Dai-ichi Life sets $2.5bn benchmark before HoldCo move

Dai-ichi Life sold a $2.5bn subordinated perpetual non-call 10 issue on 13 July with the lowest coupon for such an issue among its peers, ahead of an October move to a HoldCo/OpCo structure for Japan’s largest life insurer.

Dai-ichi Life Insurance Company’s 144A/Reg S benchmark — rated A- by Fitch — was priced at 4%, the tight end of gudiance of 4.125% plus or minus 0.125%, which followed initial price thoughts of 4.375%-4.50%, by leads Citi, Goldman Sachs, JP Morgan, Mizuho and Morgan Stanley.

“We are satisfied because both deal size and coupon level were better than our initial expectations,” said Toshiaki Sumino, general manager, group management headquarters and corporate planning department, at Dai-ichi Life (pictured).

He said the issuer was able to take advantage of the prevailing low interest rate environment and tighter credit spreads in the dollar market, even though the market was temporarily volatile after the Brexit vote on 23 June.

“We internally discussed whether investors would be able to accept the timing of the note issuance, since it was only two weeks after the Brexit vote and two months before our structural change to be a holding company scheduled for October,” said Sumino. “But once the deal process begun, we were amazed by the very positive feedbacks from investors.

“We originally thought we might have a low 4% coupon, but demand was so strong that we could go beyond that and achieve 4%. We really appreciate investors’ deep understanding of the Japanese insurance industry as well as their support for our strategy.”

The issuer previously sold a $1.3bn perpetual bond in 2011, was the first Japanese insurer to raise hybrid capital in the format, and last tapped the dollar market in 2014.

“It is our basic policy to raise hybrid capital when it is necessary for our mid-to-long term growth strategy,” said Sumino. “Going into 2016, we observed that dollar primary market conditions were quite good, and it presented us with a great opportunity to strengthen our capital base for future growth as well as to mitigate downward pressure caused by BoJ’s Negative Interest Rate Policy.”

The move to a HoldCo/OpCo structure became effective on 1 October, but Sumino said that Dai-ichi Life’s capital strategy will not change.

“We will continue to elaborate our group management further, including group capital strategy,” he said.

“When issuing new notes we will decide the appropriate issuing entity taking into account use of proceeds, financing cost, etc.”