The pricing on American International Group’s (AIG) latest catastrophe bond transaction, Tradewynd Re Ltd. (Series 2014-1), has settled at the mid-point of guidance on one tranche of notes and below it on the other two.
The seventh cat bond to be sponsored by AIG and subsidiaries since 2010, Tradewynd Re 2014-1 launched in November, seeing AIG seeking $300m of fully-collateralized named storm and earthquake reinsurance protection from the sale of three tranches of notes, all of which are structured on an indemnity and per-occurrence trigger basis. Two tranches provide their cover over a three-year risk period, while one has a one-year risk period.
The Tradewynd Re 2014-1 cat bond upsized last week, from the $300m it launched at to $500m. At the same time the price guidance narrowed for all tranches, pointing to pricing moving towards or below the guidance mid-point. Artemis understands that at final pricing on Friday, all the tranches were priced and two priced below the middle of guidance while the third priced at the mid-point.
The Class 1-B notes launched with price guidance of 6.5% to 7.5%, which was narrowed to 6.75% to 7% and these notes have now settled with pricing of 6.75%. The Class 3-A tranche, which sit higher up and have a drop-down feature, launched with guidance of 4.75% to 5.5%, which was narrowed to 5% to 5.12% and has been set at pricing at 5%. Finally, the Class 3-B notes which was the tranche that upsized to $300m, launched with guidance of 6.5% to 7.5%, which was tightened to 6.75% to 7%, and have been priced at 7%.
The Class 1-B tranche of notes has an expected loss of 2.2%, so with pricing set at 6.75% the multiple for these notes is 3.1 times. The Class 3-A tranche of notes has an expected loss of 1.14%, which with pricing set at 5% sees them with a multiple of 4.4 times the expected loss. Finally, the Class 3-B tranche has an expected loss of 2.2%, so with a coupon of 7% is a multiple of 3.2 times.
All of those multiples are higher than most of the other catastrophe bonds to come to market in recent months, the majority of which have had multiples of below 3, with some getting nearer to 2 times their expected losses. That suggests that investors have been paid better for some of the more unusual risks that are covered by AIG’s Tradewynd cat bond.
AIG’s Tradewynd Re Ltd. (Series 2014-1) catastrophe bond will be completed before the end of the month, we will update you once it has been issued. You can read all about this and every other cat bond in the Artemis Deal Directory.