Shinhan Life Insurance Co. is mulling additional 100 billion won issue after tapping heated demand for its maiden hybrid debt offering of 200 billion won ($167.6 million).

The life insurer attracted 358 billion won orders during a book building session on Monday, according to sources from the investment banking industry. It is considering scaling up the issuance in response to the strong appetite from institutional investors. Its debt issue plan that was already submitted includes an option to raise the debt ceiling to 300 billion won.

The perpetual debt is expected to be priced at a coupon of around 3.5 percent, as the company and its sole underwriter Mirae Asset Daewoo offered a band of 3.2 percent to 3.8 percent.

The issue is the life insurer under Shinhan Financial Group’s first offering in a bond that pays annual coupon like stock dividend. The offering is aimed at bolstering its capital to meet new accounting standards International Financial Reporting Standard 17 (IFRS17) and K-Insurance Capital Standard (K-ICS) to be introduced in 2023. Hybrid bonds are regarded as asset, rather than debt in the balance sheet, thus makes an attractive means to shore up capital.

The securities drew overwhelming demand although Korean Investors Service rated them as AA-, one notch below AA0 of NICE Information Service, citing its lower profitability compared to other local rivals.

The company’s bottom line will be strengthened after the debt sale as its risk-based capital (RBC) ratio would go up from current 233.1 percent to 250.5 percent. RBC is the minimum capital an insurer must hold to protect investors.

By Kang Woo-seok and Choi Mira

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