Allstate Puts its Life Insurance Unit in Blackstone’s Good Hands
Posted on 01/27/2021
On January 26, 2021, The Allstate Corporation sold Allstate Life Insurance Company to Antelope US Holdings Company, a corporation incorporated under the laws of the State of Delaware, an affiliate of an investment fund associated with The Blackstone Group Inc. Blackstone will acquire all of Allstate Life Insurance Company’s subsidiaries except for Allstate Life Insurance Company of New York. The total consideration to be paid by Blackstone to the Sellers is expected to be approximately US$ 2.8 billion in cash, subject to adjustment as specified in the Purchase Agreement, which may include downward adjustment for an up to US$ 400 million pre-closing extraordinary dividend from Allstate Life Insurance, if any, to Allstate Insurance Company. Allstate has been surgically deploying capital out of spread-based products with life and annuity liabilities declining to US$ 5 billion after the closing of this transaction. Essentially a vehicle by Blackstone is buying Allstate Life Insurance Company, Allstate Assurance Company, and certain Allstate Life Insurance subsidiaries from Allstate Insurance Company.
The Purchase Agreement also provides for potential contingent consideration payable to Allstate Insurance Company of US$ 25 million each year from 2025 through and including 2034, for up to $250 million in the aggregate, based on the monthly average of the daily 10-year treasury rate for the trailing three year period to each such year.
As currently contemplated by the Purchase Agreement, Allstate Corporation will retain ownership of Allstate Life Insurance Company of New York while pursuing alternatives to sell or otherwise transfer risk to a third party, in each case as contemplated and permitted by the Purchase Agreement.
The deal is expected to close in the second half of 2021, subject to the satisfaction or waiver of various closing conditions.
Allstate’s Life and Annuity business has not grown. Life insurance sales at Allstate have decline since 2018 and annuity sales were discontinued in 2014. An estimated US$ 3.1 billion loss
will be recorded by Allstate in the first quarter of 2021, reflecting the low return annuity business. Allstate agents and “exclusive financial specialists” will continue to offer life and retirement products to customers through the use of non-proprietary products.
Investment Portfolio
Allstate’s investment portfolio will decline by approximately US$ 28 billion to US$ 63 billion. Blackstone will enter into an asset management agreement for Allstate Life Insurance Company’s US$ 28 billion of investments. 100% of the Allstate Life portfolio, around US$ 12 billion in AUM, was in fixed income at September 30, 2020. 80% of the Allstate’s Annuity portfolio is in fixed income, while 20% is in equities. Allstate’s Annuity portfolio is US$ 22 billion in size as of September 30, 2020.
Advisors
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.
