The Allstate Corporation announced on Tuesday that it has agreed to sell Allstate Life Insurance Company (ALIC) to entities managed by investment firm Blackstone for $2.8 billion.
Explaining the move from Allstate’s perspective, Allstate Corp. Chair, President and CEO Tom Wilson, referred to a strategy to grow market share in personal lines property/casualty and the need to unlock deployable capital to support P/C business.
“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,” Wilson said in a media statement.
Looking ahead, he said in spite of the deal, “customers will be protected using non-proprietary life insurance products, as is currently done for annuities.”
Not only will deployable capital increase as a result of the deal but also the sale gives “increased transparency to the industry-leading returns of our core protection businesses,” Wilson said.
Moving in the opposite direction, two other personal lines insurers, Progressive and InsurTech Lemonade, are pursuing strategies to move into the life insurance arena.
According to the media statement, ALIC holds approximately 80 percent, or $23 billion, of Allstate’s life and annuity reserves. The life insurance company generated net income of $467 million in 2019 and a net loss of $23 million in the first nine months of 2020.
Meanwhile, Gilles Dellaert, Global Head of Blackstone Insurance Solutions, said Blackstone is continuing to grow 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.”
According to transaction details provided in Tuesday’s announcement, the sale does not include Allstate Life Insurance Company of New York. The New York company has $5 billion of GAAP reserves, and Allstate said it is pursuing alternatives to sell or otherwise transfer risk to a third party.
All statutory earnings of the life insurance business being sold to Blackstone will be retained by Allstate from Mar. 31, 2020 through closing. 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.
The transaction is subject to regulatory approval with an expected closing in the second half of 2021.
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.
(Bloomberg photo)