Allianz implements measures to generate € 12 billion in excess capital

Europe’s largest insurer Allianz has put in place a series of measures aimed at generating € 12 billion in excess capital as it seeks to reverse the decline in its share price after an earnings warning in August .

He also unveiled an agreement with insurance consolidator Resolution Life and affiliates of the Sixth Street investment group to reinsure $ 35 billion of US annuity liabilities.

The company said the deal would separately free up $ 4 billion in capital from those old policies and improve its solvency ratio, a measure of how much capital an insurer has over the regulatory minimum.

Its share price rose 1% to € 200 on Friday morning, bringing its drop over the past six months to 8%.

Allianz has announced tighter profit targets for the next three years, including growth in earnings per share of between 5 and 7 percent, to reach 12 billion euros.

In addition, it will offer a dividend payment representing either a 5% increase over the previous year or 50% of net profit, now adjusted for “extraordinary and volatile items”. The minimum solvency requirement for disbursement has been lowered.

In an interview with the Financial Times, Allianz Managing Director Oliver Bäte presented the reinsurance deal as the start of a transformation of the life division into an asset collection company with more capital needs. light. The group will continue to manage the assets linked to the reinsured annuity business.

“There are more deals coming to the United States, if and when we get good economic conditions,” Bäte said, citing so-called variable annuities as a possible example.

“This is a real starting point for the Allianz group and we are also going to extend it to other markets. He declined to give a figure on how much more money could be released through similar transactions.

Philip Kett, analyst at Jefferies, said the announcement “surprised positively in a number of ways” as it was expected to largely follow previous plans.

However, Allianz has not yet quantified the anticipated financial impact of its legal and regulatory exposure to its so-called Structured Alpha funds in the United States.

The insurer faces lawsuits from investors and regulatory investigations into the performance of these funds during the market turbulence linked to last year’s pandemic.

Other major US insurers made deals this year to free up cash from their delinquent policy portfolios.

U.S. insurer Prudential Financial announced in September that it was selling a set of variable annuities to Fortitude Re, whose backers include the Carlyle Group, for a cash purchase price of $ 1.5 billion.

AIG, another U.S. insurer, announced a strategic partnership with Blackstone, which took a stake in its life and retirement business in which it would manage tens of billions of dollars in assets.

Valerie J. Wallis