Allianz reinsures massive $35bn US indexed annuity portfolio in strategic move towards capital-light model

Allianz will free itself of a $35 billion indexed annuity portfolio in the US via a massive reinsurance deal with Sixth Street affiliates as it presses its life and health operations into a capital-light model, details of a new corporate strategy released early Friday (December 3) show.

The deal will unlock €3.6 billion in capital for Allianz Life, equal to roughly 9 percentage points (pps) on its Solvency II ratio. With capital freed, expect a 6 pps gain to ROE at Allianz Life to 18% and a roughly 1 pps gain for the larger Life/health segment to 13%, management noted in an accompanying presentation.

But Allianz, to date a leading supplier of indexed annuities in the US, will cede commissions with a post-tax net present value of roughly €1.8 billion to render a day one hit to net income of neighborhood €450 million, the presentation showed.

The deal comes as Allianz sets a strategic goal of refocusing growth in the Life and Health sector on protection, unit-linked and capital-light products in ways that should better align with asset management operations at PIMCO and Allianz Global Investors, management said.

"As customer needs evolve, the reserves are expected to increase in preferred lines and decrease in guaranteed savings and annuities business," management wrote in a statement to investors.

Allianz will continue to manage administration of the portfolio policies.

The deal brings in Sixth Street affiliates including Talcott Resolution Life Insurance Company, and Resolution Life.

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