American Financial Group, Inc. (NYSE: AFG) announced today that it has entered into a definitive agreement to sell its Annuity business to Massachusetts Mutual Life Insurance Company (MassMutual) for $3.5 billion in cash, subject to final closing adjustments to the extent that GAAP shareholders’ equity excluding accumulated other comprehensive income of the entities sold varies from $2.8 billion.
Under the terms of the agreement, which is expected to close in the second quarter of 2021, MassMutual will acquire Great American Life Insurance Company (GALIC) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company. At December 31, 2020, GALIC and its subsidiaries had approximately $40 billion of traditional fixed and indexed annuity reserves. AFG expects to recognize an after-tax gain on the sale of $620 million to $690 million ($7.10 to $7.90 per AFG share) upon closing. Prior to completion of the transaction, AFG will acquire approximately $500 million in real estate-related partnerships and directly owned real estate from GALIC.
S. Craig Lindner, AFG’s Co-Chief Executive Officer, commented, “This transaction presents an excellent opportunity for GALIC and MassMutual to be one of the leading providers of traditional fixed and indexed annuities in major distribution channels and markets. In fact, MassMutual has among the highest insurance financial strength ratings, which we believe will result in enhanced distributor recruitment and policyholder retention. MassMutual’s commitment to establish a subsidiary in Cincinnati ensures that the agreement will have no impact on GALIC’s relationships with and commitments to its annuity policyholders and distribution partners. Importantly, we are very pleased that this transaction will provide compelling career opportunities for our annuity associates, and bring the operations of a well-respected insurer to the Greater Cincinnati business community.”
Mr. Lindner continued, “As Co-CEOs, Carl and I view capital management as one of our most important priorities. AFG’s capital and liquidity will be significantly enhanced as a result of the transaction. With a strong balance sheet and substantial excess capital, we will continue to evaluate opportunities for deploying AFG’s excess capital, including the potential for healthy, profitable organic growth, expansion of our Specialty Property & Casualty niche businesses through acquisitions and start-ups that meet our target return thresholds, as well as share repurchases and special dividends.”
Roger Crandall, Chairman, President and CEO, MassMutual commented: “With MassMutual’s enduring financial strength, broad investment capabilities and end-to-end digital experience, we will build on the outstanding leadership position that the talented and dedicated Great American Life team has built over generations, enabling us to help even more people secure their future and protect the ones they love.”
Skadden, Arps, Slate, Meagher & Flom LLP and Keating Muething & Klekamp PLL are acting as legal advisors to AFG. Debevoise & Plimpton LLP is acting as legal advisor to MassMutual.
This article originally appeared on BusinessWire.
