Edgar Filing: AFLAC INC

AFL 6-06 Form 10-Q

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, 2006
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)

Registrant's telephone number, including area code: 706.323.3431

(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 ¨ 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 ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ 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, 2006

Common Stock, $.10 Par Value		496,292,534 shares

Aflac Incorporated and Subsidiaries
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					Page

Part I.	Financial Information:

Item 1.			Financial Statements.

				Consolidated Statements of Earnings	1
				Three Months Ended June 30, 2006, and 2005
				Six Months Ended June 30, 2006 and 2005

				Consolidated Balance Sheets	2
				June 30, 2006 and December 31, 2005

				Consolidated Statements of Shareholders' Equity	4
				Six Months Ended June 30, 2006, and 2005

				Consolidated Statements of Cash Flows	5
				Six Months Ended June 30, 2006, and 2005

				Consolidated Statements of Comprehensive Income	7
				Three Months Ended June 30, 2006, and 2005
				Six Months Ended June 30, 2006, and 2005

			Notes to the Consolidated Financial Statements		8

			Review by Independent Registered Public Accounting Firm		18

			Report of Independent Registered Public Accounting Firm		19

Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations.		20

Item 3.			Quantitative and Qualitative Disclosures About Market Risk.		48

Item 4.			Controls and Procedures.		48


Part II.		Other Information:

Item 1.			Legal Proceedings.		49

Item 1A.			Risk Factors.		49

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.		49

Item 6.			Exhibits.		50

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

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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)						2006		2005		2006		2005

Revenues:
	Premiums, principally supplemental health insurance			$	3,093		$	3,020	$	6,098	$	6,061
	Net investment income				542			518		1,066		1,033
	Realized investment gains (losses)				50			11		64		15
	Other income (losses)				12			18		28		18

			Total revenues		3,697			3,567		7,256		7,127

Benefits and expenses:
	Benefits and claims				2,243			2,229		4,424		4,495
	Acquisition and operating expenses:
		Amortization of deferred policy acquisition costs			143			134		288		270
		Insurance commissions			328			334		650		667
		Insurance expenses			331			324		638		611
		Interest expense			5			6		10		11
		Other operating expenses			23			24		47		50

			Total acquisition and operating expenses		830			822		1,633		1,609

			Total benefits and expenses		3,073			3,051		6,057		6,104

			Earnings before income taxes		624			516		1,199		1,023
Income taxes					216			180		416		359

			Net earnings	$	408		$	336	$	783	$	664




Net earnings per share:
	Basic			$	.82		$	.67	$	1.57	$	1.32
	Diluted				.81			.66		1.55		1.30




Common shares used in computing earnings per share (In thousands):
	Basic				496,951			501,426		497,491		502,063
	Diluted				503,286			508,002		503,927		508,722




Cash dividends per share				$	.13		$	.11	$	.26	$	.22



See the accompanying Notes to the Consolidated Financial Statements.

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Aflac Incorporated and Subsidiaries
Consolidated Balance Sheets


				June 30,		December 31,
(In millions - Unaudited)				2006		2005

Assets:
	Investments and cash:
		Securities available for sale, at fair value:
			Fixed maturities (amortized cost $26,818 in 2006
			and $25,860 in 2005)	$	27,408	$	28,142
			Perpetual debentures (amortized cost $4,342 in 2006
			and $4,255 in 2005)		4,130		4,370
			Equity securities (cost $18 in 2006 and $30 in 2005)		55		84
		Securities held to maturity, at amortized cost:
			Fixed maturities (fair value $12,209 in 2006
			and $10,839 in 2005)		12,957		10,867
			Perpetual debentures (fair value $4,161 in 2006
			and $4,252 in 2005)		4,260		4,172
		Other investments			61		57
		Cash and cash equivalents			924		1,297

			Total investments and cash		49,795		48,989
	Receivables, primarily premiums				507		479
	Receivables for security transactions				1		105
	Accrued investment income				517		484
	Deferred policy acquisition costs				5,895		5,590
	Property and equipment, at cost less accumulated depreciation				454		448
	Other				263		266

			Total assets	$	57,432	$	56,361



See the accompanying Notes to the Consolidated Financial Statements.

(continued)

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Aflac Incorporated and Subsidiaries

Consolidated Balance Sheets (continued)

June 30,

December 31,

(In millions, except for share and per-share amounts - Unaudited)

2006

2005

Liabilities and shareholders' equity:

Liabilities:

Policy liabilities:

Future policy benefits

40,177

37,853

Unpaid policy claims

2,639

2,504

Unearned premiums

628

594

Other policyholders' funds

1,520

1,378

Total policy liabilities

44,964

42,329

Notes payable

1,071

1,395

Income taxes

1,927

2,577

Payables for return of cash collateral on loaned securities

966

622

Other

1,335

1,511

Commitments and contingent liabilities (Notes 8 and 9)

Total liabilities

50,263

48,434

Shareholders' equity:

Common stock of $.10 par value. In thousands:

authorized 1,000,000 shares; issued 655,277

shares in 2006 and 654,522 shares in 2005

Additional paid-in capital

846

791

Retained earnings

8,701

8,048

Accumulated other comprehensive income:

Unrealized foreign currency translation gains

113

Unrealized gains on investment securities

580

1,917

Minimum pension liability adjustment

(37

)

(37

)

Treasury stock, at average cost

(3,100

)

(2,934

)

Total shareholders' equity

7,169

7,927

Total liabilities and shareholders' equity

57,432

56,361

Shareholders' equity per share

14.42

15.89

See the accompanying Notes to the Consolidated Financial Statements.

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Aflac Incorporated and Subsidiaries
Consolidated Statements of Shareholders' Equity


			Six Months Ended June 30,
(In millions, except for per-share amounts - Unaudited)			2006			2005

Common stock:
	Balance, beginning of period		$	65		$	65
	Exercise of stock options			1			-

		Balance, end of period		66			65

Additional paid-in capital:
	Balance, beginning of period			791			676
	Exercise of stock options, including income tax benefits			20			25
	Share-based compensation			16			15
	Gain on treasury stock reissued			19			14

		Balance, end of period		846			730

Retained earnings:
	Balance, beginning of period			8,048			6,785
	Net earnings			783			664
	Dividends to shareholders ($.26 per share in 2006
	and $.22 per share in 2005)			(130	)		(110	)

		Balance, end of period		8,701			7,339

Accumulated other comprehensive income:
	Balance, beginning of period			1,957			2,611
	Change in unrealized foreign currency translation gains (losses)
	during period, net of income taxes			36			(58	)
	Change in unrealized gains (losses) on investment
	securities during period, net of income taxes			(1,337	)		521

		Balance, end of period		656			3,074

Treasury stock:
	Balance, beginning of period			(2,934	)		(2,561	)
	Purchases of treasury stock			(197	)		(225	)
	Cost of shares issued			31			37

		Balance, end of period		(3,100	)		(2,749	)

		Total shareholders' equity	$	7,169		$	8,459



See the accompanying Notes to the Consolidated Financial Statements.

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Aflac Incorporated and Subsidiaries
Consolidated Statements of Cash Flows


					Six Months Ended June 30,
(In millions - Unaudited)						2006			2005

Cash flows from operating activities:
	Net earnings				$	783		$	664
	Adjustments to reconcile net earnings to net
	cash provided by operating activities:
		Change in receivables and advance premiums				(4	)		(1	)
		Increase in deferred policy acquisition costs				(216	)		(218	)
		Increase in policy liabilities				1,598			1,692
		Change in income tax liabilities				45			205
		Realized investment (gains) losses				(64	)		(15	)
		Other, net				37			29

				Net cash provided by operating activities		2,179			2,356

Cash flows from investing activities:
	Proceeds from investments sold or matured:
		Securities available for sale:
			Fixed maturities sold			1,386			539
			Fixed maturities matured			178			372
			Perpetual debentures sold			1			35
			Equity securities and other			30			-
	Costs of investments acquired:
		Securities available for sale:
			Fixed maturities			(2,128	)		(1,516	)
			Perpetual debentures			-			(286	)
		Securities held to maturity:
			Fixed maturities			(1,827	)		(1,723	)
	Cash received as collateral on loaned securities, net					335			(1,956	)
	Other, net					(12	)		(8	)

				Net cash used by investing activities	$	(2,037	)	$	(4,543	)

See the accompanying Notes to the Consolidated Financial Statements.

(continued)

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


					Six Months Ended June 30,
(In millions - Unaudited)						2006			2005

Cash flows from financing activities:
	Principal payments under debt obligations				$	(359	)	$	(4	)
	Purchases of treasury stock					(197	)		(225	)
	Change in investment-type contracts, net					111			127
	Dividends paid to shareholders					(123	)		(105	)
	Treasury stock reissued					23			27
	Other, net					19			26

		Net cash used by financing activities				(526	)		(154	)

Effect of exchange rate changes on cash and cash equivalents						11			(44	)

		Net change in cash and cash equivalents				(373	)		(2,385	)
Cash and cash equivalents, beginning of period						1,297			3,813

Cash and cash equivalents, end of period					$	924		$	1,428



Supplemental disclosures of cash flow information:
	Income taxes paid				$	327		$	181
	Interest paid					8			11
	Noncash financing activities:
			Capitalized lease obligations			3			1
			Treasury shares issued for:
				Associate stock bonus		18			18
				Shareholder dividend reinvestment		7			5
				Stock compensation grants		2			1



See the accompanying Notes to the Consolidated Financial Statements.

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Aflac Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income


					Three Months Ended						Six Months Ended
					June 30,						June 30,
(In millions - Unaudited)						2006			2005			2006			2005

Net earnings					$	408		$	336		$	783		$	664

Other comprehensive income (loss) before
income taxes:
	Foreign currency translation adjustments:
			Change in unrealized foreign currency translation
			gains (losses) during period			(5	)		10			(5	)		27
	Unrealized gains (losses) on investment securities:
		Unrealized holding gains (losses) arising
		during the period				(1,053	)		756			(1,988	)		800
		Reclassification adjustment for realized (gains)
		losses included in net earnings				(50	)		(11	)		(64	)		(15	)
	Minimum pension liability adjustment during period					-			-			-			1

				Total other comprehensive income (loss)
				before income taxes		(1,108	)		755			(2,057	)		813
		Income tax expense (benefit) related to items
		of other comprehensive income				(418	)		298			(756	)		351

				Other comprehensive income (loss)
				net of income taxes		(690	)		457			(1,301	)		462

				Total comprehensive income (loss)	$	(282	)	$	793		$	(518	)	$	1,126



See the accompanying Notes to the Consolidated Financial Statements.

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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 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, 2006, and December 31, 2005, and the consolidated statements of earnings and comprehensive income for the three- and six-month periods ended June 30, 2006 and 2005, and consolidated statements of shareholders' equity and cash flows for the six-month periods ended June 30, 2006, and 2005. 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, 2005.

New Accounting Pronouncements: 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 Statement of Financial Accounting Standards (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. This Interpretation 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 do not expect the adoption of this statement to have a material effect on our financial position or results of operations.

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In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140 (SFAS 155). The provisions of SFAS 155 are effective for all financial instruments acquired or issued after the beginning of the first fiscal year after September 15, 2006. Earlier adoption is permitted. SFAS 155 amends the accounting for hybrid financial instruments and eliminates the exclusion of beneficial interests in securitized financial assets from the guidance under SFAS 133 and eliminates the prohibition on the type of derivative instruments that qualified special purpose entities may hold under SFAS 140. SFAS 155 also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. In accordance with the standard's early adoption provisions, we adopted the provisions of SFAS 155 on January 1, 2006. The adoption of this standard did not have any impact on our financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123 (revised), Share-Based Payment (SFAS 123R). This standard amends SFAS No. 123, Accounting for Stock-Based Compensation, and supercedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS 123R establishes the accounting for grants of share-based awards in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or transactions that may be settled by the issuance of those equity instruments. SFAS 123R requires that companies use a fair value method to value share-based awards and recognize the related compensation expense in net earnings. The provisions of SFAS 123R, as amended by the Securities and Exchange Commission, are effective as of the beginning of the first fiscal year after June 15, 2005, although earlier application is encouraged. In accordance with the standard's early adoption provisions, we began accounting for share-based awards using the modified-retrospective application method effective January 1, 2005.

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, 2005.

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:

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				Three Months Ended						Six Months Ended
				June 30,						June 30,
(In millions)					2006			2005			2006			2005

Revenues:
	Aflac Japan:
		Earned premiums		$	2,215		$	2,217		$	4,354		$	4,471
		Net investment income			422			412			830			822
		Other income			5			7			12			15

			Total Aflac Japan		2,642			2,636			5,196			5,308

	Aflac U.S.:
		Earned premiums			878			803			1,744			1,590
		Net investment income			115			104			225			206
		Other income			1			3			4			5

			Total Aflac U.S.		994			910			1,973			1,801

	Other business segments				11			8			21			18

			Total business segment revenues		3,647			3,554			7,190			7,127
	Realized investment gains (losses)				50			11			64			15
	Corporate				24			16			51			19
	Intercompany eliminations				(24	)		(14	)		(49	)		(34	)

			Total revenues	$	3,697		$	3,567		$	7,256		$	7,127



			Three Months Ended						Six Months Ended
			June 30,						June 30,
(In millions)				2006			2005			2006			2005

Pretax earnings:
	Aflac Japan		$	432		$	387	*	$	857		$	787	*
	Aflac U.S.			150			130			297			263
	Other business segments			2			1			2			1

		Total business segments		584			518			1,156			1,051
	Interest expense, noninsurance operations			(4	)		(5	)		(8	)		(10	)
	Corporate and eliminations			(7	)		(12	)		(17	)		(24	)

		Pretax operating earnings		573			501			1,131			1,017
	Realized investment gains (losses)			50			11			64			15
	Impact from SFAS 133			1			4			4			(9	)

		Total earnings before income taxes	$	624		$	516		$	1,199		$	1,023



Income taxes applicable to pretax operating earnings			$	197		$	175		$	391		$	356
Effect of foreign currency translation
on operating earnings				(11	)		3			(33	)		8



*Includes a charge of $18 related to the write-down of previously capitalized systems development costs for Aflac Japan's administration system.

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Assets were as follows:


			June 30,			December 31,
(In millions)			2006			2005

Assets:
	Aflac Japan		$	47,461		$	46,200
	Aflac U.S.			9,500			9,547
	Other business segments			92			90

		Total business segments		57,053			55,837
	Corporate			8,462			9,559
	Intercompany eliminations			(8,083	)		(9,035	)

		Total assets	$	57,432		$	56,361

3. INVESTMENTS

Realized Investment Gains and Losses

During 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 conclude 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.

For the quarter ended June 30, 2005, we realized pretax investment gains of $11 million (after-tax, $7 million, or $.01 per diluted share) and pretax investment gains of $15 million (after-tax, $9 million, or $.01 per diluted share) for the six months ended June 30, 2005, all as a result of securities sales. Impairment charges were immaterial during the six months ended June 30, 2005.

Unrealized Investment Gains and Losses

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)	2006			2005

Unrealized gains on securities available-for-sale	$	415		$	2,452
Unamortized unrealized gains on securities transferred
to held to maturity		416			430
Deferred income taxes		(251	)		(965	)

Shareholders' equity, net unrealized gains on investment securities	$	580		$	1,917

The decrease in unrealized gains on available-for-sale securities primarily resulted from a rising interest rate environment.

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Special Purpose and Variable Interest Entities

As part of our investment activities, we own investments in qualified special purpose entities (QSPEs). At June 30, 2006, available-for-sale QSPEs totaled $2.1 billion at fair value ($2.3 billion at amortized cost, or 4.8% of total debt securities), compared with $2.2 billion at fair value ($2.3 billion at amortized cost, or 5.0% of total debt securities) at December 31, 2005. 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 yen-denominated investments in variable interest entities (VIEs) totaling $1.7 billion at fair value ($2.0 billion at amortized cost, or 4.0% of total debt securities) at June 30, 2006. We are the primary beneficiary of VIEs totaling $1.5 billion at fair value ($1.7 billion at amortized cost) 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 proceeds 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 $223 million at fair value ($236 million at amortized cost) as of June 30, 2006. The loss on any of our VIE investments would be limited to its cost.

Security Lending

We lend fixed-maturity securities to financial institutions in short-term security lending transactions. These securities continue to be carried as investment assets on our balance sheet during the term of the loans and are not recorded as sales. We receive cash or other securities as collateral for such loans. 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, 2006, we had security loans outstanding with a fair value of $938 million, and we held cash in the amount of $966 million as collateral for these loaned securities. At December 31, 2005, we had security loans outstanding with a fair value of $605 million, and we held cash in the amount of $622 million as collateral for these loaned securities. 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, 2005.

4. FINANCIAL INSTRUMENTS

We have only limited activity with derivative financial instruments. We do not use them for trading purposes, nor do we engage in leveraged derivative transactions.

We have outstanding cross-currency swap agreements related to the $450 million senior notes (Note 5). We have designated the foreign currency component of these cross-currency swaps as a hedge of the foreign currency exposure of our investment in Aflac Japan. The notional amounts and terms of the swaps match the principal amount and terms of the senior notes.

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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)		2006			2005

Interest rate component		$	9		$	6
Foreign currency component			(35	)		(22	)
Accrued interest component			4			4

	Total fair value of cross-currency swaps	$	(22	)	$	(12	)

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


(In millions)		2006			2005

Balance, beginning of period	$	(22	)	$	(91	)
Increase (decrease) in fair value of cross-currency swaps		(10	)		31
Interest rate component not qualifying for hedge accounting
reclassified to net earnings		(3	)		9

Balance, end of period	$	(35	)	$	(51	)

5. NOTES PAYABLE

A summary of notes payable follows:


		June 30,		December 31,
(In millions)		2006		2005

6.50% senior notes due April 2009 (principal amount $450)		$	450		$	450
Yen-denominated Samurai notes:
	.87% notes paid June 2006 (principal amount 40 billion yen)		-			339
	.96% notes due June 2007 (principal amount 30 billion yen)		260			254
	.71% notes due July 2010 (principal amount 40 billion yen)		347			339
Capitalized lease obligations payable through 2011			14			13

	Total notes payable	$	1,071		$	1,395

In 2001, 2002, and 2005 the Parent Company issued yen-denominated Samurai notes, each of which had five-year maturities. Each series of Samurai notes may only be redeemed prior to maturity upon the occurrence of a tax event as specified in the respective bond agreement and are not available to U.S. residents or entities. In June 2006, we paid in full the .87% Samurai notes issued in 2001.

For our yen-denominated loans, the principal amount as stated in dollar terms will fluctuate from period to period due to changes in the yen/dollar exchange rate. We have designated these yen-denominated notes payable as a hedge of the foreign currency exposure of our investment in Aflac Japan.

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The Parent Company filed a Shelf Registration Statement with Japanese regulatory authorities in February 2006 to issue up to 100 billion yen of yen-denominated Samurai notes in Japan. If issued, these securities will not be available to U.S. persons or entities.

In 1999, we issued $450 million of senior notes. These notes are redeemable at our option at any time with a redemption price equal to the principal amount of the notes redeemed plus a make-whole premium. We have entered into cross-currency swaps related to these notes (see Note 4).

We were in compliance with all of the covenants of our notes payable at June 30, 2006. No events of default or defaults occurred during the six months ended June 30, 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)			2006		2005

Common stock - issued:
	Balance, beginning of period		654,522		652,628
	Exercise of stock options		755		732

		Balance, end of period	655,277		653,360

Treasury stock:
	Balance, beginning of period		155,628		149,020
	Purchases of treasury stock:
		Open market	4,118		5,582
		Other	2		68
	Dispositions of treasury stock:
		Shares issued to AFL Stock Plan	(750	)	(825	)
		Exercise of stock options	(760	)	(1,416	)
		Other	(85	)	(241	)

		Balance, end of period	158,153		152,188

Shares outstanding, end of period			497,124		501,172

We exclude outstanding share-based awards from the calculation of weighted-average shares used in the computation of basic earnings per share. For the quarter and six months ended June 30, 2006, stock options to purchase approximately 1.4 million shares were considered to be anti-dilutive and were excluded from the calculation of diluted earnings per share, compared with 3.4 million for the quarter and six months ended June 30, 2005.

In February 2006, the board of directors authorized the purchase of 30 million shares of our common stock. As of June 30, 2006, approximately 43 million shares were available for purchase under the current share repurchase programs.

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7. SHARE-BASED TRANSACTIONS

The Company has two long-term incentive compensation plans. The first is a stock option plan, which allows grants for both incentive stock options (ISOs) to employees and non-qualifying stock options (NQSOs) to employees and non-employee directors. The options have a term of 10 years and vest on time-based conditions only. The strike price of options granted under this plan is equal to the fair market value of a share of our common stock at the date of grant. At June 30, 2006, 1.5 million shares were available for future grants under this plan.

The second long-term incentive compensation plan allows awards to Company employees for ISOs, NQSOs, restricted stock, restricted stock units, and stock appreciation rights. Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights. Generally, the awards vest based upon time-based conditions or time-and-performance-based conditions. Performance-based vesting conditions generally include the attainment of goals related to Company financial performance. As of June 30, 2006, the only performance-based awards issued and outstanding were restricted stock awards. At June 30, 2006, approximately 24.3 million shares were available for future grants under this plan.

Share-based awards granted to U.S.-based grantees are settled upon exercise with authorized but unissued Company stock, while those issued to Japan-based grantees are settled upon exercise with treasury shares. We estimate the fair value of each stock option granted using the Black-Scholes-Merton multiple option approach. The value of restricted stock awards is based on the fair market value of our common stock at the date of grant.

We adopted SFAS 123R to account for share-based awards effective January 1, 2005. In accordance with the modified-retrospective application method, we adjusted previously reported results to reflect the effect of expensing share-based awards.

The following table provides information on stock options outstanding and exercisable.


	Stock	Weighted-Average
	Option	Exercise Price
(In thousands of shares)	Shares	Per Share

Outstanding at June 30, 2006	19,554	$	28.95
Exercisable at June 30, 2006	15,216		25.83

As of June 30, 2006, the aggregate intrinsic value of stock options outstanding was $342 million, with a weighted-average remaining term of 5.4 years. The aggregate intrinsic value of stock options exercisable at that same date was $313 million, with a weighted-average remaining term of 4.5 years. We received $22 million and $28 million cash from the exercise of stock options during the six-month periods ended June 30, 2006 and 2005, respectively. The tax benefit realized as a result of stock option exercises was $11 million for the first half of 2006, compared with $18 million in the first half of 2005.

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As of June 30, 2006, total compensation cost not yet recognized in our financial statements related to restricted stock awards was $19 million, of which $9 million (306,732 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 2.2 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 9 of the Notes to the Consolidated Financial Statements included in our annual report to shareholders for the year ended December 31, 2005.

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,
			2006							2005							2006								2005

(In millions)			Japan			U.S.				Japan			U.S.				Japan				U.S.				Japan			U.S.

Components of net
periodic benefit cost:
	Service cost	$		2	$		2		$		1	$		2		$			4	$		5		$		2	$		4
	Interest cost			-			2				-			2					1			4				1			4
	Expected return on
	plan assets			-			(2	)			-			(2	)				-			(4	)			-			(3	)
	Amortization of net
	actuarial loss			1			1				1			1					1			2				1			1

	Net periodic benefit cost	$		3	$		3		$		2	$		3		$			6	$		7		$		4	$		6

As of June 30, 2006, approximately $15 million (using the June 30, 2006, exchange rate) had been contributed to the Japanese pension plan. As of June 30, 2006, no contributions had been made to the U.S. pension plan.

For additional information regarding our Japanese and U.S. pension plans, see Note 11 of the Notes to the Consolidated Financial Statement in our annual report to shareholders for the year ended December 31, 2005.

9. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments: We have employee benefit plans that provide pension and various post-retirement benefits. For additional information regarding our benefit plans, see Note 11 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2005.

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We lease office space and equipment under various agreements that expire in various years through 2021. For further information regarding lease commitments, see Note 12 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2005.

In 2005, we announced a multi-year building project for additional office space in Columbus, Georgia. The initial phase is to be completed in 2007 and is expected to cost approximately $26 million.

We have entered into an outsourcing agreement with IBM to provide mainframe computer operations and support for our Japanese operations. The agreement has a term of 10 years with an aggregate cost of 28.2 billion yen ($245 million using the June 30, 2006, exchange rate).

Litigation: We are a defendant in various lawsuits considered to be in the normal course of business. 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 against other companies, including insurers, in recent years. Although the final results of any litigation cannot be predicted with certainty, we believe the outcome of pending litigation will not have a material adverse effect on our financial position, results of operations, or cash flows.

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REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The June 30, 2006, and 2005, 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 19.

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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, 2006, and the related consolidated statements of earnings and comprehensive income for the three-month and six-month periods ended June 30, 2006, and 2005, and the consolidated statements of shareholders' equity and cash flows for the six-month periods ended June 30, 2006, and 2005. 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, 2005, 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 28, 2006, we expressed an unqualified opinion on those consolidated financial statements.

As discussed in Notes 1 and 7 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, to account for stock options and other share-based transactions, effective January 1, 2005.



Atlanta, Georgia
August 7, 2006

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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
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 used to minimize exposure of our shareholders' equity to foreign currency translation fluctuations
catastrophic events
general economic conditions in the United States and Japan

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COMPANY OVERVIEW

Aflac Incorporated (the Parent Company) and its subsidiaries (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, 2005, to June 30, 2006. 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, 2005.

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 85% 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, 2006. 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, 2005.

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.

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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,
			2006			2005			2006		2005			2006			2005				2006			2005
			In millions					Per Diluted Share						In millions					Per Diluted Share

Net earnings		$		408	$		336	$		.81	$	.66	$		783	$		664		$		1.55	$		1.30
Items impacting net
earnings, net of tax:
	Realized investment
	gains (losses)			31			7			.06		.01			41			9				.08			.01
	Impact from SFAS 133			1			3			-		.01			2			(6	)			-			(.01	)

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 and/or tax planning strategies. 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 2006 primarily resulted from our bond-swap program which took advantage of tax loss carryforwards and sales transactions in the normal course of business. Realized investment gains in the first six months of 2005 primarily resulted from 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 (see Notes 4 and 5 of the Notes to the Consolidated Financial Statements). The effect of issuing fixed-rate, dollar-denominated debt and swapping it into fixed-rate, yen-denominated debt has the same economic impact on Aflac as if we had issued yen-denominated debt of a like amount. However, the accounting treatment for cross-currency swaps is different from issuing yen-denominated Samurai notes. 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 swap, which does not qualify for hedge accounting, be reflected in net earnings (other income). This change in fair value is determined by relative dollar and yen interest rates and has no cash impact on our results of operations. At maturity, the swaps' fair value and their initial contract fair value will be equal, and the cumulative impact of gains and losses from the changes in fair value of the interest component will be zero. We have the ability and intent to retain the cross-currency swaps until their maturity. 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.

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We have also issued yen-denominated Samurai 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 exceeds 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, 2006; therefore, there was no impact on net earnings. See Note 4 of the Notes to the Consolidated Financial Statements and Note 1 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2005, for additional information.

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 causes fewer dollars to be reported. When the yen strengthens, translating yen into dollars causes more dollars to be 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 net earnings was 34.7% for the six-month period ended June 30, 2006, compared with 35.1% for the same period in 2005.

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.

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Subject to the preceding assumptions, our objective for 2006 is to achieve net earnings per diluted share of at least $2.92, an increase of 15.0% over 2005. If we achieve this objective, the following table shows the likely results for 2006 net earnings per diluted share, including the impact of foreign currency translation using various yen/dollar exchange rate scenarios.

2006 Net Earnings Per Share (EPS) Scenarios*



Weighted-Average
Yen/Dollar			Net Earnings Per		% Growth		Yen Impact
Exchange Rate			Share		Over 2005		on EPS

100.00			$	3.07	20.9	%	$	.15
105.00				2.99	17.7			.07
109.88		**		2.92	15.0			-
115.00				2.86	12.6			(.06	)
120.00				2.80	10.2			(.12	)



*	Excludes realized investment gains/losses, impact from SFAS 133 and nonrecurring items in 2006 and 2005; and assumes no impact from currency translation in 2006
**	Actual 2005 weighted-average exchange rate

Our objective for 2007 is to increase net earnings per diluted share by 15% to 16%, 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.

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AFLAC JAPAN
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)				2006		2005		2006		2005

Premium income			$	2,215	$	2,217	$	4,354	$	4,471
Net investment income				422		412		830		822
Other income				5		7		12		15

		Total operating revenues		2,642		2,636		5,196		5,308

Benefits and claims				1,716		1,735		3,375		3,522
Operating expenses:
	Amortization of deferred policy acquisition costs			73		72		143		144
	Insurance commissions			218		233		432		467
	Insurance and other expenses			203		209		389		388

		Total operating expenses		494		514		964		999

		Total benefits and expenses		2,210		2,249		4,339		4,521

		Pretax operating earnings*	$	432	$	387	$	857	$	787



Weighted-average yen/dollar exchange rates				114.43		107.63		115.65		106.04

		In Dollars								In Yen

		Three Months				Six Months				Three Months				Six Months
Percentage changes over		Ended June 30,				Ended June 30,				Ended June 30,				Ended June 30,
previous period:		2006		2005		2006		2005		2006		2005		2006		2005

	Premium income	(.1	)%	8.6	%	(2.6	)%	8.9	%	6.2	%	6.6	%	6.2	%	6.5	%
	Net investment income	2.6		7.0		1.0		8.1		9.0		5.0		10.1		5.7
	Total operating revenues	.2		8.5		(2.1	)	8.9		6.5		6.5		6.7		6.5
	Pretax operating earnings*	11.5		14.1		9.0		15.9		18.5		11.9		18.9		13.2

			Three Months Ended						Six Months Ended
			June 30,						June 30,
Ratios to total revenues, in dollars:				2006			2005			2006		2005

	Benefits and claims			64.9		%	65.8	%		65.0	%	66.3	%
	Operating expenses:
		Amortization of deferred policy acquisition costs			2.8		2.7			2.7		2.7
		Insurance commissions		8.3			8.8			8.3		8.8
		Insurance and other expenses		7.7			8.0			7.5		7.4


	Total operating expenses			18.8			19.5			18.5		18.9
	Pretax operating earnings*			16.3			14.7			16.5		14.8



See Page 24* for our definition of segment operating earnings.

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The percentage increases in premium income reflect the growth of premiums in force. Annualized premiums in force in yen increased 6.5% to 1.06 trillion yen in the first six months of 2006, compared with 992.6 billion 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 $9.2 billion in 2006 and $9.0 billion in 2005.

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. The operating expense ratio decreased slightly in the first six months. However, we expect the operating expense ratio to be relatively stable for the year in relation to 2005. Due to improvement in the benefit and expense ratios, the pretax operating profit margin expanded from 14.7% to 16.3% for the three-month period ended June 30, 2006. We expect a modest expansion in the profit margin in 2006 and 2007.

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 37% of Aflac Japan's investment income in the first six months of 2006, compared with 30% 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. 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

		2006		2005		2006		2005		2006		2005		2006		2005

Net investment income		9.0	%	5.0	%	10.1	%	5.7	%	6.6	%	5.6	%	6.7	%	6.4	%
Total operating revenues		6.5		6.5		6.7		6.5		6.1		6.6		6.2		6.6
Pretax operating
earnings*		18.5		11.9		18.9		13.2		16.2		12.5		15.7		13.9



*	See Page 24 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.

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Aflac Japan Sales

Aflac Japan's total new annualized premium sales in yen declined 4.2% in the second quarter and 2.8% in the first six months of 2006. 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)	2006			2005			2006			2005			2006			2005			2006			2005

Total new annualized	$	273		$	302		$	524		$	587			31.2			32.6			60.6			62.4
premium sales
Increase over comparable
period in prior year	(9.7		)%	2.9		%	(10.7		)%	5.4		%	(4.2		)%	1.2		%	(2.8		)%	3.1		%

From a product perspective, the decline in second quarter sales primarily reflected weakness in the medical product category. Rider MAX sales and conversions were also lower than a year ago. 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
			2006		2005			2006		2005

Medical policies			33	%	38	%		33	%	39	%
Cancer life			28		24			27		23
Ordinary life			25		19			24		19
Rider MAX			9		12			10		12
Other			5		7			6		7


	Total		100	%	100	%		100	%	100	%

Sales of our medical products, which include our EVER product line, declined 16.9% in the second quarter of 2006 and 16.3% during the first six months. We believe these declines are attributable to crowded market conditions; our agents' transition from the billing conversion program discussed last quarter back to their regular sales activities; and an industry-wide slowdown in medical sales during the first half of 2006. We also believe some of the weakness in medical sales resulted from our agents' focus on WAYS. However, with continued cost pressure on Japan's health care system, we expect demand for medical products will continue, and we remain encouraged about the outlook for the medical insurance market. As a result, we continue to believe that the medical category will remain an important part of our product portfolio.

Cancer life sales were strong in the quarter, rising 14.2%. Sales in this category benefited from a new product introduction in 2005 and a sales campaign to promote a rider that enhances the benefits of our base cancer life policy. Sales of our cancer life policy through Dai-ichi Life declined 3.2% in the second quarter and accounted for 7% of total new annualized premium sales in the second quarters of 2006 and 2005. Nevertheless, we continue to be pleased with our alliance with Dai-ichi Life.

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Ordinary Life sales increased 27.2% in the second quarter of 2006, reflecting, in part, strong sales of WAYS. We are very pleased with the initial response to WAYS, which we launched in January. Unlike traditional life insurance, WAYS allows a policyholder to convert a portion of the life insurance coverage to medical, nursing care, or fixed annuity benefits at retirement age. Despite its recent introduction, WAYS sales were up 21.4% over the first quarter of 2006 and accounted for approximately 10% of second quarter sales.

Our objective for 2006 had been to increase total new annualized premium sales in yen by 5% to 8%. However, given the current market environment, we believe Aflac Japan's sales will likely be flat to down single digits for the remainder of the year.

We continued to expand our distribution system in Japan. However, this year marks a shift in our focus from recruiting agencies to increasing the total number of licensed sales associates. During the first half of 2006, the number of licensed sales associates rose 4.8% to more than 85,600, compared with approximately 81,800 at December 31, 2005.

Reflecting changed employment patterns during a period of prolonged economic weakness, as well as changed consumer behavior, Aflac's sales growth through affiliated corporate agencies has declined for several years. Furthermore, the market for Aflac Japan's products has become crowded, and the large worksite environment that affiliated corporate agencies service is not conducive to making face-to-face sales presentations. As a result, we are encouraging our affiliated corporate agencies to form alliances with individual agents to leverage their experience with these types of sales tactics. Even though this program began early this year and the formation of these alliances will take time, we believe that they can be effective in helping us improve the sales results of the affiliated corporate agency channel.

Additionally, we have reorganized our training department and hired people from our sales force and other companies who have expertise in face-to-face sales. We have also developed a new training program, which focuses on teaching prospecting and basic consulting skills. We plan to introduce this training program to regional sales office coordinators and newly licensed associates during the fourth quarter of this year.

Aflac Japan Investments

Growth of investment income in yen is affected by available cash flow from operations, 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 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.

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


	Three Months					Six Months
		2006		2005			2006		2005

New money yield - yen only		3.21	%	2.70	%		3.01	%	2.79	%
New money yield - blended		3.36		2.85			3.23		2.98
Return on average invested assets, net of
investment expenses		4.08		4.11			4.10		4.11

At June 30, 2006, the yield on Aflac Japan's investment portfolio, including dollar-denominated investments, was 4.17%, compared with 4.28% a year ago. See Investments and Cash on Page 36 for additional information.

Japanese Economy

Recent events continue to indicate that Japan is recovering from an extended economic slump. In recent monthly and regional economic commentary, the Bank of Japan reported that corporate profits and employment were improving and business fixed investment was increasing. The Bank of Japan further stated that private consumption, exports and industrial production were increasing moderately. In July 2006, the Bank of Japan abandoned its five-year zero-interest rate policy in a move indicative of its belief that the economy has entered a period of healthy economic growth and price stability. Nevertheless, the time required for a sustained 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, 2005.

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AFLAC U.S.
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)					2006			2005			2006			2005

Premium income				$	878		$	803		$	1,744		$	1,590
Net investment income					115			104			225			206
Other income					1			3			4			5

		Total operating revenues			994			910			1,973			1,801

Benefits and claims					527			494			1,050			973
Operating expenses:
	Amortization of deferred policy acquisition costs				70			62			145			126
	Insurance commissions				110			101			218			201
	Insurance and other expenses				137			123			263			238

		Total operating expenses			317			286			626			565

		Total benefits and expenses			844			780			1,676			1,538

		Pretax operating earnings*		$	150		$	130		$	297		$	263



Percentage changes over previous period:

		Premium income			9.3	%		10.6	%		9.7	%		10.7	%
		Net investment income			10.0			6.2			9.1			5.7
		Total operating revenues			9.2			10.0			9.6			10.1
		Pretax operating earnings*			15.1			8.3			12.7			9.0



Ratios to total revenues:

		Benefits and claims			53.0	%		54.2	%		53.2	%		54.0	%
		Operating expenses
			Amortization of deferred policy acquisition costs		7.1			6.8			7.4			7.0
			Insurance commissions		11.1			11.1			11.0			11.1
			Insurance and other expenses		13.7			13.6			13.4			13.3

		Total operating expenses			31.9			31.5			31.8			31.4
		Pretax operating earnings*			15.1			14.3			15.0			14.6



See Page 24* for our definition of segment operating earnings.

The percentage increases in premium income reflect the growth of premiums in force. The increases in annualized premiums in force of 9.4% in the first six months of 2006 and 9.9% for the same period of 2005 were favorably affected by sales at the worksite primarily through cafeteria plans. Annualized premiums in force at June 30, 2006 were $3.8 billion, compared with $3.5 billion a year ago.

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After several years of trending upward, the benefit ratio declined in the first half of 2006. As a percentage of premium income, the benefit ratio was 60.2% in the first six months of 2006, compared with 61.2% in the first half of 2005. We expect the benefit ratio to decline modestly in 2006 due to favorable claim cost trends. The operating expense ratio reflected the write-off of remaining deferred policy acquisition costs associated with a large payroll account. Excluding the effect of this write-off and discretionary promotional expenses, we expect the operating expense ratio for 2006 to be relatively stable when compared to 2005. We expect the pretax operating profit margin to improve modestly in 2006.

Aflac U.S. Sales

Aflac U.S. sales results were consistent with our expectations for the second quarter. Total new annualized premium sales rose 6.3% during the second quarter and 8.8% for the six-month period ended June 30, 2006. Sales in the quarter were led by accident/disability, and we again experienced solid growth from the hospital indemnity product line. The following table presents Aflac's U.S. total new annualized premium sales for the periods ended June 30.


	Three Months						Six Months
(In millions)		2006			2005			2006			2005

Total new annualized premium sales	$	327		$	307		$	645		$	593
Increase over comparable period in prior year		6.3	%		9.2	%		8.8	%		3.5	%

For the third quarter, we believe U.S. sales will likely increase at mid- to upper-single digits similar to second quarter growth. However, we expect stronger fourth quarter sales, which we believe puts us in a good position to achieve our full-year sales goal of an 8% to 12% increase in total new annualized premium sales.

One aspect of our growth strategy is the continued enhancement of our product line. We have developed revised specified health event and intensive care plans, which we anticipate launching in the third quarter of this year. The following table details the contributions to total new annualized premium sales by major product category for the periods ended June 30.


		Three Months					Six Months
			2006		2005			2006		2005

Accident/disability coverage			52	%	53	%		52	%	52	%
Cancer expense insurance			16		18			17		18
Hospital indemnity products			13		11			12		11
Fixed-benefit dental coverage			7		8			7		8
Other			12		10			12		11

	Total		100	%	100	%		100	%	100	%

We were also encouraged to see continued expansion of our U.S. sales force. Although we did not set a specific recruiting target this year, we are continuing to emphasize recruiting as a means for growing our producer base. During the second quarter, recruiting was up .8% to 6,800 new sales associates, compared with the second quarter of 2005 and the total number of licensed agents was up 5.8%.

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However, our primary focus has been on increasing producing sales associates. We believe that we can achieve better producer growth through more effective and standardized training for our sales associates and sales management. For the second quarter of 2006, the number of average monthly producing associates increased 1.0% to more than 17,500, compared with a year ago. On an average weekly basis, the number of producing associates rose 2.7% in the second quarter to more than 9,900, compared with a year ago. As we move forward this year, our focus will shift from average monthly producers to average weekly producers as both a reporting and management metric. This shift will provide for a more active management of our sales associates and allow our sales management to monitor progress and needs on a real-time basis.

Aflac U.S. Investments

The following table presents the results of Aflac's U.S. investment activities for the periods ended June 30.


	Three Months					Six Months
		2006		2005			2006		2005

New money yield		6.54	%	6.06	%		6.37	%	6.05	%
Return on average invested assets, net of
investment expense		6.84		6.85			6.78		6.24

The return on average invested assets for the first half of 2005 was reduced by higher-than-usual securities lending at the end of the 2004. Excluding loaned securities and the related investment income earned from our security lending program, the adjusted return on average invested assets was 7.06% for the six-month period ended June 30, 2006, compared with 7.12% for the same period in 2005. At June 30, 2006, the portfolio yield on Aflac's U.S. portfolio was 7.19%, compared with 7.30% a year ago. See Investments and Cash on Page 36 for additional information.

ANALYSIS OF FINANCIAL CONDITION

Our financial condition has remained strong in the functional currencies of our operations during the last two years. The yen/dollar exchange rate at the end of each period is used to translate yen-denominated balance sheet items to U.S. dollars for reporting purposes. The exchange rate at June 30, 2006, was 115.24 yen to one dollar, or 2.5% stronger than the December 31, 2005, exchange rate of 118.07. The stronger yen increased reported investments and cash by $944 million, total assets by $1.1 billion, and total liabilities by $1.0 billion, compared with the amounts that would have been reported for the second quarter of 2006 if the exchange rate had remained unchanged from December 31, 2005.

Market Risks of Financial Instruments

Because we invest in fixed-income securities, our financial instruments are exposed primarily to two types of market risks: currency risk and interest rate risk.

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Currency Risk

The functional currency of Aflac Japan's insurance operation is the Japanese yen. All of Aflac Japan's premiums, claims and commissions are received or paid in yen, as are most of its investment income and other expenses. Furthermore, most of Aflac Japan's investments, cash and liabilities are yen-denominated. When yen-denominated securities mature or are sold, the proceeds are generally reinvested in yen-denominated securities. Aflac Japan holds these yen-denominated assets to fund its yen-denominated policy obligations. In addition, Aflac Incorporated has yen-denominated notes payable and cross-currency swaps related to its dollar-denominated senior notes.

Although we generally do not convert yen into dollars, we do translate financial statement amounts from yen into dollars for financial reporting purposes. Therefore, reported amounts are affected by foreign currency fluctuations. We report unrealized foreign currency translation gains and losses in accumulated other comprehensive income.

On a consolidated basis, we attempt to minimize the exposure of our shareholders' equity to foreign currency translation fluctuations. We accomplish this by investing a portion of Aflac Japan's investment portfolio in dollar-denominated securities, by the Parent Company's issuance of yen-denominated debt and by the use of cross-currency swaps (see Hedging Activities on Page 43 for additional information). As a result, the effect of currency fluctuations on our net assets is mitigated. The dollar values of our yen-denominated net assets, which are subject to foreign currency translation fluctuations for financial reporting purposes, are summarized as follows (translated at end-of-period exchange rates):



	June 30,				December 31,
(In millions)	2006				2005

Aflac Japan yen-denominated net assets	$	1,530		$		2,184
Parent Company yen-denominated net liabilities		(1,089	)			(1,403	)

Consolidated yen-denominated net assets subject to
foreign currency translation fluctuations	$	441		$		781

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The following table demonstrates the effect of foreign currency fluctuations by presenting the dollar values of our yen-denominated assets and liabilities, and our consolidated yen-denominated net asset exposure at selected exchange rates.

Dollar Value of Yen-Denominated Assets and Liabilities
at Selected Exchange Rates



						June 30,									December 31,
(In millions)						2006									2005

Yen/dollar exchange rates						100.24			115.24*			130.24			103.07			118.07*			133.07

Yen-denominated financial instruments:
	Assets:
		Securities available for sale:
			Fixed maturities		$	21,084		$	18,339		$	16,227		$	21,732		$	18,971		$	16,832
			Perpetual debentures			3,985			3,467			3,067			4,191			3,659			3,246
			Equity securities			34			29			26			70			61			54
		Securities held to maturity:
			Fixed maturities			14,875			12,939			11,449			12,428			10,849			9,626
			Perpetual debentures			4,898			4,260			3,769			4,779			4,172			3,702
		Cash and cash equivalents				407			354			314			553			483			429
		Other financial instruments				14			13			11			35			31			27

				Subtotal		45,297			39,401			34,863			43,788			38,226			33,916

	Liabilities:
		Notes payable				714			621			549			1,083			945			839
		Cross-currency swaps				554			482			427			539			471			417
		Japanese policyholder
		protection fund				225			195			173			232			203			180

				Subtotal		1,493			1,298			1,149			1,854			1,619			1,436

Net yen-denominated
financial instruments						43,804			38,103			33,714			41,934			36,607			32,480
Other yen-denominated assets						5,540			4,819			4,264			5,332			4,654			4,130
Other yen-denominated liabilities						(48,837	)		(42,481	)		(37,588	)		(46,371	)		(40,480	)		(35,917	)

Consolidated yen-denominated
net assets subject to foreign
currency fluctuation					$	507		$	441		$	390		$	895		$	781		$	693



*Actual period-end exchange rate

We are exposed to economic currency risk only when yen funds are actually converted into dollars. This primarily occurs when we transfer funds from Aflac Japan to Aflac U.S., which is done annually. The exchange rates prevailing at the time of transfer will differ from the exchange rates prevailing at the time the yen profits were earned. These repatriations have not been greater than 80% of Aflac Japan's prior year earnings determined in accordance with standards established by Japan's Financial Services Agency (FSA). A portion of the repatriation may be used to service Aflac Incorporated's yen-denominated notes payable with the remainder converted into dollars.

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Interest Rate Risk

Our primary interest rate exposure is to the effect of changes in interest rates on the fair value of our investments in debt securities. We use modified duration analysis, which measures price percentage volatility, to estimate the sensitivity of fair values to interest rate changes on debt securities we own. For example, if the current duration of a debt security is 10, then the fair value of that security will increase by approximately 10% if market interest rates decrease by 100 basis points, assuming all other factors remain constant. Likewise, the fair value of the debt security will decrease by approximately 10% if market interest rates increase by 100 basis points, assuming all other factors remain constant.

At June 30, 2006, we had $432 million of net unrealized losses on total debt securities, compared with $2.5 billion of net unrealized gains on total debt securities at December 31, 2005. We estimate that the reduction in the fair value of debt securities we own resulting from a 100 basis point increase in market interest rates, based on our portfolios at June 30, 2006, and December 31, 2005, would be as follows:



	June 30,				December 31,
(In millions)	2006				2005

Effect on yen-denominated debt securities	$	(4,145	)	$		(4,190	)
Effect on dollar-denominated debt securities		(787	)			(832	)

Effect on total debt securities	$	(4,932	)	$		(5,022	)

Changes in the interest rate environment drive fair value and as a result directly affect the balance of unrealized gains or losses for a given period in relation to a prior period. The net unrealized losses at June 30, 2006, relate to securities in both our available-for-sale and held-to-maturity portfolios. We do not expect to realize a majority of these unrealized losses because we have the intent and ability to hold such securities to maturity or until recovery of value. Likewise, should unrealized gains occur because of decreases in market yields, we would not expect to realize these gains.

We attempt to match the duration of our assets with the duration of our liabilities. For Aflac Japan, the duration of policy benefits and related expenses to be paid in future years is longer than that of the related invested assets due to the unavailability of acceptable long-duration yen-denominated securities. Currently, when debt securities we own mature, the proceeds may be reinvested at a yield below that of the interest required for the accretion of policy benefit liabilities on policies issued in earlier years. Also, our strategy of developing and marketing riders to our older policies has helped offset the negative investment spread. And despite negative investment spreads, adequate overall profit margins still exist in Aflac Japan's aggregate block of business because of profits that have emerged from changes in mix of business and favorable experience from mortality, morbidity, and expenses.

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Investments and Cash

Our investment philosophy is to maximize investment income while emphasizing liquidity, safety and quality. Our investment objective, subject to appropriate risk constraints, is to fund policyholder obligations and other liabilities in a manner that enhances shareholders' equity. We seek to achieve this objective through a diversified portfolio of fixed-income investments that reflects the characteristics of the liabilities it supports. Aflac invests primarily within the debt securities markets. The following table details investment securities by segment.

Investment Securities by Segment



			Aflac Japan					Aflac U.S.


			June 30,		December 31,			June 30,				December 31,
(In millions)				2006		2005			2006				2005

Securities available for sale, at fair value:
	Fixed maturities		$	21,181	$		21,907	$		6,133	*	$		6,134	*
	Perpetual debentures			3,686			3,888			444				482
	Equity securities			29			61			26				23

		Total available for sale		24,896			25,856			6,603				6,639

Securities held to maturity, at amortized cost:
	Fixed maturities			12,939			10,849			18				18
	Perpetual debentures			4,260			4,172			-				-

		Total held to maturity		17,199			15,021			18				18

		Total investment securities	$	42,095	$		40,877	$		6,621		$		6,657



*Excludes investment-grade fixed-maturity securities held by the Parent Company of $94 in 2006 and $100 in 2005.

We have investments in both publicly issued and privately issued securities. However, the status of issuance should not be viewed as an indicator of liquidity or as a limitation on the determination of fair value. The outstanding amount of a particular issuance, as well as the level of activity in a particular issuance and the state of the market, including credit events and the interest rate environment, affect liquidity regardless of type of issuance. We routinely assess the fair value of all of our investments. This process includes evaluating quotations provided by outside securities pricing sources and/or compiled using data provided by external debt and equity market sources, as described more fully in Note 3 of the Notes to the Consolidated Financial Statements included in our annual report to shareholders for the year ended December 31, 2005. The following table details investment securities by type of issuance.

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Investment Securities by Type of Issuance



					June 30, 2006				December 31, 2005

				Amortized		Fair		Amortized		Fair
(In millions)				Cost		Value		Cost		Value

Publicly issued securities:
	Fixed maturities			$	15,105	$	15,926	$	14,872	$	16,540
	Perpetual debentures				173		162		203		210
	Equity securities				14		51		14		51

		Total publicly issued			15,292		16,139		15,089		16,801

Privately issued securities:
	Fixed maturities				24,670		23,691		21,855		22,441
	Perpetual debentures				8,429		8,129		8,224		8,412
	Equity securities				3		4		16		33

		Total privately issued			33,102		31,824		30,095		30,886

			Total investment securities	$	48,394	$	47,963	$	45,184	$	47,687

The fair values of our debt securities at June 30, 2006, were relatively unchanged from December 31, 2005, as a result of the offsetting effects of a rising interest rate environment and a stronger yen/dollar exchange rate.

Of our total debt securities, privately issued securities accounted for 68.4%, at amortized cost, as of June 30, 2006, compared with 66.6% at December 31, 2005. Privately issued securities held by Aflac Japan at amortized cost accounted for $30.8 billion, or 63.7%, of total debt securities at June 30, 2006, and $27.9 billion, or 61.8%, of total debt securities at December 31, 2005. Reverse-dual currency debt securities accounted for $9.5 billion, or 28.8%, of total privately issued securities as of June 30, 2006, compared with $8.9 billion, or 29.6%, of total privately issued securities at December 31, 2005. Aflac Japan has invested in privately issued securities to secure higher yields than those available from Japanese government bonds. Aflac Japan's investments in yen-denominated privately issued securities consist primarily of non-Japanese issuers and have longer maturities, thereby allowing us to improve our asset/liability matching and our overall investment returns. Most of our privately issued securities were issued under medium-term note programs and have standard documentation commensurate with credit ratings, except when internal credit analysis indicates that additional protective and/or event-risk covenants are required.

Our investment activities expose us to credit risk, which is a consequence of extending credit and/or carrying investment positions. However, we continue to adhere to prudent standards for credit quality. We accomplish this by considering our product needs and the overall corporate objectives, in addition to credit risk. Our investment policy requires that all securities be rated investment grade at the time of purchase. In evaluating the initial rating, we look at the overall senior issuer rating, the explicit rating for the actual issue or the rating for the security class, and, where applicable, the appropriate designation from the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC). All of our securities have ratings from either a nationally recognized statistical rating organization or the SVO of the NAIC. In addition, we perform extensive internal credit reviews to ensure that we are consistent in applying rating criteria for all of our securities.

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We use specific criteria to judge the credit quality of both existing and prospective investments. Furthermore, we use several methods to monitor these criteria, including credit rating services and internal credit analysis. The distributions by credit rating of our purchases of debt securities, based on acquisition cost, were as follows:



	Six Months Ended		Twelve Months Ended		Six Months Ended
	June 30, 2006		December 31, 2005		June 30, 2005

AAA	11.0	%	6.1	%	7.1	%
AA	48.1		45.5		27.0
A	38.2		42.9		54.0
BBB	2.7		5.5		11.9

	100.0	%	100.0	%	100.0	%

The large percentage of securities purchased in categories rated A or better reflects the availability of investments of suitable quality that also met our yield targets.

The distributions of debt securities we own, by credit rating, were as follows:



		June 30, 2006				December 31, 2005

		Amortized		Fair		Amortized		Fair
		Cost		Value		Cost		Value

AAA		4.4	%	4.4	%	4.0	%	3.9	%
AA		35.6		36.9		33.7		34.9
A		37.9		37.5		38.9		38.7
BBB		20.0		19.4		21.1		20.6
BB or lower		2.1		1.8		2.3		1.9

	Total	100.0	%	100.0	%	100.0	%	100.0	%

The overall credit quality of our portfolio remained high in part because our investment policy prohibits us from purchasing below-investment-grade securities. The increase in AAA- and AA-rated holdings compared with December 31, 2005, resulted from purchases and credit rating upgrades. In the event of a credit rating downgrade to below-investment-grade status, we do not automatically liquidate our position. However, if the security is in the held-to-maturity portfolio, we immediately transfer it to the available-for-sale portfolio so that the security's fair value and its unrealized gain/loss are reflected on the balance sheet.

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Once we designate a security as below-investment-grade, we intensify our monitoring of the issuer. We do not automatically recognize an impairment for the difference between fair value and amortized cost. Our investment management starts by reviewing its credit analysis. Included in this process are an evaluation of the issuer, its current credit posture and an assessment of the future prospects for the issuer. We then obtain fair value information from at least three independent pricing sources. Upon determining the fair value, we move our focus to an analysis of whether or not the decline in fair value, if any, is other than temporary. For securities with an amortized cost in excess of fair value, investment management then reviews the issue based on our impairment policy to determine if the investment should be impaired and/or liquidated. The assessment of whether a decline is other than temporary requires significant management judgment and is discussed more fully in the Critical Accounting Estimates section of MD&A in our annual report to shareholders for the year ended December 31, 2005. Securities classified as below investment grade were as follows:

Below-Investment-Grade Securities



			June 30, 2006					December 31, 2005

		Amortized			Fair			Amortized		Fair
(In millions)		Cost			Value			Cost		Value

Ahold		$		309		$	224	$	302	$	236
KLM Royal Dutch Airlines				260			219		254		227
Ford Motor Credit				260			212		254		209
Ford Motor Company				123			92		123		84
LeGrand				*			*		46		52
Cooper Tire & Rubber Co.				45			44		45		45
Tennessee Gas Pipeline				31			31		31		33
Wendy's International				14			14		*		*

	Total	$		1,042		$	836	$	1,055	$	886



*Investment grade at respective reporting date

Occasionally a debt security will be split rated. This occurs when one rating agency rates the security as investment grade while another rating agency rates the same security as below investment grade. Our policy is to review each issue on a case-by-case basis to determine if a split-rated security should be classified as investment grade or below investment grade. Our review includes evaluating the issuer's credit position as well as current market pricing and other factors, such as the issuer's or security's inclusion on a credit rating downgrade watch list. Split-rated securities as of June 30, 2006, represented .3% of total debt securities at amortized cost and were as follows:

Split-Rated Securities

Amortized

Moody's

S&P

Fitch

Investment-Grade

(In millions)

Cost

Rating

Status

Tyco Electronics AMP (AMP Japan)

Ba1

BBB+

Investment Grade

LeGrand

Baa3

BB+

BBB-

Investment Grade

Union Carbide Corp.

Ba2

BBB-

BBB

Investment Grade

Wendy's International

Baa3

BB+

N/R*

Below Investment Grade

*Not rated

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The following table provides details on amortized cost, fair value and unrealized gains and losses for our investments in debt securities by investment-grade status as of June 30, 2006.



			Total		Total		Percent		Gross		Gross
			Amortized		Fair		of Fair		Unrealized		Unrealized
(In millions)			Cost		Value		Value		Gains		Losses

Available-for-sale securities:
	Investment-grade securities		$	30,118	$	30,702	64.1	%	$	1,761	$	1,177
	Below-investment-grade securities			1,042		836	1.7			1		207
Held-to-maturity securities:
	Investment-grade securities			17,217		16,370	34.2			287		1,134

		Total	$	48,377	$	47,908	100.0	%	$	2,049	$	2,518

The following table presents an aging of securities in an unrealized loss position as of June 30, 2006.

Aging of Unrealized Losses



											Six Months
			Total		Total		Less Than Six Months				to 12 Months					Over 12 Months

			Amortized		Unrealized		Amortized		Unrealized		Amortized		Unrealized		Amortized		Unrealized
(In millions)			Cost		Loss		Cost		Loss		Cost		Loss		Cost		Loss

Available-for-sale
securities:
	Investment-grade
	securities		$	15,727	$	1,177	$	8,404	$	283	$	5,176	$	570	$	2,147	$	324
	Below-investment-
	grade securities			975		207		44		2		270		49		661		156
Held-to-maturity
securities:
	Investment-grade
	securities			12,322		1,134		3,797		163		5,154		454		3,371		517

		Total	$	29,024	$	2,518	$	12,245	$	448	$	10,600	$	1,073	$	6,179	$	997

The following table presents a distribution of unrealized losses by magnitude as of June 30, 2006.

Percentage Decline from Amortized Cost



		Total		Total			Less than 20%				20% to 34%

		Amortized		Unrealized		Amortized		Unrealized		Amortized			Unrealized
(In millions)		Cost		Loss		Cost		Loss		Cost			Loss

Available-for-sale securities:
	Investment-grade securities	$	15,727	$	1,177	$	15,371	$	1,086	$		356	$	91
	Below-investment-
	grade securities		975		207		602		95			373		112
Held-to-maturity securities:
	Investment-grade securities		12,322		1,134		12,027		1,064			295		70

	Total	$	29,024	$	2,518	$	28,000	$	2,245	$		1,024	$	273

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The following table presents the 10 largest unrealized loss positions in our portfolio as of June 30, 2006.



	Credit	Amortized		Fair		Unrealized
(In millions)	Rating	Cost		Value		Loss

Ahold	BB	$	309	$	224	$	85
CSAV	BBB		208		153		55
Nordea Bank	A		347		293		54
Unique Zurich Airport	BBB		321		271		50
Union Fenosa	BBB		321		273		48
Ford Motor Credit	BB		260		212		48
EFG EuroBank Ergasias	A		294		249		45
United Mexican States	BBB		370		326		44
Israel Electric	BBB		736		694		42
National Bank of Greece	A		260		219		41



*Not rated

The fair value of our investments in debt securities can fluctuate as a result of changes in interest rates, foreign currency exchange rates, and credit issues. Declines in fair value noted above resulted from changes in the interest rates, yen/dollar exchange rates, and issuer credit status. However, we believe that it would be inappropriate to recognize impairment charges because we believe the changes in fair value are temporary. Based on our evaluation and analysis of specific issuers in accordance with our impairment policy, there were no impairment charges recognized during the six-month period ended June 30, 2006. Impairment charges recognized during the six-month period ended June 30, 2005 were immaterial.

Realized losses on investment-grade debt securities were as follows:

Realized Losses on Debt Securities


				Three Months Ended				Six Months Ended
				June 30, 2006				June 30, 2006

						Realized				Realized
(In millions)				Proceeds		Loss		Proceeds		Loss

Investment-grade securities, length of
	consecutive unrealized loss:
		Less than six months		$	202	$	4	$	271	$	8
		Six months to 12 months			81		6		95		7

			Total	$	283	$	10	$	366	$	15

Realized losses on investment-grade securities in an unrealized loss position for more than 12 months were immaterial for both the second quarter and the six-month period ended June 30, 2006. There were no disposals of below-investment-grade securities, which resulted in losses during the first six months of 2006.

As part of our investment activities, we have investments in variable interest entities (VIEs) and qualifying special purpose entities (QSPEs). See Note 3 of the Notes to the Consolidated Financial Statements for additional information.

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Cash, cash equivalents, and short-term investments totaled $925 million, or 1.9% of total investments and cash, as of June 30, 2006, compared with $1.3 billion, or 2.6% at December 31, 2005.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs totaled $5.9 billion at June 30, 2006, an increase of $306 million, or 5.5%, compared with $5.6 billion at December 31, 2005. The following table presents deferred policy acquisition costs by segment.


(In millions)		June 30, 2006			December 31, 2005

Aflac Japan	$		3,850	$		3,624
Aflac U.S.			2,046			1,966

Aflac Japan's deferred policy acquisition costs increased 6.2% (3.7% increase in yen) for the six months ended June 30, 2006. Deferred policy acquisition costs of Aflac U.S. increased 4.1% for the six-month period ended June 30, 2006. The stronger yen at June 30, 2006, increased reported deferred policy acquisition costs by $92 million.

Policy Liabilities

Policy liabilities totaled $45.0 billion at June 30, 2006, an increase of $2.6 billion, or 6.2% compared with $42.3 billion at December 31, 2005. The following table presents policy liabilities by segment.


(In millions)		June 30, 2006			December 31, 2005

Aflac Japan	$		39,907	$		37,556
Aflac U.S.			5,054			4,771

Aflac Japan's policy liabilities increased 6.3% (3.7% increase in yen) for the six months ended June 30, 2006. Policy liabilities of Aflac U.S. increased 5.9% for the six-month period ended June 30, 2006. The stronger yen at June 30, 2006, increased reported policy liabilities by $957 million. The increase in total policy liabilities reflected the growth and aging of our in-force business.

Notes Payable

Notes payable totaled $1.1 billion at June 30, 2006, compared with $1.4 billion at December 31, 2005. The ratio of debt to total capitalization (debt plus shareholders' equity, excluding the unrealized gains and losses on investment securities) was 14.0% as of June 30, 2006, compared with 18.8% as of December 31, 2005. See Note 5 of the Notes to the Consolidated Financial Statements for additional information on notes payable at June 30, 2006.

Off-Balance Sheet Arrangements

As of June 30, 2006, we had no material unconditional purchase obligations that were not recorded on the balance sheet. Additionally, we had no material letters of credit, standby letters of credit, guarantees or standby repurchase obligations.

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Security Lending

We use short-term security lending arrangements to increase investment income with minimal risk. For further information regarding such arrangements, see Note 3 of the Notes to the Consolidated Financial Statements.

Benefit Plans

Aflac U.S. and Aflac Japan have various benefit plans. For additional information on our U.S. and Japanese plans, see Note 8 of the Notes to the Consolidated Financial Statements and Note 11 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2005.

Policyholder Protection Fund

The Japanese insurance industry has a policyholder protection system that provides funds for the policyholders of insolvent insurers. See the Policyholder Protection Fund section of MD&A in our annual report to shareholders for the year ended December 31, 2005, for additional information.

Hedging Activities

Aflac has limited hedging activities. Our primary exposure to be hedged is our investment in Aflac Japan, which is affected by changes in the yen/dollar exchange rate. In order to mitigate this exposure, we have taken the following courses of action. First, Aflac Japan owns dollar-denominated securities, which serve as an economic currency hedge of a portion of our investment in Aflac Japan. Second, we have designated the Parent Company's yen-denominated liabilities (Samurai notes payable and cross-currency swaps) as a hedge of our investment in Aflac Japan. If the total of these yen-denominated liabilities is equal to or less than our net investment in Aflac Japan, the hedge is deemed to be effective and the related exchange effect is reported in the unrealized foreign currency component of other comprehensive income. Should these yen-denominated liabilities exceed our investment in Aflac Japan, the portion of the hedge that exceeds our investment in Aflac Japan would be deemed ineffective. As required by SFAS 133, we would then recognize the foreign exchange effect on the ineffective portion in net earnings (other income). We estimate that if the ineffective portion was $100 million, we would report a foreign exchange gain/loss of approximately $1 million for every one yen weakening/strengthening in the end-of-period yen/dollar exchange rate. At June 30, 2006, our hedge was effective with yen-denominated assets exceeding yen-denominated liabilities by 50.8 billion yen, compared with 92.3 billion yen at December 31, 2005. The decrease in our yen-denominated net asset position resulted from a decrease in Aflac Japan's yen-denominated net asset position as a result of the effect of rising interest rates partially offset by the decrease in the Parent Company's yen-denominated liabilities as a result of the 2001 Samurai maturity.

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CAPITAL RESOURCES AND LIQUIDITY

Aflac provides the primary sources of liquidity to the Parent Company through dividends and management fees. Aflac declared dividends to the Parent Company in the amount of $452 million in the first half of 2006, compared with $356 million for the same period in 2005. During the first six months of 2006, Aflac paid $35 million to the Parent Company for management fees, compared with $23 million for the same period of 2005. The primary uses of cash by the Parent Company are shareholder dividends and our share repurchase program. The Parent Company's sources and uses of cash are reasonably predictable and are not expected to change materially in the future.

The Parent Company also accesses debt security markets to provide additional sources of capital. Capital is primarily used to fund business expansion, capital expenditures and our share repurchase program. In February 2006, we filed a Shelf Registration Statement with Japanese regulatory authorities to issue up to 100 billion yen (approximately $868 million using the June 30, 2006, exchange rate) of Samurai notes in Japan. If issued, these securities will not be available to U.S. persons or entities. We believe outside sources for additional debt and equity capital, if needed, will continue to be available. For additional information, see Note 5 of the Notes to the Consolidated Financial Statements.

The principal sources of cash for our insurance operations are premiums and investment income. The primary uses of cash by our insurance operations are policy claims, commissions, operating expenses, income taxes and payments to the Parent Company for management fees and dividends. Both the sources and uses of cash are reasonably predictable.

When making an investment decision, our first consideration is based on product needs. Our investment objectives provide for liquidity through the purchase of investment-grade debt securities. These objectives also take into account duration matching, and because of the long-term nature of our business, we have adequate time to react to changing cash flow needs.

In general, our insurance products provide fixed-benefit amounts that are not subject to medical-cost inflation. Furthermore, our business is widely dispersed in both the United States and Japan. This geographic dispersion and the nature of our benefit structure mitigate the risk of a significant unexpected increase in claims payments due to epidemics and events of a catastrophic nature. Additionally, our insurance policies generally are not interest-sensitive and therefore are not subject to unexpected policyholder redemptions due to investment yield changes. As a result of policyholder aging, claims payments are expected to gradually increase over the life of a policy. Therefore, future policy benefit reserves are accumulated in the early years of a policy and are designed to help fund future claims payments. We expect our future cash flows from premiums and our investment portfolio to be sufficient to meet our cash needs for benefits and expenses.

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Consolidated Cash Flows

We translate cash flows for Aflac Japan's yen-denominated items into U.S. dollars using weighted-average exchange rates. In years when the yen weakens, translating yen into dollars causes fewer dollars to be reported. When the yen strengthens, translating yen into dollars causes more dollars to be reported. The following table summarizes consolidated cash flows by activity for the six-month periods ended June 30.

Consolidated Cash Flows by Activity



(In millions)			2006			2005

Operating activities		$	2,179		$	2,356
Investing activities			(2,037	)		(4,543	)
Financing activities			(526	)		(154	)
Exchange effect on cash and cash equivalents			11			(44	)

	Net change in cash and cash equivalents	$	(373	)	$	(2,385	)

Operating Activities

In the first half of 2006, consolidated cash flow from operations decreased 7.6%, compared with the first six months of 2005. The decrease in cash flows primarily resulted from the increase in Aflac Japan's tax payments. The following table summarizes operating cash flows by source for the six-month periods ended June 30.

Cash Provided by Operating Activities



(In millions)		2006		2005

Aflac Japan	$	1,664	$	1,901
Aflac U.S. and Other Operations		515		457

Investing Activities

Operating cash flow is primarily used to purchase debt securities to meet future policy obligations. The following table summarizes investing cash flows by source for the six-month periods ended June 30.

Cash Provided (Used) by Investing Activities



(In millions)		2006			2005

Aflac Japan	$	(1,555	)	$	(1,709	)
Aflac U.S. and Other Operations		(482	)		(2,835	)

Cash flows for Aflac U.S. and Other Operations for the first half of 2005 included the January 2005 return of cash collateral from the security lending activities of Aflac U.S. at the end of 2004 (approximately $2.6 billion).

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Prudent portfolio management dictates that we attempt to match the duration of our assets with the duration of our liabilities. For Aflac Japan, the duration of policy benefits and related expenses to be paid in future years is longer than that of the related invested assets due to the unavailability of acceptable long-duration yen-denominated securities. Currently, when debt securities we own mature, the proceeds may be reinvested at a yield below that required for the accretion of policy benefit liabilities on policies issued in earlier years. However, the long-term nature of our business and our strong cash flows provides us with the ability to minimize the effect of mismatched durations and/or yields identified by various asset adequacy analyses. When market opportunities arise, we dispose of selected debt securities that are available for sale to improve the duration matching of our assets and liabilities and/or improve future investment yields. As a result, dispositions before maturity can vary significantly from year to year. Dispositions before maturity were approximately 4% of the year-to-date average investment portfolio of debt securities available for sale during the six-month period ended June 30, 2006, compared with approximately 2% a year ago. The increase in dispositions before maturity during the first half of 2006 primarily resulted from sales in conjunction with our bond-swap program.

Financing Activities

Consolidated cash used by financing activities was $526 million in the first six months of 2006, compared with $154 million for the same period of 2005. The increase in cash used in financing primarily resulted from the pay-off of the 2001 Samurai notes in June 2006. Cash provided by investment-type contracts was $111 million in the first six months of 2006, compared with $127 million a year ago.

The following table presents a summary of treasury stock activity during the six-month periods ended June 30.


(In millions)		2006		2005

Treasury stock purchases	$	197	$	225

Shares purchased		4,120		5,650



Stock issued from treasury	$	23	$	27

Shares issued		1,595		2,482

Dividends to shareholders in the first half of 2006 of $.26 per share increased 18.2% over the same period of 2005. The following table presents the sources of dividends paid to shareholders for the six-month periods ended June 30.


(In millions)		2006		2005

Dividends paid in cash		$	123	$	105
Dividends through issuance of treasury shares			7		5

	Total dividends to shareholders	$	130	$	110

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Regulatory Restrictions

Aflac is domiciled in Nebraska and is subject to its regulations. In addition to limitations and restrictions imposed by U.S. insurance regulators, Japan's FSA may not allow transfers of funds from Aflac Japan if the transfers would cause Aflac Japan to lack sufficient financial strength for the protection of policyholders.

Payments are made from Aflac Japan to the Parent Company for management fees and to Aflac U.S. for allocated expenses and remittances of earnings. During the first six months of 2006, Aflac Japan paid $12 million to the Parent Company for management fees, compared with $15 million for the same period in 2005. Expenses allocated to Aflac Japan were $15 million for the six-month period ended June 30, 2006, compared with $14 million a year ago. During the first six months of 2006, Aflac Japan remitted profits of $355 million (40.0 billion yen) to Aflac U.S., compared with $184 million (20.0 billion yen) in the first half of 2005. We determine the timing of profit remittances based on corporate needs. In July 2006, Aflac Japan repatriated an additional 10.0 billion yen of profits. For the full year, 2006 profit remittances will total 50.0 billion yen, compared with full-year remittances of 41.2 billion yen in 2005.

For additional information on regulatory restrictions on dividends, profit transfers and other remittances, see Note 10 of the Notes to the Consolidated Financial Statements and the Regulatory Restrictions section of MD&A, both in our annual report to shareholders for the year ended December 31, 2005.

Rating Agencies

Aflac is rated AA by both Standard & Poor's and Fitch Ratings and Aa2 (Excellent) by Moody's for financial strength. A.M. Best assigned Aflac an A+ (Superior) rating for financial strength and operating performance. Aflac Incorporated's senior debt and Samurai notes are rated A by Standard & Poor's; A+ by Fitch Ratings; and A2 by Moody's.

Other

In July 2006, the board of directors declared the third quarter cash dividend of $.13 per share. The dividend is payable on September 1, 2006, to shareholders of record at the close of business on August 18, 2006. In February 2006, the board of directors authorized the purchase of 30 million shares of our common stock. As of June 30, 2006, approximately 43 million shares were available for purchase under our share repurchase programs.

For information regarding commitments and contingent liabilities, see Note 9 of the Notes to the Consolidated Financial Statements.

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Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

The information required by Item 3 is incorporated by reference from the Market Risks of Financial Instruments section of MD&A in Part I, Item 2 of this report.

Item 4.

Controls and Procedures.

Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective.

Internal Control Over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second fiscal quarter of 2006 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

We are a defendant in various lawsuits considered to be in the normal course of business. 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 against other companies, including insurers, in recent years. Although the final results of any litigation cannot be predicted with certainty, we believe the outcome of pending litigation will not have a material adverse effect on our financial position, results of operations, or cash flows.

Item 1A.

Risk Factors.

There have been no material changes in the risk factors that were discussed in our Annual Report on Form 10-K for the year ended December 31, 2005.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

During the second quarter of 2006, we repurchased shares of Aflac stock as follows:

Issuer Purchases of Equity Securities

(c) Total

(d) Maximum

Number

Number of

of Shares

Shares that

Purchased

May Yet Be

(a) Total

as Part of

Purchased

Number of

(b) Average

Announced

Under the

Shares

Price Paid

Plans or

Period

Purchased

Per Share

Programs

April 1 - April 30

44,843,263

May 1 - May 31

2,051,800

47.80

2,051,800

42,791,463

June 1 - June 30

42,791,463

Total

2,051,800

47.80

2,051,800

42,791,463

Of the shares available for purchase under current board authorizations, 12,791,463 shares relate to a repurchase authorization approved by the board and announced in February 2004. The remaining 30,000,000 shares relate to a repurchase authorization approved by the board and announced in February 2006.

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Item 6.

Exhibits.

(a) Exhibits:
	3.0		-	Articles of Incorporation, as amended - incorporated by reference from Form 10-Q for June 30, 2000, Exhibit 3.0 (File No. 001-07434).
	3.1		-	Bylaws of the Corporation, as amended - incorporated by reference from 2003 Form 10-K, Exhibit 3.1 (File No. 001-07434).
	10.0	*	-	American Family Corporation Stock Option Plan (1985) - incorporated by reference from Registration Statement No. 33-44720 on Form S-8 with respect to the Aflac Incorporated (Formerly American Family Corporation) Incentive Stock Option Plan (1982) and Stock Option Plan (1985).
	10.1	*	-	Aflac Incorporated Amended 1985 Stock Option Plan - incorporated by reference from the 1994 Shareholders' Proxy Statement, Exhibit A (File No. 001-07434).
	10.2	*	-	Aflac Incorporated Amended 1985 Stock Option Plan, as amended August 8, 1995 - incorporated by reference from Form 10-Q for September 30, 1995, Exhibit 10 (File No. 001-07434).
	10.3	*	-	American Family Corporation Retirement Plan for Senior Officers, as amended and restated October 1, 1989 - incorporated by reference from 1993 Form 10-K, Exhibit 10.2 (File No. 001-07434).
	10.4	*	-	Aflac Incorporated Supplemental Executive Retirement Plan, as amended April 1, 2003 - incorporated by reference from 2003 Form 10-K, Exhibit 10.4 (File No. 001-07434).
	10.5	*	-	Aflac Incorporated Employment Agreement with Daniel P. Amos, dated August 1, 1993 - incorporated by reference from 1993 Form 10-K, Exhibit 10.4 (File No. 001-07434).
	10.6	*	-	Aflac Incorporated Employment Agreement with Charles D. Lake, II, dated January 1, 2002 - incorporated by reference from 2003 Form 10-K, Exhibit 10.6 (File No. 001-07434).
	10.7	*	-	Aflac Incorporated Employment Agreement with Kriss Cloninger, III, dated February 14, 1992, and as amended November 12, 1993 - incorporated by reference from 1993 Form 10-K, Exhibit 10.6 (File No. 001-07434).
	10.8	*	-	Aflac Incorporated 1997 Stock Option Plan - incorporated by reference from the 1997 Shareholders' Proxy Statement, Appendix B (File No. 001-07434).
	10.9	*	-	Form of Officer Stock Option Agreement (Non-Qualifying Stock Option) under the Aflac Incorporated 1997 Stock Option Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.5 (File No. 001-07434).
	10.10	*	-	Form of Officer Stock Option Agreement (Incentive Stock Option) under the Aflac Incorporated 1997 Stock Option Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.6 (File No. 001-07434).
	10.11	*	-	Notice of grant of stock options and stock option agreement to officers under the Aflac Incorporated 1997 Stock Option Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.7 (File No. 001-07434).
	10.12	*	-	Aflac Incorporated Executive Deferred Compensation Plan, as amended, effective January 1, 1999 - incorporated by reference from Form S-8 Registration Statement No. 333-135324, Exhibit 4.1.
	10.13	*	-	Aflac Incorporated Amended and Restated Management Incentive Plan, effective January 1, 1999 - incorporated by reference from the 2003 Shareholders' Proxy Statement, Exhibit A (File No. 001-07434).
	10.14	*	-	Aflac Retirement Agreement with E. Stephen Purdom, dated February 15, 2000 - incorporated by reference from 2000 Form 10-K, Exhibit 10.13 (File No. 001-07434).
	10.15	*	-	Aflac Employment Agreement with Hidefumi Matsui, dated January 1, 1995 - incorporated by reference from 1994 Form 10-K, Exhibit 10.8 (File No. 001-07434).

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10.16	*	-	1999 Aflac Associate Stock Bonus Plan, as amended, dated February 11, 2003, - incorporated by reference from 2002 Form 10-K, Exhibit 99.2 (File No. 001-07434).
10.17	*	-	2004 Aflac Incorporated Long-Term Incentive Plan, dated May 3, 2004 - incorporated by reference from the 2004 Notice and Proxy Statement, Exhibit B (File No. 001-07434).
10.18	*	-	Form of Non-Employee Director Stock Option Agreement (NQSO) under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.1 (File No. 001-07434).
10.19	*	-	Notice of grant of stock options to non-employee director under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.2 (File No. 001-07434).
10.20	*	-	Form of Non-Employee Director Restricted Stock Award Agreement under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.3 (File No. 001-07434).
10.21	*	-	Notice of restricted stock award to non-employee director under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated January 28, 2005, Exhibit 10.4 (File No. 001-07434).
10.22	*	-	Form of Officer Restricted Stock Award Agreement under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.1 (File No. 001-07434).
10.23	*	-	Notice of restricted stock award to officers under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.2 (File No. 001-07434).
10.24	*	-	Form of Officer Stock Option Agreement (Non-Qualifying Stock Option) under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.3 (File No. 001-07434).
10.25	*	-	Form of Officer Stock Option Agreement (Incentive Stock Option) under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.4 (File No. 001-07434).
10.26	*	-	Notice of grant of stock options to officers under the 2004 Aflac Incorporated Long-Term Incentive Plan - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.5 (File No. 001-07434).
10.27	*	-	Aflac Incorporated Employment Agreement with Akitoshi Kan, dated April 1, 2001, and amended February 1, 2005 - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.1 (File No. 001-07434).
10.28	*	-	Aflac Incorporated Employment Agreement with Paul S. Amos II, dated January 1, 2005 - incorporated by reference from Form 8-K dated February 7, 2005, Exhibit 10.2 (File No. 001-07434).
10.29	*	-	Aflac Employment Agreement with Joseph W. Smith, dated December 18, 1997, incorporated by reference from 2004 Form 10-K, Exhibit 10.29 (File No. 001-07434).
10.30	*	-	Fourth Amendment to the Aflac Incorporated Executive Deferred Compensation Plan (incorporated by reference from Form S-8 Registration Statement No. 333-69333, Exhibit 4), dated December 29, 2005 - incorporated by reference from 2005 Form 10-K, Exhibit 10.30 (File No. 001-07434).
10.31	*	-	First Amendment to the 2004 Aflac Incorporated Long-Term Incentive Plan (incorporated by reference from the 2004 Notice and Proxy Statement, Exhibit B), dated May 2, 2005 - incorporated by reference from Form 10-Q for March 31, 2005, Exhibit 10.1 (File No. 001-07434).
10.32	*	-	Second Amendment to the 2004 Aflac Incorporated Long-Term Incentive Plan (incorporated by reference from the 2004 Notice and Proxy Statement, Exhibit B), dated February 14, 2006.
11.0		-	Statement regarding the computation of per-share earnings for the Registrant.
12.0		-	Statement regarding the computation of ratio of earnings to fixed charges for the Registrant.
15.0		-	Letter from KPMG LLP regarding unaudited interim financial information.

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	31.1	-	Certification of CEO dated August 7, 2006, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
	31.2	-	Certification of CFO dated August 7, 2006, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
	32.0	-	Certification of CEO and CFO dated August 7, 2006, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Management contract or compensatory plan or agreement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Aflac Incorporated


August 7, 2006	President, Treasurer and	/s/ *Kriss Cloninger III*

	Chief Financial Officer	(Kriss Cloninger III)





August 7, 2006	Senior Vice President,	/s/ *Ralph A. Rogers Jr.*

	Financial Services; Chief	(Ralph A. Rogers Jr.)
	Accounting Officer

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Exhibit Index

11.0	-	Statement regarding the computation of per-share earnings for the Registrant.

12.0	-	Statement regarding the computation of ratio of earnings to fixed charges for the Registrant.

15.0	-	Letter from KPMG LLP regarding unaudited interim financial information.

31.1	-	Certification of CEO dated August 7, 2006, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2	-	Certification of CFO dated August 7, 2006, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

32.0	-	Certification of CEO and CFO dated August 7, 2006, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.