AM Best Assigns Issue Credit Ratings to Aflac Incorporated’s Senior Unsecured Notes

Staff Report From Columbus CEO

Monday, April 20th, 2020

AM Best has assigned Long-Term Issue Credit Ratings (Long-Term IR) of “a-” to the new yen-denominated senior unsecured notes of Aflac Incorporated (Aflac) (Columbus, GA) [NYSE: AFL], which total JPY 57.0 billion (USD 541.0 million as of March 6, 2020). The offering consists of JPY 12.4 billion of 0.3% senior unsecured notes due 2025; JPY 13.3 billion of 0.55% senior unsecured notes due 2030; JPY 20.7 billion of 0.75% senior unsecured notes due 2032; and JPY 10.6 billion of 0.83% senior unsecured notes due 2035.

In addition, AM Best has assigned a Long-Term IR of “a-” to the USD 1.0 billion 3.6% senior unsecured notes due 2030 also issued by Aflac. The outlook assigned to these Long-Term IRs is stable. Aflac’s existing Long-Term Issuer Credit Ratings remain unchanged.

The use of the proceeds is for general corporate purposes. AM Best believes these issuances also serve to bolster Aflac’s capital structure and liquidity profile, given there are no immediate debt positions that are coming due, and add to its already ample financial flexibility and support for the overall enterprise. The most recent debt issues provide additional contingent liquidity given the current economic environmental challenges. Aflac’s adjusted financial leverage was approximately 22% at year-end 2019, and increased modestly to just above 25% with the new issuances; this also factors in the redemption of the 4% 2022 senior unsecured notes earlier this year.

Interest coverage has historically been high given the organization’s favorable earnings trends and remains more than adequate. AM Best expects financial leverage to return to prior levels with capital expansion over the coming year.

Aflac’s Credit Ratings, which were affirmed on April 24, 2019, recognize its 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.