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CNP Assurances plans debut euro Tier 3 bond -source
October 10, 2016 / 11:17 AM / a year ago

CNP Assurances plans debut euro Tier 3 bond -source

LONDON, Oct 10 (IFR) - CNP Assurances could become the first European insurer to issue a new type of subordinated bond in euros in order to fortify its capital base, according to a market source.

Several sources have also indicated a French insurer was considering a so-called Tier 3 transaction.

Insurers have been mulling Tier 3 issuance as a cost-efficient way to boost their regulatory capital. Because it would rank senior to Tier 2 in a liquidation, the assumption is it would be cheaper to sell.

CNP Assurances said in an August credit investor presentation it had significant subordinated debt issuance capacity as of June 30, including 2.3bn of Tier 2 and 2bn of Tier 3.

BNP Paribas, Bank of America Merrill Lynch, Citigroup, Credit Agricole and Nomura are expected to be at the helm of CNP’s potential trade.

It would be the first Tier 3 bond issued by a European insurer in euros, though Aviva priced a C$450m Tier 3 deal in May.

New European regulation known as Solvency 2 allows insurers to cover up to 15% of their Solvency Capital Requirement in Tier 3 instruments. Aviva’s Tier 3 bond improved its Solvency 2 ratio by around two percentage points to an approximate 182%, according to Moody‘s.

CNP Assurances is rated A (stable) by S&P. It was last in the market in December 2015 when it sold a 750m June 2047 callable June 2027 at 360bp over mid-swaps. That bond was quoted at 374bp over swaps on Monday, according to Thomson Reuters.

One lead manager declined to comment. CNP Assurances and the other banks did not reply to IFR’s requests for comment. (Reporting by Alice Gledhill, editing by Helene Durand, Alex Chambers, Julian Baker)

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