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Allstate to sell life insurance division to PE giant Blackstone for $2.8bn

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Allstate has agreed to sell its life insurance arm, Allstate Life Insurance Company (ALIC), to entities managed by private equity firm Blackstone for $2.8bn. 

In a statement after close of markets on Tuesday, the carrier announced the deal, which is pending regulatory approval and expected to close in the second half of 2021.

ALIC holds about 80%, or $23bn, of Allstate’s life and annuity reserves. During 2019 it generated net income of $467mn, and reported a net loss of $23mn during the first nine months of 2020.

The transaction fee includes a pre-closing dividend from ALIC of up to $400mn, and all statutory earnings from March 31, 2020 until the deal closes will be retained by Allstate.

According to the carrier, the divestment will reduce Allstate’s GAAP reserves by $23bn, and Blackstone will enter into an asset management agreement for ALIC’s $28bn of investments.

The deal excludes Allstate Life Insurance Company of New York, which remains a separate subsidiary underneath Allstate’s group parent company. The carrier retains ownership of the company, which has $5bn of GAAP, but said it is pursuing alternatives to sell the business or otherwise transfer associated risks to a third party.

Commenting on the agreement, Allstate chair, president and CEO Tom Wilson said: “Allstate is deploying capital out of lower growth and return businesses while continuing to execute our strategy to grow market share in personal property-liability and expand protection solutions for customers.”

“Customers will be protected using non-proprietary life insurance products, as is currently done for annuities. Deployable capital will increase, and the transaction also provides increased transparency to the industry-leading returns of our core protection businesses,” the executive added. 

Blackstone’s global head of insurance solutions, Gilles Dellaert, said: “We’re pleased to enter into this transaction as Blackstone continues growing its insurance business. We believe our team's extensive experience in the insurance sector and world-class asset origination capabilities will deliver significant benefits to policyholders and investors over the long term."

Dellaert, the former co-president and chief investment officer for Global Atlantic, joined Blackstone last year to lead the asset manager’s $60bn insurance business.

Allstate’s decision to dispose of its life insurance arm follows a similar move by AIG, which in October last year announced it would spin out its life and retirement unit. AIG has since said it will begin the divestment with an initial 19.9% minority IPO or sale.

JP Morgan Securities, Ardea Partners and Lazard acted as financial advisers to Allstate, and the carrier’s legal advisor was Willkie Farr & Gallagher.

Blackstone’s financial advisers on the transaction were Morgan Stanley and Credit Suisse. Its legal adviser was Debevoise & Plimpton.

In September last year, Allstate undertook a strategic restructuring, letting go of 3,800 employees as part of a plan to merge its Allstate and Esurance operations. The changes were framed as necessary to remain competitive within the auto insurance market.

At the time the carrier took a $290mn pre-tax restructuring charge, which was recognized in its third and fourth quarter results.

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