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

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

Global insurance coverage and reinsurance huge Allianz has actually released up approximately $4.1 billion in value after getting in into 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 transactions ever seen and for Allianz its everything about freeing capital and adding effectiveness, while for the counterparties it is a method to put capital to work in protecting substantial liabilities to manage.
Allianz Life revealed a reinsurance agreement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the specialist legacy life insurance coverage investments arm of insurance coverage entrepreneur Clive Cowderys Resolution Group, to cover a $35-billion repaired index annuity portfolio.
Allianz discussed that the deal will “unlock value in its life insurance coverage company by handling capital on its balance sheet more efficiently and increasing synergies with its asset management company.”
Allianz also stated that, “The transaction shows the capability of Sixth Streets insurance platform, which includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and perform extremely versatile capital options for leading insurer at scale.”
The deal will unlock $4.1 billion in value and maximize regulative capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity must improve by around 6 percentage-points to roughly 18% and at a group level, Allianzs Solvency II ratio is anticipated to improve by about 9 percentage-points to 216%.
Its the largest life back book deal Allianz has participated in and the business stated it, “remains in line with the groups expanded method to utilize partnerships with strong reinsurance and risk management business to generate income from the worth of in-force business and enhance the defense managed to consumers.”
Allianz Life will continue to manage the policy administration for the portfolio, so without any 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 main possession supervisors of the reinsured service.
But the liabilities are transferred successfully through this offer, with 2 substantial investors and specialists in the life area now set to take advantage of this arrangement.
Sixth Street is a big property manager and obtained Talcott Resolution, a professional at providing in-force and new service options concentrated on capital flexibility and risk management effectiveness to the insurance coverage and reinsurance market.
As soon as this Allianz deal is closed, Talcott Resolution and its affiliates will handle $111 billion in liabilities and surplus on a pro-forma basis.
Resolution Life is the professional legacy life focused investment vehicle and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on big books of life insurance company, utilizing acquisitions or reinsurance backed by capital structures supported by institutional financiers, carrying earnings and returns back to them in the kind of dividends.
After this transaction, Resolution Life will have invested roughly $5 billion of equity and have gathered $90 billion in assets under management.
As we explained earlier this year, Resolution Life raised $1.6 billion to money growth through the acquisition and reinsurance of life insurance coverage portfolios, using its Bermudian reinsurance platform Resolution Re, in addition to 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 internationally on behalf of approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, talked about this new arrangement, “This reinsurance contract further illustrates Resolution Lifes capability to complete large, innovative, and complicated transactions alongside useful partners. Resolution Lifes focus has always been to supply stability and security for insurance policy holders while assisting international insurance coverage partners with their restructuring plans.”
So this brand-new offer and others Resolution Life has actually 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 actually 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 feature capital markets backed capability being utilized for reinsurance of back books, with fund structures underpinning the investors and plans often paid via dividends.
Its not insurance-linked securities (ILS), although it does seem securitization might supply an alternative solution to some of these plans. But it is a form of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its investor day today and revealed a restored concentrate on enhancing capital effectiveness and lowering volatility, by lowering the long-tail dangers in its portfolio, which naturally this transaction becomes part of.
This is likely to be a trend for some of the bigger international gamers, that discover the weight of back books dragging on their capital and have a lot to get by freeing some of that with the help of reinsurance, suggesting a possibly growing function for capital market investors to finance legacy plans and perhaps more chance for the ILS market.

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