11 Debt and contingent capital instruments

The Group enters into long- and short-term debt arrangements to obtain funds for general corporate use and specific transaction financing. The Group defines short-term debt as debt having a maturity at the balance sheet date of not greater than one year and long-term debt as having a maturity of greater than one year. For subordinated debt positions, maturity is defined as the first optional redemption date (notwithstanding that optional redemption could be subject to regulatory consent). Interest expense is classified accordingly.

The Groupʼs debt as of 31 December was as follows:

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USD millions

2014

2015

Senior financial debt

654

 

Senior operational debt

1 047

765

Subordinated financial debt

 

1 069

Short-term debt – financial and operational debt

1 701

1 834

 

 

 

Senior financial debt

3 513

3 688

Senior operational debt

713

467

Subordinated financial debt

5 486

4 103

Subordinated operational debt

2 903

2 720

Long-term debt – financial and operational debt

12 615

10 978

 

 

 

Total carrying value

14 316

12 812

Total fair value

16 225

14 355

The Group uses debt for general corporate purposes and to fund discrete pools of operational leverage and financial intermediation assets. Operational leverage and financial intermediation are subject to asset and liability matching, resulting in little to no risk that the assets will be insufficient to service and settle the liabilities. Debt used for operational leverage and financial intermediation is treated as operational debt and excluded by the rating agencies from financial leverage calculations. Certain debt positions are limited- or non-recourse, meaning the debtorsʼ claims are limited to assets underlying the financing. As of 31 December 2014 and 2015, debt related to operational leverage and financial intermediation amounted to USD 4.7 billion (thereof USD 3.4 billion limited- or non-recourse) and USD 4.0 billion (thereof USD 3.0 billion limited- or non-recourse), respectively.

Maturity of long-term debt

As of 31 December, long-term debt as reported above had the following maturities:

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USD millions

2014

2015

1

Balance was reclassified to short-term debt.

Due in 2016

1 984

01

Due in 2017

1 215

1 143

Due in 2018

854

0

Due in 2019

1 922

2 663

Due in 2020

212

204

Due after 2020

6 428

6 968

Total carrying value

12 615

10 978

Senior long-term debt

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Maturity

Instrument

Issued in

Currency

Nominal in millions

Interest rate

Book value in USD millions

1

Assumed in the acquisition of GE Insurance Solutions.

2017

EMTN

2011

CHF

600

2.13%

599

2019

Syndicated revolving credit facility

2014

GBP

550

variable

808

2019

Senior notes1

1999

USD

234

6.45%

263

2022

Senior notes

2012

USD

250

2.88%

248

2024

EMTN

2014

CHF

250

1.00%

248

2026

Senior notes1

1996

USD

397

7.00%

508

2027

EMTN

2015

CHF

250

0.75%

251

2030

Senior notes1

2000

USD

193

7.75%

274

2042

Senior notes

2012

USD

500

4.25%

489

Various

Payment undertaking agreements

various

USD

383

various

467

Total senior long-term debt as of 31 December 2015

4 155

Total senior long-term debt as of 31 December 2014

4 226

Subordinated long-term debt

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Maturity

Instrument

Issued in

Currency

Nominal in millions

Interest rate

First call in

Book value in USD millions

2024

Subordinated contingent write-off loan note

2013

USD

750

6.38%

2019

813

2042

Subordinated fixed-to-floating rate loan note

2012

EUR

500

6.63%

2022

537

2044

Subordinated fixed rate resettable callable loan note

2014

USD

500

4.50%

2024

496

2045

Subordinated contingent write-off securities

2013

CHF

175

7.50%

2020

204

2057

Subordinated private placement (amortising, limited recourse)

2007

GBP

1 845

4.87%

 

2 720

 

Subordinated perpetual loan note

2007

GBP

500

6.30%

2019

736

 

Subordinated perpetual loan note

2007

AUD

300

7.64%

2017

218

 

Subordinated perpetual loan note

2007

AUD

450

6 months BBSW + 1.17%

2017

327

 

Perpetual subordinated fixed-to-floating rate callable loan note

2015

EUR

750

2.60%

2025

772

Total subordinated long-term debt as of 31 December 2015

6 823

Total subordinated long-term debt as of 31 December 2014

8 389

Interest expense on long-term debt and contingent capital instruments

Interest expense on long-term debt for the years ended 31 December was as follows:

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USD millions

2014

2015

Senior financial debt

120

118

Senior operational debt

16

13

Subordinated financial debt

300

236

Subordinated operational debt

231

137

Total

667

504

In addition to the above, interest expense on contingent capital instruments classified as equity was USD 69 million and USD 68 million for the years ended 31 December 2014 and 2015, respectively.

Long-term debt issued in 2015

In January 2015, Swiss Reinsurance Company Ltd issued senior notes due 2027. The notes have a face value of CHF 250 million, with a fixed coupon of 0.75% per annum.

In April 2015, Swiss Reinsurance Company Ltd issued EUR 750 million face amount of perpetual subordinated fixed-to-floating rate callable loan notes with a first optional redemption date on 1 September 2025. The notes bear interest through the first optional redemption date at 2.60% per annum. The notes were issued in connection with a concurrent exchange of part of the EUR 1 billion 5.252% Perpetual Subordinated Step-Up Loan Notes issued by Swiss Reinsurance Company Ltd.

Subordinated debt facility established in 2015

In November 2015, Swiss Re Ltd established a subordinated debt facility with a termination date of 15 August 2025. The facility allows Swiss Re Ltd to issue at any time subordinated fixed-to-floating rate callable notes with a face value of up to USD 700 million, having a first optional redemption date of 15 August 2025 and a maturity date of 15 August 2050. Swiss Re Ltd pays a fee of 3.53% per annum on the available commitment under the facility. Notes issued under the facility have a fixed coupon of 5.75% per annum until the first optional redemption date.

In these financial statements, the facility fee is classified as interest expense. Notes, when issued under the facility, will be classified as subordinated debt. As of 31 December 2015, no notes have been issued under the facility.

Contingent capital instruments

In February 2012, Swiss Reinsurance Company Ltd issued a perpetual subordinated instrument with stock settlement. The instrument has a face value of CHF 320 million, with a fixed coupon of 7.25% per annum until the first optional redemption date (1 September 2017).

In March 2012, Swiss Reinsurance Company Ltd issued a perpetual subordinated capital instrument with stock settlement. The instrument has a face value of USD 750 million, with a fixed coupon of 8.25% per annum until the first optional redemption date (1 September 2018).

Both instruments may be converted, at the option of the issuer, into Swiss ReSwiss Re Ltd shares at any time through at market conversion using the retrospective five-day volume weighted average share price with a 3% discount or within six months following a solvency event at a pre-set floor price (CHF 26 for the instrument with face value of CHF 320 million and USD 32 for the instrument with face value of USD 750 million, respectively). These instruments are referred to in these financial statements as “contingent capital instruments”.