Blackstone to Buy $7.3 Billion of AIG Housing, Insurance Assets

American International Group Inc. said it agreed to sell a 9.9% equity stake in its life and retirement business to Blackstone Group Inc. for $2.2 billion in cash.

The insurer and the private equity giant agreed to a “long-term strategic asset management relationship” for an initial $50 billion from the life and retirement portfolio, AIG said Wednesday in a statement. AIG will also sell affordable-housing assets to Blackstone for $5.1 billion.

The deal builds on two initiatives by Blackstone: to build its so-called permanent capital through an expansion into insurance, and to pursue lower-cost rentals for its real estate ...