New deal unlocks $4.1bn value for Allianz and scale for Resolution Life in ‘undervalued’ business

Global insurer  Allianz believes that its $35 billion fixed index annuities reinsurance transaction with Resolution Life creates value for all parties due to the market’s “undervaluation of high-performing life insurance businesses”.

Allianz Life has entered into a reinsurance agreement with Talcott Resolution Life Insurance Company and Resolution Life, a global life insurance group focusing on the acquisition and management of life insurance policies, for a $35-billion fixed index annuity portfolio.

Under the transaction, $26 billion of fixed index annuity liabilities will be reinsured to Resolution Life’s reinsurance platform Resolution Re, with $12 billion of the reinsured liabilities to be retroceded to an affiliate reinsurer of Talcott. Talcott has separately agreed to reinsure $8 billion of fixed indexed annuity liabilities directly from Allianz Life.

The transaction is expected to be completed by the end of this year. It is Resolution Life’s second reinsurance agreement with Allianz Life, following a $4.3 billion deal with Allianz Suisse Life in September 2021.

The agreement further diversifies Resolution Life’s risk profile and adds scale to the group’s balanced portfolio across major insurance markets in the US, Europe and Australia. Following completion, Resolution Life, including the group’s Bermuda reinsurance base, will manage c.$90 billion of assets. Resolution Life has now invested c.$5 billion of capital since its launch in 2018.

The transaction marks a busy period of M&A for Resolution Life in 2021, following the acquisition of Voya Financial’s individual in-force business as well as the signing of reinsurance agreements with Lincoln National Corporation and Allianz Suisse.

“This reinsurance agreement further illustrates Resolution Life’s ability to complete large, innovative, and complex transactions alongside constructive partners. Resolution Life’s focus has always been to provide stability and security for policyholders while helping global insurance partners with their restructuring plans,” said Sir Clive Cowdery (pictured), Resolution founder and executive chairman.

Meanwhile for Allianz, it unlocks $4.1 billion in value and strengthens its regulatory capital position. Allianz Life’s return on equity is expected to improve by about 6 percentage-points to approximately 18 percent. On the group level, the transaction will improve Allianz’s Solvency II ratio by about 9 percentage-points to 216 percent.

The deal is said to be the biggest so far for Allianz in terms of size of life back books.

“It is in line with the group’s expanded strategy to leverage partnerships with strong reinsurance and risk management companies to monetise the value of in-force business and enhance the protection afforded to customers,” Allianz stated.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.