Summary
Allstate Corporation (ALL) announced on March 8, 2006, a definitive agreement to sell substantially all of its variable annuity business to Prudential Financial, Inc. and its subsidiary. This transaction, structured as a combination of coinsurance and modified coinsurance reinsurance, is valued at approximately $581 million, subject to market adjustments. The sale is expected to be completed by the end of the second quarter of 2006, pending regulatory approval. This strategic move allows Allstate to exit a business line that generated roughly $278 million in contract charges on $16 billion in total account balances as of year-end 2005. While the separate account assets and liabilities will remain on Allstate's balance sheet, their results will be fully reinsured. The company expects to recognize a small gain from this transaction, which will be amortized over the agreement's life. Allstate will also retain certain pre-closing contingent liabilities and provide transition services, as well as indemnity to Prudential for specific post-closing liabilities.
Key Highlights
- 1Allstate to sell substantially all of its variable annuity business to Prudential Financial.
- 2Transaction valued at approximately $581 million, subject to market adjustments.
- 3Sale is a combination of coinsurance and modified coinsurance reinsurance.
- 4Deal expected to close by the end of Q2 2006, subject to regulatory approval.
- 5The variable annuity business generated $278 million in contract charges on $16 billion in account balances in 2005.
- 6Allstate will retain certain liabilities and provide transition services post-closing.
- 7A small gain is expected, to be amortized over the agreement's life.