AIG inks $2.2bn deal with Blackstone in bid to separate L&R business

American International Group (AIG) has agreed to sell 9.9 percent equity stake in its life & retirement business to  Blackstone for $2.2 billion in an all-cash deal that will generate "significant new capital" for  AIG as it looks to separate its L&R business.

As part of the agreement, AIG has also agreed to enter into a long-term strategic asset management relationship with Blackstone to manage an initial $50 billion of life & retirement’s existing investment portfolio upon closing of the equity investment, with that amount increasing to $92.5 billion over the next six years.

Upon the closing of these transactions, which are expected to occur simultaneously by the end of the third quarter of 2021, Jon Gray, president and chief operating officer of Blackstone, will join the life & retirement board of directors.

Separately, AIG and Blackstone Real Estate Income Trust (BREIT), a long-term, perpetual capital vehicle affiliated with Blackstone, have also reached a definitive agreement for BREIT to acquire AIG’s interests in a US affordable housing portfolio for approximately $5.1 billion, in an all cash transaction. This transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2021.

“Today’s announcement is an important milestone for AIG," said Peter Zaffino, president and chief executive officer of AIG. "Establishing a cornerstone partnership on several fronts with such a highly regarded organization as Blackstone validates the strength of our market-leading Life & Retirement business and provides it with additional growth opportunities, provides AIG with flexibility as we continue to work to separate Life & Retirement from AIG, and results in significant new capital for AIG to deploy to support our capital management priorities.”

Zaffino added: “ AIG has stewarded the Affordable Housing portfolio for more than 30 years. While the highly specialized assets subject to this transaction are attractive investments, they are no longer core to AIG’s long-term investment strategy. We believe Blackstone has the right expertise and commitment to stakeholders to manage these assets going forward.

“We look forward to a productive and value-enhancing partnership with Blackstone as we continue to build momentum on our journey to become a top performing company.”

Gray said: “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. 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.”

Kathleen McCarthy, global co-head of Blackstone Real Estate, commented: “These communities provide critical affordable housing and we look forward to being long-term owners. We will make significant investments to improve the apartments while ensuring they remain affordable and in compliance with all rent regulations. We are committed to working with our partners in this sector to expand the supply of affordable housing.”

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