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Zurich Insurance said on Monday that it will release approximately $1.2 billion in capital by selling its Italian life and pensions back book to Portuguese insurer GamaLife. Zurich also stated that the transaction will increase its Swiss Solvency Test ratio by 11 percentage points and significantly reduce its credit risk exposure.
Zurich expects the transaction to increase its liquidity by about $200 million, including a cash consideration of about $148 million. A back book is a collection of old policies that are still in force as premium-paying policies. “The sale demonstrates our commitment to improve capital utilization across our life back book,” Zurich finance chief George Quinn said in a statement.
“The transaction also reduces our exposure to interest rates and credit risks and allows us to focus on the parts of the Italian life and pensions market where we can best serve our customers.” The transaction has no effect on Zurich’s contractual obligations to policyholders and distributors, according to the company, which will remain active in the Italian life insurance and pension market.
Last year, the Swiss firm agreed to buy Deutsche Bank’s (DE: DBKGn) financial adviser network in Italy.