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 maximized roughly $4.1 billion in value after participating in a reinsurance arrangement to transfer $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 deals ever seen and for Allianz its everything about releasing capital and including effectiveness, while for the counterparties it is a way to put capital to work in protecting significant liabilities to manage.
Allianz Life revealed 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 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 business by managing capital on its balance sheet more effectively and increasing synergies with its property management business.”
Allianz likewise stated that, “The transaction illustrates the ability of Sixth Streets insurance coverage platform, that includes Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to produce and perform extremely flexible capital services for leading insurer at scale.”
The offer 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 enhance by about 9 percentage-points to 216%.
Its the biggest life back book deal Allianz has participated in and the company stated it, “is in line with the groups expanded strategy to take advantage of partnerships with strong reinsurance and danger management business to monetize the value of in-force business and improve the defense managed to clients.”
Allianz Life will continue to manage the policy administration for the portfolio, so without any changes to how policyholders are serviced, while Allianzs giant property management arm PIMCO and Allianz Global Investors will also remain on as the primary property supervisors of the reinsured business.
The liabilities are transferred successfully through this offer, with 2 considerable investors and experts in the life space now set to benefit from this plan.
Sixth Street is a big property manager and obtained Talcott Resolution, an expert at offering in-force and new service services concentrated on capital flexibility and threat management performances to the insurance coverage and reinsurance market.
When 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 specialist tradition life focused financial investment automobile and manager and part of Clive Cowderys Resolution Group.
Resolution Life handles big books of life insurance coverage service, using acquisitions or reinsurance backed by capital structures supported by institutional investors, transporting returns and earnings back to them in the kind of dividends.
After this transaction, Resolution Life will have invested roughly $5 billion of equity and have collected $90 billion in properties under management.
As we explained earlier this year, Resolution Life raised $1.6 billion to money 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 handling around $60 billion of properties worldwide on behalf of around 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, talked about this brand-new plan, “This reinsurance agreement even more shows Resolution Lifes ability to complete large, innovative, and intricate deals along with useful partners. Resolution Lifes focus has always been to provide stability and security for policyholders while assisting global insurance coverage partners with their restructuring strategies.”
So this brand-new offer and others Resolution Life has actually participated in through the 2nd 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 additional firepower from its institutional financier base.
Which is why we find these legacy life deals interesting, as they feature capital markets backed capability being used for reinsurance of back books, with fund structures underpinning the arrangements and investors often paid through dividends.
Its not insurance-linked securities (ILS), although it does seem securitization could offer an alternative service to some of these arrangements. However it is a type of insurance-linked financial investment in the eyes of the institutional backers.
Allianz also held its investor day today and revealed a restored concentrate on enhancing capital efficiency and decreasing volatility, by lowering the long-tail dangers in its portfolio, which obviously this transaction is part of.
This is most likely to be a pattern for some of the bigger global gamers, 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 possibly growing function for capital market financiers to fund legacy arrangements and possibly more chance for the ILS market.

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