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 giant Allianz has released up approximately $4.1 billion in worth after entering into 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 largest legacy or back-book life and annuity reinsurance transactions ever seen and for Allianz its all about freeing capital and adding effectiveness, while for the counterparties it is a way to put capital to work in securing considerable liabilities to manage.
Allianz Life exposed a reinsurance contract with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the specialist tradition life insurance coverage financial investments arm of insurance coverage entrepreneur Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz discussed that the deal will “unlock worth in its life insurance coverage service by managing capital on its balance sheet more efficiently and increasing synergies with its asset management organization.”
Allianz likewise stated that, “The deal highlights the ability of Sixth Streets insurance platform, which consists of Talcott Resolution, and Resolution Res insurance group, Resolution Life, to produce and execute extremely versatile capital solutions for leading insurance business at scale.”
The offer will open $4.1 billion in value and free up regulative 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 actually participated in and the company said it, “is in line with the groups expanded strategy to take advantage of collaborations with strong reinsurance and danger management companies to generate income from the worth of in-force organization and improve the protection managed to customers.”
Allianz Life will continue to handle the policy administration for the portfolio, so without any modifications to how policyholders are serviced, while Allianzs huge possession management arm PIMCO and Allianz Global Investors will likewise stay on as the primary property managers of the reinsured company.
The liabilities are transferred successfully through this deal, with two substantial investors and professionals in the life space now set to benefit from this arrangement.
Sixth Street is a big property supervisor and obtained Talcott Resolution, a specialist at supplying in-force and brand-new organization options focused on capital versatility and danger management performances to the insurance and reinsurance market.
Once this Allianz deal is closed, Talcott Resolution and its affiliates will handle $111 billion in liabilities and surplus on a pro-forma basis.
Meanwhile, Resolution Life is the expert tradition life focused financial investment automobile and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance service, utilizing acquisitions or reinsurance backed by capital structures supported by institutional financiers, channelling profits and returns back to them in the kind of dividends.
After this transaction, Resolution Life will have invested around $5 billion of equity and have collected $90 billion in assets under management.
As we described previously this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance portfolios, using its Bermudian reinsurance platform Resolution Re, as well as platforms in the United States 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 approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, discussed this new plan, “This reinsurance arrangement even more illustrates Resolution Lifes capability to finish big, innovative, and complex transactions together with positive partners. Resolution Lifes focus has actually always been to offer stability and security for insurance policy holders while helping international insurance partners with their restructuring plans.”
So this new deal and others Resolution Life has actually participated in through the second 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 extra firepower from its institutional investor base.
Which is why we find these legacy life deals fascinating, as they feature capital markets backed capability being used for reinsurance of back books, with fund structures underpinning the plans and financiers often paid through dividends.
Its not insurance-linked securities (ILS), although it does appear securitization might provide an alternative option to a few of these arrangements. 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 lowering volatility, by lowering the long-tail risks in its portfolio, which of course this deal becomes part of.
This is most likely to be a trend for some of the larger worldwide players, that discover the weight of back books dragging on their capital and have a lot to get by freeing some of that with the assistance of reinsurance, suggesting a maybe growing role for capital market financiers to fund tradition arrangements and perhaps more opportunity for the ILS market.

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