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Hannover Re successfully completes hybrid capital exchange and new issue

Hannover, 25 May 2005:

Hannover Re has today successfully issued a EUR 500 million hybrid capital bond via its subsidiary Hannover Finance (Luxembourg) S.A. As part of the transaction, existing holders of Hannover Re’s EUR 350 million 2001/2031 hybrid capital bond issued in 2001 were offered an exchange into the new bond. Participation in the exchange amounted to EUR 211.85 million, which resulted in the issue of approximately EUR 240.5 million new bonds. In addition, a further approximately EUR 259.5 million of new cash was raised from the European capital markets via JPMorgan.

The new bond priced with a coupon of 5.0% to yield 168 basis points over the mid yield of the 10-year Euro-denominated swap rate. The issue has a perpetual maturity and is callable after ten years and on every interest payment date thereafter at the issuer’s option. If the bond is not redeemed after ten years, the interest basis changes from fixed to floating rate, a stepped-up rate of 3-month EURIBOR +268 basis points.

“Given the extremely tough conditions in the capital markets in recent weeks, we are extremely pleased with the placement of this issue. With the exchange of our existing hybrid bond and the issue of additional new hybrid capital, we have used the current low level of interest rates to further optimise our capital base”, said CEO Wilhelm Zeller. The hybrid capital issue will be viewed as solvency capital by the rating agencies and the German Federal Financial Supervisory Authority (BaFin).