63 / 188
2015
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In millions)
Securities available for sale,
carried at fair value:
Fixed maturities:
Independent exploration and production
$ 1,270
$ 73
$ 139
$ 1,204
Integrated energy
575
55
27
603
Midstream
1,246
76
144
1,178
Oil field services
1,155
27
228
954
Refiners
460
6
30
436
Government owned - energy related
887
182
25
1,044
Natural gas utilities
344
53
1
396
Total fixed maturities
5,937
472
594
5,815
Equity securities
3
0
0
3
Total securities available for sale
5,940
472
594
5,818
Securities held to maturity,
carried at amortized cost:
Fixed maturities:
Integrated energy
242
9
0
251
Government owned - energy related
249
5
0
254
Natural gas utilities
207
18
0
225
Total fixed maturities
698
32
0
730
Total securities held to maturity
698
32
0
730
Total securities available for sale
and held to maturity
$ 6,638
$ 504
$ 594
$ 6,548
As of December 31, 2016, the weighted-average rating of our total fixed maturity energy exposure is BBB, and 88% of
our exposure to the oil and gas industry was investment grade, compared to 93% at December 31, 2015. Further declines
in oil and gas prices, unexpected increases in supply, or other company specific situations could lead to additional
negative ratings activity from the public rating agencies for energy credit issuers. We do not currently expect our
investments in the energy sector to have a material impact on our results of operations.
Hedging Activities
Net Investment Hedge
Our primary exposure to be hedged is our investment in Aflac Japan, which is affected by changes in the yen/dollar
exchange rate. To mitigate this exposure, we have taken several courses of action. First, Aflac Japan maintains certain
unhedged U.S. dollar-denominated securities, which serve as an economic currency hedge of a portion of our investment
in Aflac Japan. Second, we have designated the majority of the Parent Company’s yen-denominated liabilities (Samurai
and Uridashi notes) as non-derivative hedging instruments and certain foreign currency forwards and options as derivative
hedges of our net investment in Aflac Japan. We make our net investment hedge designation at the beginning of each
quarter. If the total of the designated Parent Company non-derivative and derivatives notional is equal to or less than our
net investment in Aflac Japan, the hedge is deemed to be effective, and the exchange effect on the yen-denominated
liabilities and the change in estimated fair value of the derivatives are reported in the unrealized foreign currency
component of other comprehensive income. We estimate that if the designated net investment hedge positions exceeded
our net investment in Aflac Japan by 10 billion yen, we would report a foreign exchange gain/loss of approximately $1
million for every 1% yen weakening/strengthening in the end-of-period yen/dollar exchange rate. Our net investment
hedge was effective during the years ended December 31, 2016, 2015 and 2014, respectively.
The yen net asset figure calculated for hedging purposes differs from the yen-denominated net asset position as
discussed in the Currency Risk subsection of MD&A. As disclosed in that subsection, the consolidation of the underlying
assets in certain VIEs requires that we derecognize our yen-denominated investment in the VIE and recognize the
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