Fitch Rates Aflac Inc.'s Senior Debt Issues 'A-'; Watch Negative

CHICAGO--()--Fitch Ratings has assigned an 'A-' rating to the $550 million 2.4% and $450 million 3.25% senior unsecured notes issued by Aflac, Inc. (Aflac). The ratings have been placed on Rating Watch Negative. The 'A-' rating and Rating Watch Negative are equivalent to Fitch's ratings on Aflac's outstanding senior unsecured notes.

KEY RATING DRIVERS

Aflac intends to use the net proceeds from this offering to redeem all or a portion of its $850 million 8.50% senior notes due 2019. The company intends to use proceeds in excess of such redemption price, if any, for general corporate purposes.

Following the issuance, Aflac's financial leverage ratio (FLR) is expected to temporarily increase to 31.4% from 27.8% as of Dec. 31, 2014. However, Fitch expects the company's FLR to return to previous levels following its debt redemption.

The debt issuance will lead to improved run-rate GAAP interest coverage, all else being equal, given the lower cost of net debt. GAAP interest coverage remained solid at 14.5x as of year-end 2014.

Aflac's ratings were placed on Rating Watch - Negative on Dec. 10, 2014 following Fitch's action to place the Japanese sovereign's issuer default rating (IDR) of 'A+' on Rating Watch Negative.

RATING SENSITIVITIES

An upgrade of Aflac is unlikely in the near term, given Japan's long-term local currency IDR of 'A+', Watch Negative.

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+'/Watch Negative);

--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 and placed on Rating Watch Negative the following ratings:

Aflac Inc.

--2.4% USD 550 million senior notes due 2020 'A-'.

--3.25% USD 450 million senior notes due 2025 'A-'.

Fitch currently rates Aflac as follows:

Aflac Inc.

--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-';

--3.625% USD 750 million senior notes due November 2024 '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

Aflac Japan

--IFS 'AA-'.

All ratings on Watch Negative.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (September 2014).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981152

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Contacts

Fitch Ratings
Primary Analyst
Dafina M. Dunmore, CFA
Director
+1 312-368-3136
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Mark E. Rouck, CPA, CFA
Senior Director
+1 312-368-2085
or
Committee Chairperson
Julie A. Burke, CPA, CFA
Managing Director
+1 312-368-3158
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Dafina M. Dunmore, CFA
Director
+1 312-368-3136
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Mark E. Rouck, CPA, CFA
Senior Director
+1 312-368-2085
or
Committee Chairperson
Julie A. Burke, CPA, CFA
Managing Director
+1 312-368-3158
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com