New Issue: FWD Group Holdings Limited 5.75-Year SGD Subordinated Capital Securities; IPG of 3.55%

• FWD Group Holdings Limited is a pan-Asian life and health insurer with operations spanning 10 markets and has been listed on the Hong Kong Stock Exchange since its IPO in July 2025. The group is launching a new 5.75-year Subordinated SGD bond under its Global Medium Term Note and Capital Securities Programme, with the issue size capped at SGD270 million. Settlement is slated for 14 July 2026, with the notes maturing in 2032, and Initial Price Guidance (IPG) has been set at 3.55%.

• The expected issue ratings of Baa2 (Moody's) / BBB- (Fitch) come in one to two notches below the Issuer's own ratings of Baa1 / BBB+. This is a standard notching differential that reflects the subordinated ranking of these capital securities relative to FWD's senior/issuer-level credit profile.

• Value of new business (VNB) grew 11% year-on-year (YoY) to US$945 million, annualised premium equivalents (APE) rose 25% to US$2,446 million, while new business contractual service margin (CSM) increased 18% to US$1,476 million in FY2025, ended 31 December 2025. This growth was broad-based across FWD's four segments - Hong Kong and Macau, Thailand and Cambodia, Japan, and Expansion Markets - with Hong Kong and Macau the standout performer as both APE and VNB rose by double-digit percentages. 

• Momentum carried into Q1 FY2026, with APE up 4% YoY to US$720 million and new business CSM up a faster 18% to US$556 million - a sign that quality and margins continued to improve. Hong Kong & Macau grew 1% against a very high base (Q1 2025 itself grew 143% YoY), aided by a better product mix and expense underruns. Japan rose 22% on the group's push into retirement and savings products, while Expansion Markets climbed 28% on the growth in Singapore, Malaysia, and the Philippines. Thailand & Cambodia remained the laggard as FWD prioritises quality over volume amid persistently low rates - though management noted Group-wide VNB growth would have been closer to 15% (versus 7% reported) excluding this drag. 

• Total borrowings rose to US$3,046 million as of 31 December 2025 (from US$2,793 million a year earlier), reflecting the issuance of US$1.15 billion of subordinated dated capital securities and the refinancing of the US$900 million Subordinated Notes due 2029. Total equity attributable to equity holders of the Company grew to US$6,817 million (from US$6,753 million), while comprehensive tangible equity (CTE) rose 18% to US$8.72 billion.

• The group's leverage ratio improved to 21.3% from 25.5% a year earlier, closing in on management's 15-20% target range. Liquidity remains strong with US$1,385 million in undrawn credit facilities. The group LCSM solvency ratio is a solid 265% as of year-end 2025, though it will adjust to a pro-forma ~210% to reflect Japan's transition to the new Economic Solvency Regime (ESR) on 31 March 2026. 

• Compared to similar subordinated bonds from global insurers in the SGD space, FWD's 3.550% guidance offers the highest yield of the group, reflecting its lower Baa2/BBB- rating. AIA Group's June 2035 bond trades at 2.959% despite a longer 8.9-year tenor, while Manulife's 2034 and 2036 bonds trade even tighter at 2.260% and 2.681% respectively, backed by Manulife's stronger, more diversified credit profile. Prudential Funding (Asia)'s 2035 bond offers 2.941%, and Swiss Re's shorter 2031 bond, despite its shorter 4.7-year tenor, trades at just 2.311% on the strength of Swiss Re's top-tier reinsurance credit. FWD's 3.550% sits well above all five, which feels appropriate given its lower rating, shorter track record as a standalone listed issuer.

• Backed by a pan-Asian franchise serving roughly 40 million customers, record FY2025 earnings, and a leverage ratio improving toward its 15-20% target range, FWD's new bond offers investors meaningfully more yield than the rest of the SGD insurance subordinated space at IPG. Given the roughly 60-100bp pickup over higher-rated peers, we view the new issue as attractively priced for investors comfortable stepping down the rating spectrum. Investors should stay mindful that this yield premium exists precisely because FWD sits closer to the BBB-/Baa2 floor of investment grade, with less ratings cushion than any of the five peers above it.