NongHyup Life to issue $493 mn in subordinated bonds

NongHyup Life Insurance Co. of South Korea is slated to issue 10-year-maturity subordinated bonds worth 600 billion won ($492.6 million) on March 31, according to investment banking sources.

The insurer initially aimed to sell 300 billion won in subordinated bonds. However, it expanded the issuance as the bonds were more than three times oversubscribed during the March 24 bookbuilding.

The bond coupon rate is 4.35% per year, 70 basis points higher than 3.65%, the average AA bond yield calculated by Korea’s rating companies. NongHyup Life takes AA-rated bonds as subordinated bonds. The 4.35% coupon rate is also nearly 100 basis points above the bond coupon rates of other insurers that issued subordinated bonds last year.  

Korean insurance companies are rushing to increase their equity capital ahead of two new solvency regulations to take effect from Jan. 1, 2023. To increase their risk-based capital (RBC), the insurers are scurrying to amass ample capital by issuing hybrid securities and bonds as well as selling properties. 

Some insurers have been struggling with fundraising due to tepid interest from investors. NongHyup Life, however, attracted investors thanks to its operating stability and ample capital of parent group NongHyup Financial Group Inc.

After selling the bonds, the insurer will inject funds in debt, domestic stocks and short-term investment products, as well as repay some of the subordinated debt it issued in 2017. NongHyup Life’s RBC ratio is expected to rise to 238% from 210.5% as of the end-2022, once it raises capital via the bond issue.

Write to Hyun-Il Lee at hiuneal@hankyung.com
Jihyun Kim edited this article.