UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                         

Commission File Number: 001-07434

Aflac Incorporated

(Exact name of registrant as specified in its charter)

GEORGIA		58-1167100
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1932 Wynnton Road, Columbus, Georgia		31999
(Address of principal executive offices)		(ZIP Code)

706.323.3431

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          þ Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		August 3, 2007
Common Stock, $.10 Par Value		488,641,617 shares

AFLAC INCORPORATED AND SUBSIDIARIES
Table of Contents

		Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Consolidated Statements of Earnings			1
Three Months Ended June 30, 2007, and 2006
Six Months Ended June 30, 2007, and 2006
Consolidated Balance Sheets			2
June 30, 2007 and December 31, 2006
Consolidated Statements of Shareholders’ Equity			4
Six Months Ended June 30, 2007, and 2006
Consolidated Statements of Cash Flows			5
Six Months Ended June 30, 2007, and 2006
Consolidated Statements of Comprehensive Income			7
Three Months Ended June 30, 2007, and 2006
Six Months Ended June 30, 2007, and 2006
Notes to the Consolidated Financial Statements			8
Review by Independent Registered Public Accounting Firm			19
Report of Independent Registered Public Accounting Firm			20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			46
Item 4. Controls and Procedures.			46
PART II. OTHER INFORMATION:
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			47
Item 4. Submission of Matters to a Vote of Security Holders.			48
Item 6. Exhibits.			49

Items other than those listed above are omitted because they are not required or are not applicable.

  i  

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Aflac Incorporated and Subsidiaries
Consolidated Statements of Earnings

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(In millions, except for share and per-share amounts - Unaudited)		2007				2006				2007				2006
Revenues:
Premiums, principally supplemental health insurance		$	3,162			$	3,093			$	6,318			$	6,098
Net investment income			572				542				1,138				1,066
Realized investment gains (losses)			15				50				27				64
Other income			15				12				32				28
Total revenues			3,764				3,697				7,515				7,256
Benefits and expenses:
Benefits and claims			2,266				2,243				4,524				4,424
Acquisition and operating expenses:
Amortization of deferred policy acquisition costs			155				143				309				288
Insurance commissions			326				328				655				650
Insurance expenses			351				331				688				638
Interest expense			6				5				14				10
Other operating expenses			25				23				54				47
Total acquisition and operating expenses			863				830				1,720				1,633
Total benefits and expenses			3,129				3,073				6,244				6,057
Earnings before income taxes			635				624				1,271				1,199
Income taxes			220				216				440				416
Net earnings		$	415			$	408			$	831			$	783
Net earnings per share:
Basic		$	.85			$	.82			$	1.70			$	1.57
Diluted			.84				.81				1.68				1.55
Common shares used in computing earnings per share (In thousands):
Basic			487,900				496,951				489,219				497,491
Diluted			494,227				503,286				495,435				503,927
Cash dividends per share		$	.205			$	.13			$	.39			$	.26

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets

		June 30,				December 31,
(In millions - Unaudited)		2007				2006
Assets:
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities (amortized cost $27,676 in 2007 and $27,099 in 2006)		$	28,612			$	28,805
Perpetual debentures (amortized cost $4,027 in 2007 and $4,341 in 2006)			4,015				4,408
Equity securities (cost $15 in 2007 and $16 in 2006)			24				25
Securities held to maturity, at amortized cost:
Fixed maturities (fair value $13,780 in 2007 and $13,369 in 2006)			14,249				13,483
Perpetual debentures (fair value $3,846 in 2007 and $4,024 in 2006)			3,842				3,990
Other investments			49				58
Cash and cash equivalents			1,406				1,203
Total investments and cash			52,197				51,972
Receivables, primarily premiums			523				535
Accrued investment income			559				538
Deferred policy acquisition costs			6,096				6,025
Property and equipment, at cost less accumulated depreciation			457				458
Other			282				277
Total assets		$	60,114			$	59,805

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets (continued)

		June 30,				December 31,
(In millions, except for share and per-share amounts - Unaudited)		2007				2006
Liabilities and shareholders’ equity:
Liabilities:
Policy liabilities:
Future policy benefits		$	41,079			$	40,841
Unpaid policy claims			2,404				2,390
Unearned premiums			631				645
Other policyholders’ funds			1,608				1,564
Total policy liabilities			45,722				45,440
Notes payable			1,392				1,426
Income taxes			2,360				2,462
Payables for return of cash collateral on loaned securities			1,082				807
Other			1,368				1,329
Commitments and contingent liabilities (Note 10)
Total liabilities			51,924				51,464
Shareholders’ equity:
Common stock of $.10 par value. In thousands: authorized 1,000,000 shares; issued 657,215 shares in 2007 and 655,715 shares in 2006			66				66
Additional paid-in capital			978				895
Retained earnings			10,034				9,304
Accumulated other comprehensive income:
Unrealized foreign currency translation gains (losses)			(18	)			54
Unrealized gains on investment securities			879				1,450
Pension liability adjustment			(76	)			(78	)
Treasury stock, at average cost			(3,673	)			(3,350	)
Total shareholders’ equity			8,190				8,341
Total liabilities and shareholders’ equity		$	60,114			$	59,805
Shareholders’ equity per share		$	16.77			$	16.93

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders’ Equity

		Six Months Ended June 30,
(In millions - Unaudited)		2007				2006
Common stock:
Balance, beginning of period		$	66			$	65
Exercise of stock options			-				1
Balance, end of period			66				66
Additional paid-in capital:
Balance, beginning of period			895				791
Exercise of stock options, including income tax benefits			41				20
Share-based compensation			19				16
Gain on treasury stock reissued			23				19
Balance, end of period			978				846
Retained earnings:
Balance, beginning of period			9,304				8,048
Cumulative effect of change — adoption of SAB 108			-				139
Net earnings			831				783
Dividends to shareholders			(101	)			(130	)
Balance, end of period			10,034				8,840
Accumulated other comprehensive income:
Balance, beginning of period			1,426				1,957
Change in unrealized foreign currency translation gains (losses) during period, net of income taxes			(72	)			36
Change in unrealized gains (losses) on investment securities during period, net of income taxes			(571	)			(1,337	)
Pension liability adjustment during period, net of income taxes			2				-
Balance, end of period			785				656
Treasury stock:
Balance, beginning of period			(3,350	)			(2,934	)
Purchases of treasury stock			(355	)			(197	)
Cost of shares issued			32				31
Balance, end of period			(3,673	)			(3,100	)
Total shareholders’ equity		$	8,190			$	7,308

Amounts have been adjusted for adoption of SAB 108 as of January 1, 2006.
See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows

		Six Months Ended June 30,
(In millions - Unaudited)		2007				2006
Cash flows from operating activities:
Net earnings		$	831			$	783
Adjustments to reconcile net earnings to net cash provided by operating   activities:
Change in receivables and advance premiums			9				(4	)
Increase in deferred policy acquisition costs			(203	)			(216	)
Increase in policy liabilities			1,569				1,598
Change in income tax liabilities			231				45
Realized investment (gains) losses			(27	)			(64	)
Other, net			(81	)			37
Net cash provided by operating activities			2,329				2,179
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold			320				1,386
Fixed maturities matured or called			1,189				178
Perpetual debentures sold			166				1
Equity securities sold			-				30
Costs of investments acquired:
Securities available for sale:
Fixed maturities			(2,268	)			(2,128	)
Securities held to maturity:
Fixed maturities			(1,432	)			(1,827	)
Cash received as collateral on loaned securities, net			303				335
Other, net			(20	)			(12	)
Net cash used by investing activities		$	(1,742	)		$	(2,037	)

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (continued)

		Six Months Ended June 30,
(In millions - Unaudited)		2007				2006
Cash flows from financing activities:
Purchases of treasury stock		$	(355	)		$	(197	)
Principal payments under debt obligations			(245	)			(359	)
Proceeds from borrowings			242				-
Dividends paid to shareholders			(182	)			(123	)
Change in investment-type contracts, net			103				111
Treasury stock reissued			23				23
Other, net			39				19
Net cash used by financing activities			(375	)			(526	)
Effect of exchange rate changes on cash and cash equivalents			(9	)			11
Net change in cash and cash equivalents			203				(373	)
Cash and cash equivalents, beginning of period			1,203				1,297
Cash and cash equivalents, end of period		$	1,406			$	924
Supplemental disclosures of cash flow information:
Income taxes paid		$	255			$	327
Interest paid			11				8
Noncash financing activities:
Capitalized lease obligations			1				3
Treasury shares issued for:
Associate stock bonus			20				18
Shareholder dividend reinvestment			10				7
Stock compensation grants			2				2

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions - Unaudited)		2007				2006				2007				2006
Net earnings		$	415			$	408			$	831			$	783
Other comprehensive income (loss)  before
income taxes:
Foreign currency translation adjustments:
Change in unrealized foreign currency translation gains (losses) during period			(2	)			(5	)			(11	)			(5	)
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) during period			(753	)			(1,053	)			(860	)			(1,988	)
Reclassification adjustment for realized (gains) losses included in net earnings			(15	)			(50	)			(27	)			(64	)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) during period			2				-				1				-
Pension liability adjustment during period			3				-				3				-
Total other comprehensive income (loss) before income taxes			(765	)			(1,108	)			(894	)			(2,057	)
Income tax expense (benefit) related to items of other comprehensive income (loss)			(193	)			(418	)			(253	)			(756	)
Other comprehensive income (loss), net of income taxes			(572	)			(690	)			(641	)			(1,301	)
Total comprehensive income (loss)		$	(157	)		$	(282	)		$	190			$	(518	)

See the accompanying Notes to the Consolidated Financial Statements.

Aflac Incorporated and Subsidiaries

Notes to the Consolidated Financial Statements

1. 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). 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, and liabilities for future policy benefits and unpaid policy claims. 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 Aflac Incorporated (the Parent Company), its majority-owned 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 Aflac Incorporated and subsidiaries (the “Company”) contain all adjustments, consisting of normal recurring accruals, which are necessary to fairly present the consolidated balance sheets as of June 30, 2007, and December 31, 2006, and the consolidated statements of earnings and comprehensive income for the three- and six-month periods ended June 30, 2007, and 2006, and consolidated statements of shareholders’ equity and cash flows for the six-month periods ended June 30, 2007, and 2006. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report to shareholders for the year ended December 31, 2006.

     New Accounting Pronouncements: In February 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 allows entities to choose to measure many financial instruments and certain other items at fair value. The majority of the provisions of this standard apply only to entities that elect the fair value option (FVO). The FVO may be applied to eligible items on an instrument-by-instrument basis; is irrevocable unless a new election date occurs; and may only be applied to an entire financial instrument, and not portions thereof. This standard requires a business enterprise to report unrealized gains and losses on items for which the FVO has been elected in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007, with earlier application permitted under limited circumstances. We do not expect the adoption of this standard to have a material effect on our financial position or results of operations.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. This standard applies to other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. Where applicable, this standard simplifies and codifies related guidance within GAAP. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier application encouraged under limited circumstances. We do not expect the adoption of this standard to have a material effect on our financial position or results of operations.

     In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158). We adopted the recognition and measurement date provisions of this standard effective December 31, 2006. In the consolidated statements of shareholders’ equity for the year ended December 31, 2006, we included in 2006 other comprehensive income a cumulative transition adjustment, net of income taxes, of $44 million from the adoption of SFAS 158. This cumulative effect adjustment was properly included in the roll forward of accumulated other comprehensive income for the year, but it should not have been included in other comprehensive income for the year. Total comprehensive income for the year, not including the transition adjustment for SFAS 158, was $996 million. Management concluded that the transition adjustment was not material to the financial statements taken as a whole. We will adjust other comprehensive income for the year ended December 31, 2006, in our 2007 Form 10-K to reflect the transition adjustment as a direct charge to accumulated other comprehensive income. The effect of recording the transition adjustment through other comprehensive income and the subsequent adjustment to reflect the amounts as a direct charge to accumulated other comprehensive income did not have, nor will it have, any impact on the consolidated statements of earnings, the consolidated balance sheets, the consolidated statements of shareholders’ equity or the consolidated statements of cash flows for any periods presented.

     In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. The provisions of FIN 48 clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The evaluation of a tax position in accordance with FIN 48 is a two-step process. Under the first step, the enterprise determines whether it is more-likely-than-not that a tax position will be sustained upon examination by taxing authorities. The second step is measurement, whereby a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with earlier application encouraged. We adopted the provisions of this standard effective January 1, 2007. The adoption of this standard did not have any impact on our financial position or results of operations (see Note 9).

     In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges

of Insurance Contracts (SOP 05-1). SOP 05-1 provides accounting guidance on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. Retrospective application of this SOP to previously issued financial statements is not permitted. We adopted the provisions of this statement effective January 1, 2007. We have determined that certain of our policy modifications in both the United States and Japan which were previously accounted for as a continuation of existing coverage will be considered internal replacements that are substantially changed as contemplated by SOP 05-1 and will be accounted for as the extinguishment of the affected policies and the issuance of new contracts. The adoption of this statement did not have a significant impact on our first and second quarter financial position or results of operations.

     Securities and Exchange Commission Guidance: In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in current year financial statements. Under the provisions of SAB 108, a reporting entity must quantify and evaluate errors using a balance sheet approach and an income statement approach. After considering all relevant quantitative and qualitative factors, if either approach results in a misstatement that is material, a reporting entity’s financial statements must be adjusted. SAB 108 applies to SEC registrants and is effective for fiscal years ending after November 15, 2006. In the course of evaluating balance sheet amounts in accordance with the provisions of SAB 108, we identified the following amounts that we adjusted for as of January 1, 2006: a tax liability in the amount of $87 million related to deferred tax asset valuation allowances that were not utilized; a tax liability in the amount of $45 million related to various provisions for taxes that were not utilized; and a litigation liability in the amount of $11 million related to provisions for various pending lawsuits that were not utilized. These liabilities were recorded in immaterial amounts prior to 2004 over a period ranging from 10 to 15 years. However, using the dual evaluation approach prescribed by SAB 108, correction of the above amounts would be material to 2006 earnings. In accordance with the provisions of SAB 108, the following amounts, net of tax where applicable, have been reflected as an opening adjustment to retained earnings as of January 1, 2006: a reduction of tax liabilities in the amount of $132 million; a reduction of litigation reserves in the amount of $11 million; and a reduction in deferred tax assets in the amount of $4 million. These three adjustments resulted in a net addition to retained earnings in the amount of $139 million.

     For additional information on new accounting pronouncements and their impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

2. BUSINESS SEGMENT INFORMATION

     The Company consists of two reportable insurance business segments: Aflac Japan and Aflac U.S., both of which sell individual 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 SFAS 133, and nonrecurring items. We then exclude income taxes related to operations to arrive at pretax operating earnings. Information regarding operations by segment follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions)		2007				2006				2007				2006
Revenues:
Aflac Japan:
Earned premiums		$	2,190			$	2,215			$	4,385			$	4,354
Net investment income			442				422				878				830
Other income			10				5				19				12
Total Aflac Japan			2,642				2,642				5,282				5,196
Aflac U.S.:
Earned premiums			972				878				1,933				1,744
Net investment income			124				115				246				225
Other income			3				1				5				4
Total Aflac U.S.			1,099				994				2,184				1,973
Other business segments			9				11				18				21
Total business segment revenues			3,750				3,647				7,484				7,190
Realized investment gains (losses)			15				50				27				64
Corporate			23				24				53				51
Intercompany eliminations			(24	)			(24	)			(49	)			(49	)
Total revenues		$	3,764			$	3,697			$	7,515			$	7,256

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions)		2007				2006				2007				2006
Pretax earnings:
Aflac Japan		$	461			$	432			$	926			$	857
Aflac U.S.			171				150				340				297
Other business segments			-				2				-				2
Total business segments			632				584				1,266				1,156
Interest expense, noninsurance operations			(5	)			(4	)			(10	)			(8	)
Corporate and eliminations			(5	)			(7	)			(11	)			(17	)
Pretax operating earnings			622				573				1,245				1,131
Realized investment gains (losses)			15				50				27				64
Impact from SFAS 133			(2	)			1				(1	)			4
Total earnings before income taxes		$	635			$	624			$	1,271			$	1,199
Income taxes applicable to pretax operating earnings		$	215			$	197			$	431			$	391
Effect of foreign currency translation on operating earnings			(10	)			(11	)			(15	)			(33	)

     Assets were as follows:

		June 30,				December 31,
(In millions)		2007				2006
Assets:
Aflac Japan		$	49,088			$	48,850
Aflac U.S.			10,601				10,249
Other business segments			123				110
Total business segments			59,812				59,209
Corporate			9,731				10,023
Intercompany eliminations			(9,429	)			(9,427	)
Total assets		$	60,114			$	59,805

3. INVESTMENTS

     During the quarter ended June 30, 2007, we realized pretax investment gains of $15 million (after-tax, $9 million, or $.02 per diluted share) as a result of sold or redeemed securities. For the six months ended June 30, 2007, we realized pretax investment gains of $27 million (after-tax, $18 million, or $.04 per diluted share). Impairment charges were immaterial during the six months ended June 30, 2007.

     For the quarter ended June 30, 2006, we realized pretax investment gains of $50 million (after-tax, $31 million, or $.06 per diluted share) primarily as a result of the execution of bond swaps. The bond swaps executed during the second quarter concluded the bond-swap program that we began in 2005 to take advantage of tax loss carryforwards. For the six months ended June 30, 2006, we realized pretax investment gains of $64 million (after-tax, $41 million, or $.08 per diluted share). There were no impairment charges during the six months ended June 30, 2006.

     The net effect on shareholders’ equity of unrealized gains and losses from investment securities at the following dates was:

		June 30,				December 31,
(In millions)		2007				2006
Unrealized gains on securities available-for-sale		$	933			$	1,783
Unamortized unrealized gains on securities transferred to held to maturity			341				378
Deferred income taxes			(395	)			(711	)
Shareholders’ equity, net unrealized gains on investment securities		$	879			$	1,450

     Unrealized gains on available-for-sale securities decreased as a result of the effects of a rising interest rate environment in both the United States and Japan and a weaker yen/dollar exchange rate.

     As part of our investment activities, we own investments in qualified special purpose entities (QSPEs). At June 30, 2007, available-for-sale QSPEs totaled $2.6 billion at fair value ($2.7 billion at amortized cost, or 5.5% of total debt securities), compared with $2.3 billion at fair value ($2.3 billion at amortized cost, or 4.7% of total debt securities) at December 31, 2006. We have no equity interests in any of the QSPEs, nor do we have control over these entities. Therefore, our loss exposure is limited to the cost of our investment.

     We also own investments in variable interest entities (VIEs). We are the primary beneficiary of VIEs totaling $1.5 billion at fair value ($1.6 billion at amortized cost) as of June 30, 2007 and have consolidated our interests in these VIEs in accordance with FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities. The activities of these VIEs are limited to holding debt securities and utilizing the cash flows from the debt securities to service our investments therein. The terms of the debt securities mirror the terms of the notes held by Aflac. The consolidation of these investments does not impact our financial position or results of operations. We also have interests in VIEs that we are not required to consolidate totaling $606 million at fair value ($625 million at amortized cost) as of June 30, 2007. The loss on any of our VIE investments would be limited to its cost.

     We lend fixed-maturity securities to financial institutions in short-term security lending transactions. These short-term security lending arrangements increase investment income with minimal risk. Our security lending policy requires that the fair value of the securities and/or cash received as collateral be 102% or more of the fair value of the loaned securities. At June 30, 2007, we had security loans outstanding with a fair value of $1.05 billion, and we held cash in the amount of $1.08 billion as collateral for these loaned securities. At December 31, 2006, we had security loans outstanding with a fair value of $780 million, and we held cash in the amount of $807 million as collateral for these loaned securities.

     During the first quarter of 2007, we reclassified an investment from the held-to-maturity portfolio to the available-for-sale portfolio as a result of a significant deterioration in the issuer’s creditworthiness. At the date of transfer, this debt security had an amortized cost of $169 million and an unrealized loss of $8 million. This investment was sold during the first quarter at a realized gain of $12 million.

     For additional information, see Notes 1 and 3 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

4. FINANCIAL INSTRUMENTS

     We have outstanding cross-currency swap agreements related to the $450 million senior notes (see Note 5). The components of the fair value of the cross-currency swaps were reflected as an asset or (liability) in the balance sheet as follows:

		June 30,				December 31,
(In millions)		2007				2006
Interest rate component		$	4			$	6
Foreign currency component			(1	)			(17	)
Accrued interest component			5				4
Total fair value of cross-currency swaps		$	8			$	(7	)

     The following is a reconciliation of the foreign currency component of the cross-currency swaps included in accumulated other comprehensive income for the six-month periods ended June 30.

(In millions)		2007				2006
Balance, beginning of period		$	(17	)		$	(22	)
Increase (decrease) in fair value of cross-currency swaps			15				(10	)
Interest rate component not qualifying for hedge accounting reclassified to net earnings			1				(3	)
Balance, end of period		$	(1	)		$	(35	)

     We have entered into interest rate swap agreements related to the 20 billion yen variable interest rate Uridashi notes (see Note 5). The fair value of these swaps and related changes in fair value, which are included in accumulated other comprehensive income, were immaterial during the six-month period ended June 30, 2007.

     For additional information on our cross-currency and interest rate swaps and other financial instruments, see Notes 1 and 4 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

5. NOTES PAYABLE

     A summary of notes payable follows:

		June 30,				December 31,
(In millions)		2007				2006
6.50% senior notes due April 2009		$	450			$	450
Yen-denominated Uridashi notes:
1.52% notes due September 2011 (principal amount 15 billion yen)			122				126
2.26% notes due September 2016 (principal amount 10 billion yen)			81				84
Variable interest rate notes due September 2011 (.97% at June 2007, principal amount 20 billion yen)			162				168
Yen-denominated Samurai notes:
.96% notes paid June 2007 (principal amount 30 billion yen)			-				252
.71% notes due July 2010 (principal amount 40 billion yen)			325				336
1.87% notes due June 2012 (principal amount 30 billion yen)			243				-
Capitalized lease obligations payable through 2013			9				10
Total notes payable		$	1,392			$	1,426

     In June 2007, the Parent Company issued yen-denominated Samurai notes totaling 30 billion yen with a five-year maturity. The notes pay interest semiannually, may only be redeemed prior to maturity upon the occurrence of a tax event as specified in the bond agreement and are not available to U.S. persons. The bonds were issued in Japan under a Shelf Registration Statement (SRS) filed in February 2006 for the issuance of up to 100 billion yen of yen-denominated Samurai notes. These notes are the first issuance from the February 2006 shelf registration. We used the net proceeds of these Samurai notes to pay in full the .96% Samurai notes that were issued in 2002 and matured in June 2007.

     We were in compliance with all of the covenants of our notes payable at June 30, 2007. No events of default or defaults occurred during the six months ended June 30, 2007.

     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 December 31, 2006.

6. SHAREHOLDERS’ EQUITY

     The following table is a reconciliation of the number of shares of the Company’s common stock for the six-month periods ended June 30:

(In thousands of shares)		2007				2006
Common stock — issued:
Balance, beginning of period			655,715				654,522
Exercise of stock options			1,500				755
Balance, end of period			657,215				655,277
Treasury stock:
Balance, beginning of period			163,165				155,628
Purchases of treasury stock			7,246				4,120
Dispositions of treasury stock:
Shares issued to AFL Stock Plan			(764	)			(750	)
Exercise of stock options			(798	)			(760	)
Other			(117	)			(85	)
Balance, end of period			168,732				158,153
Shares outstanding, end of period			488,483				497,124

     Outstanding share-based awards are excluded from the calculation of weighted-average shares used in the computation of basic earnings per share. For the quarter ended June 30, 2007, stock options to purchase approximately 2.4 million shares, on a weighted-average basis, were considered to be anti-dilutive and were excluded from the calculation of diluted earnings per share, compared with 1.4 million for the quarter ended June 30, 2006. For the six months ended June 30, 2007, stock options to purchase approximately 2.6 million shares, on a weighted-average basis, were considered to be anti-dilutive and were excluded from the calculation of diluted earnings per share, compared with 1.4 million for the six-month period a year ago.

     In February 2004, the Board of Directors authorized the purchase of 30.0 million shares of our common stock. We exhausted that authorization during the second quarter of 2007. In February 2006, the Board of Directors authorized the purchase of an additional 30.0 million shares of our common stock. As of June 30, 2007, approximately 29.6 million shares were available for purchase under that share repurchase authorization.

7. SHARE-BASED TRANSACTIONS

     The Company has two long-term incentive compensation plans. The first plan allows for grants of both incentive stock options (ISOs) and non-qualifying stock options (NQSOs). This plan expired in February 2007, although options granted before that date remain outstanding in accordance with their terms. The second plan allows for ISOs, NQSOs, restricted stock, restricted stock units, and stock appreciation rights. At June 30, 2007, approximately 23 million shares were available for future grants under this plan, and the only performance-based awards issued and outstanding were restricted stock awards.

     The following table provides information on stock options outstanding and exercisable at June 30, 2007.

		Stock				Weighted-Average
		Option				Exercise Price
(In thousands of shares)		Shares				Per Share
Outstanding			18,783			$	32.77
Exercisable			14,230				29.21

     As of June 30, 2007, the aggregate intrinsic value of stock options outstanding was $350 million, with a weighted-average remaining term of 5.5 years. The aggregate intrinsic value of stock options exercisable at that same date was $316 million, with a weighted-average remaining term of 4.5 years. We received cash from the exercise of stock options in the amount of $32 million during the first six months of 2007, compared with $22 million in the first six months of 2006. The tax benefit realized as a result of stock option exercises was $24 million in the first six months of 2007, compared with $11 million in the first six months of 2006.

     As of June 30, 2007, total compensation cost not yet recognized in our financial statements related to restricted stock awards was $27 million, of which $13 million (492 thousand shares) was related to 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 December 31, 2006.

8. 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:

		Three Months Ended June 30,																Six Months Ended June 30,
		2007								2006								2007								2006
(In millions)		Japan				U.S.				Japan				U.S.				Japan				U.S.				Japan				U.S.
Components of  net periodic  benefit cost:
Service cost		$	3			$	2			$	2			$	2			$	5			$	5			$	4			$	5
Interest cost			-				2				-				2				1				5				1				4
Expected return on plan assets			(1	)			(2	)			-				(2	)			(1	)			(5	)			-				(4	)
Amortization of net actuarial loss			1				1				1				1				1				2				1				2
Net periodic benefit cost		$	3			$	3			$	3			$	3			$	6			$	7			$	6			$	7

     During the six months ended June 30, 2007, Aflac Japan contributed approximately $5 million (using the June 30, 2007, exchange rate) to the Japanese pension plan. During the six months ended June 30, 2007, no contributions had been made 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 December 31, 2006.

9. INCOME TAXES

     We file federal income tax returns in the United States and Japan as well as state or prefecture income tax returns in various jurisdictions in the two countries. U.S. federal and state income tax returns for years before 2002 are no longer subject to examination. We have been examined through March 31, 2004, for Japanese tax purposes.

     We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on January 1, 2007 (see Note 1). There was no change in the liability for unrecognized tax benefits as a result of the implementation of FIN 48 and therefore no adjustment to retained earnings upon adoption. Included in the balance of the liability for unrecognized tax benefits at June 30, 2007, are $50 million of tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. The Company has accrued approximately $2 million for permanent uncertainties, which if reversed would not have a material effect on the annual effective rate.

     The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized approximately $500 thousand in interest and penalties during the three months ended June 30, 2007, compared with approximately $410 thousand in the three months ended June 30, 2006. We recognized approximately $1 million in interest and penalties during the first half of both 2007 and 2006. The Company has accrued approximately $30 million for the payment of interest and penalties as of June 30, 2007, compared with $28 million a year ago.

     As of June 30, 2007, there are no material uncertain tax positions for which the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

     For additional information on our Japanese and U.S. taxes, see Note 8 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

10. COMMITMENTS AND CONTINGENT LIABILITIES

     We have three outsourcing agreements with IBM. The first agreement provides mainframe computer operations and support for Aflac Japan. It has a remaining term of nine years and an aggregate remaining cost of 26.0 billion yen ($211 million using the June 30, 2007, exchange rate). The second agreement provides distributed computer operations and support for Aflac Japan. It has a term of nine years and an aggregate cost of 32.0 billion yen ($260 million using the June 30, 2007, exchange rate). The third agreement provides application maintenance and development services for

Aflac Japan. It has a term of five years and a remaining aggregate cost of 10.0 billion yen ($81 million using the June 30, 2007, exchange rate).

     We have entered into two additional outsourcing agreements to provide application maintenance and development services for our Japanese operation. The first agreement with Accenture has a term of seven years with an aggregate cost of 5.3 billion yen ($43 million using the June 30, 2007, exchange rate). The second agreement with NTT DATA has a term of three years with an aggregate cost of 1.3 billion yen ($10 million using the June 30, 2007, exchange rate).

     We lease office space and equipment under various agreements that expire in various years through 2021. For further information regarding lease commitments, see Note 13 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

     In 2005, we announced a multiyear building project for additional office space in Columbus, Georgia. The initial phase was substantially completed in June 2007 at a cost of approximately $26 million. The second phase of the expansion is to be completed in 2009 and is expected to cost approximately $48 million.

     We are a defendant in various lawsuits considered to be in the normal course of business. Senior legal and financial management 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.

REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     The June 30, 2007, and 2006, financial statements included in this filing have been reviewed by KPMG LLP, an independent registered public accounting firm, in accordance with established professional standards and procedures for such a review.

     The report of KPMG LLP commenting upon its review is included on page 20.

Report of Independent Registered Public Accounting Firm

The shareholders and board of directors of Aflac Incorporated:

We have reviewed the consolidated balance sheet of Aflac Incorporated and subsidiaries as of June 30, 2007, and the related consolidated statements of earnings and comprehensive income for the three-month and six-month periods ended June 30, 2007, and 2006, and the consolidated statements of shareholders’ equity and cash flows for the six-month periods ended June 30, 2007, and 2006. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheet of Aflac Incorporated and subsidiaries as of December 31, 2006, and the related consolidated statements of earnings, shareholders’ equity, cash flows and comprehensive income for the year then ended (not presented herein); and in our report dated February 27, 2007, we expressed an unqualified opinion on those consolidated financial statements.

As discussed in note 1 to the consolidated financial statements, the Company adopted the provisions of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, as of January 1, 2006. Additionally, as discussed in note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement plans, an amendment of FASB Statements 87, 88, 106 and 132(R), as of December 31, 2006.

 

Atlanta, Georgia
August 7, 2007

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING INFORMATION

     The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. We desire to take advantage of these provisions. This report contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by Company officials in communications with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks, and uncertainties. In particular, statements containing words such as “expect,” “anticipate,” “believe,” “goal,” “objective,” “may,” “should,” “estimate,” “intends,” “projects,” “will,” “assumes,” “potential,” “target,” or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.

     We caution readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:

	•		legislative and regulatory developments
	•		assessments for insurance company insolvencies
	•		competitive conditions in the United States and Japan
	•		new product development and customer response to new products and new marketing initiatives
	•		ability to attract and retain qualified sales associates and employees
	•		ability to repatriate profits from Japan
	•		changes in U.S. and/or Japanese tax laws or accounting requirements
	•		credit and other risks associated with Aflac’s investment activities
	•		significant changes in investment yield rates
	•		fluctuations in foreign currency exchange rates
	•		deviations in actual experience from pricing and reserving assumptions including, but not limited to, morbidity, mortality, persistency, expenses, and investment yields
	•		level and outcome of litigation
	•		downgrades in the Company’s credit rating
	•		changes in rating agency policies or practices
	•		subsidiary’s ability to pay dividends to Parent Company
	•		ineffectiveness of hedging strategies
	•		catastrophic events
	•		general economic conditions in the United States and Japan

COMPANY OVERVIEW

     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 Company’s 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 Aflac’s policies are individually underwritten and marketed through independent agents. Our insurance operations in the United States and our branch in Japan service the two markets for our insurance business.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to inform the reader about matters affecting the financial condition and results of operations of Aflac Incorporated and its subsidiaries for the period from December 31, 2006, to June 30, 2007. As a result, the following discussion should be read in conjunction with the consolidated financial statements and notes that are included in our annual report to shareholders for the year ended December 31, 2006.

     This MD&A is divided into four primary sections. In the first section, we discuss our critical accounting estimates. We then follow with a discussion of the results of our operations on a consolidated basis and by segment. The third section presents an analysis of our financial condition as well as a discussion of market risks of financial instruments. We conclude by addressing the availability of capital and the sources and uses of cash in the Capital Resources and Liquidity section.

CRITICAL ACCOUNTING ESTIMATES

     We prepare our financial statements in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires us to make estimates based on currently available information when recording transactions resulting from business operations. The estimates that we deem to be most critical to an understanding of Aflac’s results of operations and financial condition are those related to investments, deferred policy acquisition costs and policy liabilities. The preparation and evaluation of these critical accounting estimates involve the use of various assumptions developed from management’s analyses and judgments. The application of these critical accounting estimates determines the values at which 96% of our assets and 84% of our liabilities are reported and thus have a direct effect on net earnings and shareholders’ equity. Subsequent experience or use of other assumptions could produce significantly different results. There have been no changes in the items that we have identified as critical accounting estimates during the six months ended June 30, 2007. For additional information, see the Critical Accounting Estimates section of MD&A included in our annual report to shareholders for the year ended December 31, 2006.

New Accounting Pronouncements

     For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements.

RESULTS OF OPERATIONS

     The following table is a presentation of items impacting net earnings and net earnings per diluted share.

Items Impacting Net Earnings

		Three Months Ended June 30,																Six Months Ended June 30,
		2007				2006				2007				2006				2007				2006				2007				2006
		In millions								Per Diluted Share								In millions								Per Diluted Share
Net earnings		$	415			$	408			$	.84			$	.81			$	831			$	783			$	1.68			$	1.55
Items impacting net earnings, net of tax:
Realized investment gains (losses)			9				31				.02				.06				18				41				.04				.08
Impact from SFAS 133			(1	)			1				-				-				(1	)			2				-				-

Realized Investment Gains and Losses

     Our investment strategy is to invest in fixed-income securities in order to provide a reliable stream of investment income, which is one of the drivers of the Company’s profitability. We do not purchase securities with the intent of generating capital gains or losses. However, investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers, tax planning strategies, and/or general portfolio maintenance and rebalancing. The realization of investment gains and losses is independent of the underwriting and administration of our insurance products, which are the principal drivers of our profitability. Realized investment gains in the first six months of 2007 primarily resulted from securities sold or redeemed during the period. Realized investment gains in the first six months of 2006 primarily resulted from our bond-swap program, which took advantage of tax loss carryforwards and sales transactions in the normal course of business.

Impact from SFAS 133

     We entered into cross-currency swap agreements to effectively convert our dollar-denominated senior notes, which mature in 2009, into a yen-denominated obligation. Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), requires that the change in the fair value of the interest rate component of the cross-currency swaps, which does not qualify for hedge accounting, be reflected in net earnings (other income). The impact from SFAS 133 includes the change in fair value of the interest rate component of the cross-currency swaps, which does not qualify for hedge accounting.

     We have also issued yen-denominated Samurai and Uridashi notes. We have designated these notes as a hedge of our investment in Aflac Japan. If the value of these yen-denominated notes and the notional amounts of the cross-currency swaps exceed our investment in Aflac Japan, we would be required to recognize the foreign currency effect on the excess, or ineffective portion, in net earnings (other income). The ineffective portion would be included in the impact from SFAS 133. These hedges were effective during the six-month period ended June 30, 2007; therefore, there was no impact on net earnings.

     We have entered into interest rate swap agreements related to the 20 billion yen variable interest rate Uridashi notes and have designated the swap agreements as a hedge of the variability of the debt cash flows. SFAS 133 requires that the change in the fair value of the swap contracts be recorded in other comprehensive income so long as the hedge is deemed effective. Any ineffectiveness would be recognized in net earnings (other income) and would be included in the impact from SFAS 133. These hedges were effective during the six-month period ended June 30, 2007; therefore, there was no impact on net earnings.

     For additional information, see the Impact from SFAS 133 section of MD&A and Notes 4 and 7 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2006.

Foreign Currency Translation

     Aflac Japan’s premiums and most of its investment income are received in yen. Claims and expenses are paid in yen, and we primarily purchase yen-denominated assets to support yen-denominated policy liabilities. These and other yen-denominated financial statement items are translated into dollars for financial reporting purposes. We translate Aflac Japan’s yen-denominated income statement into dollars using an average exchange rate for the reporting period, and we translate its yen-denominated balance sheet using the exchange rate at the end of the period. However, it is important to distinguish between translating and converting foreign currency. Except for a limited number of transactions, we do not actually convert yen into dollars.

     Due to the size of Aflac Japan, where our functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on our reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. As a result, we view foreign currency translation as a financial reporting issue for Aflac and not an economic event to our Company or shareholders. Because changes in exchange rates distort the growth rates of our operations, management evaluates Aflac’s financial performance excluding the impact of foreign currency translation.

Income Taxes

     Our combined U.S. and Japanese effective income tax rate on pretax earnings was 34.6% for the six-month period ended June 30, 2007, compared with 34.7% for the same period in 2006.

Earnings Guidance

     We communicate earnings guidance in this report based on the growth in net earnings per diluted share. However, certain items that cannot be predicted or that are outside of management’s control may have a significant impact on actual results. Therefore, our comparison of net earnings includes certain assumptions to reflect the limitations that are inherent in projections of net earnings. In comparing period-over-period results, we exclude the effect of realized investment gains and losses, the impact from SFAS 133 and nonrecurring items. We also assume no impact from foreign currency translation on the Aflac Japan segment and the Parent Company’s yen-denominated interest expense for a given period in relation to the prior period.

     Subject to the preceding assumptions, our objective for 2007 is to increase net earnings per diluted share by 15% to 16% over 2006. If we achieve this objective, the following table shows the likely results for 2007 net earnings per diluted share, including the impact of foreign currency translation using various yen/dollar exchange rate scenarios.

2007 Net Earnings Per Share (EPS) Scenarios*

Weighted-Average
Yen/Dollar		Net Earnings Per		% Growth		Yen Impact
Exchange Rate		Diluted Share		Over 2006		on EPS
105.00		$  3.46 - 3.49		21.4 - 22.5%		$  .18
110.00		3.37 - 3.40		18.2 - 19.3		.09
116.31**		3.28 - 3.31		15.1 - 16.1		-
120.00		3.23 - 3.26		13.3 - 14.4		(.05)
125.00		3.17 - 3.20		11.2 - 12.3		(.11)

* Excludes realized investment gains/losses, impact from SFAS 133 and nonrecurring items in 2007 and 2006
** Actual 2006 weighted-average exchange rate

     Our objective for 2008 is to increase net earnings per diluted share by 13% to 15%, on the basis described above.

INSURANCE OPERATIONS

     Aflac’s insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan, which operates as a branch of Aflac, is the principal contributor to consolidated earnings. GAAP financial reporting requires that a company report financial and descriptive information about operating segments in its annual and interim period financial statements. Furthermore, we are required to report a measure of segment profit or loss, certain revenue and expense items, and segment assets. We measure and evaluate our insurance segments’ financial performance using operating earnings on a pretax basis. We define segment operating earnings as the profits we derive from our operations before realized investment gains and losses, the impact from SFAS 133, and nonrecurring items. We believe that an analysis of segment pretax operating earnings is vitally important to an understanding of the underlying profitability drivers and trends of our insurance business. Furthermore, because a significant portion of our business is conducted in Japan, we believe it is equally important to understand the impact of translating Japanese yen into U.S. dollars.

     We evaluate our sales efforts using new annualized premium sales, an industry operating measure. Total new annualized premium sales, which include new sales and the incremental increase in premiums due to conversions, represent the premiums that we would collect over a 12-month period, assuming the policies remain in force. Premium income, or earned premiums, is a financial performance measure that reflects collected or due premiums that have been earned ratably on policies in force during the reporting period.

AFLAC JAPAN SEGMENT

Aflac Japan Pretax Operating Earnings

     Changes in Aflac Japan’s pretax operating earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency, and investment yields. The following table presents a summary of operating results for Aflac Japan.

Aflac Japan Summary of Operating Results

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions)		2007				2006				2007				2006
Premium income		$	2,190			$	2,215			$	4,385			$	4,354
Net investment income:
Yen-denominated investment income			267				268				534				525
Dollar-denominated investment income			175				154				344				305
Net investment income			442				422				878				830
Other income			10				5				19				12
Total operating revenues			2,642				2,642				5,282				5,196
Benefits and claims			1,682				1,716				3,368				3,375
Operating expenses:
Amortization of deferred policy acquisition costs			76				73				150				143
Insurance commissions			208				218				417				432
Insurance and other expenses			215				203				421				389
Total operating expenses			499				494				988				964
Total benefits and expenses			2,181				2,210				4,356				4,339
Pretax operating earnings*		$	461			$	432			$	926			$	857
Weighted-average yen/dollar exchange rate			120.78				114.43				120.13				115.65

		In Dollars																In Yen
		Three Months								Six Months								Three Months								Six Months
Percentage change over		Ended June 30,								Ended June 30,								Ended June 30,								Ended June 30,
previous period:			2007				2006				2007				2006				2007				2006				2007				2006
Premium income			(1.1	)%			(.1	)%			.7	%			(2.6	)%			4.3	%			6.2	%			4.6	%			6.2	%
Net investment income			4.8				2.6				5.8				1.0				10.6				9.0				9.9				10.1
Total operating revenues			-				.2				1.7				(2.1	)			5.5				6.5				5.6				6.7
Pretax operating earnings*			6.7				11.5				8.0				9.0				12.6				18.5				12.2				18.9

* See Page 25 for our definition of segment operating earnings.

     The percentage increases in premium income reflect the growth of premiums in force. Annualized premiums in force in yen increased 4.3% to 1.10 trillion yen as of June 30, 2007, compared with 1.06 trillion yen a year ago, and reflect the high persistency of Aflac Japan’s business and the sales of new policies. Annualized premiums in force, translated into dollars at respective period-end exchange rates, were $8.9 billion at June 30, 2007, compared with $9.2 billion a year ago.

     Aflac Japan maintains a portfolio of dollar-denominated and reverse-dual currency securities (yen-denominated debt securities with dollar coupon payments). Dollar-denominated investment income from these assets accounted for approximately 39% of Aflac Japan’s investment income in the first six months of 2007, compared with 37% a year ago. In periods when the yen strengthens in relation to the dollar, translating Aflac Japan’s dollar-denominated investment income into yen lowers growth

rates for net investment income, total operating revenues, and pretax operating earnings in yen terms. In periods when the yen weakens, translating dollar-denominated investment income into yen magnifies growth rates for net investment income, total operating revenues, and pretax operating earnings in yen terms. On a constant currency basis, dollar-denominated investment income accounted for approximately 38% of Aflac Japan’s investment income during the first six months of 2007. The following table illustrates the effect of translating Aflac Japan’s dollar-denominated investment income and related items into yen by comparing certain segment results with those that would have been reported had yen/dollar exchange rates remained unchanged from the comparable period in the prior year.

Aflac Japan Percentage Changes Over Previous Period
Yen Operating Results
For the Periods Ended June 30,

		Including Foreign Currency Changes																Excluding Foreign Currency Changes**
		Three Months								Six Months								Three Months								Six Months
			2007				2006				2007				2006				2007				2006				2007				2006
Net investment income			10.6	%			9.0	%			9.9	%			10.1	%			8.3	%			6.6	%			8.3	%			6.7	%
Total operating revenues			5.5				6.5				5.6				6.7				5.1				6.1				5.3				6.2
Pretax operating earnings*			12.6				18.5				12.2				18.9				10.6				16.2				10.8				15.7

 *  See Page 25 for our definition of segment operating earnings.

** Amounts excluding foreign currency changes on dollar-denominated items were determined using the same yen/dollar
   exchange rate for the current period as the comparable period in the prior year.

     The following table presents a summary of operating ratios for Aflac Japan.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Ratios to total revenues, in dollars:			2007				2006				2007				2006
Benefits and claims			63.7	%			64.9	%			63.8	%			65.0	%
Operating expenses:
Amortization of deferred policy acquisition costs			2.9				2.8				2.8				2.7
Insurance commissions			7.9				8.3				7.9				8.3
Insurance and other expenses			8.1				7.7				8.0				7.5
Total operating expenses			18.9				18.8				18.7				18.5
Pretax operating earnings*			17.4				16.3				17.5				16.5

* See Page 25 for our definition of segment operating earnings.

     The benefit ratio has declined over the past several years, reflecting the impact of newer products with lower loss ratios. We have also experienced favorable claim trends in our major product lines. We expect the benefit ratio to continue to decline in future years primarily reflecting the shift to newer products and riders and the impact of favorable claim trends. The operating expense ratio increased slightly in the first six months. However, we expect the operating expense ratio to be relatively stable for the year in relation to 2006. Due to improvement in the benefit ratio, the pretax operating profit margin expanded from 16.3% to 17.4% for the three-month period and from 16.5% to 17.5% for the six-month period ended June 30, 2007. We expect continued expansion in the profit margin in 2007 and 2008.

Aflac Japan Sales

     Aflac Japan’s sales for both the second quarter and first half of 2007 were better than expected. Aflac Japan’s total new annualized premium sales in yen declined 3.5% in the second quarter of 2007, compared with the second quarter of 2006. For the six months ended June 30, 2007, total new annualized premium sales declined 6.9% compared with the same period a year ago. The following table presents Aflac Japan’s total new annualized premium sales for the periods ended June 30.

		In Dollars																In Yen
(In millions of dollars and		Three Months								Six Months								Three Months								Six Months
billions of yen)		2007				2006				2007				2006				2007				2006				2007				2006
Total new annualized premium sales		$	249			$	273			$	470			$	524				30.1				31.2				56.4				60.6
Percentage change over comparable period in prior year			(8.7	)%			(9.7	)%			(10.4	)%			(10.7	)%			(3.5	)%			(4.2	)%			(6.9	)%			(2.8	)%

     The following table details the contributions to total new annualized premium sales by major product for the periods ended June 30.

		Three Months								Six Months
		2007				2006				2007				2006
Medical policies			30	%			33	%			31	%			33	%
Cancer life			36				28				34				27
Ordinary life			23				25				22				24
Rider MAX			7				9				8				10
Other			4				5				5				6
Total			100	%			100	%			100	%			100	%

     Although medical sales improved somewhat over the first quarter of 2007, they continued to be weak in the second quarter across the industry and for Aflac. Medical sales declined 13.4% in the second quarter of 2007, compared with the same period a year ago. However, sales of our cancer insurance product category were again strong during the second quarter of 2007, improving 22.7% over the same period a year ago. We believe our cancer product sales benefited from advertising and promotional efforts for that product, in addition to accelerated purchases before a premium rate increase in September resulting from adoption of new mortality tables. Ordinary life sales recovered somewhat during the second quarter, increasing 23.3% over the first quarter of 2007. However, ordinary life sales were down 10.9%, compared with the same period a year ago. We believe the increase in life insurance sales over the first quarter of 2007 reflects the introduction of reduced life insurance premium rates that went into effect in April of this year. For our life insurance products, we adopted the new mortality tables in April 2007, which had the effect of lowering premium rates for ordinary life products.

     We remain encouraged about the prospects for improvement in sales, and we continue to believe we will produce a modest sales increase in the second half of the year.

Aflac Japan Investments

     Growth of investment income in yen is affected by available cash flow from operations, timing of and yields on new investments, and the effect of yen/dollar exchange rates on dollar-denominated

investment income. Aflac Japan has invested in privately issued securities to secure higher yields than Japanese government or other public corporate bonds would have provided, while still adhering to prudent standards for credit quality. All of our privately issued securities are rated investment grade at the time of purchase. These securities are generally issued with standard documentation for medium-term note programs and have appropriate covenants.

     The following table presents the results of Aflac Japan’s investment activities for the periods ended June 30.

		Three Months								Six Months
		2007				2006				2007				2006
New money yield — yen only			3.20	%			3.21	%			3.18	%			3.01	%
New money yield — blended			3.58				3.36				3.47				3.23
Return on average invested assets, net of investment expenses			4.10				4.08				4.10				4.10

     At June 30, 2007, the yield on Aflac Japan’s investment portfolio, including dollar-denominated investments, was 4.09%, compared with 4.17% a year ago. See Investments and Cash on Page 35 for additional information.

Japanese Economy

     Japan continues to show signs of economic improvement and while recent events indicate that Japan’s economy has begun to recover, the time required for a full economic recovery remains uncertain. For additional information, see the Japanese Economy section of MD&A in our annual report to shareholders for the year ended December 31, 2006.

Japanese Regulatory Environment

     Japan’s Financial Services Agency (FSA) adopted new mortality tables effective April 2007, that will be used when developing our policy premium and reserving assumptions on newly underwritten policies. These new tables reflect recent improvements in survival rates in Japan. If our other assumptions remain unchanged, these revisions will generally result in a decrease in policy premiums for death benefit products and an increase in premium rates for third sector (health) products and annuities. We reflected the impact of the new mortality table in our product pricing for the first sector (life) products in April 2007. For the third sector, the revised tables will be reflected in our product pricing in September 2007.

     Additionally, the FSA has implemented a new rule for third sector product reserving. The new reserving rule was effective April 1, 2007. Under the new rule, we are required to conduct stress testing of our reserves using a prescribed method that incorporates actual incidence rates. The results of the tests and their relation to our reserves will determine whether reserve strengthening is required. While this new reserve requirement will not impact our GAAP financial statements, we currently estimate that adoption of this requirement will not have a material impact on our 2007 FSA-based financial statements or on our product pricing.

     As disclosed in our 2006 Form 10-K, Aflac Japan, along with the entire Japanese life insurance industry, began a review of the last five years of paid claims to determine if those claims were paid fully and accurately. On April 13, 2007, Aflac Japan reported the findings of its review to the FSA. By the end of June 2007, we had paid all of the affected customers except for a few that require

additional documentation before the claim payment can be made. In addition, we are using this review to identify process changes that will help ensure that payment errors such as these are not repeated. The financial impact of paying the claims that were in error was immaterial to our operations and has been provided for in our financial statements.

AFLAC U.S. SEGMENT

Aflac U.S. Pretax Operating Earnings

     Changes in Aflac U.S. pretax operating earnings and profit margins are primarily affected by morbidity, mortality, expenses, persistency and investment yields. The following table presents a summary of operating results for Aflac U.S.

Aflac U.S. Summary of Operating Results

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions)		2007				2006				2007				2006
Premium income		$	972			$	878			$	1,933			$	1,744
Net investment income			124				115				246				225
Other income			3				1				5				4
Total operating revenues			1,099				994				2,184				1,973
Benefits and claims			584				527				1,156				1,050
Operating expenses:
Amortization of deferred policy acquisition costs			79				70				159				145
Insurance commissions			118				110				238				218
Insurance and other expenses			147				137				291				263
Total operating expenses			344				317				688				626
Total benefits and expenses			928				844				1,844				1,676
Pretax operating earnings*		$	171			$	150			$	340			$	297
Percentage change over previous period:
Premium income			10.7	%			9.3	%			10.8	%			9.7	%
Net investment income			8.4				10.0				9.4				9.1
Total operating revenues			10.6				9.2				10.7				9.6
Pretax operating earnings*			14.1				15.1				14.7				12.7