Aflac AFL · USD

BUSINESS SEGMENT INFORMATION AND SELECTED FOREIGN CURRENCY TRANSLATION ITEMSThe Company consists of two 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.

COMMITMENTS AND CONTINGENT LIABILITIESThe Company is a defendant in various lawsuits and receives various regulatory inquiries considered to be in the normal course of business. Members of the Company's senior legal and financial management teams review litigation and regulatory inquiries on a quarterly and annual basis and the Company updates the related estimates, accruals, and disclosures, if any, based on such reviews. For litigation and regulatory matters where it is probable that a loss has been incurred, and the amount of that loss can be reasonably estimated, the Company establishes accruals for loss contingencies. Where a loss may be reasonably possible but not probable, or is probable but not reasonably estimable, no accrual is recorded. The final results of any litigation or regulatory inquiries cannot be predicted with certainty. Although some of this litigation is pending in states where large punitive damages, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in recent years, the Company believes the outcome of pending litigation will not have a material adverse effect on its financial position, results of operations, or cash flows.Cyber IncidentAs previously disclosed, the Company identified an incident involving unauthorized access to a limited number of its systems in the U.S. on June 12, 2025. The Company promptly initiated its cybersecurity incident response protocols and believes it contained the unauthorized access within hours. The Company's systems were not affected by ransomware, and the Company remained able to serve its policyholders and underwrite policies, review claims, and otherwise service customers as usual. In December 2025, the Company determined that personal information associated with approximately 22.65 million individuals was involved. The Company has received questions from regulators and has pending disputes related to the June 2025 incident. The Company believes that the potential amount of loss cannot be reasonably estimated at this time.Outsourcing Agreements and Other CommitmentsThe Company has an outsourcing agreement with a technology and consulting corporation that provides for mainframe computer operations, distributed mid-range server computer operations, and related support for Aflac Japan. The agreement has a remaining term of three years with an aggregate remaining cost of ¥33.6 billion ($215 million using the December 31, 2025 foreign exchange rate).

INCOME TAXES The components of pretax earnings for the year ended December 31, 2025 were as follows: (In millions)ForeignU.S.Total2025: Pretax earnings$3,321 $1,212 $4,533 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:(In millions)ForeignU.S.Total2025: Current$785 $330 $1,115 Deferred217 (445)(228)Total income tax expense$1,002 $(115)$887 2024:Current$1,196 $134 $1,330 Deferred159 (515)(356)Total income tax expense$1,355 $(381)$974 2023:Current$1,275 $388 $1,663 Deferred(160)(900)(1,060)Total income tax expense$1,115 $(512)$603 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:(In millions)2025Income taxes based on U.S. statutory rates$952 21.0 %Domestic federal reconciling items:Tax creditsSolar tax credits(54)(1.2)Other tax credits(41)(.9)Nontaxable and nondeductible itemsDST functional currency change23 .5 Other nontaxable and nondeductible items, net23 .5 Effects of cross-border tax lawsU.S.

SHARE-BASED COMPENSATIONThe Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (as Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan). Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors.The Plan allows for a maximum number of shares issuable over its term of 75 million shares including 38 million shares that may be awarded in respect of awards other than options or stock appreciation rights. If any awards granted under the Plan are forfeited or are terminated before being exercised or settled for any reason other than tax forfeiture, then the shares underlying the awards will again be available under the Plan. As of December 31, 2025, approximately 32.6 million shares were available for future grants under this plan.The Plan allows awards to Company employees as follows:•Stock options◦Incentive stock options◦Non-qualifying stock options •Performance-based restricted stock awards and units (performance-based restricted stock)•Restricted stock awards and units (restricted stock)•Stock appreciation rights Non-employee directors are eligible for grants of non-qualifying stock options, restricted stock, and stock appreciation rights. Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while those issued to Japan-based grantees are settled with treasury shares.Vesting SchedulesStock options and stock appreciation rights have an expiration date of no later than 10 years from the grant date. Generally, the vesting period for share-based awards is the requisite service period, which is typically three years for employees and one year for non-employee directors. Vesting for employees is generally on a ratable basis over the three years, typically subject to continued employment. For performance-based restricted stock, vesting is also contingent on certain performance conditions typically achieved over three years. The Compensation Committee of the board of directors has the discretion to determine vesting schedules.

DEFERRED POLICY ACQUISITION COSTSThe following tables present a rollforward of deferred policy acquisition costs by reporting segment and disaggregated by product type for the years ended December 31.2025Aflac JapanAflac U.S.(In millions)CancerMedical and Other HealthLife InsuranceOtherAccidentDisabilityCritical CareHospital IndemnityDental/VisionLife InsuranceOtherTotalDeferred policy acquisition costs:Balance, beginning of year$2,776 $1,833 $441 $52 $915 $636 $1,348 $452 $86 $219 $0 $8,758 Capitalization357 85 33 3 137 127 162 90 13 98 0 1,105 Amortization expense(188)(99)(33)(3)(143)(122)(155)(79)(12)(40)0 (874)Foreign currency translation and other20 21 5 (1)0 0 0 0 0 0 0 45 Balance, end of year$2,965 $1,840 $446 $51 $909 $641 $1,355 $463 $87 $277 $0 $9,034 2024Aflac JapanAflac U.S.(In millions)CancerMedical and Other HealthLife InsuranceOtherAccidentDisabilityCritical CareHospital IndemnityDental/VisionLife InsuranceOtherTotalDeferred policy acquisition costs:Balance, beginning of year$2,971 $2,041 $491 $56 $917 $625 $1,336 $436 $86 $172 $1 $9,132 Capitalization300 103 36 4 141 129 165 89 12 77 0 1,056 Amortization expense(184)(100)(34)(3)(143)(118)(153)(73)(12)(30)(1)(851)Foreign currency translation and other(311)(211)(52)(5)0 0 0 0 0 0 0 (579)Balance, end of year$2,776 $1,833 $441 $52 $915 $636 $1,348 $452 $86 $219 $0 $8,758 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.

The Company’s board of directors maintains an information security policy directing management to establish and operate a global information security program with the goals of identifying, assessing and monitoring existing and emerging cybersecurity threats and ensuring that the Company’s information assets and data, and the data of its customers, are appropriately protected from loss or theft. The Board has delegated oversight of the Company’s information security program to the Audit and Risk Committee. The Company’s senior officers, including its Global Chief Information Security Officer (GCISO), are responsible for the operation of the global information security program and communicate quarterly with the Audit and Risk Committee on the program, including with respect to the state of the program, compliance with applicable regulations, risks associated with current and evolving threats, and recommendations for changes in the information security program. The global information security program includes a cybersecurity incident response plan that is designed to provide a management framework across Company functions for a coordinated assessment and response to cybersecurity incidents. This framework establishes a protocol to report certain incidents to the GCISO and other senior officers, with the goal of timely assessing such incidents, determining applicable disclosure requirements, and communicating with the Board of Directors as appropriate. The incident response plan directs the executive officers to report certain incidents immediately and directly to the Lead Non-Management Director and/or the Chair of the Audit and Risk Committee. The above framework tracks and allows team members to monitor each incident throughout its lifecycle to help ensure the Company is informed about cybersecurity incidents as they are mitigated and remediated. Post-incident reviews are also performed as appropriate to identify potential additional controls that may feasibly be implemented to help prevent recurrence.As a part of the global information security program, an enterprise cybersecurity risk assessment is performed annually in coordination with the GCISO to identify and assess cybersecurity risks and mitigating controls. The assessment results are incorporated into a risk register managed by the Company’s overall enterprise risk management group to integrate the risks into the overall risk management processes.

INVESTMENTSNet Investment IncomeThe components of net investment income for the years ended December 31 were as follows:(In millions)202520242023Fixed maturity securities$3,017 $2,894 $2,873 Equity securities20 24 28 Commercial mortgage and other loans821 1,046 1,002 Other investments (1)231 130 (70)Short-term investments and cash equivalents230 258 213 Gross investment income4,319 4,352 4,046 Less investment expenses243 236 235 Net investment income$4,076 $4,116 $3,811 (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 HoldingsThe 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. 2025(In millions)AmortizedCostAllowancefor CreditLossesGrossUnrealizedGainsGrossUnrealizedLossesFairValueSecurities available-for-sale, carried at fair value through other comprehensive income:Fixed maturity securities: Yen-denominated:Japan government and agencies$18,063 $0 $41 $3,727 $14,377 Municipalities856 0 5 145 716 Mortgage- and asset-backed securities297 0 1 38 260 Public utilities2,519 0 123 174 2,468 Sovereign and supranational330 0 7 13 324 Banks/financial institutions5,382 0 170 477 5,075 Other corporate5,438 0 357 534 5,261 Total yen-denominated32,885 0 704 5,108 28,481 U.S. dollar-denominated:U.S. government and agencies230 0 2 2 230 Municipalities1,185 0 83 54 1,214 Mortgage- and asset-backed securities3,854 0 239 35 4,058 Public utilities4,292 0 465 107 4,650 Sovereign and supranational57 0 21 0 78 Banks/financial institutions3,672 0 518 21 4,169 Other corporate18,967 0 2,740 597 21,110 Total U.S.

REINSURANCEThe 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.(In millions)202520242023Earned premiums:Direct$13,760 $13,562 $14,318 Ceded(368)(284)(404)Assumed156 162 209 Net earned premiums$13,548 $13,440 $14,123 Benefits and claims, excluding reserve remeasurement:Direct$8,174 $8,098 $8,599 Ceded (249)(153)(147)Assumed62 63 142 Benefits and claims, excluding reserve remeasurement7,987 8,008 8,594 Reserve remeasurement (gains) losses:Direct(683)(558)(394)Ceded(11)0 11 Reserve remeasurement (gains) losses(694)(558)(383)Total benefits and claims, net$7,293 $7,450 $8,211 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.