What You Need to Know
- Global Atlantic grew by acquiring Accordia Life, Commonwealth Annuity and Life, First Allmerica Financial and Forethought Life.
- KKR completed the acquisition of Global Atlantic Feb. 1.
- In the second quarter, the Global Atlantic Insurance accounted for $128 million of KKR's $1.1 billion in distributable operating earnings.
Ordinary investors may be skeptical of life insurers’ exposure to low interest rates, stock market ups and downs, and COVID-19.
But KKR & Co. loves Global Atlantic — the life insurer it recently acquired — for its sticky capital.
Executives from KKR talked about Global Atlantic’s stable base of capital Tuesday, during a conference call. KKR held the call to go over its earnings for the second quarter, which ended June 30.
KKR classifies much of Global Atlantic’s capital as “perpetual capital,” meaning that it is likely to stay on the books for many years and can be fed into lucrative, long-duration investments.
The Global Atlantic deal helped increase KKR’s total level of perpetual capital to $130 billion, from $22 billion just a year earlier.
Scott Nuttall, KKR’s co-president, told securities analysts that the KKR insurance business can bring in big, growing flows of capital by selling annuities and other products to individual customers.
The individual capital flow alone can amount to $8 billion to $10 billion per year, Nuttall said.
The insurance business can also bring in capital by buying blocks of life and annuity business, reinsurance blocks of life and annuity business, and by selling big group annuities to pension plan sponsors, through pension risk transfer arrangements, Nuttall added.
The pension risk transfer market “is incredibly active and it’s getting more active, especially this year,” Nuttall said.