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

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

International insurance coverage and reinsurance huge Allianz has actually maximized roughly $4.1 billion in value after participating in a reinsurance arrangement to transfer $35 billion of fixed index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its one of the largest tradition or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about freeing capital and adding efficiency, while for the counterparties it is a way to put capital to operate in securing significant liabilities to manage.
Allianz Life exposed a reinsurance contract with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the expert tradition life insurance investments arm of insurance business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz described that the deal will “unlock worth in its life insurance company by managing capital on its balance sheet more effectively and increasing synergies with its property management business.”
Allianz also stated that, “The deal illustrates the capability of Sixth Streets insurance platform, that includes Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to produce and perform highly flexible capital services for leading insurance companies at scale.”
The offer will open $4.1 billion in worth and maximize regulatory capital for Allianz, the re/insurer said, while Allianz Lifes return on equity ought to enhance by around 6 percentage-points to around 18% and at a group level, Allianzs Solvency II ratio is expected to improve by about 9 percentage-points to 216%.
Its the largest life back book deal Allianz has participated in and the business said it, “is in line with the groups broadened technique to take advantage of collaborations with strong reinsurance and danger management business to monetize the worth of in-force organization and boost the security paid for to customers.”
Allianz Life will continue to manage the policy administration for the portfolio, so with no changes to how policyholders are serviced, while Allianzs giant property management arm PIMCO and Allianz Global Investors will also remain on as the primary property supervisors of the reinsured company.
The liabilities are moved successfully through this deal, with 2 substantial financiers and professionals in the life space now set to benefit from this arrangement.
Sixth Street is a big asset supervisor and obtained Talcott Resolution, an expert at providing in-force and new business options focused on capital flexibility and danger management performances to the insurance coverage and reinsurance industry.
As soon as this Allianz offer is closed, Talcott Resolution and its affiliates will manage $111 billion in liabilities and surplus on a pro-forma basis.
Resolution Life is the expert legacy life focused financial investment car and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on big books of life insurance business, utilizing acquisitions or reinsurance backed by capital structures supported by institutional investors, directing returns and profits back to them in the form of dividends.
After this deal, Resolution Life will have invested around $5 billion of equity and have actually gathered $90 billion in properties under management.
As we described previously this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance portfolios, utilizing its Bermudian reinsurance platform Resolution Re, along with platforms in the United States and Australiasia.
At the time of that capital raise, which we covered in May 2021, Resolution Life was handling around $60 billion of possessions globally on behalf of around 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, commented on this new plan, “This reinsurance agreement further illustrates Resolution Lifes capability to finish large, innovative, and complicated deals along with useful partners. Resolution Lifes focus has actually constantly been to provide stability and security for insurance policy holders while assisting global insurance coverage partners with their restructuring plans.”
So this new offer and others Resolution Life has participated in through the 2nd half of 2021, which consist of 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 find these tradition life offers fascinating, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the investors and arrangements frequently paid through dividends.
Its not insurance-linked securities (ILS), although it does appear securitization could supply an alternative option to some of these plans. It is a kind of insurance-linked investment in the eyes of the institutional backers.
Allianz also held its financier day today and revealed a renewed focus on improving capital effectiveness and decreasing volatility, by lowering the long-tail risks in its portfolio, which of course this deal becomes part of.
This is most likely to be a pattern for some of the bigger worldwide players, that find the weight of back books dragging on their capital and have a lot to get by releasing some of that with the help of reinsurance, suggesting a perhaps growing role for capital market investors to finance tradition plans and maybe more chance for the ILS market.

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