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 released up approximately $4.1 billion in value after entering into a reinsurance arrangement to move $35 billion of fixed index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its one of the biggest tradition or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about releasing capital and adding effectiveness, while for the counterparties it is a method to put capital to work in securing substantial liabilities to handle.
Allianz Life revealed a reinsurance agreement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the expert tradition life insurance financial investments arm of insurance entrepreneur Clive Cowderys Resolution Group, to cover a $35-billion repaired index annuity portfolio.
Allianz described that the deal will “unlock value in its life insurance coverage company by managing capital on its balance sheet more efficiently and increasing synergies with its possession management company.”
Allianz likewise stated that, “The deal shows the ability of Sixth Streets insurance platform, which includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and execute extremely flexible capital solutions for leading insurance business at scale.”
The offer will unlock $4.1 billion in worth and complimentary up regulatory capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity ought to enhance 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 largest life back book offer Allianz has entered into and the company said it, “is in line with the groups broadened strategy to take advantage of collaborations with strong reinsurance and threat management business to monetize the value of in-force organization and improve the protection managed to consumers.”
Allianz Life will continue to manage the policy administration for the portfolio, so with no modifications to how insurance policy holders are serviced, while Allianzs huge asset management arm PIMCO and Allianz Global Investors will likewise stay on as the main property supervisors of the reinsured organization.
The liabilities are moved efficiently through this offer, with two significant financiers and experts in the life space now set to benefit from this arrangement.
Sixth Street is a large asset manager and obtained Talcott Resolution, a professional at supplying in-force and new company solutions focused on capital flexibility and threat management efficiencies to the insurance coverage and reinsurance industry.
When this Allianz deal is closed, Talcott Resolution and its affiliates will manage $111 billion in liabilities and surplus on a pro-forma basis.
Resolution Life is the professional legacy life focused financial investment car and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance business, using acquisitions or reinsurance backed by capital structures supported by institutional financiers, directing returns and earnings back to them in the type of dividends.
After this deal, Resolution Life will have invested roughly $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, 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 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, discussed this new plan, “This reinsurance contract further shows Resolution Lifes capability to complete big, innovative, and complicated deals along with constructive partners. Resolution Lifes focus has constantly been to offer stability and security for policyholders while helping global insurance coverage partners with their restructuring strategies.”
This new offer and others Resolution Life has actually entered into through the 2nd half of 2021, which consist of a transaction with Allianz Suisse Life to reinsure $4.3 billion of liabilities in September, Resolution has grown its platform considerably thanks to the additional firepower from its institutional financier base.
Which is why we find these tradition life offers fascinating, 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 might provide an alternative solution to a few of these plans. But it is a form of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its financier day today and announced a renewed concentrate on enhancing capital efficiency and lowering volatility, by reducing the long-tail risks in its portfolio, which of course this transaction is part of.
This is likely to be a trend for some of the bigger international gamers, that discover the weight of back books dragging on their capital and have a lot to acquire by freeing some of that with the assistance of reinsurance, suggesting a maybe growing function for capital market financiers to finance tradition arrangements and maybe more chance for the ILS market.

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