Allianz frees capital with $35bn annuity reinsurance from Sixth Street & Resolution

Allianz frees capital with $35bn annuity reinsurance from Sixth Street & Resolution

International insurance and reinsurance giant Allianz has actually released up approximately $4.1 billion in value after getting in into a reinsurance arrangement to move $35 billion of set index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its one of the largest legacy or back-book life and annuity reinsurance transactions ever seen and for Allianz its everything about releasing capital and adding efficiency, while for the counterparties it is a way to put capital to work in securing considerable liabilities to manage.
Allianz Life revealed a reinsurance contract with affiliates of Sixth Street, consisting of Talcott Resolution Life Insurance Company, and Resolution Life, the specialist legacy life insurance coverage financial investments arm of insurance coverage business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz discussed that the deal will “unlock value in its life insurance coverage service by managing capital on its balance sheet more efficiently and increasing synergies with its property management organization.”
Allianz also said that, “The deal shows the ability of Sixth Streets insurance coverage platform, which consists of Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to create and carry out extremely flexible capital services for leading insurance provider at scale.”
The deal will unlock $4.1 billion in value and maximize regulatory capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity should improve by around 6 percentage-points to around 18% and at a group level, Allianzs Solvency II ratio is expected to enhance by about 9 percentage-points to 216%.
Its the biggest life back book deal Allianz has gotten in into and the business stated it, “remains in line with the groups expanded technique to leverage partnerships with strong reinsurance and risk management business to monetize the value of in-force service and boost the defense afforded to clients.”
Allianz Life will continue to manage the policy administration for the portfolio, so with no changes to how insurance policy holders are serviced, while Allianzs huge property management arm PIMCO and Allianz Global Investors will also stay on as the primary asset managers of the reinsured business.
But the liabilities are transferred efficiently through this deal, with 2 significant financiers and specialists in the life space now set to benefit from this plan.
Sixth Street is a big property manager and acquired Talcott Resolution, an expert at offering in-force and brand-new service services focused on capital flexibility and threat management efficiencies to the insurance coverage and reinsurance market.
When this Allianz deal is closed, Talcott Resolution and its affiliates will manage $111 billion in liabilities and surplus on a pro-forma basis.
Meanwhile, Resolution Life is the expert tradition life focused investment car and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance organization, utilizing acquisitions or reinsurance backed by capital structures supported by institutional investors, channelling returns and revenues back to them in the type of dividends.
After this deal, Resolution Life will have invested approximately $5 billion of equity and have actually collected $90 billion in assets under management.
As we explained earlier this year, Resolution Life raised $1.6 billion to money development through the acquisition and reinsurance of life insurance coverage portfolios, using its Bermudian reinsurance platform Resolution Re, along with platforms in the US and Australiasia.
At the time of that capital raise, which we covered in May 2021, Resolution Life was handling around $60 billion of possessions worldwide on behalf of around 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, commented on this brand-new arrangement, “This reinsurance arrangement further highlights Resolution Lifes capability to finish big, ingenious, and complicated deals alongside positive partners. Resolution Lifes focus has actually constantly been to supply stability and security for insurance policy holders while helping worldwide insurance coverage partners with their restructuring plans.”
This new offer and others Resolution Life has gotten in into through the second half of 2021, which include a transaction with Allianz Suisse Life to reinsure $4.3 billion of liabilities in September, Resolution has grown its platform considerably thanks to the additional firepower from its institutional financier base.
Which is why we discover these legacy life deals intriguing, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the investors and plans frequently paid through dividends.
Its not insurance-linked securities (ILS), although it does seem securitization could provide an alternative solution to some of these arrangements. However it is a type of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its investor day today and revealed a renewed focus on improving capital effectiveness and reducing volatility, by decreasing the long-tail risks in its portfolio, which naturally this deal is part of.
This is most likely to be a trend for some of the bigger international gamers, that find the weight of back books dragging on their capital and have a lot to gain by freeing some of that with the aid of reinsurance, suggesting a maybe growing function for capital market financiers to finance tradition plans and possibly more chance for the ILS market.

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