AM Best has affirmed
the Financial Strength Rating of A+ (Superior) and the Long-Term
Issuer Credit Ratings (Long-Term ICR) of “aa-” of Aflac Life
Insurance Japan, Ltd. (Aflac Japan), American Family Life Assurance
Company of Columbus (Omaha, NE), American Family Life Assurance
Company of New York (Albany, NY) and Continental American Insurance
Company (Omaha, NE). These companies represent the life/health
insurance subsidiaries of Aflac Incorporated (Aflac) (Columbus, GA)
[NYSE: AFL] and are collectively referred to as Aflac Incorporated
Group. Concurrently, AM Best has affirmed the Long-Term ICR of “a-”
and all existing Long-Term Issue Credit Ratings (Long-Term IR) of
Aflac. The outlook of these Credit Ratings (ratings) is stable.
(See below for a detailed listing of the Long-Term IRs.)
The ratings reflect Aflac
Incorporated Group’s balance sheet strength, which AM Best
categorizes as strongest, as well as its strong operating
performance, favorable business profile and appropriate enterprise
risk management (ERM).
Aflac Incorporated Group continues to report risk-adjusted
capitalization at the strongest level, as measured by Best’s
Capital Adequacy Ratio (BCAR), and maintains favorable risk-based
capital levels in the United States and excellent solvency ratios
in Japan. Aflac’s liquidity is significant and supported by
favorable positive operating cash flow, high-quality investments
and a stable liability structure. The organization recognizes the
potential for volatility as a result of the COVID-19 pandemic, and
Aflac Incorporated Group remains committed to prudent liquidity and
capital management and is taking a tactical approach to capital
allocation. The group enjoys the financial flexibility provided by
its publicly traded parent company. The organization’s investment
team continues to manage the challenges of a prolonged low interest
rate environment and foreign exchange risk effectively. AM Best
will continue to monitor the impact of the current economic
environment on its investment results and overall portfolio
yields.
Aflac has reported strong operating earnings and profitability
ratios across its various segments, in line with expectations.
Aflac’s insurance business consists of two core reporting segments:
Aflac Japan and Aflac’s U.S. operations. The majority of the
organization’s revenue and earnings are generated from its
insurance operations in Japan. The U.S. operations also have
delivered consistent earnings and moderate premium growth in recent
years. It is important to note, that Aflac Japan utilizes the Japan
Post as a major nationwide distribution network in Japan primarily
for its cancer products. The Japan Post has been conducting an
internal investigation for inappropriate sales practices; the
investigation is expected to be completed by the end of June 2020.
However, the sale of Aflac Japan cancer insurance products was not
within the scope of the Japan Post investigation. Beginning in
August 2019, Aflac has experienced a material decrease of sales
from the Japan Post channel. The company also continues to work on
revising and diversifying its distribution strategy. The group has
reported favorable operating earnings from its subsidiaries across
its diversified business segments, strengthened by ongoing expense
management and its controlled distribution strategy.
Aflac is a leading provider of cancer and supplemental medical
insurance in Japan and supplemental accident and health sales
through the worksite market in the United States. The organization
has been a leader in product innovation and customer service,
working toward claims payment efficiency.
Aflac’s ERM program is supported by its well-established
governance structure, along with culture and risk-management
controls. Additionally, the organization completes various stress
and scenario tests across its risks, and is adding to its embedded
value model by developing more robust economic capital modeling
capabilities.
The organization has taken several tactical steps to address the
impact of the global COVID-19 pandemic, to include sensitivity and
stress testing of capital and liquidity position, operational
impacts, investment portfolio, issuance of debt and other measures.
AM Best will continue to monitor its practices, as the organization
shifts to a global risk management program.
Aflac’s insurance subsidiaries offer a diverse portfolio of
supplemental health products in the United States and Japan. These
products generate strong earnings and steady cash flows to the
holding company, supporting its cash position and interest coverage
measures. Aflac’s adjusted financial leverage was approximately
24.4%, with strong interest coverage ratios as well. AM Best notes
that Aflac’s capitalization and liquidity provide financial
flexibility and support for the overall enterprise and its
operating entities.
The following Long-Term IRs have been affirmed with a stable
outlook:
Aflac Incorporated—
-- “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 12.4 billion JPY, 0.3% senior unsecured notes, due
2025
-- “a-” on $300 million 2.875% senior unsecured notes, due
2026
-- “a-” on 60 billion JPY, 0.932% senior unsecured notes, due
2027
-- “a-” on 12.6 billion JPY, 0.5% senior unsecured notes, due
2029
-- “a-” on 13.3 billion JPY, 0.55% senior unsecured notes, due
2030
-- “a-” on $1.0 billion, 3.6% senior unsecured notes, due
2030
-- “a-” on 29.3 billion JPY, 1.159% senior unsecured notes, due
2030
-- “a-” on 9.3 billion JPY, 0.843% senior unsecured notes, due
2031
-- “a-” on 20.7 billion JPY, 0.75% senior unsecured notes, due
2032
-- “a-” on 15.2 billion JPY, 1.488% senior unsecured notes, due
2033
-- “a-” on 9.8 billion JPY, 0.934% senior unsecured notes, due
2034
-- “a-” on 10.6 billion JPY, 0.83% senior unsecured notes, due
2035
-- “a-” on 8.9 billion JPY, 1.75% senior unsecured notes, due
2038
-- “a-” on 6.3 billion JPY, 1.122% senior unsecured notes, due
2039
-- “a-” on $400 million 6.90% senior unsecured notes, due
2039
-- “a-” on $450 million 6.45% senior unsecured notes, due
2040
-- “a-” on $400 million 4.0% senior unsecured notes, due
2046
-- “bbb+” on 60 billion JPY, 2.108% subordinated debentures, due
2047
-- “a-” on $550 million 4.75% senior unsecured notes, due
2049
The following indicative Long-Term IRs have been affirmed with a
stable outlook for securities available under the existing shelf
registration:
Aflac Incorporated—
-- “a-” on senior unsecured debt
-- “bbb+” on subordinated debt
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper media use of Best’s
Credit Ratings and AM Best press releases, please view Guide for
Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in New York, London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20200625005567/en/
Jeffrey Lane Senior Financial Analyst +1 908 439 2200,
ext. 5567 jeffrey.lane@ambest.com
Joseph Zazzera, MBA Director +1 908 439 2200,
ext. 5797 joseph.zazzera@ambest.com
Jason Shum Associate Director +852 2827
3424 jason.shum@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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