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 maximized approximately $4.1 billion in value after entering into a reinsurance plan to transfer $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 transactions ever seen and for Allianz its all about freeing capital and including efficiency, while for the counterparties it is a way to put capital to operate in securing 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 expert 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 offer will “unlock value in its life insurance organization by managing capital on its balance sheet more efficiently and increasing synergies with its property management business.”
Allianz likewise said that, “The deal shows the ability of Sixth Streets insurance coverage platform, that includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and execute extremely flexible capital solutions for leading insurance provider at scale.”
The deal will unlock $4.1 billion in worth and free up regulatory capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity need to improve by around 6 percentage-points to roughly 18% and at a group level, Allianzs Solvency II ratio is expected to improve by about 9 percentage-points to 216%.
Its the biggest life back book offer Allianz has entered into and the company stated it, “is in line with the groups expanded strategy to leverage partnerships with strong reinsurance and risk management business to monetize the value of in-force service and boost the protection paid for to consumers.”
Allianz Life will continue to manage the policy administration for the portfolio, so without any changes to how insurance policy holders are serviced, while Allianzs giant property management arm PIMCO and Allianz Global Investors will also remain on as the main asset managers of the reinsured organization.
The liabilities are transferred successfully through this deal, with two considerable financiers and experts in the life area now set to benefit from this plan.
Sixth Street is a big asset manager and got Talcott Resolution, an expert at supplying in-force and new organization options focused on capital flexibility and risk management efficiencies to the insurance and reinsurance market.
When this Allianz offer 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 investment automobile and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on big books of life insurance organization, using acquisitions or reinsurance backed by capital structures supported by institutional financiers, carrying returns and earnings back to them in the form of dividends.
After this transaction, Resolution Life will have invested roughly $5 billion of equity and have gathered $90 billion in properties under management.
As we explained previously this year, Resolution Life raised $1.6 billion to money growth through the acquisition and reinsurance of life insurance coverage portfolios, utilizing 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 assets internationally on behalf of approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, commented on this brand-new arrangement, “This reinsurance agreement even more highlights Resolution Lifes ability to finish big, ingenious, and intricate transactions together with constructive partners. Resolution Lifes focus has always been to supply stability and security for insurance policy holders while assisting international insurance partners with their restructuring plans.”
This new deal and others Resolution Life has actually gotten in into through the second half of 2021, which consist of 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 extra 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 investors and arrangements typically paid through dividends.
Its not insurance-linked securities (ILS), although it does seem securitization could offer an alternative service to some of these arrangements. But it is a type of insurance-linked financial investment in the eyes of the institutional backers.
Allianz also held its financier day today and announced a restored concentrate on enhancing capital effectiveness and reducing volatility, by decreasing the long-tail risks in its portfolio, which naturally this deal belongs to.
This is most likely to be a trend for a few of the bigger worldwide players, that discover the weight of back books dragging out their capital and have a lot to gain by freeing a few of that with the aid of reinsurance, suggesting a possibly growing function for capital market investors to fund legacy arrangements and possibly more opportunity for the ILS market as well.

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