American Financial Group announced Wednesday it will sell its annuity business to Massachusetts Mutual Life Insurance Co. for $3.5 billion in cash.
In a deal expected to close before June 30, MassMutual will acquire Great American Life Insurance Co. (GALIC) and its two insurance subsidiaries, Annuity Investors Life Insurance Co. and Manhattan National Life Insurance Co.
The Downtown-based specialty insurer said MassMutual would establish a subsidiary in Cincinnati to operate the acquired business and provide “compelling career opportunities for our annuity associates.”
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More than a fifth of American Financial’s 2,800 local employees would change employers as part of the deal. The insurer employs 6,800 nationwide.
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American Financial said more than 600 workers in their annuity business would join MassMutual as employees of the new independent MassMutual subsidiary.
The business unit sale won’t affect American Financial’s naming rights to Great American Ball Park, company officials said.
While the company is selling the Great American annuity operations – and MassMutual will continue to use that name for a period, American Financial’s flagship property and casualty operations, Great American Insurance Group, won’t be affected.
American Financial operates nearly three dozen subsidiaries, several that use the “Great American” moniker, which dates to 1872.
MassMutual said Great American Life will continue to be led by its current president, Mark Muething.
MassMutual CEO Roger Crandall said the deal diversifies its existing annuity business, allowing it to reach more customers.
“This acquisition is an excellent strategic fit for MassMutual that will broaden our product offerings, expand our distribution, and generate additional earnings,” Crandall said in a statement. “We will build on the outstanding leadership position that the talented and dedicated Great American Life team has built over generations.”
The deal will likely lower American Financial’s overall revenues – and its ranking on the Fortune 500 list. Annuities are more than 20% of American Financial’s revenues. AFG was 383rd on the most recent list.
American Financial’s annuity business generated nearly $1.4 billion in revenues through Sept. 30 and $1.9 billion in 2019.
American Financial said the sale would book an after-tax gain of $620 million to $690 million upon closing. Prior to the deal closing, the company said it would buy roughly $500 million in real estate-related partnerships and directly owned real estate from GALIC.
Investors cheered the windfall as American Financial’s stock soared in Thursday morning trading as high as $93.04 – up 17.1%.
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Co-CEO S. Craig Lindner said the deal would strengthen the insurer’s financial position and give it the flexibility to explore other opportunities.
“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,” Lindner said in a statement.
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This article originally appeared on Cincinnati Enquirer: American Financial Group sells annuity business to MassMutual for $3.5B, 600 jobs affected