Lotte Insurance Begins Subordinated Bond Redemption Process Despite FSS Objection

"Rumors of Early Redemption Delay Are Untrue"
"Redemption Will Be Completed Within a Few Days"

Lotte Insurance has begun the process of early redemption (call option) for subordinated bonds worth 90 billion KRW, despite disapproval from financial supervisory authorities.

Lotte Insurance Headquarters, Jung-gu, Seoul. Lotte Sonbo

On May 8, Lotte Insurance released a press statement, saying, "It is not true that we have postponed the exercise of the call option regarding the recent subordinated bond redemption," and added, "We have secured sufficient funds for redemption and exercised the call option today, officially initiating the redemption process."

Lotte Insurance issued subordinated bonds in May 2020. Although the maturity is 10 years (until 2030), the company can exercise the call option five years after the issuance date. In the market, it is customary to exercise the call option. Typically, new subordinated bonds are issued to redeem the existing ones.

Lotte Insurance claimed that it had planned to issue new subordinated bonds in February to redeem the existing ones, but the plan was thwarted due to intervention by supervisory authorities.

A Lotte Insurance official stated, "At the time, the supervisory authorities made it practically difficult to issue the bonds by strengthening issuance conditions, such as requiring a corrected report the day before the demand forecast for the subordinated bond issuance."

Regarding the current redemption, the official explained, "Due to the withdrawal of the refinancing issuance, exercising the call option under the current circumstances would result in only a slight failure to meet the 150% requirement for the capital adequacy ratio (K-ICS), so we requested a no-action letter from the Financial Supervisory Service. However, the Financial Supervisory Service did not approve this request and notified us yesterday not to exercise the call option."

Lotte Insurance has begun practical procedures for the early redemption and plans to complete the redemption within a few days.

Lotte Insurance stated, "Since this redemption is being carried out using the company's own general account funds, it will have no impact on policyholder assets and there are no issues regarding policyholder protection. We will continue to fulfill our social responsibilities, including contributing to the stability of the financial market based on investor trust, and will do our utmost to protect our customers."