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

Rhea-AI Summary

AM Best has assigned a Long-Term Issue Credit Rating of 'a-' to Aflac's new yen-denominated senior unsecured notes totaling JPY 82.0 billion. This includes notes with varying maturities from 2031 to 2051. The stable outlook reflects Aflac's sound financial metrics, despite an expected temporary increase in financial leverage to around 21%. The proceeds will be used to prefund a forthcoming USD 700 million debt repayment. Aflac maintains a strong liquidity position with over USD 5.1 billion in cash and cash equivalents.

Positive

• Long-Term Issue Credit Rating of 'a-' assigned by AM Best.
• Proceeds from new notes will fund a USD 700 million debt repayment.
• Strong liquidity with over USD 5.1 billion in cash and cash equivalents.

Negative

• Financial leverage expected to increase to approximately 21% temporarily.

AM Best has assigned the 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 82.0 billion. The offering consists of JPY 30.0 billion of 0.633% senior unsecured notes due 2031, JPY 12.0 billion of 0.844% senior unsecured notes due 2033, JPY 10.0 billion 1.039% senior unsecured notes due 2036, JPY 10.0 billion 1.264% senior unsecured notes due 2041 and JPY 20.0 billion 1.56% senior unsecured notes due 2051. The outlook assigned to these Long-Term IRs is stable. Aflac’s existing Long-Term Issuer Credit Ratings remain unchanged.

The proceeds are expected to be used to prefund Aflac’s forthcoming USD 700 million 3.625% senior unsecured notes due in 2023; and under redemption with a make-whole provision, Aflac is expected to pay off this debt early through this process over the next few weeks. Aflac’s financial leverage is expected to increase to approximately 21% for an interim period; AM Best expects the leverage to stay elevated until the notes due 2023 are paid off. The interest coverage has remained favorable in a range of 21.1 to 19.3 times, in 2019 and 2020, respectively, and is expected to remain flat factoring in the additional interest expense.

Aflac’s liquidity position remains solid with cash and cash equivalents at the consolidated entities exceeding USD 5.1 billion and cash flows from operations of approximately USD 6.0 billion reported at year-end 2020. Aflac also maintains other sources of contingent liquidity in its unsecured revolving credit facilities of USD 1.0 billion and JPY 100.0 billion respectively, and has access to an USD 800 million borrowing limit from the Federal Home Loan Bank of Atlanta of which USD 300 million is designated for the short-term liquidity needs of Aflac’s U.S. insurance subsidiaries. This is subject to qualified collateral availability and other conditions.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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FAQ

What is the Long-Term Issue Credit Rating for Aflac?

AM Best has assigned a Long-Term Issue Credit Rating of 'a-' to Aflac's new yen-denominated senior unsecured notes.

How much is Aflac's new senior unsecured notes offering?

Aflac's new senior unsecured notes offering totals JPY 82.0 billion.

What will the proceeds from Aflac's new notes be used for?

The proceeds are expected to prefund a USD 700 million debt repayment due in 2023.

What is Aflac's financial leverage after the new notes issuance?

Aflac's financial leverage is expected to temporarily increase to approximately 21%.

How strong is Aflac's liquidity position?

Aflac has a strong liquidity position, with over USD 5.1 billion in cash and cash equivalents.