AFLAC INC

Company Overview

Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) provide financial protection to millions of policyholders and customers in Japan and the United States (U.S.). The Company’s principal business is supplemental health and life insurance products with the goal to provide customers the best value in supplemental insurance products in Japan and the U.S. The Company's insurance business consists of two reporting segments: Aflac Japan and Aflac U.S. The Parent Company’s primary insurance subsidiaries are Aflac Life Insurance Japan Ltd. in Japan (Aflac Japan) and American Family Life Assurance Company of Columbus (Aflac); Continental American Insurance Company (CAIC), branded as Aflac Group Insurance (AGI); American Family Life Assurance Company of New York (Aflac New York); Tier One Insurance Company (TOIC) and Aflac Benefits Solutions, Inc. (ABS), which provides a platform for Aflac Dental and Vision in the U.S. (collectively, Aflac U.S.). 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.

Performance Highlights

Total revenues were $4.7 billion in the third quarter of 2025, compared with $2.9 billion in the third quarter of 2024, primarily due to net investment gains of $275 million in the third quarter of 2025 compared with net investment losses of $1.4 billion in the third quarter of 2024. Net earnings were $1.6 billion, or $3.08 per diluted share, in the third quarter of 2025, compared with $(93) million, or $(.17) per diluted share, in the third quarter of 2024.

Total revenues were $12.3 billion in the first nine months of 2025, compared with $13.5 billion in the first nine months of 2024, primarily due to net investment losses of $1.1 billion in the first nine months of 2025 compared with net investment gains of $239 million in the first nine months of 2024. Net earnings were $2.3 billion, or $4.21 per diluted share, in the first nine months of 2025, compared with $3.5 billion, or $6.23 per diluted share, in the first nine months of 2024.

Net earnings in the third quarter of 2025 included net investment gains of $275 million, compared with net investment losses of $1.4 billion in the third quarter of 2024. Net investment gains in the third quarter of 2025 included $285 million of net gains from certain derivative and foreign currency gains or losses; $33 million of net gains from sales and redemptions; a $10 million gain from an increase in the fair value of equity securities; offset by an increase in credit loss allowances of $53 million.

Net earnings in the first nine months of 2025 included net investment losses of $1.1 billion, compared with net investment gains of $239 million in the first nine months of 2024. Net investment losses in the first nine months of 2025 included $1.1 billion of net losses from certain derivative and foreign currency gains or losses; an increase in credit loss allowances of $166 million and $6 million of impairments; offset by $71 million of net gains from sales and redemptions and a $47 million gain from an increase in the fair value of equity securities.

The average yen/dollar exchange rate(1) for the three-month period ended September 30, 2025 was 147.68, or .2% stronger than the average yen/dollar exchange rate(1) of 147.95 for the same period in 2024. The average yen/dollar exchange rate(1) for the nine-month period ended September 30, 2025 was 148.03, or 1.7% stronger than the average yen/dollar exchange rate(1) of 150.60 for the same period in 2024.

Adjusted earnings(2) in the third quarter of 2025 were $1.3 billion, or $2.49 per diluted share, compared with $1.2 billion, or $2.16 per diluted share in the third quarter of 2024. The slightly stronger yen/dollar exchange rate did not impact adjusted earnings per diluted share. Adjusted earnings(2) in the first nine months of 2025 were $3.2 billion, or $5.92 per diluted share, compared with $3.2 billion, or $5.64 per diluted share, in the first nine months of 2024. The stronger yen/dollar exchange rate positively impacted adjusted earnings per diluted share by $.03.

In the first nine months of 2025, Aflac Incorporated repurchased $2.7 billion, or 25.7 million of its common shares. At September 30, 2025, the Company had 121.6 million remaining shares authorized for repurchase.

Shareholders’ equity was $28.7 billion, or $54.57 per share, at September 30, 2025, compared with $26.1 billion, or $47.45 per share, at December 31, 2024. Shareholders’ equity at September 30, 2025 included a cumulative increase of $6.8 billion from the effect of changes in discount rate assumptions on insurance reserves, compared with a corresponding cumulative increase of $2.0 billion at December 31, 2024, and a net unrealized loss on investment securities and derivatives of $1.7 billion, compared with a net unrealized gain of $4 million at December 31, 2024. Shareholders’ equity at September 30, 2025 also included an unrealized foreign currency translation loss of $4.5 billion, compared with an unrealized foreign currency translation loss of $5.0 billion at December 31, 2024. The annualized return on average shareholders’ equity in the third quarter of 2025 was 23.5%.

Shareholders’ equity excluding accumulated other comprehensive income (AOCI)(2) (adjusted book value) was $28.0 billion, or $53.33 per share, at September 30, 2025, compared with $29.1 billion, or $52.87 per share, at December 31, 2024. Adjusted book value excluding foreign currency remeasurement(2) was $24.4 billion, or $46.35 per share, at September 30, 2025, compared with $23.4 billion, or $42.46 per share, at December 31, 2024. The annualized adjusted return on equity (ROE) excluding foreign currency remeasurement(2) in the third quarter of 2025 was 22.1%.

Cyber Incident

As previously disclosed, the Company identified an incident involving unauthorized access to its network in the U.S. on June 12, 2025. The Company promptly initiated its cybersecurity incident response protocols and continues to believe it contained the intrusion within hours. The Company's systems were not affected by ransomware, and the Company continues to serve its policyholders and underwrite policies, review claims, and otherwise service customers as usual. The Company also remains engaged with leading third-party cybersecurity experts to support the Company’s response to the incident.

The Company is aware of the exfiltration of certain data including claims information, health information, social security numbers and/or other personal information relating to a substantial number of customers, beneficiaries, employees, agents, and other individuals in the Company’s U.S. business. The Company is still in the process of validating the extent and nature of the files that were involved.

Based on the information currently available and the investigation to date, as of the date of this report, the Company has not determined that the incident is reasonably likely to have a material impact on the Company’s financial condition or results of operations. However, the Company’s investigation remains ongoing and as a result, it does not yet know the full impact of the cybersecurity incident, including how much of the financial impact will be covered by insurance. As a result of the cybersecurity incident, the Company has incurred certain costs and may, depending on future developments, incur additional costs, including but not limited to: costs to provide credit monitoring, identity theft protection, and Medical Shield to impacted individuals and maintain a call center related to the provision of such services; incident response costs; expenses arising from potential litigation, governmental investigations, or enforcement actions; expenses related to compliance, finance, and legal advisory services; elevated cybersecurity insurance premiums; and costs incurred in meeting evolving legal and regulatory requirements concerning cybersecurity governance, monitoring, and disclosure. The costs associated with the incident to date, including the cost to investigate and respond to the incident as well as related legal and other professional services, resulted in a slight increase to the Company's expenses and are recorded in the insurance and other expenses line in the consolidated statement of earnings.

(1) Yen/U.S. dollar exchange rates are based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).

(2)See the Results of Operations section of this MD&A for a definition of this non-U.S. GAAP financial measure.