AM Best affirms credit ratings of Aflac Incorporated and its subsidiaries

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of Aflac Life Insurance Japan, Ltd. (Japan), American Family Life Assurance Company of Columbus (Omaha, NE), American Family Life Assurance Company of New York (Albany, NY), and Continental American Insurance Company (Omaha, NE). These companies represent the life/health insurance subsidiaries of Aflac Incorporated (Aflac) (Columbus, GA) (NYSE:AFL) and are collectively referred to as the Aflac Incorporated Group. At the same time, AM Best has affirmed the Long-Term ICR of “a” (Excellent) and all of Aflac’s existing Long-Term Issue Credit Ratings (Long-Term IRs). The outlook of these credit ratings (ratings) is stable. (A detailed listing of Long-Term IRs and Shelf Registration is provided below.)

The ratings reflect Aflac Incorporated Group’s balance sheet strength, which is ranked as the strongest by AM Best, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

The rating affirmations also reflect the maintenance of Aflac Incorporated Group’s risk-adjusted capitalization at the highest levels, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as strong NAIC Risk-Based Capital (RBC) in the United States and excellent solvency ratios in Japan. The Group’s risk-adjusted capitalization continues to be enhanced by its strong operating performance, which has more than offset unrealized foreign exchange losses in recent years. Aflac’s GAAP shareholders’ equity increased over 18% through the second half of 2024, with retained earnings improving. The organization’s investment team continues to effectively manage foreign exchange risk challenges. AM Best considers the organization’s investment management capabilities to be strong and the total assets invested are diverse across different asset classes and types, as these are managed both internally and through highly respected external asset managers. However, the group’s investment portfolio also includes some exposure to commercial mortgages, transitional properties and real estate loans. Aflac’s mortgage loan portfolio has performed well historically, but has experienced an increase in delinquencies and foreclosures since 2023. AM Best recognizes that the mortgage and real estate portfolios represent a small but material portion of Aflac’s invested assets. The group benefits from the financial flexibility provided by its publicly traded parent. Flexibility has been further enhanced by its reinsurance subsidiary, Aflac Re, which assumes a modest portion of the liabilities on legacy cancer insurance policies of Aflac Life Insurance Japan, Ltd. In addition, AM Best notes that Aflac Incorporated Group’s current adjusted financial and operating leverage remains relatively modest for its rating levels.

The rating affirmations also reflect Aflac Incorporated Group’s continued strong operating margins in the Japanese and US markets. The Company has a trend toward strong return on equity, which will exceed 20% in 2023. Earnings continue to be positively impacted by lower benefit utilization in the US segment, partially offset by higher administrative expenses. While the US and Japanese operating segments have historically delivered positive results, the Group continues to face challenges in reversing the trend of premium decline and significantly increasing new sales due to the increasingly competitive market. However, AM Best acknowledges that premium decline improved in 2023 compared to previous years. The Company continues to actively focus on customer retention strategies, product enhancements and operational capabilities to meet evolving market demands and drive growth.

Aflac’s ERM management capabilities are very strong and deeply embedded in the company’s strategy and decision-making, which has had a positive impact on balance sheet strength, operational performance and business profiles. The ERM program has continued to demonstrate robust processes within its framework that are effective in identifying, managing and mitigating potential risks. AM Best’s assessment also includes an evaluation of the program’s risk mitigation capabilities across multiple risks and found that most are managed with very high levels of skill.

Aflac’s positive business profile is supported by its market-leading position in the Japanese market and its strong market presence in the US market. The company is a leader in providing health and cancer insurance in Japan and its strong partnership with Japan Post cements its position as a strong competitor in this market. In addition, Aflac Japan is continuously updating its product offering to remain competitive in the market. In the US market, Aflac continues to be a leader in supplemental health insurance. In addition, management has made numerous investments in its US market segment to position the company for growth in the coming years.

The following long-term IRs were confirmed with stable outlooks:

Aflac Incorporated –

— ‘a’ (Excellent) on JPY 12.4 billion senior unsecured notes, 0.3%, due 2025

— “a” (Excellent) for USD 300 million 2.875% senior unsecured notes due 2026

— “a” (Excellent) for USD 400 million 1.125% senior unsecured notes due 2026

— “a” (Excellent) on JPY 60 billion 0.932% senior unsecured notes due 2027

— “a” (Excellent) on JPY 12.6 billion 0.5% senior unsecured notes due 2029

— “a” (Excellent) on JPY 13.0 billion senior unsecured notes, 1.048% due 2029

— “a” (Excellent) on JPY 33.4 billion 1.075% senior unsecured notes due 2029

— “a” (Excellent) on JPY 13.3 billion, 0.55% senior unsecured notes due 2030

— “a” (Excellent) for USD 1.0 billion, 3.6% senior unsecured notes due 2030

— “a” (Excellent) on JPY 29.3 billion 1.159% senior unsecured notes due 2030

— “a” (Excellent) on JPY 9.3 billion 0.843% senior unsecured notes due 2031

— “a” (Excellent) on JPY 27.9 billion 1.412% senior unsecured notes due 2031

— “a” (Excellent) on JPY 30 billion 0.633% senior unsecured notes due 2031

— “a” (Excellent) on JPY 20.7 billion 0.75% senior unsecured notes due 2032

— “a” (Excellent) on JPY 21.1 billion, 1.32% senior unsecured notes due 2032

— “a” (Excellent) on JPY 15.2 billion 1.488% senior unsecured notes due 2033

— “a” (Excellent) on JPY 12.0 billion 0.844% senior unsecured notes due 2033

— “a” (Excellent) on JPY 9.8 billion 0.934% senior unsecured notes due 2034

— “a” (Excellent) on JPY 7.7 billion 1.682% senior unsecured notes due 2034

— “a” (Excellent) on JPY 10.6 billion, 0.83% senior unsecured notes due 2035

— “a” (Excellent) on JPY 10.0 billion 1.039% senior unsecured notes due 2036

— “a” (Excellent) on JPY 6.5 billion 1.594% senior unsecured notes due 2037

— “a” (Excellent) on JPY 8.9 billion 1.75% senior unsecured notes due 2038

— “a” (Excellent) on JPY 6.3 billion 1.122% senior unsecured notes due 2039

— “a” (Excellent) on USD 400 million senior unsecured notes bearing interest at 6.90% and due 2039

— “a” (Excellent) for USD 450 million, 6.45% senior unsecured notes due 2040

— “a” (Excellent) on JPY 10.0 billion 1.264% senior unsecured notes due 2041

— “a” (Excellent) on $400 million 4.0% senior unsecured notes due 2046

— “a-” (Excellent) on JPY 60 billion 2.108% subordinated notes due 2047

— “a” (Excellent) on $550 million 4.75% senior unsecured notes due 2049

— “a” (Excellent) on JPY 20.0 billion 1.56% senior unsecured notes due 2051

— “a” (Excellent) on JPY 12.0 billion 2.144% senior unsecured notes due 2052

The following indicative long-term IRs have been confirmed with stable outlooks for securities available under existing shelf registrations:

Aflac Incorporated –

— “a” (Excellent) for senior unsecured debt

— “a-” (Excellent) for subordinated liabilities

This press release refers to credit ratings published on AM Best’s website. All rating information related to this publication and related disclosures, including the identification of the bureau responsible for assigning each credit rating mentioned in this press release, can be found on AM Best’s website. Current review activity Website. For more information on the use and limitations of credit rating opinions, see Guide to Best Credit Ratings. For information regarding the proper use of AM Best’s credit ratings, performance ratings, preliminary credit ratings and press releases, please visit Guide to the correct use of Best’s ratings and reviews.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company operates in over 100 countries and has offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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