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-” of Aflac Life Insurance Japan, Ltd. (Aflac 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 Aflac Incorporated Group. Concurrently, AM Best has affirmed the Long-Term ICR of “a-” and all existing Long-Term Issue Credit Ratings (Long-Term IR) of Aflac. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs.)

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

Aflac Incorporated Group continues to report risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and maintains favorable risk-based capital levels in the United States and excellent solvency ratios in Japan. Aflac’s liquidity is significant and supported by favorable positive operating cash flow, high-quality investments and a stable liability structure. The organization recognizes the potential for volatility as a result of the COVID-19 pandemic, and Aflac Incorporated Group remains committed to prudent liquidity and capital management and is taking a tactical approach to capital allocation. The group enjoys the financial flexibility provided by its publicly traded parent company. The organization’s investment team continues to manage the challenges of a prolonged low interest rate environment and foreign exchange risk effectively. AM Best will continue to monitor the impact of the current economic environment on its investment results and overall portfolio yields.

Aflac has reported strong operating earnings and profitability ratios across its various segments, in line with expectations. Aflac’s insurance business consists of two core reporting segments: Aflac Japan and Aflac’s U.S. operations. The majority of the organization’s revenue and earnings are generated from its insurance operations in Japan. The U.S. operations also have delivered consistent earnings and moderate premium growth in recent years. It is important to note, that Aflac Japan utilizes the Japan Post as a major nationwide distribution network in Japan primarily for its cancer products. The Japan Post has been conducting an internal investigation for inappropriate sales practices; the investigation is expected to be completed by the end of June 2020. However, the sale of Aflac Japan cancer insurance products was not within the scope of the Japan Post investigation. Beginning in August 2019, Aflac has experienced a material decrease of sales from the Japan Post channel. The company also continues to work on revising and diversifying its distribution strategy. The group has reported favorable operating earnings from its subsidiaries across its diversified business segments, strengthened by ongoing expense management and its controlled distribution strategy.