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 giant Allianz has actually maximized roughly $4.1 billion in value after getting in into a reinsurance plan to move $35 billion of fixed 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 deals 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 work in protecting considerable liabilities to handle.
Allianz Life exposed a reinsurance contract with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the expert legacy life insurance coverage investments arm of insurance coverage business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz explained that the offer will “unlock worth in its life insurance service by managing capital on its balance sheet more efficiently and increasing synergies with its possession management service.”
Allianz likewise stated that, “The deal highlights the ability of Sixth Streets insurance platform, that includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and carry out highly flexible capital solutions for leading insurer at scale.”
The deal will open $4.1 billion in worth and free up regulative capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity should enhance by around 6 percentage-points to roughly 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 offer Allianz has entered into and the company stated it, “is in line with the groups expanded method to leverage partnerships with strong reinsurance and risk management companies to generate income from the value of in-force service and enhance the protection managed to consumers.”
Allianz Life will continue to handle the policy administration for the portfolio, so without any modifications to how policyholders are serviced, while Allianzs huge property management arm PIMCO and Allianz Global Investors will likewise remain on as the primary possession managers of the reinsured company.
The liabilities are moved successfully through this deal, with 2 substantial financiers and specialists in the life space now set to benefit from this arrangement.
Sixth Street is a large property manager and acquired Talcott Resolution, a specialist at offering in-force and brand-new company solutions concentrated on capital versatility and threat management efficiencies to the insurance coverage and reinsurance industry.
As soon as this Allianz deal 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 expert legacy life focused financial investment lorry and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance coverage company, using acquisitions or reinsurance backed by capital structures supported by institutional financiers, funneling revenues and returns back to them in the type of dividends.
After this deal, Resolution Life will have invested around $5 billion of equity and have gathered $90 billion in possessions under management.
As we discussed earlier this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance coverage portfolios, utilizing its Bermudian reinsurance platform Resolution Re, as well as platforms in the US and Australiasia.
At the time of that capital raise, which we covered in May 2021, Resolution Life was handling around $60 billion of assets worldwide on behalf of around 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, discussed this brand-new arrangement, “This reinsurance agreement even more highlights Resolution Lifes ability to complete big, innovative, and complex deals together with positive partners. Resolution Lifes focus has always been to provide stability and security for insurance policy holders while helping global insurance partners with their restructuring strategies.”
This brand-new deal and others Resolution Life has entered into through the second half of 2021, which include a deal with Allianz Suisse Life to reinsure $4.3 billion of liabilities in September, Resolution has actually grown its platform substantially thanks to the extra firepower from its institutional financier base.
Which is why we discover these tradition life offers interesting, as they include capital markets backed capability being used for reinsurance of back books, with fund structures underpinning the plans and investors often paid via dividends.
Its not insurance-linked securities (ILS), although it does appear securitization could offer an alternative service to some of these arrangements. It is a kind 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 performance and lowering volatility, by minimizing the long-tail risks in its portfolio, which of course this transaction becomes part of.
This is most likely to be a trend for some of the bigger international players, that discover the weight of back books dragging on their capital and have a lot to acquire by releasing some of that with the assistance of reinsurance, recommending a perhaps growing function for capital market financiers to finance legacy plans and possibly more opportunity for the ILS market.

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