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

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

Worldwide insurance and reinsurance giant Allianz has actually maximized approximately $4.1 billion in value after participating in a reinsurance plan 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 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 protecting substantial liabilities to manage.
Allianz Life exposed a reinsurance arrangement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the specialist tradition life insurance 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 service by handling capital on its balance sheet more effectively and increasing synergies with its asset management service.”
Allianz likewise stated that, “The deal illustrates the capability of Sixth Streets insurance platform, which consists of Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to produce and carry out extremely versatile capital services for leading insurance coverage companies at scale.”
The deal will open $4.1 billion in worth and totally free up regulative capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity must improve by around 6 percentage-points to approximately 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 actually entered into and the business said it, “remains in line with the groups expanded technique to leverage partnerships with strong reinsurance and danger management companies to generate income from the value of in-force organization and improve the protection paid for to clients.”
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 huge property management arm PIMCO and Allianz Global Investors will also remain on as the main asset managers of the reinsured service.
The liabilities are moved efficiently through this deal, with 2 significant financiers and professionals in the life space now set to benefit from this arrangement.
Sixth Street is a big possession manager and acquired Talcott Resolution, an expert at supplying in-force and brand-new business solutions focused on capital flexibility and danger management efficiencies to the insurance coverage and reinsurance market.
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.
On The Other Hand, Resolution Life is the expert tradition life focused financial investment car and supervisor and part of Clive Cowderys Resolution Group.
Resolution Life handles big books of life insurance coverage business, using acquisitions or reinsurance backed by capital structures supported by institutional investors, funneling 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 explained earlier this year, Resolution Life raised $1.6 billion to fund development through the acquisition and reinsurance of life insurance coverage portfolios, utilizing 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 managing around $60 billion of assets worldwide on behalf of approximately 2.5 million insurance policy holders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, talked about this new arrangement, “This reinsurance agreement further illustrates Resolution Lifes ability to complete large, innovative, and intricate deals alongside constructive partners. Resolution Lifes focus has actually constantly been to provide stability and security for insurance policy holders while assisting worldwide insurance partners with their restructuring plans.”
So this brand-new offer and others Resolution Life has 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 significantly thanks to the extra firepower from its institutional investor base.
Which is why we discover these legacy life deals fascinating, as they feature capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the financiers and arrangements typically paid via dividends.
Its not insurance-linked securities (ILS), although it does appear securitization might offer an alternative option to some of these arrangements. It is a form of insurance-linked financial investment in the eyes of the institutional backers.
Allianz likewise held its financier day today and revealed a renewed focus on enhancing capital effectiveness and decreasing volatility, by reducing the long-tail dangers in its portfolio, which of course this deal belongs to.
This is likely to be a trend for some of the bigger worldwide 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 aid of reinsurance, suggesting a possibly growing function for capital market financiers to finance tradition plans and perhaps more opportunity for the ILS market.

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