Insurance-linked synergies are rife in the just completed transaction that saw private equity and buyout giant KKR & Co. L.P. (or Kohlberg Kravis Roberts) acquiring life and retirement focused insurance and reinsurance firm Global Atlantic Financial Group.
The pair announced the completion of the strategic transaction yesterday and Global Atlantic now becomes an independently operating entity of KKR, while the PE giant will act as investment manager to Global Atlantic’s rapidly growing float.
We explained before how this deal is yet another clear signal of the appetite of private equity and alternative investment giants of to gain and secure access to sources of insurance premium float, as a form of assets under management, while also showing their appreciation for bringing third-party capital into re/insurance businesses.
When we said “growing float” above, Global Atlantic really has put on the pounds, in terms of weight of assets under management in recent months.
In discussing the completed acquisition, KKR and Global Atlantic highlighted the significant growth and strong performance delivered by the life and annuity insurance and reinsurance business, since the original announcement on the transaction in July 2020.
Based on preliminary financial data of Global Atlantic and as of December 31st 2020, the estimated value of the assets to be managed by KKR as of the closing is roughly $90 billion.
Thanks to three large reinsurance block transactions and other activity, that figure now represents asset growth of around 25% since the announcement of the acquisition.
“Since we announced this transaction, Global Atlantic’s success has been remarkable, and in many ways we are well ahead of our initial expectations,” Joseph Bae and Scott Nuttall, Co-Presidents and Co-Chief Operating Officers of KKR, explained. “We welcome Global Atlantic to the KKR family and look forward to supporting its policyholders and clients through our asset management and origination capabilities, as well as our global network.”
Global Atlantic will continue to operate under the leadership of Chief Executive Officer Allan Levine and its existing senior leadership team, operating as a separate company.
KKR will now step in as sole investment manager for Global Atlantic’s rapidly growing haul of assets, giving the life and annuity speciality access to KKR’s leading origination engine and asset management capabilities.
Of course, this also delivers significant fire-power to KKR’s deal-making, with the increased float set to provide even more benefits than had perhaps been envisaged so soon when the acquisition was first discussed.
“This is an exciting day for Global Atlantic. Being a part of KKR strengthens our position as a leading U.S. annuity and life insurance company, enhances our ability to deliver compelling solutions for our clients and deepens our access to long-term strategic capital,” Allan Levine, Chairman and Chief Executive Officer of Global Atlantic said. “Our strong results to date were driven by our people and culture. We are thrilled to be working with the KKR team to capitalize on the significant opportunities we see in front of us. In KKR we have a tremendous partner who shares our values, is aligned around our vision, and committed to our success.”
The deal economics have moved in-line with Global Atlantic’s growth and success in block reinsurance deals of recent months, it seems.
When the acquisition was first announced, KKR said that it expected to pay an amount equal to 1.0x Global Atlantic’s Book Value as of the date of closing, subject to an equity roll-over for certain existing shareholders.
Based off March 31st 2020 valuations that would have equalled roughly $4.4 billion, but now the announcement says the transaction valued Global Atlantic at approximately $4.7 billion.
However, KKR had said that it anticipated that its assets under management would increase from $207 billion to $279 billion thanks to buying Global Atlantic.
But, now it seems the increase will have taken KKR’s assets much closer to $300 billion, with the addition of Global Atlantic’s roughly $90 billion.
That’s a significant uplift in long-term and institutionally focused capital for KKR, enabling its investment strategies to do more and generate greater returns to its entire business.
While also delivering on the promise of providing Global Atlantic with much greater financial support and flexibility going forwards.
With the deal now done, KKR will own a controlling interest in Global Atlantic of approximately 60%.
KKR led an equity co-investment process in Global Atlantic as well, receiving significant investor demand from new and existing investors and generating an additional $250 million of primary equity capital to support future growth objectives.