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Aviva Singlife to issue S$550m subordinated notes

Singapore

NEWLY formed holding company Aviva Singlife Holdings Pte Ltd (ASH) has priced S$550 million of 10.25-year callable subordinated notes at 3.375 per cent.

To be listed on the Singapore Exchange, they will be issued on Nov 24, 2020, and the first call date falls 5.25 years later, on Feb 24, 2026.

The Tier 2 unsecured notes mature on Feb 24, 2031, according to deal terms seen by The Business Times (BT).

Singapore-based ASH will fully own its proposed key operating entity, Aviva Singlife, following the merger of British insurance bigwig Aviva Ltd's Singapore operations with home-grown digital insurer Singapore Life (Singlife). The merger is expected to be completed by January 2021.

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Proceeds from the notes issuance will be used for funding the purchase price and for capital adequacy purposes.

If the acquisition is not completed within three months of the issue date, ASH will be required to redeem the notes at 101 per cent of face value, according to the deal terms.

Standard Chartered Bank (StanChart) was the sole global coordinator for the notes sale. The joint lead managers and joint bookrunners were DBS and StanChart.

Last Friday, Fitch Ratings assigned ASH a long-term issuer default rating of BBB+ with a stable outlook, and rated the new notes BBB-.

The credit rating agency said the BBB+ rating takes into account the challenges ASH faces in sustaining its business growth and improving its operating performance amid intense market competition.

Fitch expects the consolidated operating entity, Aviva Singlife, to maintain a strong capital buffer as a cushion against unexpected shocks and claims arising from the coronavirus pandemic.

The agency estimates that the consolidated operation had a market share of about 7 per cent by total premiums written last year. "It will continue to rely strongly on financial advisory and group or affinity distribution channels. These channels constituted about 74 per cent and 15 per cent, respectively, of Aviva Ltd's operations on a standalone basis," Fitch said.

In September, Singlife announced it would acquire Aviva Ltd's Singapore arm for S$2.7 billion, in one of the largest deals in South-east Asia's insurance sector.

The combined business would be valued at S$3.2 billion and initially branded as Aviva Singlife.

Aviva Ltd will retain a 25 per cent equity stake, with another 20 per cent going to Japan's Sumitomo Life Insurance Company, an existing Singlife shareholder.

US alternative asset firm TPG, which stepped in as Singlife's new investor, holds a 35 per cent interest.

Singlife's other shareholders, including Aberdeen Asset Management, will collectively hold the remaining 20 per cent of the group's equity.

Aviva's sale of the Singapore operations mirrors a global trend of private equity firms digging into the strong growth of insurance businesses, BT reported.

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