Aflac Downgraded by Fitch and UBS

It seems these days many insurers can’t escape downgrades and plummeting stocks. Such is the case with Aflac. The insurer’s shares fell 11%, as analysts expressed concerns that insurance firms are too heavily invested in banks, MarketWatch reported yesterday.

Analysts at UBS downgraded Aflac Monday to “sell” from “neutral,” and on Friday, Fitch Ratings downgraded Aflac as well.

Fitch downgrades Aflac's issuer default rating to A+ from AA-, and senior debt rating to A from A+. Additionally, the insurer financial strength ratings of Aflac's insurance operating subsidiaries were downgraded from AA to AA-. The rating watch remains “negative.”

“Today's rating action reflects Fitch's heightened concern related to potential impairments within Aflac's sizable financial institution perpetual debenture asset portfolio,” says Fitch, which also reported that as of Dec. 31, 2008, Aflac reported a book value of approximately $9 billion invested in perpetual debenture assets (mostly in financial institutions), which is a significant exposure relative to $6.6 billion in GAAP shareholders' equity, and $4.6 billion in statutory total adjusted capital.

If impairments do materialize, Fitch says the result could substantially weaken Aflac's capital position.