6.12 Debt and subordinated capital
On 15 September 2014 Hannover Re placed another EUR 500.0 million subordinated bond on the European capital market through Hannover Rück SE, Hannover. The issue has a perpetual maturity with a first scheduled call option on 26 June 2025 and may be redeemed at each coupon date thereafter. It carries a fixed coupon of 3.375% p.a. until 26 June 2025, after which the interest rate basis changes to 3-month EURIBOR +325 basis points.
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 and may be redeemed at each coupon date thereafter. It carries a fixed coupon of 5.00% p. a. until this date, after which the interest rate 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 and may be redeemed at each coupon date thereafter. The bond carries a fixed coupon of 5.75% in the first ten years, after which the interest rate 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.
The subordinated debt issued in 2004 by Hannover Finance (Luxembourg) S.A. with a volume of EUR 750.0 million was cancelled by the issuer in the full nominal amount at the first scheduled call date and repaid on 26 February 2014.
Altogether four (four) subordinated bonds were recognised as at the balance sheet date with an amortised cost of EUR 1,986.5 million (EUR 2,237.8 million).
| Debt and subordinated capital | |||||||
| in EUR thousand | 2014 | ||||||
|---|---|---|---|---|---|---|---|
| Subordinated loans | Coupon | Maturity | Currency | Amortised cost | Fair value measurement | Accrued interest | Fair value |
| Hannover Rück SE, 2014 | 3.375 | n/a | EUR | 493,464 | 8,221 | 4,947 | 506,632 |
| Hannover Finance (Luxembourg) S.A., 2012 | 5.00 | 2043 | EUR | 496,922 | 89,933 | 12,603 | 599,458 |
| Hannover Finance (Luxembourg) S.A., 2010 | 5.75 | 2040 | EUR | 498,447 | 89,653 | 8,507 | 596,607 |
| Hannover Finance (Luxembourg) S.A., 2005 | 5.00 | n/a | EUR | 497,658 | 8,802 | 14,589 | 521,049 |
| 1,986,491 | 196,609 | 40,646 | 2,223,746 | ||||
| Debt | 283,853 | 2,839 | 1,136 | 287,828 | |||
| Other long-term liabilities | 3 | – | – | 3 | |||
| Total | 2,270,347 | 199,448 | 41,782 | 2,511,577 | |||
| 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 | |||
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 | 2014 | ||||||
|---|---|---|---|---|---|---|---|
| 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 | 33,993 | 236,189 | 247 | – | – | 176 | – |
| Debt | 15,259 | 39 | 257,789 | 10,766 | – | – | – |
| Subordinated loans | – | – | – | – | – | 995,369 | 991,122 |
| Other long-term liabilities | – | 3 | – | – | – | – | – |
| Total | 49,252 | 236,231 | 258,036 | 10,766 | – | 995,545 | 991,122 |
| 1 Excluding minority interests in partnerships, sundry non-technical provisions and derivative financial instruments; the maturities of the latter two items are broken down separately | |||||||
| 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, sundry non-technical provisions and derivative financial instruments; the maturities of the latter two items are broken down separately | |||||||
| Net gains and losses from dept an subordinated capital | ||||||
| in EUR thousand | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
|---|---|---|---|---|---|---|
| Ordinary income/expenses | Amortisation | Net result | ||||
| Debt | (11,718) | (9,281) | 593 | 613 | (11,125) | (8,668) |
| Subordinated loans | (90,439 | (121,857) | (5,288) | (4,813) | (95,720) | (126,670) |
| Total | (102,150) | (131,138) | (4,695) | (4,200) | (106,845) | (135,338) |
The ordinary expenses principally include interest expenses of nominally EUR 90.4 million (EUR 121.9 million) resulting from the issued subordinated debt.
Other financial facilities
Letter of credit (LoC) facilities exist with a number of financial institutions. A syndicated letter of credit facility taken out in 2011 with a volume equivalent to EUR 822.7 million (EUR 726.4 million) has a maturity until the beginning of 2019.
Unsecured letter of credit facilities with various terms (maturing at the latest in 2022) and a total volume equivalent to EUR 2,559.3 million (EUR 2,488.0 million) exist on a bilateral basis with financial institutions; in addition, a long-term unsecured line of credit intended specifically for US life reinsurance business taken out in December 2009 has a total volume equivalent to EUR 226.2 million (EUR 363.2 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 also our explanatory remarks in the “Financial position” section of the management report, on the information pursuant to § 315 Para. 4 German Commercial Code (HGB).
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