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KKR has announced one of PE's largest insurance bets this year, underscoring alternative asset managers’ deepening ties with insurers as they try to boost asset growth and revenue in a challenging fundraising market.  

The PE giant said it will pay roughly $2.7 billion to purchase the remaining 37% stake in Global Atlantic, a life insurer it took control of in 2021. 

The all-cash transaction set a new valuation for Global Atlantic at more than $7 billion, well above the $4.7 billion valuation it fetched in the 2021 deal.

Wednesday's agreement marks the latest efforts by KKR to strengthen its footprint in the insurance industry, a space that has increasingly attracted PE interest in the last four years. In September, KKR increased its stake in USI Insurance Services—an insurance broker it jointly acquired with CDPQ in 2017—through a $1-billion-plus equity investment.

Global PE insurance investments peaked in 2021, with 709 deals totaling $100.2 billion, according to PitchBook data. Through Nov. 13, private equity buyers inked 490 transactions in 2023 to total $59.3 billion, remaining above pre-pandemic levels. 
   
KKR's move comes at a time when the PE market is grappling with a fundraising dry spell and a difficult exit environment for its traditional buyout strategies, which has prompted firms to seek new sources of capital for asset growth. 

PitchBook's Q3 2023 US PE Breakdown shows PE exits announced in Q3 totaled $44.1 billion, down roughly 84% from its peak in Q2 2021. And the fundraising pace for this asset class decelerated this year. Managers closed just 258 PE funds so far in 2023, only 35% of 2022's full-year tally.

The backlog of PE exits and the slowdown in fundraising may hurt GP's efforts to grow their AUM and fee-related revenue, said PitchBook lead PE analyst Tim Clarke.

Insurance companies, which possess massive stockpiles of assets that need to be invested to generate returns, can be a stable source of capital. For some of the largest alternative asset managers, their insurance arms have become a significant driver of capital inflows in recent years. 

One case is Apollo Global Management, which raised $58 billion through its insurance channel in the last year, accounting for half of the asset manager's organic inflows, according to PitchBook's Q3 2023 US Public PE and GP Deal Roundup. Similarly, Blackstone recorded $22 billion year to date, according to the report.

Alongside the investment, KKR unveiled a series of new strategic plans, including introducing a new reporting metric and launching a novel business segment that will contain its PE balance sheet holdings. 

The firm also revamped its compensation scheme to draw a greater share of carried interest, saying the new compensation structure will increase its recurring revenue and shareholder value. 

Featured image by Richard Drury/Getty Images

This article originally appeared on PitchBook News