10-QPeriod: Q3 FY2020

KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 6, 2020For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. (KKR) reported strong financial results for the nine months ended September 30, 2020, demonstrating resilience despite the ongoing economic impacts of COVID-19. Total revenues saw a decrease compared to the prior year, primarily driven by a significant drop in Capital Allocation-Based Income, which is sensitive to market performance. However, Fees and Other revenues showed growth, indicating strength in KKR's core asset management and capital markets businesses. Net income attributable to KKR & Co. Inc. common stockholders decreased substantially year-over-year, largely due to a considerable drop in Net Gains (Losses) from Investment Activities and lower Capital Allocation-Based Income. Despite this, the company's AUM grew to $233.8 billion, reflecting successful capital raising and positive investment valuation changes in the latter half of the period. KKR also announced the pending acquisition of Global Atlantic Financial Group, a significant strategic move expected to close in early 2021, which will be financed through a combination of cash, preferred stock, and senior notes.

Financial Highlights

33 data points
Beta

Revenue

$1.90B

Net Income

$1.06B

56.2% Net Margin

Total Assets

$70.66B

Cash & Equivalents

$5.89B

Free Cash Flow

-$1.41B

Financial Statements
Beta
Revenue$1.90B
Interest Expense$223.71M
Net Income$1.06B

Key Highlights

  • 1Total revenues decreased by 30% year-over-year for the nine months ended September 30, 2020, primarily due to a substantial decline in Capital Allocation-Based Income, from $1.85 billion to $888 million.
  • 2Fees and Other revenues increased by 2% year-over-year for the nine months ended September 30, 2020, driven by growth in management fees, signaling strength in core business operations.
  • 3Net income attributable to KKR & Co. Inc. common stockholders decreased significantly to $466 million for the nine months ended September 30, 2020, compared to $1.46 billion in the same period last year, largely impacted by lower investment gains.
  • 4Total AUM increased by approximately 7% to $233.8 billion as of September 30, 2020, compared to $218.4 billion as of December 31, 2019, demonstrating KKR's continued ability to attract and manage capital.
  • 5KKR announced a significant strategic transaction to acquire Global Atlantic Financial Group, a leading retirement and life insurance company, expected to close in early 2021.
  • 6The company's balance sheet strengthened, with total assets growing to $70.7 billion as of September 30, 2020, up from $60.9 billion as of December 31, 2019, with a notable increase in cash and cash equivalents.
  • 7Despite lower net income, KKR maintained a positive After-tax Distributable Earnings of $1.09 billion for the nine months ended September 30, 2020, up from $1.03 billion in the prior year, reflecting robust operational cash generation.

Frequently Asked Questions

For the nine months ended September 30, 2020, KKR reported total revenues of $2.23 billion, a decrease from $3.16 billion in the same period of 2019. This decrease was primarily driven by a significant decline in Capital Allocation-Based Income, while Fees and Other revenues saw a modest increase. Net income attributable to KKR & Co. Inc. common stockholders was $466 million, down from $1.46 billion in the prior year, mainly due to lower investment gains and a reduction in Capital Allocation-Based Income. Despite these fluctuations, After-tax Distributable Earnings increased slightly to $1.09 billion.

KKR's Assets Under Management (AUM) demonstrated strong growth, increasing by approximately 7% to $233.8 billion as of September 30, 2020, from $218.4 billion as of December 31, 2019. The Private Markets segment saw AUM grow to $135.8 billion, driven by new capital raised and valuation increases, while Public Markets AUM stood at $98.1 billion, with growth in new capital raised and portfolio value, partially offset by redemptions.

The announced acquisition of Global Atlantic Financial Group is a major strategic move for KKR, expected to close in early 2021. This acquisition will significantly expand KKR's presence in the insurance sector, particularly in retirement and life insurance, offering a new avenue for growth and diversification. The transaction is being financed through a mix of cash on hand, preferred stock, and senior notes, reflecting KKR's capital management strategy.

The report acknowledges the ongoing impact of COVID-19 on the global economy and financial markets. While the pandemic created market volatility and impacted investment valuations, KKR's business demonstrated resilience. The company experienced a decrease in Capital Allocation-Based Income due to market downturns earlier in the year, but saw a recovery in investment valuations in the latter part of the third quarter. The company also noted changes in travel expenses and a shift to remote work to mitigate operational impacts.