The insurer from Northbrook, Illinois is taking steps for a final exit from that industry sector.
Allstate has decided to make a complete departure from the life insurance business, selling off the rest of what remained of its shrunken coverage unit.
The giant announced that it had come to a deal with Wilton Re to sell the rest of the life unit.
To close this deal, Allstate chose to book a $4 billion loss in the first quarter. In it, the company has sold the last of its life insurance business unit to Wilton Re, based Norwalk, Connecticut. This follows closely on the heals of the sale it made in January when it offloaded a large chunk of the unit to Blackstone Group for $2.8 billion.
Allstate has been selling life coverage since 1957 but chose to complete its exit now for reasons of capital. By getting rid of the unit, it has freed up $1.7 billion in capital that it can now spend on acquisitions or shareholder buybacks, as it sees fit.
Moreover, this move has also streamlined and simplified the insurer’s investment portfolio. Once the two deals close – with Blackstone and with Wilton Re – the insurance giant’s portfolio will be valued at about $55 billion. At the end of 2020, life insurance news reports showed that it was worth over $90 billion.
Wall Street appeared to be unaffected by the on-paper loss of the $4 billion in the life insurance business sale.
Upon the initial announcement of the deal, the company’s share prices increased by about 0.6 percent, or around seventy cents.
“This transaction has minimal impact on our strategy of increasing market share in personal property-liability and expanding protection solutions for customers,” said Mario Rizzo, Allstate Chief Financial Officer. “Wilton Re is a trusted name with a history of excellent customer service and expert management of life insurance and annuity portfolios, so (our) customers will be well protected.”
The company’s life insurance business has been seeing considerably lower returns than the other lines for which the insurer is far better recognized, such as home and auto. Analysts have been seeking this unit sale for several years, said a Chicago Business report. Agents with the insurer will continue selling life and retirement products from other providers.