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

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

Global insurance and reinsurance huge Allianz has actually maximized roughly $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 biggest legacy or back-book life and annuity reinsurance deals ever seen and for Allianz its all about freeing capital and adding performance, while for the counterparties it is a way to put capital to work in protecting significant liabilities to handle.
Allianz Life exposed a reinsurance agreement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the professional tradition life insurance coverage investments arm of insurance coverage entrepreneur Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz described that the deal will “unlock value in its life insurance organization by managing capital on its balance sheet more effectively and increasing synergies with its asset management service.”
Allianz likewise said that, “The deal shows the capability of Sixth Streets insurance coverage platform, that includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to create and carry out highly flexible capital services for leading insurer at scale.”
The deal will unlock $4.1 billion in worth and maximize regulatory capital for Allianz, the re/insurer said, while Allianz Lifes return on equity ought to improve by around 6 percentage-points to around 18% and at a group level, Allianzs Solvency II ratio is anticipated to enhance by about 9 percentage-points to 216%.
Its the biggest life back book deal Allianz has participated in and the business said it, “is in line with the groups broadened strategy to take advantage of partnerships with strong reinsurance and risk management companies to generate income from the value of in-force company and enhance the protection paid for to clients.”
Allianz Life will continue to handle 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 property supervisors of the reinsured company.
The liabilities are moved successfully through this deal, with 2 considerable investors and specialists in the life area now set to benefit from this arrangement.
Sixth Street is a big asset supervisor and got Talcott Resolution, a specialist at supplying in-force and brand-new business services focused on capital versatility and risk management performances to the insurance coverage and reinsurance industry.
Once 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 expert tradition life focused investment car and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life handles large books of life insurance coverage business, utilizing acquisitions or reinsurance backed by capital structures supported by institutional investors, channelling returns and earnings back to them in the kind of dividends.
After this transaction, Resolution Life will have invested around $5 billion of equity and have collected $90 billion in properties under management.
As we explained previously this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance 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 properties worldwide on behalf of approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, discussed this new arrangement, “This reinsurance contract further highlights Resolution Lifes ability to complete big, ingenious, and complicated transactions alongside constructive partners. Resolution Lifes focus has actually constantly been to offer stability and security for insurance policy holders while helping global insurance partners with their restructuring plans.”
This brand-new offer and others Resolution Life has gotten in into through the second 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 significantly thanks to the extra firepower from its institutional financier base.
Which is why we find these legacy life offers intriguing, as they feature capital markets backed capability being used for reinsurance of back books, with fund structures underpinning the arrangements and financiers often paid through dividends.
Its not insurance-linked securities (ILS), although it does seem securitization might supply an alternative option to a few of these plans. But it is a type of insurance-linked investment in the eyes of the institutional backers.
Allianz also held its financier day today and announced a renewed focus on improving capital effectiveness and reducing volatility, by reducing the long-tail threats in its portfolio, which of course this transaction belongs to.
This is most likely to be a pattern for some of the bigger global players, that find the weight of back books dragging on their capital and have a lot to acquire by releasing some of that with the help of reinsurance, recommending a perhaps growing function for capital market financiers to fund tradition arrangements and possibly more opportunity for the ILS market.

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