Cathay Life issues first offshore dollar bond from a Taiwanese insurer

The $600m 10-year subordinated corporate bond was issued through a special purpose vehicle set up in Singapore.

Taiwan-headquartered Cathay Life Insurance announced that it had priced a $600 million 10-year tier 2 subordinated corporate bond issuance through its wholly owned subsidiary, Cathaylife Singapore.

The issuance was priced at a coupon rate 170 basis points above the US 10-year treasury yield at 5.95%, with an issuing interest rate at 5.988%.

Proceeds raised will be channelled to “strengthen Cathay Life’s financial structure and boost its capital adequacy”, according to a June 26 press release. The issuance was rated BBB+ by both S&P Global and Fitch Ratings.

A spokesperson for Cathay Life Insurance confirmed to FinanceAsia that the bond will be issued and settled in Singapore. The person also commented that this would help boost the company’s capital, as well as helping increase its visibility across global capital markets.

Cathaylife Singapore was established in June as a special purpose vehicle (SPV) for the issuance, with Cathay Life Insurance acting as the guarantor of the transaction. Citi, JP Morgan and Morgan Stanley acted as joint bookrunners of the deal.

The issuance was three times oversubscribed by institutional investors, before being upsized to the current $600 million from $500 million, the press release underlined. The investor base, mainly in Hong Kong and Singapore, include 72% of fund and asset managers, 17% of insurance and pension funds, 7% of banks and 4% of others.

This marks the first offshore dollar bond issuance from a Taiwanese insurer, after Taiwan’s Insurance Bureau at the Financial Supervisory Commission (FSC) announced that the market’s insurance players would be allowed to set up offshore SPVs for bond issuances in March. Also in April 2023, the bureau introduced the eligibility to issue 10-year subordinated corporate bonds for Taiwanese insurers.

This was followed by the FSC’s announcement, also in April, of a third phase of a series of “localisation and transitional measures” to facilitate its domestic insurance companies to adopt a new generation of solvency system for the industry, called TW-ICS, by 2026. This includes the counting of callable bonds, which could be early redeemed by the issuer before maturity, as Taiwanese insurers’ eligible assets, as well as multiple other incentive schemes.

The aim was to encourage Taiwanese insurers to “continuously improve their financial and business development and asset and liability management capabilities”, according to FSC.

Cathay Life Insurance is a wholly owned subsidiary of Cathay Financial Holdings, which also owns Cathay United Bank, one of Taiwan’s largest financial institutions.

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