AM Best has assigned the Long-Term Issue Credit Ratings (Long-Term IR) of “a” (Excellent) to the new yen-denominated senior unsecured notes of Aflac Incorporated (Aflac) (Columbus, GA) [NYSE: AFL], which total JPY 73 billion. The offering consists of JPY 21.1 billion in 1.32 % senior unsecured notes due 2032, JPY 33.4 billion in 1.075 % senior unsecured notes due 2029, JPY 6.5 billion in 1.594 % senior unsecured notes due 2037 and JPY 12.0 billion in 2.144% senior unsecured notes due 2052. The outlook assigned to these Long-Term IRs is stable. Aflac’s existing Long-Term Issuer Credit Ratings remain unchanged.
Net proceeds are expected to be used to fund all or a portion of Aflac’s USD 750 million 3.625% senior unsecured notes due 2024, and the USD 450 million 3.25% senior unsecured notes due 2025. Proceeds in excess of such redemption will be used for general corporate purposes.
Aflac’s adjusted financial leverage is expected to increase to approximately 25.7% for an interim period; AM Best expects the leverage to stay elevated until the notes due in 2024 are paid off. Aflac has reported strong earnings before interest and taxes (EBIT) interest coverage at around 20 times the past few years, a trend that is expected to continue.
Aflac’s liquidity position remains solid with cash and cash equivalents at the consolidated entities exceeding USD 5.1 billion and cash flows from operations of approximately USD 1.7 billion reported at June 30, 2022. Aflac also maintains other sources of contingent liquidity in its unsecured revolving credit facilities of USD 1.2 billion and JPY 100.0 billion respectively, and has access to an USD 800 million borrowing limit from the Federal Home Loan Bank of Atlanta, of which USD 600 million is designated for the short-term liquidity needs of Aflac’s U.S. insurance subsidiaries. This is subject to qualified collateral availability and other conditions.
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