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A.M. Best Assigns Debt Ratings to Aflac Incorporated’s Senior Unsecured Notes

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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

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

Copyright (c) 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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