Financing and Group debt
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 observance of rating requirements. The total volume of debt and subordinated capital stood at EUR 2,056.8 million (EUR 1,481.3 million) as at the balance sheet date.
Our subordinated loans and bonds supplement our equity with the aim of reducing the cost of capital and also help to ensure liquidity at all times. In the 2010 financial year we again placed subordinated debt of nominally EUR 500.0 million on the European capital market through our subsidiary Hannover Finance (Luxembourg) S.A. It has a term of 30 years and carries a fixed coupon of 5.75% p.a. in the first ten years. The bond has a first scheduled call option after ten years, after which the coupon steps up to a floating rate of three-month EURIBOR +4.235%.
The table below summarises the carrying amounts of our subordinated bonds.
| Subordinated bonds in EUR million | Issue date | Coupon in % | 2010 | 2009 |
|---|---|---|---|---|
1 This bond was exchanged in an amount of EUR 211.9 million in 2005 |
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2 Repayment of the outstanding volume of this debt in an amount of EUR 138.1 million is planned for 14 March 2011 |
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| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 350 million; 2001/20311,2 | 14.03.2001 | 6.25 | 138.1 | 137.9 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 750 million; 2004/2024 | 26.02.2004 | 5.75 | 746.9 | 746.1 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 500 million; 2005/undated | 01.06.2005 | 5.00 | 484.1 | 481.1 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 500 million; 2010/2040 | 14.09.2010 | 5.75 | 500.0 | - |
| Total | 1,869.1 | 1,365.1 | ||
In addition, unsecured syndicated guarantee facilities exist with a number of financial institutions as collateral for our technical liabilities as letters of credit. For detailed information on existing contingent liabilities please see the notes, Section 5.12 “Debt and subordinated capital” and 7.7 “Contingent liabilities and commitments”.
Furthermore, several Group companies have taken up long-term debt – principally in the form of mortgage loans – amounting to EUR 187.6 million (EUR 116.2 million).
For further explanatory information please see our remarks in the notes to this report, Section 5.12 “Debt and subordinated capital” and 5.13 “Shareholders’ equity, minority interests and treasury shares”.