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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:

As of 31 December 2015 and 2016, operational debt, i.e. debt related to operational leverage, amounted to USD 4.0 billion (thereof USD 3.0 billion limited- or non-recourse) and USD 3.1 billion (thereof USD 2.2 billion limited- or non-recourse), respectively. Operational leverage is subject to asset/liability matching and is excluded from rating agency financial leverage calculations.

Maturity of long-term debt

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

Senior long-term debt

Subordinated long-term debt

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:

In addition to the above, interest expense on contingent capital instruments classified as equity was USD 68 million and USD 68 million for the years ended 31 December 2015 and 2016, respectively.

Long-term debt issued in 2016

In May 2016, Swiss Re Admin Re Ltd issued senior notes due 2023. The notes have a face value of EUR 750 million, with a fixed coupon of 1.375% per annum.

Subordinated debt facility established in 2016

In April 2016, Swiss Re Ltd established a subordinated debt facility with a termination date of 15 February 2031. The facility allows Swiss Re Ltd to issue at any time subordinated fixed rate callable notes with a face value of up to USD 400 million, having a first optional redemption date of 15 February 2031 and a scheduled maturity date of 15 February 2056. Swiss Re Ltd pays a fee of 3.92% per annum on the available commitment under the facility. Notes issued under the facility have a fixed coupon of 6.05% per annum.

In June 2016, Swiss Re Ltd established a subordinated debt facility with a termination date of 15 August 2027. 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 800 million, having a first optional redemption date of 15 August 2027 and a scheduled maturity date of 15 August 2052. Swiss Re Ltd pays a fee of 3.67% per annum on the available commitment under the facility. Notes issued under the facility have a fixed coupon of 5.625% per annum until the first optional redemption date and a floating rate coupon thereafter.

In these financial statements, the facility fees are classified as interest expense. Notes, when issued under these facilities, will be classified as subordinated debt. As of 31 December 2016, no notes have been issued under either 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 Re Ltd shares at any time through an “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”.