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04 Jun 2010
Approximately $2.5 billion of securities affected
New York, June 04, 2010 -- Moody's Investors Service today affirmed the debt ratings of Aflac,
Inc. (Aflac; NYSE:AFL) (senior debt at A2) and the Aa2
insurance financial strength rating of its operating subsidiary,
American Family Life Assurance Company of Columbus. Moody's
also maintained the negative outlook on the ratings.
The rating agency said that the affirmation of Aflac's ratings reflects
the continued strength in the company's franchise and the solidity of
its business profile. The financial profile of the company is further
supported by its strong earnings capacity, strengthened capital
position, and modest financial leverage.
Commenting on the continuing negative outlook on Aflac, Moody's
highlighted that Aflac still faces significant risks within its concentrated
investment portfolio, and its capital could suffer material losses
under a stress scenario. According to Moody's Analyst, Shachar
Gonen, "During the past year, Aflac has recorded credit impairments
on several large investment positions. In a stress scenario,
the significant holdings of European financial institutions including
perpetual securities, which represents a significantly higher proportion
of its investment portfolio and equity relative to peers, could
lead to large investment losses, and place pressure on earnings
and regulatory capital." Although Moody's views such
a stress scenario as unlikely, if the expectation of such an event
were to increase, a downgrade would occur. The rating agency
also noted concerns about the singular niche business focus on supplemental
health products in both the U.S. and Japan, which
exposes the company to regulatory and competitive risks in Japan and in
the U.S. from healthcare reform.
Moody's noted that a downgrade could occur if: 1) investment
losses exceed $750 million pre-tax in 2010 or the expectation
of significant losses in European financial institutions were to increase;
2) adjusted financial and total leverage consistently above 25%;
3) NAIC RBC ratio falls below 350%; and 4) earnings coverage
falls below 8 times.
Conversely, the following could return the outlook to stable:
1) continued progress in reducing investment concentrations as a percentage
of regulatory capital; 2) adjusted financial and total leverage of
less than 20%; and 3) pre-tax impairments of less than
$750 million for 2010.
The following ratings were affirmed and with a negative outlook:
Aflac, Inc: senior unsecured debt at A2, senior unsecured
shelf at (P)A2, subordinated shelf at (P)A3;
American Family Life Assurance Company of Columbus: insurance financial
strength at Aa2.
Aflac Incorporated is headquartered in Columbus, Georgia.
For the first quarter of 2010, Aflac reported total revenues of
$5.1 billion and net earnings of $636 million.
The company reported consolidated assets as of March 31, 2010 of
approximately $85.2 billion.
The last rating action on Aflac occurred on December 14, 2009 when
Moody's assigned an A2 (negative outlook) rating to $400 million
of senior unsecured notes.
The principal methodology used in rating Aflac was Moody's Global Rating
Methodology for Life Insurers, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually pay senior policyholder claims and
For more information please visit Moody's website at www.moodys.com/insurance.
Financial Institutions Group
Moody's Investors Service
Moody's affirms Aflac's ratings; negative outlook
Financial Institutions Group
Moody's Investors Service
No Related Data.
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