A KKR executive says closing on the Global Atlantic deal is just
a start.
KKR & Co. is still planning to pay $4.4 billion to buy
Global Atlantic Financial Group Ltd., a major life and annuity issuer.
Some of the insurer already in the annuity market are trying
to get out, because of concerns about the effects of low interest rates on
bonds and big ups and downs in stock prices.
Scott Nuttall, KKR’s co-chief operating officer,
talked about his company’s decision to swim against the annuity tide last week,
during a conference call with securities analysts.
Nuttall said one reason is that it’s hard to tell how much of
the recent drop in individual annuity sales has been due to low interest rates
and how much has been due to the effects of the COVID-19 pandemic.
“Perhaps it’s been harder for some advisors to get to their
clients,” Nuttall said. “Perhaps it hasn’t been top of mind for some of the
clients to focus on how they’re managing their wealth.”
Nuttall said KKR believes the situation will soon change.
“Our view is that, if anything, this low rate environment
is going to drive demand for savings products that have tax deferral,” Nuttall
said. “And, really, that’s what an annuity product is.”
KKR’s ability to produce great investment returns should complement
Global Atlantic’s annuity distribution team, Nuttall said.
The companies should be able to create new products that can
satisfy consumers’ need for yield and tax deferral, he said.
“So, we’re not of the view that the last few months is a
long-term trend,” Nuttall said. “We believe that we’ll continue to see organic
growth by virtue of that need for yield.”
KKR also wants to create “inorganic growth” by working with
Global Atlantic to buy blocks of life and annuity business from life insurers
other than Global Atlantic, Nuttall said.
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