AFL

Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, foreign currency volatility, and interest rate volatility

to significant interest rate risk • concentration of business in Japan • limited availability of acceptable Japanese yen-denominated investments • foreign currency fluctuations in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in t

Foreign Currency Translation Aflac Japan’s premiums and a significant portion of its investment income are received in Japanese yen, and its claims and most expenses are paid in Japanese yen

to significant interest rate risk • concentration of business in Japan • limited availability of acceptable Japanese yen-denominated investments • foreign currency fluctuations in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in t

Japanese yen is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, the effect of yen/dollar exchange rates on U

A+ 102 69 (33) Japan Expressway Holding and Debt A+ 203 173 (30) Generally, declines in fair values can be a result of changes in interest rates, yen/dollar exchange rate, and changes in net spreads driven by a broad market move or a change in the issuer's underlying credit quality

• Adjusted book value excluding foreign currency remeasurement is the U

Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Return on Equity to Adjusted Return on Equity (Excluding Foreign Currency Remeasurement) The following table is a reconciliation of items impacting adjusted return on equity excluding foreign currency remeasurement to the most directly comparable U

21 Current period foreign currency impact (2) (19) N/A (

Management's Discussion and Analysis of Financial Condition and Results of Operations Foreign Currency Exchange Risk Hedge Program The Company has deployed the following hedging strategies to mitigate exposure to foreign currency exchange risk: • Aflac Japan hedges U

Condition and Results of Operations Japanese yen-denominated liabilities and the change in estimated fair value of the derivatives are included in unrealized foreign currency translation gains (losses) in the consolidated statements of comprehensive income (loss)

Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time

by comparing certain segment results with those that would have been reported had foreign exchange rates remained unchanged from the prior year

Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Book Value to Adjusted Book Value (Excluding Foreign Currency Remeasurement) The following table is a reconciliation of items impacting adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share to the most directly compa

Net investment losses in 2025 included $467 million of net losses from certain derivative and foreign currency gains or losses

GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book 35

1,918 1,848 287 280 Total benefits and adjusted expenses 5,917 6,165 886 936 Pretax adjusted earnings $ 3,440 $ 3,494 ¥ 514 ¥ 528 Weighted-average yen/dollar exchange rate 149

and Japanese yen interest rates also contributes to costs of hedging foreign currency exchange risk of U

terms by hedging foreign currency exchange risk related to dividend payments by Aflac Japan

Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, credit-related losses, or changes in foreign exchange rates, negatively impacting Aflac Japan's earnings and corresponding dividend and capital deployment

With the exception of disclosed activities in those referenced footnotes and the Risk Factors entitled, "The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate" and "Lack of availability of acceptable Japanese yen-denominated investments could adversely affect the Company's results of operations, financial position or liquidity," the Company is not aware o

Certain Derivative and Foreign Currency Activities The Company's derivative activities include: • foreign currency forwards and options used in hedging foreign currency exchange risk on U

HEDGING ACTIVITIES The Company uses derivative contracts to hedge foreign currency exchange risk and interest rate risk

The Company uses foreign currency forwards to hedge foreign currency exchange risk on certain U

investment-grade and below-investment-grade fixed maturity securities and loan receivables, and has entered into foreign currency derivatives to economically hedge the foreign currency exchange risk on the fair value of a portion of the U

Aflac Japan's SMR is sensitive to interest rate, credit spread and foreign exchange rate changes

The Company also uses foreign currency derivatives to hedge a portion of its U

investments with foreign currency options or forwards or execute additional reinsurance transactions

• Adjusted book value excluding foreign currency remeasurement is the U

investments with foreign currency options or forwards or execute additional reinsurance transactions

21 Current period foreign currency impact (2) (19) N/A (

and Japanese yen interest rates also contributes to costs of hedging foreign currency exchange risk of U

Certain Derivative and Foreign Currency Activities The Company's derivative activities include: • foreign currency forwards and options used in hedging foreign currency exchange risk on U

Foreign Currency Translation Aflac Japan’s premiums and a significant portion of its investment income are received in Japanese yen, and its claims and most expenses are paid in Japanese yen

Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Book Value to Adjusted Book Value (Excluding Foreign Currency Remeasurement) The following table is a reconciliation of items impacting adjusted book value excluding foreign currency remeasurement and adjusted book value excluding foreign currency remeasurement per common share to the most directly compa

HEDGING ACTIVITIES The Company uses derivative contracts to hedge foreign currency exchange risk and interest rate risk

Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Return on Equity to Adjusted Return on Equity (Excluding Foreign Currency Remeasurement) The following table is a reconciliation of items impacting adjusted return on equity excluding foreign currency remeasurement to the most directly comparable U

1,918 1,848 287 280 Total benefits and adjusted expenses 5,917 6,165 886 936 Pretax adjusted earnings $ 3,440 $ 3,494 ¥ 514 ¥ 528 Weighted-average yen/dollar exchange rate 149

Management's Discussion and Analysis of Financial Condition and Results of Operations Foreign Currency Exchange Risk Hedge Program The Company has deployed the following hedging strategies to mitigate exposure to foreign currency exchange risk: • Aflac Japan hedges U

to significant interest rate risk • concentration of business in Japan • limited availability of acceptable Japanese yen-denominated investments • foreign currency fluctuations in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in t

by comparing certain segment results with those that would have been reported had foreign exchange rates remained unchanged from the prior year

to significant interest rate risk • concentration of business in Japan • limited availability of acceptable Japanese yen-denominated investments • foreign currency fluctuations in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in t

The Company also uses foreign currency derivatives to hedge a portion of its U

Japanese yen is affected by available cash flow from operations, the timing of investing the cash flow, yields on new investments, the effect of yen/dollar exchange rates on U

The Company uses foreign currency forwards to hedge foreign currency exchange risk on certain U

Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, foreign currency volatility, and interest rate volatility

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 l ocked-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 cont

strategies, which are both reclassified to net investment income, and iii) the impact of interest from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment inc

strategies, which are both reclassified to net investment income, and iii) the impact of interest from derivatives associated with notes payable, which is reclassified to interest expense as a component of total adjusted expenses. The Company considers adjusted net investment gains and losses important as it represents the remainder amount that is considered outside management’s control, while excluding the components that are within management’s control and are accordingly reclassified to net investment inc

Benefits and claims, excluding reserve remeasurement 491 426 Reserve remeasurement (gains) losses (33) (19) Total benefits and claims, net 458 407 Adjusted expenses: Interest expense 210 156 Other adjusted expenses 508 412 Total adjusted expenses 718 568 Total benefits and adjusted expenses 1,176 975 Pretax adjusted earnings $ 101 $ 32 Percentage change over previous period: Net earned premiums 18.5 % 70.0 % Adjusted net investment income 48.4 613.6 Total adjusted revenues 26.8 118.9 Total benefits and clai

activities come from insurance premiums and investment income. The principal cash outflows are the result of policy claims, operating expenses, income tax, as well as interest expense. As a result of policyholder aging, claims payments are expected to gradually increase over the life of a policy. Therefore, future policy benefit reserves are accumulated in the early years of a policy and are designed to help fund future claims payments. The Company expects its future cash flows from premiums and investment p

of this program include enhancing the yield on invested assets, achieving further diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of floating rate assets

A 145 112 (33) West Japan Railway Company A+ 102 69 (33) Japan Expressway Holding and Debt A+ 203 173 (30) Generally, declines in fair values can be a result of changes in interest rates, yen/dollar exchange rate, and changes in net spreads driven by a broad market move or a change in the issuer's underlying credit quality

related to foreign currency exposure management strategies and certain derivative activity, ii) net interest income/expense from foreign currency and interest rate derivatives associated with certain investment strategies, which are both reclassified to net investment income, and iii) the impact of interest from derivatives associated with notes payable, which is reclassified to interest expense as a compon

Aflac Japan remains focused on maintaining leadership in third sector insurance products that are less interest rate sensitive and have strong and stable margins

Aflac Japan's SMR is sensitive to interest rate, credit spread and foreign exchange rate changes

Japan interest rates, and the cross-currency basis

For example, the Company employs policy reserve matching (PRM) investment strategies, which is a Japan-specific accounting treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost consistent with corresponding liabilities

rates remain stable and excluding the impact of tax credit investments, as tax benefits are recognized in a corresponding lower income tax expense

In addition, differences between interest rates in Japan and the U

For regulatory accounting purposes for Aflac Japan, there are certain requirements for realizing impairments that could be triggered by rising interest rates, credit-related losses, or changes in foreign exchange rates, negatively impacting Aflac Japan's earnings and corresponding dividend and capital deployment

and recessionary pressures could result in significant realized or unrealized losses due to severe price declines driven by high interest rates or increases in credit spreads, defaults in payment of principal or interest, or credit rating downgrades

Future economic conditions and market volatility, including increases in interest rates or widening credit spreads, can adversely impact the Company’s tax planning strategies and in particular the Company’s ability to utilize tax benefits on previously recognized capital losses

Item 1A. Risk Factors The Company is also exposed to the general movement in credit market spreads. A widening of credit spreads could reduce the value of the Company's existing portfolio, create unrealized losses on its investment portfolio, and reduce the Company's adjusted capital position and/or the dividend capacity of the Company's insurance subsidiaries. A tightening of credit spreads could reduce the net investment income available to the Company o

is unable to predict the course of the global financial markets or the recurrence, duration or severity of disruptions in such markets. Defaults, downgrades, widening credit spreads or other events impairing the value of the fixed maturity securities and loan receivables in the Company's investment portfolio may reduce the Company's earnings and capital position. The Company is subject to the risk that the issuers and/or guarantors of fixed maturity securities and loan receivables the Company owns may defaul

of this program include enhancing the yield on invested assets, achieving further diversification of credit risk, and mitigating the risk of rising interest rates and hedge costs through the acquisition of floating rate assets

The Bank of Japan remains an exception to the major central bank loosening trends, ending a prolonged period of negative interest rates on bank reserves in March 2024

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

If interest rates decreased by 100 basis points, the Company's LFPB balance as of December 31, 2025 would increase by $7

• difficult conditions in global capital markets and the economy, including inflation • defaults and credit downgrades of investments • global fluctuations in interest rates and exposure to significant interest rate risk • concentration of business in Japan • limited availability of acceptable Japanese yen-denominated investme

HEDGING ACTIVITIES The Company uses derivative contracts to hedge foreign currency exchange risk and interest rate risk

The Company's valuation model for private placements explicitly incorporates currency basis swap adjustments (market observable data) to assumed interest rate curves where appropriate

Japan interest rates, and the cross-currency basis

These conditions, together with higher levels of inflation may result in increased operating expenses

For example, the Company employs policy reserve matching (PRM) investment strategies, which is a Japan-specific accounting treatment that reduces SMR interest rate sensitivity since PRM-designated investments are carried at amortized cost consistent with corresponding liabilities

Aflac Japan remains focused on maintaining leadership in third sector insurance products that are less interest rate sensitive and have strong and stable margins

The Company is exposed to significant interest rate risk, which may adversely affect its results of operations, financial condition and liquidity

The Company promptly initiated its cybersecurity incident response protocols and believes it contained the unauthorized access within hours

The Company promptly initiated its cybersecurity incident response protocols and believes it contained the unauthorized access within hours

of new technology, including the use of AI by the Company and third-party vendors, could lead to an increased risk of a business interruption or a cybersecurity breach

▪ Privacy and Cybersecurity With regard to personal information obtained from policyholders, the insured, or others, Aflac Japan is regulated in Japan by the Act on the Protection of Personal Information (APPI) and guidelines issued by FSA and other governmental authorities

cybersecurity insurance premiums

expenses increased primarily due to $61 million from higher costs pertaining to business operations, including costs related to the ongoing response to the cybersecurity incident and legal and other professional services related thereto, higher interest expense of $54 million, and $35 million associated with internal reinsurance activity

A number of states, including California and New York, have adopted and continue to expand their privacy and cybersecurity laws and regulations in recent years

could be significant. The Company could also be subject to legal risk, including government enforcement action and civil litigation, related to cyber-attacks and security breaches, which could adversely affect the Company’s business, reputation, financial condition or results of operations. In addition, the Company may be adversely impacted by reputational harm or a loss of confidence in the security and integrity of its information technology systems among customers, beneficiaries, employees, agents

in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in the Company's financial strength or debt ratings • decline in creditworthiness of other financial institutions • the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners • deviations in actual experience from p

in the yen/dollar exchange rate • differing interpretations applied to investment valuations • significant valuation judgments in determination of expected credit losses recorded on the Company's investments • decreases in the Company's financial strength or debt ratings • decline in creditworthiness of other financial institutions • the Company's ability to attract and retain qualified sales associates, brokers, employees, and distribution partners • deviations in actual experience from p

rates, credit spreads, foreign currency forward and spot rates, foreign currency volatility, and interest rate volatility. The Company estimates an allowance for credit losses on investments measured at amortized cost including held-to-maturity securities, loan receivables and certain loan commitments on a quarterly basis. For collateral dependent financial assets, including loans where foreclosure is probable, the allowance for credit losses is based on the fair value of the underlying collateral. For

of Item 7. MD&A, and Notes 1, 3, 4, and 5 of the Notes to the Consolidated Financial Statements for additional information. The determination of the amount of expected credit losses recorded on the Company's investments is based on significant valuation judgments and could materially impact its results of operations or financial position. The Company estimates an allowance for credit losses on investments measured at amortized cost including held-to-maturity securities, loan receivables and loan commitments

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Securities Transactions, Credit Losses and Changes in the Fair Value of Equity Securities Securities transactions include gains and losses from sales and redemptions of investments where the amount received is different from the amortized cost of the investment. Credit losses include losses for held-to-maturity securities, available-for-sale securities, loan receivable

securities 161 161 158 158 Total privately issued 16,022 16,199 14,922 15,723 Total investment securities $ 82,270 $ 80,484 $ 80,851 $ 82,837 (1) Net of allowance for credit losses (2) Primarily consists of securities owned by Aflac Japan (3) Excludes Rule 144A securities The following table details the Company's reverse dual-currency securities as of December 31. Reverse Dual-Currency Securities (1) (Amortized cost, in millions) 2025 2024 Privately issued reverse dual-currency securities $ 3,196 $ 3,368 Pub

factors, including a competitive labor market

or debt ratings may have an adverse effect on its competitive position and access to liquidity and capital” for additional information. Broad economic factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets and inflation, as well as ongoing central bank responses to these factors, all affect the business and economic environment and, indirectly, the amount and profitability of the Company's business. In an economic downturn characterized

share or profitability. The Company operates in a competitive environment and in an industry that is subject to ongoing changes from market pressures brought about by customer demands, legislative reform, marketing practices and changes to health care and health insurance delivery. These factors require the Company to anticipate market trends and make changes to differentiate the Company's products and services from those of its competitors. The Company also faces potential competition from existing or new c

7 Natural Gas 892 74 (80) 886 1

6 Natural Gas 894 62 (87) 868 1

7 Natural Gas 892 74 (80) 886 1

6 Natural Gas 894 62 (87) 868 1

Continuing geopolitical tensions, including armed conflicts and regime changes, exacerbate uncertainty and can contribute to volatility across both physical and financial asset classes

to do business and service its customers, seriously harm the Company's brand, reputation, and ability to compete effectively, subject it to regulatory sanctions and other claims, lead to a loss of customers and revenues and otherwise adversely affect the Company's business