Deal Talk: Nationwide acquires Allstate's Group Health Business

Good morning. Welcome to The Deal Talk where each week we break down a recent M&A deal.

Today we’re going to be walking through Nationwide’s acquisition of Allstate's Group Health Business that was announced on January 30th.

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DEEP DIVE
Allstate to Sell Group Health Business to Nationwide for $1.25B

Allstate Corporation has entered into a definitive agreement to sell its employer stop-loss business to Nationwide for $1.25B in cash, subject to regulatory approvals. Allstate’s employer stop-loss insurance segment provides financial protection for small businesses against high medical costs. The transaction is expected to close in the second half of 2025.

Allstate protects 16 million households, offering auto, home, and life insurance, along with financial products. With $113.74B in assets and operations across all 50 states, it stands as one of the largest U.S. insurers, focusing on technology and personalized service to meet customer needs.

Nationwide serves over 17 million individuals, offering insurance and financial services across auto, home, life, and retirement. With $290B in assets and operations in all 50 states, it ranks lower than Allstate among the largest U.S. insurers, leveraging innovation to strengthen its presence in key markets.

Strategic Rationale

Allstate is selling its Group Health business to focus on core insurance areas and increase shareholder value. CEO Tom Wilson stated that Nationwide’s ownership would offer small businesses better coverage and services. The Group Health segment earned $608M in revenue and $69M in adjusted net income in the first nine months of 2024. This sale, following a previous divestiture, brings Allstate’s total proceeds from exiting it’s Health & Benefits services to $3.25B.

For Nationwide, the deal enhances its position in the stop-loss insurance market, addressing the growing demand for employer-sponsored health coverage solutions. John Carter, President of Nationwide Financial, stated that the acquisition fits within Nationwide’s long-term growth strategy by diversifying its insurance portfolio and expanding distribution channels.

This transaction follows Allstate’s 2021 acquisition of National General, which originally included the Group Health business. By divesting this unit, Allstate aims to reallocate capital toward higher-return investments while Nationwide capitalizes on new market opportunities.

Financial Impact & Market Multiples

The sale is expected to generate a book gain of approximately $450M for Allstate and increase deployable capital by $900M upon completion. However, it will reduce Allstate’s adjusted net income return on equity by 75 basis points.

Nationwide is a mutual company owned by its policyholders, not shareholders, so traditional EPS metrics don't apply. Therefore, an accretion/dilution analysis isn't relevant for this transaction.

Key Financial Metrics:

• Transaction Value: $1.25B in cash

• Allstate’s Group Health Revenue (9M 2024): $608M

• Allstate’s Group Health Adjusted Net Income (9M 2024): $69M

• Allstate’s Group Health Estimated Adjusted Net Income (1Y 2024): $92M

• Allstate’s EV/EBITDA Multiple (2024): (9.38x)

• Projected Book Gain: $450M

• Capital Impact: +$900M in deployable capital

• Effect on Allstate’s Adjusted Net Income ROE: -75 basis points

• Valuation Premium Estimate:

  • In insurance M&A deals, transaction premiums typically range between 20%–40% over book value. However, given that Allstate's Group Health unit is highly profitable, If we assume Allstate valued the unit at around 10x earnings pre-deal, this implies a premium of ~36%.

Deal Structure & Financial Advisors

Allstate is selling the business in an $1.25B all-cash transaction to Nationwide, allowing for immediate capital deployment.

• Financial Advisors:

  • Allstate: J.P. Morgan, Ardea Partners

  • Nationwide: Citi

• Legal Advisors:

  • Allstate: Willkie Farr & Gallagher LLP

  • Nationwide: Squire Patton Boggs LLP.

Opinion & Outlook

What Could Go Right?

• Enhanced Market Position strengthens Nationwide’s foothold in the stop-loss insurance market

• Strategic Alignment for Allstate as it focuses on core businesses with stronger growth potential.

• Operational Synergies for Nationwide’s existing infrastructure could accelerate expansion.

What Could Go Wrong?

• Integration Challenges: Merging Allstate’s Group Health operations with Nationwide’s existing framework could pose logistical and operational hurdles.

• Regulatory Approvals: The deal remains subject to regulatory review, which could delay the closing timeline or introduce additional conditions.

Conclusion

This transaction highlights insurance companies doubling down on core strengths while streamlining operations to maximize efficiency and profitability. For Allstate, the divestiture enhances financial flexibility and unlocks $900M in deployable capital. Meanwhile, Nationwide solidifies its position as a leader in the employer stop-loss market.

As insurers continue to optimize their portfolios, expect further consolidation and realignment, with firms prioritizing scalable, high-margin businesses to stay competitive in an evolving landscape.

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The Deal Talk Team