KKR Says the Annuity Market Still Looks Good

KKR & Co. is still planning to pay $4.4 billion to buy Global Atlantic Financial Group Ltd., a major life and annuity issuer.

Some of the insurer already in the annuity market are trying to get out, because of concerns about the effects of low interest rates on bonds and big ups and downs in stock prices.

Scott Nuttall, KKR’s  co-chief operating officer, talked about his company’s decision to swim against the annuity tide last week, during a conference call with securities analysts.

(Related: KKR Agrees to Buy Global Atlantic for About $4.4 Billion)

Nuttall said one reason is that it’s hard to tell how much of the recent drop in individual annuity sales has been due to low interest rates and how much has been due to the effects of the COVID-19 pandemic.

“Perhaps it’s been harder for some advisors to get to their clients,” Nuttall said. “Perhaps it hasn’t been top of mind for some of the clients to focus on how they’re managing their wealth.”

Nuttall said KKR believes the situation will soon change.

“Our view is that, if anything, this low rate environment is going to drive demand for savings products that have tax deferral,” Nuttall said. “And, really, that’s what an annuity product is.”

KKR’s ability to produce great investment returns should complement Global Atlantic’s annuity distribution team, Nuttall said.

The companies should be able to create new products that can satisfy consumers’ need for yield and tax deferral, he said.

“So, we’re not of the view that the last few months is a long-term trend,” Nuttall said. “We believe that we’ll continue to see organic growth by virtue of that need for yield.”

KKR also wants to create “inorganic growth” by working with Global Atlantic to buy blocks of life and annuity business from life insurers other than Global Atlantic, Nuttall said.

— Read Global Atlantic Wants to Talk, on ThinkAdvisor.

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