Reinsurance Group of America has reinsured a $2.3 billion annuities portfolio for a subsidiary of Swiss insurer Zurich, helping Zurich to reduce risk and better manage its capital, by offloading the liabilities associated with this legacy book of annuities business using reinsurance capital.
Zurich Insurance Group subsidiary Farmers New World Life has entered into the agreement with Reinsurance Group of America to reinsure a block of its closed U.S. annuity book with the firm, in a transaction representing reserves of roughly $2.3 billion.
Farmers New World Life will continue to administer and service the policies involved, with Reinsurance Group of America providing the reinsurance capital to back the policies and pay any claims.
The transaction provides Zurich with certainty over its financial exposure to this portion of its legacy U.S. annuities book, helping it to better manage its capital and freeing up capacity that can now be put to work elsewhere.
Reinsurance Group of America benefits from the chance to profit over the lifetime of the annuities, while the assets underlying them could be a source of profit for the firm.
Zurich said that the annuity reinsurance arrangement continues the firm’s efforts to reduce tail-risk within its portfolio, improve its use of capital and boost profitability across the insurance Group.
George Quinn, Group Chief Financial Officer, commented on the deal; “The transaction with Reinsurance Group of America is another example of how the Group actively manages its capital and sharpens its business profile. This transaction reduces risk and continues the process of simplifying the group and releasing capital from non core activities as communicated at the time of our investor day in 2016.”
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