AFL

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How AFL rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

32%

of sentences unchanged

Added

794

new sentences

Dropped

806

sentences removed

Length

−157

words, now 62,274

New in FY2025

Risk Factors for the risk factor entitled, "Difficult conditions in global capital markets and the economy could have a material adverse effect on the Company's investments, capital position, revenue, profitability, and liquidity and harm the Company's business." Demographics Aflac Japan Segment With Japan’s aging population and the rise in healthcare costs, supplemental health care insurance products remain attractive.
Japan’s existing customers and potential customers seek products that are easily understood, affordable and accessible via digital platforms.
Segment Customer demographics continue to shift, generating new opportunities across various consumer groups, including millennials and diverse cultural communities.
As customer expectations and preferences change, trends indicate that both existing and potential customers seek affordable options that are easily understood and accessible via digital platforms.
Furthermore, the insurance industry continues to be impacted by the financial security requirements and healthcare demands of the aging baby boomer generation.
Competitive Markets for a discussion of the competitive environment and the basis on which the Company competes in each of its segments. 2026 OUTLOOK The Company’s strategy to drive long-term shareholder value is to pursue growth and maintain solid pretax profit margins while exercising tactical capital deployment.
The Company's approach to pursue growth is through product development and distribution expansion, along with enhanced efficiency through technological upgrades and operational refinement.
The Company's objectives in 2026 include preserving solid pretax profit margins with increased sales production achieved through the ongoing promotional efforts for products launched in 2025 in Aflac Japan and continued growth initiatives across both its Aflac Japan and Aflac U.S. segments.
The Company believes this strategy positions it for future growth Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations and efficiency while defending and leveraging its market-leading position, powerful brand recognition and varied distribution in Japan and the U.S.
In November 2025, the board of directors announced a 5.2% increase in the quarterly cash dividend, effective with the first quarter of 2026.
The Company's target range for economic solvency ratio (ESR) is 170% to 230% for Aflac Japan and a target combined RBC range of 350% to 450%, over time, for Aflac U.S., which are consistent with the Company's risk management practices.
Aflac Japan Segment For 2026, the Company expects Aflac Japan to generate a benefit ratio in the range of 60% to 63% driven by favorable trends in morbidity experience, new product launches featuring lower benefit ratios, and the premium shift over recent years from first sector savings products to third sector cancer and medical products, as well as first sector protection products.
The Company expects Aflac Japan to generate an expense ratio in the range of 20% to 23% reflecting continued growth and strategic initiatives.
Segment For 2026, the Company expects Aflac U.S. to generate a benefit ratio in the range of 48% to 52% driven by growth in life, disability, and dental and vision insurance products, all of which typically carry higher benefit ratios.
The Company expects Aflac U.S. to generate an expense ratio in the range of 36% to 39%.
However, continued revenue growth associated with these products is expected to decrease expense ratios over time.
Corporate and other The Company's objectives for Corporate and other in 2026 include achieving solid pretax adjusted earnings, assuming that U.S. interest rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense.
For important disclosures applicable to statements made in this 2026 Outlook, please see the statement on Forward-Looking Information at the beginning of Item 1.
In periods when the Japanese yen weakens, translating Japanese yen into U.S. dollars results in fewer U.S. dollars being reported.
When the Japanese yen strengthens, translating Japanese yen into U.S. dollars results in more U.S. dollars being reported.
Consequently, Japanese yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while Japanese yen strengthening has the effect of magnifying current period results in relation to the comparable prior period.
A significant portion of the Company’s business is conducted in Japanese yen and never converted into U.S. dollars but translated into U.S. dollars for U.S.
GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations value on a U.S.
GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses. • Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign currency exchange risks in the Company's Japan segment or in Corporate and other.
GAAP financial measure for amortized hedge costs/income. • Adjusted earnings excluding current period foreign currency impact are computed using the average foreign exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign exchange rate changes.
GAAP book value (representing total shareholders’ equity), less accumulated other comprehensive income as recorded on the U.S.
The Company considers adjusted book value and adjusted book value per common share important Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations as they exclude accumulated other comprehensive income, which fluctuates due to market movements that are outside management’s control.
GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively. • Adjusted book value excluding foreign currency remeasurement is the U.S.
The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share important as they exclude both accumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control.
GAAP financial measures for adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share are total book value and total book value per common share, respectively. • Adjusted return on equity is annualized adjusted earnings divided by average shareholders’ equity, excluding accumulated other comprehensive income.
The Company considers adjusted return on equity important as it excludes components of accumulated other comprehensive income, which fluctuate due to market movements that are outside management's control.
GAAP financial measure for adjusted return on equity is return on equity as determined using annualized net earnings and average total shareholders’ equity. • Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings divided by average shareholders’ equity, excluding both accumulated other comprehensive income and the cumulative (beginning January 1, 2021) foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets.
The Company considers adjusted return on equity excluding foreign currency remeasurement important because it excludes both accumulated other comprehensive income and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control.
GAAP financial measure for adjusted return on equity excluding foreign currency remeasurement is return on equity as determined using annualized net earnings and average total shareholders’ equity. • U.S. dollar-denominated investment income excluding foreign currency impact represents amounts excluding foreign currency impact on U.S. dollar-denominated investment income using the average foreign exchange rate for the comparable prior year period.
Reconciliation of Net Earnings to Adjusted Earnings In Millions Per Diluted Share 2025 2024 2025 2024 Net earnings $ 3,646 $ 5,443 $ 6.82 $ 9.63 Items impacting net earnings: Adjusted net investment (gains) losses (1) 375 (1,495) .70 (2.65) Other and non-recurring (income) loss 54 23 .10 .04 Income tax (benefit) expense on items excluded from adjusted earnings (67) 101 (.13) .18 Adjusted earnings 4,008 4,072 7.49 7.21 Current period foreign currency impact (2) (19) N/A (.04) N/A Adjusted earnings excluding current period foreign currency impact $ 3,989 $ 4,072 $ 7.46 $ 7.21 (1) See reconciliation of net investment (gains) losses to adjusted net investment (gains) losses below.
GAAP financial measure of net investment (gains) losses for the years ended December 31.
Reconciliation of Net Investment (Gains) Losses to Adjusted Net Investment (Gains) Losses (In millions) 2025 2024 Net investment (gains) losses $ 572 $ (1,271) Items impacting net investment (gains) losses: Amortized hedge costs (45) (26) Amortized hedge income 98 113 Net interest income (expense) from derivatives associated with certain investment strategies (252) (338) Impact of interest from derivatives associated with notes payable 2 27 Adjusted net investment (gains) losses $ 375 $ (1,495) The Company's investment strategy is to invest primarily in fixed maturity securities to provide a reliable stream of investment income, which is one of the drivers of the Company’s profitability.

and 754 more.

Gone since FY2024

Risk Factors for the risk factor entitled, "Difficult conditions in global capital markets and the economy could have a material adverse effect on the Company's investments, capital position, revenue, profitability, and liquidity and harm the Company's business." Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations Demographics Aflac Japan Segment With Japan’s aging population and the rise in healthcare costs, supplemental health care insurance products remain attractive.
Japan’s existing customers and potential customers seek products that are easily understood, cost-effective and can be accessed through technology-enabled devices.
Segment Customer demographics continue to evolve and new opportunities present themselves in different customer segments such as the millennial and multicultural markets.
Customer expectations and preferences are changing.
Trends indicate existing customers and potential customers seek cost-effective solutions that are easily understood and can be accessed through technology-enabled devices.
Additionally, income protection and the health needs of retiring baby boomers are continuing to shape the insurance industry.
Competitive Markets for a discussion of the competitive environment and the basis on which the Company competes in each of its segments. 2025 OUTLOOK The Company’s strategy to drive long-term shareholder value is to pursue growth and strong profit margins and to exercise tactical capital deployment.
The Company's approach to pursue growth is through product development and distribution expansion and to achieve efficiencies by modernizing its technology and streamlining its operations.
The Company's objectives in 2025 include maintaining strong pretax margins with increased sales production through product refreshments and growth initiatives in both its Aflac Japan and Aflac U.S. segments.
For Aflac Japan, this includes continuing to focus on third sector products as well as introducing policies to new and younger customers.
For Aflac U.S., this includes continuing to focus on realizing benefits from its buy to build initiatives and other platform investments, maintaining strong expense management discipline and strengthening the number of career agents for Aflac U.S.
The Company believes that its strategy of positioning itself for future growth and efficiency while defending and leveraging its market-leading position, powerful brand recognition and varied distribution in Japan and the U.S. will provide support toward these objectives.
In December 2024, the board of directors announced a 16.0% increase in the quarterly cash dividend, effective with the first quarter of 2025.
The Company's economic solvency ratio (ESR) target range is 170% to 230% for Aflac Japan and a target combined RBC range of 350% to 450%, over time, for Aflac U.S., which is consistent with the Company's risk management practices.
Aflac Japan Segment For Aflac Japan, the Company anticipates that favorable morbidity experience and the shift in premiums over the last several years from first sector savings products to third sector cancer and medical products and first sector protection products will result in stable benefit ratios in the Aflac Japan segment with a slightly higher expense ratio reflecting growth and strategic initiatives.
For the 2025 through 2027 period, the Company expects Aflac Japan to generate a benefit ratio in the range of 64% to 66% and an expense ratio in the range of 20% to 23%.
For 2025, the Company expects the benefit ratio to be toward the higher end of the 64% to 66% range and the expense ratio to be on the lower end of the 20% to 23% range.
Segment For Aflac U.S., the Company expects growth in life and disability to increase benefit ratios.
This growth as well as realized benefits from the buy to build initiatives are expected to decrease expense ratios over time.
For the 2025 through 2027 period, the Company expects Aflac U.S. to generate a benefit ratio in the range of 48% to 52% and an expense ratio in the range of 36% to 39%.
For 2025, the Company expects the benefit ratio to be at the lower end of the 48% to 52% range and the expense ratio to be at the higher end of the 36% to 39% range.
Corporate and other The Company's objectives for Corporate and other in 2025 include maintaining strong pretax adjusted earnings as compared with 2024, assuming that U.S. interest rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense.
For important disclosures applicable to statements made in this 2025 Outlook, please see the statement on Forward-Looking Information at the beginning of Item 1.
In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported.
When the yen strengthens, translating yen into dollars results in more dollars being reported.
Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period.
A significant portion of the Company’s business is conducted in yen and never converted into dollars but translated into dollars for U.S.
GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S.
Management's Discussion and Analysis of Financial Condition and Results of Operations The Company defines the non-U.S.
GAAP financial measure for adjusted net investment gains and losses is net investment gains and losses. • Amortized hedge costs/income represent costs/income incurred or recognized as a result of using foreign currency derivatives to hedge certain foreign exchange risks in the Company's Japan segment or in Corporate and other.
GAAP financial measure for amortized hedge costs/income. • Adjusted earnings excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes.
GAAP book value (representing total shareholders’ equity), less AOCI as recorded on the U.S.
The Company considers adjusted book value and adjusted book value per common share important as they exclude AOCI, which fluctuates due to market movements that are outside management’s control.
GAAP financial measures for adjusted book value and adjusted book value per common share are total book value and total book value per common share, respectively.
Management's Discussion and Analysis of Financial Condition and Results of Operations • Adjusted book value excluding foreign currency remeasurement is the U.S.
The Company considers adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share important as they exclude both AOCI and the cumulative foreign currency remeasurement gains/losses, which fluctuate due to market movements that are outside management's control.
GAAP financial measures for adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share are total book value and total book value per common share, respectively. • Adjusted return on equity is annualized adjusted earnings divided by average shareholders’ equity, excluding AOCI.
The Company considers adjusted return on equity important as it excludes components of AOCI, which fluctuate due to market movements that are outside management's control.
GAAP financial measure for adjusted return on equity is return on average equity (ROE) as determined using annualized net earnings and average total shareholders’ equity. • Adjusted return on equity excluding foreign currency remeasurement is annualized adjusted earnings divided by average shareholders’ equity, excluding both AOCI and the cumulative [beginning January 1, 2021] foreign currency gains/losses associated with i) foreign currency remeasurement and ii) sales and redemptions of invested assets.

and 766 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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