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Allianz reduces runoff with $1 billion legacy liability transfer


Allianz S.E. Reinsurance says it will transfer $1.1 billion in U.S. legacy liability claims to runoff reinsurer Enstar Group Ltd. in a 50% quota share arrangement.

Allianz's San Francisco Reinsurance Co., a unit of Allianz Resolution Management that does business as ARM U.S., and Enstar will jointly manage runoff of the three U.S. legacy business areas — asbestos and environmental, construction defects and workers compensation — that have net reserves of $2.2 billion, Allianz said Wednesday in a statement.

“Enstar's combined role as reinsurer and co-manager provides several benefits,” Dieter Wemmer, Allianz's chief financial officer, said in the statement. “We reduce our risk and release capital through the reinsurance contract. Further, the premium for the reinsurance agreement is in line with the carried reserves at year-end 2015. We see significant value potential for both parties thanks to the combined strengths and economies of scale going forward.”

The agreement will support the company's goal of establishing a runoff operation for the group and is part of its Renewal Agenda announced in November, Axel Theis, the Allianz board member responsible for Allianz Re, said in the statement.

The Renewal Agenda that's intended to improve Allianz's financial and client performance includes getting €1 billion ($1.13 billion) in annual productivity gains by 2018, a 13% return on equity by 2018 and annual earnings growth of 5% per share from 2016 to 2018.

The quota share agreement is subject to regulatory approvals, Allianz said.