On 12 October 2016, CNP Assurances successfully completed the first issue of Tier 3 euro-denominated subordinated bonds by a European insurer.
The bonds, issued in an amount of €1 billion, are non-callable bullet bonds and will mature in 6 years. They are rated BBB+ by Standard & Poor’s, rank pari passu with the previously issued Tier 2 subordinated notes, and pay a 1.875% fixed rate of interest until October 2022. This is the lowest fixed coupon paid by CNP Assurances since the Group’s inaugural subordinated issue in 1999. This is also the lowest fixed coupon ever paid by a European insurer for a euro denominated subordinated debt.
The bonds are intended to support the growth in CNP Assurances’ business in Europe and Latin America by taking advantage of the Solvency 2 Directive that entered into force at the beginning of 2016 and recognises Tier 3 bonds as the least onerous form of regulatory capital. The bond issue will reduce the Group’s average cost of financing by around 40 bps at 4.5%.
The issue was placed with 335 investors and the order book totalled €7 billion. The Tier 3 bond issue allows CNP Assurances to diversify its bond-investor base by offering a less risky instrument than a Tier 2 bond, notably via a coupon deferral clause in the event of a breach of the Minimum Capital Requirement (MCR) rather than the Solvency Capital Requirement (SCR), thereby providing investors with an additional degree of comfort. This new success confirms investors’ interest and confidence in the CNP Assurances signature.
Settlement is scheduled for 20 October 2016.
