Debt and liquidity

Debt and liquidity

DEBT

In accordance with the IAS / IFRS managerial model used by the Generali Group, consolidated liabilities were split into two categories:

  • Liabilities linked to operating debt, defined as all the consolidated financial liabilities related to specific balance sheet items. This category also includes liabilities related to investment contracts issues by insurance companies and liabilities to banks and customers of banks belonging to the Group;
  • Liabilities linked to financial activities, including other consolidated financial liabilities, such as subordinated liabilities, bonds issued and other loans received. This category includes liabilities incurred in connection with a purchase of controlling interests.

Total liabilities were as follows:

(€ million) 31.12.201431.12.2013
Liabilities linked to operating activities 36,541 32,656
Liabilities linked to financing activities 12,253 12,686
  Subordinated debt 8,315 7,539
  Senior bonds 3,477 4,468
  Other non subordinated liabilities linked to financing activities 460 678
Total 48,794 45,342

In comparison to the stock at 31 December 2013, there was a significant reduction of liabilities linked to financial activities. Consistent with the strategy of the Group, the net decrease is the result of an increase in subordinated debt following the refinancing of senior obligation from € 500 million maturing in May 2015 through a subordinated issuance carried out in May 2014 and a reduction of senior debt attributable to the repayment of maturities in 2014 partially using resources for € 1,000 million.

The weighted average cost of financial debt at 31 December 2014 amounted to 5.62%, decreasing from 5.93% at December 31, 2013 and 5.71% at 30 September 2014. The decrease in the cost during the year was due to the activities of refinancing and Liability Management conducted in 2014 at rates below maturing issues. The weighted average cost reflects the annualized cost of financial debt considering the outstanding debt at the reporting date and the related activities currency and interest rate hedging. The average remaining duration moves from 5.27 years at December 2013 to 6.87 years at December 2014.

Interest expenses on total liabilities are detailed below:

(€ million)31.12.201431.12.2013
Interest expenses on liabilities linked to operating activities 518 529
Interest expense on liabilities linked to financing activities 741 747
Total 1,260 1,276

Focus on finacial debt

DETAILS OF SUBORDINATED LIABILITIES AND SENIOR BONDS

(€ million) 31.12.2014  31.12.2013   
 Nominal valueBook valueAccrued interest expensesAverage weighted cost %Nominal valueBook valueAccrued interest expensesAverage weighted cost %
Subordinated liabilities 8,356 8,315 541 6.21% 7,580 7,539 528 6.55%
Senior bons 3,508 3,477 200 4.13% 4,496 4,468 216 4.81%
Total 11,864 11,792     12,076 12,007    

* The weighted average cost reflects annualized cost of financial debt considering the outstanding debt at the reporting date and the related activities of currency and interest rate hedging.

DETAILS OF ISSUES AN REDEMPTIONS OF SUBORDINATED LIABILITIES AND SENOR BONDS

(€ million) 31.12.2014  31.12.2013 
 IssuancesRedemptionsIssuances net of redemptionsIssuancesRedemptionsIssuances net of redemptions
Subordinated liabilities 2,500 1,858 642 0 200 -200
Senior bonds 1,250 2,250 -1,000 0 0 0
Total 3,750 4,108 -358 0 200 -200

Detail of the principal issues

SUBORDINATED LIABILITIES

 CouponOutstanding (*) CurrencyAmortised cost(**) Issue dateCall dateMaturity
Generali Finance B.V.  5.32% 752 EUR  740 16/06/2006 16/06/2016 Perp 
Generali Finance B.V.  6.21% 345 GBP  444 16/06/2006 16/06/2016 Perp 
Assicurazioni Generali  6.27% 350 GBP  448 16/06/2006 16/06/2026 Perp 
Generali Finance B.V.  5.48% 869 EUR  709 08/02/2007 08/02/2017 Perp 
Assicurazioni Generali  6.42% 495 GBP  633 08/02/2007 08/02/2022 Perp 
Assicurazioni Generali  10.13% 750 EUR  747 10/02/2012 10/07/2022 10/07/2042
Assicurazioni Generali  7.75% 1,250 EUR  1,246 12/12/2012 12/12/2022 12/12/2042
Assicurazioni Generali  4.13% 1,000 EUR  987 02/04/2014 na  04/05/2026
Generali Finance B.V.  4.60% 1,500 EUR  1,340 21/11/2014 21/11/2025 Perp 

(*) in currency million.
(**) in € million.

This category also includes unquoted subordinated liabilities issued by Assicurazioni Generali SpA and other subsidiaries. Liabilities issued by Assicurazioni Generali SpA in the form of private placements amounted to a nominal value of € 1,000 million corresponding to an amortized cost of € 997 million. The remaining subordinated liabilities are denominated in securities issued by subsidiaries in Austria for approximately € 25 million euro.

In 2014 the following transactions on subordinated liabilities were performed:

  • On 7 April 2014 Assicurazioni Generali made an early repayment of a bank loan of € 500 million;
  • On 2 May 2014 Assicurazioni Generali issued a subordinated loan of € 1,000 million;
  • On 21 November 2014 Generali Finance BV set up a Liability Management transaction in which three subordinated notes were partially bought back of the proceeds of a new subordinated issuance for a nominal amount of € 1,500 million.

SENIOR BONDS

IssuerCouponOutstanding(*) CurrencyAmortised cost(**) Emissione Maturity
Generali Finance B.V.  3.88% 500 EUR  500 06/05/2005 06/05/2005
Generali Finance B.V.  5.13% 1,750 EUR  1,722 16/09/2009 16/09/2024
Assicurazioni Generali  2.88% 1,250 EUR  1,242 14/01/2014 14/01/2020

(*) in currency million.
(**) in € million.

This category includes also other bonds issued by the subsidiary Ceska Pojistovna for a nominal amount of CZK 500 million, corresponding to an amortized cost of approximately € 13 million. During 2014 the following operations on senior debt securities were performed:

  • On 14 January 2014 Assicurazioni Generali SpA issued a bond for € 1,250 million;
  • On 12 May 2014 Generali Finance BV repaid a bond issued for € 1,500 million;
  • On 11 November 2014 Assicurazioni Generali SpA repaid a bond of € 750 million.

Maturity of financial debt

The average duration at 31 December 2014 was 6.87 years compared to 5.27 years at December 31, 2013. The lengthening of the average duration is a direct result of the re-financing operations and the optimization of capital described above.

Lines of credit
As established market practice for the sector, Assicurazioni Generali has a series of revolving credit lines for a total amount of € 2 billion with maturities between 2015 and 2016.

The counterparties are major financial institutions of high international standing. This operation will have an impact the Group’s financial debt only if the facility is drawn upon and allows Generali to improve its financial flexibility to manage future liquidity needs in a volatile environment.

LIQUIDITY

(€ million)31.12.201431.12.2013
Cash at bank and short-term securities 8,340 9,854
Cash and cash equivalents 154 2,418
Cash and balances with central banks 14 15
Money market investment funds unit 2,158 129
Other -443 -1,320
Cash and cash equivalents 10,223 11,096

As mentioned previously, cash decreased to € 10.223 million, as a result of the Group investment policy focused on preserving current return and reducing the amount of cash.