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Aflac plans $1B in dividends to lower risk-based capital ratio

Aflac Inc. plans to reduce its risk-based capital ratio to about 650% by the end of 2018, CFO Frederick Crawford said during the company's second-quarter earnings call.

In the previous quarter's call, executives expressed that they wanted to draw down the company's U.S. capital buffer to 500% from about 870%.

Regulators require insurance companies to hold a certain amount of capital, called the risk-based capital, or RBC, ratio. The buffer is determined by the relative size and risk profile of each company in order to limit the amount of risk an insurer can take to prevent overexposure.

During the conference call, Crawford said the first half of tax reform was already incorporated into the reduction by the company's deferred tax assets, accounting for about 75 percentage points of the capital buffer. Prior to the implementation of the reform, Aflac would have posted an RBC ratio of 925%. The law's impact lowered it to 850%, he said.

To reach the 650% RBC target, Crawford said, the company expects to issue $1 billion in dividends in the second half of the year.

"I think most observers would say that 500% RBC on the nature of our business is quite high, even for our high ratings threshold," he added.