AFLAC INC [AFL] Filings

10-Q 1 afl-20230630.htm 10-Q afl-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-07434

Aflac Incorporated

_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Georgia

58-1167100

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1932 Wynnton Road

Columbus,

Georgia

31999

(Address of principal executive offices)

(ZIP Code)

706. 323.3431

(Registrant's telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.10 par value per share

AFL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	☐
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 594,062,478 shares of the issuer's common stock were outstanding as of July 26, 2023.

Aflac Incorporated and Subsidiaries

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2023

Table of Contents


PART I.		FINANCIAL INFORMATION:	Page

	Item 1.	Financial Statements (Unaudited)

		Consolidated Statements of Earnings Three Months Ended June 30, 2023 and 2022 Six Months Ended June 30, 2023 and 2022	1

		Consolidated Statements of Comprehensive Income (Loss) Three Months Ended June 30, 2023 and 2022 Six Months Ended June 30, 2023 and 2022	2

		Consolidated Balance Sheets June 30, 2023, and December 31, 2022	3

		Consolidated Statements of Shareholders' Equity Three Months Ended March 31, 2023 and 2022 Three Months Ended June 30, 2023 and 2022	4

		Consolidated Statements of Cash Flows Six Months Ended June 30, 2023 and 2022	6

		Notes to the Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	81

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	115

	Item 4.	Controls and Procedures	115

PART II.		OTHER INFORMATION:

	Item 1A.	Risk Factors	116

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	117



	Item 6.	Exhibits	118

Glossary of Selected Terms			119

Items other than those listed above are omitted because they are not required or are not applicable.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Earnings


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except for share and per-share amounts - Unaudited)	2023			2022			2023			2022
Revenues:
Net earned premiums, principally supplemental health insurance		$	3,573		$	3,764		$	7,262		$	7,844
Net investment income		999			937			1,942			1,840
Net investment gains (losses)		555			564			678			686
Other income (loss)		45			50			90			118
Total revenues		5,172			5,315			9,972			10,488
Benefits and expenses:
Benefits and claims, excluding reserve remeasurement		2,152			2,299			4,354			4,816
Reserve remeasurement (gains) losses		(54)			(25)			(107)			(59)
Total benefits and claims, net		2,098			2,274			4,247			4,757
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs		202			197			407			405
Insurance commissions		268			279			547			579
Insurance and other expenses		728			802			1,505			1,633
Interest expense		51			55			99			112
Total acquisition and operating expenses		1,249			1,333			2,558			2,729
Total benefits and expenses		3,347			3,607			6,805			7,486
Earnings before income taxes		1,825			1,708			3,167			3,002
Income taxes		191			314			345			561
Net earnings		$	1,634		$	1,394		$	2,822		$	2,441
Net earnings per share:
Basic		$	2.72		$	2.18		$	4.66		$	3.78
Diluted		2.71			2.17			4.64			3.77
Weighted-average outstanding common shares used in computing earnings per share (In thousands):
Basic		600,742			640,707			605,945			645,205
Diluted		602,929			643,243			608,411			648,010
Cash dividends per share		$	.42		$	.40		$	.84		$	.80

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions - Unaudited)	2023			2022			2023			2022
Net earnings		$	1,634		$	1,394		$	2,822		$	2,441
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period		(439)			(751)			(482)			(1,203)
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities during period		890			(3,503)			3,468			(8,254)
Reclassification adjustment for (gains) losses on fixed maturity securities included in net earnings		(27)			(114)			(84)			(192)
Unrealized gains (losses) on derivatives during period		1			0			2			1
Effect of changes in discount rate assumptions during period		(209)			6,462			(3,745)			11,809
Pension liability adjustment during period		58			5			67			8
Total other comprehensive income (loss) before income taxes		274			2,099			(774)			2,169
Income tax expense (benefit) related to items of other comprehensive income (loss)		334			628			135			738
Other comprehensive income (loss), net of income taxes		(60)			1,471			(909)			1,431
Total comprehensive income (loss)		$	1,574		$	2,865		$	1,913		$	3,872

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Balance Sheets


(In millions, except for share and per-share amounts - Unaudited)	June 30, 2023			December 31, 2022
Assets:
Investments and cash:
Fixed maturity securities available for sale, at fair value, (no allowance for credit losses in 2023 and 2022, amortized cost $67,927 in 2023 and $72,246 in 2022)		$	70,739		$	71,936
Fixed maturity securities available for sale - consolidated variable interest entities, at fair value (amortized cost $2,922 in 2023 and $3,223 in 2022)		3,766			3,805
Fixed maturity securities held to maturity, at amortized cost, net of allowance for credit losses of $5 in 2023 and $7 in 2022 (fair value $19,938 in 2023 and $21,210 in 2022)		17,436			19,056
Equity securities, at fair value		965			1,091
Commercial mortgage and other loans, net of allowance for credit losses of $225 in 2023 and $192 in 2022 (includes $10,652 in 2023 and $10,832 in 2022 of consolidated variable interest entities)		13,346			13,496
Other investments (includes $2,163 in 2023 and $1,909 in 2022 of consolidated variable interest entities)		5,491			4,070
Cash and cash equivalents		4,720			3,943
Total investments and cash		116,463			117,397
Receivables		755			647
Accrued investment income		719			745
Deferred policy acquisition costs		8,860			9,239
Property and equipment, at cost less accumulated depreciation		500			530
Other		3,329			3,180
Total assets		$	130,626		$	131,738
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	85,904		$	88,241
Unpaid policy claims		244			201
Unearned premiums		1,544			1,825
Other policyholders’ funds		6,115			6,643
Total policy liabilities		93,807			96,910
Income taxes		343			698
Payables for return of cash collateral on loaned securities		4,679			1,809
Notes payable and lease obligations		7,087			7,442
Other		4,271			4,739
Total liabilities		110,187			111,598
Commitments and contingent liabilities (Note 13)
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2023 and 2022; issued 1,355,227 shares in 2023 and 1,354,079 shares in 2022		136			135
Additional paid-in capital		2,697			2,641
Retained earnings		46,937			44,367
Accumulated other comprehensive income (loss):
Unrealized foreign currency translation gains (losses)		(4,249)			(3,564)
Unrealized gains (losses) on fixed maturity securities		1,978			(702)
Unrealized gains (losses) on derivatives		(25)			(27)
Effect of changes in discount rate assumptions		(5,059)			(2,100)
Pension liability adjustment		17			(36)
Treasury stock, at average cost		(21,993)			(20,574)
Total shareholders’ equity		20,439			20,140
Total liabilities and shareholders’ equity		$	130,626		$	131,738

Prior-year amounts have been adjusted for the adoption of accounting guidance on January 1, 2023 related to accounting for long-duration insurance contracts.

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Consolidated Statements of Shareholders’ Equity


(In millions, except for per share amounts - Unaudited)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
Balance at December 31, 2022	$	135	$	2,641	$	44,367	$	(6,429)	$	(20,574)	$	20,140
Net earnings	0		0		1,188		0		0		1,188
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(54)		0		(54)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		1,991		0		1,991
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		(2,794)		0		(2,794)
Pension liability adjustment during period, net of income taxes	0		0		0		7		0		7
Dividends to shareholders (1) ($.00 per share)	0		0		0		0		0		0
Exercise of stock options	0		3		0		0		0		3
Share-based compensation	0		14		0		0		0		14
Purchases of treasury stock	0		0		0		0		(732)		(732)
Treasury stock reissued	0		7		0		0		13		20
Balance at March 31, 2023	$	135	$	2,665	$	45,555	$	(7,278)	$	(21,293)	$	19,784
Net earnings	0		0		1,634		0		0		1,634
Unrealized foreign currency translation gains (losses) during period, net of income taxes	0		0		0		(631)		0		(631)
Unrealized gains (losses) on fixed maturity securities during period, net of income taxes and reclassification adjustments	0		0		0		689		0		689
Unrealized gains (losses) on derivatives during period, net of income taxes	0		0		0		1		0		1
Effect of changes in discount rate assumptions during period, net of income taxes	0		0		0		(165)		0		(165)
Pension liability adjustment during period, net of income taxes	0		0		0		46		0		46
Dividends to shareholders (1) ($.42 per share)	0		0		(252)		0		0		(252)
Exercise of stock options	0		5		0		0		0		5
Share-based compensation

AFLAC INC [AFL] Filings
10-Q	[2023-08-02]
10-Q	[2023-05-01]
10-K	[2023-02-24]
10-Q	[2022-11-02]
10-Q	[2022-08-02]
10-Q	[2022-04-29]
10-K	[2022-02-23]
10-Q	[2021-10-28]
10-Q	[2021-07-29]
10-Q	[2021-04-29]
10-K	[2021-02-23]
10-Q	[2020-10-29]
10-Q	[2020-07-29]
10-Q	[2020-04-30]
10-K	[2020-02-21]
10-Q	[2019-10-25]
10-Q	[2019-07-26]
10-Q	[2019-04-26]
10-K	[2019-02-25]
10-Q	[2018-11-01]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-K	[2018-02-23]
10-Q	[2017-11-02]
10-Q	[2017-08-03]
10-Q	[2017-05-03]
10-K	[2017-02-24]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-04]
10-K	[2016-02-25]
10-Q	[2015-11-03]
10-Q	[2015-08-04]
10-Q	[2015-05-01]
10-K	[2015-02-26]
10-Q	[2014-11-03]
10-Q	[2014-08-05]
10-Q	[2014-05-02]
10-K	[2014-02-27]
10-Q	[2013-11-05]
10-Q	[2013-08-06]
10-Q	[2013-05-06]
10-K	[2013-02-27]
10-Q	[2012-11-02]
10-Q	[2012-08-03]
10-Q	[2012-05-07]
10-K	[2012-02-27]