Allstate to sell Group Health business to Nationwide

Rhea-AI Summary

Allstate (NYSE: ALL) has announced the sale of its Group Health business to Nationwide for $1.25 billion in cash. The Group Health division, which provides stop-loss insurance to small businesses, generated revenues of $608 million and Adjusted Net Income of $69 million in the first nine months of 2024.

Combined with the previously announced sale of Employer Voluntary Benefits to StanCorp Financial Group, total sale proceeds will reach $3.25 billion. The transaction is expected to generate a financial book gain of approximately $450 million and increase deployable capital by $0.9 billion, while reducing adjusted net income return on equity by 75 basis points after closing in 2025.

Allstate's Individual Health business, which reported Adjusted Net Income of $18 million for the first nine months of 2024, will either be retained or combined with another company.

Positive

• Sale of Group Health business for $1.25 billion in cash
• Total sale proceeds of $3.25 billion including previous StanCorp deal
• Expected financial book gain of $450 million
• Increase in deployable capital by $0.9 billion
• Group Health revenue of $608 million in first 9 months of 2024

Negative

• 75 basis points reduction in adjusted net income ROE after closing
• Divestment of profitable unit with $69 million in Adjusted Net Income

Insights

Financial Analyst

This strategic divestiture represents a compelling value-creation opportunity for Allstate shareholders. The $1.25 billion sale price values the Group Health business at approximately 13.6x annualized adjusted earnings (based on the $69 million nine-month figure), suggesting a premium valuation that effectively monetizes the asset.

The transaction's strategic rationale is particularly noteworthy for three reasons:

• The deal unlocks significant capital efficiency, with $0.9 billion in deployable capital that could be redirected toward share repurchases, debt reduction, or core business investment
• The $450 million book gain demonstrates Allstate's ability to create value through both acquisition (via National General) and subsequent strategic divestitures
• The 75% basis point reduction in adjusted net income ROE is a reasonable trade-off given the substantial capital liberation and strategic focus benefits

Particularly impressive is Allstate's execution of its portfolio optimization strategy. The Group Health business, acquired as part of the $4.0 billion National General acquisition in 2021, is being divested at an attractive multiple while creating strategic value for both parties. Nationwide gains expanded product offerings and distribution capabilities, while Allstate streamlines its operations and strengthens its capital position.

The potential handling of the Individual Health business (with $18 million in Adjusted Net Income) remains a strategic option, suggesting management's disciplined approach to portfolio optimization isn't complete. This methodical approach to capital allocation and business portfolio management demonstrates strong execution of Allstate's value-maximization strategy.

Insurance Industry Analyst

This transaction exemplifies the ongoing consolidation trend in the specialized insurance segments, particularly in the stop-loss insurance market where scale and product diversification are increasingly critical success factors. The deal structure is particularly noteworthy for several key reasons:

• Nationwide gains immediate scale in the growing stop-loss insurance segment, which has become increasingly important as small businesses seek to manage healthcare costs
• The integration of Allstate's Group Health business with Nationwide's existing infrastructure creates significant cross-selling opportunities and operational synergies
• The transaction strengthens Nationwide's competitive position against larger players in the small business insurance market

The deal's timing is strategic, occurring during a period of increased focus on healthcare cost management among small businesses. Nationwide's strong capitalization position and existing distribution networks should enable effective integration and growth of the acquired business. For the broader insurance industry, this transaction signals continued interest in specialized insurance segments and the importance of scale in achieving competitive advantages.

NORTHBROOK, Ill.--(BUSINESS WIRE)-- The Allstate Corporation (NYSE: ALL) announced a definitive agreement to sell its Group Health business to Nationwide for $1.25 billion in cash, adjusted for the closing balance sheet, and subject to standard closing conditions including regulatory approvals. For the first nine months of 2024, Group Health had revenues of $608 million and Adjusted Net Income of $69 million.

“We reached another milestone in the strategy to maximize shareholder value by combining the Health & Benefits businesses with companies that have greater strategic alignment,” said Tom Wilson, Allstate’s Chair, President and CEO. “Group Health provides stop-loss insurance to small businesses, which will gain access to Nationwide’s complementary product offerings. When combined with the previously announced sale of Employer Voluntary Benefits to StanCorp Financial Group, Inc., (The Standard), total sale proceeds will be $3.25 billion. The Individual Health business, with Adjusted Net Income of $18 million for the first nine months of 2024, will either be retained or combined with another company.”

“Nationwide is extremely well capitalized and this transaction advances its growth strategy by expanding its product portfolio and distribution capabilities,” said Jess Merten, Allstate’s Chief Financial Officer. “Allstate acquired the Group Health business in 2021 as part of the $4.0 billion acquisition of National General. The sale is expected to generate a financial book gain of about $450 million, increase deployable capital by $0.9 billion but reduce adjusted net income return on equity by 75 basis points after closing, which is expected in 2025.”

J.P. Morgan and Ardea Partners are acting as financial advisors and Willkie Farr & Gallagher LLP is acting as legal advisor to Allstate. Citi is acting as financial advisor and Squire Patton Boggs LLP is acting as legal advisor to Nationwide.

About Allstate

The Allstate Corporation (NYSE: ALL) protects people from life’s uncertainties with a wide array of protection for autos, homes, electronic devices, and identity theft. Products are available through a broad distribution network including Allstate agents, independent agents, major retailers, online, and at the workplace. Allstate is widely known for the slogan “You’re in Good Hands with Allstate.” For more information, visit www.allstate.com.

About Nationwide

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; and pet, motorcycle and boat insurance.

Forward-looking statements

This news release contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions, and plans. However, if the estimates, assumptions, or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward-looking statements are as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250130696636/en/

Nick Nottoli

Media Relations

(847) 402-5600

Allister Gobin

Investor Relations

(847) 402-2800

Source: The Allstate Corporation

FAQ

What is the value of Allstate's Group Health business sale to Nationwide?

Allstate (ALL) is selling its Group Health business to Nationwide for $1.25 billion in cash, subject to closing balance sheet adjustments and regulatory approvals.

When is the Allstate-Nationwide deal expected to close?

The transaction is expected to close in 2025.

How much revenue did Allstate's Group Health business generate in 2024?

The Group Health business generated revenues of $608 million and Adjusted Net Income of $69 million in the first nine months of 2024.

What is the total value of Allstate's recent business unit sales?

The total sale proceeds will be $3.25 billion, combining the Nationwide Group Health sale ($1.25 billion) and the previously announced sale of Employer Voluntary Benefits to StanCorp Financial Group.

How will the Group Health sale affect Allstate's financial metrics?

The sale will generate a financial book gain of about $450 million, increase deployable capital by $0.9 billion, but reduce adjusted net income return on equity by 75 basis points after closing.