AFLAC INCAFL
AFLAC INC Stock Compensation Disclosure
SHARE-BASED COMPENSATION
The Company has outstanding share-based awards under the Aflac Incorporated Long-Term Incentive Plan (as Amended and Restated February 14, 2017), as further amended on August 9, 2022 (the Plan). Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors.
The Plan allows for a maximum number of shares issuable over its term of 75 million shares including 38 million shares that may be awarded in respect of awards other than options or stock appreciation rights. If any awards granted under the Plan are forfeited or are terminated before being exercised or settled for any reason other than tax forfeiture, then the shares underlying the awards will again be available under the Plan. As of December 31, 2025, approximately 32.6 million shares were available for future grants under this plan.
The Plan allows awards to Company employees as follows:
•Stock options
◦Incentive stock options
◦Non-qualifying stock options
•Performance-based restricted stock awards and units (performance-based restricted stock)
•Restricted stock awards and units (restricted stock)
•Stock appreciation rights
Non-employee directors are eligible for grants of non-qualifying stock options, restricted stock, and stock appreciation rights.
Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while those issued to Japan-based grantees are settled with treasury shares.
Vesting Schedules
Stock options and stock appreciation rights have an expiration date of no later than 10 years from the grant date. Generally, the vesting period for share-based awards is the requisite service period, which is typically three years for employees and one year for non-employee directors. Vesting for employees is generally on a ratable basis over the three years, typically subject to continued employment.
For performance-based restricted stock, vesting is also contingent on certain performance conditions typically achieved over three years.
The Compensation Committee of the board of directors has the discretion to determine vesting schedules.
Share-Based Compensation Expense
Share-based compensation expense consists primarily of expenses for stock options, restricted stock, and performance-based restricted stock. The expense is included in insurance and other expenses in the consolidated statements of earnings.
The following table presents the impact of share-based compensation expense for the years ended December 31.
| (In millions, except for per-share amounts) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Impact on earnings from continuing operations | $ | 82 | $ | 72 | $ | 79 | |||||||||||||||||||||||||||||
| Impact on earnings before income taxes | 82 | 72 | 79 | ||||||||||||||||||||||||||||||||
| Impact on net earnings | 65 | 57 | 62 | ||||||||||||||||||||||||||||||||
| Impact on net earnings per share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | .12 | $ | .10 | $ | .10 | |||||||||||||||||||||||||||||
| Diluted | .12 | .10 | .10 | ||||||||||||||||||||||||||||||||
Stock Options
The following tables summarize stock option activity under the employee stock option plan. There were no options granted in 2025, 2024 or 2023.
| (In thousands of shares) | Stock Option Shares | Weighted-Average Exercise Price Per Share | |||||||||||||||||||||
| Outstanding at December 31, 2022 | 1,577 | $ | 32.05 | ||||||||||||||||||||
| Granted in 2023 | 0 | 0.00 | |||||||||||||||||||||
| Canceled in 2023 | 0 | 24.75 | |||||||||||||||||||||
| Exercised in 2023 | (526) | 30.35 | |||||||||||||||||||||
| Outstanding at December 31, 2023 | 1,051 | 32.90 | |||||||||||||||||||||
| Granted in 2024 | 0 | 0.00 | |||||||||||||||||||||
| Canceled in 2024 | (3) | 31.21 | |||||||||||||||||||||
| Exercised in 2024 | (425) | 31.40 | |||||||||||||||||||||
| Outstanding at December 31, 2024 | 623 | 33.92 | |||||||||||||||||||||
| Granted in 2025 | 0 | 0.00 | |||||||||||||||||||||
| Canceled in 2025 | (2) | 30.53 | |||||||||||||||||||||
| Exercised in 2025 | (301) | 31.04 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 320 | $ | 36.65 | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Total intrinsic value of options exercised | $ | 23 | $ | 25 | $ | 22 | |||||||||||||||||||||||||||||
| Cash received from options exercised | 9 | 13 | 16 | ||||||||||||||||||||||||||||||||
| Tax benefit realized as a result of options exercised and restricted stock releases | 31 | 28 | 20 | ||||||||||||||||||||||||||||||||
Stock options and stock appreciation rights granted under the Plan have an exercise price of at least the fair market value of the underlying stock on the grant date. For awards with an exercise price currently below the quoted closing price of the Company's common stock, the total pretax intrinsic value of stock options exercised during the period is based on the difference between the exercise price of the stock options and the closing price of the Company's common stock of $110.27 as of December 31, 2025.
| (In thousands of shares) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Shares exercisable, end of year | 320 | 623 | 1,051 | ||||||||||||||||||||||||||||||||
The Company estimates the fair value of each stock option granted using the Black-Scholes-Merton multiple option approach. Expected volatility is based on historical periods generally commensurate with the estimated terms of the options. The Company uses historical data to estimate option exercise and termination patterns within the model. Separate groups of employees that have similar historical exercise patterns are stratified and considered separately for valuation purposes. The expected term of options granted is derived from the output of the Company's option model and represents the weighted-average period of time that options granted are expected to be outstanding. The Company bases the risk-free interest rate on the Treasury note rate with a term comparable to that of the estimated term of the options.
The following table presents the assumptions used in valuing options granted, if applicable, during the years ended December 31.
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Expected term (years) | 8.0 | 8.0 | 8.0 | ||||||||||||||||||||||||||||||||
| Expected volatility | 27.2 | % | 26.8 | % | 26.7 | % | |||||||||||||||||||||||||||||
| Annual forfeiture rate | 4.4 | 4.4 | 4.2 | ||||||||||||||||||||||||||||||||
| Risk-free interest rate | 4.2 | 4.0 | 3.0 | ||||||||||||||||||||||||||||||||
| Dividend yield | 2.2 | 2.4 | 2.3 | ||||||||||||||||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at December 31, 2025.
| (In thousands of shares) | Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Range of Exercise Prices Per Share | Stock Option Shares Outstanding | Wgtd.-Avg. Remaining Contractual Life (Yrs.) | Wgtd.-Avg. Exercise Price Per Share | Stock Option Shares Exercisable | Wgtd.-Avg. Exercise Price Per Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 0.00 | - | $ | 28.97 | 39 | 0.1 | $ | 28.97 | 39 | $ | 28.97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28.97 | - | 36.21 | 166 | 1.2 | 35.17 | 166 | 35.17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 36.21 | - | 44.59 | 115 | 1.9 | 41.37 | 115 | 41.37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 0.00 | - | $ | 44.59 | 320 | 1.3 | $ | 36.65 | 320 | $ | 36.65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2025, the aggregate intrinsic value of stock options outstanding and in-the-money stock options exercisable was $24 million.
Performance-Based Restricted Stock
Under the Plan, the Company grants selected executive officers performance-based restricted stock with vesting contingent upon meeting various financial performance goals or other Company identified metrics. Performance-based restricted stock is generally granted at-the-money and contingently cliff vest over a period of three years, generally subject to continued employment. Additionally, grants of performance-based restricted stock may also be contingent upon certain market conditions. Compensation expense for performance-based restricted stock subject to accelerated vesting at the date of retirement eligibility is expensed over the implicit service period.
In 2025, the Company granted 284 thousand performance-based restricted stock, which are contingent on the achievement of the Company's financial performance goals and certain market conditions. On the date of grant, the Company estimated the fair value of performance-based restricted stock with market conditions using a Monte Carlo simulation model. The model discounts the value of the stock at the assumed vesting date based on a risk-free interest rate. Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter. Actual performance, including modification for relative total shareholder return, may result in the ultimate award of 0% to 200% percent of the initial number of performance-based restricted stock issued, with the potential for no award if the Company's performance goals are not achieved.
In 2025, the Company also granted 10 thousand performance-based stock units, which are contingent on the achievement of certain Company determined metrics. Based on estimates of actual performance versus the vesting thresholds, the calculated fair value percentage pay-out estimate will be updated each quarter. Actual performance may result in the ultimate award of 0% to 100% percent of the initial number of performance-based restricted stock issued, with the potential for no award if the Company's determined metrics are not achieved.
The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, a Monte Carlo simulation model. The Company is responsible for determining the assumptions used in estimating the fair value of its share-based compensation awards.
Key assumptions used to value performance-based restricted stock granted during 2025 follows:
| (In millions) | 2025 | ||||||||||
| Expected volatility (based on Aflac Inc. and peer group historical daily stock price) | 21.3 | % | |||||||||
| Expected life from grant date (years) | 2.9 | ||||||||||
| Risk-free interest rate (based on U.S. Treasury yields at the date of grant) | 4.2 | % | |||||||||
Restricted Stock
The value of restricted stock is based on the fair market value of the Company's common stock at the date of grant. The following table summarizes restricted stock activity during the years ended December 31.
| (In thousands of shares) | Shares | Weighted-Average Grant-Date Fair Value Per Share | |||||||||||||||||||||
| Restricted stock at December 31, 2022 | 2,414 | $ | 56.21 | ||||||||||||||||||||
| Granted in 2023 | 1,171 | 70.74 | |||||||||||||||||||||
| Canceled in 2023 | (112) | 60.62 | |||||||||||||||||||||
| Vested in 2023 | (1,165) | 52.77 | |||||||||||||||||||||
| Restricted stock at December 31, 2023 | 2,308 | 62.96 | |||||||||||||||||||||
| Granted in 2024 | 1,300 | 80.90 | |||||||||||||||||||||
| Canceled in 2024 | (48) | 74.68 | |||||||||||||||||||||
| Vested in 2024 | (1,461) | 47.22 | |||||||||||||||||||||
| Restricted stock at December 31, 2024 | 2,099 | 73.65 | |||||||||||||||||||||
| Granted in 2025 | 1,139 | 104.53 | |||||||||||||||||||||
| Canceled in 2025 | (77) | 78.60 | |||||||||||||||||||||
| Vested in 2025 | (1,294) | 68.83 | |||||||||||||||||||||
| Restricted stock at December 31, 2025 | 1,867 | $ | 86.15 | ||||||||||||||||||||
As of December 31, 2025, total compensation cost not yet recognized in the Company's financial statements related to restricted stock was $38 million, of which $13 million (1.6 million shares) was related to performance-based restricted stock. The Company expects to recognize these amounts over a weighted-average period of approximately 1.7 years. There are no other contractual terms covering restricted stock once vested.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 25, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.