The Allstate Corp. sells Allstate Life Insurance Co. to entities managed by investment firm Blackstone for $ 2.8 billion.
Explaining this development from Allstate’s perspective, Allstate CEO Tom Wilson discussed a strategy to increase market share in personal property / casualty insurance and the need to unlock deployable capital to support property / damage insurance activities.
It’s the same strategy Wilson cited last July when it announced that Allstate was buying National auto insurer General for $ 4 billion.
“Allstate is deploying capital in low growth, high performing businesses while continuing to execute on our strategy to grow personal property liability market share and expand protection solutions for clients Wilson said when announcing the unit life insurance deal.
According to transaction details, the sale of ALIC does not include Allstate Life Insurance Company of New York. The New York-based company has $ 5 billion in GAAP reserves and Allstate said it was looking for alternatives to sell or transfer the risk to a third party.
Not only will the increase in deployable capital as a result of the agreement with Blackstone, but the sale will also provide “increased transparency to the peak returns of our core protection business,” Wilson said.
In the opposite direction, two other personal insurers, Progressive and InsurTech Lemonade, are pursuing strategies to enter the life insurance business.
ALIC owns about 80 percent, or $ 23 billion, of Allstate’s life reserves and annuities. The life insurance company generated a net profit of $ 467 million in 2019 and a net loss of $ 23 million in the first nine months of 2020.
Gilles Dellaert, Global Head of Blackstone Insurance Solutions, said Blackstone continues to grow its insurance business. “We believe that our team’s extensive experience in the insurance industry and world-class asset origination capabilities will provide significant benefits to policyholders and investors over the long term,” said Dellaert.
All statutory profits from the life insurance business sold to Blackstone will be retained by Allstate from March 31, 2020 until closing. The transaction will reduce Allstate’s GAAP reserves by $ 23 billion.
Blackstone will enter into an asset management deal for ALIC’s $ 28 billion investment.
The transaction is subject to regulatory approval with a closing expected in the second half of 2021.
JP Morgan Securities, Ardea Partners and Lazard acted as financial advisers and Willkie Farr & Gallagher acted as legal advisor to Allstate. Morgan Stanley and Credit Suisse Securities acted as financial advisers and Debevoise & Plimpton acted as legal advisor to Blackstone.
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