The Allstate Corporation has agreed to sell Allstate Life Insurance Company (ALIC) to entities managed by Blackstone for $2.8 billion. 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, announced Jan. 26, 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.”
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.”
Transaction details
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.”
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.”
The Allstate Corporation, based in Northbrook, Ill., offers a wide array of protection for autos, homes, electronic devices and identity theft with more than 172 million policies in force. Products are available through a broad distribution network including Allstate agents, independent agents, major retailers, online and at the workplace.
Blackstone is one of the world’s leading investment firms. Earlier this week, the company announced the $7.3 billion sale of Alight Solutions, a recordkeeping and employee benefits company it bought three years ago, to a special purpose acquisition company, Foley Trasimene Acquisition Corp., with the intention of creating a new publicly traded company.
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