) had its junior subordinated debt rated by Standard & Poor's
Ratings Services (S&P) at "BBB", while the counterparty credit
rating was denoted at "A-". However, the outlook remains negative
based on the negative sovereign rating in Japan.
Primarily, the rating agency assigned the "BBB" rating to
Aflac's recently issued long-term junior subordinated debentures
worth $500 million. The debentures are slated to expire in 2052.The
amount of the proceeds is expected to inject ample liquidity by
utilizing funds for general corporate and capital purposes.
Following this debt issue, Aflac's financial leverage is
estimated to be about 25%, while fixed-charge coverage is projected
to be within 20x, which aligns well with the company's ratings,
according to S&P. Meanwhile, in July 2012, ratings agency -
A.M. Best Co. disclosed its rating of "a-" to the senior unsecured
notes issued by Aflac, with a stable outlook. At that time, this
rating agency had expected the company's interest coverage to
remain over 10x and financial leverage to stay below 25%.
Nevertheless, both the rating agencies have been backed by
Aflac's consistent growth of 3% in the U.S. in the first half of
2012, coupled with solid 51% growth in Japan, driven by vigorous
bank channel and cancer product sales. Consequently, operating
earnings climbed 3.4% for Aflac in the first half of 2012.
Further, the company's National Association of Insurance
Commissioners (NAIC) estimated risk-based capital ratio of 560 600%
in the first half of 2012, improving from 493% in 2011, reflects
its stable returns and appears impressive amid the ongoing
de-risking program. Going ahead, the strong capital and surplus
cash position is expected to mitigate this balance sheet risk and
provide liquidity cushion to its long-term growth.
Overall, Aflac's strong brand name and solid business model
enabled it to improve earnings considerably faster than other life
and health insurers such as
Employer Holdings Inc.
Moreover, the company's strong capital and surplus cash position
is expected to mitigate balance-sheet risks and provide liquidity
cushion in the long run, as well as return value to shareholders
consistently. Hence, we continue to retain our long-term Neutral
stance on the stock, with a Zacks Rank #3, implying a short-term
AFLAC INC (AFL): Free Stock Analysis Report
EMPLOYERS HLDGS (EIG): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
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