As somebody who is generally interested in the annuity space by virtue of an investment in Apollo / Athene (disclosure: author owns), I realized I don’t know the KKR analogue to Athene well, if at all. To that end, I looked up some high level figures try to understand the basics of Global Atlantic (GA), the annuity player majority owned by KKR.
As a starting point, Marc Rowan commented on KKR / GA on two occasions:
It’s not to say we’re always going to have this fixed income replacement market to ourselves versus our alternatives peers. Some are making good progress. I would say KKR is probably making the best progress because they have the greatest understanding of what is needed to feed a retirement services balance sheet.
APO 2021 Investor Day
Most of the marketplace today in the alternatives area has originated higher octane, higher risk reward, if you will, credit, which is generally not where insurance company balance sheets invest. Some, I believe, will be successful in getting this over time. I think KKR bought a very nice franchise with an excellent management team. And I think if they embrace what I’ve just said and understand what their management needs, I think, over time, they will be very successful. Others will be effective server — providers of assets to the insurance company marketplace.
Credit Suisse Financials Conference, Feb 2021
First, just to understand the scale of the two businesses:
Athene’s business is substantially larger than GA’s, especially considering the Q1-22 number of $181B excludes $37B of assets attributable to Apollo / Athene’s sidecar investment vehicle (ADIP / ACRA). KKR / GA has a similar sidecar vehicle (perhaps multiple), but I’m unfamiliar as to how much of its liability base is attributable to the sidecar (it seems like $14B via the “trading fixed maturity securities” line item).
Athene’s business is more profitable on an absolute basis as is to be expected by its larger asset base:
However, it appears that Athene is more profitable per unit of assets. Here are the ROAs net of tax for each:
While it would be great to drill into the investment yield of each book and associated expenses – Athene notes in its docs that its investment yield is messed up due to purchase accounting from the Apollo merger (yield goes down during period of rising rates without any acquisition and increased retail flows). Thus for now I think ROA, or nominal operating earnings vs its asset base is the best way to compare the two for now.
As for new business, both have nice organic flows vs their asset bases:
Athene has been super quiet on the inorganic front within the US – as other alt players have crowded the market and its retail channel took off. GA got off a deal with Ameriprise in July of ’21. I’m not sure what is happening with GA’s low organic print as 2022 started. Below are the annuity rankings for 2021, in which Athene is at the top (the below includes VAs):
Last, considering the debt profile of both, Athene appears to use less leverage than GA to drive profits to the equity:
Perhaps this is why GA pulled back on organic flows in Q1-22? I’m not sure. Surely Athene put its foot on the gas post-Covid while others pulled back and the result was its jump to the top in annuity rankings for now.
In conclusion, the above helps outline some notable differences between the two, namely profitability, asset base size, organic funnel size, and debt profile. It isn’t a judgement of what the future may hold for each, just a high level overview of some differences measured by past results.
I’m looking forward to following GA more closely to the extent that public disclosures allow in the future.
Disclosure: This isn’t investment advice, do your own work.