You know that Blackstone founder Stephen A Schwarzman focuses a lot on #1, that is, himself. Schwarzman has pushed Blackstone into many industries, and now he’s adding another, insurance. The Wall Street Journal reports:
Blackstone BX +2.48% Group Inc. struck a sweeping deal with American International Group Inc. to manage a portion of the assets backing AIG’s life-insurance policies and annuities, a big step by the private-equity firm toward becoming a major player in the insurance industry.
Blackstone will enter into a long-term agreement to manage an initial $50 billion in assets, with the amount increasing to nearly $100 billion over the next six years, the companies said Wednesday. The AIG unit has roughly $200 billion in assets.
The private-equity firm would also pay $2.2 billion for a 9.9% stake in AIG’s life-insurance and retirement-services unit, and Blackstone President Jonathan Gray is to join its board.
AIG, a global insurance conglomerate, is preparing to split off the unit into a separate company, leaving the parent to focus on property-casualty insurance. AIG announced its divestiture plan in October and is continuing to work on an initial public offering of the unit.
Blackstone’s nontraded real-estate investment trust, known as BREIT, also struck a deal to buy $5.1 billion of U.S. affordable-housing assets that AIG has held on its books for decades but aren’t considered core to its operations.
Insurance has been a priority for buyout firms in recent years, offering steady streams of cash to invest and reliable, if not spectacular, returns.
Action Line: There’s nothing wrong with a steady stream of cash, but it’s better when it actually gets to investors. Instead, money managers like former Blackstone partner, Larry Fink (current CEO of BlackRock), would prefer to use that money to pursue their own social justice agenda, and bolster their own EGO. You invest, they win.