AFLAflac

Policy Liabilities, page 139 1. Please tell us how much of the favorable $465 million in claims development for prior years relates to the lines of business in Japan, separately breaking out the portion related to the impact of foreign exchange. Also, provide us a description of those lines and an analysis explaining with more specificity the reason for the favorable development unrelated to foreign exchange.

See Exhibit A attached for proposed disclosure enhancements to our Form 10-Q Filing for the quarter ended June 30, 2017 and prospective filings.

Please tell us how much of the favorable $465 million in claims development for prior years relates to the lines of business in Japan, separately breaking out the portion related to the impact of foreign exchange.

The favorable claims development of $465 million is comprised of approximately $339 million from our third sector insurance lines of business in Japan and approximately $126 million from our U.S. business.

Rest of the answer

Excluding the impact of foreign exchange of approximately $35 million, the favorable claim development attributable to our third sector insurance lines of business in Japan was approximately $304 million, representing approximately 66% of the total. We establish and carry, as a liability, reserves for incurred but not reported claims (IBNR) based on our “best estimate” each reporting period of how much will ultimately be required to pay for claims. We calculate these reserves using various assumptions and estimates. These assumptions and estimates are inherently uncertain. Accordingly, we cannot determine with precision the ultimate amounts that we will pay, or the timing of payment of actual claims. We evaluate our actual experience compared to our best estimate assumptions, which at times may indicate our assumptions and related reserves may need to be adjusted. As a result, we would incur an earnings impact in the period in which we determine such an increase or decrease exists, and these changes reflect our updated “best estimate” of reserves in the current period versus the prior period.

Also, provide us a description of those lines and an analysis explaining with more specificity the reason for the favorable development unrelated to foreign exchange.

Set forth below is a description of our third sector insurance lines of business in Japan, and the amounts include the impact of foreign exchange.

1. Cancer: approximately $184 million

2. Medical: approximately $120 million

3. Other: approximately $35 million

Cancer:

These products provide lump-sum and daily indemnity amounts to cover hospitalization and treatments related to the incidence of cancer. The products can include death benefits and cash surrender values which are available upon voluntary surrender of the policy.

The approximately $184 million in favorable claims development attributable to our cancer line of business in Japan is comprised of the following:

a.

Cancer Morbidity Trends - Approximately $145 million of the favorable claims development was attributable to major benefits, such as hospital, death, first occurrence and chemotherapy. We believe that factors such as advances in early-detection techniques, the increased use of pathological diagnosis rather than clinical exams, the use of outpatient services, and a trend toward more hospital stays of shorter duration have influenced cancer treatment in Japan in recent years. As such, our Japan cancer morbidity trends have been favorable in recent years, driven by shorter hospital average length of stays resulting in current period favorable experience versus prior year best estimate. Our experience has shown continued favorable movements in the current period, not only from established benefits such as hospital, but also newer benefits, such as chemotherapy. We have reflected these continued trends as experience has developed in our IBNR estimates for new incurrals. Reflecting these trends, IBNR for prior year incurrals will naturally adjust in a favorable direction and prior year liabilities will develop favorably as lower amounts and shorter durations of claims are paid than previously estimated.

b.

Other Cancer (primarily Cancer post-36 months) - Approximately $39 million of the favorable claims development was attributable to the completion of our current period best estimate analysis as compared to prior period. The analysis concluded that our IBNR for claims that were incurred more than 36 months prior could be reduced and we reduced these reserves consistent with the results of the analysis.

Medical:

These products provide daily indemnity benefit for hospital benefits, outpatient treatments and surgery lump-sum amounts. The products cover all causes including sickness and accidents.

Main drivers for favorable development are as follows:

Consistent with developments in Japan noted above, we have observed a continued trend toward more hospital stays of shorter duration in current year versus prior year. The approximately $120 million in favorable claims development attributable to our medical line of business in Japan is comprised of the following:

Medical Morbidity Trends - Approximately $96 million of the favorable claims development was attributable to major benefits, such as hospital and surgery. Overall, our medical line of business is newer than our cancer line, as we didn’t enter this line materially until 2002. Therefore, we have allowed more time to develop credible experience in updating our best estimate. Nevertheless, overall medical trends from our major benefits of hospitalization and surgery have been favorable in relation to our prior year best estimate. Reflecting these trends, IBNR for prior year incurrals will naturally adjust in a favorable direction and prior year liabilities will develop favorably as lower amounts and shorter durations of claims are paid than previously estimated.

Other - Approximately $24 million of the favorable claims development was attributable to the completion of our current period best estimate analysis as compared to prior period. As part of this analysis, we concluded that our IBNR for claims that were incurred more than 36 months prior could be reduced and we reduced these reserves consistent with the results of the analysis.

Other:

This includes other Japan miscellaneous accident and health products. The overall impact was not material compared to Cancer and Medical.

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