Kyobo Life Insurance drew orders worth nearly 1.5 times its target in a bookbuilding for its first hybrid bond in two years, a sale analysts said held up well even as insurers sharply cut back on capital securities this year, buoyed by the company's strong credit standing and fundamentals.
Kyobo Life launched the institutional bookbuilding on the 24th to issue 300 billion won ($218 million) in hybrid bonds, according to investment banking sources. Institutions submitted bids totaling 446 billion won. The insurer had said it could raise the issue to as much as 500 billion won depending on the bookbuilding results, and the final size is expected to be set between 300 billion won and 400 billion won.
With solid demand flowing in, the interest rate is expected to be set within the range initially projected. Ahead of the bookbuilding, Kyobo Life set an indicative rate band of 4.80% to 5.40%. If the company confirms a 300 billion won issue, the final rate is expected to be set at 5.35%.
Analysts said the sale held up well even as rising interest rates this year curbed issuance of insurers' capital securities, which include subordinated bonds and hybrid bonds. Domestic credit rating agencies rate Kyobo Life's hybrid bonds "AA0, stable." Among insurers that issued capital securities this year, that is the highest grade, alongside DB Insurance ("AA0, stable"). In the first half, Kyobo Life posted consolidated operating profit of 975.9 billion won and net profit of 729.1 billion won, up 23% and 22% respectively from a year earlier.
Kyobo Life plans to use the funds raised through the hybrid bond issue to stabilize its Korea Insurance Capital Standard (K-ICS) ratio, a measure of an insurer's ability to pay claims. Hybrid bonds are classified as equity for accounting purposes, which can help raise an insurer's K-ICS ratio. The issue is being led by Shinhan Securities, Korea Investment & Securities and NH Investment & Securities as lead managers, with Kyobo Securities, SK Securities, Daishin Securities and Meritz Securities joining the underwriting syndicate.
