Aflac Incorporated -- Moody’s rates Aflac’s senior sustainability notes A3
Rating Action:
Moody’s rates Aflac’s senior sustainability notes A3
8 March 2021
New York, March 8, 2021 – Moody's Investors Service, (”Moody's”) has assigned an A3 debt
rating to the $400 million, fixed rate senior unsecured notes issued by Aflac Incorporated (Aflac;
NYSE: AFL; A3 senior debt, stable). Aflac intends to use the net proceeds from the offering to
finance investments in Eligible Sustainability Assets which meet the criteria of its sustainability bond
framework and align with the relevant UN Sustainable Development Goals. The debt offering is a
drawdown from a shelf registration filed in September 2018. The outlook on Aflac is unchanged at
stable.
RATINGS RATIONALE
According to Moody's, Aflac's A3 senior debt rating reflects the company's excellent franchise and
strong market position in supplemental health in both the US and Japan. Aflac's excellent financial
profile, supported by strong profitability, liquidity and coverage of interest expense, is partially offset
by the company's limited product diversification and somewhat concentrated investment portfolio.
Moody's noted that the debt issuance will have modest impact on Aflac's strong financial flexibility as
pro forma adjusted financial leverage is expected to remain in the low 20% range. Aflac's earnings
coverage continues to remain very strong at over 12 times.
The debt offering is Aflac’s first sustainable bond issue and reinforces the importance of
environmental, social, and governance (ESG) initiatives for the company. As another example,
Aflac Global Investments announced last month that it is making a $1.5 billion investment in a newly
created commercial real estate finance vehicle with Sound Point Capital Management, LP. A portion
of this amount ($500 million) will be dedicated to providing transitional and other debt financing to
support economically distressed communities designated as Qualified Opportunity Zones.
Moody's believes that the coronavirus-driven economic downturn and ultra-low interest rates will
stress most aspects of life insurers' financials, including those of Aflac. This includes sales, capital
adequacy, and the investment portfolio which could weaken if the recent market conditions persist.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's said the following factors could lead to an upgrade of Aflac's ratings: (1) an upgrade of the
US or Japanese operating entities, (2) adjusted financial and total leverage of less than 20%, and (3)
significant diversification of the company's liabilities outside of limited benefit medical policies.
Conversely, the following factors could lower the company's ratings: (1) a downgrade of the US or
Japanese operating entities, (2) a decline in total adjusted capital of over 15% in 12 months, (3)
adjusted financial leverage and total leverage increase above 30%, (4) earnings interest coverage <
8x, or (5) a downgrade of the Government of Japan sovereign debt rating (A1 stable).
The following rating was assigned:
Aflac Incorporated -- senior unsecured debt rating at A3.
The outlook on Aflac and its subsidiaries is unchanged at stable.
The principal methodology used in this rating was Life Insurers Methodology published in
November 2019 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1187348
. Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Aflac Incorporated is headquartered in Columbus, Georgia. The company reported consolidated
assets as of December 31, 2020 of approximately $165 billion and shareholders' equity of about $34
billion.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see
the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure
form. Moody’s Rating Symbols and Definitions can be found at:
https://www.moodys.com/
researchdocumentcontentpage.aspx?docid=PBC_79004
.
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docid=PBC_1243406
.
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Shachar Gonen, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Scott Robinson, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
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U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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