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 freed up approximately $4.1 billion in value after entering into a reinsurance arrangement to move $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 releasing capital and including efficiency, while for the counterparties it is a method to put capital to operate in protecting considerable liabilities to handle.
Allianz Life exposed 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 business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz explained that the deal will “unlock worth in its life insurance coverage company by managing capital on its balance sheet more effectively and increasing synergies with its possession management service.”
Allianz also stated that, “The transaction shows the capability of Sixth Streets insurance platform, that includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to develop and carry out highly flexible capital services for leading insurer at scale.”
The deal will open $4.1 billion in worth and complimentary up regulatory capital for Allianz, the re/insurer said, while Allianz Lifes return on equity need to enhance by around 6 percentage-points to approximately 18% and at a group level, Allianzs Solvency II ratio is anticipated to enhance by about 9 percentage-points to 216%.
Its the largest life back book deal Allianz has gotten in into and the business stated it, “remains in line with the groups broadened technique to utilize collaborations with strong reinsurance and danger management business to generate income from the value of in-force business and improve the protection managed to clients.”
Allianz Life will continue to handle the policy administration for the portfolio, so with no modifications to how insurance policy holders are serviced, while Allianzs huge asset management arm PIMCO and Allianz Global Investors will also remain on as the primary asset managers of the reinsured business.
The liabilities are moved successfully through this deal, with 2 significant investors and professionals in the life space now set to benefit from this plan.
Sixth Street is a big possession manager and acquired Talcott Resolution, an expert at offering in-force and new service options concentrated on capital versatility and threat management effectiveness to the insurance coverage and reinsurance industry.
When this Allianz deal is closed, Talcott Resolution and its affiliates will manage $111 billion in liabilities and surplus on a pro-forma basis.
On The Other Hand, Resolution Life is the professional tradition life focused financial investment vehicle and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance company, using acquisitions or reinsurance backed by capital structures supported by institutional financiers, funneling profits and returns back to them in the form of dividends.
After this deal, Resolution Life will have invested approximately $5 billion of equity and have actually gathered $90 billion in properties under management.
As we discussed previously this year, Resolution Life raised $1.6 billion to fund development through the acquisition and reinsurance of life insurance coverage portfolios, utilizing its Bermudian reinsurance platform Resolution Re, in addition to platforms in the US and Australiasia.
At the time of that capital raise, which we covered in May 2021, Resolution Life was managing around $60 billion of assets globally on behalf of approximately 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, talked about this brand-new arrangement, “This reinsurance arrangement further highlights Resolution Lifes ability to complete big, ingenious, and intricate transactions along with positive partners. Resolution Lifes focus has always been to supply stability and security for policyholders while helping worldwide insurance coverage partners with their restructuring strategies.”
So this brand-new offer and others Resolution Life has participated in 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 substantially thanks to the extra firepower from its institutional investor base.
Which is why we find these legacy life deals interesting, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the plans and investors often paid through dividends.
Its not insurance-linked securities (ILS), although it does appear securitization might provide an alternative option to a few of these arrangements. It is a type of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its investor day today and announced a restored concentrate on enhancing capital efficiency and lowering volatility, by reducing the long-tail dangers in its portfolio, which obviously this transaction belongs to.
This is likely to be a trend for a few of the bigger worldwide players, that find the weight of back books dragging out their capital and have a lot to acquire by releasing some of that with the assistance of reinsurance, suggesting a maybe growing function for capital market investors to finance legacy plans and perhaps more opportunity for the ILS market also.

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