KKR & Co. Inc. announced Wednesday it would buy out the remaining stake in the insurance company Global Atlantic Financial Group LLC. The private equity giant will purchase the remaining 37% of the company from minority shareholders for $2.7 billion, financing the transaction from its $23 billion balance sheet. KKR initially purchased a majority stake in Global Atlantic in 2021.
Global Atlantic is a major provider of annuities and life insurance for individuals and institutions. Its AUM has grown to $158 billion today, according to the announcement, from $72 billion in 2020.
“We see a strong path to double [Global Atlantic assets] again,” said Scott Nuttall, one of KKR’s co-CEOs, on a Wednesday conference call following the announcement.
In 2021, Global Atlantic was partially acquired by KKR for $4.7 billion, a deal which added $90 billion to KKR’s assets under management.
“The strategic partnership we envisioned three years ago has exceeded our expectations,” said Nuttall and his co-CEO, Joe Bae, in a statement with the transaction’s announcement. “It has been transformative for both businesses and a great cultural fit that has enabled us to contribute to Global Atlantic’s continued strong performance and success, while also being a key driver of growth for KKR.”
KKR’s investment continues a trend of private equity firms buying insurance companies. Following KKR’s initial investment in Global Atlantic, Apollo Global Management Inc. acquired insurer Athene Holding Ltd. in full in 2021. Other firms such as the Carlyle Group and Blackstone have also taken large stakes in insurance companies. Earlier this year, Blackstone created a new credit and insurance group.
In announcing the sale, KKR also announced new strategic initiatives. The firm will create a new business segment called “strategic holdings,” comprised of the firm’s core private equity balance sheet holdings. “Core private equity” represents $35 billion in AUM for the firm, including $6.5 billion on its balance sheet.
KKR stated that it will also draw significant compensation from carried interest, the firm’s share of profits on investments, instead of from fee-related earnings. The firm intends to introduce a new financial reporting framework, including a metric it calls “total operational earnings,” comprised of fee-related earnings, strategic holdings and insurance operations holdings. The firm expects this metric to highlight revenue growth from the fund’s recurring earning streams.
“We remain focused on performing through cycles for the millions of clients and policyholders counting on us—with a business model that allows us to compound earnings and value for the very long term while retaining our culture. Today’s announcements are in service of that vision—more fully establishing three avenues for long-term sustained growth, further increasing our optimism about the path ahead,” Bae and Nuttall said in the statement.
The transaction is expected to close in the first quarter of 2024.
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Tags: General Atlantic Financial Group, Global Atlantic, insurance, KKR, Private Equity