A.M. Best Co. reiterated issuer credit rating ("ICR") of "a-" of
). The rating agency also affirmed the present debt ratings of the
Concurrently, A.M. Best reiterated the financial strength rating
("FSR") of A+ (Superior) and ICR of "aa-" of American Family Life
Assurance Company of Columbus (Omaha, NE), American Family Life
Assurance Company of Columbus(Japan Branch), American Family Life
Assurance Company of New York (New York, New York) and Continental
American Insurance Company (Continental American) (Columbia, SC),
the company's subsidiaries.
The outlook of all rating remains stable.
The ratings further reiterate Aflac's dominant position as life
insurance and individual guaranteed-renewable health and accident
insurance provider in Japan and the United States. The ratings also
reflect Aflac's solid top-line growth and enhanced operating
earnings coupled with its ability to maintain adequate
risk-adjusted capital ratios over the past few quarters.
Aflac delivered strong operating results over the preceding
quarters on the heels of better performances by its subsidiaries.
The improved performances were driven by prudent restraint over
expenses control and controlled distribution strategy.
Almost 75% of the company's sales and premiums come from Japan.
Aflac has grown primarily on the heels of its insurance operations
in Japan. Alongside, substantial improvement in group sales from
Continental American's worksite distribution drove sales growth in
the United States.
The rating agency noted that Aflac's endeavor to diversify its
product offering has helped it to deliver comparatively stable
However, Aflac recorded huge impairments in its investment
portfolio in 2011, largely due to investment de-risking activities,
which is a part of its new investment strategy. The company
continues to have European exposure, more specifically to European
perpetual preferred investments. The rating agency remains
concerned regarding the adverse impact on earnings and capital,
stemming from repositioning investment portfolio and expected
Nevertheless A.M. Best believes Aflac can weather losses within
its investment portfolio on the back of solid earnings stream,
healthy cash flows and favorable risk-adjusted capitalization.
A.M. Best stated that the ratings could be subject to downgrade
if Aflac incurs huge losses owing to the execution of a new
investment strategy, decline in premiums in its core business lines
or capital erosion in its subsidiaries.
We believe, the company's strong ratings scores from eminent
credit rating agencies will help retain investor confidence and
augment its business going forward.
We retain our long term Neutral recommendation on Aflac Inc. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the stock over the near
AFLAC INC (AFL): Free Stock Analysis Report
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