KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Summary

KKR & Co. Inc. reported its third-quarter 2022 financial results, showing a net loss attributable to common stockholders of $91.6 million, or $0.11 per diluted share, compared to a net income of $1,131.4 million, or $1.80 per diluted share, in the prior year's third quarter. This decline was primarily driven by significant unrealized losses on investments within its asset management segment, reflecting challenging market conditions, particularly in the private equity and credit portfolios, which more than offset strong management fee growth and a robust insurance segment performance. Despite the net loss for the quarter, KKR's asset management segment demonstrated resilience in its fee-generating businesses, with management fees increasing year-over-year, supported by new fund raises and growth in its real assets and credit businesses. The insurance segment, operated by Global Atlantic, showed strong growth in net investment income, benefiting from higher market interest rates and increased assets under management. However, the overall financial performance was heavily impacted by market volatility, leading to substantial unrealized investment losses that overshadowed these positive operational trends. The company ended the period with substantial liquidity, though uncalled capital commitments and a focus on future fundraising remain key areas for investors to monitor.

Key Highlights

• 1Net loss attributable to KKR & Co. Inc. common stockholders for the third quarter of 2022 was $91.6 million ($0.11 per diluted share), a significant decrease from a net income of $1,131.4 million ($1.80 per diluted share) in Q3 2021.
• 2Asset Management revenues saw a decline due to a substantial $(572.9) million Capital Allocation-Based Income (Loss), primarily driven by unrealized investment losses, which overshadowed an increase in Fees and Other revenues, up to $673.9 million.
• 3The Insurance segment demonstrated strong performance with a 35% increase in Net Investment Income to $1.1 billion, driven by higher assets under management and favorable market interest rates, although Net Investment-Related Losses widened considerably to $(173.8) million.
• 4Total Assets increased slightly to $266.2 billion as of September 30, 2022, from $264.3 billion as of December 31, 2021, with Assets Under Management (AUM) growing to $496.2 billion.
• 5KKR ended the quarter with $6.9 billion in cash and cash equivalents for its asset management business and $4.1 billion for its insurance business.
• 6The company's Fee Related Earnings (FRE) for the asset management segment saw a slight increase to $541.8 million for the quarter, indicating the stability of its recurring fee-based revenue streams.
• 7Total Segment Operating Earnings decreased by 8% year-over-year to $1.1 billion, primarily due to the decline in Asset Management Segment Operating Earnings.

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