Resolution Life Australasia targets growth via acquisitions, partnerships
Resolution Life, a global life insurance group, entered the Australian market in 2019 through its acquisition of AMP Life for approximately A$3 billion ($2.08 billion). Completed in June 2020, the deal signalled not just a change in ownership but a new approach to life insurance investment management for the firm.
Resolution Life
“The general mission we have within the IM function is to deliver superior risk-adjusted returns in a more capital-efficient, sustainable manner for the benefit of our policyholders," John Lucey, CIO of Resolution Life Australasia told AsianInvestor, referring to its investment management business.
The life insurer’s investment approach to building a diversified, multi-asset portfolio places a particular emphasis on a small but powerful network of strategic external manager relationships.
"We're never going to have 60 managers. We're not like a large pension fund where they'll have 10 managers per asset class. We'll find managers that we think are best-of-breed in their space," said Lucey.
The depth of these partnerships has been evident in how Resolution Life Australia interacts with its chosen managers.
"We're not going to say, 'Here's $100 million, come see us in six months and let us know how the portfolio went,'” Lucey explained. “It's a strategic partnership, an extension of the investment team. If we've got issues or problems on some other part of our portfolio, we should be able to reach out and have those discussions, which we do."
“We have high single-digit manager relationships, but they're all very meaningful relationships,” the CIO added. “They understand insurance and capital regimes.”
Resolution Life has also been very aware of its environmental, social and governance (ESG) impact and places this expectation upon external managers.
“We take an engagement lens in relation to ESG, where our managers have to be engaged with the companies they own in the portfolio. They have to know the companies, be involved, and report,” Lucey said. “We run reports over the top in relation to metrics so they're not just telling us what they do in a glossy brochure, but we have proof in the pudding and can measure the ESG engagements.”
GROWTH AND ACQUISITIONS
Globally, the group has around $85 billion in assets under management, while Resolution Life Australasia manages around A$30 billion.
To grow its Australasian arm, the life insurer has also used leveraged acquisitions to significantly expand its assets and investment scope.
“The AIA Super and Investments portfolio is probably the most recent one that we completed, in July of last year,” said Lucey.
The acquisition brought around A$5 billion worth of extra assets under the firm’s management and investment function.
“It allowed us to leverage our strategic partnerships to introduce new strategies that would have previously been out of reach for an asset owner without that amount of funds. So that, in turn, allowed us to expand the investable universe of those portfolios and build a better portfolio with more enhanced outcomes,” said the CIO.
This growth strategy extends beyond Australia.
"Resolution Life is focused on growth across the globe, including opportunities in US, UK and Australasia. It's a truly global approach,” Lucey said. “We opened the office in Singapore last year to focus more on opportunities and growth in Asia."
The impact of acquisitions on their investment strategy is significant.
"As we make acquisitions, any assets that come with those acquisitions get folded into the strategy if appropriate. This allows us to leverage the size of the group, the local portfolio, the local team, and the local manager relationships, enhancing outcomes on that portfolio as well," Lucey said.
MAINTAINING LIQUIDITY
Within Resolution Life Australasia's portfolio, the major asset classes play the roles one would normally expect in an insurance book.
“We have fixed income and cash, some private and public credit, and then we have growth assets including equities, both domestic and international, and some real assets such as property and infrastructure, both listed and unlisted,” said Lucey.
While he declined to provide an exact portfolio breakdown, the CIO noted “it's roughly around a 50/50 split” between growth and defensive asset classes.
However, Lucey contends that the firm maintains a very liquid portfolio with illiquid assets representing the minority.
“It's a relatively small percentage, but we do model our liquidity very carefully,” he said.
The insurer’s less liquid assets allow it to harvest complexity and illiquidity premium, but Lucey emphasised that they are very careful in relation to how much is placed within the portfolio.
“We do like the asset classes. We look at real assets, some unlisted property, some unlisted infrastructure. In 2022, we entered into a strategic partnership with Blackstone, and we utilise Blackstone primarily across private credit,” said Lucey.
Within private credit, Resolution Life has been engaged with global direct lending, asset-backed finance, and some residential and commercial mortgage loans, according to Lucey.
“We access private credit markets through our Blackstone relationship, which has proved to be very beneficial. That's been one of the shifts in the portfolio in the last two years where we've rotated into private credit, both domestically and globally,” he said.
Editor's Note: The title of this article has been updated.