CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A-' rating to the $750 million 3.625% senior unsecured notes issued by Aflac, Inc. (Aflac). The 'A-' ratings are equivalent to Fitch's ratings on Aflac's outstanding senior unsecured notes.
KEY RATING DRIVERS
Fitch's ratings on Aflac reflect the company's extremely strong competitive position in the supplemental accident and health insurance markets in Japan and the U.S. and its exceptionally strong earnings profile and capitalization. The ratings also consider the impact of slow economic growth in the company's key Japanese market.
Net proceeds from the issuance will be used for general corporate purposes, including capital contributions to subsidiaries, if needed.
Following the issuance, Aflac's financial leverage ratio is expected to increase to 26.8% from 23.9% as of Sept. 30, 2014. GAAP interest coverage is anticipated to remain solid at 13.9x compared with 15.1x for the first nine months of 2014. The company's financial leverage and coverage metrics remain in line with Fitch's rating expectations.
An upgrade of Aflac is unlikely in the near term, given Japan's Long-Term Local-Currency IDR of 'A+' with a Negative Outlook.
The key rating triggers that could result in a downgrade include:
--A downgrade in Fitch's sovereign rating (local currency) of Japan to 'A', or lower (currently 'A+'/Negative Outlook);
--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%.
Fitch has assigned the following ratings:
--3.625% USD 750 million senior notes due November 2024 'A-'.
Fitch currently rates Aflac as follows:
--Issuer Default Rating (IDR) 'A';
--3.65% USD 700 million senior notes due June 2023 'A-';
--2.26% Uridashi notes due September 2016 'A-';
--1.84% Samurai notes due July 2016 'A-';
--8.5% USD 850 million senior notes due May 15, 2019 'A-';
--6.9% USD 400 million senior notes due Dec. 17, 2039 'A-'.
--3.45% USD 300 million senior notes due Aug. 15, 2015 'A-';
--6.45% USD 450 million senior notes due Aug. 15, 2040 'A-'
--2.65% USD 650 million senior notes due Feb. 15, 2017 'A-';
--4% USD 350 million senior notes due Feb. 15, 2022 'A-'.
--5.5% USD 500 million junior subordinated debentures due Sept. 15, 2052 'BBB'.
American Family Life Assurance Co. of Columbus
American Family Life Assurance Co. of New York
The Rating Outlook is Negative.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (September 2014).