Allstate sells its Group Health business to Nationwide for $1.25bn

US primary insurer, The Allstate Corporation, has entered into 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.

Nationwide stated that this acquisition will serve as a foundation for its ongoing efforts to add capabilities for significant growth in employer benefits.

The deal is expected to strengthen and diversify Nationwide Financial’s portfolio, enhancing the company’s ability to sell stop-loss insurance to small businesses.

Additionally, for the first nine months of 2024, Group Health had revenues of $608 million and an adjusted net income of $69 million.

J.P. Morgan and Ardea Partners acted 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.

Tom Wilson, Chair, President and Chief Executive Officer, Allstate commented, “We reached another milestone in the strategy to maximise shareholder value by combining the Health & Benefits businesses with companies that have greater strategic alignment.

“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.”

Jess Merten, Chief Financial Officer, Allstate added, “Nationwide is extremely well capitalized and this transaction advances its growth strategy by expanding its product portfolio and distribution capabilities. 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.”

Kirt Walker, CEO, Nationwide said, “As Nationwide continues to focus on our mission to protect people, businesses and futures with extraordinary care, this acquisition is a strong fit. We are extending our protection solutions to meet the needs of business owners today and into the future.”

John Carter, President and Chief Operating Officer, Nationwide Financial concluded, “Acquiring Allstate’s employer stop loss segment will broaden Nationwide Financial’s portfolio, meeting the needs of small businesses, allowing us to serve more customers and positioning us as a leading provider in the stop loss industry.

“This represents a significant investment in the stop loss market, adding experienced talent with proven business results, protecting over 13,000 small businesses and complementing our existing offerings in the market while accelerating our opportunity for growth.”

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