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Hannover Re issues further hybrid capital in the form of a subordinated loan

Hannover, 12 March 2001:

Last week, Hannover Re placed further hybrid capital on the European capital market through its subsidiary Hannover Finance (Luxembourg) S. A. in the form of a subordinated loan. The loan, which has a term of 30 years and a call option for the issuer after 10 years, has a total volume of EUR 350 million. The offering price of the loan is fixed at 99.276% with a coupon of 6.25%. The loan has been subscribed primarily by European institutional investors.

By issuing this subordinated loan and following Hannover Re's first placement of a subordinated loan totalling USD 400 million in February 1999, the company is continuing to pursue its objective of optimising its capital structure and the cost of capital. The loans issued by Hannover Re qualify for treatment as equity credit (hybrid capital) by the rating agency Standard & Poor's.

By means of these subordinated loans Hannover Re is thus strengthening its available capital, which the rating agencies use as a criterion for determining their financial strength rating of Hannover Re. Since these subordinated loans bear significantly lower capital costs than equity, Hannover Re is able to finance substantial business growth without diluting its returns on equity.