AIG Makes $150B BlackRock Deal on Way to Life & Retirement Separation

What You Need to Know

The proposed IPO is part of a long-running annuity industry Great Restructuring.
The drivers have been low interest rates and new accounting rules.
Now, however, interest rates are rising, and there are signs the new accounting rules might be manageable.

American International Group on Monday announced a money management deal with BlackRock, for up to $150 billion in assets, on its way to a separation from the AIG Life & Retirement business.

AIG said that it has formed “significant partnerships” with BlackRock in connection with the deal.

BlackRock could end up managing $60 billion of the assets in AIG’s own investment portfolio and up to $90 billion in Life & Retirement investment portfolio assets.

The assets affected are “liquid fixed-income and private placement assets,” according to AIG.

BlackRock’s Aladdin platform will provide investment management technology for both AIG and the Life & Retirement business.

AIG executives said in February, when the company announced its earnings for the fourth quarter of 2021, that they hoped to launch an initial public offering for the Life & Retirement unit’s stock by June 30.

Peter Zaffino, AIG’s CEO, said in a comment included in the BlackRock deal announcement that the company chose BlackRock as a partner because of its strong investment performance and its Aladdin platform risk analytics.

“This is another important milestone as our momentum continues toward the separation of our Life & Retirement business and future state of AIG,” Zaffino said.

The BlackRock deal gives the Life & Retirement business strategic and operating flexibility, Zaffino said.

AIG’s Asset Totals

AIG ended 2021 with $596 billion in total assets. The Life & Retirement business ended the year with $406 billion in total assets, according to the company’s financial supplement for the fourth quarter of 2021.

The Life & Retirement business had about $198 billion fixed-income securities, including bonds available for sale and other bond securities.

Implementation

AIG said the arrangements with BlackRock will be implemented in phases, “subject to customary onboarding and implementation requirements and any required regulatory approvals.”

What It Means

For annuity professionals, the deal implies that one of the biggest issuers of U.S. annuities is still headed toward a major realignment.

AIG reported collecting $19 billion in annuity considerations in 2021, and it ranked third on the National Association of Insurance Commissioners’ annuity consideration rankings.

Many multiline insurers have separated from part or all of their annuity businesses in recent years.

Reasons include the effects of very low interest rates on the giant portfolios of bonds that support annuity obligations and the possible effects of the new Long Duration Targeted Improvements accounting rules on the future look of annuity issuers’ financial statements.

The pressure driving annuity issuer separations could be starting to ease.

The Federal Reserve Board is starting to do what it can to push interest rates higher, and life insurers and securities analysts seem to be growing more comfortable with the possible effects of the new accounting rules on life insurers’ earnings reports.

Pictured: AIG’s headquarters, in New York. (Photo: Ryland West/ALM)