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Aflac Has $1.75 Billion of Greek, Portugal Bank Debt

The headquarters of Aflac Inc.
The headquarters of Aflac Inc. stands in Columbus, Georgia. Photographer: Chris Rank/Bloomberg

April 28 (Bloomberg) -- Aflac Inc., the world’s largest seller of supplemental health insurance, said it holds almost $2 billion of bonds tied to banks in Greece and Portugal, whose ratings have been cut on mounting debt.

Aflac has about $1 billion in Greek bank bonds and $750 million issued by Portuguese lenders, Chief Investment Officer Jerry Jeffery said in a conference call today. The insurer also holds about $285 million in Greek sovereign bonds, Jeffery said.

Greece is waiting on word of a 45 billion-euro ($59 billion) rescue package from the European Union and the International Monetary Fund after the nation’s credit rating was cut to junk by Standard & Poor’s yesterday. The firm lowered its rating on Greece by three levels to BB+ from BBB+ and warned that investors could recover as little as 30 percent if it restructures debt.

Aflac is “looking very carefully” at limits on sovereign debt, Jeffery said. “I still don’t think it’s predictable what’s going to happen with Greece, but there is enormous pressure being applied by the EU and IMF as we speak. It will be very instructive as to how we proceed.”

Standard & Poor’s cut Portugal’s ratings two steps to A-from A+, the seventh-lowest investment grade. Jeffery said Columbus, Georgia-based Aflac also holds about $269 million of Italian sovereign debt and none from Spain.

The insurer dropped $2.73, or 5.2 percent, to $49.68 at 2:48 p.m. in New York Stock Exchange composite trading. The stock earlier dropped 5.4 percent, the most since Sept. 1.

‘Troubled Credits’

Aflac’s “exposure to troubled credits in the current cycle is well above what it experienced in past cycles,” Sanford C. Bernstein & Co. analysts led by Suneet Kamath wrote in a note today. “We feel this change in the perception of balance sheet quality will limit AFL’s ability to return to the multiples it traded at in the past.”

Kamath downgraded Aflac to “market perform” from “outperform” last month.

Aflac’s first-quarter net income was $636 million, compared with $569 million in the same period in 2009, it said in a statement yesterday. Operating income, which excludes some investment results, was $1.41 a share, beating the $1.32 average estimate of 17 analysts surveyed by Bloomberg.

Sales of new policies in Japan rose 10 percent to 30.3 billion yen ($322 million), a first-quarter record. A stronger yen boosted operating earnings per share by 5 cents, Aflac said.

Aflac will “learn a lot today,” about prospects for countries like Greece and Portugal, and will “respond to that,” Jeffery said.

To contact the reporter on this story: Sapna Maheshwari in New York at

To contact the editor responsible for this story: Dan Kraut at

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