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Blackstone Enters Deal to Control AIG Lifestyle and Retirement Belongings

Blackstone

BX 1.88%

Team Inc. struck a sweeping offer with American Intercontinental Group Inc. to regulate a part of the belongings backing AIG’s life-insurance policy guidelines and annuities, a massive move by the private-fairness agency towards getting a big player in the insurance field.

Blackstone will enter into a long-expression arrangement to take care of an original $50 billion in property, with the sum increasing to nearly $100 billion over the next 6 yrs, the firms explained Wednesday. The AIG unit has about $200 billion in assets.

The private-equity agency would also pay $2.2 billion for a 9.9% stake in AIG’s life-insurance and retirement-services unit, and Blackstone President

Jonathan Grey

is to sign up for its board.

AIG, a worldwide insurance policies conglomerate, is making ready to break up off the device into a individual enterprise, leaving the mother or father to aim on assets-casualty insurance policy. AIG announced its divestiture strategy in Oct and is continuing to perform on an initial community featuring of the device.

Blackstone’s nontraded true-estate investment have confidence in, acknowledged as BREIT, also struck a offer to buy $5.1 billion of U.S. very affordable-housing belongings that AIG has held on its books for many years but are not regarded core to its functions.

Insurance has been a precedence for buyout corporations in modern many years, giving continual streams of dollars to invest and trusted, if not spectacular, returns.

The transaction would catapult Blackstone’s insurance company to about $150 billion in property below management by the conclude of 2021 just after accounting for a offer before this 12 months by entities managed by Blackstone to buy a daily life-insurance policy unit of

Allstate Corp.

Apollo Worldwide Management Inc.,

lengthy a chief in the insurance policy system, managed a whole of close to $250 billion in assets on behalf of its affiliate marketers

Athene Holding Ltd.

and Athora Keeping Ltd. at the stop of the 1st quarter. Apollo introduced a offer in March to purchase the portion of Athene it did not by now own.

KKR & Co. closed a offer to get insurance policies business World wide Atlantic Monetary Team Ltd. in February, supplying it about $90 billion in insurance policy belongings to regulate.

As opposed to Apollo and KKR, Blackstone isn’t fascinated in owning a the vast majority stake in an coverage enterprise. In the Allstate offer, which is remaining performed largely by means of Blackstone’s resources, Blackstone will keep a stake well worth just under 10% of the insurance company on its own equilibrium sheet.

The press by personal-equity giants into the existence-insurance business is part of an exertion to control extra so-termed permanent funds that does not want to constantly be re-lifted. In an era of very low desire costs, the firms have seized on the require amongst lifestyle insurers to create returns that go over and above what publicly traded company and government bonds can supply. The corporations have produced credit platforms that churn out an ever-expanding array of products including privately put loans, asset-backed securities and aircraft finance that are specially made for insurance plan organizations.

Life insurers, on the other hand, are seeking to exit or lessen exposure to product lines whose profitability is dented by ultralow desire fees. Insurers rely on interest earnings from significant bond portfolios for a considerable portion of their revenue. They make investments premium pounds compensated by their customers until wanted to spend promises, usually in basic-vanilla publicly traded bonds.

In partnering with Blackstone, AIG doesn’t anticipate a change in its general portfolio allocation. The belongings Blackstone will handle are currently invested in a lot less-liquid categories.

Publish to Miriam Gottfried at Miriam.Gottfried@wsj.com and Leslie Scism at leslie.scism@wsj.com

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Appeared in the July 15, 2021, print version as ‘Blackstone Would make Offer To Deal with AIG Assets.’