IAG is considering raising up to $NZ250 million ($272 million) by issuing new unsecured subordinated convertible notes to institutional investors and New Zealand retail investors.

The insurer says it has the discretion to accept up to $NZ100 million ($108.6 million) in oversubscription, in the event of strong investor interest for the debt securities.

IAG expects to open the subscription offer this month, and the notes are expected to have a final maturity date in June 2043.

It has not provided an explanation for the capital-raising. However, an investment bank’s financial analyst, who did not want to be named, told insuranceNEWS.com.au it is normal for large companies like IAG to tap the debt markets as part of its capital management strategy.

IAG’s financial report for the half-year to December 31 flagged plans to “refinance a significant portion” of its debt and hybrid capital via the issue of new instruments this year.

The insurer wants a capital mix comprising 60-70% ordinary equity and 30-40% debt and hybrids.

Its subordinated debt, which falls under the interest bearing liabilities category, stood at $858 million at December 31.

ANZ Bank and Forsyth Barr have been appointed as joint lead managers for the offer.