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 released up approximately $4.1 billion in value after entering into a reinsurance plan to move $35 billion of set index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its among the biggest tradition or back-book life and annuity reinsurance transactions ever seen and for Allianz its all about releasing capital and adding effectiveness, while for the counterparties it is a method to put capital to operate in securing 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 professional tradition life insurance coverage investments arm of insurance business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz described that the offer will “unlock worth in its life insurance service by managing capital on its balance sheet more effectively and increasing synergies with its possession management company.”
Allianz also stated that, “The deal illustrates the ability of Sixth Streets insurance platform, which includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to develop and perform highly versatile capital solutions for leading insurer at scale.”
The deal will unlock $4.1 billion in value and maximize regulatory capital for Allianz, the re/insurer said, 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 improve by about 9 percentage-points to 216%.
Its the largest life back book offer Allianz has entered into and the business said it, “remains in line with the groups broadened technique to leverage collaborations with strong reinsurance and threat management companies to monetize the value of in-force business and improve the security managed to consumers.”
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 primary possession supervisors of the reinsured business.
But the liabilities are transferred efficiently through this offer, with two considerable financiers and specialists in the life space now set to benefit from this plan.
Sixth Street is a big asset manager and acquired Talcott Resolution, a specialist at offering in-force and new organization solutions concentrated on capital flexibility and threat management performances to the insurance coverage and reinsurance market.
Once this Allianz offer 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 specialist legacy life focused investment vehicle and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life handles large books of life insurance coverage business, using acquisitions or reinsurance backed by capital structures supported by institutional investors, directing earnings and returns back to them in the form of dividends.
After this transaction, Resolution Life will have invested around $5 billion of equity and have collected $90 billion in possessions under management.
As we described earlier this year, Resolution Life raised $1.6 billion to fund development through the acquisition and reinsurance of life insurance coverage portfolios, using its Bermudian reinsurance platform Resolution Re, as well as platforms in the United States and Australiasia.
At the time of that capital raise, which we covered in May 2021, Resolution Life was managing around $60 billion of possessions worldwide on behalf of roughly 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, talked about this new plan, “This reinsurance arrangement further highlights Resolution Lifes ability to finish large, innovative, and complex transactions along with positive partners. Resolution Lifes focus has actually constantly been to provide stability and security for insurance policy holders while helping international insurance coverage partners with their restructuring strategies.”
So this brand-new offer and others Resolution Life has entered into through the second half of 2021, that include a deal with Allianz Suisse Life to reinsure $4.3 billion of liabilities in September, Resolution has actually grown its platform significantly thanks to the additional firepower from its institutional investor base.
Which is why we find these tradition life offers interesting, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the financiers and arrangements typically paid through dividends.
Its not insurance-linked securities (ILS), although it does seem 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 investor day today and revealed a restored focus on improving capital performance and reducing volatility, by reducing the long-tail risks in its portfolio, which obviously this deal is part of.
This is most likely to be a trend for some of the bigger global gamers, that find the weight of back books dragging on their capital and have a lot to gain by releasing some of that with the assistance of reinsurance, recommending a possibly growing function for capital market financiers to finance legacy plans and possibly more chance for the ILS market.

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