Fubon Life Insurance Co (富邦人壽) on Wednesday sold US$650 million of 10.25-year subordinated bonds at a coupon rate of 5.45 percent, parent Fubon Financial Holding Co (富邦金控) said in a regulatory filing yesterday.
The insurer would use the proceeds to supplement and strengthen its working capital and financial structure, as well as increase its capital adequacy ratio as it is to adopt the nation’s new solvency system for the insurance industry, known as TW-ICS, next year, the filing said.
The bonds were issued by the insurer’s wholly owned offshore special purpose vehicle (SPV), Fubon Life Singapore Pte Ltd, with Fubon Life Insurance serving as the guarantor, which would unconditionally and irrevocably guarantee full payment, when due, of the principal and interest of the bonds, it said in a separate statement.
Photo: CNA
Fubon Life Insurance’s board of directors in April approved the establishment of the SPV in Singapore to help raise funds and bolster its financial health.
The sale also marks the first time a Taiwanese insurer has issued US dollar-denominated bonds with a par call option in global bond markets, which allows the insurer to redeem the debt within three months before maturity at its par value — helping reduce interest costs in the event of early refinancing, Fubon Life Insurance said.
The insurer said it held roadshows in Singapore and Hong Kong from Monday to Tuesday and received positive feedback from investors.
The insurer’s first bond sale in overseas markets was nearly three times oversubscribed, drawing more than US$1.9 billion in orders, it added.
Asia-Pacific investors accounted for 86 percent of the buyers of the bonds, it said.
In terms of investor structure, fund managers or asset management firms accounted for 82 percent, insurance companies or pension funds made up 11 percent, while banks, private banking and others contributed 7 percent, it added.
Fubon Life Insurance — along with other Taiwanese life insurers such as Cathay Life Insurance Co (國泰人壽), Nan Shan Life Insurance Co (南山人壽) and Shin Kong Life Insurance Co (新光人壽) — faces heightened risks to its earnings, capitalization and business-risk profile following the New Taiwan dollar’s 8 percent surge against the US dollar over two days in early May, Fitch Ratings has said.
Soaring foreign-currency hedging costs and the potential for further appreciation in the NT dollar would elevate the insurer’s risks going forward, the ratings agency said.
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