By David Bull
Feb 5 - (The Insurer) - Giant fund manager KKR is increasing its direct holdings in broker USI and two other companies by around $1.1bn in the aggregate, with Chubb broadly matching the investment by contributing an additional $1.0bn.
In its earnings presentation on Tuesday the firm said it has arrangements in place through its own Strategic Holdings arm to increase its ownership interests across three existing private equity businesses – USI Insurance Services, 1-800 Contacts and Heartland Dental – by around $1.1bn.
On KKR’s earnings call, CFO Robert Lewin said: “Our Strategic Holdings business represents a big differentiator for us, and the announcement this morning is a further accelerant of this segment.
“We will be increasing the existing stakes of three business that we know and really like by at least $2.1bn. KKR will invest $1.1bn, which will show in Strategic Holdings, while the remainder will be from one of our strategic partners.”
Overall, the Strategic Holdings unit directly owns around 20 percent of KKR’s core private equity business, with individual holdings varying from business to business, Lewin explained.
The direct investment strategy is separate from the holdings in the businesses held by PE funds KKR manages.
He said the firm believes that the three companies in which it is upping its direct investment “would be really accretive to our long-term earnings per share growth”.
The firm’s co-CEO and director Scott Nuttall confirmed that Chubb is investing alongside KKR’s Strategic Holdings arm.
“This incremental investment we’re making, one of our partners, Chubb, the large insurance company, is going to be investing alongside of us,” he said.
KKR acquired USI in 2017 in a deal that valued the intermediary at $4.3bn alongside Canadian pension fund CDPQ in partnership with the broker’s management and employees.
In September 2023 KKR made a new equity investment of more than $1bn in USI through its core investments strategy in a transaction that saw around 50 percent of the CDPQ shares acquired and made KKR USI’s largest single shareholder.
Chubb has been contacted for comment.