PFS Financing Corp. upsized and priced its $500 million insurance premium finance asset backed notes. The asset class brings some diversity to a securitization makret that has been largely dominated by CMBS and auto loan deals.
Moody's Investors Service and Standard & Poor’sassigned Aaa’/ 'AAA' ratings respectively to the series 2014-A notes that were priced at 60 basis points over one month Libor, according to a market report publiished by structured finance analytics firm Interactive Data. The class B notes, rated A’ by S&P, priced at 95 basis points over one month Libor.
IPFS has been a regular issuer in the securitization market since the 1990s. According to the presale report the latest deal is one of several series of notes outstanding under the issuer’s master trust structure.
The deal is backed by short-duration loans made to commercial insurance buyers to purchase property and casualty insurance policies with a typical duration of one-year.
Property and casualty insurance policies for businesses typically require a full, one-year premium to be paid at or near the beginning of the policy period. The premium finance loan enables the insurance policy holder to spread payments over the course of the policy instead of paying the entire premium up front.
The loans are secured by the right to receive any unearned premium balance that the insurance carrier owes if the borrower fails to pay the amounts due on the premium finance loans and the underlying policies are canceled.
IPFS (formerly known as Premium Financing Specialists, Inc.) was formed in 1977 and offers premium financing services through a network of approximately 16,250 insurance agencies. As of Oct. 31, 2013, the company had approximately $2.3 billion outstanding receivables, according to the presale report.