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

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

International insurance coverage and reinsurance huge Allianz has freed up roughly $4.1 billion in value after participating in 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 biggest legacy or back-book life and annuity reinsurance deals ever seen and for Allianz its everything about freeing capital and adding effectiveness, while for the counterparties it is a method to put capital to work in protecting considerable liabilities to handle.
Allianz Life revealed a reinsurance arrangement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, the professional legacy life insurance coverage investments arm of insurance business owner Clive Cowderys Resolution Group, to cover a $35-billion repaired index annuity portfolio.
Allianz discussed that the deal will “unlock worth in its life insurance coverage company by handling capital on its balance sheet more efficiently and increasing synergies with its property management service.”
Allianz likewise stated that, “The transaction highlights the capability of Sixth Streets insurance coverage platform, which includes Talcott Resolution, and Resolution Res insurance coverage group, Resolution Life, to develop and carry out highly flexible capital options for leading insurer at scale.”
The deal will open $4.1 billion in value and complimentary up regulatory capital for Allianz, the re/insurer stated, while Allianz Lifes return on equity ought to enhance by around 6 percentage-points to approximately 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 participated in and the business said it, “remains in line with the groups expanded strategy to leverage collaborations with strong reinsurance and threat management companies to generate income from the worth of in-force business and boost the security managed to clients.”
Allianz Life will continue to handle the policy administration for the portfolio, so with no modifications to how policyholders are serviced, while Allianzs giant possession management arm PIMCO and Allianz Global Investors will likewise stay on as the main property managers of the reinsured service.
But the liabilities are moved successfully through this offer, with two substantial financiers and specialists in the life space now set to gain from this plan.
Sixth Street is a large property supervisor and obtained Talcott Resolution, a professional at providing in-force and new organization solutions concentrated on capital versatility and danger management effectiveness to the insurance coverage and reinsurance market.
When 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 financial investment automobile and manager and part of Clive Cowderys Resolution Group.
Resolution Life handles big books of life insurance organization, using acquisitions or reinsurance backed by capital structures supported by institutional financiers, directing returns and revenues back to them in the type of dividends.
After this transaction, Resolution Life will have invested approximately $5 billion of equity and have actually collected $90 billion in possessions under management.
As we discussed earlier this year, Resolution Life raised $1.6 billion to fund growth through the acquisition and reinsurance of life insurance coverage portfolios, using its Bermudian reinsurance platform Resolution Re, in addition to 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 properties internationally on behalf of approximately 2.5 million policyholders.
Sir Clive Cowdery, Resolution Founder and Executive Chairman of Resolution Life, discussed this brand-new plan, “This reinsurance agreement further illustrates Resolution Lifes capability to finish large, ingenious, and intricate transactions together with positive partners. Resolution Lifes focus has actually constantly been to supply stability and security for insurance policy holders while assisting international insurance partners with their restructuring strategies.”
So this new offer and others Resolution Life has actually participated in through the second 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 extra firepower from its institutional investor base.
Which is why we discover these legacy life offers intriguing, as they include capital markets backed capacity being used for reinsurance of back books, with fund structures underpinning the investors and plans frequently paid through dividends.
Its not insurance-linked securities (ILS), although it does appear securitization could provide an alternative option to some of these plans. It is a form of insurance-linked investment in the eyes of the institutional backers.
Allianz likewise held its investor day today and announced a restored concentrate on enhancing capital effectiveness and decreasing volatility, by minimizing the long-tail risks in its portfolio, which obviously this transaction becomes part of.
This is most likely to be a pattern for some of the bigger global players, that discover the weight of back books dragging on their capital and have a lot to acquire by releasing some of that with the assistance of reinsurance, recommending a maybe growing role for capital market investors to fund legacy arrangements and possibly more chance for the ILS market.

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