Aflac (AFL) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	May. 03, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	AFL
Entity Registrant Name	AFLAC INC
Entity Central Index Key	0000004977
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		469,563,139

Consolidated Statements of Earn

Consolidated Statements of Earnings (USD $)
In Millions, except Share data in Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues:
Premiums, principally supplemental health insurance	$4,348	$4,115
Net investment income	726	688
Other-than-temporary impairment losses:
Total other-than-temporary impairment losses	(42)	(238)
Other-than-temporary impairment losses recognized in other comprehensive income	0	4
Other-than-temporary impairment losses realized	(42)	(234)
Sales and redemptions	(21)	225
Derivative gains (losses)	17	0
Total realized investment gains (losses)	(46)	(9)
Other income	37	24
Total revenues	5,065	4,818
Benefits and expenses:
Benefits and claims	2,857	2,811
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs	280	250
Insurance commissions	403	389
Insurance expenses	481	457
Interest expense	33	8
Other operating expenses	37	32
Total acquisition and operating expenses	1,234	1,136
Total benefits and expenses	4,091	3,947
Earnings before income taxes	974	871
Income taxes	338	302
Net earnings	$636	$569
Net earnings per share:
Basic	1.36	1.22
Diluted	1.35	1.22
Weighted-average outstanding common shares used in computing earnings per share (In thousands):
Basic	467,926	466,097
Diluted	472,450	467,132
Cash dividends per share	0.28	0.28

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	3 Months Ended Mar. 31, 2010		12 Months Ended Dec. 31, 2009
Securities available for sale, at fair value:
Equity securities (cost $21 in 2010 and $22 in 2009)	$24		$24
Securities held to maturity, at amortized cost:
Other investments	106		114
Cash and cash equivalents	1,611		2,323
Total investments and cash	73,998		73,192
Receivables	671		764
Accrued investment income	654		649
Deferred policy acquisition costs	8,522		8,533
Property and equipment, at cost less accumulated depreciation	583		593
Other	750	[1]	375
Total assets	85,178		84,106
Policy liabilities:
Future policy benefits	61,530		61,501
Unpaid policy claims	3,298		3,270
Unearned premiums	937		926
Other policyholders' funds	3,739		3,548
Total policy liabilities	69,504		69,245
Notes payable	2,584		2,599
Income taxes	1,629		1,653
Payables for return of cash collateral on loaned securities	486		483
Other	1,988	[2]	1,709
Commitments and contingent liabilities (Note 10)
Total liabilities	76,191		75,689
Shareholders' equity:
Common stock of $.10 par value. In thousands: authorized 1,900,000 shares in 2010 and 2009; issued 661,799 shares in 2010 and 661,209 shares in 2009	66		66
Additional paid-in capital	1,248		1,228
Retained earnings	12,890		12,410
Accumulated other comprehensive income:
Unrealized foreign currency translation gains	412		776
Unrealized gains (losses) on investment securities:
Unrealized gains (losses) on securities not other-than-temporarily impaired	(197)		(621)
Unrealized gains (losses) on other-than-temporarily impaired securities	(8)		(16)
Unrealized gains (losses) on derivatives	(9)		(3)
Pension liability adjustment	(105)		(107)
Treasury stock, at average cost	(5,310)		(5,316)
Total shareholders' equity	8,987		8,417
Total liabilities and shareholders' equity	85,178		84,106
Non Variable Interest Entities
Securities available for sale, at fair value:
Fixed maturities	33,992		36,781	[3]
Perpetual securities	6,218		7,263	[3]
Securities held to maturity, at amortized cost:
Fixed maturities	25,861		26,687	[3]
Variable Interest Entity, Primary Beneficiary
Securities available for sale, at fair value:
Fixed maturities	4,443		0	[3]
Perpetual securities	1,205		0	[3]
Securities held to maturity, at amortized cost:
Fixed maturities	$538		$0	[3]
[1]Includes $292 of derivatives from consolidated VIEs
[2]Includes $521 of derivatives from consolidated VIEs
[3]Due to the prospective application of accounting guidance adopted in 2010, consolidated fixed maturity and perpetual security variable interest entities (VIEs) are only disclosed separately in 2010.

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data in Thousands	Mar. 31, 2010	Dec. 31, 2009
Securities available for sale, Equity securities, cost	$21	$22
Common stock, par value	0.1	0.1
Common stock, shares authorized	1,900,000	1,900,000
Common stock, shares issued	661,799	661,209
Non Variable Interest Entities
Securities available for sale, Fixed maturities, amortized cost	34,467	37,633
Securities available for sale, Perpetual securities, amortized cost	6,083	7,554
Securities held to maturity, Fixed maturities, fair value	25,031	25,828
Variable Interest Entity, Primary Beneficiary
Securities available for sale, Fixed maturities, amortized cost	4,350	0
Securities available for sale, Perpetual securities, amortized cost	1,432	0
Securities held to maturity, Fixed maturities, fair value	457	0
Derivatives from consolidated VIEs, assets	292
Derivatives from consolidated VIEs, liabilities	$521

Consolidated Statements of Shar

Consolidated Statements of Shareholders' Equity (USD $)
In Millions	Common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income	Treasury stock	Total
Balance, beginning of period at Dec. 31, 2008	$66	$1,184	$11,306	($582)	($5,335)
Unrealized foreign currency translation gains (losses) during period, net of income taxes:
Cumulative effect of change in accounting principle, net of income taxes				0
Change in unrealized foreign currency translation gains (losses) during period, net of income taxes				(255)
Cumulative effect of change in accounting principle, net of income taxes			0
Exercise of stock options		0
Purchases of treasury stock					(2)
Unrealized gains (losses) on investment securities during period, net of income taxes and reclassification adjustments:
Cumulative effect of change in accounting principle, net of income taxes				0
Change in unrealized gains (losses) on investment securities not other-than-temporarily impaired, net of income taxes				(1,772)
Change in unrealized gains (losses) on other-than-temporarily impaired investment securities, net of income taxes				(3)
Net earnings			569			569
Share-based compensation		6
Cost of shares issued					13
Unrealized gains (losses) on derivatives during period, net of income taxes				0
Dividends to shareholders			0
Gain (loss) on treasury stock reissued		0
Pension liability adjustment during period, net of income taxes				4
Balance, end of period at Mar. 31, 2009	66	1,190	11,875	(2,608)	(5,324)	5,199
Balance, beginning of period at Dec. 31, 2009	66	1,228	12,410	29	(5,316)	8,417
Unrealized foreign currency translation gains (losses) during period, net of income taxes:
Cumulative effect of change in accounting principle, net of income taxes				(320)
Change in unrealized foreign currency translation gains (losses) during period, net of income taxes				(44)
Cumulative effect of change in accounting principle, net of income taxes			(25)
Exercise of stock options		16
Purchases of treasury stock					(4)
Unrealized gains (losses) on investment securities during period, net of income taxes and reclassification adjustments:
Cumulative effect of change in accounting principle, net of income taxes				180
Change in unrealized gains (losses) on investment securities not other-than-temporarily impaired, net of income taxes				244
Change in unrealized gains (losses) on other-than-temporarily impaired investment securities, net of income taxes				8
Net earnings			636			636
Share-based compensation		5
Cost of shares issued					10
Unrealized gains (losses) on derivatives during period, net of income taxes				(6)
Dividends to shareholders			(131)
Gain (loss) on treasury stock reissued		(1)
Pension liability adjustment during period, net of income taxes				2
Balance, end of period at Mar. 31, 2010	$66	$1,248	$12,890	$93	($5,310)	$8,987

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net earnings	$636	$569
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in receivables and advance premiums	235	257
Increase in deferred policy acquisition costs	(50)	(68)
Increase in policy liabilities	679	734
Change in income tax liabilities	(71)	187
Realized investment (gains) losses	46	12
Other, net	(197)	(42)
Net cash provided (used) by operating activities	1,278	1,649
Securities available for sale:
Fixed maturities sold	712	3,575
Fixed maturities matured or called	150	1,087
Perpetual securities sold	54	0
Securities held to maturity:
Fixed maturities matured or called	1	103
Securities available for sale:
Fixed maturities acquired	(2,593)	(3,615)
Securities held to maturity:
Fixed maturities acquired	(302)	(832)
Cash received as collateral on loaned securities, net	7	(1,582)
Other, net	2	(61)
Net cash provided (used) by investing activities	(1,969)	(1,325)
Cash flows from financing activities:
Purchases of treasury stock	(5)	(2)
Principal payments under debt obligations	(1)	(1)
Dividends paid to shareholders	(131)	(131)
Change in investment-type contracts, net	89	90
Treasury stock reissued	7	4
Other, net	18	(5)
Net cash provided (used) by financing activities	(23)	(45)
Effect of exchange rate changes on cash and cash equivalents	2	(24)
Net change in cash and cash equivalents	(712)	255
Cash and cash equivalents, beginning of period	2,323	941
Cash and cash equivalents, end of period	1,611	1,196
Supplemental disclosures of cash flow information:
Income taxes paid	403	190
Interest paid	10	6
Impairment losses included in realized investment losses	42	234
Treasury stock issued for:
Associate stock bonus	0	6
Share-based compensation grants	$2	$3

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net earnings	$636	$569
Other comprehensive income (loss) before income taxes:
Unrealized foreign currency translation gains (losses) during period	(18)	(109)
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) on investment securities during period	323	(2,763)
Reclassification adjustment for realized (gains) losses on investment securities included in net earnings	63	12
Unrealized gains (losses) on derivatives during period	(10)	1
Pension liability adjustment during period	2	6
Total other comprehensive income (loss) before income taxes	360	(2,853)
Income tax expense (benefit) related to items of other comprehensive income (loss)	156	(827)
Other comprehensive income (loss), net of income taxes	204	(2,026)
Total comprehensive income (loss)	$840	($1,457)

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	3 Months Ended Mar. 31, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Aflac Incorporated (the Parent Company) and its subsidiaries (collectively, the Company) primarily sell supplemental health and life insurance in the United States and Japan. The Companys insurance business is marketed and administered through American Family Life Assurance Company of Columbus (Aflac), which operates in the United States (Aflac U.S.) and as a branch in Japan (Aflac Japan). Most of Aflacs policies are individually underwritten and marketed through independent agents. Aflac U.S. markets and administers group products through Continental American Insurance Company (CAIC). Our insurance operations in the United States and our branch in Japan service the two markets for our insurance business. Aflac Japans revenues, including realized gains and losses on its investment portfolio, accounted for 74% of the Companys total revenues in both the three-month periods ended March31, 2010, and 2009. The percentage of the Companys total assets attributable to Aflac Japan was 85% at both March31, 2010, and December31, 2009. Basis of Presentation We prepare our financial statements in accordance with U.S. generally accepted accounting principles (GAAP). These principles are established primarily by the Financial Accounting Standards Board (FASB). In these Notes to the Consolidated Financial Statements, references to GAAP issued by the FASB are derived from the FASB Accounting Standards CodificationTM (ASC). The preparation of financial statements in conformity with GAAP requires us to make estimates when recording transactions resulting from business operations based on currently available information. The most significant items on our balance sheet that involve a greater degree of accounting estimates and actuarial determinations subject to changes in the future are the valuation of investments, deferred policy acquisition costs, liabilities for future policy benefits and unpaid policy claims, and income taxes. These accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, mortality, morbidity, commission and other acquisition expenses, and terminations by policyholders. As additional information becomes available, or actual amounts are determinable, the recorded estimates will be revised and reflected in operating results. Although some variability is inherent in these estimates, we believe the amounts provided are adequate. The consolidated financial statements include the accounts of the Parent Company, its subsidiaries and those entities required to be consolidated under applicable accounting standards. All material intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of March31, 2010, and December31, 2009, and the consolidated statements of earnings, shareholders equity, cash flows and comprehensive income for the three-month periods ended March31, 2010, a

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION
	3 Months Ended Mar. 31, 2010
BUSINESS SEGMENT INFORMATION	2.BUSINESS SEGMENT INFORMATION The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell supplemental health and life insurance. Operating business segments that are not individually reportable are included in the Other business segments category. We do not allocate corporate overhead expenses to business segments. We evaluate and manage our business segments using a financial performance measure called pretax operating earnings. Our definition of operating earnings excludes the following items from net earnings on an after-tax basis: realized investment gains/losses, the impact from ASC 815 (Derivatives and Hedging), and nonrecurring items. We then exclude income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment as follows: ThreemonthsEndedMarch31, (In millions) 2010 2009 Revenues: Aflac Japan: Earned premiums $3,206 $3,012 Net investment income 593 560 Other income 28 7 Total Aflac Japan 3,827 3,579 Aflac U.S.: Earned premiums 1,142 1,103 Net investment income 132 125 Other income 2 2 Total Aflac U.S. 1,276 1,230 Other business segments 12 11 Total business segments 5,115 4,820 Realized investment gains (losses) (46 ) (9) Corporate 52 35 Intercompany eliminations (56 ) (28) Total revenues $5,065 $4,818 ThreeMonthsEndedMarch31, (In millions) 2010 2009 Pretax earnings: Aflac Japan $821 $681 Aflac U.S. 244 204 Other business segments (1) - Total business segments 1,064 885 Interest expense, noninsurance operations (31) (7) Corporate and eliminations (13) (9) Pretax operating earnings 1,020 869 Realized investment gains (losses) (46) (9) Impact from ASC 815 - (5) Gain on extinguishment of debt - 16 Total earnings before income taxes $974 $871 Income taxes applicable to pretax operating earnings $354 $302 Effect of foreign currency translation on operating earnings 22 41 Assets were as follows: (In millions) March31, 2010 December31, 2009 Assets: Aflac Japan $72,384 $71,639 Aflac U.S. 12,198 11,779 Other business segments 145 142 Total business segments 84,727 83,560 Corporate 11,616 11,261 Intercompany eliminations (11,165) (10,715) Total assets $85,178 $84,106

INVESTMENTS

INVESTMENTS
	3 Months Ended Mar. 31, 2010
INVESTMENTS	3. INVESTMENTS Investment Holdings The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables. March31, 2010 (In millions) Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities available for sale, carried at fair value: Fixed maturities: Yen-denominated: Japan government and agencies $12,308 $375 $123 $12,560 Mortgage- and asset-backed securities 1,097 11 16 1,092 Public utilities 2,252 116 105 2,263 Sovereign and supranational 825 28 90 763 Banks/financial institutions 4,073 109 660 3,522 Other corporate 4,991 117 534 4,574 Total yen-denominated 25,546 756 1,528 24,774 Dollar-denominated: U.S. government and agencies 139 4 2 141 Municipalities 724 7 25 706 Mortgage- and asset-backed securities(1) 693 73 57 709 Collateralized debt obligations 2 2 - 4 Public utilities 1,975 165 27 2,113 Sovereign and supranational 368 53 7 414 Banks/financial institutions 3,451 109 234 3,326 Other corporate 5,919 435 106 6,248 Total dollar-denominated 13,271 848 458 13,661 Total fixed maturities 38,817 1,604 1,986 38,435 Perpetual securities: Yen-denominated: Banks/financial institutions 6,808 437 552 6,693 Other corporate 288 30 - 318 Dollar-denominated: Banks/financial institutions 419 41 48 412 Total perpetual securities 7,515 508 600 7,423 Equity securities 21 4 1 24 Total securities available for sale $46,353 $2,116 $2,587 $45,882 (1) Includes $12 million of other-than-temporary non-credit-related losses March31, 2010 (In millions) Costor Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities held to maturity, carried at amortized cost: Fixed maturities: Yen-denominated: Japan government and agencies $215 $5 $- $220 Municipalities 357 1 6 352 Mortgage- and asset-backed securities 165 2 7 160 Public utilities 5,395 153 154 5,394 Sovereign and supranational 4,203 143 160 4,186 Banks/financial institutions 11,655 133 1,033 10,755 Other corporate 4,409 135 123 4,421 Total yen-denominated 26,399 572 1,483 25,488 Total securities held to maturity $26,399 $572 $1,483 $25,488 December31, 2009 (In millions) Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities available for sale, carried at fair value: Fixed maturities: Yen-denominated: Japan government and agencies $11,710 $405 $174 $

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS
	3 Months Ended Mar. 31, 2010
DERIVATIVE INSTRUMENTS	4. DERIVATIVE INSTRUMENTS We do not use derivative financial instruments for trading purposes, nor do we engage in leveraged derivative transactions. The majority of our freestanding derivatives are interest rate, foreign currency and credit default swaps that are associated with investments in special-purpose entities, including VIEs where we are the primary beneficiary. The remaining derivatives are interest rate swaps associated with our variable interest rate yen-denominated debt. Derivative Types Interest rate and credit default swaps involve the periodic exchange of cash flows with other parties, at specified intervals, calculated using agreed upon rates or other financial variables and notional principal amounts. Generally, no cash or principal payments are exchanged at the inception of the contract. Typically, at the time a swap is entered into, the cash flow streams exchanged by the counterparties are equal in value. Interest rate swaps are primarily used to convert interest receipts on floating-rate fixed maturity securities contracts to fixed rates. These derivatives are predominantly used to better match cash receipts from assets with cash disbursements required to fund liabilities. Credit default swaps are used to assume credit risk related to an individual security or an index. These contracts entitle the consolidated VIE to receive a periodic fee in exchange for an obligation to compensate the derivative counterparty should the referenced security issuers experience a credit event, as defined in the contract. The consolidated VIE is also exposed to credit risk due to embedded derivatives associated with credit-linked notes. Foreign currency swaps exchange an initial principal amount in two currencies, agreeing to re-exchange the currencies at a future date, at an agreed upon exchange rate. There may also be a periodic exchange of payments at specified intervals calculated using the agreed upon rates and exchanged principal amounts. Foreign currency swaps are used primarily in the consolidated VIEs in our Aflac Japan portfolio to convert foreign denominated cash flows related to certain investment receipts and liability payments to yen, the functional currency of Aflac Japan, in order to minimize cash flow fluctuations due to changes in non-yen currency rates. Credit Risk Assumed through Derivatives Our exposure to credit risk in the event of nonperformance by counterparties to our interest rate swaps associated with our variable interest rate Uridashi notes as of March31, 2010, was immaterial. For the interest rate, foreign currency, and credit default swaps associated with our VIE investments for which we are the primary beneficiary, we do not bear the risk of loss for counterparty default. We are not a direct counterparty to those contracts. The consolidated VIE enters into credit default swaps that assume credit risk from an asset pool in order to synthetically replicate investment transactions. The consolidated VIE will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment by delivery of associated collateral, which consists of highly rated asset-back

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	3 Months Ended Mar. 31, 2010
FAIR VALUE MEASUREMENTS	5.FAIR VALUE MEASUREMENTS We determine the fair values of our debt, derivative, perpetual and privately issued equity securities primarily using three pricing approaches or techniques: quoted market prices readily available from public exchange markets, a discounted cash flow (DCF) pricing model, and price quotes we obtain from outside brokers. Our DCF pricing model utilizes various market inputs we obtain from both active and inactive markets. The estimated fair values developed by the DCF pricing models are most sensitive to prevailing credit spreads, the level of interest rates (yields) and interest rate volatility. Credit spreads are derived based on pricing data obtained from investment brokers and take into account the current yield curve, time to maturity and subordination levels for similar securities or classes of securities. We validate the reliability of the DCF pricing models periodically by using the models to price investments for which there are quoted market prices from active and inactive markets or, in the alternative, are quoted by our custodian for the same or similar securities. The pricing data and market quotes we obtain from outside sources are reviewed internally for reasonableness. If a fair value appears unreasonable, the inputs are re-examined and the value is confirmed or revised. In recent years, we have noted a continued reduction in the availability of pricing data from market sources. This decline is due largely to the contraction of liquidity in the global markets and a reduction in the overall number of sources to provide pricing data. As a result, we have noted that available pricing data has become more volatile. The reduction in available pricing sources coupled with the increase in price volatility has increased the degree of management judgment required in the final determination of fair values. We assess the reasonableness of the pricing data we receive by comparing it to relevant market indices and other performance measurements. The final pricing data used to determine fair values is based on managements judgment. Fair Value Hierarchy GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels. Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets. Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets. Level 3 valuations reflect valuations in which one or more of the significant valuation inputs are not observable in an active market. The vast majority of our financial instruments subject to the classification provisions of GAAP relate to our investment securities classified as securities available for sale in our investment portfolio. We determine the fair value of our securities available for sale using several sources or techniques based on the type

NOTES PAYABLE

NOTES PAYABLE
	3 Months Ended Mar. 31, 2010
NOTES PAYABLE	6.NOTES PAYABLE A summary of notes payable follows: (In millions) March31, 2010 December31, 2009 8.50% senior notes due May 2019 $ 850 $ 850 6.90% senior notes due December 2039 396 (1) 396 (1) Yen-denominated Uridashi notes: 1.52% notes due September 2011 (principal amount 15 billion yen) 161 163 2.26% notes due September 2016 (principal amount 8 billion yen) 86 87 Variable interest rate notes due September 2011 (.68% at March 2010, principal amount 20 billion yen) 215 217 Yen-denominated Samurai notes: .71% notes due July 2010 (principal amount 39.4 billion yen) 423 428 1.87% notes due June 2012 (principal amount 26.6 billion yen) 286 289 Yen-denominated loans: 3.60% loan due July 2015 (principal amount 10 billion yen) 107 109 3.00% loan due August 2015 (principal amount 5 billion yen) 54 54 Capitalized lease obligations payable through 2015 6 6 Total notes payable $ 2,584 $ 2,599 (1) $400 issuance net of a $4 underwriting discount that is being amortized over the life of the notes We have no restrictive financial covenants related to our notes payable. We were in compliance with all of the covenants of our notes payable at March31, 2010. No events of default or defaults occurred during the three months ended March31, 2010. For additional information, see Notes 4 and 7 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December31, 2009.

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY
	3 Months Ended Mar. 31, 2010
SHAREHOLDERS' EQUITY	7.SHAREHOLDERS EQUITY The following table is a reconciliation of the number of shares of the Companys common stock for the three-month periods ended March31. (In thousands of shares) 2010 2009 Common stock - issued: Balance, beginning of period 661,209 660,035 Exercise of stock options and issuance of restricted shares 590 391 Balance, end of period 661,799 660,426 Treasury stock: Balance, beginning of period 192,641 193,420 Purchases of treasury stock: Open market - - Other 94 85 Dispositions of treasury stock: Shares issued to AFL Stock Plan - (355 ) Exercise of stock options (270 ) (13 ) Other (88 ) (135 ) Balance, end of period 192,377 193,002 Shares outstanding, end of period 469,422 467,424 Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic earnings per share. The following table presents the approximate number of share-based awards to purchase shares, on a weighted-average basis, that were considered to be anti-dilutive and were excluded from the calculation of diluted earnings per share for the three-month periods ended March31. (In thousands) 2010 2009 Anti-dilutive share-based awards 2,450 15,367 As of March31, 2010, a remaining balance of 32.4million shares of our common stock was available for purchase under share repurchase authorizations by our board of directors. The 32.4million shares were comprised of 2.4million shares remaining from a board authorization in 2006 and 30.0million shares remaining from an authorization by the board of directors in 2008.

SHARE-BASED TRANSACTIONS

SHARE-BASED TRANSACTIONS
	3 Months Ended Mar. 31, 2010
SHARE-BASED TRANSACTIONS	8.SHARE-BASED TRANSACTIONS The Company has two long-term incentive compensation plans. The first plan, which expired in February 2007, is a stock option plan which allowed grants for incentive stock options (ISOs) to employees and non-qualifying stock options (NQSOs) to employees and non-employee directors. Options granted before the plans expiration date remain outstanding in accordance with their terms. The second long-term incentive plan allows awards to Company employees for ISOs, NQSOs, restricted stock, restricted stock units, and stock appreciation rights. Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights. As of March31, 2010, approximately 16.7million shares were available for future grants under this plan, and the only performance-based awards issued and outstanding were restricted stock awards. 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. The following table provides information on stock options outstanding and exercisable at March31, 2010. Stock Option Shares (inthousands) Weighted-Average Remaining Term (in years) Aggregate Intrinsic Value (inmillions) Weighted-Average Exercise Price Per Share Outstanding 16,777 5.4 $270 $38.79 Exercisable 12,769 4.3 213 37.82 We received cash from the exercise of stock options in the amount of $13.4 million during the first quarter of 2010, compared with $.4 million in the first quarter of 2009. The tax benefit realized as a result of stock option exercises and restricted stock releases was $11 million in the first quarter of 2010, compared with $2 million in the first quarter of 2009. As of March31, 2010, total compensation cost not yet recognized in our financial statements related to restricted-share-based awards was $32 million, of which $15 million (626 thousand shares) was related to restricted-share-based awards with a performance-based vesting condition. We expect to recognize these amounts over a weighted-average period of approximately two years. There are no other contractual terms covering restricted stock awards once vested. For additional information on our long-term share-based compensation plans and the types of share-based awards, see Note 10 of the Notes to the Consolidated Financial Statements included in our annual report to shareholders for the year ended December31, 2009.

BENEFIT PLANS

BENEFIT PLANS
	3 Months Ended Mar. 31, 2010
BENEFIT PLANS	9.BENEFIT PLANS Our basic employee defined-benefit pension plans cover substantially all of our full-time employees in the United States and Japan. The components of retirement expense for the Japanese and U.S. pension plans were as follows: ThreeMonthsEndedMarch31, 2010 2009 (In millions) Japan U.S. Japan U.S. Components of net periodic benefit cost: Service cost $ 3 $ 3 $ 3 $ 2 Interest cost 1 3 1 3 Expected return on plan assets (1) (3) (1) (3) Amortization of net actuarial loss 1 1 1 1 Net periodic benefit cost $ 4 $ 4 $ 4 $ 3 During the three months ended March31, 2010, Aflac Japan contributed approximately $4 million (using the March31, 2010, exchange rate) to the Japanese pension plan, and Aflac U.S. did not make a contribution to the U.S. pension plan. For additional information regarding our Japanese and U.S. benefit plans, see Note 12 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December31, 2009.

COMMITMENTS AND CONTINGENT LIAB

COMMITMENTS AND CONTINGENT LIABILITIES
	3 Months Ended Mar. 31, 2010
COMMITMENTS AND CONTINGENT LIABILITIES	10.COMMITMENTS AND CONTINGENT LIABILITIES We are a defendant in various lawsuits considered to be in the normal course of business. Members of our senior legal and financial management teams review litigation on a quarterly and annual basis. The final results of any litigation 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, we believe the outcome of pending litigation will not have a material adverse effect on our financial position, results of operations, or cash flows.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS
	3 Months Ended Mar. 31, 2010
SUBSEQUENT EVENTS	11.SUBSEQUENT EVENTS At March31, 2010, we had Greek exposure of $1.3 billion, at amortized cost, available-for-sale fixed maturity investments comprised of $1.0 billion invested in Greek financial institutions and $280 million in Greek sovereign debt.Subsequent to March31, 2010, the Greek financial institutions were downgraded to below investment grade.We continue to believe that these issuers have the ability to meet their obligations to us, and we have the intent to hold these investments to recovery in value.As a result, we have not recognized an other-than-temporary impairment for these investments as of March31, 2010.