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 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, among which subordinated liabilities, bonds issued and other loans obtained. This category includes, for example, liabilities incurred in connection with a purchase of controlling interests.
Total liabilities were as follows:
Group debt
| (€ million) | 31/12/2018 | 31/12/2017 |
|---|---|---|
| Liabilities linked to operating activities | 27,009 | 26,199 |
| Liabilities linked to financing activities | 11,532 | 11,816 |
| Subordinated liabilities | 8,124 | 8,379 |
| Senior bonds | 2,983 | 2,980 |
| Other non-subordinated liabilities linked to financing activities | 425 | 457 |
| Total | 38,540 | 38,015 |
The reduction in the Group’s liabilities linked to financing activities was mainly due to the redemption of two subordinated bonds issued in 2008 for a nominal amount of € 250 million through the exercise of the early redemption option in November and December 2018.
The liabilities linked to operating activities posted an increase due mainly to the increase in the deposits of the Group banks.
The weighted average cost of liabilities linked to financing activities at 31 December 2018 stood at 5.66%, down from 5.71% at 31 December 2017. The weighted average cost reflects the annualized cost of financial debt, considering the nominal amounts at the reporting date and the related transactions of currency and interest rate hedging.
Interest expenses on total liabilities were detailed below:
Interest expenses
| (€ million) | 31/12/2018 | 31/12/2017 | Change |
|---|---|---|---|
| Interest expense on liabilities linked to operating activities | 333 | 337 | -1,1% |
| Interest expense on liabilities linked to financing activities | 666 | 673 | -1,0% |
| Total(*) | 1,000 | 1,010 | -1,0% |
(*) Without taking into account the interest expenses on liabilities linked to operating activities 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 financing activities
Details on subordinated liabilities and senior bonds
| (in milioni di euro) | 31/12/2018 | 31/12/2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nominal value | Book value | Accrued interest expenses | Average weighted cost %* | Nominal value | Book value | Accrued interest expenses | Average weighted cost %* | |
| Subordinated liabilities | 8,162 | 8,124 | 541 | 6,18% | 8,417 | 8,379 | 547 | 6,22% |
| Senior bonds | 3,000 | 2,983 | 125 | 4,19% | 3,000 | 2,980 | 125 | 4,19% |
| Total | 11,162 | 11,106 | 11,417 | 11,359 | ||||
(*) 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) | 31/12/2018 | 31/12/2017 | ||||
|---|---|---|---|---|---|---|
| Issuances | Redemptions | Issuances net of redemptions | Issuances | Redemptions | Issuances net of redemptions | |
| Subordinated liabilities | 0 | 250 | -250 | 0 | 869 | -869 |
| Senior bonds | 0 | 0 | 0 | 0 | 13 | -13 |
| Total | 0 | 250 | -250 | 0 | 882 | -882 |
Details on main issues
Subordinated liabilities
Principali emissioni subordinate
| Coupon | Outstanding (*) | Currency | Amortised cost (**) | Issue date | Call date | Maturity | |
|---|---|---|---|---|---|---|---|
| Assicurazioni Generali | 6.27% | 350 | GBP | 388 | 16/06/2006 | 16/02/2026 | Perp |
| Assicurazioni Generali | 6.42% | 495 | GBP | 549 | 08/02/2007 | 08/02/2017 | Perp |
| Assicurazioni Generali | 7.24% | 350 | EUR | 350 | 04/03/2009 | 04/03/2019 | Perp |
| Assicurazioni Generali | 8.50% | 350 | EUR | 350 | 06/03/2009 | 06/03/2019 | Perp |
| Assicurazioni Generali | 9.00% | 50 | EUR | 50 | 15/07/2009 | 15/07/2019 | Perp |
| Assicurazioni Generali | 10.13% | 750 | EUR | 748 | 10/07/2012 | 10/07/2022 | 10/07/2042 |
| Assicurazioni Generali | 7.75% | 1,250 | EUR | 1,248 | 12/12/2012 | 12/12/2022 | 12/12/2042 |
| Assicurazioni Generali | 4.13% | 1,000 | EUR | 991 | 04/02/2014 | n,a, | 04/05/2026 |
| Assicurazioni Generali | 4.60% | 1,500 | EUR | 1,341 | 21/11/2014 | 21/11/2025 | Perp |
| Assicurazioni Generali | 5.50% | 1,250 | EUR | 1,243 | 27/10/2015 | 27/10/2027 | 27/10/2047 |
| Assicurazioni Generali | 5.00% | 850 | EUR | 841 | 08/06/2016 | 08/06/2028 | 08/06/2048 |
(*) In currency million.
(**) In € million.
This category also includes unlisted subordinated liabilities issued by Assicurazioni Generali and other subsidiaries. The remaining subordinated liabilities are mainly issued by Austrian subsidiaries for approximately € 25 million at amortized cost.
In November and December 2018, two subordinated bonds issued by the Group in 2008 were redeemed for a nominal amount of € 250 million using available cash.
Senior bonds
Main senior bonds issues
| Issuer | Coupon | Outstanding (*) | Currency | Amortised cost (**) | Issue date | Maturity |
|---|---|---|---|---|---|---|
| Assicurazioni Generali | 5.13% | 1,750 | EUR | 1,733 | 16/09/2009 | 16/09/2024 |
| Assicurazioni Generali | 2.88% | 1,250 | EUR | 1,247 | 14/01/2014 | 14/01/2020 |
(*) In currency million.
(**) In € million.
The senior bonds were essentially unchanged
Detail on debt maturity
The average duration at 31 December 2018 stood at 5.34 years compared to 6.22 years at 31 December 2017.
Revolving credit facilities
Assicurazioni Generali has revolving credit facilities for a total amount of € 4 billion. They represent, in line with best market practice, an efficient tool to protect the Group’s financial flexibility in case of adverse scenarios.
The two facilities syndicated with a value of € 2 billion each, have a duration of 3 and 5 years.
The revolving credit facilities also present innovative features in terms of sustainability: their cost is linked to both the targets on green investments and the progress made in sustainability. This transaction further strengthens Generali’s commitment to sustainability and the environment, as set out in the Charter of Sustainability Commitments and in the climate change strategy. This will only impact the Group’s liabilities linked to financing activities if the facilities are drawn down.
Liquidity
Cash and cash equivalent
| (€ million) | 31/12/2018 | 31/12/2017 |
|---|---|---|
| Cash at bank and short-term securities | 5,553 | 5,738 |
| Cash and cash equivalents | 115 | 96 |
| Cash and balances with central banks | 1,029 | 593 |
| Money market investment funds unit | 4,367 | 5,560 |
| Other | 50 | -351 |
| Cash and cash equivalents | 11,114 | 11,635 |
Liquidity remained broadly stable, reaching € 11,114 million, in line with its seasonal trend and in the presence of unfavourable opportunities for reinvestment of profits generated, especially in the last part of the year.