6.12 Debt and subordinated capital
6.12 Debt and subordinated capital
In order to safeguard the sustained financial strength of the Hannover Re Group, a Group company has issued subordinated debt by way of a number of callable bonds which are guaranteed by Hannover Rück SE.
On 20 November 2012 Hannover Rück SE placed a EUR 500.0 million subordinated bond in the European capital market via its subsidiary Hannover Finance (Luxembourg) S.A. The bond has a maturity of approximately 30 years, with a first scheduled call option on 30 June 2023. It carries a fixed coupon of 5.00% p.a. until this date, after which the interest basis changes to a floating rate of 3-month EURIBOR +430 basis points.
On 14 September 2010 Hannover Rück SE placed a subordinated bond on the European capital market through its subsidiary Hannover Finance (Luxembourg) S.A. This subordinated debt of nominally EUR 500.0 million has a maturity of 30 years with a first scheduled call option after ten years. The bond carries a fixed coupon of 5.75% in the first ten years, after which the interest basis changes to a floating rate of 3-month EURIBOR +423.5 basis points.
On 1 June 2005 Hannover Rück SE issued further subordinated debt in the amount of EUR 500.0 million through its subsidiary Hannover Finance (Luxembourg) S.A. The bond is perpetual and carries a fixed coupon of 5.00% in the first ten years. It may be redeemed on 1 June 2015 at the earliest and at each coupon date thereafter. If the bond is not called at the end of the tenth year, the coupon will step up to a floating-rate yield of quarterly EURIBOR +268 basis points. The interest will be serviced according to the same principles as those practised in the past.
On 26 February 2004 subordinated debt in the amount of EUR 750.0 million was placed through Hannover Finance (Luxembourg) S.A. on the European capital markets. The bond has a final maturity of 20 years and for the first ten years carries a fixed coupon of 5.75%. With regard to the redemption of this bond please see our remarks in Section 8.11 “Events after the balance sheet date”.
Altogether four (previous year: four) subordinated bonds were recognised as at the balance sheet date with an amortised cost of EUR 2,237.8 million (EUR 2,233.0 million).
Debt and subordinated capital | |||||||
in EUR thousand | 2013 | ||||||
---|---|---|---|---|---|---|---|
Subordinated loans | Coupon | Maturity | Currency | Amortised cost | Fair value measurement | Accrued interest | Fair value |
Hannover Finance (Luxembourg) S.A., 2012 | 5.00 | 2043 | EUR | 496,653 | 33,847 | 12,603 | 543,103 |
Hannover Finance (Luxembourg) S.A., 2010 | 5.75 | 2040 | EUR | 498,247 | 58,663 | 8,507 | 565,417 |
Hannover Finance (Luxembourg) S.A., 2005 | 5.00 | n/a | EUR | 493,337 | 19,108 | 14,589 | 527,034 |
Hannover Finance (Luxembourg) S.A., 2004 | 5.75 | 2024 | EUR | 749,593 | 3,407 | 36,390 | 789,390 |
2,237,830 | 115,025 | 72,089 | 2,424,944 | ||||
Debt | 227,115 | 2,479 | 1,085 | 230,679 | |||
Other long-term liabilities | 15 | – | – | 15 | |||
Total | 2,464,960 | 117,504 | 73,174 | 2,655,638 |
Debt and subordinated capital | |||||||
in EUR thousand | 2012 | ||||||
---|---|---|---|---|---|---|---|
Subordinated loans | Coupon | Maturity | Currency | Amortised cost |
Fair value measurement |
Accrued interest |
Fair value |
Hannover Finance (Luxembourg) S.A., 2012 |
5.00 | 2043 | EUR | 496,643 | 49,572 | 2,808 | 549,023 |
Hannover Finance (Luxembourg) S.A., 2010 |
5.75 | 2040 | EUR | 498,033 | 77,287 | 8,507 | 583,827 |
Hannover Finance (Luxembourg) S.A., 2005 |
5.00 | n/a | EUR | 489,550 | 22,016 | 14,589 | 526,155 |
Hannover Finance (Luxembourg) S.A., 2004 |
5.75 | 2024 | EUR | 748,791 | 32,146 | 36,409 | 817,346 |
2,233,017 | 181,021 | 62,313 | 2,476,351 | ||||
Debt | 167,758 | – | 690 | 168,448 | |||
Other long-term liabilities | 16 | – | – | 16 | |||
Total | 2,400,791 | 181,021 | 63,003 | 2,644,815 |
The aggregated fair value of the extended subordinated loans is based on quoted, active market prices. If such price information was not available, fair value was determined on the basis of the recognised effective interest rate method or estimated using other financial assets with similar rating, duration and return characteristics. Under the effective interest rate method the current market interest rate levels in the relevant fixed-interest-rate periods are always taken as a basis.
Maturities of financial liabilities | |||||||
in EUR thousand | 2013 | ||||||
---|---|---|---|---|---|---|---|
Less than three months | Three months to one year | One to five years | Five to ten years | Ten to twenty years | More than twenty years | No maturity | |
Other financial liabilities1 | 82,362 | 237,012 | 1,443 | 798 | – | – | – |
Debt | 13 | – | 195,574 | 31,528 | – | – | – |
Subordinated loans | – | – | – | – | 749,593 | 994,900 | 493,337 |
Other long-term liabilities | – | – | 15 | – | – | – | – |
Total | 82,375 | 237,012 | 197,032 | 32,326 | 749,593 | 994,900 | 493,337 |
1 Excluding minority interests in partnerships; the maturities of derivative financial instruments and sundry non-technical provisions are broken down separately |
Maturities of financial liabilities | |||||||
in EUR thousand | 2012 | ||||||
Less than three months | Three months to one year | One to five years | Five to ten years | Ten to twenty years | More than twenty years | No maturity | |
Other financial liabilities1 | 155,168 | 92,247 | 2 | 4 | – | – | – |
Debt | – | – | 134,886 | 32,872 | – | – | – |
Subordinated loans | – | – | – | – | 748,791 | 994,677 | 489,549 |
Other long-term liabilities | – | – | 16 | – | – | – | – |
Total | 155,168 | 92,247 | 134,904 | 32,876 | 748,791 | 994,677 | 489,549 |
1 Excluding minority interests in partnerships; the maturities of derivative financial instruments and sundry non-technical provisions are broken down separately |
Net gains and losses from debt and subordinated capital | ||||||
in EUR thousand | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
---|---|---|---|---|---|---|
Ordinary income/expenses | Amortisation | Net result | ||||
Debt | 613 | |||||
Subordinated loans | ||||||
Total |
The ordinary expenses principally include interest expenses of nominally EUR 121.9 million (EUR 99.8 million) resulting from the subordinated debt placed through Hannover Finance (Luxembourg) S.A.
Other financial facilities
Letter of credit (LoC) facilities exist with a number of financial institutions. With respect to the syndicated facility taken out in 2011 with a volume equivalent to EUR 726.4 million (758.6 million), the second renewal option was utilised and the maturity extended from the beginning of 2018 to the beginning of 2019. In addition, several bilateral loan agreements were taken out and existing agreements were expanded.
Unsecured letter of credit facilities with various terms (maturing at the latest in 2022) and a total volume equivalent to EUR 2,488.0 million (EUR 2,621.2 million) exist on a bilateral basis with financial institutions; in addition, a long-term unsecured line of credit intended specifically for US life business taken out in December 2009 has a total volume equivalent to EUR 363.2 million (EUR 379.3 million).
For further information on the letters of credit provided please see our explanatory remarks in Section 8.7 “Contingent liabilities and commitments”.
A number of LOC facilities include standard market clauses that allow the banks rights of cancellation in the event of material changes in our shareholding structure or trigger a requirement on the part of Hannover Re to furnish collateral upon materialisation of major events, for example if our rating is significantly downgraded. Please see our explanatory remarks in the “Financial position and net assets” section of the management report on the information pursuant to § 315 Para. 4 German Commercial Code (HGB).