Moody's: Aflac outlook negative

Moody's Investors Service said it affirmed the A2 senior debt rating of Aflac, Inc. but changed the outlook to negative from stable following Aflac's fourth-quarter earnings announcement, which included $1.3 billion of net income and investment losses of $262 million.

The agency said the affirmation was based on Aflac's very strong franchise and market position in supplemental health insurance in both Japan and the United States, well-established niche distribution channels, robust and predictable earnings capacity, excellent capital adequacy and moderate financial leverage.

However, the outlook was changed to negative primarily because of concerns about the performance of Aflac's investment portfolio - given its composition and concentration - in the current harsh credit environment, Moody's said. Although the company has very modest exposure to structured mortgage securities, the agency said there is the potential for sizeable investment losses in Aflac's $9 billion of perpetual preferred securities under some downside scenarios.

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