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American International Group Inc. plans to use an IPO to sell part of its life and retirement business, while Blackstone Group Inc. agreed to buy a sizeable stake, according to a person familiar with the matter.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and Blackstone said on Wednesday the private equity firm would pay $2.2 billion in cash for 9.9% of the unit, sending the insurer’s shares more than 6% higher in after-market trading.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ had been fielding inquiries from potential investors about taking a 19.9% stake in the life and retirement unit, which sells insurance and annuities, but Chief Executive Officer Peter Zaffino in May said the company would use an IPO to sell the stake instead, dashing the hopes of bidders.

“This does not derail the IPO plan,” the source said.

The moves are part of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s effort to split its life insurance and retirement businesses off from its property and casualty operations, which was announced in 2020, years after activist investors targeted ÌìÃÀÍøÕ¾´«Ã½´«Ã½ for a break-up.

“The deal) provides ÌìÃÀÍøÕ¾´«Ã½´«Ã½ with flexibility as we continue to work to separate Life & Retirement from ÌìÃÀÍøÕ¾´«Ã½´«Ã½, and results in significant new capital for ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to deploy to support our capital management priorities,” Zaffino said in a statement on Wednesday.

Blackstone will also enter a long-term asset management relationship with ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to manage $50 billion, or about 25%, of life and retirement’s investment portfolio. That amount is due to increase to $92.5 billion over the next six years.

Shares of Blackstone were up 3.6% at $102.25.

Private equity firms, including Blackstone, have been aggressively buying annuity providers, saying they can use their investing prowess to earn better returns on the large pots of money, an important consideration in the current low-interest rate environment. The buyout firms, in return, earn fees for such services.

In a separate agreement also announced on Wednesday, Blackstone Real Estate Income Trust will acquire some of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s affordable housing assets for $5.1 billion, the companies said.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½, which has managed the affordable housing portfolio for more than 30 years, said the assets “are no longer core to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s long-term investment strategy.”

(Reporting by Alwyn Scott, Nivedita Balu and David French in New York; Editing by Devika Syamnath and David Gregorio)

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