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Aflac and its Units Get Rating Affirmation from A.M Best

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Aflac Incorporated (AFL - Free Report) and its affiliates recently received rating action from credit rating giant, A.M. Best. The credit rating giant has affirmed the Financial Strength Rating (FSR) and Long-Term Issuer Credit Ratings (ICR) of the company and its life or health insurance subsidiaries like American Family Life Assurance Company of Columbus (Both the Omaha and the Japan branch), American Family Life Assurance Company of New York and Continental American Insurance Company. The outlook for the ratings remained stable.

The rating action follows the recent announcement made by Aflac regarding its organizational restructuring. Year to date, the stock has returned 14.01%, which is much lower than 17.70% returned by the Zacks-categorized Accident and Insurance Industry. Nonetheless, we believe that the company’s organizational restructuring will position it for long-term growth by retaining investors’ confidence on the stock.

The insurer disclosed its intention to convert its operations in Japan and create a new insurance subsidiary in the nation over the course of the next 24 months. The conversion is mainly targeted to enhance transparency in legal and regulatory matters as well as boost business development opportunities within the organization. This is expected to reduce strategic risk and improve cash flows and capital management. This conversion is also expected to impact the financial leverage, interest coverage, cash flow or liquidity of the concerned affiliates of Aflac.

We note that Aflac has always received good ratings on its stability and healthy risk-based capital. In Jun 2016, A.M. Best affirmed the issuer credit rating (ICR) “a-” and all existing issue ratings of Aflac. The ratings agency also reiterated the FSR of “A+” (Superior) and ICR of “aa-” on all the subsidiaries of Aflac.

The ratings reaffirmation indicates thatthe conversion will not have any material impact on the company’s operations, either in the U.S. or Japan.

Zacks Rank and Stocks to Consider

Aflac presently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the insurance industry that warrant a look include Alleghany Corporation , First American Financial Corporation (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany Corporation deals with Property & Casualty reinsurance and insurance businesses in the U.S. and internationally. The company recorded positive surprises in three of the last four quarters with an average beat of 20.52%.

First American Financial is a leading provider of title insurance and settlement services to the real estate and mortgage industries in the U.S. The company beat estimates in all the trailing last four quarters with an average beat of 14.32%

Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It posted positive surprises in all of the last four quarters with an average beat of 9.27%.

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