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Best’s News & Research Service - April 24, 2019 10:26 AM (EDT)

AM Best Affirms Credit Ratings of Aflac Incorporated and Its Subsidiaries

  • April 24, 2019 10:26 AM (EDT)
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Oldwick //BestWire// - 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 will be referred to in aggregate 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).

The Aflac Incorporated Group has the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and maintains excellent financial flexibility, favorable liquidity and well-managed invested assets. As part of its investment portfolio management, Aflac has implemented a recent portfolio de-risking strategy. AM Best notes that the exposure to a prolonged low interest rate environment and foreign exchange risk has been a challenge for investment management, however, the investment team has effectively managed these challenges.

Aflac has reported strong operating earnings and profitability ratios across its various segments. Aflac’s insurance business consists of two core reporting segments, Aflac Japan and Aflac U.S. operations. The majority of the organization’s revenue and earnings are generated from its insurance operations in Japan. However, the U.S. operations have also delivered consistent earnings and premium growth in recent years, through Aflac’s growing suite of innovative and value-added products. The company also continues to work on revising its distribution strategy and anticipates favorable premiums and earnings growth going forward. The group has reported favorable operating earnings from its subsidiaries, across its diversified business segments, which in turn have been strengthened by ongoing expense management and its controlled distribution strategy.

Through these segments, 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 and 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. AM Best will continue to monitor its practices for future improvements.

Aflac Inc.’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 is a leader in voluntary worksite insurance sales in the United States; in Japan, the company is a leading provider of cancer and medical insurance. Aflac Inc.’s adjusted financial leverage was approximately 20% at year-end 2018, with strong interest coverage ratios as well. AM Best notes that Aflac Inc.’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:

Aflac Incorporated—

— “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 $300 million 2.875% senior unsecured notes, due 2026

— “a-” on 60 billion JPY, 0.932% senior unsecured notes, due 2027

— “a-” on 29.3 billion JPY, 1.159% senior unsecured notes, due 2030

— “a-” on 15.2 billion JPY, 1.488% senior unsecured notes, due 2033

— “a-” on 8.9 billion JPY, 1.75% senior unsecured notes, due 2038

— “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 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 Understanding 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 rating agency and information provider with a unique focus on the insurance industry.

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