The Allstate Corporation has agreed to sell Allstate Life Insurance Company to entities managed by Blackstone for $2.8 billion, the company said in a news release.
ALIC holds approximately 80% (or $23 billion) of Allstate’s life and annuity reserves and generated net income of $467 million in 2019 and a net loss of $23 million in the first nine months of 2020. The transaction is subject to regulatory approval with an expected closing in the second half of 2021.
“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,” said Tom Wilson, chair, president and CEO. “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,” concluded Wilson.
Gilles Dellaert, Global Head of Blackstone Insurance Solutions, 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.”
Allstate will sell ALIC and certain subsidiaries, excluding Allstate Life Insurance Company of New York (ALNY), to entities managed by Blackstone for $2.8 billion, including a pre-closing dividend from ALIC of up to $400 million. All statutory earnings from March 31, 2020, to closing, will be retained by Allstate. The transaction will reduce Allstate’s GAAP reserves by $23 billion. Blackstone will enter into an asset management agreement for ALIC’s $28 billion of investments.
Allstate will retain ownership of ALNY, which has $5 billion of GAAP reserves and is pursuing alternatives to sell or otherwise transfer risk to a third party.
“Allstate has been surgically deploying capital out of spread-based products with life and annuity liabilities declining to $5 billion after the closing of this transaction,” said Mario Rizzo, Allstate Chief Financial Officer. “The investment portfolio will decline by approximately $28 billion to $63 billion. A financial book loss of approximately $3.1 billion will be recorded in the first quarter of 2021 given the lower returns on equity for the annuity businesses. Adjusted Net Income Return on Equity will increase by approximately 1 percentage point,” concluded Rizzo.
Menes Chee, a Senior Managing Director at Blackstone, said, “We’re excited to have raised long-term capital to invest in the business. Allstate’s team has created a strong book of business and we look forward to helping continue to provide exceptional service to policyholders moving forward.”
J.P. Morgan Securities LLC, Ardea Partners LP and Lazard acted as financial advisers and Willkie Farr & Gallagher LLP was the legal adviser to Allstate. Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC acted as financial advisers and Debevoise & Plimpton LLP was legal adviser to Blackstone.