Kyobo Life Insurance Plans to Issue $1 Billion New Hybrid Capital Securities for the First Time in 3 Years

Securing Capital and Improving Solvency Ratio
Considering Domestic and Overseas Split Issuance

[Asia Economy Reporter Oh Hyung-gil] Kyobo Life Insurance is planning to issue $1 billion worth of hybrid capital securities for the first time in three years since 2018. It is expected to secure capital that has been decreasing recently and also raise the Risk-Based Capital (RBC) ratio.

According to the insurance industry on the 30th, Kyobo Life Insurance held a board meeting on the 17th and decided to issue subordinated hybrid capital securities worth about $1 billion overseas. The issuance will be in the form of bearer, unsecured, and unsubordinated bonds, and considering market conditions, partial issuance domestically or overseas is also being considered. Kyobo Life plans to secure KRW 1.5 trillion in funds to strengthen financial soundness.

Next month, it is expected to issue hybrid capital securities in the form of ESG (Environmental, Social, and Governance) bonds worth between KRW 300 billion and KRW 500 billion domestically, and then raise investors in the overseas market around next year.

This capital increase is supported by the recent positive evaluations of Kyobo Life Insurance. The global credit rating agency Moody’s has rated Kyobo Life’s insurance payment ability credit rating as ‘A1’, the highest grade among domestic financial companies for seven consecutive years. The rating outlook was also upgraded to ‘stable’.

Fitch has maintained an ‘A+’ rating for Kyobo Life for nine consecutive years. Three domestic credit rating agencies including Korea Ratings have also assigned the highest grade ‘AAA’ for Kyobo Life’s insurance payment ability.

It is also interpreted as an intention to proactively secure sufficient capital to prepare for new capital regulations such as the new International Financial Reporting Standards (IFRS 17) and the new solvency regime (K-ICS) to be implemented in 2023.

Kyobo Life Insurance’s RBC ratio has been declining recently, raising the necessity for capital expansion. As of the first half of the year, Kyobo Life’s RBC ratio was 286.1%, down 47.3 percentage points from 333.4% at the end of the previous year. This is attributed to a decrease in insurance companies’ bond valuation gains due to the recent rise in market interest rates.

Kyobo Life’s capital decreased by about KRW 1 trillion in the first half of this year alone. The consolidated total capital of Kyobo Life, which was KRW 12.8923 trillion at the end of 2020, decreased to KRW 11.8969 trillion as of the end of June.

The purpose also includes refinancing for the redemption of hybrid capital securities issued overseas in 2017. Kyobo Life has been securing funds in the overseas market early on. After issuing $500 million worth of hybrid capital securities in 2017, the first among domestic insurers, it succeeded in issuing $1 billion worth of hybrid capital securities in 2018, securing various investors.

A Kyobo Life Insurance official expressed expectations, saying, "Through the issuance of hybrid capital securities, we expect not only to proactively respond to regulatory introductions but also to mitigate capital volatility."

This content was produced with the assistance of AI translation services.