KKR & Co. Inc. (KKR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to KKR's call to discuss the acquisition of Global Atlantic. [Operator Instructions] I will now hand the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please go ahead.

Thank you, operator. We're excited to announce this morning that KKR has signed a definitive agreement to acquire Global Atlantic Financial Group or GA. On the call today, you'll hear remarks from Scott Nuttall, KKR's Co-President and Co-Chief Operating Officer; and Rob Lewin, KKR's Chief Financial Officer. Please note that we posted a presentation on our website that we'll be referring to over the course of the call. On our website at kkr.com within the Investor Center section, you'll be able to find the presentation under the Events & Presentations tab. Before we begin, we'd like to remind everyone that this call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our SEC filings and the accompanying presentation on our website for cautionary factors related to these statements. And we'll also refer to non-GAAP measures on the call, which are reconciled to GAAP figures in the presentation. And finally, on our upcoming second quarter earnings call, we do expect to discuss Global Atlantic and the transaction in greater detail, including how we expect GA to be reflected within our financial reporting upon closing. That call is currently scheduled for Tuesday, August 4. So while more details will be forthcoming right around the corner, we're pleased to have the opportunity to introduce GA and the transactions [ ahead of this ]. And with that, I'm pleased to turn things over to Scott.

Thank you, Craig. Good morning, everybody, and thanks for joining our call on short notice. This morning, we announced that KKR has agreed to acquire Global Atlantic in an all-cash transaction. We wanted to spend some time explaining why we're so excited about this development, introduce you to GA's business and also take your questions. In summary, this transaction is highly strategic for KKR. It meaningfully expands our base of permanent capital, further diversifies and scales our business and significantly grows our position within the insurance industry, all in a transaction that we expect will improve the quality and visibility of our earnings while also being accretive on a per share basis across our key financial metrics. Rob will get into more of the transaction details in a few minutes. Now I know many of you know KKR quite well. But for those of you less familiar with us, please take a look at Page 2 of the presentation that Craig referenced. I think it's a good reminder for everyone, and it helps highlight why GA fits so well for our firm. When we meet with investors for the first time, we hope they'll remember 4 things. First, we are in a secularly growing industry. Our clients are searching for return in a low rate world. Opportunities for the industry in areas like insurance and retail have been expanding. And in this growing industry, we have been taking share, growing faster than the industry itself. Second, our business model is different than our peers. We enhance our core asset management business when we invest our own capital alongside our partners' capital and bring opportunities to others through our Capital Markets business. We've built a business model that enables us to generate significantly greater profitability from the opportunities we see. And our balance sheet gives us the opportunity to be opportunistic and aggressive when it makes sense. We can use it as a real strategic enabler. Through our approach, we can pursue opportunities we like in size and monetize our ideas to a much greater extent. GA is a great example of this. Third, we have a lot of ways to grow. The vast majority of our investment activities around the world were started in the last 10 years. Of our 24 investment strategies, 18 of them are less than 10 years old. And in our business, it takes 10-plus years to start to achieve scale. Said another way, the vast majority of what KKR is doing on a daily basis around the world is in this first 10-year period. We see massive growth opportunities ahead as we inflect and scale. And this scaling can be achieved in a number of ways, whether through marketing fund IIIs and IVs instead of Is and IIs or geographically as we take strategies like infrastructure to Asia or as we're further developing channels in areas like retail or insurance. And finally, given our significant level of employee ownership, we are very aligned with our shareholders. And we have a collaborative culture that lends itself to our model and drives differentiated outcomes. So where does Global Atlantic fit into all of this? Let's move to Page 3 of the presentation. The global insurance industry is estimated to have over $30 trillion in invested assets. It's an enormous end market. And in this low rate world, we've been finding that insurance companies are looking for alternative investments within their portfolios. So we have built a dedicated team that is focused on the specific needs of insurance LPs. And our insurance AUM has continued to grow. It was about $26 billion as of March 31. And as we've worked with these clients and as we've built custom products that really address the specific needs of the insurance market, we've become more constructive about the long-term opportunity for us within this vertical. You have heard us on our earnings calls talk about insurance as an important growth area. And while we have been scaling organically, we have also been looking at inorganic opportunities, searching for the right strategic partner that can take our platform to the next level. And that's what takes us to GA. As many of you know, KKR has been investing in the insurance industry since the 1990s. We've met with all types of insurance companies. And as a leadership team, when we've discussed the type of insurance company we'd love to find as a strategic partner, we've really been describing Global Atlantic. GA is a scaled player focused in 2 areas: retirement and life insurance. And in those markets, they have a leading presence. They are focused on the fastest-growing products and the fastest-growing sales channels. A lot of this success can be credited to GA's management team. Led by Chairman and CEO Allan Levine, Global Atlantic's strong and experienced team is a critical element of this transaction for us. We found a great partner. GA has grown rapidly, both organically and through acquisitions. To give you a sense, GA's GAAP assets more than doubled from 2014 to 2019. And we do expect continued M&A in this space and believe GA is very well positioned to continue to be a consolidator. And we believe we can help GA grow even faster going forward through helping generate even better investment returns and using our network to access capital to fund more organic and inorganic growth. And in terms of KKR, we plan to become GA's investment manager, subject to regulatory approval. In doing so, we will create a mutually beneficial dynamic wherein KKR will bring its asset management and origination expertise to bear on behalf of Global Atlantic and its policyholders. GA already has a strong investment track record, with assets managed by an accomplished team of investment professionals. We believe working with this team, we can further improve GA's risk-adjusted return profile. And at the same time, with over $70 billion of invested assets, GA is going to bring additional scale to our businesses in a number of critical areas for us. Think real estate credit, principal finance, private credit and leveraged credit, to name a few. And longer term, we'll have opportunities to work together and leverage our collective strengths as it relates to product creation and distribution. This transaction will significantly accelerate our presence across insurance. Assets managed on behalf of insurance clients will increase from 12% of our total AUM today to 35%. Our relevance to the insurance industry will increase materially. And as Rob will explain, this transaction meaningfully accelerates our objective of increasing our permanent capital base and is financially very compelling for our shareholders. All of these factors combined increase the growth trajectory of our firm and the opportunity we have to increase equity value meaningfully for KKR shareholders over the long term. Hopefully, that gives you a sense of our enthusiasm. Now let me shift gears a bit and spend a few minutes on GA, its background and business, and if you could flip to Page 4 of the deck, we'd appreciate it. The business was founded within Goldman Sachs in 2004 and separated from Goldman in 2013 to become an independent company renamed Global Atlantic. As GA's business evolved, the team made a strategic choice to focus exclusively on only 2 areas: retirement and life insurance in the U.S. These markets and the products GA offers have attractive risk and return characteristics and have allowed GA to leverage its strengths in distribution and risk management. GA hasn't tried to be all things to all people. Instead, where they have a presence, they are focused on being a market leader. At this point, the company has 1,100 employees with a senior team that brings a great deal of experience, about 20 years on average. 16 years in now, GA has a scaled and diversified business. It is a leader in this targeted market, with GAAP assets of about $90 billion. You see GA's growth in these GAAP assets in the top right-hand corner of the page. This growth has really been driven by the development of its individual and institutional sales channels in addition to strategic M&A. And now partnered alongside KKR, we think the company will be even better positioned to consider these opportunities. In the bottom right-hand side of the page, you see an operating performance summary, both adjusted operating earnings and book value. GA has delivered mid-teens annual growth in both metrics, with an average adjusted operating ROE of 16%. Global Atlantic's retirement business is clearly its most significant business, so Page 5 is worth spending a few minutes on. In terms of product offering, GA focuses on fixed annuities. These are longer-duration, stable liabilities with products that are simple and easy to understand and with favorable macroeconomic and demographic tailwinds. It's a spread-based business that lends itself to high-quality asset management opportunities quite naturally. Now at the same time, from a distribution standpoint, GA has been focused within the bank and broker-dealer channel. The company has an established presence at this point at over 200 banks and broker-dealers, and its top 10 distribution partners are all blue chip financial institutions. We view GA's footprint in this channel as a real strategic advantage. It's difficult to establish a presence within these firms, let alone be embraced by these sales teams. Global Atlantic has been working with this for over 15 years [ now ]. So when you look at the bottom half of the page, you see that GA has been focused on the fastest-growing products being sold through the fastest-growing distribution channel. This combination has positioned the company solidly in the top 5, when you look at fixed annuity sales across the industry. And to be clear, there remains significant opportunities for growth. Fixed annuity sales for the industry were about $140 billion in 2019, so GA was about 5% of the market. And remember the portion of the U.S. population that is aged 55 and older is growing and an increasing portion of the retirement wealth in the U.S. is being managed by individuals themselves, not through pensions. So the market is growing. And within that growing market, GA is positioned in the most attractive segments, given its product and distribution focus, with scale and distribution channel advantages. In its institutional business, GA has executed 20 reinsurance transactions since its founding, covering about $27 billion in assets. We see tremendous potential for continued growth in the institutional channel, with the current market environment only increasing the opportunity set as many insurers seek to refocus their businesses and release capital for other needs. Alongside all of this, we expect GA to benefit from KKR's asset management expertise and direct origination capabilities. This should help GA's organic growth while increasing its ROE, and it will have a larger capital base and access to our capital markets syndication relationships as M&A situations are evaluated. And to be clear, all of these growth avenues for GA should further increase AUM and permanent capital for KKR. Let me now turn things over to Rob.

Thanks a lot, Scott. We are planning to provide additional information on Global Atlantic and how it will fit within our financial reporting as part of our Q2 earnings call in a few weeks, so I'm going to be brief in my remarks today. If you flip to Page 6. We have agreed to a cash transaction that values GA at 1x its book value at closing. So we haven't yet fixed the purchase price and are taking several months of risk off the table prior to us closing. At that point, it will be our responsibility to ensure a strong performance of GA's investment portfolio. In addition, we have agreed to give certain existing holders in GA the opportunity to roll their investment into our transaction, and we are also planning to syndicate a portion of our investment to co-investors. Importantly, our intention is to maintain a controlling position in GA with an initial economic ownership stake in the 60% range. But that could shift a bit between now and closing. In terms of funding our portion of the deal consideration, we currently have around $3 billion of cash on hand, an investment portfolio that was valued at $11.5 billion at the end of March which we expect to continue to generate meaningful liquidity. And we also have access to additional funding through the debt and equity capital markets. While there are still some moving pieces, we did want to give you a high-level sense for why we're so excited about the potential impact of this transaction. To start, it's important to understand that GA is going to continue to operate as a stand-alone business, keeping its independent brand and management team. In terms of GA's impact on KKR's economics, there are really 2 distinct forms of contribution. The first is that we believe this is an excellent stand-alone investment opportunity. Global Atlantic will be KKR's largest balance sheet investment and a majority-owned subsidiary. As a result of our ownership stake in GA, we'll recognize our share of their operating earnings in KKR's distributable earnings metric. The second way this transaction will impact our economics is through the assets we manage on GA's behalf. Our intention is to become GA's investment manager concurrent with the closing of the acquisition, subject to receipt of required regulatory approvals, which should add roughly $70 billion of assets under management. In addition, over time, we would expect to directly manage certain aspects of GA's investment portfolio where we have the expertise to deliver attractive risk-adjusted returns. So the impact to our capital base here should be pretty straightforward. We would expect our AUM to increase by 35% from $207 billion as of 3/31 to $279 billion on a pro forma basis. And our fee-paying AUM on that same basis would increase by 45%. The impact on the quality of our capital base, though, is even more significant. Our permanent capital will increase from $19 billion to $92 billion. And alongside of this capital, we believe we're already the industry leader in creating large investor partnerships, where we recycle capital for 20 to 30 years. So permanent capital, together with long-dated strategic partnerships, will represent $118 billion or a little over 40% of our AUM. We expect to grow this component of our asset base over time given the opportunities at GA. As you saw earlier in the deck, GA has a history of book value growth, with assets more than doubling from 2014 through 2019. Turning to the financial impact. Our expectation is that annual management fees will increase by approximately $200 million over the next couple of years as we ramp up our work with GA, both as their investment manager as well as increasing our direct asset management activities. Our distributable earnings will depend on our final ownership stake in GA. But our current expectation is that the transaction will add north of $500 million of annual after-tax TDE. That reflects the incremental management fees I just went through as well as our share of GA's operating earnings. Even more important is the long-term impact of this transaction. We expect the financial benefits will meaningfully accelerate over the next several years, primarily due to the expected organic growth of GA's investment portfolio but also due to our ability to generate carried interest if our performance is strong. And as mentioned, there are a number of opportunities to grow GA inorganically as well. More holistically, this acquisition is very consistent with our strategy of long-term book value compounding. When GA spun out of Goldman Sachs 7 years ago, they had a book value of $1.4 billion which has grown organically to $4.4 billion today. We will follow up with more specificity over time as some of the moving pieces related to this deal become more clear between signing and closing. And finally looking at Page 7, you can see how we're summarizing our thoughts on this transaction. It meaningfully increases our AUM as well as the perpetual nature of our capital base. In addition, our management fees become even more visible as 85% of our pro forma AUM will now have a duration of at least 8 or more years at inception. We will meaningfully diversify our assets under management and achieve real scale quicker, especially across multiple credit-related products. This is another example of KKR using its balance sheet in a way that is highly aligned with our strategy, investing behind a high-quality asset that should compound over the long term while also driving increased asset management economics. We are extremely excited by the strategic and financial benefits of this acquisition. The aggregate economics to KKR are very compelling while increasing our earnings quality, stability and visibility. And with that, we'll be happy to take any of your questions.

[Operator Instructions] Our first question comes from the line of Alex Blostein with Goldman Sachs.

Congrats, everybody, on the transaction. Scott, first question for you and a follow-up for Rob. I guess starting with just the strategic rationale. We've seen the private markets industry increase its presence in the insurance space for quite some time, you guys obviously talked about that for a while as well, through a variety of different kind of ways and deal structures. Can you talk a little bit about why owning an insurance company outright or, I guess, in this case 60% of an insurance company or so versus partnering with one like we've seen with some of your peers is a better way to do that for KKR? So that's the first question.

Great. Thanks for the question, Alex. And I appreciate you dialing in on short notice. Look, I think the way we've thought about this is this is a big space, as we talk about tens of trillions of dollars of assets. As you know, we have been building a presence in the space for the last several years, first on the sales side then creating kind of customized products for insurers and then creating a strategic partnership off our balance sheet where we manage the alternatives portfolio of a strategic partner. So we've been learning along the way. And as we did that work and we figured out how we could add value to an insurance partner and we look to figure out how to play more aggressive strategic offense which is really how I think about this, and as we looked at it, what we determined is that for these structures to really be aligned has real value. And the way that we think about this as a firm, as you know, we have a strategy where we invest our own capital and we're focused on capital that can compound over the long term and, attached to that capital, asset management economics. And that's how we analyze everything that we do as a firm strategically. So this approach fits really nicely with our existing strategy as a firm. It fits right down the middle of the fairway and has very attractive economics for the firm. So that's the first thing I would say. We do not think about this as acquiring an insurance company per se. We think about this as acquiring a majority of an insurance company where we can partner together and we can help increase their investment returns, which should in turn allow them to increase their growth. So this is not KKR becoming an insurance company. This is creating an aligned and durable partnership. The other thing I would say is -- that's a bit different about how we're doing it is that we expect GA to stay private and we expect to have control. As you noted, Rob said about 60% ownership is our expectation. We think with control we can move faster and at scale. And we think there's a lot to do. We think this is the beginning of the story, not the story. So as we've talked about and thought about it inside the firm, we really think it fits with how we operate, and we're excited to be in business with the team at GA because we think we can help make each other better. But that's some of the considerations that we have, to your question.

Great. Great. That's helpful. And then Rob, so a follow-up question for you. So I think towards the end I heard you say $500 million of after-tax contribution to distributable earnings. Can we just get a little bit more color on whether that assumes sort of the full run rate of management fees of $200 million that you guys expect to get to over the next couple of years? Or is that kind of within the first year of the deal closing? And then as we think about the funding of the transaction, you highlighted various sources of funding opportunities. Obviously, you guys have liquidity on the balance sheet, et cetera. But help us better frame maybe how the purchase price will be broken down between cash and investment of the balance sheet debt and perhaps if there's any common equity you guys would need to issue for this.

Great. Thanks a lot, Alex. On your first part of your question, as it relates to our earnings, I think we'd probably get to that $500-plus million number close to the end of the first year of our ownership. That's how we thought about that. So not the full couple of years. And then in terms of how we fund this deal, I mean the reality today is that there's a few different moving pieces on this deal. Our purchase price isn't set, so it was something that we negotiated for as part of our discussions with Global Atlantic. We don't expect a ton of variability there, but there could be some. Obviously, our final ownership percentage, as Scott mentioned, could move around a bit. In terms of potential debt financing for this transaction, we've just started the dialogue with the rating agencies. So I think it would be premature to comment on the debt capacity available. And then finally, we need to see the degree to which our $11.5 billion investment portfolio monetizes over the next several months. And so there's a fair number of moving pieces as it relates to how we would fund this acquisition. And obviously, we believe there is access to the equity capital markets to the extent we think that's the right capital decision for us as we look at our overall financing package.

Our next question is from the line of Glenn Schorr with Evercore.

So I think I definitely get all the benefits to both sides in terms of growth, profitability and everything you outlined. One of the things I'm just thinking about is if you are successful and, say, GA doubles over the next 5 years, insurance becomes a big -- your balance sheet grows and insurance becomes a big part of both the balance sheet and the overall company. And as much as I get the benefits, insurance sector trades like c*** last I checked and rates are expected to stay low for a while. So how do you balance on how big to be? And that goes towards your ownership and then how much to fuel growth, how much to fuel M&A because this is a half M&A-led strategy. Sorry for the rambling question.

Sure. Thanks a lot, Glenn. So I think as we look at how this can scale over time for us, we see that in 2 ways. You're right, we see our investment in GA potentially scaling over time. Likewise, we see the rest of KKR and our balance sheet scaling over time in a roughly proportional way. In addition to that, as GA scales over time, the asset management economics to us scale. And so I think when you add it all up, you'd actually see the rest of KKR on that basis probably growing faster than the insurance component of our balance sheet, if that makes sense. And so that's how we thought about this transaction relative to the overall size of KKR. It's certainly meaningful, but it's certainly also not overwhelming in size.

Very good point. Fair enough.

Glenn, just one thing. I think it is important, though. I mean to be clear, we really think this is a pretty unique company, if you look at their historical ROEs, the consistency of the return profile, the way that they've managed risk. I mean they've been able to generate mid-teens ROEs for multiple years now. And so as we look at this, we think it's a really nice investment. We think it's a really nice compounder. And frankly, as we look at the look-through valuation for KKR's balance sheet, our balance sheet is trading at a discount to book. And so our perspective is that this is a really interesting long-term mid-teens compounder in its own right. And it will be a meaningful investment off the balance sheet, but you know how big our balance sheet is. 60% of roughly $4.5 billion is going to be meaningful, but we're still going to have a lot of other ways to win on the balance sheet in addition to this. So we like it in the first instance because it's a really attractive compounder. On top of that, it has all the strategic benefits that we talked about. Permanent AUM that can grow, that generates fees and carry. So when we look at it, the ROE, you start with mid-teens and then we get multiple hundreds of basis points of incremental ROE and permanency through that strategic alignment. And we can help each other grow faster. That's how we've thought about it. And so from our standpoint, it really is just a continuation of the strategy that we've developed as a firm which is to compound book and be a big investor in everything that we do, and that allows us to scale our AUM faster. This fits right in the middle of that story.

I think those are important points. One, well, quick follow-up is who owns GA now and who owns the other roughly 40% post close.

It's Scott. I'll take that, Glenn. So GA today is owned by a combination of Goldman Sachs, on their balance sheet. So Goldman Sachs private wealth management channel is actually the biggest owner. So you've got Goldman private wealth, you've got Goldman balance sheet, and then you have a small group of institutional investors that own a minority piece. And so the nice thing about this, frankly, is we have a great relationship with Goldman, both KKR does and GA does, of course. And so we expect to continue to partner with Goldman and their clients after this transaction. And in terms of your question about who's going to own the other roughly 40%, it's we'll see. We've offered to the existing shareholders to roll over into our deal. So some element of it will likely be some of the existing shareholders rolling over. They've had a great experience. They've made about 3x their money in the last 7 years. So that's kind of part one, the rollover. Part two is we are going to run a co-invest syndication and go out through our capital markets and CPG teams as we typically do to try to raise syndicated capital. And we're seeing a lot of demand for private markets opportunities right now. So I think it's going to be a combination of rollover plus co-invest.

The next question is from the line of Patrick Davitt with Autonomous Research.

First question. So I appreciate the increased management fees by $200 million over next few years. But as we think about kind of the potential increase in fee earnings at close, is there any reason to think the fee agreement would be much different than the agreements we've seen from other alternative firms that have these kind of relationships with insurance companies?

Yes. Patrick, thanks for the question. So as we think about how we will ultimately get paid and what's going to flow through our management fees, there's really going to be 2 ways. There's going to be the investment management agreement, which I think you flagged, across all $70 billion of assets from Global Atlantic. We'll need to work through that arrangement with GA's regulators, but there's some clear precedent for us to look at there, as you suggest. And then the second way is assets that we'll manage directly, which we'll charge GA the relevant fee rates or other similarly large investors in those strategies, including assets that could have performance-related fees where appropriate. So those would really be the 2 ways that we will get paid. To your point, more immediately would be the IMA on the $70 billion. And as you suggest, there's a lot of precedent out there as to what appropriate level of fee rate is. But we'll need to work through the regulators on that question.

Okay. Cool. And a follow-up with Scott. I think you said you're going to be bringing in scale in real estate credit, real estate finance, private credit real estate. Should we take that to mean that you're actually bringing in origination teams to KKR with this deal? Or did I misunderstand that?

No. I think possibly is the answer, Patrick. So I think, to be clear, so GA has really had very nice investment performance on their own. And frankly, they've had a core competency in investment management. It's been a key driver of their success. And so what we're trying to do here is bring the best of both organizations together. So we think that we can help them, we have broad strategies in alts, origination platforms, our global network. But we would also expect the GA investment team to continue to be a critical driver of significant portions of the investment portfolio. So I think you can think of it, frankly, that we will be taking the best of both. And as a result of that, I think the short answer would be yes. We would be augmenting our origination capability by combining with the GA team. And so I think we can bring them a lot of what we're already doing and we can work together and they can bring us some of what they're doing. And combined, we'll be able to be even more powerful. And on top of that, it just gives us more scale and market presence in everything that we're doing. I listed those asset classes, but we think over time, it's going to impact virtually every business of the firm.

Our next question is from the line of Devin Ryan with JMP Securities.

Congratulations, guys.

Thanks, Devin.

So just question here following up a little bit on the economics. I appreciate the detail but just looking for a little more perspective, if you can, just on the time line of moving GA's assets into KKR funds and what that can look like, percentages that you think that could get to, the strategies that you are kind of looking at there. And then if possible, any way to think about kind of more of a pro forma fully baked financial impact? I get that there's kind of probably a range of outcomes here but just trying to kind of think about what this looks like a few years down the road based on the assets today.

Yes. Thanks, Devin. And so I think the primary way that management fees are going to flow through to us is going to be through that IMA. And we'll need to figure out over time, in coordination with the GA team, which direct assets we're going to manage on their behalf and where we've got the core expertise to be able to deliver better risk-adjusted returns than what their alternatives are. And so that's going to be a collaborative process with the GA team that's going to happen over the next several months between signing and closing and then, I'm sure, over the next couple of years as we continue to get integrated. We'll certainly keep you updated as that progresses and where we ultimately end up shaking up.

The only thing I would add, Devin, just one quick thing. I think the numbers that Rob gave you, which is the $200 million annualized over the next couple years, incorporates our expectation in terms of that IMA plus direct. But we think there's meaningful upside to that number over time.

Yes. Exactly. I appreciate that. And then just a follow-up, I apologize if I missed this, but in terms of how the deal actually came together, I'm not sure if you can provide any more perspective around that. I'm sure others were potentially interested in these assets or in this business. So just curious if you can give any more detail around that piece.

Oh, there's only so much I can share with you on that topic, Devin. I would just tell you that as we said in the prepared remarks, we've been looking for the right strategic partner in the insurance space for a long time and have been spending time with different players. And frankly, as we got to know Allan Levine and his management team, cultures clicked. It felt right and checked all the boxes we were looking for strategically. And so the conversations began several months ago, and we're thrilled to be on the phone with you today talking about it.

The next question is from the line of Mike Carrier with Bank of America.

It makes a lot of strategic and financial sense. Just a question on how this changes the growth opportunity ahead in the insurance space. So it seems like GA's organic growth has already been strong, but any benefit there as part of KKR? Or do you see more opportunity either on the deal front with more capital? Or are there some benefits with your current strategy in managing money on behalf of insurance clients with increased scale?

Thanks for the question, Mike. I think there's a lot of opportunities for growth. As you said, GA has been growing at a very attractive rate on their own, both organically in the individual business through blocks, in the institutional business. They've been making acquisitions, they've been creating new products. So they've been doing a great job before we show up as a partner. And so our first rule is do no harm. And so they're going to continue to do that great work. Our job is to help them grow even faster and, where possible, even smarter. And I think that's going to come in a couple ways. First is we believe, working with their team, we can help them generate incremental investment returns. And if they have additional investment return, they should be able to be even more competitive in the market, for example, for the issuance of new annuities. And so that should allow them to enhance their market presence and drive their organic growth. So it's the investment return piece of it, I would say, is part one. Part two is that we think that by virtue of our access to capital, we should be able to help them grow inorganically as well. And so there may be acquisitions, as an example, that we could pursue together. And with our access to institutional capital around the world, we think we can find the capital for attractive investment opportunities and invest more behind this great management team. So there's the inorganic opportunity on top of that. And then there's perhaps a little bit more of a nuanced opportunity. We mentioned in the prepared remarks that the institutional business has a lot of opportunity for growth. And a lot of runoff blocks are coming to market. And working together, we believe we can be even more aggressive with GA in trying to compete for those blocks. And so what we would expect to do is be able to not only raise capital at the company level, but also the company recently raised a sidecar fund, in effect, to allow it to scale its presence in that space. That fund looks a lot like a type of fund KKR raises. It has a fee, it has a carry, and it allows them to have dry powder and that they can use to be a more aggressive grower. And we think we can use our sales team to help raise more vehicles like that as well. So a lot of ways to grow.

And Michael, I'll just point you back to Page 4 of the presentation just to put some numbers around how successful the GA team has been on their own without our partnership. They have grown their assets since they spun out of Goldman from $17 billion in middle of 2013 to roughly $90 billion today, so almost a 30% CAGR. They've done a really nice job on their own, and hopefully, we can complement that.

The next question is from the line of Chris Harris with Wells Fargo.

Are there any regulatory or capital considerations that may affect KKR's financial flexibility once this transaction closes?

I think the short answer, Chris, is no.