10-QPeriod: Q2 FY2022

KKR & Co. Inc. Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 5, 2022For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. (KKR) reported its financial results for the quarter ended June 30, 2022. The company experienced a net loss attributable to common stockholders of $827.9 million, or $1.22 per diluted share, a significant decline compared to a net income of $1,277.7 million, or $2.05 per diluted share, in the same period last year. This shift was largely driven by substantial unrealized investment losses in the Asset Management segment, particularly impacting private equity and credit strategies, as well as a decline in net investment income and an increase in net investment-related losses within the Insurance segment. Despite the net loss, the company's total revenues for the quarter were $330.1 million, down from $3,136.2 million in the prior year, impacted by a considerable decrease in Capital Allocation-Based Income (loss) due to market depreciation. Asset Management segment operating earnings decreased by 3.6% year-over-year to $953.0 million, impacted by lower transaction fees and a decline in realized performance income. However, management fees saw a notable increase, driven by new capital raised and the inclusion of KJRM assets. The Insurance segment, operated by Global Atlantic, showed resilience with a 7.4% increase in segment operating earnings to $137.1 million, primarily due to higher net investment income driven by increased assets under management and higher yields on floating-rate investments. Total assets grew to $266.1 billion, while total liabilities increased, leading to a decrease in total equity. KKR ended the quarter with $6.7 billion in cash and cash equivalents for its asset management business and $5.1 billion for its insurance business.

Financial Highlights

27 data points
Beta

Revenue

$323.39M

Net Income

-$717.38M

-221.8% Net Margin

Cash & Equivalents

$12.37B

Free Cash Flow

-$4.06B

Financial Statements
Beta
Revenue$323.39M
Interest Expense$328.73M
Net Income-$717.38M

Key Highlights

  • 1KKR reported a net loss of $827.9 million attributable to common stockholders for Q2 2022, a significant drop from a net income of $1,277.7 million in Q2 2021.
  • 2Total revenues decreased substantially to $330.1 million from $3,136.2 million in the prior year, primarily due to a large unrealized investment loss in the Asset Management segment.
  • 3Asset Management segment operating earnings declined slightly by 3.6% to $953.0 million, with growth in management fees offset by lower transaction fees and realized performance income.
  • 4Insurance segment operating earnings increased by 7.4% to $137.1 million, driven by higher net investment income and growth in assets under management.
  • 5Total assets increased to $266.1 billion from $264.3 billion at the end of 2021, while total equity decreased to $52.7 billion from $58.1 billion.
  • 6The company continued to repurchase shares, with $108 million remaining under its share repurchase program as of July 29, 2022.
  • 7KKR completed the acquisition of Mitsubishi Corp-UBS Realty Inc. (MC-UBSR), renaming it KJR Management (KJRM), to enhance its real estate asset management business in Japan.

Frequently Asked Questions

The substantial decrease in net income from a profit of $1,277.7 million in Q2 2021 to a net loss of $827.9 million in Q2 2022 was primarily driven by significant unrealized investment losses in the Asset Management segment. Market depreciation negatively impacted the value of KKR's investments, leading to large mark-to-market losses, particularly in private equity and credit strategies. The Insurance segment also experienced increased net investment-related losses.

The Asset Management segment saw a slight decrease in operating earnings to $953.0 million, impacted by lower transaction fees and realized performance income, though management fees grew due to new capital raises and acquisitions. The Insurance segment, operated by Global Atlantic, showed growth with operating earnings increasing by 7.4% to $137.1 million, supported by higher net investment income and increased assets under management.

KKR's total assets grew to $266.1 billion as of June 30, 2022, compared to $264.3 billion at the end of 2021. However, total equity decreased to $52.7 billion from $58.1 billion at the end of 2021. This decrease in equity was largely due to the net loss for the quarter, unrealized losses on available-for-sale securities, share repurchases, and dividends, which more than offset the positive contributions from after-tax distributable earnings and capital raised.

Yes, KKR completed the acquisition of Mitsubishi Corp-UBS Realty Inc. (MC-UBSR), which was renamed KJR Management (KJRM). This acquisition is expected to enhance KKR's real estate asset management business in Japan.