Principal Financial Group has entered into an agreement with an affiliate of Sixth Street and its insurance platform, Talcott Resolution (Talcott).

Under the agreement, the Talcott affiliate will reinsure Principal’s nearly $25bn of liabilities, which includes $16bn and $9bn of retail fixed annuity and secondary guarantee universal life insurance liabilities, respectively.

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Principal will continue to administer and service the reinsured policies.

As part of the agreement, Principal will manage Talcott’s nearly $4bn of commercial mortgage loans and private credit assets for at least five years.

Principal chairman, president, and CEO Dan Houston said: “We are focused on improving capital efficiency and strengthening Principal to win, grow, and create long-term shareholder value. We conducted a comprehensive process designed to optimise the value of these blocks while improving our overall risk profile and reducing the capital requirements of our portfolio.

“At close, these transactions, along with strong operating performance, enables a significant increase to our share repurchase program, while supporting our ability to invest in growth, serve our customers, and lead in higher growth markets.”

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Sixth Street co-founder and partner A. Michael Muscolino said: “The Talcott team continues to affirm our original investment thesis: this platform, with its broad capabilities and deep expertise, can realise its significant growth potential as the premier strategic partner to the insurance industry.

“We were pleased to work with the Principal team to create this solution, and we look forward to Talcott continuing to successfully execute on its plans for growth and diversification.”

Once the deal is closed, Talcott and its affiliates will manage $140bn in liabilities and surplus on a pro-forma basis as of 30 September 2021.