A.M. Best has assigned a debt rating of “a-” to the forthcoming $750 million 3.625% senior unsecured notes due 2024 of Aflac Incorporated (Aflac) (Columbus, GA) [NYSE: AFL]. The assigned outlook is stable. Aflac’s existing issuer credit and debt ratings are unchanged.

Proceeds from the issuance will be used for general corporate purposes, which also could include capital contributions to Aflac’s subsidiaries, if needed.

A.M. Best anticipates that Aflac’s adjusted financial leverage ratio, which includes equity credit for a portion of its existing subordinated debentures, will increase to approximately 24% as a result of the current notes offering. Despite the increase in leverage, A.M. Best notes that Aflac’s financial leverage and interest coverage ratios remain well within A.M. Best’s guidelines for its current rating level.

The ratings recognize Aflac’s growth in risk-adjusted capitalization, strong operating earnings and the ongoing execution of its long-term investment allocation strategy. In addition, the ratings reflect the company’s status as a leading provider of individual guaranteed-renewable health and accident insurance both in Japan and the United States. While operating earnings have been strong, Aflac continues to report net realized investment losses. However, A.M. Best notes that the investment losses have been significantly lower than in prior years. Furthermore, given Aflac’s strong earnings and the substantial cash flow from its operating activities, as well as its much improved risk-adjusted capitalization, A.M. Best believes the organization has the capacity to withstand a reasonably high level of additional realized losses should they occur.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Equity Credit for Hybrid Securities
  • Insurance Holding Company and Debt Ratings

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best CompanyTom Zitelli, 908-439-2200, ext. 5412Senior Financial Analysttom.zitelli@ambest.comorTom Rosendale, 908-439-2200, ext. 5201Assistant Vice Presidentthomas.rosendale@ambest.comorChristopher Sharkey, 908-439-2200, ext. 5159Manager, Public Relationschristopher.sharkey@ambest.comorJim Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public Relationsjames.peavy@ambest.com

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