American International Group, Inc. (AIG) has reached an agreement with Blackstone over the sale of a 9.9% stake in its Life & Retirement business, and will also sell certain affordable housing assets to Blackstone Real Estate Income Trust (BREIT).
Blackstone will acquire an almost 10% stake in AIG’s Life & Retirement operation for $2.2 billion in an all cash transaction.
This agreement also sees the pair enter into a long-term strategic asset management relationship through which Blackstone will manage an initial $50 billion of Life & Retirement’s existing investment portfolio upon completion of the equity investment, with that amount rising to $92.5 billion over the next six years.
These two transactions are expected to close by the end of the third quarter of 2021. Once finalised, Jon Gray, President and Chief Operating Officer (COO) of Blackstone, will join the Life & Retirement Board of Directors.
Peter Zaffino, President and Chief Executive Officer (CEO) of AIG, commented: “Today’s announcement is an important milestone for 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.”
At the same time, AIG and BREIT, a long-term, perpetual capital vehicle affiliated with Blackstone, have reached an agreement for BREIT to purchase AIG’s shares in a U.S. affordable housing portfolio for approximately $5.1 billion, in an all cash transaction.
“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,” added Zaffino.
Jon Gray added: “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, said: “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.”