Allianz Life, part of the global insurer and reinsurer, has announced a new reinsurance agreement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company, and Resolution Life, for a $35 billion fixed index annuity portfolio.
The arrangement is in line with the firm’s strategy to unlock value in its life insurance business by managing capital on its balance sheet more efficiently.
In fact, Allianz says that the transaction will unlock $4.1 billion in value and free up regulatory capital. It’s also expected to improve the Life division’s return on equity by around 6% to 18%.
This deal is the largest so far for Allianz in terms of size of life back books, and is line with the group’s strategy to enter partnerships with “strong reinsurance and risk management companies to monetize the value of in-force business and enhance the protection afforded to customers.”
Under the arrangement, Allianz Life will continue to manage administration of the policies in the portfolio and will remain responsible for fulfilling its obligations to policyholders.
Additionally, there will be no changes to policy servicing, call center management, claims payments, statement generation and delivery, distribution partner experience, and digital self-service.
Both PIMCO and Allianz Global Investors will remain the primary asset managers of the reinsured business.
Allianz states that this transaction creates value for all parties due to the market’s undervaluation of high-performing life insurance businesses. Furthermore, this transaction is internationally structured in order to ensure continued commitment to high-quality service and support for Allianz Life’s U.S. policyholders.
Discussing its strategy in action, Allianz notes that, “the reinsurance agreement is envisaged to accelerate growth in its life insurance and asset management businesses: Allianz Life, PIMCO and Allianz Global Investors.
“In the life insurance business, the agreement will maximize Allianz Life’s competitive advantage as an asset gatherer, empowering it to pursue growth in core markets and expand through new product offerings, distribution channels, and customer pools. This positions Allianz Life to leverage current and emerging opportunities in the financial markets and offer customers innovative products that meet changing needs.”
For Sixth Street, a global investment firm with more than $55 billion in assets under management and committed capital, the transaction demonstrates the ability of its insurance platform to create and execute highly flexible capital solutions for leading insurers at scale.