Resolution Life sets up permanent capital structure

Resolution Life, the life focused arm of insurance entrepreneur Clive Cowdery’s Resolution Group, has set up a new permanent capital structure which aims to acquire and manage in-force portfolios of life insurance to benefit its institutional investors.

Resolution Group was launched in 2008 by Clive Cowdery promising to consolidate the UK life insurance sector, which Cowdery said was overrun with inefficient, smaller companies. Resolution’s aim was to, through acquisition and consolidation using funds raised from institutional investors, grow a performing portfolio of life business which would generate attractive returns for the firm and its investors.

Resolution first looked to the U.S. last year when it bought Lincoln Benefit Co. from U.S. insurer Allstate, attempting to repeat the success Cowdery has had in the UK in buying life portfolios for less than their embedded values and running in-force books off to realise profits.

On Monday 31st March Resolution Life said it had established a permanent capital structure to target U.S. life insurance business. The structure aligns Resolution Life’s long-term commitment to the U.S. market with its institutional investors investment horizon and the duration of the underlying life insurance policies, the firm said.

The firms initial plans are to invest $2 billion in the structure, which it says will help it to build; “A lasting, sizeable and differentiated life insurance business through the acquisition and management of in-force portfolios.”

“At Resolution Life, we provide a unique opportunity to insurance companies by acquiring their non-core U.S. life insurance and annuity portfolios and making them our sole priority,” commented CEO Weldon Wilson. “We have a long-term view of the U.S. market and have a deep commitment to delivering high-quality customer service and building enduring relationships with our policyholders.”

Demonstrating the opportunity in acquisition and run-off of in-force life insurance books, Resolution has over the past ten years consolidated a substantial share of the U.K. life market through the acquisition of 25 life insurance companies, including more than 10 million policyholders and $200 billion of policy assets.

“The U.S. life insurance industry is highly mature, with over-capacity and increasing competition aimed at a shrinking new business pool. This has created significant profitability pressure and many companies’ life insurance portfolios are becoming increasingly non-core businesses. We believe there is significant opportunity for industry consolidation,” added Chairman Clive Cowdery.

The Resolution Group example shows another area of the insurance and reinsurance market that capital markets investors may look to become more involved in years to come. Through companies such as Resolution institutional investors can access the returns of run-off life insurance business, but in future we may see structures established giving investors more direct access to financing these deals.

The Resolution Life permanent capital vehicle will likely provide this to a degree, but fund based approaches to financing in-force life insurance acquisitions could be a very attractive opportunity for investors, with the funds partnering with companies able to run down the business for them.

Also read our article from earlier on French reinsurer SCOR’s latest VIF (Value of In Force) life reinsurance deal with Mediterráneo Vida.