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Rating Action:

Moody's rates Aflac's senior debt A3 (stable outlook)

08 Feb 2012

Approximately $750 million of debt rated.

New York, February 08, 2012 -- Moody's Investors Service has assigned an A3 (stable outlook) debt rating to the approximately $750 million of fixed rate senior unsecured notes, maturing in two tranches, 2017 and 2022, to be issued by Aflac, Inc. (Aflac; NYSE:AFL, senior debt at A3; stable outlook). The proceeds of the notes are expected to be used to repay Aflac's 1.87% Samurai notes coming due in June, 2012 (approximately $347 million), and for general corporate purposes, including potential capital contributions to subsidiaries. The notes are a drawdown from a shelf registration filed in May, 2009.


According to Moody's Assistant Vice President, Shachar Gonen, "Although the refinancing of the June 2012 debt maturity with the proceeds of the issuance eliminates near-term refinancing risks, the incremental debt (approximately $400 million) increases Aflac's adjusted financial leverage modestly, to about 24%. Going forward, Moody's anticipates that the company will maintain adjusted financial leverage between 25% and 30%."

Commenting on Aflac's use of excess (over the planed debt repayment) proceeds, the rating agency stated that to the extent Aflac contributes capital to its operating subsidiaries, it would be viewed as credit positive owing to stronger capital adequacy metrics . The improved capital adequacy would help offset the pressures from Aflac's investment portfolio, which has high concentrations of European sovereign and financial institution holdings. Aflac reported after-tax realized investment losses of $522 million in fourth quarter 2011, primarily due to impaired European securities.

Moody's said that Aflac's A3 senior debt rating and the company's Aa3 insurance financial strength (IFS) rating on its principal operating company, American Family Life Assurance Company of Columbus, reflect Aflac's very strong franchise and market position in supplemental health insurance in both Japan and the U.S., well-established niche distribution channels, and strong and predictable earnings capacity. The financial profile of the company is further supported by strong capital adequacy and modest financial leverage. Offsetting these strengths are Aflac's limited product diversification and concentrated investment portfolio, including European sovereign and financial institution exposures.

The factors that could lead to an upgrade of Aflac and its subsidiaries include: (1) significant reduction in investment concentrations as a percentage of regulatory capital, (2) adjusted financial and total leverage of less than 20%, and (3) significant diversification of the company's in-force liabilities outside of limited benefit medical policies.

Factors that could lower the company's ratings include: (1) consolidated NAIC RBC ratio < 350%, (2) adjusted financial leverage and total leverage above 30%, (3) earnings interest coverage < 8x, (4) multi-notch downgrade of the Government of Japan sovereign debt rating (currently Aa3/stable), and (5) pre-tax investment losses exceeding $2.0 billion in 2012.

Aflac Incorporated is headquartered in Columbus, Georgia. For the fourth quarter of 2011, Aflac reported total revenues of $6.0 billion and net earnings of $546 million. The company reported consolidated assets as of December 31, 2011 of approximately $117 billion.

The principal methodology used in this rating was "Moody's Global Rating Methodology for Life Insurers," published in May, 2010. Please see the Credit Policy page on for a copy of this methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations. For more information, visit our website at


Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

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Shachar Gonen
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates Aflac's senior debt A3 (stable outlook)
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