Kkr to take over Goldman Sachs backed insurer Global Atlantic
NEW YORK: kkr & Co Inc said on Wednesday it would acquire Goldman Sachs-backed Global Atlantic Financial Group Ltd, making it the latest private equity firm to add an annuities and life insurance provider to its platform.
kkr said it will become the manager of Global Atlantic’s investment portfolio, giving it a steady stream of lucrative fees and boosting its assets under management from Us$207bil to Us$279bil.
New York-based kkr will take over Global Atlantic through its balance sheet rather than its buyout funds, and plans to keep it as opposed to flipping it for a profit as it does with its private equity portfolio. It said the deal will boost its permanent capital base from 9% to 33%, reducing its reliance on fundraising.
The purchase price will be equal to Global Atlantic’s book value at the time the deal closes, sometime in the first quarter of 2021 subject to regulatory approvals, kkr said. Global Atlantic had a book value of about Us$4.4bil at the end of March.
kkr said it would pay cash for the acquisition but offer the opportunity to Global Atlantic investors, including Goldman Sachs Group Inc, to keep ownership of the firm. kkr said it expected to own about 60% of Global Atlantic.
kkr shares ended Wednesday up 10% at US$33.88.
Global Atlantic serves more than 2 million policyholders through its retirement and life insurance products. It was set up by Goldman Sachs in 2004.
The investment bank kept a stake in it when it separated it as an independent company in 2013. kkr co-president Scott Nuttall told analysts on a conference call on Wednesday that Global Atlantic’s investors will have made three times their money over the last seven years as a result of the deal.
Two years from now, kkr expects to be receiving Us$200mil in annual management fees as a result of the deal, kkr’s chief financial officer, Robert Levin, said. Last year, it generated Us$1.2bil in management fees.
kkr said it expected to grow Global Atlantic’s platform through more acquisitions, as low interest rates give insurers that generate returns from high-yielding assets such as private equity an edge.