AAI Limited issues new floating rate bond

By Money Team

Published on December 8, 2015

This week Money asks FIIG where to invest and their pick is the Suncorp Group Limited

Suncorp subsidiary AAI has issued a new floating-rate subordinated bond.

Being floating rate, the amount of interest investors earn is directly linked to future expected interest rates. If the market expects rates to rise, the interest earned on these bonds will also rise.

The estimated yield to call in November 2020 is a high 5.4%.

Company description

AAI (formerly Vero Insurance) is a wholly owned core operating subsidiary of Suncorp Group. It is one of the largest general insurers in Australia, underwriting mainly motor, home and compulsory third-party insurance for individual and commercial clients. It is the main operating general insurance company for Suncorp. AAI underwrites and distributes personal and commercial general insurance products across Australia through direct and intermediated channels under several leading brands including AAMI, GIO, Suncorp, Vero and APIA.

Investor information

The AAI notes are subordinated floating-rate bonds with a current projected yield to call of 5.40%. (The return quoted is accurate as at December 7, 2015, but subject to change.)
The bonds are investment grade and rated by S&P as BBB+ and Moody's as A3. (The credit ratings are specific to the bond identified as AU3FN0029609.)
They are expected to be repaid at first call in November 2020, but should the call date be missed they have a final maturity of November 2040.
Minimum investment per bond is A$10,000.
FIIG is a dealer and we take a small brokerage fee when we transact; this is already included in the yield-to-maturity returns.
A custody service fee is also charged
The subordinated bonds are only available to wholesale investors; the minimum upfront spend for new investors is $50,000.