KKR & Co. Inc. is making a big leap into the U.S. life and annuity market.
The New York-based private equity firm has agreed to buy Global Atlantic Financial Group Ltd. from its shareholders.
KKR plans to pay an amount equal to Global Atlantic’s book value, as of the date of the closing, to acquire the stock, KKR and Global Atlantic announced today.
Book value equals the estimated market value of a company’s assets, minus the company’s intangible assets, such as goodwill, and minus the company’s liabilities. At the end of the first quarter, Global Atlantic had a book value of about $4.4 billion.
- Links to KKR-Global Atlantic deal resources, including an audio recording of a KKR conference call meeting for investors, are available here.
- An article about a KKR assessment of the U.S. life and annuity market is available here.
KKR said that it would operate Global Atlantic as a separate business, and that Global Atlantic would keep its current management team and brands.
KKR would become Global Atlantic’s investment manager.
More Deal Details
KKR said it would pay for the deal with a combination of cash on hand, proceeds from minority co-investors and the issuance of new KKR debt or KKR stock.
KKR would not put any client funds into the deal, but it would create a vehicle that outside investors could use to invest in the deal alongside KKR.
KKR and Global Atlantic need to get approvals from regulators before they can complete the deal. They hope to complete the deal in early 2021.
The Players’ History
Goldman Sachs formed Global Atlantic in 2004 and converted it into an independent company in 2013.
Global Atlantic made its first big splash in acquisitions in 2005, when it acquired Allmerica Life.
In 2013, Global Atlantic acquired Forethought Life Insurance Company, the company that ended up with Hartford Financial Services Group Inc.’s formidable annuity origination business.
Global Atlantic also acquired a U.S. arm of Aviva PLC in 2013, and turned that business into Accordia Life and Annuity Company.
Global Atlantic has its headquarters in Hamilton, Bermuda.
KKR was founded in 1976, as Kohlberg Kravis Roberts & Co.
In 1992, KKR helped buy American Re Corp. out from Aetna Inc.
KKR made a big investment in Willis, which is now part of Willis Towers Watson, in 1998.
KKR has also interacted with the insurance community as a significant source of investment services. In 2017, for example, Aflac Inc. tapped KKR in an effort to use private equity investments to increase returns on its $120 billion investment portfolio.
Global Atlantic Today
KKR shows, in a slidedeck prepared for a conference call meeting with investors, that Global Atlantic is a significant force in the U.S. life and annuity products.
Global Atlantic reported $602 million in operating earnings in 2019 on $90 billion in assets, up from $377 million in operating earnings on $50 billion in assets in 2016, according to KKR.
The company’s life insurance company units sell preneed life arrangements and indexed universal life, and they are major providers of fixed annuities, with about $8.3 billion in 2019 fixed annuity sales, according to Secure Retirement Institute statistics cited by KKR.
Global Atlantic as a whole ranked fourth in the United States in 2019 in the Secure Retirement Institute’s individual fixed annuity sales rankings.
Global Atlantic ranked below Allianz in the rankings but ahead of Athene.
Allan Levine, Global Atlantic’s chairman and chief executive officer, said in a comment included in the deal announcement that Global Atlantic is thrilled to have a new, long-term partner in KKR.
Henry Kravis and George Roberts, the co-chairmen and co-CEOs of KKR, called the deal “a transformative event for KKR.”
KKR, as a company, said that the world’s insurance industry has about $30 trillion in assets and is “a key strategic focus for KKR.”
“The acquisition of Global Atlantic represents a significant and natural extension of KKR’s existing insurance business, which includes managing $26 billion of assets on behalf of insurance companies across our strategies and products,” KKR said.
The deal would increase KKR’s total assets under management to $279 billion, from $207 billion.
KKR and Global Atlantic describe some of the risks they and their deal face at the bottom of the deal announcement, including:
- Problems with integrating Global Atlantic into KKR.
- The cost of deal financing.
- Problems with attracting co-investors.
- Regulatory delays.
- The severity and duration of the COVID-19 pandemic.
- The pandemic’s impact on the U.S. and global economies.
- Federal, state and local governmental responses to the pandemic.
- Uncertainty regarding the benefits of turning KKR into a corporation.
- Capital markets and economic volatility.
- Any disruption in servicing Global Atlantic’s insurance policies.
— Read Global Atlantic Wants to Talk, on ThinkAdvisor.