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

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

International insurance and reinsurance giant Allianz has actually maximized approximately $4.1 billion in value after entering into a reinsurance plan to transfer $35 billion of set index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its among the biggest legacy or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about releasing capital and including efficiency, while for the counterparties it is a way to put capital to work in securing substantial 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 expert legacy life insurance coverage financial investments arm of insurance coverage business owner Clive Cowderys Resolution Group, to cover a $35-billion repaired index annuity portfolio.
Allianz described that the offer will “unlock worth in its life insurance company by handling capital on its balance sheet more effectively and increasing synergies with its possession management organization.”
Allianz also stated that, “The transaction highlights the ability of Sixth Streets insurance coverage platform, which consists of Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and carry out highly flexible capital solutions for leading insurance business at scale.”
The deal will unlock $4.1 billion in worth and complimentary up regulative capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity ought to 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 biggest life back book deal Allianz has participated in and the company said it, “remains in line with the groups expanded strategy to take advantage of collaborations with strong reinsurance and threat management companies to monetize the value of in-force business and improve the protection paid for to consumers.”
Allianz Life will continue to manage the policy administration for the portfolio, so without any changes to how policyholders are serviced, while Allianzs huge property management arm PIMCO and Allianz Global Investors will also remain on as the main property managers of the reinsured organization.
The liabilities are moved efficiently through this offer, with 2 significant financiers and professionals in the life area now set to benefit from this plan.
Sixth Street is a big asset supervisor and got Talcott Resolution, a professional at supplying in-force and new company options focused on capital flexibility and danger management performances to the insurance coverage and reinsurance industry.
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.
On The Other Hand, Resolution Life is the professional legacy life focused financial investment automobile and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life handles big books of life insurance coverage business, utilizing 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 deal, Resolution Life will have invested approximately $5 billion of equity and have actually gathered $90 billion in properties under management.
As we described previously 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, along with 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 internationally on behalf of around 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, commented on this brand-new arrangement, “This reinsurance agreement further highlights Resolution Lifes capability to complete large, innovative, and complex deals together with positive partners. Resolution Lifes focus has always been to provide stability and security for policyholders while assisting worldwide insurance coverage partners with their restructuring plans.”
So this new offer and others Resolution Life has gotten in into through the 2nd half of 2021, that include 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 extra firepower from its institutional financier base.
Which is why we discover these tradition life deals fascinating, as they feature capital markets backed capability being utilized for reinsurance of back books, with fund structures underpinning the plans and investors typically paid via dividends.
Its not insurance-linked securities (ILS), although it does appear securitization could supply an alternative solution to a few of these arrangements. However it is a form of insurance-linked investment in the eyes of the institutional backers.
Allianz also held its investor day today and revealed a renewed focus on improving capital performance and reducing volatility, by decreasing the long-tail dangers in its portfolio, which naturally this deal is part of.
This is most likely to be a trend for some of the bigger worldwide players, that discover the weight of back books dragging on their capital and have a lot to gain by freeing some of that with the aid of reinsurance, recommending a possibly growing role for capital market financiers to finance legacy arrangements and perhaps more chance for the ILS market.

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