Seth’s Blog on Finance

NTUC Income’s First Ever Bond Issue Oversubscribed

NTUC Income recently debuted its first ever bond issue of $600 million 15-year bonds which was open to the public and corporate entities. The coupon rate was 3.65% and NTUC Income has the option to redeem the bonds in full at the end of 10 years.

Oversubscribed would be an understatement: the subscription rate was 15 times its $600 million offer, a cool $9 billion which attests to the attractiveness of the returns vis-à-vis the strong credit rating of NTUC Income. (And that’s a lot of money wanting to be invested.)

I personally find it perplexing that NTUC Income is issuing bonds. With their sizeable participating funds, insurance companies typically need to find investment opportunities to reap returns for their profits and participating policyowners. Hence, it’s not surprising that many other insurers have actually subscribed to Income’s bonds as participating funds typically contain a large allocation of bonds.

This bond issue follows the withdrawal of NTUC Income’s rather popular single-premium participating endowment policy – Growth Plan – which was earlier this year revised downwards with the company citing declining interest rates.

I guess NTUC Income wishes to use the money for things outside the mandate of its participating fund – perhaps riskier investments or a possible expansion overseas? We’ll have to see what Income’s chief executive Mr. Tan Suee Chieh has up his sleeves.

Incidentally, NTUC Income has scored a record annual revenue of $4.2b last year, effectively doubling it since Mr. Tan Suee Chieh took over from his predecessor Mr. Tan Kin Lian 5 years ago.