8-K/A: KKR Completes Acquisition of Global Atlantic, Adjusts Financials

KKR & Co. Inc. finalizes the acquisition of Global Atlantic, resulting in adjustments to its 2023 financials, including a reduction in cash and an increase in net income attributable to common stockholders.

Summary

• KKR & Co. Inc. has completed the acquisition of the remaining minority interests of Global Atlantic Financial Group on January 2, 2024.
• This acquisition makes Global Atlantic a wholly-owned subsidiary of KKR.
• The financial statements of Global Atlantic have already been included in KKR's consolidated financial statements for more than a year.
• Pro forma adjustments were made to reflect the acquisition's impact on KKR's financials as if it had occurred on December 31, 2023, for balance sheet adjustments and January 1, 2023, for income statement adjustments.
• As of December 31, 2023, KKR's cash and cash equivalents would have decreased by $2.6 billion, and stockholders' equity would have decreased by $2.2 billion.
• Noncontrolling interests would have decreased by $0.4 billion.
• The decrease in stockholders' equity is primarily due to Global Atlantic's negative accumulated comprehensive income, largely from unrealized losses on its fixed maturity investment portfolio.
• KKR believes these unrealized losses are temporary as Global Atlantic intends to hold these investments until recovery.
• For the year ended December 31, 2023, net income attributable to KKR & Co. Inc. common stockholders would have increased from $3.7 billion to $3.8 billion.
• This reallocation of net income from noncontrolling interests would have increased basic earnings per share from $4.24 to $4.33.

Sentiment

Score: 7

Explanation: The document reports the expected financial impacts of a previously announced acquisition. While there are some negative impacts on cash and equity, the overall tone is neutral to slightly positive due to the increase in net income and EPS.

Positives

• The acquisition of Global Atlantic is complete, simplifying KKR's corporate structure.
• Net income attributable to KKR common stockholders increased by $100 million due to the acquisition.
• Basic earnings per share increased from $4.24 to $4.33 due to the acquisition.

Negatives

• KKR's cash and cash equivalents decreased by $2.6 billion due to the acquisition.
• Stockholders' equity decreased by $2.2 billion due to unrealized losses in Global Atlantic's investment portfolio.

Risks

• The unrealized losses in Global Atlantic's investment portfolio could potentially impact future financial results if not recovered.
• The pro forma financial information is not necessarily indicative of future performance.

Future Outlook

The pro forma financial information is for illustrative purposes only and is not necessarily indicative of future financial performance.

Management Comments

• Management believes the pro forma adjustments are reasonable under the circumstances.
• KKR believes that substantially all of the unrealized losses should not be realized as Global Atlantic intends to hold these investments until recovery of the losses.

Industry Context

The acquisition of Global Atlantic is part of KKR's strategy to expand its presence in the insurance and asset management sectors, aligning with the trend of private equity firms diversifying their holdings.

Comparison to Industry Standards

• KKR's acquisition of Global Atlantic is similar to other private equity firms acquiring insurance companies to gain access to long-term capital and diversify their revenue streams.
• Blackstone's acquisition of a majority stake in AIG's life and retirement business is a comparable transaction in the industry.
• The pro forma adjustments are in line with standard accounting practices for acquisitions, but the impact on KKR's financials is specific to the nature of Global Atlantic's investment portfolio.

Stakeholder Impact

• Shareholders will see an increase in earnings per share.
• The acquisition will result in a decrease in cash and stockholders' equity in the short term.
• The long-term impact will depend on the performance of Global Atlantic's investment portfolio.

Key Dates

Keywords

KKR, Global Atlantic, Acquisition, Financial Results, Net Income, Earnings Per Share, Stockholders Equity, Cash Equivalents, Pro Forma, Investment Portfolio