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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).

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Debt and subordinated capital
in EUR thousand2013
Subordinated loansCouponMaturityCurrencyAmortised
cost
Fair value
measurement
Accrued
interest
Fair
value
Hannover Finance
(Luxembourg) S.A., 2012
5.002043EUR496,65333,84712,603543,103
Hannover Finance
(Luxembourg) S.A., 2010
5.752040EUR498,24758,6638,507565,417
Hannover Finance
(Luxembourg) S.A., 2005
5.00n/aEUR493,33719,10814,589527,034
Hannover Finance
(Luxembourg) S.A., 2004
5.752024EUR749,5933,40736,390789,390
2,237,830115,02572,0892,424,944
 
Debt227,1152,4791,085230,679
Other long-term liabilities1515
Total2,464,960117,50473,1742,655,638
Debt and subordinated capital
in EUR thousand2013
Subordinated loansCouponMaturityCurrencyAmortised
cost
Fair value
measurement
Accrued
interest
Fair
value
Hannover Finance
(Luxembourg) S.A., 2012
5.002043EUR496,65333,84712,603543,103
Hannover Finance
(Luxembourg) S.A., 2010
5.752040EUR498,24758,6638,507565,417
Hannover Finance
(Luxembourg) S.A., 2005
5.00n/aEUR493,33719,10814,589527,034
Hannover Finance
(Luxembourg) S.A., 2004
5.752024EUR749,5933,40736,390789,390
2,237,830115,02572,0892,424,944
 
Debt227,1152,4791,085230,679
Other long-term liabilities1515
Total2,464,960117,50473,1742,655,638

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Debt and subordinated capital
in EUR thousand2012
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
Debt and subordinated capital
in EUR thousand2012
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.

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Maturities of financial liabilities
in EUR thousand2013
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 liabilities182,362237,0121,443798
Debt13195,57431,528
Subordinated loans749,593994,900493,337
Other long-term liabilities15
Total82,375237,012197,03232,326749,593994,900493,337
Maturities of financial liabilities
in EUR thousand2013
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 liabilities182,362237,0121,443798
Debt13195,57431,528
Subordinated loans749,593994,900493,337
Other long-term liabilities15
Total82,375237,012197,03232,326749,593994,900493,337

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Maturities of financial liabilities
in EUR thousand2012
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 liabilities1155,16892,24724
Debt134,88632,872
Subordinated loans748,791994,677489,549
Other long-term liabilities16
Total155,16892,247134,90432,876748,791994,677489,549
Maturities of financial liabilities
in EUR thousand2012
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 liabilities1155,16892,24724
Debt134,88632,872
Subordinated loans748,791994,677489,549
Other long-term liabilities16
Total155,16892,247134,90432,876748,791994,677489,549

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Net gains and losses from debt and subordinated capital
in EUR thousand201320122013201220132012
Ordinary income/expensesAmortisationNet result
Debt(9,281)(10,564)613(847)(8,668)(11,411)
Subordinated loans(121,857)(99,765)(4,813)(4,746)(126,670)(104,511)
Total(131,138)(110,329)(4,200)(5,593)(135,338)(115,922)
Net gains and losses from debt and subordinated capital
in EUR thousand201320122013201220132012
Ordinary income/expensesAmortisationNet result
Debt(9,281)(10,564)613(847)(8,668)(11,411)
Subordinated loans(121,857)(99,765)(4,813)(4,746)(126,670)(104,511)
Total(131,138)(110,329)(4,200)(5,593)(135,338)(115,922)

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).

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