Aflac (AFL) risk factors, FY2025 10-K

Aflac's FY2025 10-K, filed Feb 25, 2026, lists 27 risk factors. Against the prior year's 25: 4 new, 2 dropped, 8 substantially reworded.

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Risk factors listed
270 groups
New this year
4vs 25 last year
Dropped
2since the prior 10-K
Substantially reworded
8of those kept
Section length
9k wordsItem 1A

What the changes say

  • Aflac Japan continues to represent the vast majority of assets and revenues, creating heavy reliance on the yen-dollar exchange rate and hedging strategies.

What changed since the prior 10-K

New

  • New

    pay dividends to the Parent Company. The Company has historically maintained and currently maintains the size of the unhedged portfolio at levels below the economic equity surplus in Aflac Japan, but this strategy may not be successful

    The Parent Company uses forward contracts for hedging Aflac Japan dividend cash flows, and a significantly stronger Japanese yen could cause cash strain from collateral and settlement requirements.

  • New

    These hedging activities are limited in scope and the strategies may not be successful

    Hedging activities are limited in scope and may not succeed in protecting against currency and investment risks.

  • New

    Company cannot provide assurance that its risk management framework, including the underlying assumptions or strategies, will be accurate and effective

    The growing number and complexity of models used for pricing, reserves, and capital requirements increase exposure to design, implementation, and input errors.

  • New

    Catastrophic events could adversely affect the Company's financial condition and results of operations as well as the availability of the Company’s infrastructure and systems

    Catastrophic events like pandemics, natural disasters, or war could cause volatility in financial results, reduce profitability, and impact 2026 outlook guidance.

Dropped

  • Dropped

    complexity of models the Company utilizes expands, increasing the Company's exposure to error in the design, implementation or use of models, including the associated input data and assumptions

  • Dropped

    Catastrophic events, including those as a result of climate change or major public health issues, could adversely affect the Company's financial condition and results of operations as well as the availability of the Company’s infrastructure and systems

Reworded

  • 100% rewritten

    For regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by changes in the yen/dollar exchange rate and could negatively impact Aflac Japan's earnings and the corresponding dividends and capital deployment

    Updated to describe specific regulatory accounting requirements for impairments triggered by yen-dollar exchange rates and interest rate impacts on hedging U.S. assets.

    Was: For regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by changes in the rate of exchange between the yen and U.S. dollar and could negatively impact Aflac Japan's earnings and the corresponding dividends and capital deployment

  • 87% rewritten

    The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate

    Added explicit mention that Japanese yen weakening suppresses current year results relative to prior years and negatively impacts equity.

  • 39% rewritten

    The Company's risk management policies and procedures may prove to be ineffective and leave the Company exposed to unidentified or unanticipated risk, which could adversely affect the Company's businesses or result in losses

    Retained the risk text regarding limitations in enterprise risk management frameworks and potential unexpected losses.

  • 38% rewritten

    Interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality, integrity or privacy of sensitive data residing on such systems, could harm the Company's business

    Retained the risk text concerning IT system interruptions, cyber attacks, and protection of confidential policyholder data.

  • 38% rewritten

    The Company's concentration of business in Japan poses risks to its operations and financial condition

    Updated financial figures showing Aflac Japan's adjusted revenues accounted for 53% in 2025 compared with 55% in 2024 and 60% in 2023.

  • 33% rewritten

    The determination of the amount of expected credit losses recorded on the Company's investments is based on significant valuation judgments and could materially impact its results of operations or financial position

    Terminology changed from estimating expected lifetime credit losses to estimating an allowance for credit losses on amortized cost investments.

  • 29% rewritten

    The Company aims to match both the duration and currency of its assets with its liabilities. This is very difficult for Aflac Japan and Aflac Re due to the lack of available long-dated Japanese yen-denominated fixed income instruments beyond JGBs

    Added wording noting that during periods of market stress, certain newly added U.S. dollar-denominated asset classes face liquidity constraints.

    Was: The Company aims to match both the duration and currency of its assets with its liabilities. This is very difficult for Aflac Japan and Aflac Re due to the lack of available long-dated yen-denominated fixed income instruments beyond JGBs

  • 27% rewritten

    As a holding company, the Parent Company depends on the ability of its subsidiaries to transfer funds to it to meet its debt service and other obligations and to pay dividends on its common stock

    Retained holding company dependence on operating subsidiary dividends and Nebraska insurance regulations restricting dividend payments.

All 27 risk factors

Headings as the filing states them, in filing order.

Other

  1. 01The Company's concentration of business in Japan poses risks to its operations and financial condition38% rewritten
  2. 02The Company aims to match both the duration and currency of its assets with its liabilities. This is very difficult for Aflac Japan and Aflac Re due to the lack of available long-dated Japanese yen-denominated fixed income instruments beyond JGBs29% rewritten
  3. 03The Company is exposed to foreign currency fluctuations in the yen/dollar exchange rate87% rewritten
  4. 04For regulatory accounting purposes, there are certain requirements for realizing impairments that could be triggered by changes in the yen/dollar exchange rate and could negatively impact Aflac Japan's earnings and the corresponding dividends and capital deployment100% rewritten
  5. 05pay dividends to the Parent Company. The Company has historically maintained and currently maintains the size of the unhedged portfolio at levels below the economic equity surplus in Aflac Japan, but this strategy may not be successfulNew
  6. 06These hedging activities are limited in scope and the strategies may not be successfulNew
  7. 07The valuation of the Company's investments and derivatives includes methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may adversely affect the Company's results of operations or financial condition
  8. 08The determination of the amount of expected credit losses recorded on the Company's investments is based on significant valuation judgments and could materially impact its results of operations or financial position33% rewritten
  9. 09Any decrease in the Company's financial strength or debt ratings may have an adverse effect on its competitive position and access to liquidity and capital
  10. 10A decline in the creditworthiness of other financial institutions could adversely affect the Company
  11. 11Sales of the Company's products and services are dependent on its ability to attract, retain and support a network of qualified sales associates, brokers and employees in the U.S. and sales associates and other distribution partners in Japan
  12. 12If future policy benefits, claims or expenses exceed those anticipated in establishing premiums and reserves, the Company's financial results would be adversely affected
  13. 13The success of the Company's business depends in part on effective information technology systems, on continuing to develop and implement improvements in technology, and on successful execution of revenue growth and expense management initiatives
  14. 14Interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality, integrity or privacy of sensitive data residing on such systems, could harm the Company's business38% rewritten
  15. 15As a holding company, the Parent Company depends on the ability of its subsidiaries to transfer funds to it to meet its debt service and other obligations and to pay dividends on its common stock27% rewritten
  16. 16The Company's risk management policies and procedures may prove to be ineffective and leave the Company exposed to unidentified or unanticipated risk, which could adversely affect the Company's businesses or result in losses39% rewritten
  17. 17Company cannot provide assurance that its risk management framework, including the underlying assumptions or strategies, will be accurate and effectiveNew
  18. 18The use of third-party vendors to support the Company's operations makes the Company susceptible to the operational risk of those third parties, which could lower revenues, increase costs, reduce profits, disrupt business, or damage the Company’s reputation
  19. 19Tax rates applicable to the Company may change
  20. 20Extensive regulation and changes in legislation can impact profitability and growth
  21. 21Competition could adversely affect the Company's ability to increase or maintain its market share or profitability
  22. 22Catastrophic events could adversely affect the Company's financial condition and results of operations as well as the availability of the Company’s infrastructure and systemsNew
  23. 23Events, including those external to the Company's operations, could damage the Company's reputation
  24. 24The Company depends heavily on key management personnel, and the loss of services of one or more of its key executives could harm the Company's business
  25. 25Changes in accounting standards issued by the Financial Accounting Standards Board (FASB) or other standard-setting bodies may adversely affect the Company's financial statements
  26. 26The Company faces risks related to litigation, regulatory investigations and inquiry and other matters
  27. 27Allegations or determinations of agent misclassification could adversely affect the Company’s results of operations, financial condition and liquidity

Other Aflac 10-Ks

  • FY2024 10-K risk factors
    25 risks

    Aflac's business is heavily concentrated in Japan, representing 55% of adjusted revenues and 77% of total assets.

    Filed Feb 26, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.