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Annual Report 2016

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

2015

2016

Senior financial debt

 

590

Senior operational debt

765

431

Subordinated financial debt

1 069

543

Short-term debt – financial and operational debt

1 834

1 564

 

 

 

Senior financial debt

3 688

3 734

Senior operational debt

467

423

Subordinated financial debt

4 103

3 381

Subordinated operational debt

2 720

2 249

Long-term debt – financial and operational debt

10 978

9 787

 

 

 

Total carrying value

12 812

11 351

Total fair value

14 355

13 139

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:

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USD millions

2015

2016

1

Balance was reclassified to short-term debt.

Due in 2017

1 143

01

Due in 2018

0

0

Due in 2019

2 663

2 367

Due in 2020

204

195

Due in 2021

210

209

Due after 2021

6 758

7 016

Total carrying value

10 978

9 787

Senior long-term debt

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Instrument

Issued in

Currency

Nominal in millions

Interest rate

Book value in USD millions

1

Assumed in the acquisition of GE Insurance Solutions.

2019

Syndicated senior bank loans

2014

GBP

550

variable

680

2019

Senior notes1

1999

USD

234

6.45%

254

2019

Bilateral senior bank loans

2016

NGN

6 360

various

21

2022

Senior notes

2012

USD

250

2.88%

249

2023

Senior notes

2016

EUR

750

1.38%

784

2024

EMTN

2014

CHF

250

1.00%

245

2026

Senior notes1

1996

USD

397

7.00%

497

2027

EMTN

2015

CHF

250

0.75%

247

2030

Senior notes1

2000

USD

193

7.75%

268

2042

Senior notes

2012

USD

500

4.25%

489

Various

Payment undertaking agreements

various

USD

353

various

423

Total senior long-term debt as of 31 December 2016

4 157

Total senior long-term debt as of 31 December 2015

4 155

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

795

2042

Subordinated fixed-to-floating rate loan note

2012

EUR

500

6.63%

2022

522

2044

Subordinated fixed rate resettable callable loan note

2014

USD

500

4.50%

2024

497

2045

Subordinated contingent write-off securities

2013

CHF

175

7.50%

2020

195

2057

Subordinated private placement
(amortising, limited recourse)

2007

GBP

1 819

4.92%

 

2 250

 

Subordinated perpetual loan note

2007

GBP

500

6.30%

2019

617

 

Perpetual subordinated fixed-to-floating rate callable loan note

2015

EUR

750

2.60%

2025

754

Total subordinated long-term debt as of 31 December 2016

5 630

Total subordinated long-term debt as of 31 December 2015

6 823

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

2015

2016

Senior financial debt

118

121

Senior operational debt

13

10

Subordinated financial debt

236

179

Subordinated operational debt

137

122

Total

504

432

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”.