CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 09, 2010 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and 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) and its wholly owned subsidiary, American Family Life Assurance Company of New York (New York, NY). In addition, A.M. Best has upgraded the FSR to A+ (Superior) from A (Excellent) and ICR to "aa-"from "a" of Continental American Insurance Company (Continental American) (Columbia, SC).
Concurrently, A.M. Best has affirmed the ICR of "a-" and all existing debt ratings of the ultimate parent, Aflac, Inc. (Aflac) (Columbus, GA) [NYSE: AFL]. The outlook for all ratings is stable. (See below for a detailed list of the debt ratings.)
Aflac's ratings reflect its solid capital position, favorable statutory and GAAP operating results and strong brand recognition. During 2009, Aflac raised $1.4 billion through U.S. public debt offerings and loans. A.M. Best notes that Aflac's financial leverage remains below 25%, which is consistent with its current ratings. The operating companies' capitalization was supported by Aflac's $500 million capital contribution, which helped to partially offset the sizable capital losses incurred last year.
Aflac's increased earnings in 2009 reflected the strong growth of insurance operations in Japan, where the company maintains a dominant market position, as well as the weakness in the U.S. dollar relative to the yen. While overall sales were negatively impacted by an unstable U.S. economy, Aflac continues to sustain its leading market position in the supplemental health market in this country. Moreover, Aflac's acquisition of Continental American has provided the organization with a platform of group products that are sold through brokers. These products are branded as Aflac Group Insurance.
The group maintains considerable exposure to European perpetual preferred investments heavily concentrated in the financial sector, and more specifically in troubled European financial institutions, which have declined considerably in value. More than one-quarter of the group's perpetual preferred exposure is designated Tier 1, representing the highest risk securities. Additionally, A.M. Best is concerned with Aflac's high concentration of investment exposure within a number of single counterparties. However, given Aflac's strong earnings capabilities and sources of cash flow, as well as its favorable risk-adjusted capitalization, A.M. Best believes the organization can potentially withstand additional write-downs in its investment portfolio.
The upgrading of Continental American's ratings reflects Aflac's explicit capital support agreement, the aforementioned branding and the progression of Continental American's integration within the Aflac organization.
The following debt ratings have been affirmed:
Aflac, Inc.—
- "a-" on $850 million 8.50% senior unsecured notes, due 2019
- "a-" on $400 million 6.90% senior unsecured notes, due 2039
Yen-denominated Samurai notes:
- "a-" on JPY 40 billion 0.71% senior unsecured notes, due 2010
- "a-" on JPY 30 billion 1.87% senior unsecured notes, due 2012
Yen-denominated Uridashi notes:
- "a-" on JPY 15 billion 1.52% senior unsecured notes, due 2011
- "a-" on JPY 8 billion 2.26% senior unsecured notes, due 2016
- "a-" on JPY 20 billion variable interest rate senior unsecured notes, due 2011
The following indicative ratings have been affirmed for securities available under the existing shelf registration:
Aflac, Inc.—
- "a-" on senior unsecured
- "bbb+" on subordinated
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.