KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Summary

KKR & Co. Inc. reported a significant turnaround in its financial performance for the nine months ended September 30, 2012, compared to the same period in 2011. The company generated substantial "Net Income Attributable to KKR & Co. L.P." of $464.1 million, a marked improvement from a loss of $44.2 million in the prior year. This turnaround was largely driven by a dramatic increase in "Net Gains (Losses) from Investment Activities," which surged to $7.0 billion from $0.7 billion, primarily due to strong appreciation in the company's private equity portfolio. Fee income saw a notable decrease, however, from $514.3 million to $390.8 million, largely driven by a decline in monitoring and transaction fees. The company's Assets Under Management (AUM) grew to $49.8 billion in the Private Markets segment, up from $43.6 billion at the end of 2011, indicating successful capital deployment and market appreciation. Despite the increase in AUM, Fee Paying AUM (FPAUM) also saw growth, suggesting a healthy base for management fees. The company continues to manage a substantial amount of uncalled capital, indicating future investment potential. Overall, the report signals a period of strong investment performance recovery for KKR, driven by its private equity investments, although fee generation experienced some headwinds.

Key Highlights

• 1Net Income Attributable to KKR & Co. L.P. increased significantly to $464.1 million for the nine months ended September 30, 2012, from a loss of $44.2 million in the prior year's period.
• 2Total Investment Income (Loss) showed a dramatic improvement, reaching $7.5 billion for the nine months ended September 30, 2012, compared to $0.7 billion in the same period of 2011, driven primarily by gains in the private equity portfolio.
• 3Total Fees decreased by $123.5 million to $390.8 million for the nine months ended September 30, 2012, mainly due to lower monitoring and transaction fees.
• 4Total Expenses increased by $356.6 million to $1,240.5 million for the nine months ended September 30, 2012, largely due to higher compensation and benefits.
• 5Assets Under Management (AUM) in the Private Markets segment grew to $49.8 billion as of September 30, 2012, indicating successful capital raising and investment growth.
• 6The company reported $1.3 billion in outstanding Senior Notes as of September 30, 2012, a slight increase from $1.56 billion at December 31, 2011.

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