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 freed up approximately $4.1 billion in value after participating in a reinsurance arrangement to transfer $35 billion of fixed index annuity liabilities to entities of Sixth Street and Clive Cowderys Resolution Life.Its one of the biggest legacy or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about releasing capital and including efficiency, while for the counterparties it is a method to put capital to work in securing significant liabilities to handle.
Allianz Life revealed a reinsurance agreement with affiliates of Sixth Street, consisting of Talcott Resolution Life Insurance Company, and Resolution Life, the specialist legacy life insurance investments arm of insurance coverage business owner Clive Cowderys Resolution Group, to cover a $35-billion repaired index annuity portfolio.
Allianz explained that the deal will “unlock worth in its life insurance service by managing capital on its balance sheet more efficiently and increasing synergies with its property management service.”
Allianz also said that, “The deal illustrates the ability of Sixth Streets insurance platform, that includes Talcott Resolution, and Resolution Res insurance group, Resolution Life, to create and perform highly flexible capital options for leading insurance business at scale.”
The offer will unlock $4.1 billion in worth and free up 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 improve by about 9 percentage-points to 216%.
Its the biggest life back book offer Allianz has participated in and the business said it, “remains in line with the groups broadened technique to leverage collaborations with strong reinsurance and risk management business to generate income from the worth of in-force service and boost the security 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 likewise remain on as the primary property supervisors of the reinsured company.
The liabilities are transferred effectively through this deal, with two substantial investors and experts in the life area now set to benefit from this plan.
Sixth Street is a large asset manager and obtained Talcott Resolution, an expert at providing in-force and new business services focused on capital flexibility and threat management efficiencies to the insurance and reinsurance industry.
As soon as this Allianz offer 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 legacy life focused investment automobile and manager and part of Clive Cowderys Resolution Group.
Resolution Life takes on large books of life insurance coverage service, utilizing acquisitions or reinsurance backed by capital structures supported by institutional financiers, channelling revenues and returns back to them in the type of dividends.
After this deal, Resolution Life will have invested approximately $5 billion of equity and have actually collected $90 billion in assets under management.
As we explained earlier this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance portfolios, utilizing its Bermudian reinsurance platform Resolution Re, along with 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 possessions internationally on behalf of around 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, discussed this brand-new plan, “This reinsurance agreement even more illustrates Resolution Lifes capability to complete large, innovative, and intricate deals together with positive partners. Resolution Lifes focus has always been to offer stability and security for insurance policy holders while helping international insurance coverage partners with their restructuring strategies.”
This new offer and others Resolution Life has entered into 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 significantly thanks to the extra firepower from its institutional financier base.
Which is why we discover these legacy life deals fascinating, as they feature capital markets backed capability being utilized for reinsurance of back books, with fund structures underpinning the plans and investors often paid through dividends.
Its not insurance-linked securities (ILS), although it does seem securitization could supply an alternative solution to some of these arrangements. But it is a kind of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its financier day today and announced a renewed concentrate on improving capital effectiveness and lowering volatility, by decreasing the long-tail risks in its portfolio, which obviously this deal becomes part of.
This is likely to be a pattern for some of the bigger global players, that find the weight of back books dragging on their capital and have a lot to gain by freeing some of that with the assistance of reinsurance, suggesting a maybe growing function for capital market financiers to fund tradition arrangements and possibly more opportunity for the ILS market as well.

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