A.M. Best Affirms Ratings of Aflac Incorporated and Its Subsidiaries

  A.M. Best Affirms Ratings of Aflac Incorporated and Its Subsidiaries

Business Wire

OLDWICK, N.J. -- May 8, 2013

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and
issuer credit ratings (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,
NY) and Continental American Insurance Company (Continental American)
(Columbia, SC). These companies represent the life/health insurance
subsidiaries of Aflac Incorporated (Aflac) (Columbus, GA) [NYSE: AFL].
Concurrently, A.M. Best has affirmed the ICR of “a-” and all existing debt
ratings of Aflac. The outlook for all ratings is stable. (See below for a
detailed listing of the debt ratings.)

The ratings recognize Aflac’s growth in operating earnings, solid
risk-adjusted capitalization, strong sales within Japan and the ongoing
execution of its long-term investment allocation strategy. In addition, the
ratings reflect the company’s status as a leading provider of individual
guaranteed-renewable health and accident insurance both in Japan and the
United States.

The growth in Aflac’s operating earnings in recent years has been driven
primarily by favorable operating results across its subsidiaries through its
diversified business segments, ongoing expense management and its controlled
distribution strategy. The majority of the organization’s growth has come from
its insurance operations in Japan, where Aflac maintains a dominant market
position. In addition, the U.S. operations have delivered consistent earnings
despite fluctuating sales. A.M. Best also notes that Aflac’s financial
leverage and interest coverage ratios remain well within the guidelines for
its current ratings.

While operating earnings have been strong, Aflac has reported sizeable
impairments within its investment portfolio. However, A.M. Best notes that the
investment losses in 2012 were significantly lower than what was experienced
in 2011 and that the organization expects investment losses to decrease
significantly going forward. As Aflac continues its investment de-risking
activities as part of its new investment strategy, A.M. Best would expect
further realized losses over the near-term. Additionally, the organization
maintains a considerable exposure to European perpetual preferred investments
heavily concentrated in the financial sector, and more specifically, in
troubled European financial institutions. However, A.M. Best notes that the
allocation to European holdings is considerably less than it was just 18
months ago. Furthermore, given Aflac’s strong operating earnings and
substantial cash flow from its operating activities, as well as its improved
risk-adjusted capitalization, A.M. Best believes the organization has the
capacity to withstand a reasonably high level of additional realized losses
within its investment portfolio.

A.M. Best believes Aflac to be well positioned at its current rating level
over the near to medium term.

Factors that could lead to a negative rating action include sizeable realized
losses as Aflac implements its new investment strategy, a significant decline
in net premiums within its core lines of business or a material deterioration
in risk-adjusted capitalization within its subsidiaries.

The following debt ratings have been affirmed:

Aflac Incorporated—
-- “a-” on $300 million 3.45% senior unsecured notes, due 2015
-- “a-” on $650 million 2.65% senior unsecured notes, due 2017
-- “a-” on $850 million 8.50% senior unsecured notes, due 2019
-- “a-” on $350 million 4.00% senior unsecured notes, due 2022
-- “a-” on $400 million 6.90% senior unsecured notes, due 2039
-- “a-” on $450 million 6.45% senior unsecured notes, due 2040
-- “bbb+” on $450 million 5.50% senior debentures, due 2052

Yen-denominated Samurai notes:
-- “a-” on JPY 28.7 billion 1.47% senior unsecured notes, due 2014
-- “a-” on JPY 5.5 billion variable interest rate senior unsecured notes, due
-- “a-” on JPY 15.8 billion 1.84% senior unsecured notes, due 2016

Yen-denominated Uridashi notes:
-- “a-” on JPY 8 billion 2.26% senior unsecured notes, due 2016

The following indicative ratings have been affirmed for securities available
under the existing shelf registration:

Aflac Incorporated—
-- “a-” on senior unsecured debt
-- “bbb+” on subordinated debt

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at

A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Tom Zitelli, 908-439-2200, ext. 5412
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Thomas Rosendale, 908-439-2200, ext. 5201
Assistant Vice President
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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