Allstate to sell group health business to Nationwide for $1.25bn

By Michael Loney

Jan 30 - (The Insurer) - Allstate has agreed a deal to sell its group health business to Nationwide for $1.25bn in cash adjusted for the closing balance sheet.

The deal is subject to standard closing conditions including regulatory approvals and is expected to close in the second half of this year.

Nationwide CEO Kirt Walker said the acquisition is “a strong fit”, further strengthening and diversifying its portfolio and expanding its ability to sell stop loss insurance to small businesses.

Stop loss insurance protects employers who self-fund their health insurance plans from excess losses.

For the first nine months of 2024, the group health business had revenues of $608mn and adjusted net income of $69mn.

“We reached another milestone in the strategy to maximize shareholder value by combining the health and benefits businesses with companies that have greater strategic alignment,” said Tom Wilson, Allstate chair, president and CEO.

“Group Health provides stop-loss insurance to small businesses, which will gain access to Nationwide’s complementary product offerings,” he added.

Allstate had in August last year announced a deal to sell of its employer voluntary benefits to The Standard for total sale proceeds of $3.25bn.

“The individual health business, with adjusted net Income of $18mn for the first nine months of 2024, will either be retained or combined with another company,” Wilson said.

Allstate acquired the group health business in 2021 as part of its $4.0bn acquisition of National General.

The sale is expected to generate a financial book gain of about $450mn, increase deployable capital by $900mn but reduce adjusted net income return on equity by 75 basis points after closing, which is expected in 2025.

Allstate CFO Jess Merten commented that Nationwide “is extremely well capitalized and this transaction advances its growth strategy by expanding its product portfolio and distribution capabilities.”

JP Morgan and Ardea Partners are acting as financial advisors and Willkie Farr & Gallagher is acting as legal advisor to Allstate.

Citi is acting as financial advisor and Squire Patton Boggs is acting as legal advisor to Nationwide.