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Aflac's Senior Unsecured Notes Get Debt Rating from Moody's
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Aflac Incorporated (AFL - Free Report) recently received rating action from Moody's Investors Service, a wing of Moody’s Corporation (MCO - Free Report) . The rating giant has assigned an A3 debt rating to the JPY 60 billion of 10-year fixed rate senior unsecured notes issued by the company. The insurer plans to use the net proceeds of the notes for general corporate purposes, including the repurchase of its 6.90% senior notes due 2039 and 6.45% senior notes due 2040.
Aflac usually receives good ratings due to its stability and healthy risk-based capital. In Jun 2016, A.M. Best affirmed the issuer credit rating (ICR) “a-” on Aflac and financial strength rating (FSR) of “A+” (Superior) and ICR of “aa-” on all the subsidiaries of the company.
In the last one year, the shares of Aflac gained 24% compared with 31% increase registered by the Zacks categorized Accident and Health Insurance industry. Favorable ratings from renowned rating agencies cement shareholders’ confidence on the stock and make it an attractive investment option.
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Also, the latest hike in interest rates have made investors optimistic about insurance stocks like Hartford Financial Services Group, Inc. (HIG - Free Report) and Kemper Corporation (KMPR - Free Report) , to name a few. This also casts in a ray of hope for Aflac.
Coming back, the latest A3 senior debt rating from Moody’s evidences Aflac's strong market position in the supplemental health market of both the US and Japan. In addition, Aflac's robust financial profile, backed by strong capital adequacy, drove the favorable rating action. As of Sep 30, 2016, Aflac had NAIC company action level (CAL) risk-based capital (RBC) ratio in the mid-800% range and its Solvency Margin Ratio (SMR) in Japan was above 900%.
The aforesaid debt rating is expected to further boost Aflac's financial flexibility as its adjusted financial leverage is likely to remain in the mid-20% range after the issuance of the notes. The debt issuance, however, is likely to be offset by the debt reduction from Aflac's Dec 2016 tender offer. Management anticipates the low coupon rate to keep interest expenses modest and Aflac's earnings coverage strong at over 13 times.
However, Moody believes that Aflac's limited product diversification, and concentrated investment portfolio – particularly in Japanese Government Bonds (JGBs) – might limit the company’s growth prospects. Specifically, a decline in total adjusted capital of over 15% in the last 12 months, above 30% hike in total financial leverage and a downgrade of the Government of Japan sovereign debt rating might impact the company’s financial health and strength.
Zacks Rank
Aflac presently has a Zacks Rank #5 (Strong Sell).
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Aflac's Senior Unsecured Notes Get Debt Rating from Moody's
Aflac Incorporated (AFL - Free Report) recently received rating action from Moody's Investors Service, a wing of Moody’s Corporation (MCO - Free Report) . The rating giant has assigned an A3 debt rating to the JPY 60 billion of 10-year fixed rate senior unsecured notes issued by the company. The insurer plans to use the net proceeds of the notes for general corporate purposes, including the repurchase of its 6.90% senior notes due 2039 and 6.45% senior notes due 2040.
Aflac usually receives good ratings due to its stability and healthy risk-based capital. In Jun 2016, A.M. Best affirmed the issuer credit rating (ICR) “a-” on Aflac and financial strength rating (FSR) of “A+” (Superior) and ICR of “aa-” on all the subsidiaries of the company.
In the last one year, the shares of Aflac gained 24% compared with 31% increase registered by the Zacks categorized Accident and Health Insurance industry. Favorable ratings from renowned rating agencies cement shareholders’ confidence on the stock and make it an attractive investment option.
PRICE CHART
Also, the latest hike in interest rates have made investors optimistic about insurance stocks like Hartford Financial Services Group, Inc. (HIG - Free Report) and Kemper Corporation (KMPR - Free Report) , to name a few. This also casts in a ray of hope for Aflac.
Coming back, the latest A3 senior debt rating from Moody’s evidences Aflac's strong market position in the supplemental health market of both the US and Japan. In addition, Aflac's robust financial profile, backed by strong capital adequacy, drove the favorable rating action. As of Sep 30, 2016, Aflac had NAIC company action level (CAL) risk-based capital (RBC) ratio in the mid-800% range and its Solvency Margin Ratio (SMR) in Japan was above 900%.
The aforesaid debt rating is expected to further boost Aflac's financial flexibility as its adjusted financial leverage is likely to remain in the mid-20% range after the issuance of the notes. The debt issuance, however, is likely to be offset by the debt reduction from Aflac's Dec 2016 tender offer. Management anticipates the low coupon rate to keep interest expenses modest and Aflac's earnings coverage strong at over 13 times.
However, Moody believes that Aflac's limited product diversification, and concentrated investment portfolio – particularly in Japanese Government Bonds (JGBs) – might limit the company’s growth prospects. Specifically, a decline in total adjusted capital of over 15% in the last 12 months, above 30% hike in total financial leverage and a downgrade of the Government of Japan sovereign debt rating might impact the company’s financial health and strength.
Zacks Rank
Aflac presently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>