Allianz reopens euro insurance sub debt with successful €1bn

Allianz launched the first subordinated insurance euro benchmark of the year on Friday, a successful €1bn 30 year non-call 10 Tier 2 that took advantage of a window of opportunity between less propitious days to sate investor appetite for financials.

“Thursday was quite a difficult day,” said André Bonnal, FI syndicate at joint bookrunner Crédit Agricole CIB, “but the US closed positively, and when we looked at the market in the morning there were much more positive signs.”

The leads announced the mandate for the 30 non-call 10 fixed to floating subordinated issue, with A+/A2 expected ratings, on Friday morning with initial price thoughts (IPTs) of the mid-swaps plus 250bp area. After two hours and 20 minutes, they reported books above €2bn and an hour later set guidance at 230bp+/-2bp, will price in range, and the size at €1bn on the back of books in excess of €2.25bn. After a total of almost four hours, they fixed the spread at 228bp on the back of books above €2.1bn, pre-reconciliation, and the final book was just above €1.8bn.

Fair value was seen in the context of 208bp, according to Bonnal, given that Allianz 2029 non-call 2049s, sold in September 2019, were bid at an i-spread of 204bp and its 2047 non-call 2027s at 192bp. He said the IPTs of the 250bp area took into account the softness of the market evident earlier in the week, notably in the corporate sector (see main article).

“It was crystal clear to us that 250bp was the right number to get the appropriate momentum and attention from investors, which it did,” said Bonnal. “At the end of the day, we had a 1.8 times subscribed book and a very safe and successful trade at the end of a busy week in the primary market and ahead of a potentially tricky week ahead. The pipeline in financials has been building, corporates are due to remain extremely busy, so it felt like the right day for us to launch the transaction, even being the Friday of a very primary-heavy week.

“There was of course no doubt that the market would be open to a subordinated trade from an issuer like Allianz, but we clearly wanted to find a window that such a name deserves.”

The last subordinated euro benchmark from an insurance company was a €750m debut Restricted Tier 1 for Ageas on 3 December and Bonnal said the lack of subordinated supply among financials in general helped demand for the deal. Investor appetite for the sector had meanwhile already been demonstrated in the sterling market, where Phoenix Group, Legal & General and Pension Insurance Corporation raised an aggregate £1.2bn of Tier 2 from 23 to 30 April.