Fitch Ratings Affirms AFLAC's 'AA' IFS Ratings.Business Editors CHICAGO--(BUSINESS WIRE)--Dec. 10, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the 'AA' insurer financial strength rating of AFLAC AFLAC American Family Life Assurance Company AFLAC American Family Life Assurance Company of Columbus AFLAC Apologies For Lack of Audi Content (Audi listservs) Inc.'s insurance operating subsidiaries American Family Life Assurance Co. of Columbus (AFLAC), American Family Life Assurance Co. of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (AFLAC NY), and the Japan branch, AFLAC Japan. Fitch has also affirmed AFLAC Inc.'s senior debt rating at 'A+'. The Rating Outlook is Stable. The success of AFLAC in both Japan and the U.S. is due to the company's ability to offer affordable insurance to an under-penetrated market, while earning strong margins due to being the low cost provider and investing in a conservative manner. AFLAC Japan, which accounts for approximately three-quarters of total operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for AFLAC, has both the largest number of individual insurance policies in force and the industry's leading solvency margin. In the U.S., where AFLAC is the market leader in supplemental insurance, the company has a modest 5% penetration into the small business market. Balanced against these strengths are serious concerns regarding the state of the Japanese economy, and any adverse impact this may have on AFLAC's investment portfolio or operating margins. AFLAC NY's rating is based on an explicit capital support agreement from AFLAC, as well as its strategic importance within AFLAC Inc. AFLAC's investment portfolio consists of high-quality assets, and management follows a conservative investment strategy. However, the prolonged economic hardships experienced in Japan, some industry concentrations, and the generally low interest rate environment in Japan are areas of potential risk. Approximately 85% of the company's total assets support its Japanese business, however, only one-third of Yen-denominated fixed income securities are invested in Japanese companies. AFLAC has further minimized its exposure to corporate Japan investments by holding a relatively small percentage of equities, real estate, and loans compared to peers. AFLAC's debt-to-total capital was 23% at September 30, 2003, which is within Fitch's stated target and consistent with the parameters of the rating category. On a consolidated basis, AFLAC matches Yen-denominated assets to yen-denominated liabilities to minimize the exposure of shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. to foreign currency translation fluctuations. AFLAC's debt acts as a natural hedge against exchange rate risk, and the company uses the proceeds for general corporate purposes including the repurchase of stock Repurchase of stock Technique to pay cash to firm's shareholders that provides more preferential tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. . Earnings coverage of interest expense remains extremely strong at more than 50 times, reflecting the low cost of yen-denominated debt which has a weighted average interest rate of 1.3%. AFLAC Inc. is a publicly traded holding company with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). assets of $49 billion and shareholders' equity of $7 billion as of September 30, 2003. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. GAAP return on stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. (ROE) for the first nine months of 2003 was 22.7%, which excluded the impact of FAS 115, FAS 133, realized investment losses, and the contribution to the Policyholder Protection Fund. Entity/Issue/Type Action Rating/Outlook AFLAC Inc. --Senior debt Affirmed 'A+'/Stable. American Family Life Assurance Co. of Columbus American Family Life Assurance Co. of New York AFLAC Japan --Insurer financial strength Affirmed 'AA'/Stable. |
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