Corebridge Financial Inc. ended its first full day of trading only slightly off its listing price, indicating investors agreed with the decision to substantially cut the life and retirement business' valuation before it entered the market.
Corebridge entered the public market on Sept. 15 with an initial public offering of 80 million common shares priced at $21 a share. The price American International Group Inc. set for the Texas-based life insurance company's shares was at the lower end of the $21 to $24 range it had previously announced. The Financial Times reported that the price range valued the company between $13.5 billion and $15.5 billion, as opposed to a $22.2 billion valuation seen after private equity giant Blackstone Inc. invested in the company last year.
CreditSights analyst Josh Esterov said in an interview that the IPO marked a "significant milestone" for AIG in a couple of different ways.
"Just having an IPO process for a major player in the life industry is notable in and of itself," Esterov said. "But more broadly, for AIG, it speaks to the success of the last several years of AIG's core commercial platform and the turnaround story there."
A number of other life insurers have also separated parts of their business and taken them public in recent years. They include Brighthouse Financial Inc., Equitable Holdings Inc. and Jackson Financial Inc., as well as Athene Holding Ltd., which has since been taken private once again. All of those names have generally performed well over the years.
The Corebridge offering is expected to close Sept. 19. Following the completion of the offering, AIG will retain ownership of 75.8% or 77.7% of Corebridge's common stock and an affiliate of Blackstone Inc. will own about 9.9%.
Esterov said, as an investor, he would likely have a greater concern if AIG was offering the entirety of the company during this time of market turbulence.
"Given that it's a minority IPO, it kind of puts them on the path forward for a fairly straightforward additional drawdown of their ownership stake in life and retirement," Esterov said, adding that it would likely be a better move than trying to perfectly time the market.
Corebridge ended its first two trading days at $20.61. AIG, meanwhile, lost 2.53% for the week ending Sept. 16.
August inflation reading pushes stocks down
U.S. equity markets were thrown for a loop this week after the latest consumer price index reading showed that U.S. inflation rose above expectations in August, increasing the odds of more and steeper interest rate hikes from the Federal Reserve.
The S&P U.S. Insurance index dropped 3.53% for the week ending Sept. 16, finishing at 542.51. The S&P 500 lost 4.77% to close at 3,873.33.
Amid the market chaos, Prudential Financial Inc. and MetLife Inc. subsidiaries issued nonparticipating single-premium group annuity contracts to International Business Machines Corp.'s personal pension plan in equivalent amounts of $8 billion on Sept. 13, transferring approximately $16 billion in obligations related to certain pension benefits.
The transaction represented the second-largest U.S. pension risk transaction to date. With favorable conditions for similar de-risking activity by defined benefit plan sponsors, the move is expected to push full-year 2022 activity to a record high.
Prudential Financial's shares ended the week down 6.66%. MetLife's shares fell 3.80%.
In managed care, the U.S. Department of Justice is awaiting a federal judge's decision on whether to block UnitedHealth Group Inc.'s plans to buy Change Healthcare Inc. due to concerns over whether UnitedHealth should have access to the substantial amount of competitor data it would gain by buying Change, which serves as a data analysis service provider for many major managed care companies.
The $13 billion deal was announced in January 2021. The DOJ filed a lawsuit in February and closing arguments finished late last week. UnitedHealth Group's shares finished down 0.67% for the week.