American Worldwide Group Inc plans to make use of an IPO to promote a part of its life and retirement enterprise, whereas Blackstone Group Inc agreed to purchase a sizeable stake, based on an individual acquainted with the matter.
AIG and Blackstone mentioned on Wednesday the non-public fairness agency would pay $2.2 billion in money for 9.9 p.c of the unit, sending the insurer’s shares greater than 6 p.c greater in after-market buying and selling.
AIG had been fielding inquiries from potential traders about taking a 19.9 p.c stake within the life and retirement unit, which sells insurance coverage and annuities, however Chief Government Officer Peter Zaffino in Might mentioned the corporate would use an IPO to promote the stake as an alternative, dashing the hopes of bidders.
“This doesn’t derail the IPO plan,” the supply mentioned.
The strikes are a part of AIG’s effort to separate its life insurance coverage and retirement companies off from its property and casualty operations, which was introduced in 2020, years after activist traders focused AIG for a break-up.
“[The deal] gives AIG with flexibility as we proceed to work to separate Life & Retirement from AIG, and leads to vital new capital for AIG to deploy to help our capital administration priorities,” Zaffino mentioned in an announcement on Wednesday.
Blackstone will even enter a long-term asset administration relationship with AIG to handle $50 billion, or about 25 p.c, of life and retirement’s funding portfolio. That quantity is because of enhance to $92.5 billion over the subsequent six years.
Shares of Blackstone have been up 3.6 p.c at $102.25.
Personal fairness companies, together with Blackstone, have been aggressively shopping for annuity suppliers, saying they will use their investing prowess to earn higher returns on the massive pots of cash, an necessary consideration within the present low-interest-rate setting. The buyout companies, in return, earn charges for such companies.
In a separate settlement additionally introduced on Wednesday, Blackstone Actual Property Earnings Belief will purchase a few of AIG’s reasonably priced housing belongings for $5.1 billion, the businesses mentioned.
AIG, which has managed the reasonably priced housing portfolio for greater than 30 years, mentioned the belongings “are not core to AIG’s long-term funding technique.”
By Alwyn Scott, Nivedita Balu and David French