May 2, 2017 / 4:33 PM / 4 months ago

Fitch Affirms Aflac's Ratings; Revises IFS Outlook to Stable

(The following statement was released by the rating agency) CHICAGO, May 02 (Fitch) Fitch Ratings has affirmed Aflac Inc.'s (Aflac) primary life insurance subsidiaries' Insurer Financial Strength (IFS) ratings at 'A+' and revised the Outlook to Stable from Negative. Fitch has affirmed Aflac's Issuer Default Rating (IDR) at 'A' and senior debt ratings at 'A-'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS Today's actions follow Fitch's affirmation of Japan's Long-Term IDR at 'A' and the revision of its Outlook to Stable (see 'Fitch Revises Outlook on Japan to Stable; Affirms at 'A'', dated April 27, 2017, at www.fitchratings.com). Fitch views Aflac's ratings as partially constrained by Fitch's sovereign rating for Japan and does not envision Aflac's ratings at levels more than one notch higher than the Japanese sovereign. The constraint reflects Aflac's exposure to the Japanese economy. Aflac Japan comprises more than two-thirds of Aflac's assets, capital and profitability. While Aflac benefits from strong global diversification from its U.S. operations, the company is exposed to continued weak macroeconomic conditions. Exposure to Japan also considers the company's investment concentration in Japan government bonds, which are susceptible to further downgrade in the Japan sovereign rating. The affirmation of Aflac's ratings reflect the company's extremely strong competitive position in the supplemental accident and health insurance markets in Japan and the U.S., extremely strong earnings profile and very strong capitalization. The ratings also consider operating challenges associated with the ongoing low interest rate environment and exposure to the Japan economy. RATING SENSITIVITIES Key rating triggers that could result in a downgrade include: --A downgrade of Japan's sovereign rating (local currency) to 'A-' or lower (currently 'A'/Outlook Stable); --Significant investment impairments or losses in Aflac's capital position; --A decline in Aflac's run-rate pre-tax operating margin below 17% in Japan or 15% in U.S.; --A significant increase in either operating (greater than 16x) or financial leverage (greater than 30%); --NAIC RBC less than 400%, a Prism capital model score below 'Extremely Strong' or SMR sustained below 800%. An upgrade of Aflac's ratings could result from an upgrade of Japan's Long-Term Local Currency IDR to 'A+' or higher. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings and revised the Outlook to Stable from Negative: Aflac Inc. --Long-Term IDR at 'A'; --2.4% USD550 million senior notes due March 16, 2020 at 'A-' --4% USD350 million senior notes due Feb. 15, 2022 at 'A-'; --3.625% USD700 million senior notes due June 2023 at 'A-'; --3.625% USD750 million senior notes due Nov. 15, 2024 at 'A-'; --3.25% USD450 million senior notes due March 17, 2025 at 'A-'; --2.875% USD300 million senior notes due Oct. 15, 2026 at 'A-'; --0.932% JPY60 billion senior unsecured notes due 2027 at 'A-' --6.9% USD400 million senior notes due Dec. 17, 2039 at 'A-'; --6.45% USD450 million senior notes due Aug. 15, 2040 at 'A-'; --4.00% USD400 million senior notes due Oct. 15, 2046 at 'A-'; --5.5% USD500 million junior subordinated debentures due Sept. 15, 2052 at 'BBB'. Fitch has affirmed the following ratings with a Stable Outlook: American Family Life Assurance Co. of Columbus American Family Life Assurance Co. of New York Aflac Japan --IFS at 'A+'. Contacts: Primary Analyst Dafina M. Dunmore, CFA Director +1-312-368-3136 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Nelson Ma, CFA Director +1-212-908-0273 Tertiary Analyst Teruki Morinaga Director +81 3 3288 2781 Committee Chairperson Keith M. Buckley, CFA Managing Director +1-312-368-3211 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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