July 14 (Reuters) – American International Group Inc (AIG.N) on Wednesday announced it would sell a 9.9% stake in its life and retirement business to Blackstone Group Inc (BX.N) in a $ 2.2 billion cash deal, sending the insurer’s shares more than 6% higher after-sales.
AIG had responded to inquiries from potential investors for a 19.9% ââstake in the Life & Pensions unit, which sells insurance and annuities, but CEO Peter Zaffino said in May the company would use a IPO to sell the stake instead, dashing bidders’ hopes. Read more
The move was part of AIG’s plan to split its general insurance and pension business, announced in 2020, years after activist investors targeted the company with a plan to dissolve.
“(The Agreement) gives AIG flexibility as we continue to work to separate AIG’s life and retirement, and results in significant new capital that AIG can deploy to support our capital management priorities. “Zaffino said in a statement Wednesday.
Blackstone will also enter into a long-term asset management relationship with AIG to manage $ 50 billion of life and retirement investment portfolio, rising to $ 92.5 billion over the next six years.
Blackstone shares rose 3.6% to $ 102.25.
Private equity firms, including Blackstone, have sought out such deals, arguing that they can use their investing prowess to deliver better returns, an important consideration in today’s low interest rate environment. Buyout companies, in turn, charge a fee for these services.
Blackstone Real Estate Income Trust will also acquire some of AIG’s affordable housing assets for $ 5.1 billion, the companies said.
AIG, which has managed the affordable housing portfolio for more than 30 years, said assets “are no longer at the heart of AIG’s long-term investment strategy.”
Reporting by Nivedita Balu and David French in New York; Editing by Devika Syamnath
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