Why did full-year After-tax Distributable Earnings decline even though fee earnings grew?

Full-year DE fell 13% to $3.0 billion mainly because realized performance income dropped sharply from $2.2 billion in 2022 to $1.1 billion in 2023, and realized investment income declined as well. Fee Related Earnings rose 10%, but these realization-driven components are lumpy and depend on the timing of exits, so DE is more volatile than FRE.

What does the Global Atlantic acquisition mean for KKR?

KKR closed the purchase of the remaining minority equity interests in The Global Atlantic Financial Group on January 2, 2024, raising its ownership to 100%. This consolidates the insurance business for KKR, which the company frames as one of three long-term growth avenues alongside Asset Management and Strategic Holdings. Global Atlantic AUM totaled $161 billion, of which $125 billion was credit AUM.

What changes should investors expect in KKR's reporting?

Beginning with 1Q'24 results, KKR will introduce a new Strategic Holdings segment, a new financial metric called Total Operating Earnings, and revised compensation ratios. These changes were previously announced on November 29, 2023, and the company refers investors to that presentation for details. Comparability with prior-period metrics may be affected.

Is KKR's dividend growing, and how secure is it?

KKR declared a $0.165 quarterly dividend payable March 1, 2024, to holders of record as of February 16, 2024. It intends to raise the regular annualized dividend from $0.66 to $0.70 starting with the 1Q'24 announcement and has increased its dividend every year since its 2018 C-corp conversion. The company notes that dividends remain at board discretion and are not calculated from After-tax DE, which is a fixed amount per period.

What is the outlook for capital deployment and the pending Manulife transaction?

KKR invested $16 billion of capital in Q4 and $44 billion in 2023, and it had $99 billion of uncalled commitments at year end. The pending Manulife block reinsurance transaction is expected to close in the first half of 2024, subject to regulatory approvals, and is estimated to add about $10 billion to AUM. Actual assets may differ from estimates depending on final terms and market movements.

KKR & Co. Inc. 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed February 6, 2024. Cited figures are marked; the original filing is the authoritative source.

KKR & Co. Inc. reported fourth quarter and full-year 2023 results on February 6, 2024, highlighting record Fee Related Earnings (FRE) in the quarter and the firm's most active fundraising and deployment quarter of 2023.

Q4 2023 FRE was $675 million^a ($0.76 per adjusted share), up 21% year over year, while full-year FRE reached $2.4 billion ($2.68 per adjusted share), up 10%. After-tax Distributable Earnings (DE) were $888 million ($1.00 per adjusted share) in the quarter, up 4%, but full-year DE of $3.0 billion ($3.42 per adjusted share) declined 13% year over year, largely reflecting lower realized performance income. GAAP net income attributable to KKR common stockholders was $3.7 billion for 2023, versus a loss of $591 million in 2022, driven by strong unrealized investment gains and carried interest.

Total AUM rose 10% to $553 billion^b and fee-paying AUM rose 8% to $446 billion, with $69 billion of new capital raised for the year. Book value per adjusted share increased 13% to $30.95. Structural developments are central to the investment case.

KKR closed the acquisition of the remaining minority stake in Global Atlantic on January 2, 2024, bringing its ownership to 100%. Management will begin reporting a new Strategic Holdings segment and a new metric, Total Operating Earnings, starting with 1Q'24 results, alongside revised compensation ratios. KKR also declared a $0.165^c quarterly dividend and intends to raise its regular annualized dividend from $0.66 to $0.70 starting with the dividend announced alongside 1Q'24 results.

Investors should note that full-year DE declined and that the firm's earnings are sensitive to the timing of realizations, so the forward view depends on exit activity and the pending Manulife block reinsurance transaction, expected to add roughly $10 billion^d of AUM in the first half of 2024. The 8-K itself is a furnishing of the earnings release under Item 2.02 (Exhibit 99.1), which is not deemed "filed" for Section 18 purposes, so the substantive content lies in the exhibit. Note that the exhibit's cover date reads "February 7, 2023," which appears to be a typographical error since the release is dated February 6, 2024.

02—Key points

Key Highlights

Record Q4 2023 Fee Related Earnings of $675 million ($0.76 per adjusted share), up 21% year over year; FY2023 FRE of $2.4 billion ($2.68 per adjusted share), up 10%.
Full-year 2023 After-tax Distributable Earnings of $3.0 billion ($3.42 per adjusted share) declined 13% year over year, while Q4 DE of $888 million rose 4%.
GAAP net income attributable to KKR common stockholders was $3.7 billion for FY2023 versus a $591 million loss in FY2022; diluted EPS was $4.09.
AUM grew 10% year over year to $553 billion; fee-paying AUM grew 8% to $446 billion; $69 billion of new capital raised in 2023, with $31 billion in Q4.
Book value per adjusted share rose 13% to $30.95, including $23.27 per adjusted share of net cash and total investments.
Acquired the remaining Global Atlantic minority stake on January 2, 2024, giving KKR 100% ownership; new Strategic Holdings segment and Total Operating Earnings metric begin with 1Q'24 reporting.
Dividend of $0.165 per share declared for Q4 2023; intent to raise the regular annualized dividend from $0.66 to $0.70 starting with the 1Q'24 announcement.

03—Questions

Frequently Asked Questions

Why did full-year After-tax Distributable Earnings decline even though fee earnings grew?
Full-year DE fell 13% to $3.0 billion mainly because realized performance income dropped sharply from $2.2 billion in 2022 to $1.1 billion in 2023, and realized investment income declined as well. Fee Related Earnings rose 10%, but these realization-driven components are lumpy and depend on the timing of exits, so DE is more volatile than FRE.
What does the Global Atlantic acquisition mean for KKR?
KKR closed the purchase of the remaining minority equity interests in The Global Atlantic Financial Group on January 2, 2024, raising its ownership to 100%. This consolidates the insurance business for KKR, which the company frames as one of three long-term growth avenues alongside Asset Management and Strategic Holdings. Global Atlantic AUM totaled $161 billion, of which $125 billion was credit AUM.
What changes should investors expect in KKR's reporting?
Beginning with 1Q'24 results, KKR will introduce a new Strategic Holdings segment, a new financial metric called Total Operating Earnings, and revised compensation ratios. These changes were previously announced on November 29, 2023, and the company refers investors to that presentation for details. Comparability with prior-period metrics may be affected.
Is KKR's dividend growing, and how secure is it?
KKR declared a $0.165 quarterly dividend payable March 1, 2024, to holders of record as of February 16, 2024. It intends to raise the regular annualized dividend from $0.66 to $0.70 starting with the 1Q'24 announcement and has increased its dividend every year since its 2018 C-corp conversion. The company notes that dividends remain at board discretion and are not calculated from After-tax DE, which is a fixed amount per period.
What is the outlook for capital deployment and the pending Manulife transaction?
KKR invested $16 billion of capital in Q4 and $44 billion in 2023, and it had $99 billion of uncalled commitments at year end. The pending Manulife block reinsurance transaction is expected to close in the first half of 2024, subject to regulatory approvals, and is estimated to add about $10 billion to AUM. Actual assets may differ from estimates depending on final terms and market movements.

04—Continue

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