DEBT AND LIQUIDITY

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)31/12/201631/12/2015
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)31/12/201631/12/2015Change
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)31/12/201631/12/2015 
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
IssuancesRedemptionsIssuances
net of
redemptions
IssuancesRedemptionsIssuances
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

IssuerCouponOutstanding (*)CurrencyAmortised cost(**)Issue dateMaturity
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

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.