Allianz plots new third party capital options in 2022 to lighten capital load of new business

Allianz will come to market in 2022 with unspecified new options for third party capital that can help the group manage capital and exposures.

Asked about Allianz's plans to sell more back book in the life segment, chief executive officer Oliver Bäte (pictured) asked analysts on the Q4 earnings call to think bigger:  it's not just life, it's not just in-force policies and it's certainly not just the Allianz balance sheet.

"The next step is not just in-force [policies], but how can we do this with new business to work with private capital," Bäte said. And P&C got equal billing with life as Bäte sounds ready to work on any line where other people's money can ease the capital strain from writing new business.

Bäte claims to see numerous competitive markets in the US and elsewhere where he could gladly set the structure, handle distribution "then put the business onto balance sheets that have much better cost of capital than we have."

"That is the next level of the transformation we are working on, and some of that is coming in 2022," Bäte said.

The goal should be to enable high-ROE growth by "making sure we systematically reduce exposure to tail shocks."

"And you are going to see that in reduced volatility of our Solvency II ratio and in a strongly growing Solvency II ratios because new business is going to be accretive to Solvency II which is a total change and it is coming this year."

Allianz highlighted its move out of capital-intensive life products with a massive reinsurance deal late in 2021, freeing itself of a $35 billion index annuity portfolio in the US in a reinsurance deal with Sixth Street affiliates.

The deal was hailed for unlocking €3.6 billion in capital for Allianz Life, equal to roughly 9 percentage points (pps) on its Solvency II ratio. With capital freed, markets were told to 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%.

Allianz claims to approach other back books with a broader toolkit, including renegotiating contracts in Italy and offering replacement products in France. "It's not just about selling books," Bäte said.

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