A.M. Best has affirmed the financial strength rating of
A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of
American Family Life Assurance Company of Columbus (Omaha,
NE), American Family Life Assurance Company of Columbus
(Japan Branch), American Family Life Assurance Company of New
York (New York, NY) and Continental American Insurance
Company (Continental American) (Columbia, SC). These companies
represent the life/health insurance subsidiaries of Aflac
Incorporated (Aflac) (Columbus, GA) [NYSE: AFL]. Concurrently,
A.M. Best has affirmed the ICR of “a-” and all existing issue
ratings of Aflac. The outlook for each rating is stable. (See below
for a detailed listing of issue ratings.)
The rating affirmations reflect Aflac’s continued strong
risk-adjusted capitalization and excellent financial flexibility,
its consistently favorable operating earnings reported, the
company’s well-managed investment portfolio, despite interest rate
pressures in Japan and the United States, and the ongoing strategic
sales growth initiatives within Aflac’s U.S. operations. The
ratings also reflect the company’s leading position as a provider
of innovative and value-added supplemental worksite benefits.
Partially offsetting these positive rating factors are the
company’s exposure to the competitive market for supplemental
products in the United States and its need to further enhance
distribution strategies, as well as macroeconomic pressures that
exist within its core market in Japan. A.M. Best notes that recent
operating profitability has been hindered by the weakened Japanese
yen relative to the U.S. dollar.
Through the first quarter of 2016, Aflac produced strong
financial results that were in line with publicly provided
guidance, supporting growth rates of 4-6% in Japan and 3-5% in the
United States. The company’s operations are supported by
significant financial flexibility at its parent company, with a
debt-to-capital ratio of roughly 22% reported at March 31, 2016,
and interest coverage in excess of fourteen times. Aflac continues
to proactively focus on risk mitigation strategies, as evidenced by
the recent implementation of a contingent capital/committed
reinsurance line for the support of its solvency metric ratio in
Japan and several internal reinsurance treaties, which were
effective during 2015. In the United States, risk-adjusted capital
also remains strong, supported by favorable operating metrics.
While the company is focused on the aging population and
negative interest rates impacting its sizable Japan operations;
domestically, the company continues to execute its distribution
strategy, focusing on the enhancement of its broker distribution
channel, its group operations at Continental American and the
Everwell proprietary private exchange. A.M. Best notes that sales
in the U.S. operations have been relatively flat for several years
driven by the entrance of various sizable group carriers looking to
further enhance their existing suites of products, materially
increasing competition in the market. In 2015, the company
introduced its One Day Pay promotion, which has been well-utilized
thus far, with over one million claims paid to date.
In Japan, the unfavorable interest rate environment has hindered
sales of first sector (life insurance) products, and the company
has de-emphasized these products in favor of its cancer and other
medical/health-related coverages. The company intends to further
grow its product portfolio with new, value-added coverages that
complement its third-sector portfolio in Japan and reflect the
needs of the aging population. Unfavorable interest rates in Japan
have placed pressure on Aflac’s sizable allocation to Japanese
government bonds, and the company continues to work to further
diversify through controlled allocations to high-yield bonds,
commercial mortgage loans and other assets. A.M. Best anticipates
that cash flows for investment may be somewhat lower in the near to
medium term due to materially lower sales of higher-premium, first
sector products in Japan. Premium persistency within the Japan
operations continues to be very favorable.
The following issue ratings have been affirmed:
Aflac Incorporated—
-- “a-” on $650 million 2.65% senior unsecured notes, due
2017
-- “a-” on $550 million 2.40% senior unsecured notes, due
2020
-- “a-” on $350 million 4.00% senior unsecured notes, due
2022
-- “a-” on $700 million 3.625% senior unsecured notes, due
2023
-- “a-” on $750 million 3.625% senior unsecured notes, due
2024
-- “a-” on $450 million 3.25% senior unsecured notes, due
2025
-- “a-” on $400 million 6.90% senior unsecured notes, due
2039
-- “a-” on $450 million 6.45% senior unsecured notes, due
2040
-- “bbb+” on $450 million 5.50% subordinated debentures, due
2052
Yen-denominated Samurai notes:
-- “a-” on JPY 15.8 billion 1.84% senior unsecured notes, due
2016
Yen-denominated Uridashi notes:
-- “a-” on JPY 8 billion 2.26% senior unsecured notes, due
2016
The following indicative issue ratings have been affirmed for
securities available under the existing shelf registration:
Aflac Incorporated—
-- “a-” on senior unsecured debt
-- “bbb+” on subordinated debt
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160622005946/en/
A.M. BestKate SteffanelliSenior Financial Analyst+1 908 439
2200, ext. 5063kate.steffanelli@ambest.comorJoseph Zazzera,
MBAAssistant Vice President+1 908 439 2200, ext.
5797joseph.zazzera@ambest.comorChristopher SharkeyManager,
Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comorJim PeavyAssistant Vice
President, Public Relations+1 908 439 2200, ext.
5644james.peavy@ambest.com
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