AM Best Affirms Credit Ratings of Aflac Incorporated and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa" (Superior) of Aflac Life Insurance Japan, Ltd. (Japan), American Family Life Assurance Company of Columbus (Omaha, NE), American Family Life Assurance Company of New York (Albany, NY) and Continental American Insurance Company (Omaha, NE). These companies represent the life/health insurance subsidiaries of Aflac Incorporated (Aflac) (Columbus, GA) (NYSE:AFL) and are collectively referred to as Aflac Incorporated Group. Concurrently, AM Best has affirmed the Long-Term ICR of "a" (Excellent) and all existing Long-Term Issue Credit Ratings (Long-Term IRs) of Aflac. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs and shelf registration.)

The ratings reflect Aflac Incorporated Group's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

The rating affirmations also reflect Aflac Incorporated Group's maintenance of risk-adjusted capitalization at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), as well as strong NAIC risk-based capital (RBC) in the United States and excellent solvency ratios in Japan. The group's risk-adjusted capitalization continues to be enhanced by its strong operating performance, which has more than offset unrealized foreign currency losses in recent years. Aflac's GAAP equity increased over 18% through the second half of 2024, with improvement in retained earnings. The organization's investment team continues to manage the challenges effectively of foreign exchange risk. AM Best considers the organization's investment management capabilities to be strong and overall invested assets are diverse across asset classes and types, as these are managed both internally and through highly respected external asset managers. However, the group's investment portfolio includes some exposure to commercial mortgage, transitional real estate and real estate owned loans. Aflac's mortgage loan portfolio has historically performed well but has experienced a rise in delinquencies and foreclosures since 2023. AM Best acknowledges that the mortgage and real estate portfolios comprise a small but material portion of Aflac's invested assets. The group enjoys the financial flexibility provided by its publicly traded parent company. The flexibility has been further enhanced through its reinsurance subsidiary, Aflac Re, which assumes a modest portion of older cancer policies liabilities from Aflac Life Insurance Japan, Ltd. Furthermore, AM Best notes that Aflac Incorporated Group's current adjusted financial and operating leverages remain relatively modest for their rating levels.

The rating affirmations also reflect Aflac Incorporated Group's continued strong operating margins in the Japan and U.S. markets. The organization has a trend of strong return on equity, which exceeded 20% in 2023. The earnings continue to be favorably impacted by lower benefit utilization in the U.S segment partially offset by higher administrative expenses. While the U.S. and Japan operating segments historically have produced favorable results, the group continues to be challenged to reverse the trend of premium decline and grow new sales materially, due to the increasingly competitive market. However, AM Best does recognize that the decrease in premiums in 2023 had improved from prior years. The company continues to focus actively on client retention strategies, product enhancements and operational capabilities to meet evolving market demands and facilitate growth.

Aflac's ERM management capabilities are very strong and are deeply embedded in the organization's strategy and decision making, which has positively impacted its balance sheet strength, operational performance and business profiles. The ERM program has continued to demonstrate robust processes within its framework that are effective in identifying potential risks, managing those risks and mitigating them. AM Best's assessment also includes an evaluation of the program's risk defense capabilities on multiple exposures and has determined that most are managed with very high capabilities.

Aflac's favorable business profile is supported by its market-leading position in the Japan market and its strong market presence in the U.S. market. The company is the leader in providing both medical and cancer insurance in Japan, and its strong partnership with Japan Post solidifies its standing as a formidable competitor in that market. Furthermore, Aflac Japan continues to refresh its product offerings to remain competitive in the market. In the U.S. market, Aflac continues to be a leader in the supplemental medical insurance space. Additionally, management has made numerous investments in its U.S. market segment to position the company for growth over the next few years.

The following Long-Term IRs have been affirmed with stable outlooks:

Aflac Incorporated—

— "a" (Excellent) on JPY 12.4 billion, 0.3% senior unsecured notes, due 2025

— "a" (Excellent) on USD 300 million, 2.875% senior unsecured notes, due 2026

— "a" (Excellent) on USD 400 million, 1.125% senior unsecured notes, due 2026

— "a" (Excellent) on JPY 60 billion, 0.932% senior unsecured notes, due 2027

— "a" (Excellent) on JPY 12.6 billion, 0.5% senior unsecured notes, due 2029

— "a" (Excellent) on JPY 13.0 billion, 1.048% senior unsecured notes, due 2029

— "a" (Excellent) on JPY 33.4 billion, 1.075% senior unsecured notes, due 2029

— "a" (Excellent) on JPY 13.3 billion, 0.55% senior unsecured notes, due 2030

— "a" (Excellent) on USD 1.0 billion, 3.6% senior unsecured notes, due 2030

— "a" (Excellent) on JPY 29.3 billion, 1.159% senior unsecured notes, due 2030

— "a" (Excellent) on JPY 9.3 billion, 0.843% senior unsecured notes, due 2031

— "a" (Excellent) on JPY 27.9 billion, 1.412% senior unsecured notes, due 2031

— "a" (Excellent) on JPY 30 billion, 0.633% senior unsecured notes, due 2031

— "a" (Excellent) on JPY 20.7 billion, 0.75% senior unsecured notes, due 2032

— "a" (Excellent) on JPY 21.1 billion, 1.32% senior unsecured notes, due 2032

— "a" (Excellent) on JPY 15.2 billion, 1.488% senior unsecured notes, due 2033

— "a" (Excellent) on JPY 12.0 billion, 0.844% senior unsecured notes, due 2033

— "a" (Excellent) on JPY 9.8 billion, 0.934% senior unsecured notes, due 2034

— "a" (Excellent) on JPY 7.7 billion, 1.682% senior unsecured notes, due 2034

— "a" (Excellent) on JPY 10.6 billion, 0.83% senior unsecured notes, due 2035

— "a" (Excellent) on JPY 10.0 billion, 1.039% senior unsecured notes, due 2036

— "a" (Excellent) on JPY 6.5 billion, 1.594% senior unsecured notes, due 2037

— "a" (Excellent) on JPY 8.9 billion, 1.75% senior unsecured notes, due 2038

— "a" (Excellent) on JPY 6.3 billion, 1.122% senior unsecured notes, due 2039

— "a" (Excellent) on USD 400 million, 6.90% senior unsecured notes, due 2039

— "a" (Excellent) on USD 450 million, 6.45% senior unsecured notes, due 2040

— "a" (Excellent) on JPY 10.0 billion, 1.264% senior unsecured notes, due 2041

— "a" (Excellent) on USD 400 million, 4.0% senior unsecured notes, due 2046

— "a-" (Excellent) on JPY 60 billion, 2.108% subordinated debentures, due 2047

— "a" (Excellent) on USD 550 million, 4.75% senior unsecured notes, due 2049

— "a" (Excellent) on JPY 20.0 billion, 1.56% senior unsecured notes, due 2051

— "a" (Excellent) on JPY 12.0 billion, 2.144% senior unsecured notes, due 2052

The following indicative Long-Term IRs have been affirmed with stable outlooks on securities available under the existing shelf registrations:

Aflac Incorporated—

— "a" (Excellent) on senior unsecured debt

— "a-" (Excellent) on subordinated debt

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

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