It’s been a busy week for two of Australia’s big insurers.
IAG announced it had successfully raised A$450m in a 16 year, non-call six-year (16NC6), tier 2 floating rate note.
The IAG subordinated bond has a first call in December 2026, just over six years after settlement with the final maturity date occurring in December 2036.
Investors will expect the bond to be called at the first opportunity but as tier 2 capital, APRA will need to approve the repayment and there will be other terms and conditions IAG will need to meet.
The coupon payment on the bond is 3 month BBSW + 245 basis points which equates to approximately 2.55% for the first quarter (paid in arrears).
Today, QBE Insurance launched a similarly structured transaction. Indicative price guidance for the forthcoming deal, which is expected to price on the day of launch, is 300 basis points area over 3 month BBSW. The higher margin may be revised downwards as the IAG bond was originally marketed at BBSW+270 basis points.
