Blackstone Takes Stake In AIG Life & Retirement Business In $2.2B Deal

American International Group is selling a 9.9% equity stake in AIG’s Life & Retirement business to Blackstone for $2.2 billion in an all-cash transaction.

As part of this agreement, AIG also agreed to enter into a long-term strategic asset management relationship with Blackstone to manage an initial $50 billion of Life & Retirement’s existing investment portfolio upon closing of the equity investment, with that amount increasing to $92.5 billion over the next six years.

Upon the closing of these transactions, which are expected to occur simultaneously by the end of the third quarter of 2021, Jon Gray, President and Chief Operating Officer of Blackstone, will join the Life & Retirement Board of Directors. These transactions are subject to HSR approval and other customary closing conditions.

AIG announced the planned sale of its Life & Retirement business in October, succumbing to pressure from high-profile investors to split it off from the insurer's P&C operations. There are no plans to break up the Life & Retirement business, AIG President and CEO Peter Zaffino has said.

The insurer hoped to sell a 19.9% stake in the Life & Retirement business. Zaffino suggested that AIG will continue efforts to find additional partners beyond the Blackstone deal for 9.9%.

“Today’s announcement is an important milestone for AIG. Establishing a cornerstone partnership on several fronts with such a highly regarded organization as Blackstone validates the strength of our market-leading Life & Retirement business and provides it with additional growth opportunities, provides AIG with flexibility as we continue to work to separate Life & Retirement from AIG, and results in significant new capital for AIG to deploy to support our capital management priorities,” Zaffino said.

The Blackstone Group Inc. is an American alternative investment management company based in New York City. In 2019, Blackstone converted from a publicly traded partnership into a corporation.

Blackstone's private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate business has actively acquired commercial real estate. As of 2021, the company's total assets under management were approximately $649 billion.

Separate Real Estate Deal

Separately, AIG and Blackstone Real Estate Income Trust (BREIT), a long-term, perpetual capital vehicle affiliated with Blackstone, also announced today that they have reached a definitive agreement for BREIT to acquire AIG’s interests in a U.S. affordable housing portfolio for approximately $5.1 billion, in an all cash transaction. This transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2021.

Mr. Zaffino added: “AIG has stewarded the Affordable Housing portfolio for more than 30 years. While the highly specialized assets subject to this transaction are attractive investments, they are no longer core to AIG’s long-term investment strategy. We believe Blackstone has the right expertise and commitment to stakeholders to manage these assets going forward.

“We look forward to a productive and value-enhancing partnership with Blackstone as we continue to build momentum on our journey to become a top performing company.”

Jon Gray said: “We are honored to become AIG’s strategic partner, supporting the growth and success of one the world’s top life insurers as a standalone business. We believe our leading private credit origination platform will play an important role to help meet long-term policyholder obligations while maintaining strong credit quality.”

Kathleen McCarthy, Global Co-Head of Blackstone Real Estate, commenting on the real estate transaction, added: “These communities provide critical affordable housing and we look forward to being long-term owners. We will make significant investments to improve the apartments while ensuring they remain affordable and in compliance with all rent regulations. We are committed to working with our partners in this sector to expand the supply of affordable housing.”

AIG’s financial advisors with respect to the Life & Retirement transactions are Evercore and J.P. Morgan Securities LLC, and its legal advisors are Wachtell, Rosen, Lipton & Katz and Debevoise & Plimpton LLP. With respect to the sale of the Affordable Housing portfolio, CBRE Capital Advisors, Inc. acted as AIG’s financial advisor, and its legal advisors are Sullivan & Cromwell LLP, Nixon Peabody LLP and Elkins Kalt Weintraub Reuben Gartside, LLP.

On the Life & Retirement transactions, Goldman Sachs served as financial advisor, and Simpson Thacher and Bartlett LLP and Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to Blackstone. With respect to the Affordable Housing portfolio transaction, Blackstone’s financial advisors were Eastdil Secured, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC and legal advisors were Simpson Thacher & Bartlett LLP and Jones Day.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.