Zurich Insurance Group has agreed to sell its legacy traditional life insurance back book in Germany, including $20bn (€19bn) of net reserves, to run-off platform Viridium Holding AG, it announced today.
The $20bn of net reserves are mainly related to traditional guaranteed products underwritten by Zurich Deutscher Herold Lebensversicherung more than five years ago.
A spokesperson for Zurich in Germany said the insurer continued to want to grow its occupational pensions business and that the deal with Viridium did not change its new business offering. He also said the transaction did not have any effect on Deutsche Pensionsfonds AG, the IORP vehicle that Zurich owns with Deutsche Bank.
The transaction, which is subject to regulatory approvals, will involve Zurich Group Germany transferring the policy portfolio and associated balance sheet to a new company, which Viridium will acquire and integrate under a new brand. The portfolio will be transferred gradually to Viridium over a three-year transition period.
On completion, Zurich’s Swiss solvency test ratio is expected to increase by around 8 percentage points, Zurich 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,” said group chief financial officer George Quinn.
“Germany is one of our most important markets and has been a significant driver of our customer growth. We will support our team in Germany with the resources required to ensure that this profitable growth continues.”
The sale of Zurich’s back book is the first larger run-off in Germany since 2019, when Viridium bought the life insurance arm of Generali, and the platform’s fifth acquisition of a closed-book life insurance portfolio.
Viridium’s portfolio will grow to about 4.5 million policies and its assets under management to around €92bn as a result of the deal with Zurich.
Speaking at an industry conference in 2019, Heinz-Peter Roß, chief executive officer at Viridium Group at that time, said he thought more insurers would look into selling closed business branches, most of which contain contracts with high interest rate guarantees, because of the low interest rate environment.