The sale will make it possible for Allstate to focus on its personal property-liability units.
Blackstone Group Inc. has announced its agreement to purchase an Allstate life insurance business for $2.8 billion. This move was made as the private equity firm has been broadening its strategy within the insurance industry.
The purchase is being made by entities managed by Blackstone Group, according to the announcement.
Though the Allstate life insurance business will be sold to the private equity firm, the insurer will be holding onto a New York life business. It is also looking for a strategy for selling or transferring risk from that NY business to a third party.
The insurer has been seeking to back away from life coverage and annuities. Instead, the Illinois-based insurance company is aiming to focus its energy to a wider extent on its property-casualty products such as personal coverage and identity protection. This new deal will also boost Blackstone’s expansion into this market following its work with FGL Holdings, which was purchased in 2020 by Fidelity National Financial Inc.
The sale of the Allstate life insurance business represents a strategic move on the insurer’s part.
“This transaction represents the next step in the process to deploy capital out of spread-based risks,” said Tom Wilson, Allstate CEO, while discussing the sale on a conference call this week. “This transaction is economically attractive when compared to issuing life insurance and running off the closed block of annuities.”
The sale is expected to close before the end of 2021 and will result in a financial book loss of about $3.1 billion for Allstate during Q1.
“Private equity firms have been ascendant in the life and annuity space, while multiline insurers have been dialing back from a conglomerate insurance business model,” said Imperial Capital credit analyst David Havens in a Bloomberg report.
This sale of the Allstate life insurance business to Blackstone is a part of a growing trend among private equity firms. Others, such as Apollo Global Management Inc. have also found annuity businesses appealing due to the steady asset stream that can be invested. Upon the closure of this deal, Blackstone will step into an asset management agreement to support the oversight of the $28 billion portfolio of the life insurance business.