Allstate will sell its employer voluntary benefits business to StanCorp Financial Group (The Standard) for $2 billion, the company said in a press release last night.
The Northbrook-based insurance giant said the sale was the first in a strategic plan to find other companies to take on the business of its health and benefits holdings.
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The $2 billion sale represents 20.6 times earnings from the last 12 months, which compares favorably with recent transactions, and will generate a financial book gain of about $600 million for Allstate and increase deployable capital by $1.6 billion, Allstate Chief Financial Officer Jess Merten said in a Wednesday call with investors.
Shares in Allstate were up 5.02% to $180.60 as of 11:38 a.m. today.
The insurer is looking to combine its three health and benefits businesses — employer voluntary benefits, individual and group health — with companies that have additional health and benefit capabilities, while Allstate focuses on increasing market share in its property-liability business, Tom Wilson, Allstate chair, president and CEO said, on the call.
Wilson said the alignment between Allstate’s product offerings, employer relationships, distribution and talent and The Standard’s group benefits business "will provide customers with broader protection and higher value."
As part of the deal, Allstate agents will now offer their customers benefit and insurance products from Portland, Ore.-based The Standard, in a five-year exclusive distribution arrangement, he said.
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Dan McMillan, president and CEO of The Standard, said inthe press release that there are "significant synergies between Allstate’s industry-leading supplemental and voluntary life products and The Standard’s expertise in workplace benefits."
In the first half of 2024, Allstate's employer voluntary benefits subsidiaries had revenues of $535 million, adjusted net income of $45 million, and statutory capital and surplus of $255 million.
Merten said Allstate's adjusted net income return on equity will decline by about 100 basis points following the sale, which is expected to close in the first half of 2025.
The company had considered selling all three business to one company, Wilson said, but found it better to shop them individually. Discussions of the sale of the individual and group health businesses, either together or separately, is continuing, Wilson said.
Overall, the health and benefits segment represents 4% of Allstate’s total 2023 revenues through the three businesses, the company said in an investor presentation as part of today's call.
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The employer voluntary benefits business provides voluntary benefits and health products through employers including life, accident, critical illness, and hospital indemnity protection to 3.6 million policyholders.
Individual health provides short-term medical coverage and medicare supplemental insurance, while group health provides stop-loss and fully insured group health protection to small businesses, the presentation said.
This story first appeared in Crain's Chicago Business.
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