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 actually maximized approximately $4.1 billion in value 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 biggest tradition or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about freeing capital and including performance, while for the counterparties it is a method to put capital to work in protecting considerable liabilities to handle.
Allianz Life revealed a reinsurance contract with affiliates of Sixth Street, consisting of Talcott Resolution Life Insurance Company, and Resolution Life, the professional legacy life insurance financial investments arm of insurance coverage business owner Clive Cowderys Resolution Group, to cover a $35-billion fixed index annuity portfolio.
Allianz explained that the offer will “unlock worth in its life insurance organization by managing capital on its balance sheet more efficiently and increasing synergies with its property management organization.”
Allianz also stated that, “The deal illustrates the ability of Sixth Streets insurance platform, which consists of Talcott Resolution, and Resolution Res insurance group, Resolution Life, to create and perform highly versatile capital options for leading insurance provider at scale.”
The deal will open $4.1 billion in value and free up regulatory capital for Allianz, the re/insurer said, while Allianz Lifes return on equity ought to improve by around 6 percentage-points to roughly 18% and at a group level, Allianzs Solvency II ratio is anticipated to improve by about 9 percentage-points to 216%.
Its the biggest life back book deal Allianz has participated in and the company stated it, “remains in line with the groups broadened strategy to utilize collaborations with strong reinsurance and danger management business to monetize the value of in-force company and enhance 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 property management arm PIMCO and Allianz Global Investors will also remain on as the primary asset supervisors of the reinsured business.
The liabilities are transferred efficiently through this offer, with two substantial investors and professionals in the life area now set to benefit from this plan.
Sixth Street is a large possession supervisor and got Talcott Resolution, a specialist at providing in-force and new organization services focused on capital versatility and threat management efficiencies to the insurance coverage and reinsurance industry.
Once this Allianz offer is closed, Talcott Resolution and its affiliates will manage $111 billion in liabilities and surplus on a pro-forma basis.
Meanwhile, Resolution Life is the specialist legacy life focused financial investment car and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on big books of life insurance coverage service, utilizing acquisitions or reinsurance backed by capital structures supported by institutional financiers, channelling returns and earnings back to them in the kind of dividends.
After this deal, Resolution Life will have invested approximately $5 billion of equity and have actually gathered $90 billion in assets under management.
As we described earlier 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, in addition to 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 assets globally on behalf of approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, commented on this brand-new plan, “This reinsurance contract even more highlights Resolution Lifes ability to complete large, innovative, and complicated transactions alongside positive partners. Resolution Lifes focus has always been to provide stability and security for policyholders while assisting worldwide insurance coverage partners with their restructuring strategies.”
So this new offer and others Resolution Life has actually participated in 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 substantially thanks to the additional firepower from its institutional investor base.
Which is why we discover these tradition life offers fascinating, as they include capital markets backed capability being utilized for reinsurance of back books, with fund structures underpinning the investors and plans frequently paid via dividends.
Its not insurance-linked securities (ILS), although it does seem securitization might offer an alternative service to some of these arrangements. However it is a form of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its financier day today and revealed a renewed concentrate on enhancing capital performance and decreasing volatility, by reducing the long-tail threats in its portfolio, which obviously this transaction is part of.
This is likely to be a trend for some of the bigger international players, that discover the weight of back books dragging on their capital and have a lot to acquire by freeing some of that with the help of reinsurance, suggesting a possibly growing function for capital market investors to fund legacy arrangements and maybe more opportunity for the ILS market.

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