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

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

Worldwide insurance coverage and reinsurance giant Allianz has maximized approximately $4.1 billion in value after entering into a reinsurance plan to move $35 billion of fixed 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 deals ever seen and for Allianz its everything about freeing capital and including effectiveness, while for the counterparties it is a way to put capital to work in protecting significant liabilities to handle.
Allianz Life revealed a reinsurance arrangement 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 entrepreneur Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz explained that the deal will “unlock value in its life insurance coverage organization by managing capital on its balance sheet more effectively and increasing synergies with its possession management organization.”
Allianz likewise said that, “The transaction illustrates the ability of Sixth Streets insurance platform, that includes Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to create and perform extremely versatile capital services for leading insurance business at scale.”
The deal will unlock $4.1 billion in value and maximize regulatory capital for Allianz, the re/insurer said, while Allianz Lifes return on equity should 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 offer Allianz has participated in and the company said it, “is in line with the groups broadened strategy to utilize partnerships with strong reinsurance and risk management companies to monetize the worth of in-force business and boost the protection paid for to consumers.”
Allianz Life will continue to manage the policy administration for the portfolio, so without any modifications to how policyholders are serviced, while Allianzs huge asset management arm PIMCO and Allianz Global Investors will likewise remain on as the primary asset managers of the reinsured business.
The liabilities are transferred effectively through this deal, with two substantial investors and professionals in the life space now set to benefit from this plan.
Sixth Street is a big possession supervisor and obtained Talcott Resolution, a specialist at providing in-force and new business options concentrated on capital flexibility and danger management efficiencies to the insurance coverage and reinsurance industry.
Once 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 investment lorry and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance service, using acquisitions or reinsurance backed by capital structures supported by institutional investors, channelling profits and returns back to them in the type of dividends.
After this transaction, Resolution Life will have invested approximately $5 billion of equity and have collected $90 billion in properties under management.
As we described earlier this year, Resolution Life raised $1.6 billion to money growth through the acquisition and reinsurance of life insurance portfolios, utilizing 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 managing around $60 billion of assets internationally 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 agreement even more illustrates Resolution Lifes ability to finish big, ingenious, and intricate transactions along with useful partners. Resolution Lifes focus has constantly been to supply stability and security for policyholders while helping worldwide insurance coverage partners with their restructuring strategies.”
This new deal and others Resolution Life has actually entered into through the 2nd half of 2021, which include a deal 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 find these tradition life deals intriguing, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the investors and plans typically paid through dividends.
Its not insurance-linked securities (ILS), although it does appear securitization could offer an alternative solution 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 announced a restored concentrate on improving capital performance and decreasing volatility, by reducing the long-tail dangers in its portfolio, which naturally this deal belongs to.
This is likely to be a pattern for a few of the bigger 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, recommending a possibly growing role for capital market financiers to finance legacy plans and possibly more chance for the ILS market as well.

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