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Allstate (ALL) to Totally Sell Off Life and Annuity Units

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The Allstate Corporation ALL recently agreed to divest the Allstate Life Insurance Company of New York (ALNY) unit to Wilton Re for $220 million. Post the receipt of regulatory approval and other closing conditions, the divestiture is anticipated to be completed in second-half 2021.

The latest move will aid Allstate to streamline business by intensifying focus on high-growth areas of Property-Liability and Protection Services businesses.

Details of the Deal

Per the agreement, Allstate has agreed to infuse capital worth $660 million into ALNY, in return of which Wilton Re is entitled to pay $220 million to Allstate. The company’s GAAP reserves and invested assets are likely to decline by $5 billion and $6 billion, respectively, as a result of the transaction. Its deal with Wilton Re also encompasses the dismissal of a stop-loss reinsurance treaty of Allstate Life Insurance Company (ALIC).

Allstate Exits From Life and Annuity Businesses

The latest move marks Allstate’s exit from life and annuity businesses. In January 2021, Allstate agreed to divest ALIC to Blackstone managed entities for $2.8 billion. Earnings of the company's life and annuity businesses have taken a hit last year from the pandemic-induced lower interest rates and higher mortality claims, which in turn dampened Allstate’s prospects to some extent. Thus, exiting life and annuity businesses is a strategic move by the insurer.

Notably, the joint deals to sell ALIC and ALNY are likely to create deployable capital of around $1.7 billion. However, the combined agreements are expected to produce a GAAP net loss of $4 billion, which will be reflected in first-quarter 2021 results.

On exit from the above-mentioned underperforming businesses, Allstate will continue to pursue the long-term strategy of boosting the personal Property-Liability business and extending protection offerings to customers. The company’s buyout of National General in January 2021 not only bears testament to its endeavor of growing personal property-liability market share but also is likely to fortify Allstate as one of the top five personal line carriers in the independent agent distribution channel.

During the latter half of 2021, the company intends to launch standard auto and homeowner insurance offerings, with countrywide deployment of these products likely to be completed within two years. All these initiatives have been driving the company’s prospects, boosting customer base and re-establishing trust on the Allstate brand.

Moreover, the company is deploying capital out of lower-return businesses, through which it is able to continue pursuing several growth initiatives such as buyouts and returning value to shareholders through share buybacks and dividend hikes.

Share Price Performance

Shares of this Zacks Rank #3 (Hold) company have gained 27.3% over a year compared with the industry’s 33.2% rally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Moves Undertaken by Other Insurers

Assurant, Inc. AIZ has agreed to divest the Global Preneed business to CUNA Mutual Group for $1.3 billion in cash during this month itself for intensifying focus on market-leading lifestyle and housing businesses.

This January, Voya Financial, Inc. VOYA divested all individual life insurance and other legacy non-retirement annuities businesses to Resolution Life US, a new holding company established by Resolution Life Group.

Last December, MetLife, Inc. MET entered into a definitive agreement to divest its auto and home insurance unit, namely Metropolitan Property and Casualty Insurance Company, and certain wholly-owned subsidiaries to Farmers Group for $3.94 billion. The deal is likely to close in second-quarter 2021.

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