Allianz Life moves to strengthen annuity operations with own reinsurer

Allianz has long been a major innovator and seller of annuities. But the annuity world is changing fast and Allianz recently committed to changing with it by establishing its own reinsurer.

Last month, Allianz quietly announced the new independent strategic reinsurance platform called Sconset Re. Like many of its competitors, Allianz set up Sconset Re in Bermuda.

The reinsurer is being capitalized through equity investments from high-quality institutional partners and will focus on fixed indexed annuity product risk and its asset management.

Allianz declined an interview request about Sconset Re, but shared this statement:

Allianz SE has announced a new independent strategic reinsurance company, Sconset Re, to support growth opportunities. Sconset Re will help support Allianz Life’s expansion into the fast-growing accumulation space by increasing the competitiveness of Allianz Life products and delivering greater consumer value.

As part of this, Allianz Life will reinsure a $4B block of fixed index annuities, with PIMCO managing the majority of the investment portfolio. Similar to prior reinsurance transactions, the policies that are part of this transaction remain insured and serviced by Allianz Life, who will remain responsible for fulfilling the obligations of the policies. This transaction is representative of the close relationship between Allianz Life and PIMCO and the increased role and opportunity that Allianz sees with its life and asset management business in the U.S.

Also in December, Allianz held an investor day and set ambitious goals for 2025.

Strong sales environment

Annuity sales exploded in the aftermath of the COVID-19 interruption. The industry broke $300 billion in annuity sales and set records in each of the past two years and is expected to again when 2024 sales are tallied.

Wink, Inc. reported third-quarter annuity sales of $115.2 billion, up 6.6% compared to the previous quarter. Allianz Life ranking as the No. 1 seller of indexed annuities, with a market share of 13%, Wink reported. Indexed annuity sales for the third quarter were $36.8 billion, up 57.8% compared to the same period last year.

Now that it has its own reinsurer, Allianz is in good position to further reclaim its dominance of the market, said Sheryl Moore, founder of Wink, Inc. and Moore Market Intelligence.

“It has been my experience that once an indexed annuity carrier enters an arrangement with an asset manager and a reinsurer, that their products become more competitive,” she said.

Allianz Life has a quarter century of delivering strong annuity sales to its parent, Allianz SE, headquartered in Munich, Germany. In 1999, Allianz SE bought Life USA for $540 million and merged it with Allianz Life. Founder Robert W. McDonald led Life USA to annual sales exceeding $1 billion, and Allianz named him CEO of the newly constituted Allianz Life.

The insurer would soon become a top leader in the fixed indexed annuity market. In recent years, new challengers such as Athene Life and Annuity are perfecting a high-volume strategy in close partnership with asset manager Apollo Global Management and its own reinsurer, Athene Life Re.

Utilizing a self-owned Bermuda reinsurer allows insurers to better manage its reserves more efficiently due to lower capital requirements in Bermuda compared to other jurisdictions.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.