Zurich unloads next life back book, cuts $20bn in reserves from Germany

Zurich Insurance Group will sell its legacy traditional life insurance back book in Germany to portfolio manager Viridium in what is arguably  Zurich’s biggest move to date towards a sought-out capital-light model.

The sale will sweep $20 billion of net reserves from the  Zurich balance sheet stemming from annuity and endowment products underwritten more than five years ago.

That disposal plus the associated reduction in interest rate exposure will increase  Zurich’s Swiss Solvency Test (SST) ratio by an estimated 8 percentage points (pps) to a pro-forma 242 percent at end-Q1 as measured on the group’s own regulator-approved internal model, management said.

“This is, perhaps, the most important step in our efforts to reduce the capital intensity of  Zurich’s legacy life portfolios and to lower our exposure to interest rates,” group CFO George Quinn (pictured) said, reiterating the twin goals of eliminating earnings dilution and supporting growth.

Growth will remain a German matter. “Germany is one of our most important markets and has been a significant driver of our customer growth,” Quinn said. “We will support our team in Germany with the resources required to ensure that this profitable growth continues.”

Zurich is ticking box after box on its capital-light strategy, having recently sold or reinsured books in Italy, Singapore and the UK.

The current deal remains subject to regulatory approvals.

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