A.M. Best Affirms Ratings of Aflac Incorporated and Its Subsidiaries
May 27 2011 - 2:18PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
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), its wholly owned subsidiary, American Family
Life Assurance Company of New York (New York, NY) and
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
Incorporated (Aflac) (Columbus, GA) [NYSE: AFL]. The outlook
for all ratings is stable. (See below for a detailed listing of the
debt ratings.)
Aflac’s ratings reflect its continued strong profitable
operating results, solid capital position and strong brand
recognition in Japan and the United States. Aflac’s financial
leverage remains below 25%, which is consistent with its current
ratings. In addition, Aflac’s management has implemented an
initiative to methodically reduce the risk in its investment
portfolio.
Aflac’s increased earnings in 2010 and in the first quarter of
2011 recognize the strong growth of its 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 Japanese
yen. In addition, sales in the United States grew significantly,
reflecting an increase in agent production despite sales challenges
from a prolonged weak economy. Aflac continues to sustain its
leading market position in the supplemental health market in this
country. However, going forward, A.M. Best believes sales in Japan
will be challenged to grow, at least in the near term, in the
aftermath of the Japanese earthquake and tsunami disasters.
Aflac reported elevated realized investment losses primarily as
a result of its investment de-risking activities. While the company
lowered some of its largest credit exposures, the portfolio still
maintains considerable exposure to European perpetual preferred
investments heavily concentrated in the financial sector, and more
specifically in troubled European financial institutions. A.M. Best
is concerned with the negative impact that repositioning its
investment portfolio will have on its net income. 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 comfortably withstand additional
write-downs in its investment portfolio.
The following debt ratings have been affirmed:
Aflac Incorporated—-- “a-” on $300 million 3.45% senior
unsecured notes, due 2015-- “a-” on $850 million 8.50% senior
unsecured notes, due 2019-- “a-” on $396 million 6.90% senior
unsecured notes, due 2039-- “a-” on $448 million 6.45% senior
unsecured notes, due 2040Yen-denominated Samurai notes:-- “a-” on
JPY 26.6 billion 1.87% senior unsecured notes, due
2012Yen-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 Incorporated—-- “a-” on senior unsecured debt--
“bbb+” on subordinated debt
The principal methodology used in determining these ratings is
Best’s Credit Rating Methodology -- Global Life and Non-Life
Insurance Edition, which provides a comprehensive explanation of
A.M. Best’s rating process and highlights the different rating
criteria employed. Additional key criteria utilized include:
“Rating Health Companies”; “Risk Management and the Rating Process
for Insurance Companies”; “Understanding BCAR for Life and Health
Insurers”; “A.M. Best’s Liquidity Model for U.S. Life Insurers”;
“Rating Members of Insurance Groups”; “A.M. Best’s Ratings &
the Treatment of Debt”; and “Assessing Country Risk.” Methodologies
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, 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 © 2011 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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