AM Best has assigned the Long-Term Issue Credit Ratings (Long-Term IR) of “a-” to the new yen-denominated senior unsecured notes of Aflac Incorporated (Aflac) (Columbus, GA) [NYSE:AFL], which total JPY 82.0 billion. The offering consists of JPY 30.0 billion of 0.633% senior unsecured notes due 2031, JPY 12.0 billion of 0.844% senior unsecured notes due 2033, JPY 10.0 billion 1.039% senior unsecured notes due 2036, JPY 10.0 billion 1.264% senior unsecured notes due 2041 and JPY 20.0 billion 1.56% senior unsecured notes due 2051. The outlook assigned to these Long-Term IRs is stable. Aflac’s existing Long-Term Issuer Credit Ratings remain unchanged.

The proceeds are expected to be used to prefund Aflac’s forthcoming USD 700 million 3.625% senior unsecured notes due in 2023; and under redemption with a make-whole provision, Aflac is expected to pay off this debt early through this process over the next few weeks. Aflac’s financial leverage is expected to increase to approximately 21% for an interim period; AM Best expects the leverage to stay elevated until the notes due 2023 are paid off. The interest coverage has remained favorable in a range of 21.1 to 19.3 times, in 2019 and 2020, respectively, and is expected to remain flat factoring in the additional interest expense.

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 6.0 billion reported at year-end 2020. Aflac also maintains other sources of contingent liquidity in its unsecured revolving credit facilities of USD 1.0 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 300 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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