The financial fallout from concerns over Aflac’s investments in European banks appears to be lessening.
Tuesday, Standard & Poor’s removed Columbus-based supplemental insurance company off of credit watch. The company has been under the credit watch since Jan. 23, shortly after a Morgan Stanley analyst raised concerns about $7 billion in investments Aflac had in European banks. That was part of the company’s nearly $68 billion investment portfolio. The concern was if the banks failed, the so-called “hybrid securities” could be greatly devalued or even worthless.
The stock started a dramatic drop that saw it lose almost 60 percent of its value, including a single day loss of 36 percent or more than $13 per share on Jan. 22.
Tuesday after the S&P release, Aflac’s stock rose $4.26 to close at $29.23 per share, easily the highest it has been since the January plunge. Wednesday, the stock lost a little ground, closing at $27.66 per share, down $1.57 or more than 5 percent.
The stock reached its low point at $10.83 per share on March 9.
“After incorporating our current ratings on AFLAC’s hybrid securities into our analysis of AFLAC’s capitalization as well as applying stress factors against other asset classes, we believe AFLAC should be able to return to and maintain a level of statutory capital that supports the current ratings,” Standard & Poor’s credit analyst Jon Reichert stated in the report.
Steven Schwartz, a financial analyst for Raymond James & Associates Inc. based in Chicago, said it appears the concern raised about Aflac’s investments is subsiding.
“I think the investment community is getting more comfortable with the portfolio,” Schwartz said. “...I think people are probably comfortable there are not going to be a large amount of losses out of the portfolio. Aflac’s only issue was the portfolio.”
Aflac is scheduled to release first-quarter earnings on Wednesday. The company’s annual shareholder meeting is scheduled for May 4.