10-Q: KKR & Co. Inc. Reports Strong First Quarter 2024 Results Driven by Asset Management and Strategic Holdings Growth

KKR & Co. Inc. announced a robust first quarter for 2024, with significant revenue growth in its asset management and strategic holdings segments.

Summary

• KKR & Co. Inc. reported a net income of $682.2 million attributable to common stockholders for the first quarter of 2024, compared to $322.7 million in the same period last year.
• The company's total revenues reached $9.66 billion, a substantial increase from $3.13 billion in the first quarter of 2023.
• Asset management and strategic holdings revenues totaled $1.96 billion, up from $1.13 billion year-over-year, driven by capital allocation-based income.
• Insurance revenues were $7.70 billion, compared to $2.00 billion in the first quarter of 2023, primarily due to net premiums and net investment income.
• KKR's asset management business saw a significant increase in capital allocation-based income, which rose to $1.26 billion from $449 million in the prior year.
• The company's insurance segment reported net investment income of $1.52 billion, up from $1.30 billion in the first quarter of 2023.
• KKR's strategic holdings segment generated $20.7 million in operating earnings, primarily from dividends.
• The company's diluted earnings per share were $0.74, compared to $0.36 in the first quarter of 2023.
• KKR's total assets increased to $339.8 billion as of March 31, 2024, from $317.3 billion at the end of 2023.
• The company's cash, cash equivalents and restricted cash decreased to $16.2 billion from $20.8 billion at the end of 2023.

Sentiment

Score: 8

Explanation: The document presents a strong financial performance with significant growth in key areas, indicating a positive outlook from an investment perspective. However, the presence of risks and uncertainties warrants a slightly cautious approach.

Positives

• The company experienced significant growth in both its asset management and insurance segments.
• Capital allocation-based income in asset management and strategic holdings more than doubled year-over-year.
• Net investment income in the insurance segment showed a solid increase.
• The company's earnings per share saw a substantial improvement compared to the same period last year.
• KKR's total assets increased, indicating growth in the company's overall scale.

Negatives

• Cash, cash equivalents and restricted cash decreased from $20.8 billion to $16.2 billion.
• Net investment-related losses in the insurance segment were $(241.5) million.

Risks

• The document mentions that forward-looking statements are subject to various risks and uncertainties, which could cause actual results to differ materially.
• The document notes that certain events particular to each industry and country or region in which the portfolio companies conduct their operations, as well as general market, economic, political and geopolitical, regulatory and public health conditions, may have a significant negative impact on KKR's investments and profitability.
• The document notes that the likelihood that such events may occur and the effect on KKR's use of estimates cannot be predicted.

Future Outlook

The report contains forward-looking statements regarding KKR's operations and financial performance, including potential for future business growth, ability to grow AUM, deploy capital, and realize unrealized investment appreciation. These statements are subject to various risks and uncertainties.

Management Comments

• Management believes that providing these performance measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's businesses.
• Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the financial statements are presented fairly and that estimates made in preparing the financial statements are reasonable and prudent.

Industry Context

The announcement reflects KKR's position as a leading global investment firm with a diversified business model, including alternative asset management, capital markets, and insurance solutions. The results are influenced by broader market trends, including interest rates, equity prices, and credit spreads.

Comparison to Industry Standards

• The document notes that KKR's calculations of AUM, FPAUM and other operating metrics may differ from the calculations of other investment managers and, as a result, may not be comparable to similar metrics presented by other investment managers.
• The document also notes that KKR's non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers.

Legal Proceedings

• KKR is currently subject to investigations by the Antitrust Division of the DOJ related to antitrust matters, including civil investigative demands and a grand jury subpoena seeking information with respect to the accuracy and completeness of certain filings made by KKR pursuant to the premerger notification requirements under the Hart-Scott-Rodino Act of 1976 for certain transactions in 2021 and 2022.
• KKR is also currently subject to an investigation by the Antitrust Division of the DOJ related to the restrictions on interlocking directorates under Section 8 of the Clayton Act.
• KKR is also currently subject to investigations by the SEC related to business-related electronic communications, including with respect to the preservation of text messages and similar communications on electronic messaging applications under the Investment Advisers Act of 1940.
• KKR intends to continue to vigorously defend against the claims in the 2020 AG Action and the Second Tier 3 Action against KKR and Messrs. Kravis and Roberts.

Related Party Transactions

• In the ordinary course of business, KKR's Asset Management business, Strategic Holdings business and Insurance business enter into transactions with each other, which may include transactions pursuant to their investment management agreements and certain financing arrangements.
• The borrowings from these financing arrangements are non-recourse to KKR beyond the assets designated to support such borrowings.
• All of the investment management and financing arrangements amongst KKR segments are eliminated in consolidation.

Stakeholder Impact

• Shareholders benefit from the increased net income and earnings per share.
• Employees may benefit from the company's strong performance through compensation and benefits.
• Fund investors may benefit from the increased capital allocation-based income.
• Policyholders in the insurance segment may benefit from the company's strong financial position.

Next Steps

• KKR will continue to evaluate the potential future impacts of Pillar Two and will continue to review and monitor the issuance of additional guidance.
• KKR is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated financial statements and disclosures.
• KKR is currently evaluating the impact of the adoption of ASU 2024-01 on its consolidated financial statements and disclosures.
• KKR is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements and disclosures.

Key Dates

Keywords

asset management, strategic holdings, insurance, private equity, credit, real assets, investment income, net income, AUM, FPAUM, capital allocation, financial results