Global Atlantic Annuity Holders Are Keeping Their Contracts: KKR

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The latest results include $120 million in insurance unit gains on investments and derivatives, and $126 million in income tax benefits.

The company as a whole paid $541 million in income taxes, up from $186 million in income taxes in the third quarter of 2021.

Interest Rates

In the United States, annuities and life insurance policies are like burritos filled with bonds, mortgages, derivatives and a smattering of other assets.

The Federal Reserve Board has been trying to control inflation by doing what it can to increase interest rates.

Rising interest rates hurt home buyers, growing businesses that use loans to fuel growth, and investors who buy stocks on margin. But rising rates can increase life and annuity issuers’ investment yields, by improving the rates the issuers earn on newly invested money.

Some analysts have suggested that rising rates could also hurt life and annuity issuers, by hurting bond issuers’ ability to make bond payments, and by causing “disintermediation,” or efforts by customers to move assets from old, low-paying life and annuity products and into new, higher-paying products.

Global Atlantic’s Situation

Lewin said that KKR is watching how rising rates affect Global Atlantic closely, but that the company believes the insurer will be a net beneficiary of the new rate environment.

KKR has not seen any deterioration in bond issuer credit quality, and it believes that rising rates will help Global Atlantic sell more group annuities to pension plan sponsors and more individual annuities to consumers.

“I think, on the individual side, it’s just easier to be able to sell and distribute a 4% annuity than it is a 1.5% annuity,” Lewin said.

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