Allianz reinsures $35bn of fixed index annuity liabilities

German insurance and asset management giant Allianz said on Friday its Allianz Life subsidiary is entering into a reinsurance agreement with affiliates of Sixth Street, including Talcott Resolution Life Insurance Company and Resolution Life, for a $35 billion fixed index annuity portfolio.

Allianz Life will reinsure $35 billion of liabilities of a fixed index annuity book in what it called one of the largest transactions of its kind.

Sixth Street is a US investment firm with over $55 billion in assets under management.

Allianz manages around €800 billion on behalf of its insurance customers and its asset managers PIMCO and Allianz Global Investors manage €1.9 trillion of third-party assets.

Allianz also announced its strategic outlook for 2022-24, targeting 5%-7% annual growth in earnings per share (EPS) and a minimum 13% return-on-equity (RoE).

Over the next three years, Allianz said it expects to generate €12 billion of excess capital through its operational plans.

Beginning retrospectively with fiscal year 2021, Allianz said it will follow a new and improved dividend policy that offers a dividend per share “which is the higher of a 50% payout ratio or a 5% increase from the preceding year’s dividend.”

On the $35 billion reinsurance agreement, Allianz said: “The transaction is in line with the Allianz Group’s strategy to unlock value in its life insurance business by managing capital on its balance sheet more efficiently and increasing synergies with its asset management business …” said Allianz.

“The agreement will unlock $4.1 billion in value and free up regulatory capital for Allianz.

“Allianz Life’s return on equity is expected to improve by about 6 percentage-points to approximately 18%.

“On the group level, the transaction will improve Allianz’s Solvency II ratio by about 9 percentage-points to 216%.

“The transaction, which is the biggest so far for Allianz in terms of size of life back books, is in line with the group’s expanded strategy to leverage partnerships with strong reinsurance and risk management companies to monetize the value of in-force business and enhance the protection afforded to customers.

“Allianz Life will continue to manage administration of the policies in the portfolio and will remain responsible for fulfilling its obligations to policyholders.

“There will be no changes to policy servicing, call center management, claims payments, statement generation and delivery, distribution partner experience, and digital self-service.

“PIMCO and Allianz Global Investors will remain the primary asset managers of the reinsured business …

“Reflecting Allianz’s integrated approach to creating value for shareholders, 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.

“Allianz’s asset management business stands to benefit from the brand and reach of Allianz Life, with increased growth in assets under management and corresponding fee revenue.”