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these derivatives and the related hedged items in current earnings within derivative and other gains (losses). The change
in the fair value of the interest rate swaptions related to the time value of the option is excluded from the assessment of
hedge effectiveness.
The following table presents the gains and losses on derivatives and the related hedged items in fair value hedges for
the years ended December 31.
Fair Value Hedging Relationships
(In millions)
Hedging Derivatives
Hedged
Items
Hedging
Derivatives
Hedged Items
Total
Gains
(Losses)
Gains
(Losses)
Excluded
from
Effectiveness
Testing
Gains
(Losses)
Included in
Effectiveness
Testing
Gains
(Losses)
Ineffectiveness
Recognized for
Fair Value
Hedge
2016:
Foreign currency
forwards
Fixed-maturity
securities and
equity securities
$ 207 $
(338)
$
545 $ (566) $
(21)
Foreign currency
options
Fixed-maturity
securities
(95)
(18)
(77)
70
(7)
2015:
Foreign currency
forwards
Fixed-maturity
securities
$ (133) $
(136)
$
3 $
(5) $
(2)
Foreign currency
options
Fixed-maturity
securities
(4)
3
(7)
7
0
Interest rate
swaptions
Fixed-maturity
securities
(95)
19
(114)
99
(15)
2014:
Foreign currency
forwards
Fixed-maturity
securities
$ (1,835) $
(38)
$
(1,797) $ 1,819 $
22
Foreign currency
options
Fixed-maturity
securities
(41)
(4)
(37)
38
1
Interest rate
swaptions
Fixed-maturity
securities
(318)
(36)
(282)
316
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Net Investment Hedge
Our primary exposure to be hedged is our net investment in Aflac Japan, which is affected by changes in the yen/
dollar exchange rate. To mitigate this exposure, we have designated the Parent Company's yen-denominated liabilities
(see Note 9) as non-derivative hedges and designated foreign currency forwards and options as derivative hedges of the
foreign currency exposure of our net investment in Aflac Japan.
We used foreign exchange forwards and options to hedge foreign exchange risk on 114.0 billion yen of profit
repatriation received from Aflac Japan in 2016. As of December 31, 2016, we had entered into foreign exchange forwards
and options as part of a hedge on 122.6 billion yen of future profit repatriation.
Our net investment hedge was effective for the years ended December 31, 2016, 2015 and 2014.
Non-qualifying Strategies
For our derivative instruments in consolidated VIEs that do not qualify for hedge accounting treatment, all changes in
their fair value are reported in current period earnings within derivative and other gains (losses). The amount of gain or
loss recognized in earnings for our VIEs is attributable to the derivatives in those investment structures. While the change
in value of the swaps is recorded through current period earnings, the change in value of the available-for-sale fixed-
maturity or perpetual securities associated with these swaps is recorded through other comprehensive income.
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