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US private equity group KKR is buying the remaining 37 percent stake in Global Atlantic Life Insurance Company, which it took control of in 2021, for $2.7 billion, taking full ownership of a fast-growing company whose overall value has risen in recent years.
KKR said on Wednesday that it had bought the outstanding stake at a valuation of more than $7 billion: far more than the price it paid when it bought a majority stake in Global Atlantic at a valuation of $4.4 billion in February 2021. The life insurance company’s rising price tag comes as it more than doubled Its total assets have more than doubled to $158 billion since 2020, pushing up its book value.
During Global Atlantic’s initial sale to KKR, minority shareholders—most of whom were wealthy clients of Goldman Sachs—had the option of holding on to their investments to be purchased by KKR at a later date.
In an interview with the Financial Times, KKR co-chief executive Scott Nuttall rejected the idea that the group had to buy its remaining stake in Global Atlantic as its value rose.
“We don’t do it because we have to, we do it because we want to, and this was a local investment,” Nuttall said. He pointed to the synergies KKR could gain through full ownership, such as selling private equity funds it designed for wealthy individuals to existing Global Atlantic clients.
As part of the deal, NYSE-listed KKR is also rearranging its finances so that public shareholders can better understand operations that have become increasingly broad and complex.
The group will change the way it reports quarterly earnings to focus on how quickly it can double its total profits and assets.
In the years since KKR went public in 2009, it has distinguished itself from rivals such as Blackstone in retaining most of its profits, rather than paying them out as dividends to shareholders. This strategy has allowed KKR to reinvest its profits in acquisitions and build an increasingly large portfolio of investment assets on its balance sheet.
The pool of private equity assets directly owned by KKR has grown from less than $10 billion a decade ago to more than $26 billion today, and is expected to pay significant dividends for KKR in the coming years, according to Nuttall.
KKR will divide its operations into three business segments: fee-related earnings from asset management operations, insurance earnings and balance sheet assets called “strategic holdings.”
It will create a new profit metric called “gross operating profit” to highlight more predictable profit streams, such as core management fees, spread-related profits from its insurance operations, and profits earned from its balance sheet investments.
KKR will also adjust its finances by reducing the pay dealmakers earn from base management fees and increasing their participation in performance-based fees. The combined changes are expected to boost KKR’s overall earnings.
Nuttall said that with the new financial structure, he hopes KKR will increasingly compare to investment conglomerates such as Berkshire Hathaway and Danaher, where shareholders have focused on compound growth of their profits and market capitalization over long periods of time.
KKR shares rose 4.4 percent in early New York trading on Wednesday, taking their gains over the past month to more than 25 percent.
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