Staff of Reuters 2 minutes ReadFILE PHOTO: On January 9, 2013, a new sign is posted over the entrance of the AIG headquarters offices in New York’s financial center. Brendan McDermid/Reuters (Source: Reuters) In a $2.2 billion all-cash agreement, American International Group Inc said it will sell a 9.9% stake in its life and retirement business to Blackstone Group Inc, sending the insurer’s shares up more than 6% afterwards. AIG has been hearing requests from possible investors about purchasing a 19.9% share in the life and retirement unit, which provides insurance and annuities, but CEO Peter Zaffino announced in May that the company would instead sell the holding through an IPO, putting bidders’ hopes to rest. The move was part of AIG’s 2020 plan to split its general insurance and retirement operations, which was disclosed years after activist investors threatened to tear up the corporation. “(The deal) gives AIG flexibility as we strive to remove Life & Retirement from AIG, and it results in significant fresh money for AIG to deploy to support our capital management initiatives,” said Zaffino in a statement on Wednesday. Blackstone will also establish a long-term asset management agreement with AIG to manage $50 billion of AIG’s investment portfolio over the next six years, with the amount escalating to $92.5 billion. Blackstone’s stock was up 3.6 percent to $102.25. Private equity firms, like as Blackstone, have sought out such arrangements, arguing that they can utilize their investment prowess to produce superior returns, which is vital in the current low interest rate environment, in exchange for fees. According to the firms, Blackstone Real Estate Income Trust will buy some of AIG’s affordable housing assets for $5.1 billion. The properties “are no longer key to AIG’s long-term investment strategy,” according to AIG, which has managed the affordable housing portfolio for more than 30 years. Nivedita Balu and David French in New York contributed reporting, and Devika Syamnath edited the piece./n
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