In addition to the financing effect of the changes in shareholders’ equity described above, debt financing on the capital market is a key component of Hannover Re’s financing. It was essentially composed of subordinated bonds issued to ensure lasting protection of our capital base – in part also in observance of rating requirements. The total volume of debt and subordinated capital stood at EUR 2,270.3 million (EUR 2,465.0 million) as at the balance sheet date.

Our subordinated bonds supplement our equity with the aim of reducing the cost of capital and also help to ensure liquidity at all times. In the year under review we cancelled and repaid at the first scheduled call date the subordinated debt of EUR 750.0 million issued in 2004 by Hannover Finance (Luxembourg) S.A. In addition, we issued new perpetual subordinated debt with a nominal volume of EUR 500.0 million on the European capital market through Hannover Rück SE. As at the balance sheet date altogether four subordinated bonds had been placed on the European capital market through Hannover Rück SE and Hannover Finance (Luxembourg) S.A.

The table on the previous page presents an overview of the amortised cost of our subordinated bonds.

Several Group companies have also taken up long-term debt – principally in the form of mortgage loans – amounting to EUR 283.9 million (EUR 227.1 million).

For further explanatory information please see our remarks in the notes to this report, Section 6.12 “Debt and subordinated capital”, and Section 6.13 “Shareholders’ equity and treasury shares”.

Letters of credit have been furnished by various financial institutions as collateral for our technical liabilities. Both bilateral agreements and an unsecured syndicated guarantee facility existed as at the balance sheet date with a number of financial institutions for this purpose. We report in detail on existing contingent liabilities in the notes, Section 6.12 “Debt and subordinated capital” in our remarks on other financial facilities and Section 8.7 “Contingent liabilities and commitments”.