A.M. Best Assigns Credit Ratings to Aflac’s New Japan Subsidiary; Affirms Credit Ratings of U.S. Insurance Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has assigned a Financial Strength Rating (FSR) of A+ (Superior) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” to Aflac Life Insurance Japan, Ltd. (Aflac Japan). The rating outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” of 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 U.S. life/health insurance subsidiaries of Aflac Incorporated (Aflac) (Columbus, GA) (NYSE:AFL) and will be referred to in aggregate as Aflac U.S. Concurrently, A.M. 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 ratings is stable. (See below for a detailed listing of the Long-Term IRs.)

The rating assignments reflect Aflac Japan’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The rating actions follow the recent announcement that Aflac has completed its conversion of the Japan branch operations to a subsidiary. The company believes that the conversion provides greater legal and regulatory transparency, as well as enhances business development opportunities, reduces strategic risk and improves cash flows and capital management within the organizational structure. To date, there has not been a material impact to operational metrics, financial leverage or liquidity during the conversion process. Aflac’s Japan operations represent roughly 75% of assets, revenue and operating earnings for the organization. The company’s balance sheet reflects favorable liquidity, financial flexibility and well-managed invested assets, supplementing its strong solvency margin ratio. The company continues to report a sustained level of operating profitability that is supported by its leading position in Japan’s medical and cancer insurance market. A.M. Best believes that the macroeconomic environment in Japan may lead to potential challenges going forward and will continue to monitor future developments.

The rating affirmations reflect Aflac U.S.’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate ERM.

The U.S. business, which is roughly 25% of the enterprise, continues to maintain risk-adjusted capital at the strongest level, as well as good liquidity and favorable reserve characteristics. A.M. Best notes, however, that it is anticipated that capitalization will decline somewhat under the new organization structure as a result of the company’s intention to draw down U.S. risk-based capital to 500% over a 3-year period. Aflac’s U.S. operations maintain a favorable business profile as a leading voluntary benefits carrier with a growing suite of innovative and value-added products. The company also continues to work on the revision of its distribution strategy and anticipates favorable premiums and earnings growth going forward.

The following Long-Term IRs have been affirmed:

Aflac Incorporated—
-- “a-” on $550 million 2.40% senior unsecured notes, due 2020
-- “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 $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

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 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 see A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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A.M. Best

Kate Steffanelli, +1-908-439-2200, ext. 5063

Senior Financial Analyst

kate.steffanelli@ambest.com

or

Joseph Zazzera, MBA, +1-908-439-2200, ext. 5797

Director

joseph.zazzera@ambest.com

or

Christopher Sharkey, +1-908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1-908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com

Source: A.M. Best