American International Group will be selling a 9.9 percent equity stake in its life and retirement assets.
Blackstone will be purchasing AIG insurance and housing business assets representing a 9.9 percent stake and will pay $2.2 billion in cash for the acquisition.
The private equity giant and insurer agreed to a “long-term strategic asset management relationship.”
The agreement is for an initial $50 billion from the AIG insurance and retirement portfolio, according to the insurer in a statement last week. Additionally, Blackstone will also be paying $5.1 billion for American International Group’s affordable housing assets.
This deal takes off from the foundation Blackstone has already been building in permanent capital by expanding into the insurance industry, and in pursuing lower-cost rentals as a fresh component for its real estate business.
This has been an increasingly common tactic with Blackstone and its private equity peers. Rivals like KKR & Co. and Apollo Global Management Inc. have been drawn to the insurance industry due to the steady capital stream it generates for investment. By broadening permanent capital, firms aren’t as affected by the private equity model’s rises and falls which demand fundraising from institutions on a regular basis.
Blackstone’s purchase of AIG insurance takes advantage of insurers’ efforts to shed life businesses.
Insurers have been trending toward the sale of their non-core assets and their life insurance businesses in order to raise capital. Blackstone purchased Allstate’s life business back in January for $2.8 billion. As a component of that agreement, Blackstone agreed to the oversight of a $28 billion portfolio.
This new asset management agreement between Blackstone and AIG is expected to see $92.5 billion in growth across the next six years. Upon the closure of the deal, Blackstone president and COO Jon Gray will have a seat on the life and retirement business boards.
“We are honored to become AIG’s strategic partner, supporting the growth and success of one the world’s top life insurers as a standalone business,” said Gray in a statement released about the AIG insurance and housing deal. “We believe our leading private credit origination platform will play an important role to help meet long-term policyholder obligations while maintaining strong credit quality.”