Liabilities
In accordance with the IAS / IFRS managerial model used by the Generali Group, consolidated liabilities were split into two categories:
- liabilities linked to operating activities, defined as all the consolidated financial liabilities related to specific balance sheet items from the consolidated financial statements. This category also includes liabilities stated by the insurance companies against investment contracts and liabilities to banks and customers of banks belonging to the Group;
- liabilities linked to financing activities, including the other consolidated financial liabilities, including subordinated liabilities, bonds issued and other loans obtained. This category includes liabilities incurred in connection with a purchase of controlling interests.
Total liabilities were as follows:
Group debt
| (€ million) | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Liabilities linked to operating activites | 38,747 | 36,787 |
| Liabilities linked to fiancing activities | 12,669 | 13,117 |
| Subordinated liabilities | 9,126 | 9,643 |
| Senior bonds | 3,017 | 2,992 |
| Other non subordinated liabilities linked to financing activities | 526 | 481 |
| Total | 51,416 | 49,904 |
The decrease in the Group’s liabilities linked to financing activities was due mainly to the following transactions completed in the course of the year:
- the issue by Assicurazioni Generali of a subordinated bond with a nominal value of € 850 million for the early financing of the repayment of another subordinated liability issued by the subsidiary Generali Finance, with an early repayment option as of 8 February 2017;
- the repayment as at 16 June 2016 of two subordinated bonds issued, in euro and pounds, by the subsidiary Generali Finance, for a total equivalent value of € 1,167 million.
The weighted average cost of liabilities linked to financing activities at 31 December 2016 amounted to 5.67%, similar to the 5.65% at 31 December 2015 and the 5.68% at 30 September 2016. The weighted average cost reflects the annualized average cost of the debt considering the outstanding liabilities at the reporting date and the related currency and interest rate hedging.
Interest expenses on total liabilities are detailed below:
Interest expenses
| (€ million) | 31/12/2016 | 31/12/2015 | Change |
|---|---|---|---|
| Interest expense on liabilities linked to operating activities | 358 | 411 | -12.8% |
| Interest expense on liabilities linked to financing activities | 723 | 684 | 5.8% |
| Total(*) | 1,081 | 1,094 | -7.1% |
(*) Without taking into account the interest expenses on liabilities linked of the real estate development companies, classified among the other expenses, as well as the interest on deposit under reinsurance business accepted, deducted from the related interest income.
Details on the liabilities linked to financial activites
Details of subordinated liabilities and senior bonds
| (€ million) | 31/12/2016 | 31/12/2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nominal value | Book value | Accured interest expenses | Avarage weighted cost % | Nominal value | Book value | Accured interest expenses | Avarage weighted cost % | |
| Subordinated liabilities | 9,166 | 9,126 | 595 | 6.14% | 9,681 | 9,643 | 551 | 6.10% |
| Senior bonds | 3,000 | 3,017 | 125 | 4.18% | 3,009 | 2,992 | 132 | 4.20% |
| Total | 12,166 | 12,144 | 12,690 | 12,635 | ||||
(*) 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 and redemptions of subordinated liabilities and senior bonds
| (€ million) | 31/12/2016 | 31/12/2015 | ||||
|---|---|---|---|---|---|---|
| Issuances | Redemptions | Issuances net of redemptions | Issuances | Redemptions | Issuances net of redemptions | |
| Subordinated liabilities | 850 | 1,167 | -317 | 1,250 | 0 | 1,250 |
| Senior bonds | 0 | 0 | 0 | 0 | 500 | 0 |
| Total | 850 | 1,167 | 1,250 | 500 | ||
Details on principal issuances
Subordinated liabilities
Main subordinated issues
| Coupon | Outstanding (*) | Currency | Amortised cost (**) | Issue date | Call date | Maturity | |
|---|---|---|---|---|---|---|---|
| Generali Finance B.V. | 5.32% | 752 | EUR | - | 16/06/2006 | repaid(***) | Perp |
| Generali Finance B.V. | 6.21% | 345 | GBP | - | 16/06/2006 | repaid(***) | Perp |
| Assicurazioni Generali | 6.27% | 350 | GBP | 407 | 16/06/2006 | 16/06/2026 | Perp |
| Generali Finance B.V. | 5.48% | 869 | EUR | 711 | 08/02/2007 | 08/02/2017 | Perp |
| Assicurazioni Generali | 6.42% | 495 | GBP | 576 | 08/02/2007 | 08/02/2022 | Perp |
| Assicurazioni Generali | 10.13% | 750 | EUR | 748 | 10/07/2012 | 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 | 989 | 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 |
| Assicurazioni Generali | 5.50% | 1,250 | EUR | 1,242 | 27/10/2015 | 27/10/2027 | 27/10/2047 |
| Assicurazioni Generali | 5.00% | 850 | EUR | 840 | 08/06/2016 | 08/06/2028 | 08/06/2048 |
(*) in currency million.
(**) in € million.
(***) on 16/06/2016.
This category also includes unlisted subordinated liabilities issued by Assicurazioni Generali S.p.A. and other subsidiaries.
Liabilities issued by Assicurazioni Generali S.p.A.
in the form of private placements amounted to a nominal amount of € 1,000 million corresponding to an amortized cost of € 998 million. The remaining subordinated liabilities relate to shares issued by subsidiaries in Austria with an amortized cost of about € 29 million.
A subordinated bond was issued in June 2016 for a total amount of € 850 million the proceeds from which were used to refi nance a subordinated bond issued by the Group with a call date in February 2017.
Senior bonds
Main senior bonds issues
| Issuer | Coupon | Outstanding (*) | Currency | Amortised cost(**) | Issue date | Maturity |
|---|---|---|---|---|---|---|
| Assicurazioni Generali | 5.13% | 1,750 | EUR | 1,724 | 16/09/2009 | 16/09/2024 |
| Assicurazioni Generali | 2.88% | 1,250 | EUR | 1,245 | 14/01/2014 | 14/01/2020 |
(*) in currency million.
(**) in € million.
This category also includes other bonds, mainly including those issued by the subsidiary Ceska Pojistovna for a nominal amount of CZK 500 million. The amortized cost of the remaining positions amounts to about € 48 million.
Maturity of the fi nancial debt
The average duration at 31 December 2016 was 6.72 years compared to 6.68 years at 31 December 2015. The change in the average duration is a direct result of the re-fi nancing operations described above.
Lines of credit
As in established market practice for the sector, in May 2015 Assicurazioni Generali renewed the previous revolving credit lines programme. The series of lines with a total maximum amount of € 2 billion has expiries from 3 to 5 years.
The counterparties are major financial institutions of high international standing. This will only impact the Group’s financial liabilities if the facility is drawn down, and will allow Generali to improve financial flexibility to manage future cash requirements in a volatile environment.
Liquidity
Cash and cash equivalent
| (€ million) | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Cash at bank and short-term securities | 6,279 | 8,792 |
| Cash and cash equivalents | 649 | 211 |
| Cash and balances with central banks | 606 | 41 |
| Money market investment funds unit | 4,362 | 5,527 |
| Other | -796 | -803 |
| Cash and cash equivalents | 11,099 | 13,768 |
Liquidity decreased to € 11,099 million, in particular due to its reinvestment, in order to limit the dilution of yelds, which are currently negative for bank deposits.