National Friendly has secured €15m in Tier 2 capital financing – equivalent to around £13m at current exchange rates.
The mutual said the funds, with a 10-year maturity and sourced from a syndicate of European insurers and pension schemes, will power its ambitious growth agenda – accelerating product innovation, expanding distribution, and reinforcing its mission to deliver protection cover to more people across the UK.
National Friendly told Health & Protection the move was designed to support its mutual status, rather than challenge it.
“The sole purpose of raising the capital is to enable National Friendly to accelerate the delivery of our strategic growth agenda which involves further investment in product innovation driven from fundamental insurance needs of the communities we serve and our distribution capability,” it said.
“National Friendly is very proud of its friendly society roots and everything we are doing is to further the aims of the society’s original founders but in our modern world.
“The consumer need and opportunity in today’s social economic environment is considerable,” it added.
Earlier this week, the mutual launched an entry-level healthcare product which has no medical questions or underwriting.
Capital rules and interest rate
National Friendly told Health & Protection that the tier 2 capital rules meant the funding line was treated as sub-ordinated debt capital to all other creditors of the society, in effect as unsecured lending.
However, from a capital credit perspective it behaves like equity rather than debt and increases the society’s regulatory solvency capital and strength, it added.
The floating rate note bond has a fixed margin of 7.6% plus Euribor three months. With a Euribor three-month rate today of 2.016% that gives a total interest cost today of 9.616%.
The mutual said this was a “very competitive rate” when comparing building society tier 2 debt financing on the UK stock market has been at rates of 12% – 14%.
“The rate on our capital is exceptionally competitive, but also reflects the type of private European institutions funding the capital which includes European mutual insurers,” the society added.
‘Transformational moment’
Graham Singleton, CEO of National Friendly, said: “This is a transformational moment for National Friendly. Securing €15m in Tier 2 capital gives us the financial flexibility to invest boldly in our strategic priorities – building innovative, affordable insurance solutions and extending our reach to underserved communities.
“The fundamental human need to protect loved ones during times of sickness, accident, or death remains as strong today as it was in 1868, and we are proud to meet that need with relevance and compassion.”
Mark Searles, chairman of National Friendly, added: “The board are delighted that the financiers have demonstrated their active support for the society’s evolving strategy with strong growth at its centre.
“The society’s forward-looking strategy centres on providing accessible, affordable, and inclusive insurance, focusing on the events most likely to affect working individuals and families and the funding will be utilised to accelerate this objective.”