Development of sundry non-technical provisions
balance at 31.12. 2009 currency trans- lation at 1 January balance at 1 January of the year under review
Reclassifica- tions pursuant
to ifrs 5 provisions for
Audits and costs of publishing the annual financial
statements 6,189 183 6,372 (707)
consultancy fees 1,847 157 2,004 (206)
suppliers' invoices 7,909 611 8,520 (444)
partial retirement arrangements and early retirement
obligations 8,232 266 8,498 (3,947)
holiday entitlements and overtime 3,880 132 4,012 (121)
anniversary bonuses 2,131 – 2,131 –
management bonuses 19,607 964 20,571 (2,803)
measurement of disposal groups – – – –
other 19,287 839 20,126 (672)
161 Hannover Re Group annual report 2010
Notes
5.11 oTher liabiliTies Notes
in eUr thousand other reclassifications changes in consolidated group
additions Utilisation release currency
translation at 31 December Balance at 31.12.2010 – – 5,306 5,104 – (27) 5,840 918 – 1,407 1,097 15 145 3,156 (190) – 6,731 6,152 307 119 8,277 – – 3,983 3,043 – (8) 5,483 – – 5,184 3,444 7 186 5,810 – – 2 53 – – 2,080 – – 17,600 14,894 4,095 (6) 16,373 – – 54,918 – – 137 55,055 (728) (17) 15,786 4,267 377 (99) 29,752 – (17) 110,917 38,054 4,801 447 131,826
162 Notes 5.12 DebT anD sUborDinaTeD capiTal Hannover Re Group annual report 2010
5.12 Debt and subordinated capital
In order to safeguard the sustained financial strength of the Hannover Re Group, Hannover Re has issued subordinated debt by way of a number of guaranteed, callable bonds. On 14 September 2010 Hannover Re placed a new subordin- ated bond on the European capital market through its sub- sidiary Hannover Finance (Luxembourg) S.A. This subordin- ated debt with a nominal value of 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% p.a. in the first ten years, after which the interest basis changes to a float- ing rate of three-month EURIBOR +423.5 basis points. On 1 June 2005 Hannover Re 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 by Hannover Re 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. As part of the trans- action, holders of the subordinated debt of EUR 350.0 million placed by Hannover Re in 2001 – which has a term of 30 years and may be called in prior to maturity by the issuer on 14 March 2011 – were offered an opportunity to exchange
their existing issue for holdings in the new bond. Participation in the exchange amounted to a nominal value of EUR 211.9 million, corres ponding to EUR 240.5 million of the new bond issue. The cash component of the new bond in the amount of nominally EUR 259.5 million was placed predominantly with institutional investors in Europe. The remaining volume of the bond issued in 2001 after the exchange was unchanged at EUR 138.1 million and carries a fixed coupon of 6.25% until March 2011. If Hannover Re does not exercise its right of early cancellation on this date, the coupon will step up to a floating-rate yield of quarterly EURIBOR +205 basis points. On 26 February 2004 subordinated debt in the amount of EUR 750.0 million was placed through Hannover Finance (Luxem- bourg) 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% (calculated as a spread of 163 basis points over the 10-year mid-swap rate at the time of issue). It may be redeemed by Hannover Re on 26 February 2014 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 +263 basis points. Altogether four subordinated bonds were recognised as at the balance sheet date with a cost or amortised cost of EUR 1,869.1 million (EUR 1,365.1 million).
163 Hannover Re Group annual report 2010
Notes
5.12 DebT anD sUborDinaTeD capiTal Notes
Debt and subordinated capital in eUr thousand 2010
subordinated loans cou-
pon turityma- rencycur- amortised cost fair value measure- ment
accrued interest and rent
fair value
hannover finance (luxembourg) s.a.,
2010 5.75 2040 eUr 500,000 (34,750) 8,507 473,757
hannover finance (luxembourg) s.a.,
2005 5.00 n/a eUr 484,132 (44,527) 14,589 454,194
hannover finance (luxembourg) s.a.,
2004 5.75 2024 eUr 746,912 9,276 36,390 792,578
hannover finance (luxembourg) s.a.,
2001 6.25 2031 eUr 138,063 (1,549) 6,908 143,422
1,869,107 (71,550) 66,394 1,863,951
Debt 187,624 – 841 188,465
other long-term liabilities 66 – – 66
total 2,056,797 (71,550) 67,235 2,052,482
Debt and subordinated capital in eUr thousand 2009
subordinated loans cou-
pon turityma- rencycur- amortised cost fair value measure- ment
accrued interest and rent
fair value
hannover finance (luxembourg) s.a.,
2005 5.00 n/a eUr 481,091 (71,794) 14,589 423,886
hannover finance (luxembourg) s.a.,
2004 5.75 2024 eUr 746,091 (27,599) 36,409 754,901
hannover finance (luxembourg) s.a.,
2001 6.25 2031 eUr 137,868 (7,775) 6,907 137,000
1,365,050 (107,168) 57,905 1,315,787
Debt 116,200 – 59 116,259
other long-term liabilities 86 – – 86
total 1,481,336 (107,168) 57,964 1,432,132
The aggregated fair value of the extended subordinated loans is based on quoted, active market prices. If such price infor- mation was not available, fair value was determined on the basis of the recognised effective interest rate method or esti- mated 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.
The further rise of EUR 71.4 million in the debt to EUR 187.6 million was driven by increased borrowing requirements as a consequence of the extended investment activities of Han- nover Re Real Estate Holdings, Inc. The largest debt in an amount equivalent to nominally EUR 68.4 million matures on 26 March 2015 and was accessed by the company in two tranches as at 1 April 2010 and 2 November 2010.
164 Notes 5.12 DebT anD sUborDinaTeD capiTal Hannover Re Group annual report 2010
The ordinary expenses principally include interest expenses of EUR 85.3 million (EUR 76.7 million) resulting from the
subordinated debt placed through Hannover Finance (Lux- embourg) S.A.
Net gains and losses from debt and subordinated capital in eUr thousand
2010 2009 2010 2009 2010 2009
ordinary income/expenses amortisation net result
Debt (9,218) (2,807) (1,414) – (10,632) (2,807)
subordinated loans (85,266) (76,650) (4,057) (2,476) (89,323) (79,126)
total (94,484) (79,457) (5,471) (2,476) (99,955) (81,933)
Facilities exist with various financial institutions for letters of credit, including two syndicated guarantee facilities from 2005 and 2006.
Following the contractual maturity of the first 50% of the line from 2005 in January 2010, it amounted to an equivalent of EUR 754.5 million (EUR 1,395.1 million) as at the balance sheet date. The other 50% of this line matures in January
2012. The line from 2006, the amount of which as at the bal- ance sheet date was equivalent to EUR 1,509.0 million (EUR 1,395.1 million), matures in January 2013.
Unsecured letter of credit facilities with various terms (matur- ing at the latest in 2017) and a total volume equivalent to EUR 1,207.2 million (EUR 802.2 million) exist on a bilateral basis with financial institutions.