A.M. Best Co.
has assigned debt ratings of “a-” to the forthcoming senior unsecured notes of
(Aflac) (Columbus, GA) [NYSE: AFL]. The securities will be issued in two tranches: $400 million 2.65% senior unsecured notes due 2017 and $350 million 4.00% senior unsecured notes due 2022. The outlook assigned to both ratings is stable. Aflac’s existing issuer credit and debt ratings are unchanged.
Proceeds from the issuance will be used to repay $347 million aggregate principal amount of the 1.87% Samurai notes due June 2012. The balance of the proceeds will be used for general corporate purposes, including capital contributions to its subsidiaries, if necessary. Aflac’s overall financial leverage is expected to drop back below 25% following the repayment of the Samurai notes, while interest coverage should remain in the high teens, driven by the company’s strong operating earnings profile. Both ratios are well within A.M. Best’s guidelines for its current rating level.
The ratings recognize Aflac’s status as a leading provider of life insurance and individual guaranteed-renewable health and accident insurance in both Japan and the United States. In addition to the company’s strong sales growth, Aflac reported improved operating earnings while maintaining more than adequate risk-adjusted capital ratios in 2011. Despite strong operating earnings, Aflac continues to report sizeable impairments within its investment portfolio. A.M. Best will be monitoring the impact of the company’s new investment portfolio strategy and the potential for further realized investment losses.
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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Health Insurance Companies”; “Assessing Country Risk”; and “A.M. Best’s Ratings & the Treatment of Debt.” Best’s Credit Rating Methodology can be found at
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