A.M. Best Assigns Debt Ratings to Aflac Incorporated’s Senior Unsecured Notes
March 10 2015 - 12:36PM
Business Wire
A.M. Best has assigned debt ratings of “a-” to the $550
million 2.40% 5-year senior unsecured notes and $450 million 3.25%
10-year senior unsecured notes recently issued by Aflac
Incorporated (Aflac) (Columbus, GA) [NYSE: AFL]. The assigned
outlook is stable. Aflac’s existing issuer credit and debt ratings
are unchanged.
A.M. Best expects the proceeds from the sale of the notes to be
utilized to fund all or a portion of the redemption price of
Aflac’s $850 million 8.50% senior notes due 2019. As Aflac intends
to call the 8.50% notes, the redemption price will include a
significant make-whole premium. Additional funds needed to satisfy
the noteholders are expected to be sourced through cash on hand as
Aflac had over $1.6 billion of cash and cash equivalents at
year-end 2014.
A.M. Best notes that Aflac’s financial leverage will be
minimally impacted, and is expected to remain in the 25% range in
the near to medium term. Additionally, Aflac’s financial
flexibility remains strong and interest coverage is expected to
remain above 12 times.
Aflac’s ratings recognize its position as the world’s leading
underwriter of individually issued policies marketed at worksites.
The company’s insurance subsidiaries offer a diverse portfolio of
supplemental health products in both Japan and the United States,
which generate strong earnings and steady cash flows to the holding
company. A.M. Best believes that Aflac will be challenged to
achieve considerable growth in its domestic operations given the
intense competition in the voluntary supplemental insurance market.
Additionally, Aflac’s earnings will be impacted due to the weaker
Japanese yen relative to the U.S. dollar, and the potential exists
for noteworthy realized investment losses as the company continues
to execute its long-term asset allocation strategy.
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:
- Analyzing Insurance Holding Company
Liquidity
- Insurance Holding Company and Debt
Ratings
This press release relates to rating(s) that have been
published on A.M. 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 visit A.M.
Best’s Ratings & Criteria Center.
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 © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestKate Steffanelli, FLMI, 908-439-2200, ext.
5063Senior Financial
Analystkate.steffanelli@ambest.comorAndrew Edelsberg, CPA,
FLMI, 908-439-2200, ext. 5182Vice
Presidentandrew.edelsberg@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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