sheets.

The Company does not offset amounts recognized for derivative instruments and amounts recognized for the right to reclaim or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement.

For additional information on the Company's derivative instruments, see Note 4. For additional information on the Company's valuation methodology for derivatives, see Note 5.

Deferred Policy Acquisition Costs: The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that are related directly to the successful acquisition of new or the renewal of existing insurance contracts are capitalized as DAC. DAC primarily includes the excess of current-year commissions over ultimate renewal-year commissions and certain direct and incremental policy issue, underwriting and sales expenses directly related to successful policy acquisition.

DAC is amortized on a grouped-contract basis over the expected term of the related contracts, using a constant-level basis, as follows:

Face amount is the stated dollar amount that the policy’s beneficiaries receive upon the death of the insured. For life and health products issued in Japan, the constant-level basis used is units in force, which is a proxy for the face amount and insurance in force, respectively.

Amortization is computed using the same contract groupings (also referred to as cohorts) and mortality and termination assumptions that are used in computing the LFPB. These assumptions are reviewed and updated at least annually. The effects of changes in assumptions are recognized prospectively over the remaining contract term as a revision of the future amortization pattern, while current period amortization is calculated based on the actual experience during the quarter.

Internal Replacements

For some products, policyholders can elect to modify product benefits, features, rights or coverages. These transactions are known as internal replacements and can occur by:

•exchanging a contract for a new contract, or

•amendment, endorsement, or rider to a contract, or

•the election of a feature or coverage within a contract.

The Company performs the following two-step analysis of the internal replacements to determine if the modification is substantive to the base policy: (1) determine if the modification is integrated with the base policy, and (2) if it is integrated, determine if the resulting contract is substantially changed. Contract modifications resulting in integrated contract features can be determined only in conjunction with the value of the base policy. Non-integrated features are not related to or dependent on the value of the base policy.

For an internal replacement transaction that results in a policy that is integrated and substantially changed, the policy is treated as lapsed for amortization purposes, and the costs of acquiring the new policy are capitalized and amortized in accordance with the Company's accounting policies for DAC.

For internal replacement transactions where the resulting contract is integrated and substantially unchanged, unamortized DAC from the original policy continue to be amortized over the expected life of the cohort, and the costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred.

Non-integrated internal replacement transactions are accounted for as separately issued contracts within the cohort open at the effective date of the non-integrated feature. Any DAC related to the non-integrated contract feature or coverage are accounted for in accordance with the Company's accounting policies for DAC.

Property and Equipment: The costs of buildings, furniture and equipment are depreciated principally on a straight-line basis over their estimated useful lives (maximum of 50 years for buildings and 20 years for furniture and equipment). Expenditures for maintenance and repairs are expensed as incurred; expenditures for betterments are capitalized and depreciated. Classes of property and equipment as of December 31 were as follows:

Depreciation and other amortization expenses, which are included in insurance and other expenses in the consolidated statements of earnings, were $36 million in 2025, compared with $40 million in 2024 and $39 million in 2023.

Goodwill: Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The amount of goodwill recognized is also impacted by measurement differences resulting from certain assets and liabilities not recorded at fair value (e.g. income taxes, employee benefits). Goodwill is not amortized, but is tested for impairment at a level of a reporting unit at least annually, in the same reporting period each year. Goodwill is included in the other assets line item in the consolidated balance sheets and was $260 million at December 31, 2025, compared with $263 million at December 31, 2024. A significant majority of the goodwill balance is attributable to business combinations within the Aflac U.S. segment, which represents the reporting unit for goodwill impairment testing.

Policy Liabilities: The Company's total policy liabilities consist of:

•Future policy benefits

•Unpaid policy claims

•Unearned premiums

•Other policyholders' funds

Long-duration insurance contracts issued by the Company are grouped into annual calendar-year cohorts based on the contract issue date, reportable segment, legal entity and product type. Limited-pay contracts are grouped into separate cohorts from other traditional products in the same manner and are further separated based on their premium payment structures. For long-duration insurance contracts, the Company calculates an integrated LFPB reserve that represents all payments under the contract including future expected claims, unpaid policy claims and related expenses.

The LFPB is determined using the net level premium method as the present value of expected future policy benefits to be paid to or on the behalf of policyholders and certain related expenses less the present value of expected future net premiums receivable under the Company’s insurance contracts, where expected future net premiums receivable are future gross premiums receivable under the contract multiplied by the NPR.

The LFPB is calculated using assumptions and estimates including, (1) cash flow assumptions (mortality, morbidity, and terminations, also referred to as lapses), (2) expense assumptions and (3) discount rates. The assumptions and estimates that the Company uses depend on its judgment regarding the likelihood of future events and are inherently uncertain.

Cash flow assumptions are established at policy inception and are evaluated each quarter to determine if an update is needed.

Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are included in reserve remeasurement (gains) losses in the consolidated statements of earnings.

To facilitate a more detailed review of cash flow assumptions, experience studies are performed annually during the third quarter. Changes in cash flow assumptions are the result of applying the updated best estimate assumptions as of the beginning of the reporting period and are included as a cumulative catch-up adjustment in reserve remeasurement (gains) losses in the consolidated statements of earnings.

Expense assumptions are established at policy inception and determined for each issue-year cohort as a percentage of paid claims. These expense assumptions are locked in and remain unchanged over the term of the insurance policy.

Discount rates used to calculate net premiums are locked in at policy inception and represent the basis to recognize interest expense accreted on insurance reserves included in benefits and claims, excluding reserve remeasurement in the consolidated statements of earnings. These locked-in discount rates are determined separately for each issue-year cohort as a single discount rate that reflects the duration characteristics of the corresponding insurance contracts and will remain unchanged after the calendar year of issue.

Discount rates used to measure the carrying value of the LFPB in the consolidated balance sheets are updated each reporting period, and the difference between the liability balances calculated using the locked-in discount rates and the updated discount rates is included in the effect of changes in discount rate assumptions in accumulated other comprehensive income (loss).

The Company's discount rate methodology involves constructing a current discount rate curve separately for discounting cash flows used to calculate the Japan and U.S. LFPB, reflective of the characteristics of the insurance liabilities, such as currency and tenor. For additional information on the Company's discount rate methodology, see Note 7.

The difference in the liability balance calculated as of the beginning of the current reporting period and the end of the current reporting period both using the revised NPR and the locked-in discount rates is included in benefits and claims in the consolidated statements of earnings.

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

Unpaid Policy Claims

Unpaid policy claims primarily represent unpaid policy claims on the Company’s short-duration insurance contracts.

Unearned Premiums

Unearned premiums consist of unearned premiums and advance premiums.

Unearned premiums represent the portion of premium related to the unexpired coverage as of a balance sheet date and are deferred and recognized in net earned premiums when earned.

Advance premiums consist primarily of discounted advance premiums on deposit from policyholders in conjunction with their purchase of certain Aflac Japan limited-payment insurance products. Advanced premiums are deferred upon collection and recognized as earned premiums over the contractual premium payment period.

Other Policyholders' Funds

The other policyholders’ funds liability consists primarily of the fixed annuity line of business in Aflac Japan which has fixed benefits and premiums.

Reinsurance: The Company enters into reinsurance agreements in the normal course of business. For each reinsurance agreement, the Company determines if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, benefits and acquisition costs are reported net of insurance ceded.

Income Taxes: Income tax provisions are generally based on pretax earnings reported for financial statement purposes, which differ from those amounts used in preparing the Company's 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 the Company expects the temporary differences to reverse. The Company records deferred tax assets for tax positions taken based on its 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.

Policyholder Protection Corporation and State Guaranty Association Assessments: In Japan, the government has required the insurance industry to contribute to a policyholder protection corporation. The Company recognizes a charge for its estimated share of the industry's obligation once it is determinable. The Company reviews the estimated liability for policyholder protection corporation contributions on an annual basis and reports any adjustments in Aflac Japan's expenses.

In the U.S., each state has a guaranty association that supports insolvent insurers operating in those states. The Company's policy is to accrue assessments when the entity to which the insolvency relates has met its state of domicile's statutory definition of insolvency, the amount of the loss is reasonably estimable and the related premium upon which the assessment is based is written. See Note 15 for further discussion of the guaranty fund assessments charged to the Company.

Treasury Stock: Treasury stock is reflected as a reduction of shareholders' equity at cost. The Company uses the weighted-average purchase cost to determine the cost of treasury stock that is reissued. The Company includes any gains and losses in additional paid-in capital when treasury stock is reissued.

Share-Based Compensation: The Company measures compensation cost related to its share-based payment transactions at fair value on the grant date, and the Company recognizes those costs in the financial statements over the vesting period during which the employee provides service in exchange for the award. The Company has made an entity-wide accounting policy election to estimate the number of awards that are expected to vest and the corresponding forfeitures.

Earnings Per Share: The Company computes basic earnings per share (EPS) by dividing net earnings by the weighted-average number of unrestricted shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the weighted-average number of shares outstanding for the period plus the shares representing the dilutive effect of share-based awards.

Reclassifications: Certain reclassifications have been made to prior-year amounts to conform to current-year reporting classifications. These reclassifications had no impact on net earnings or total shareholders' equity.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Accounting Standards Update (ASU) 2023-09 Income Taxes (Topic 740) - Improvements to Income Tax Disclosures

In December 2023, the FASB issued amendments that require enhanced income tax disclosures including (1) disclosure of specific categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The Company adopted this guidance for the annual period beginning January 1, 2025 and elected a prospective implementation. The adoption of this guidance did not have an impact on the Company’s financial position or results of operations. See Note 10 for expanded disclosures required as a result of the amended guidance.

ASU 2023-07 Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued amendments that add certain segment disclosures related to significant segment expenses and require that a public entity disclose the title and position of the Chief Operating Decision Maker (CODM) and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The Company adopted this guidance for the annual period beginning January 1, 2024, and interim periods beginning January 1, 2025. The adoption of this guidance did not have an impact on the Company’s financial position or results of operations. See Note 2 for expanded disclosures required as a result of the amended guidance.

ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

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

The Company early adopted this guidance on July 1, 2023. The adoption of this guidance did not have a significant impact on the Company's financial position, results of operations or disclosures.

ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued amendments that eliminated the accounting guidance for troubled debt restructurings (TDRs) for creditors, required enhanced disclosures for creditors about loan modifications when a borrower is experiencing financial difficulty, and required public business entities to include current-period gross write-offs in the vintage disclosure tables. As a result of eliminating the TDR guidance for creditors, all loan modifications will follow the existing loan refinancing or restructuring guidance.

The Company adopted this guidance on January 1, 2023 on a prospective basis. The adoption did not have an impact on the Company’s financial position or results of operations.

ASU 2018-12 Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by:

ASU 2019-09 Financial Services - Insurance: Effective Date

ASU 2020-11 Financial Services - Insurance: Effective Date and Early Application

In August 2018, the FASB issued amendments that significantly changed how insurers account for long-duration contracts. The Company adopted the standard on January 1, 2023 using a modified retrospective transition method which resulted in applying the amended guidance as of the beginning of the earliest period presented on the January 1, 2021 transition date (Transition Date). The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date. On the Transition Date, the Company calculated the ratio of the present value of expected future policy benefits and expenses less existing carrying values to the present value of expected future gross premiums (Transition Date NPR) using updated assumptions and the discount rate immediately before the Transition Date. The Company capped the Transition Date NPR at 100% for any cohorts with a Transition Date NPR greater than 100%. The Company calculated the LFPB using the Transition Date NPR (capped at 100% if required) and two different discount rates: (i) the discount rate used immediately before the Transition Date, and (ii) the discount rate determined by reference to the Transition Date market level yields for upper-medium grade (low credit risk) fixed income instruments (as of December 31, 2020). For cohorts with their Transition Date NPR capped at 100%, the Company recorded as an adjustment (decrease) to opening retained earnings any difference between the LFPB calculated using the discount rate immediately before the Transition Date and the existing carrying value as of the Transition Date. For all cohorts on the Transition Date, the Company recorded in accumulated other comprehensive income net of tax, the difference in the LFPB calculated using the two different discount rates (i.e., the discount rate used immediately before the Transition Date and the updated discount rate as of the Transition Date).

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

The adoption of ASU 2018-12 did not have an impact on the Company's balance for deferred policy acquisition costs upon adoption.

In conjunction with the adoption of ASU 2018-12, the Company changed its practice of recording the change in the deferred profit liability on products with limited-payment features from the benefits and claims, net line item to the net earned premiums line item in the consolidated statements of earnings. This reclassification had no impact on net earnings. The change in presentation has been made for all comparative periods presented.

Accounting Pronouncements Pending Adoption

ASU 2024-03 Income Statement (Topic 220) - Disaggregation of Income Statement Expenses

In November 2024, the FASB issued amendments that require disaggregated disclosure, in the notes to the financial statements, of specified information about certain costs and expenses including (1) the amounts of employee compensation, depreciation, and intangible asset amortization; (2) certain expense, gain, or loss amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; (3) qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and (4) the total amount of selling expenses and, in annual reporting periods, the Company’s definition of selling expenses.

The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The adoption of this guidance has no impact on the Company’s financial position or results of operations. The Company is evaluating the impact of adoption on its disclosures.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company's business.

2. BUSINESS SEGMENT INFORMATION AND SELECTED FOREIGN CURRENCY TRANSLATION ITEMS

The Company consists oftwo reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. In addition, the Parent Company, other operating business units that are not individually reportable, reinsurance activities, including internal reinsurance activity with Aflac Re, and other business activities not included in Aflac Japan or Aflac U.S., as well as intercompany eliminations, are included in Corporate and other. The Company does not allocate corporate overhead expenses to business segments.

The Company’s reportable segments are regularly reviewed by the Company's CODM, Senior Executive Vice President and Chief Financial Officer, in deciding how to allocate resources and in assessing performance. The Company's CODM reviews and approves the annual budget and operating forecast, which allocates resources to segments and serves as a key benchmark for tracking performance and accountability of each segment's operating results. The Company’s CODM evaluates the performance of the segments using, in comparison to the annual budget, operating forecast and historical results, a financial performance measure called pretax adjusted earnings and believes this financial performance measure to be vitally important for understanding the underlying profitability drivers and trends of the Company’s insurance business.

•Pretax adjusted earnings are adjusted revenues less benefits and adjusted expenses. The adjustments to both revenues and expenses account for certain items that are outside management's control because they tend to be driven by general economic conditions and events or are related to infrequent activities not directly associated with insurance operations. The Company excludes income taxes related to operations to arrive at pretax adjusted earnings.

◦Adjusted revenues are U.S. GAAP total revenues excluding net investment gains and losses, except for amortized hedge costs/income related to foreign currency exposure management strategies and net interest income/expense from derivatives associated with certain investment strategies, which are reclassified from net investment gains (losses) and included in adjusted earnings as a component of adjusted net investment income when analyzing operations.

◦Adjusted expenses are U.S. GAAP total acquisition and operating expenses including the impact of interest from derivatives associated with notes payable but excluding any non-recurring or other items not associated with the normal course of the Company’s insurance operations and that do not reflect the Company’s underlying business performance.

Aflac Japan's adjusted revenues accounted for 53% of the Company's total adjusted revenues in 2025, compared with 55% in 2024 and 60% in 2023. The percentage of the Company's total assets attributable to Aflac Japan was 76% at December 31, 2025, compared with 77% at December 31, 2024.

Information regarding operations by reportable segment and Corporate and other for the years ended December 31 is presented in the following tables.

(1)Includes a gain (loss) of $(52), $(81) and $20 in 2025, 2024 and 2023, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

(2)The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024 and 2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164 and $334 in 2025, 2024 and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See Note 1 for additional information on these investments.

(1)Includes a gain (loss) of $(52), $(81) and $20 for 2025, 2024 and 2023, respectively, related to remeasurement of the deferred profit liability for limited-payment contracts.

(2)The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024 and 2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164 and $334 in 2025, 2024 and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See Note 1 for additional information on these investments.

Internal Reinsurance: Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by Aflac Japan and is reported as a part of Corporate and other. Under these internal reinsurance transactions, Aflac Japan's net earned premiums are reduced by the amount of premiums ceded to Aflac Re. Aflac Re recorded net earned premiums of $692 million in 2025, $568 million in 2024 and $258 million in 2023 related to these reinsurance transactions with Aflac Japan. These internal reinsurance transactions have no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting. For additional information on these internal reinsurance transactions, see Note 8.

Transfers of funds from Aflac Japan: Aflac Japan makes payments to the Parent Company for management fees and remittances of earnings. Information on transfers for each of the years ended December 31 is shown below. See Note 14 for information concerning restrictions on transfers from Aflac Japan.

Total Assets: The Company's total assets as of December 31 were as follows:

Receivables: Receivables consist primarily of monthly insurance premiums due from individual policyholders or their employers for payroll deduction of premiums, net of allowance for credit losses. Total receivables were $835 million and $779 million as of December 31, 2025 and 2024, respectively. The allowance for credit losses related to premiums receivable was $107 million and $108 million as of December 31, 2025 and 2024, respectively. At December 31, 2025, $167 million, or 20.0% of total receivables, were related to Aflac Japan's operations, compared with $197 million, or 25.3%, at December 31, 2024.

Selected Foreign Currency Translation Items

Japanese Yen-Translation Effects: The following table shows the Japanese yen/U.S. dollar (yen/dollar) exchange rates used for or during the periods ended December 31. For comparison, exchange effects for the current year were calculated using the yen/dollar exchange rate that was used in the prior year.

(1)Rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

3. INVESTMENTS

Net Investment Income

The components of net investment income for the years ended December 31 were as follows:

(1) The change in value of federal historic rehabilitation and solar investments in partnerships of $65, $165 and $343 in 2025, 2024, and 2023, respectively, is included as a reduction to net investment income. Tax credits on these investments of $69, $164, and $334 in 2025, 2024, and 2023, respectively, have been reported as an income tax benefit in the consolidated statements of earnings. See Note 1 for additional information on these investments.

Investment Holdings

The amortized cost and allowance for credit losses for the Company's investments in fixed maturity securities and the fair values of these investments as well as the fair value of the Company's investments in equity securities are presented in the following tables.

For additional information on the Company's valuation methodology for fixed maturity and equity securities, see Note 5.

During 2025 and 2024, the Company didnot reclassify any investments from the held-to-maturity category to the available-for-sale category.

Contractual and Economic Maturities

The contractual and economic maturities of the Company's investments in fixed maturity securities at December 31, 2025, were as follows:

Economic maturities are used for certain fixed maturity securities with no stated maturity where the expected maturity date is based on the combination of features in the financial instrument such as the right to call or prepay obligations or changes in coupon rates.

Investment Concentrations

The Company's process for investing in credit-related investments begins with an independent approach to underwriting each issuer's fundamental credit quality. The Company evaluates independently those factors that it believes could influence an issuer's ability to make payments under the contractual terms of the Company's instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). The Company further evaluates the investment considering broad business and portfolio management objectives, including asset/liability needs, portfolio diversification, and expected income.

Investment exposures that individually exceeded 10% of shareholders' equity as of December 31 were as follows:

(1)Japan Government Bonds (JGBs) or JGB-backed securities

Net Investment Gains and Losses

Information regarding pretax net investment gains and losses for the years ended December 31 follows:

For the year ended December 31, 2025, the Company recognized an impairment loss of $6 million on an office-type REO property classified as held-and-used for the production of income. The impairment was based on the Company's evaluation of a material adverse change in occupancy and resulted in an estimated fair value of the REO property of $12 million. The fair value was based on expected future cash flows utilizing inputs classified as Level 3 under the fair value guidance in ASC 820.

The unrealized holding gains, net of losses, included in net investment gains and losses for the year ended December 31, 2025 that relate to equity securities held at the December 31, 2025 reporting date were $46 million. The unrealized holding gains, net of losses, included in net investment gains and losses for the year ended December 31, 2024 that relate to equity securities held at the December 31, 2024 reporting date were $118 million. The unrealized holding gains, net of losses, included in net investment gains and losses for the year ended December 31, 2023 that relate to equity securities held at the December 31, 2023 reporting date were $63 million.

Unrealized Investment Gains and Losses

Information regarding changes in unrealized investment gains and losses included in other comprehensive income (loss) for the years ended December 31 follows:

Effect on Shareholders' Equity

The net effect on shareholders' equity of unrealized gains and losses from fixed maturity securities at December 31 follows:

Gross Unrealized Loss Aging

The following tables present the fair values and gross unrealized losses of the Company's available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31.

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on the Company's available-for-sale securities have been primarily related to general market factors such as changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal.

For available-for-sale securities in an unrealized loss position, the Company performs detailed analyses to identify whether the drivers of the decline in fair value are due to general market factors, such as the recent rise in interest rates, or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company's resources to the review and monitoring of securities with real credit-related concerns that could impact ultimate collection of principal and interest. For any significant declines in fair value determined to be non-interest rate or market-related, the Company performs a more focused review of the related issuers' specific credit profile.

For corporate issuers, the Company evaluates their assets and business profile, including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer's capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers' continued ability to service the Company's investment through payment of interest and principal.

Assuming no credit-related factors develop and excluding any impact resulting from fluctuations in the yen/dollar exchange rate, unrealized gains and losses on available-for-sale securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its available-for-sale securities in the sectors presented in the table above have the ability to service their obligations to the Company. Further, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, if the Company identifies certain available-for-sale securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit-related factors, an allowance for credit losses is recognized. Based on an evaluation of its securities currently in an unrealized loss position, the Company has determined that those securities should not have an allowance for credit losses as of December 31, 2025. Refer to the Allowance for Credit Losses Methodology section below for additional information.

As of December 31, 2025 and 2024, the Company had an immaterial amount of fixed maturity securities on nonaccrual status.

Commercial Mortgage and Other Loans

The following table presents the composition of the carrying value for commercial mortgage and other loans by property type as of December 31.

CMLs and TREs are secured by properties entirely within the U.S. (with the largest concentrations in California (22%), Texas (13%) and Florida (8%)). MMLs are issued only to companies domiciled within the U.S. and Canada.

Transitional Real Estate Loans

TREs are relatively short-term floating rate commercial mortgage loans that are secured by a first lien on the property. These loans provide funding for properties undergoing a change in their physical characteristics and/or economic profile and do not typically require any principal repayment prior to the maturity date.

As of December 31, 2025, the Company had $140 million in outstanding commitments to fund TREs. These commitments are contingent on the final underwriting and due diligence to be performed.

Commercial Mortgage Loans

CMLs are typically fixed rate loans on commercial real estate with partial repayment of principal over the life of the loan with the remaining outstanding principal being repaid upon maturity. This loan portfolio is generally considered higher quality investment grade loans.

Middle Market Loans

MMLs are typically first lien senior secured cash flow loans to small to mid-size companies for working capital, refinancing, acquisition, and recapitalization. These loans are generally considered to be below investment grade.

As of December 31, 2025, the Company had commitments of approximately $704 million to fund future MMLs. These commitments are contingent upon the availability of MMLs that meet the Company's underwriting criteria.

Other Loans

Other loans are primarily infrastructure loans. Infrastructure loans are typically senior secured, financing operating portfolios of renewable and conventional energy generation assets characterized by predictable, often contractual cash flows for loan repayment. The infrastructure loan portfolio weighted average rating is investment grade.

As of December 31, 2025, the Company had commitments of approximately $1 million to fund future other loans. These commitments are contingent upon the availability of other loans that meet the Company's underwriting criteria.

Past Due and Nonaccrual Loans

The following tables present an aging of past due and nonaccrual loans at amortized cost, before allowance for credit losses, as of December 31.

(1) As of December 31, 2025, there wereno loans that were 90 days or more past due that continued to accrue interest.

(1) As of December 31, 2024, there wereno loans that were 90 days or more past due that continued to accrue interest.

For each of the years ended December 31, 2025 and 2024, the Company recognized $2 million of interest income on loans that were on nonaccrual status. For the year ended December 31, 2023, the Company recognizedno interest income on loans that were on nonaccrual status. Of these loans, TREs with an amortized cost of $30 million and $140 million had no credit loss allowance as of December 31, 2025 and December 31, 2024, respectively, because these loans are collateral dependent assets for which the estimated fair values of the collateral were in excess of amortized cost. As of December 31, 2025 and 2024, MMLs with an amortized cost of $36 million and $5 million, respectively, were on nonaccrual status without an allowance for credit losses.

Loan Modifications to Borrowers Experiencing Financial Difficulties

The Company granted certain loan modifications to borrowers experiencing financial difficulty during 2025, 2024 and 2023. The types of modifications granted may include interest rate reductions, principal forgiveness, other-than-insignificant payment delays, term extensions or a combination of these types of modifications. The amount, timing, and extent of modifications granted are considered in determining any allowance for credit loss recorded.

Loans that have both been modified and are paid or written off during the period, resulting in an amortized cost balance of zero at the end of the period, are not included in the disclosures below.

The following tables present the amortized cost basis of modified loans to borrowers experiencing financial difficulty and the financial effect of the modifications, disaggregated by loan classification and type of modification, for the years ended December 31.

Additionally, an immaterial percentage of MMLs with an amortized cost of $15 million were modified in the form of interest rate reductions and maturity extensions during the year ended December 31, 2024.

For the year ended December 31, 2023, loan modifications to borrowers experiencing financial difficulty were immaterial.

The following tables present an aging of loans that received modifications in the 12 months preceding December 31, at amortized cost.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Loans that were granted a modification in the past 12 months, as of December 31, 2025 and 2024, and subsequently defaulted in the years ended December 31, 2025 and 2024, were immaterial. There were no modified loans to borrowers experiencing financial difficulties in the past 12 months, as of December 31, 2023, that subsequently defaulted in the year ended December 31, 2023.

As of December 31, 2025, the Company had $15 million of outstanding commitments to lend additional funds to borrowers experiencing financial difficulty that were granted a loan modification, compared with $14 million as of December 31, 2024.

Allowance for Credit Losses

The following table presents the roll forward of the allowance for credit losses by portfolio segment for loans and by accounting classification for securities.

(1)Includes an allowance for credit losses of $4 recognized on financial assets accounted for as purchased financial assets with credit deterioration that is not recorded in earnings upon recognition.

As of December 31, 2025, the Company identified TREs with an amortized cost of $137 million in anticipation of potential foreclosure or deed in lieu of foreclosure transactions. As of December 31, 2025, the Company established an allowance for credit losses of $45 million related to these loans.

As of December 31, 2025, the Company’s held-to-maturity portfolio includes Japan Government and Agency securities with an amortized cost of $15.3 billion that meet the requirements for zero-credit-loss expectation and therefore have been excluded from the measurement of the allowance for credit losses.

Allowance for Credit Losses Methodology

Available-for-sale Securities

For available-for-sale securities, the Company evaluates estimated credit losses only when the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit related factors. The Company’s methodology for estimating an allowance for credit losses for available-for-sale securities utilizes the discounted cash flow model, based on past events, current market conditions and future economic conditions, as well as industry analysis and credit ratings of the securities. In addition, the Company evaluates the specific issuer’s probability of default and expected recovery of its position in the event of default based on the underlying financial condition and assets of the borrower as well as seniority and/or security of other debt holders in the issuer when developing management’s best estimate of expected cash flows.

An investment in an available-for-sale security may be impaired if the fair value falls below amortized cost. The Company regularly reviews its available-for-sale portfolio for declines in fair value. The Company's available-for-sale impairment model focuses on the ultimate collection of the cash flows from its investments and whether the Company has the intent to sell or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost. The determination of the amount of impairments under this model is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective securities. Such evaluations and assessments are revised as conditions change and new information becomes available.

When determining the Company's intention to sell a security prior to recovery of its amortized cost basis, the Company evaluates facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition its security portfolio, and risk profile of individual investment holdings. The Company performs ongoing analyses of its liquidity needs, which includes cash flow testing of its policy liabilities, debt maturities, projected dividend payments, and other cash flow and liquidity needs.

Held-to-maturity Securities, Loan Receivables, and Loan Commitments

The Company calculates its allowance for credit losses for held-to-maturity securities, loan receivables and loan commitments by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual asset. For held-to-maturity securities, MMLs, and MML commitments, the Company groups assets by industry, country, and key credit quality indicators. The Company groups CMLs and TREs and respective loan commitments by property type, property location and key credit quality indicators. On a quarterly basis, CMLs and TREs within a portfolio segment that share similar risk characteristics are pooled for the allowance calculation. On an ongoing basis, TREs, CMLs and other loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is probable), are evaluated individually for credit loss.

The allowance for credit losses for held-to-maturity securities and loan receivables is estimated using a probability-of-default (PD) / loss-given-default (LGD) method, discounted for the time value of money. For held-to-maturity securities, available-for-sale securities, and loan receivables, the Company includes the change in present value due to the passage of time in the change in the allowance for credit losses. The Company’s methodology for estimating credit losses utilizes the contractual maturity date of the financial asset, adjusted when necessary to reflect the expected timing of repayment (such as prepayment options, renewal options, call options, or extension options). The Company applies reasonable and supportable forecasts of macroeconomic variables that impact the determination of PD / LGD over a two-year period for held-to-maturity securities and MMLs. The Company reverts to historical loss information over one year, following the two-year forecast period.

For the CML and TRE portfolio, the Company applies reasonable and supportable forecasts of macroeconomic variables as well as national and local real-estate market factors to estimate future credit losses where the market factors revert back to historical levels over time with the period being dependent on current market conditions, projected market conditions and difference in the current and historical market levels for each factor.

For off-balance sheet credit exposure primarily attributable to loan commitments that are not unconditionally cancellable, the Company considers the contractual period of exposure to credit risk, the likelihood that funding will occur, the risk of loss, and the current conditions and expectations of future economic conditions to estimate the allowance for credit losses.

The Company continuously monitors the estimation methodology, due to changes in portfolio composition, changes in underwriting practices and significant events or conditions and makes adjustments as necessary.

Key Credit Quality Indicators

The Company’s key credit quality indicators used in the grouping of assets are outlined by investment type below.

•For held-to-maturity securities and MMLs, the Company’s key credit quality indicator is credit ratings. The Company’s held-to-maturity portfolio is composed of investment grade securities that are senior unsecured instruments, while its MMLs generally have below-investment-grade ratings but are typically senior secured instruments. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

•For TREs, the Company’s key credit quality indicators include performance of the loan and loan-to-value (LTV), which is calculated by dividing the current outstanding loan balance by the estimated property value, primarily using values at origination. Given that TREs involve properties undergoing a repositioning of their commercial profile, LTV provides the most insight into the credit risk of the loan. The Company monitors the performance of the loans periodically, but not less frequently than quarterly. The monitoring process also focuses on higher risk loans, which include those that are delinquent or for which foreclosure or deed in lieu of foreclosure is anticipated.

•For CMLs, the Company’s key credit quality indicators include LTV and debt service coverage ratios (DSCR). DSCR is the most recently available net operating income of the underlying property compared to the required debt service of the loan.

•For other loans, the Company's key credit quality indicator is credit ratings. The Company monitors these credit ratings periodically, but not less frequently than quarterly.

The following tables present as of December 31, 2025 the amortized cost basis of TREs, CMLs, MMLs, and other loans by year of origination and key credit quality indicator.

Other Investments

The table below presents the composition of the carrying value for other investments as of December 31.

(1)Includes securities lending collateral

(2) Includes tax credit investments and asset classes such as private equity and real estate funds

As of December 31, 2025 and 2024, all REO was classified as held-and-used for the production of income. Depreciation expense on REO was $29 million, $13 million, and an immaterial amount for the years ended December 31, 2025, 2024, and 2023, respectively. Additionally, as of December 31, 2025 and 2024, accumulated depreciation on REO was $41 million and $14 million, respectively.

The Company had $3.0 billion and $2.8 billion in outstanding commitments to fund investments in limited partnerships, which included $2.1 billion and $2.1 billion of unfunded commitments related to VIEs that are non-consolidated as of December 31, 2025 and 2024, respectively.

Variable Interest Entities

In the normal course of its activities, the Company invests in legal entities that are VIEs. The Company's variable interests in VIEs are limited to the debt and equity instruments issued by them. With the exception of commitments to limited partnerships and to certain loan investments made in the normal course of business, the Company has not provided any direct or contingent obligations to fund the limited activities of these VIEs, or support related to the limited activities of these VIEs, and does not have any intention to do so in the future, nor has it provided any direct or indirect financial guarantees.

The Company's risk of loss related to its interests in any of its VIEs is limited to the carrying value of the related investments, and in certain cases, to any unfunded commitments held in the VIE.

For those VIEs other than certain unit trust structures, the Company's involvement is passive in nature.

VIEs - Consolidated

If the Company determines that it is the VIE’s primary beneficiary, it consolidates the VIE. Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company except to the extent of the unfunded commitments referenced above, as the Company’s obligation to each VIE is limited to the amount of its committed investment.

The following table presents the carrying value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported as of December 31.

Investments in Consolidated Variable Interest Entities

(1)Consists entirely of alternative investments in limited partnerships, which represent VIEs where the Company is not the primary beneficiary and therefore are not consolidated

(2)Consists entirely of derivatives

The Company is the sole investor in the consolidated VIEs listed in the table above. The Company invests in fixed maturity securities issued by VIEs that in turn hold U.S. dollar-denominated fixed maturity securities coupled with foreign currency swap agreements. The weighted-average lives of the Company's investments in these VIEs are very similar to the underlying collateral held by these VIEs. The activities of these VIEs are limited to holding invested assets and foreign currency swaps and utilizing the cash flows from these securities to service the VIEs' debt. Neither the Company nor any of its creditors are able to obtain the underlying collateral of these VIEs unless there is an event of default or other specified event. The Company is not a direct counterparty to the foreign currency swap contracts and has no control over them. The Company's loss exposure to these VIEs is limited to its original investment. These consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and foreign currency swap contracts, if applicable. The underlying collateral assets and funding of these consolidated VIEs are generally static in nature.

Investments in Unit Trust Structures

The Company also utilizes unit trust structures in Aflac Japan to invest in various asset classes, which include CMLs, MMLs, TREs, other loans and limited partnerships. As the sole investor of these VIEs, the Company is required to consolidate these trusts. The limited partnership investments are comprised of private equity and real estate. The Company's loss exposure to these VIEs is limited to its original investments, together with any unfunded portion of the Company's commitments made in the normal course of business to fund certain loan investments and limited partnership investments, as described in the Commercial Mortgage and Other Loans and Other Investments sections of this note. Excluding these commitments, the Company does not provide financial or other support to consolidated VIEs.

VIEs - Not Consolidated

The table below presents the carrying value and balance sheet caption in which the Company's investments in VIEs that are not consolidated are reported as of December 31.

Investments in Variable Interest Entities Not Consolidated

(1)Consists entirely of alternative investments in limited partnerships

Certain investments in VIEs that the Company is not required to consolidate are investments that are in the form of debt obligations issued by the VIEs. These fixed maturity securities include structured securities, primarily asset-backed securities. The Company's involvement in the related VIEs is limited to that of a passive investor in asset-backed securities issued by the VIEs. The Company also invests in fixed maturity securities issued by VIEs that are the primary financing vehicles used by their corporate sponsors to raise financing in the capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. The Company does not have the power to direct the activities that most significantly impact the entity's economic performance, nor does it have the obligation to absorb losses of the VIE entity or the right to receive benefits from the entity that could be significant to the entity. As such, the Company is not the primary beneficiary of these VIEs and therefore is not required to consolidate them.

The Company also holds equity investments in limited partnerships that have been determined to be VIEs. These partnerships primarily invest in private equity and real estate funds. The Company’s maximum exposure to loss on these investments is limited to the amount of its investment and any unfunded commitments. As described in the Other Investments section of this note, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to unconsolidated VIEs. The Company is not the primary beneficiary of these VIEs and is therefore not required to consolidate them. The Company classifies these investments as other investments in the consolidated balance sheets.

Securities Lending and Pledged Securities

In the normal course of business, the Company enters into securities lending transactions. Details of the collateral by loaned security type and remaining maturity of the agreements as of December 31 were as follows:

(1)The related loaned security, under the Company's U.S. securities lending program, can be returned to the Company at the transferee's discretion; therefore, they are classified as Overnight and Continuous.

In connection with securities lending, in addition to cash collateral received, the Company received from counterparties securities collateral of $2.2 billion and $3.0 billion at December 31, 2025, and 2024, respectively, which may not be sold or re-pledged, unless the counterparty is in default. Such securities collateral is not reflected in the consolidated balance sheets.

The Company didnot have any repurchase agreements or repurchase-to-maturity transactions outstanding as of December 31, 2025 and 2024, respectively.

Certain fixed maturity securities can be pledged as collateral as part of derivative transactions, or pledged to support state deposit requirements on certain investment programs. For additional information regarding pledged securities related to derivative transactions, see Note 4.

At December 31, 2025, fixed maturity securities with a fair value of $20 million were on deposit with regulatory authorities in the U.S. (including U.S. territories). The Company retains ownership of all securities on deposit and receives the related investment income.

For general information regarding the Company's investment accounting policies, see Note 1.

4. DERIVATIVE INSTRUMENTS

The Company's freestanding derivative instruments include:

•foreign currency forwards and options used in hedging foreign currency exchange risk on U.S. dollar-denominated investments held by Aflac Japan, with options used on a standalone basis and/or in a collar strategy;

•foreign currency forwards and options used to economically hedge certain portions of forecasted cash flows denominated in Japanese yen and hedge the Company's long-term exposure to a weakening Japanese yen;

•foreign currency swaps used to economically hedge the foreign currency exchange risk associated with certain investments denominated in other foreign currencies held by Aflac Japan;

•cross-currency swaps, also referred to as foreign currency swaps, associated with certain senior notes and subordinated debentures;

•foreign currency swaps that are associated with VIE bond purchase commitments, and investments in special-purpose entities, including VIEs where the Company is the primary beneficiary;

•foreign currency forwards used to economically hedge the foreign currency exchange risk associated with certain investments denominated in other foreign currencies held by Aflac Japan;

•interest rate swaps used to economically hedge interest rate fluctuations in certain variable-rate investments;

•interest rate swaptions (swaptions) used to hedge changes in the fair value associated with interest rate fluctuations for certain U.S. dollar-denominated available-for-sale securities; and

•bond purchase commitments at the inception of investments in consolidated VIEs.

Foreign currency forwards and options are executed for Aflac Japan in order to hedge the foreign currency exchange risk on the carrying value of certain U.S. dollar-denominated investments. The average maturity of these forwards and options can change depending on factors such as market conditions and types of investments being held. In situations where the maturity of the forwards and options is shorter than the underlying investment being hedged, the Company may enter into new forwards and options near maturity of the existing derivative in order to continue hedging the underlying investment. In forward transactions, Aflac Japan agrees with another party to buy a fixed amount of Japanese yen and sell a corresponding amount of U.S. dollars at a specified future date. The Company also uses one-sided foreign currency put options to mitigate the settlement risk on U.S. dollar-denominated assets related to extreme foreign exchange rate changes.

From time to time, Aflac Japan also executes foreign currency option transactions in a collar strategy, where Aflac Japan agrees with another party to simultaneously purchase put options and sell call options. In the purchased put transactions, Aflac Japan obtains the option to buy a fixed amount of Japanese yen and sell a corresponding amount of U.S. dollars at a specified future date. In the sold call transactions, Aflac Japan agrees to sell a fixed amount of Japanese yen and buy a corresponding amount of U.S. dollars at a specified future date. The combination of purchasing the put option and selling the call option results in no net premium being paid (i.e. a costless or zero-cost collar).

From time to time, the Company may also enter into foreign currency forwards and options to hedge the foreign currency exchange risk associated with the net investment in Aflac Japan. In these forward transactions, the Company agrees with another party to buy a fixed amount of U.S. dollars and sell a corresponding amount of Japanese yen at a specified price at a specified future date. In the option transactions, the Company may use a combination of foreign currency options to protect expected future cash flows by simultaneously purchasing Japanese yen put options (options that protect against a weakening Japanese yen) and selling Japanese yen call options (options that limit participation in a strengthening Japanese yen). The combination of these two actions create a zero-cost collar. Additionally, the Company enters into purchased options to hedge cash flows from the net investment in Aflac Japan.

The Company enters into foreign currency swaps pursuant to which it exchanges an initial principal amount in one currency for an initial principal amount of another currency, with an agreement to re-exchange the principal amounts at a future date. There may also be periodic exchanges of payments at specified intervals based on the agreed upon rates and notional amounts. Foreign currency swaps are used primarily in the consolidated VIEs held by Aflac Japan to convert foreign-denominated cash flows to Japanese yen in order to minimize cash flow fluctuations. The Company also uses foreign currency swaps to economically hedge the foreign currency exchange risk on certain fixed maturity securities denominated in other foreign currencies held by Aflac Japan, as well as to economically convert certain of its U.S. dollar-denominated senior note and subordinated debenture principal and interest obligations into Japanese yen-denominated obligations.

The Company also uses foreign currency forwards to economically hedge the foreign currency exchange risk on certain variable-rate investments denominated in other foreign currencies held by Aflac Japan.

In order to reduce investment income volatility from its variable-rate investments, the Company enters into receive–fixed, pay–floating interest rate swaps. These derivatives are cleared and settled through a central clearinghouse.

Swaptions are used to mitigate the adverse impact resulting from significant changes in the fair value of U.S. dollar-denominated available-for-sale securities due to fluctuation in interest rates. In a payer swaption, the Company pays a premium to obtain the right, but not the obligation, to enter into a swap contract where it will pay a fixed rate and receive a floating rate. Interest rate swaption collars are combinations of two swaption positions. In order to maximize the efficiency of the collars while minimizing cost, a collar strategy is used whereby the Company purchases a long payer swaption (the Company purchases an option that allows it to enter into a swap where the Company will pay the fixed rate and receive the floating rate of the swap) and sells a short receiver swaption (the Company sells an option that provides the counterparty with the right to enter into a swap where the Company will receive the fixed rate and pay the floating rate of the swap). The combination of purchasing the long payer swaption and selling the short receiver swaption results in no net premium being paid (i.e. a costless or zero-cost collar).

Bond purchase commitments result from repackaged bond structures that are consolidated VIEs whereby there is a delay in the trade date and settlement date of the bond within the structure to ensure completion of all necessary legal agreements to support the consolidated VIE that issues the repackaged bond. Since the Company has a commitment to purchase the underlying bond at a specified price, the agreement meets the definition of a derivative. The fair value of the derivative is derived based on the current market value of the bond compared to the fixed purchase price to be paid on the settlement date.

Derivative Balance Sheet Classification

The table below summarizes the balance sheet classification of the Company's derivative instruments at fair value, at December 31. The fair value amounts presented exclude income accruals. Derivative assets are included in other assets while derivative liabilities are included in other liabilities in the consolidated balance sheets. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of exposure or credit risk.

Cash Flow Hedge

The Company designates and accounts for certain foreign currency swaps as cash flow hedges when they meet the requirements for hedge accounting. For certain variable-rate U.S. dollar-denominated available-for-sale securities held by Aflac Japan via consolidated VIEs, foreign currency swaps are used to swap the U.S. dollar variable rate interest and principal payments to fixed rate Japanese yen interest and principal payments. The remaining maximum length of time over which these cash flows are hedged is approximatelyone year.

Fair Value Hedge

The Company designates and accounts for certain foreign currency forwards, options, and interest rate swaptions as fair value hedges when they meet the requirements for hedge accounting.

Foreign currency forwards and options hedge the foreign currency exchange risk associated with certain U.S. dollar-denominated available-for-sale securities held by Aflac Japan. For these derivatives and the related hedged items, gains and losses included in the assessment of hedge effectiveness are included in current earnings.

The change in the fair value of the foreign currency forwards related to changes in the difference between the spot rate and the forward price, and the change in fair value of the foreign currency option related to the time value of the option, are excluded from the assessment of hedge effectiveness and are included in current earnings.

Interest rate swaptions hedge the interest rate risk associated with certain U.S. dollar-denominated available-for-sale securities held by Aflac Japan. Gains and losses associated with these derivatives and included in the assessment of hedge effectiveness, premium amortization and time value amortization while the hedge items are still outstanding, are included in current earnings. If the interest rate swaption is terminated but the hedged item is still outstanding, the amortization of the disposal amount of the interest rate swaption is included in current earnings over the remaining life of the hedged items. When the related hedged items are redeemed, the time value gains and losses for the interest rate swaptions are included in current earnings, which is consistent with the accounting for the impact of the hedged item.

The change in the fair value of interest rate swaptions related to the time value of the swaption is excluded from the assessment of hedge effectiveness and is included in the consolidated statements of comprehensive income (loss) and amortized into earnings over its legal term.

Fair Value Hedging Relationships

The following table presents the gains and losses on derivatives and the related hedged items in fair value hedging relationships for the year ended December 31, 2023. The Company hadno fair value hedges during the years ended December 31, 2025 and 2024.

(1)For the year ended December 31, 2023, gains and losses included in the hedge assessment on interest rate swaptions and related hedged items were immaterial.

The following table presents the carrying amounts of (1) assets designated and qualified as hedged items in fair value hedges of interest rate risk and (2) the related cumulative hedge adjustment included in the carrying amount. The Company hadno fair value hedges of interest rate risk as of December 31, 2025 and 2024; therefore, the amounts presented in the table below are related to previous fair value hedges of interest rate risk that were discontinued.

(1)The balance includes hedging adjustment on discontinued hedging relationships of $121 in 2025 and $137 in 2024.

Net Investment Hedge

The Company's investment in Aflac Japan is affected by changes in the foreign exchange rate. To mitigate this exposure, the Parent Company designated some of its Japanese yen-denominated liabilities (see Note 9) as non-derivative net investment hedges and certain foreign currency forwards and options as derivative net investment hedges of the foreign currency exchange risk associated with the Company's net investment in Aflac Japan.

The Company's net investment hedge was effective during the years ended December 31, 2025, 2024 and 2023.

Non-qualifying Strategies

The Company uses foreign currency swaps to economically hedge the foreign currency exchange risk associated with certain investments denominated in other foreign currencies held by Aflac Japan.

For the Company's derivative instruments in consolidated VIEs that do not qualify for hedge accounting, changes in fair value are reported in current earnings. The gain or loss in earnings includes amounts attributable to the derivatives in those investment structures. While the change in fair value of the derivative instrument is reported in current earnings, the change in the fair value of the available-for-sale securities associated with these instruments is included in accumulated other comprehensive income.

The Company uses foreign currency forwards and options to economically hedge the foreign currency exchange risk associated with certain U.S. dollar-denominated loan receivables held by Aflac Japan. These arrangements are not designated as accounting hedges because the foreign currency remeasurement gains and losses associated with the loan receivables substantially offsets gains and losses from foreign currency forwards in current period earnings.

Additionally, the Company uses foreign currency forwards to economically hedge the foreign currency exchange risk associated with certain U.S. dollar-denominated available-for-sale securities and certain investments denominated in other foreign currencies held by Aflac Japan.

The Company uses interest rate swaps to economically convert the variable rate investment income to a fixed rate on certain variable-rate investments.

The Parent Company had cross-currency swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert interest and principal on the notes from U.S. dollar to Japanese yen. These swaps matured in 2025. Changes in the fair value of these swaps were reported in earnings in the period where they occurred.

Impact of Derivatives and Hedging Instruments

The following table summarizes the impact to earnings and other comprehensive income (loss) from all derivatives and hedging instruments for the years ended December 31.

(1) Impact of cash flow hedges reported as net investment gains (losses) includes $4 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended December 31, 2025, compared with $4 of losses during the years ended December 31, 2024 and 2023, respectively.

(2) Includes $1 of losses reclassified from accumulated other comprehensive income (loss) into earnings during the year ended December 31, 2025, compared with $1 of losses during the years ended December 31, 2024 and 2023, respectively, related to fair value hedges excluded component. Impact shown net of effect of hedged items.

As of December 31, 2025, $4 million of deferred gains on derivative instruments recorded in accumulated other comprehensive income are expected to be reclassified into earnings during the next 12 months.

Credit Risk Assumed through Derivatives

For the foreign currency swaps associated with the Company's VIE investments for which it is the primary beneficiary, the Company bears the risk of loss due to counterparty default even though it is not a direct counterparty to those contracts.

The Company is a direct counterparty to the foreign currency swaps that it has entered into in connection with certain of its senior notes and subordinated debentures; foreign currency forwards; and foreign currency options, and therefore the Company is exposed to credit risk in the event of nonperformance by the counterparties in those contracts. The risk of counterparty default for the Company's foreign currency swaps, certain foreign currency forwards, and foreign currency options is mitigated by collateral posting requirements that counterparties to those transactions must meet.

As of December 31, 2025, all of the Company's derivative agreement counterparties were investment grade.

The Company engages in over-the-counter (OTC) bilateral derivative transactions directly with unaffiliated third parties under International Swaps and Derivatives Association, Inc. (ISDA) agreements and other documentation. Most of the ISDA agreements also include Credit Support Annexes (CSAs) provisions, which generally provide for two-way collateral postings at the first dollar of exposure. The Company mitigates the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value while generally requiring that collateral be posted at the outset of the transaction. In addition, a significant portion of the derivative transactions have provisions that give the counterparty the right to terminate the transaction upon a downgrade of the Company's financial strength rating. The actual amount of payments that the Company could be required to make depends on market conditions, the fair value of outstanding affected transactions, and other factors prevailing at and after the time of the downgrade.

The Company also engages in OTC cleared derivative transactions through regulated central clearing counterparties. These positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to these derivatives.

Collateral posted by the Company to third parties for derivative transactions can generally be repledged or resold by the counterparties. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position by counterparty was approximately $861 million and $804 million as of December 31, 2025 and 2024, respectively. If the credit-risk-related contingent features underlying these agreements had been triggered on December 31, 2025, the Company estimates that it would be required to post a maximum of $669 million of additional collateral to these derivative counterparties. The Company is generally allowed to sell or repledge collateral obtained from its derivative counterparties, although it does not typically exercise such rights. See the Offsetting tables below for collateral posted or received as of the reported balance sheet dates.

Offsetting of Financial Instruments and Derivatives

Most of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Parent Company or its subsidiaries and the respective counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements with the master netting arrangements generally provide that the Company will receive or pledge financial collateral at the first dollar of exposure.

The Company has securities lending agreements with unaffiliated financial institutions that post collateral to the Company in return for the use of its fixed maturity and public equity securities (see Note 3). When the Company has entered into securities lending agreements with the same counterparty, the agreements generally provide for net settlement in the event of default by the counterparty. This right of set-off allows the Company to keep and apply collateral received if the counterparty failed to return the securities borrowed from the Company as contractually agreed.

The tables below summarize the Company's derivatives and securities lending transactions as of December 31, and as reflected in the tables, in accordance with U.S. GAAP, the Company's policy is to not offset these financial instruments in the consolidated balance sheets.

Offsetting of Financial Assets and Derivative Assets

Offsetting of Financial Liabilities and Derivative Liabilities

For additional information on the Company's derivative and other financial instruments, see Notes 1, 3 and 5.

5. FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels, as follows:

•Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets.

•Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets.

•Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active market.

The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and carried at fair value on a recurring basis as of December 31.

The following tables present the carrying amount and fair value categorized by fair value hierarchy level for the Company's financial instruments that are not carried at fair value as of December 31.

(1) Excludes policy loans of $210, equity method investments of $4,109, and REO of $902, at carrying value

(1) Excludes policy loans of $203, equity method investments of $3,435, and REO of $682, at carrying value

Fair Value of Financial Instruments

Fixed maturity and equity securities

The fair values of the Company's public fixed maturity securities are generally based on prices provided by third-party pricing vendors. The Company utilizes internally generated valuations or broker quotes for privately issued fixed maturity securities or fixed maturity securities where there is no price available from a third-party pricing vendor.

The fair values of the Company's public equity securities are generally based on price quotes, including quoted market prices readily available from independent public exchange markets or established security dealer associations. The Company determines the fair values of privately issued equity securities using the following approaches or techniques:

•price quotes and valuations from third-party pricing vendors,

•in-house valuations, and

•non-binding price quotes the Company obtains from outside brokers.

The pricing data and market quotes the Company obtains from outside sources, including third-party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the provider. Additionally, the Company may compare the inputs to relevant market indices and other performance measurements. Based on management's analysis, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data. The Company has performed verification of the inputs and calculations in any valuation models, including independent validations and back testing, to confirm that the valuations represent reasonable estimates of fair value. For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

For internally generated valuations, the Company utilizes valuation models developed by a third-party pricing vendor. The models and associated processes and controls are executed by Company personnel.

These models are discounted cash flow valuation models but also use information from related markets, specifically public bond markets and the credit default swap (CDS) market, to estimate expected cash flows. The models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve using the most appropriate comparable security(ies) of the issuer and issuer-specific CDS spreads. This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the security by discounting those loss adjusted cash flows. In cases where a credit curve cannot be developed from market information for the specific issuer, the valuation methodology takes into consideration other market observable inputs, including:

•the most appropriate comparable security(ies) of a guarantor and/or parent

•CDS spreads of a guarantor and/or parent

•bonds of comparable issuers with similar characteristics such as rating, geography, or sector

•CDS spreads of an appropriate index or of comparable issuers with similar characteristics such as rating, geography, or sector

•bond indices that are comparative in rating, industry, maturity, and region.

The following tables present the pricing sources for the fair values of the Company's fixed maturity and equity securities as of December 31.

The following is a discussion of the determination of fair value of the Company's remaining financial instruments.

Derivatives

The Company uses derivative instruments to manage the risk associated with certain assets. However, the derivative instrument may not be classified in the same fair value hierarchy level as the associated asset. The significant inputs to pricing derivatives are generally observable in the market or can be derived from observable market data. When these inputs are observable, the derivatives are classified as Level 2.

The Company uses present value techniques to value non-option based derivatives. It also uses option pricing models to value option based derivatives. Key inputs are as follows:

(1)Option-based only

The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are classified as Level 2.

The Parent Company had cross-currency swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S. dollar to Japanese yen. These swaps matured in March 2025. Their fair values were based on observable market inputs; therefore, they were classified as Level 2.

To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract, the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange since it maintains a daily margin to mitigate counterparties' credit risk. These derivatives are priced using observable inputs, accordingly, they are classified as Level 2.

For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct counterparty to the swap contracts. Nevertheless, the Company has full transparency into the contracts to properly value the swaps for reporting purposes. For these derivatives, the Company utilizes valuation models developed by independent valuation analytics providers. The models are market standard discounted cash flow models and all associated processes and controls are executed by Company personnel. These models take into consideration any unique characteristics of the derivatives in determining the appropriate valuation methodology to estimate expected cash flows. The fair values of these swaps are based on observable market inputs and are classified as Level 2 within the fair value hierarchy.

For forward bond purchase commitments with VIEs, the fair value of the derivative is based on the difference in the fixed purchase price and the current market value of the related bond prior to the settlement date. Since the bond is typically a public bond with readily available pricing, the derivatives associated with the forward purchase commitment are classified as Level 2 within the fair value hierarchy.

Commercial mortgage and other loans

Commercial mortgage and other loans include TREs, CMLs, MMLs and other loans. The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or floating-rate benchmark yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore, these investments are classified as Level 3 within the fair value hierarchy.

Other investments

Other investments includes short-term investments that are measured at fair value where amortized cost approximates fair value.

Other policyholders' funds

The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified this valuation as Level 3.

Notes payable

The fair values of the Company's publicly issued notes payable are determined by utilizing available sources of observable inputs from third-party pricing vendors and are classified as Level 2. The Company's private placement notes payable are valued using the same internal models that the Company uses for its Japanese yen-denominated and U.S. dollar-denominated private placement investment portfolio. The fair values for these private placements are deemed Level 2 valuations, as they are model-derived valuations that are generated internally with all significant valuation inputs being observed in active markets. The fair values of the Company's Japanese yen-denominated loans approximate their carrying values and are classified as Level 3.

Transfers between Hierarchy Levels and Level 3 Rollforward

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

The following tables present the changes in fair value of the Company's investments carried at fair value classified as Level 3 as of December 31.

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments carried at fair value as of December 31. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

(a)Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques

(b) Category represents a single security; range not applicable

(c)Actual or equivalent credit spreads in basis points

(d) Prices do not utilize credit spreads; therefore, range is not applicable

(a) Represents prices for securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques

(b) Category represents a single security; range not applicable

(c) Actual or equivalent credit spreads in basis points

(d) Prices do not utilize credit spreads; therefore, range is not applicable

The following is a discussion of the significant unobservable inputs or valuation techniques used in determining the fair value of securities classified as Level 3.

Credit Spreads

The Company holds certain assets that are of a unique, specialized, and/or securitized nature that do not trade on a regular basis in an active market, which makes their fair values difficult to estimate. Most of these assets are managed by external asset managers and the Company utilizes these managers for their expertise when evaluating various inputs used to determine the fair values for these assets, including identifying the appropriate credit or risk spread over risk-free interest rates that incorporates the unique nature or structure of the asset in the valuations. For those assets of a similar nature but not managed by external asset managers, the Company internally estimates the spreads and risk adjustments over risk-free interest rates that reflect the unique nature or structure of the asset as well as the current pricing environment and market conditions for comparable or related investments. Credit or risk spreads are an important input needed to complete the discounted cash flow analyses used to estimate an investment’s fair value. Credit or risk spreads underlying these fair values are a significant, unobservable input whose derivation is based on the Company’s evaluation of a combination of the external manager’s expertise and knowledge, the current pricing environment, and market conditions for the specific asset.

Offered Quotes

In circumstances where the Company's valuation model price is overridden because it implies a value that is not consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company also receives unadjusted prices from brokers for certain of its mortgage and asset-backed securities. These quotes are non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial institutions, certain other corporate, and equity securities investments.

Private Financials

The Company invests in the debt and equity securities of private companies operating in the cancer, healthtech, insurtech, finance, internet of things, big data and analytics sectors. Due to their private and often small, startup nature, these companies rely on capital provided by institutional and private equity investors for their ongoing operations. They do not have public securities that trade on a regular basis in an active market, which makes their fair values difficult to estimate. The Company values these investments on a cost basis with appropriate adjustments made based on monitoring private financial information provided by these companies. Adjustments to valuations are generally made as new funding tranches are executed or if the financial information provided significantly changes indicating the need for impairment. This private financial information is unobservable and is a significant determinant in the fair value of these corporate venture investments.

For additional information on the Company's investments and financial instruments, see Notes 1, 3 and 4.

6. DEFERRED POLICY ACQUISITION COSTS

The following tables present a rollforward of deferred policy acquisition costs by reporting segment and disaggregated by product type for the years ended December 31.

Commissions deferred as a percentage of total acquisition costs deferred were 67% in 2025, compared with 69% in 2024 and 67% in 2023.

There were no changes to the inputs, judgments or methods used to determine amortization amounts during 2025 and 2024. The Company updated the assumptions used to determine amortization using the same assumptions as those used for measuring the liability for future policy benefits during 2025 and 2024. The Company recognizes the effects of changes in assumptions prospectively over the remaining contract term as a revision of the future amortization pattern.

See Note 1 for additional information on deferred policy acquisition costs.

7. POLICY LIABILITIES

The following tables present the changes in the present value of expected future net premiums and the present value of expected future policy benefits by reporting segment and disaggregated by product type for the years ended December 31. The present value of expected future net premiums and the present value of expected future policy benefits are presented gross of internal and external ceded reinsurance.

(1)Net premiums collected represent the portion of gross premiums collected from policyholders that is used to fund expected future benefit payments.

(1)Net premiums collected represent the portion of gross premiums collected from policyholders that is used to fund expected future benefit payments.

The following tables present the weighted-average interest rates and weighted-average liability duration (calculated using the original discount rate) by reporting segment and disaggregated by product type as of December 31.

(1)The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.

(1)The weighted-average interest rates are calculated using the reserve balances as the weights. No adjustments were made to observable market information.

The following table presents a reconciliation of the disaggregated rollforwards above to the ending liability for future policy benefits presented in the consolidated balance sheets as of December 31. The deferred profit liability for limited-payment contracts and the deferred reinsurance gain liability are presented together with the liability for future policy benefits in the consolidated balance sheets and have been included as reconciling items in the table below.

(1) Elimination entry necessary due to the internal reinsurance transactions with Aflac Re and to recapture a portion of policy liabilities ceded externally as a result of the reinsurance retrocession transaction. See Note 8 for additional details.

There were no changes to the inputs, judgments or methods used in measuring the liability for future policy benefits in 2025 and 2024.

Discount Rate Methodology

The Company’s discount rate methodology involves constructing a current discount rate curve separately for discounting cash flows used to calculate the Japan and U.S. LFPB, reflective of the characteristics of the insurance liabilities, such as currency and tenor. Discount rates are updated each reporting period and require estimation techniques (e.g., interpolation, extrapolation) for determination of points on the curve for which there is limited or no observable market data.

Discount rates are determined using upper-medium grade (low credit risk) fixed-income instrument yields that reflect the duration characteristics of the liability. Locked-in discount rates are determined separately for each issue-year cohort as a single discount rate, calculated as the weighted-average of monthly upper-medium grade (low credit risk) fixed-income instrument forward curves in the calendar year, where the weights are the annualized premiums issued for each month of the cohort. The single discount rate for each issue-year cohort is determined by solving for a rate that produces an equivalent NPR to the forward curve and will remain unchanged after the calendar year of issue.

In the Aflac Japan segment, all long-duration insurance policies are denominated in Japanese yen. A significant portion of policies are characterized by tenors exceeding the availability of liquid market data in Japan for single-A rated (as a proxy for upper-medium grade) corporate Japanese yen-denominated debt. The discount rate curve is designed to prioritize the observable inputs where available, while past the last liquid point, the data is derived based on estimation techniques consistent with the fair value guidance in ASC 820. The Aflac Japan segment's curve utilizes liquid market indices tracking publicly traded Japanese yen-denominated single-A corporate debt for the initial 10-year tenor. For the bonds within these market indices where only local ratings are available, the Company prioritizes the bonds with local ratings that are equivalent to a single-A rating based on international rating standards.

For the discount rates applicable to tenors for which the Japan single-A debt market is not liquid but there is sufficient observable market data and/or the observable market data is available for similar instruments (between 10 and 30 years), the Company estimates tenor-specific single-A credit spreads and applies them to risk-free government rates. Lastly, for the tenors where there is limited or no observable single-A or similar market data or risk-free government rates (beyond 30 years), the discount curve is derived by extrapolation of risk-free rates beyond their last liquid point following the Smith-Wilson method and grading of the estimated forward credit spread anchored by the ultimate forward rate. The ultimate forward rate is based on the economic value-based solvency regime, which is consistent with the International Association of Insurance Supervisors (IAIS) Insurance Capital Standards (ICS) (effective for Aflac Japan's 2025 fiscal year-end, which is March 31, 2026), and is adjusted for credit and inflation components.

For the Aflac U.S. segment where all long-duration insurance policies are denominated in U.S. dollars and substantially all have cash flow duration within 30 years, for which the U.S. upper-medium grade fixed-income market is liquid and observable, the Company uses data from a liquid fixed-income market index tracking single-A U.S. corporate debt. For the insignificant portion of the policies with cash flow tenors exceeding 30 years, the discount curve beyond that tenor is extrapolated following the Smith-Wilson method from year 30 to the same ultimate forward rate calculated for the Japan discount curve at year 60 and held constant thereafter. The use of the same ultimate rate for U.S. and Japan segments is based on the assumption of long-term global economic convergence.

There were no changes to the methods used to determine the discount rates during the years ended December 31, 2025 and 2024.

Cash Flow Assumptions

Cash flow assumptions include (1) mortality, (2) morbidity and (3) termination or lapses.

Mortality rate assumptions are based on industry tables and adjusted for the Company's actual or expected experience. These assumptions typically vary by age, gender, and other demographic characteristics such as smoking status.

Morbidity assumptions are based on the Company's internal data and consider emerging experience. These assumptions are reflective of the coverage and benefits provided and generally vary by age, gender, duration, and any other material policyholder characteristics. In cases where a calendar-year trend is significant, future cash flow projections may include a trend adjustment.

In Japan, separate lapse assumptions are set based on actual or expected experience. These lapse and total termination rate assumptions vary by line of business and with policyholder characteristics such as duration. In the U.S., the majority of the future cash flows are modeled using total termination rates (which include both lapse and mortality) and are adjusted for actual experience. Policy provisions, such as reaching premium paid-up status, are taken into account when setting assumptions.

The Company evaluates actual experience compared with expected experience for cash flow assumptions each quarter.

•In 2025 and 2024, the variance of actual experience from expected experience was primarily due to favorable variances in morbidity assumptions as compared to actual experience.

The Company performs a more detailed review of its assumptions annually during the third quarter.

•In 2025, the Company's annual assumption review process resulted in favorable changes largely due to favorable morbidity assumptions in Japan and favorable morbidity and termination assumptions in the U.S.

•In 2024, the Company's annual assumption review process resulted in favorable changes largely due to recent favorable Japan morbidity experience.

Favorable morbidity experience has been reflected in the annual assumptions primarily due to lower utilization of certain cancer benefits, including reduced hospitalizations and fewer first-occurrence claims influenced by COVID-19-related behavioral changes. While recognizing ongoing uncertainty, management has reviewed these trends and incorporated elements of the observed experience into its assumptions where considered appropriate.

The following table summarizes the amount of net earned premiums recognized in the consolidated statements of earnings by reporting segment and disaggregated by product type for the years ended December 31.

The following table summarizes the amount of interest expense related to insurance contracts recognized in benefits and claims, excluding reserve remeasurement in the consolidated statements of earnings by reporting segment and disaggregated by product type for the years ended December 31.

The following tables present the amount of expected future gross premiums and expected future policy benefits and expenses (undiscounted and discounted at the current period discount rate) by reporting segment and disaggregated by product type as of December 31. These tables are presented gross of internal and external ceded reinsurance.

Future gross premiums represent the expected amount of future premiums to be received. For limited-payment policies, the premiums are collected over a shorter period than the policy term over which benefits are provided. As a result, once the policy reaches premium paid-up status, the future gross premiums can be significantly less than the future benefit payments. Further, benefits and expenses are generally greater in the later years of a policy. These are the primary factors that result in future gross premiums lower than future benefit and expense payments for certain lines of business of the Company.

Loss expense as a result of NPR capping for the years ended December 31, 2025, 2024 and 2023 was immaterial.

Other Policyholders' Funds

As of December 31, 2025 and 2024, the largest component of the other policyholders' funds liability was the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums.

The following table presents the changes in other policyholders’ funds for the years ended December 31.

(1)Aflac Japan fixed annuities

The following table presents other policyholders’ funds balances by range of guaranteed crediting rates as of December 31.

(1)Aflac Japan fixed annuities

(2)Weighted-average crediting rate of 1.5% at December 31, 2025 and 2024.

Aflac Japan’s fixed annuities have guaranteed fixed crediting rates which results in the policyholders' funds balances being sufficient to cover all guaranteed benefit amounts. The reserves are adequate to fully fund future benefits at any given time.

See Note 1 for additional information on policy liabilities.

8. REINSURANCE

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business, primarily to provide additional capacity for future growth, optimize capital, limit losses, and minimize exposure to significant risks. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. These reinsurance transactions are indemnity reinsurance agreements that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, the Company remains liable for the reinsured claims.

The following table reconciles direct earned premiums, direct benefits and claims, excluding reserve remeasurement gains and losses, and reserve remeasurement gains and losses to net amounts after the effect of reinsurance for the years ended December 31.

The Company reported a deferred reinsurance gain liability related to reinsurance transactions, which represents ceded reserves in excess of consideration paid or consideration received in excess of assumed reserves. The remaining consolidated deferred reinsurance gain liability of $125 million and $146 million as of December 31, 2025 and 2024, respectively, is included in future policy benefits in the consolidated balance sheets and is being amortized over the expected lives of the policies. The amortization is included in benefits and claims in the consolidated statements of earnings.

The Company also reported a reinsurance recoverable with a remaining balance, net of allowance for credit losses of $161 million and $163 million as of December 31, 2025 and 2024, respectively. As of both December 31, 2025 and 2024, the related allowance for credit losses was $4 million. The allowance for credit losses is estimated using a PD / LGD method and the key credit quality indicator is the credit rating of the Company’s significant reinsurance counterparties. The Company uses external credit ratings focused on these reinsurers' financial strength and credit worthiness. As of December 31, 2025, the Company's significant reinsurance counterparties were rated A+. The Company monitors these credit ratings periodically, but not less frequently than quarterly.

Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. The inter-segment amounts associated with these internal reinsurance transactions are eliminated in consolidation.

In October 2024, ALIJ entered into a coinsurance transaction whereby it ceded 30% of the liabilities associated with certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $1.8 billion of reserves associated with these policies. Approximately $1.7 billion of assets were transferred from ALIJ to Aflac Re as consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

In December 2023, the Company entered into a novation agreement under which Aflac Re assumed the duties, obligations and liabilities through reinsurance of business ALIJ previously ceded to an external reinsurer and recorded a pretax loss of $151 million in 2023.

In October 2023, ALIJ entered into a coinsurance transaction whereby it ceded 30% of the liabilities associated with certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $1.9 billion of reserves associated with these policies. Approximately $1.7 billion of assets were transferred from ALIJ to Aflac Re as consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

In January 2023, ALIJ entered into a coinsurance transaction whereby it ceded 28% of the liabilities associated with certain cancer insurance policies and riders to Aflac Re. This transaction transferred approximately $2.1 billion of reserves associated with these policies. Approximately $1.9 billion of assets were transferred from ALIJ to Aflac Re as consideration for assuming the reinsurance risk. This internal reinsurance transaction with Aflac Re has no financial statement impact on a consolidated basis, except for the effect of foreign currency accounting.

In January 2023, ALIJ also entered into an external coinsurance transaction to cede 1.5% of the liabilities associated with the same cancer insurance policies and riders, in connection with which ALIJ transferred cash consideration to the reinsurer.

9. NOTES PAYABLE AND LEASE OBLIGATIONS

A summary of notes payable and lease obligations as of December 31 follows:

Amounts in the table above are reported net of debt issuance costs and issuance premiums or discounts, if applicable, that are being amortized over the life of the notes.

In June 2025, the Parent Company issued four series of senior notes totaling ¥74.9 billion through a public debt offering under its U.S. shelf registration statement. The first series, which totaled ¥35.0 billion, bears interest at a fixed rate of 1.726% per annum, payable semiannually, and will mature in October 2030. The second series, which totaled ¥23.4 billion, bears interest at a fixed rate of 2.003% per annum, payable semiannually, and will mature in December 2032. The third series, which totaled ¥9.5 billion, bears interest at a fixed rate of 2.369% per annum, payable semiannually, and will mature in June 2035. The fourth series, which totaled ¥7.0 billion, bears interest at a fixed rate of 2.779% per annum, payable semiannually, and will mature in June 2040. These notes are redeemable at the Parent Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance. In addition, the notes maturing in October 2030, December 2032, June 2035 and June 2040 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after July 18, 2030, September 14, 2032, December 5, 2034, and December 5, 2039, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In May 2025, the Parent Company issued four series of senior notes totaling ¥75.1 billion through a private placement. The first series, which totaled ¥18.2 billion, bears interest at a fixed rate of 1.990% per annum, payable semiannually, and will mature in May 2032. The second series, which totaled ¥38.3 billion, bears interest at a fixed rate of 2.320% per annum, payable semiannually, and will mature in May 2035. The third series, which totaled ¥11.6 billion, bears interest at a fixed rate of 2.650% per annum, payable semiannually, and will mature in May 2040. The fourth series, which totaled ¥7.0 billion, bears interest at a fixed rate of 3.040% per annum, payable semiannually, and will mature in May 2045. These notes are redeemable at the Parent Company's option (i) in whole at any time or (ii) in part from time to time in an amount not less than 5% of the aggregate principal amount then outstanding of the notes to be redeemed.

In March 2024, the Parent Company issued five series of senior notes totaling ¥75.0 billion through a private placement. The first series, which totaled ¥18.3 billion, bears interest at a fixed rate of 1.600% per annum, payable semiannually, and will mature in March 2034. The second series, which totaled ¥15.0 billion, bears interest at a fixed rate of 1.740% per annum, payable semiannually, and will mature in March 2036. The third series, which totaled ¥16.5 billion, bears interest at a fixed rate of 1.920% per annum, payable semiannually, and will mature in March 2039. The fourth series, which totaled ¥5.7 billion, bears interest at a fixed rate of 2.160% per annum, payable semiannually, and will mature in March 2044. The fifth series, which totaled ¥19.5 billion, bears interest at a fixed rate of 2.400% per annum, payable semiannually, and will mature in March 2054. These notes are redeemable at the Parent Company's option (i) in whole at any time or (ii) in part from time to time in an amount not less than 5% of the aggregate principal amount then outstanding of the notes to be redeemed.

In March 2024, the Parent Company issued three series of senior notes totaling ¥48.6 billion through a public debt offering under its U.S. shelf registration statement. The first series, which totaled ¥13.0 billion, bears interest at a fixed rate of 1.048% per annum, payable semiannually, and will mature in March 2029. The second series, which totaled ¥27.9 billion, bears interest at a fixed rate of 1.412% per annum, payable semiannually, and will mature in March 2031. The third series, which totaled ¥7.7 billion, bears interest at a fixed rate of 1.682% per annum, payable semiannually, and will mature in March 2034. These notes are redeemable at the Parent Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance. In addition, the notes maturing in March 2029, March 2031 and March 2034 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after December 21, 2028, December 31, 2030 and September 21, 2033, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In December 2023, ALIJ issued ¥30.0 billion (par value) of subordinated bonds that will mature in December 2053. The bonds bear interest at an initial rate of 1.958% per annum until December 5, 2028. Thereafter, the rate of interest of the bonds will be reset every five years to a rate of interest equal to the then-current five-year JGB rate plus (i) 1.650% per annum on and after the day immediately following December 5, 2028 to December 5, 2033, and (ii) 2.650% per annum on and after the day immediately following December 5, 2033 to December 5, 2053. The bonds are redeemable, in whole but not in part, (i) at any time upon the occurrence of certain regulatory or tax events, as specified in the indenture governing the terms of the bonds or (ii) on each interest rate reset date on or after December 5, 2028.

In September 2022, the Parent Company issued four series of senior notes totaling ¥73.0 billion through a public debt offering under its U.S. shelf registration statement. The first series, which totaled ¥33.4 billion, bears interest at a fixed rate of 1.075% per annum, payable semiannually, and will mature in September 2029. The second series, which totaled ¥21.1 billion, bears interest at a fixed rate of 1.320% per annum, payable semiannually, and will mature in December 2032. The third series, which totaled ¥6.5 billion, bears interest at a fixed rate of 1.594% per annum, payable semiannually, and will mature in September 2037. The fourth series, which totaled ¥12.0 billion, bears interest at a fixed rate of 2.144% per annum, payable semiannually, and will mature in September 2052. These notes are redeemable at the Parent Company’s option at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance. In addition, the notes maturing in September 2029, December 2032 and September 2037 are redeemable at the Parent Company's option, in whole or in part from time to time, on or after June 14, 2029, June 14, 2032 and March 14, 2037, respectively, at a redemption price equal to the aggregate principal amount of the applicable series to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In August 2022, the Parent Company renewed a senior term loan facility with a commitment amount totaling ¥107.0 billion. The first tranche of the facility, which totaled ¥11.7 billion, bears interest at a rate per annum equal to the Tokyo interbank market rate (TIBOR), or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2027. The applicable margin ranges between.225% and.625%, depending on the Parent Company's debt ratings as of the date of determination. The second tranche, which totaled ¥25.3 billion, bears interest at a rate per annum equal to TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2029. The applicable margin ranges between.325% and.725%, depending on the Parent Company's debt ratings as of the date of determination. The third tranche, which totaled ¥70.0 billion, bears interest at a rate per annum equal to TIBOR, or alternate TIBOR, if applicable, plus the applicable TIBOR margin and will mature in August 2032. The applicable margin ranges between.475% and 1.025%, depending on the Parent Company's debt ratings as of the date of determination.

In April 2021, the Parent Company issued five series of senior notes totaling ¥82.0 billion through a public debt offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥30.0 billion, bears interest at a fixed rate of.633% per annum, payable semiannually, and will mature in April 2031. The second series, which totaled ¥12.0 billion, bears interest at a fixed rate of.844% per annum, payable semiannually, and will mature in April 2033. The third series, which totaled ¥10.0 billion, bears interest at a fixed rate of 1.039% per annum, payable semiannually, and will mature in April 2036. The fourth series, which totaled ¥10.0 billion, bears interest at a fixed rate of 1.264% per annum, payable semiannually, and will mature in April 2041. The fifth series, which totaled ¥20.0 billion, bears interest at a fixed rate of 1.560% per annum, payable semiannually, and will mature in April 2051. The notes are redeemable at the Parent Company’s option (i) at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance or (ii) on or after the date that is six months prior to the stated maturity date of the series, in whole or in part, at a redemption price equal to the aggregate principal amount to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In March 2021, the Parent Company issued $400 million of senior sustainability notes through a U.S. public debt offering. The notes bear interest at a fixed rate of 1.125% per annum, payable semiannually, and will mature in March 2026. The Company intends, but is not contractually committed, to allocate an amount at least equivalent to the net proceeds from this issuance exclusively to existing or future investments in, or financing of, assets, businesses or projects that meet the eligibility criteria of the Company's sustainability bond framework described in the offering documentation in connection with such notes. These notes are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining term of the notes, plus 10 basis points, plus in each case, accrued and unpaid interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.

In April 2020, the Parent Company issued $1.0 billion of senior notes through a U.S. public debt offering. The notes bear interest at a fixed rate of 3.60% per annum, payable semiannually, and will mature in April 2030. These notes are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining term of the notes, plus 45 basis points, plus in each case, accrued and unpaid interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.

In March 2020, the Parent Company issued four series of senior notes totaling ¥57.0 billion through a public debt offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥12.4 billion, bore interest at a fixed rate of.300% per annum, payable semiannually, and matured in September 2025. The second series, which totaled ¥13.3 billion, bears interest at a fixed rate of.550% per annum, payable semiannually, and will mature in March 2030. The third series, which totaled ¥20.7 billion, bears interest at a fixed rate of.750% per annum, payable semiannually and will mature in March 2032. The fourth series, which totaled ¥10.6 billion, bears interest at a fixed rate of.830% per annum, payable semiannually, and will mature in March 2035. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance. In September 2025, the Parent Company extinguished ¥12.4 billion of.300% senior notes upon their maturity.

In December 2019, the Parent Company issued four series of senior notes totaling ¥38.0 billion through a public debt offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥12.6 billion, bears interest at a fixed rate of.500% per annum, payable semiannually, and will mature in December 2029. The second series, which totaled ¥9.3 billion, bears interest at a fixed rate of.843% per annum, payable semiannually, and will mature in December 2031. The third series, which totaled ¥9.8 billion, bears interest at a fixed rate of.934% per annum, payable semiannually, and will mature in December 2034. The fourth series, which totaled ¥6.3 billion, bears interest at a fixed rate of 1.122% per annum, payable semiannually, and will mature in December 2039. The notes are redeemable at the Parent Company’s option (i) at any time, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance or (ii) on or after the date that is six months prior to the stated maturity date of the series, in whole or in part, at a redemption price equal to the aggregate principal amount to be redeemed plus accrued and unpaid interest on the principal amount to be redeemed to, but excluding, the date of redemption.

In October 2018, the Parent Company issued $550 million of senior notes through a U.S. public debt offering. The notes bear interest at a fixed rate of 4.750% per annum, payable semiannually, and will mature in January 2049. These notes are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of: (i) the aggregate principal amount of the notes to be redeemed or (ii) the amount equal to the sum of the present values of the remaining scheduled payments for principal of and interest on the notes to be redeemed, not including any portion of the payments of interest accrued as of such redemption date, discounted to such redemption date on a semiannual basis at the yield to maturity for a U.S. Treasury security with a maturity comparable to the remaining term of the notes, plus 25 basis points, plus in each case, accrued and unpaid interest on the principal amount of the notes to be redeemed to, but excluding, such redemption date.

In October 2018, the Parent Company issued three series of senior notes totaling ¥53.4 billion through a public debt offering under its then existing U.S. shelf registration statement. The first series, which totaled ¥29.3 billion, bears interest at a fixed rate of 1.159% per annum, payable semiannually, and will mature in October 2030. The second series, which totaled ¥15.2 billion, bears interest at a fixed rate of 1.488% per annum, payable semiannually, and will mature in October 2033. The third series, which totaled ¥8.9 billion, bears interest at a fixed rate of 1.750% per annum, payable semiannually, and will mature in October 2038. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance.

In October 2017, the Parent Company issued ¥60.0 billion of subordinated debentures through a U.S. public debt offering. The debentures bear interest at an initial rate of 2.108% per annum through October 22, 2027, or earlier redemption. Thereafter, the rate of interest of the debentures will be reset every five years to a rate of interest equal to the then-current Japanese yen 5-year Swap Offered Rate plus 205 basis points. The debentures are payable semiannually in arrears and will mature in October 2047. The debentures are redeemable (i) at any time, in whole but not in part, upon the occurrence of certain tax events or certain rating agency events, as specified in the indenture governing the terms of the debentures or (ii) on or after October 23, 2027, in whole or in part, at a redemption price equal to their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption.

In January 2017, the Parent Company issued ¥60.0 billion of senior notes through a U.S. public debt offering. The notes bear interest at a fixed rate of.932% per annum, payable semiannually, and will mature in January 2027. These notes may only be redeemed before maturity, in whole but not in part, upon the occurrence of certain changes affecting U.S. taxation, as specified in the indenture governing the terms of the issuance.

In September 2016, the Parent Company issuedtwo series of senior notes totaling $700 million through a U.S. public debt offering. The first series, which totaled $300 million, bears interest at a fixed rate of 2.875% per annum, payable semiannually and will mature in October 2026. The second series, which totaled $400 million, bears interest at a fixed rate of 4.00% per annum, payable semiannually, and will mature in October 2046.

In 2010 and 2009, the Parent Company issued senior notes through U.S. public debt offerings; the details of these notes are as follows. In August 2010, the Parent Company issued $450 million of senior notes that will mature in August 2040. In December 2009, the Parent Company issued $400 million of senior notes that will mature in December 2039. These senior notes pay interest semiannually and are redeemable at the Parent Company's option in whole at any time or in part from time to time at a redemption price equal to the greater of: (i) the principal amount of the notes or (ii) the present value of the remaining scheduled payments of principal and interest to be redeemed, discounted to the redemption date, plus accrued and unpaid interest. In December 2016, the Parent Company completed a tender offer in which it extinguished $176 million principal of its 6.90% senior notes due December 2039 and $193 million principal of its 6.45% senior notes due August 2040. The pretax loss due to the early redemption of these notes was $137 million.

For the Company's Japanese yen-denominated notes and loans, the principal amount as stated in dollar terms will fluctuate from period to period due to changes in the yen/dollar exchange rate. The Company has designated the majority of its Japanese yen-denominated notes payable as a non-derivative hedge of the foreign currency exposure of the Company's investment in Aflac Japan.

The aggregate contractual maturities of notes payable during each of the years after December 31, 2025, are as follows:

Interest expense related to the Company's notes payable, which is included in interest expense in the consolidated statements of earnings, was $217 million, $194 million and $190 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Operating lease costs, included in insurance and other expenses in the consolidated statements of earnings, were $42 million, $43 million and $49 million for the years ended December 31, 2025, 2024 and 2023, respectively. Operating cash outflows for operating leases were $42 million, $41 million and $48 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Senior Note Facility Agreements

In August 2025, the Parent Company entered intotwo separate facility agreements: a 10-year facility agreement (2035 Facility Agreement) with a Delaware trust (2035 Trust) and a 30-year facility agreement (2055 Facility Agreement) with a Delaware trust (2055 Trust). In connection with these transactions, the trusts issued and sold pre-capitalized trust securities in private placements and invested the proceeds in a portfolio of principal and/or interest strips of U.S. Treasury securities (the Strips). These trusts are an off-balance sheet funding arrangement.

The 2035 Facility Agreement provides the Parent Company the right to issue and sell to the 2035 Trust from time to time up to $1.0 billion of 5.251% senior notes due August 2035 in exchange for a corresponding amount of the Strips held by the 2035 Trust. In return, the Parent Company agreed to pay a semiannual facility fee to the 2035 Trust at a rate of 0.9875% per annum applied to the unexercised amount of senior notes that the Parent Company could issue and sell to the 2035 Trust.

The 2055 Facility Agreement provides the Parent Company the right to issue and sell to the 2055 Trust from time to time up to $1.0 billion of 5.991% senior notes due August 2055 in exchange for a corresponding amount of the Strips held by the 2055 Trust. In return, the Parent Company agreed to pay a semiannual facility fee to the 2055 Trust at a rate of 1.1218% per annum applied to the unexercised amount of senior notes that the Parent Company could issue and sell to the 2055 Trust.

The Parent Company can redeem the senior notes at any time, in whole or in part, by returning the Strips to the trusts or by delivering cash at a redemption price equal to the greater of the principal amount or a make-whole redemption price, in each case plus accrued and unpaid interest to, but excluding, the date of redemption. As of December 31, 2025, the Parent Company had no senior note issuances under these facility agreements.

A summary of the Company's lines of credit as of December 31, 2025 follows:

(1) Intercompany credit agreement

(continued)

(1) Intercompany credit agreement

The Company was in compliance with all of the covenants of its notes payable and lines of credit at December 31, 2025. No events of default or defaults occurred during 2025 and 2024.

10. INCOME TAXES

The components of pretax earnings for the year ended December 31, 2025 were as follows:

The Company elected a prospective implementation for the adoption of ASU 2023-09 Income Taxes (Topic 740). See Note 1 for additional information.

The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as follows:

The Japan income tax rate for the fiscal years 2025, 2024 and 2023 was 28.0%. The Japan income tax rate will increase to 28.9% beginning April 1, 2026. The Bermuda corporate income tax rate for the 2025 fiscal year was 15%.

Aflac Japan holds certain U.S. dollar-denominated assets in a Delaware Statutory Trust (DST). These assets are mostly comprised of various U.S. dollar-denominated commercial mortgage loans. The functional currency of the DST for U.S. tax purposes was historically the Japanese yen. In 2022, the Company requested a change in tax accounting method through the Internal Revenue Service's automatic consent procedures to change the functional currency of the DST for U.S. tax purposes to the U.S. dollar. As a result, foreign currency translation gains or losses on assets held in the DST are no longer recognized for U.S. tax purposes. The non-taxable foreign currency translation gain/loss resulting from the method change resulted in the Company recognizing an income tax expense of $23 million in 2025. The Company recognized an income tax benefit of $208 million in 2024 and $174 million in 2023.

Income tax expense in the accompanying consolidated statements of earnings varies from the amount computed by applying the expected U.S. tax rate of 21% to pretax earnings.

The principal reasons for the differences and the related tax effects for the year ended December 31, 2025 were as follows:

For the year ended December 31, 2025, applicable U.S. state income taxes were immaterial.

The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:

The components of income taxes paid, net of refunds received for the year ended December 31, 2025 were as follows:

The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of December 31 were as follows:

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. The Company has determined no valuation allowance against its anticipatory foreign tax credits is necessary. The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan deferred tax liabilities in the future. Deferred foreign tax credits are foreign tax credits generated in the current tax year by the Japanese life company, but are unable to be utilized until 2026 due to Japan's current tax year not closing until March 31, 2026. Based upon a review of the Company's anticipated future taxable income, and including all other available evidence, both positive and negative, the Company's management has concluded that it is more likely than not that all other deferred tax assets will be realized.

Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income each year. For current U.S. income tax purposes, as of December 31, 2025, there were non-life operating loss carryforwards of $26 million available to offset against future taxable income, which expire after December 31, 2040, and there were life operating loss carryforwards available to offset against future taxable income of $106 million, which do not expire. The Company hasno capital loss carryforwards available to offset capital gains. The Company has a foreign tax credit carryforward of $296 million as of December 31, 2025, which expires after December 31, 2034.

The Company files federal income tax returns in the U.S., Japan, and Bermuda as well as state or prefecture income tax returns in various jurisdictions in the two countries. The 2023 U.S. federal consolidated tax return is currently under examination. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax returns for years before 2022 are no longer subject to examination. Japan corporate income tax returns for years before the tax year ended March 2023 are no longer subject to examination. Management believes it has established adequate tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's consolidated financial statements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31:

Included in the balance of the liability for unrecognized tax benefits at December 31, 2025 and 2024, wereno tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. As of December 31, 2025, the Company did not have an accrual for permanent uncertainties and therefore did not have an effect on the annual effective rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognized no interest and penalties in 2025, and an immaterial amount of interest and penalties in 2024 and 2023.

11. SHAREHOLDERS' EQUITY

Share Data: The following table is a reconciliation of the number of shares of the Company's common stock for the years ended December 31.

Share Repurchase Program: In August 2025, the Company's board of directors authorized the purchase of an additional 100 million shares of its common stock. As of December 31, 2025, a remaining balance of 114.3 million shares of the Company's common stock was available for purchase under share repurchase authorizations by its board of directors.

During 2025, the Company repurchased 33.0 million shares of its common stock in the open market for $3.5 billion. The Company repurchased 30.4 million shares for $2.8 billion in 2024 and 38.9 million shares for $2.8 billion in 2023.

Voting Rights: In accordance with the Parent Company's articles of incorporation, shares of common stock are generally entitled toone vote per share until they have been held by the same beneficial owner for a continuous period of 48 months, at which time they become entitled to 10 votes per share.

EPS: A reconciliation of basic and diluted weighted-average shares outstanding used in the computation of basic and diluted EPS for the years ended December 31 is as follows:

Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic EPS, but are included in the calculation of weighted-average shares used in the computation of diluted EPS. Anti-dilutive share-based awards are excluded from the computation of diluted EPS.

The following table presents the approximate number of share-based awards to purchase shares, on a weighted-average basis, that were considered to be anti-dilutive and were excluded from the calculation of diluted EPS at December 31.