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Blackstone signs contract to manage AIG’s life and retirement assets

Blackstone BX -1.18%

Group Inc. has entered into a major contract with American International Group Inc. to manage some of the assets that underpin AIG’s life insurance policies and annuities. This is a major step towards making private equity firms a major player in the insurance industry.

Blackstone has signed a long-term contract to manage its first $ 50 billion in assets, which will grow to nearly $ 100 billion over the next six years, the two companies said Wednesday. AIG Unit has assets of approximately $ 200 billion.

The private equity firm will also pay $ 2.2 billion in a 9.9% stake in AIG’s life insurance and retirement services division, and Blackstone President Jonathan Gray will join the board, people said.

AIG, a global insurance conglomerate, is preparing to split its units into separate companies, with the parent company devoted to non-life insurance. AIG announced a sale plan in October and continues to work on the initial public offering of the unit.

Blackstone’s non-trading real estate investment trust, BREIT, also buys $ 5.1 billion of affordable U.S. home assets that AIG has kept on its books for decades but is not considered the core of its business. I signed a contract.

Insurance has been a priority for buyout companies in recent years, providing a stable cash flow for investing and reliable, if not superb, returns.

The deal will turn Blackstone’s insurance business into approximately $ 150 billion in assets under management by the end of 2021 after considering a deal earlier this year by a Blackstone-managed entity to purchase the Allstate life insurance sector. Will push it up. Co., Ltd.

Apollo Global Management Co., Ltd.

A longtime leader in insurance strategy, he managed assets totaling approximately $ 250 billion on behalf of affiliate Athene Holding. Co., Ltd.

At the end of the first quarter, Athora Holding Ltd. Apollo announced in March an agreement to purchase a portion of Athens that it does not yet own.

KKR & Co. Signed an agreement to acquire insurer Global Atlantic Financial Group Ltd. in February, enabling it to manage approximately $ 90 billion in insurance assets.

Unlike Apollo and KKR, Blackstone is not interested in owning a majority stake in an insurance company. For all-state transactions, primarily funded by Blackstone, Blackstone holds a little less than 10% stake in the insurer on its own balance sheet.

The private-equity fund’s push into the life insurance industry is part of an effort to manage more so-called permanent capital that does not need to be constantly re-raised. In an era of low interest rates, companies have seen the need to generate more returns among life insurers than listed corporate and government bonds can provide. The two companies have developed a credit platform that creates an ever-expanding range of products, including personal loans, asset-backed securities and aircraft finance specifically designed for insurers.

Meanwhile, life insurers are trying to eliminate or reduce their exposure to product lines whose profitability is declining due to ultra-low interest rates. Insurers rely on interest income from large fixed income portfolios for a significant portion of their profits. They invest the premium dollars paid by the customer in ordinary vanilla-listed bonds until they have to pay the bill.

In its partnership with Blackstone, AIG does not anticipate changes in the allocation of its entire portfolio. Assets managed by Blackstone have already been invested in illiquid categories.

Write to Miriam Gottfried (Miriam.Gottfried@wsj.com) and Leslie Scism (leslie.scism@wsj.com)

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Blackstone signs contract to manage AIG’s life and retirement assets

Source link Blackstone signs contract to manage AIG’s life and retirement assets

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