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KKR takes full control of Global Atlantic and reorganizes its finances

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US private equity group KKR is buying the remaining 37% of Global Atlantic, the life insurer it took control of in 2021, for $2.7 billion, gaining full ownership of a growing company fast whose overall value has skyrocketed in recent years.

KKR announced Wednesday that it would buy back the remaining stake at a valuation of more than $7 billion: far more than the price it paid when purchasing a majority stake in Global Atlantic at a valuation of $4 .4 billion as of February 2021. The life insurer’s price rise comes as its overall assets have more than doubled to $158 billion since 2020, leading to an increase in its book value.

When Global Atlantic was initially sold to KKR, minority shareholders – primarily high-net-worth clients of Goldman Sachs – had the option of keeping their investment and being acquired by KKR at a later date.

Scott Nuttall, co-chief executive of KKR, rejected in an interview with the Financial Times the idea that the group was forced to buy its remaining stake in Global Atlantic as its value had risen.

“We’re not doing this because we have to, we’re doing this because we want to and it’s been a successful investment,” Nuttall said. He highlighted the synergies KKR could generate with full ownership, such as selling private equity funds it had designed for high-net-worth individuals to Global Atlantic’s existing clients.

As part of the deal, New York Stock Exchange-listed KKR is also reorganizing its finances so public shareholders can better understand operations that have become increasingly large and complex.

The group will change the way it publishes its quarterly results to focus on how quickly it compounds its overall profits and assets.

In the years since its 2009 IPO, KKR has stood out from rivals like Blackstone by retaining most of its profits, instead of paying them out as dividends to shareholders. This strategy allowed KKR to reinvest its profits in acquisitions and build an increasingly large pool of investment assets on its balance sheet.

KKR’s directly owned pool of private equity assets has grown from less than $10 billion a decade ago to more than $26 billion currently, and is expected to pay significant dividends to KKR in the years to come. come, according to Nuttall.

KKR will divide its operations into three business segments: fee-related revenues from its asset management operations, insurance revenues and balance sheet assets known as “strategic holdings.”

It will create a new profit metric called “total operating profit” to highlight its more predictable revenue streams, such as base management fees, spread profits from its insurance operations and dividends earned of its investments on the balance sheet.

KKR will also change its finances by reducing the salaries traders earn through base management fees and increasing their participation in performance-based fees. These changes combined should increase KKR’s overall profits.

Nuttall said that with the new financial structure, he hoped KKR would become increasingly comparable to investment conglomerates such as Berkshire Hathaway and Danaher, whose shareholders have focused on compound growth in their earnings and capitalization stock market over long periods.

KKR shares rose 4.4 percent in early trading in New York on Wednesday, taking their gain over the past month to more than 25 percent.

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