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 part also in observance of rating requirements. The total volume of debt and subordinated capital stood at EUR 1,934.4 million (EUR 2,056.8 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. As at the balance sheet date three subordinated bonds had been placed on the European capital market through Hannover Finance (Luxembourg) S.A. The subordinated debt that had also been issued through Hannover Finance (Luxembourg) S.A. in 2001 had a first call option as at 14 March 2011. The outstanding bond volume of EUR 138.1 million was called by the issuer at the specified date and repaid in full.
The table on the following page summarises the carrying amounts of our subordinated bonds.
| Subordinated bonds in EUR million |
Issue date | Coupon in % | 2011 | 2010 |
|---|---|---|---|---|
1 This bond was exchanged in an amount of EUR 211.9 million in 2005
2 The outstanding volume of this debt in an amount of EUR 138.1 million was repaid on 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 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 750 million; 2004/2024 | 26.02.2004 | 5.75 | 748.0 | 746.9 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 500 million; 2005/undated | 01.06.2005 | 5.00 | 485.7 | 484.1 |
| Hannover Finance (Luxembourg) S.A., subordinated debt, EUR 500 million; 2010/2040 | 14.09.2010 | 5.75 | 497.9 | 500.0 |
| Total | 1,731.6 | 1,869.1 | ||
In addition, collateral in the form of letters of credit have been furnished by a number of financial institutions as collateral for our technical liabilities; bilateral agreements exist with various financial institutions. Furthermore, two unsecured syndicated guarantee facilities, one of which had a remaining volume after partial cancellations and was terminated in its entirety at the beginning of January 2012, existed as at the balance sheet date. 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”.
Several Group companies have also taken up long-term debt – principally in the form of mortgage loans – amounting to EUR 202.8 million (EUR 187.6 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, non-controlling interests and treasury shares”.