8-K: KKR Reports Strong First Quarter 2024 Results Driven by Fee Growth and Strategic Acquisitions

KKR's first quarter 2024 results show significant year-over-year growth in key earnings metrics, driven by strong fee-related performance and the acquisition of Global Atlantic.

Summary

• KKR reported a solid first quarter in 2024, with over 20% year-over-year growth in Fee Related Earnings, Total Operating Earnings, and Adjusted Net Income.
• The company raised $31 billion in new capital during the quarter and closed the acquisition of the remaining stake in Global Atlantic.
• KKR now reports its financial results through three segments: Asset Management, Insurance, and Strategic Holdings.
• Fee Related Earnings (FRE) reached $669 million, a 22% increase year-over-year, and $2.5 billion for the last twelve months (LTM), up 19% year-over-year.
• Total Operating Earnings (TOE) were $962 million for the quarter, a 28% increase year-over-year, and $3.4 billion for the LTM, up 17% year-over-year.
• Adjusted Net Income (ANI) was $864 million for the quarter, a 20% increase year-over-year, and $3.2 billion for the LTM, down 2% year-over-year.
• Assets Under Management (AUM) totaled $578 billion, a 13% increase year-over-year, and Fee Paying Assets Under Management (FPAUM) reached $471 billion, also up 13% year-over-year.
• The company invested $14 billion in capital during the quarter and $48 billion in the LTM.
• A regular dividend of $0.175 per share was declared for the quarter, a 6% increase on an annualized basis from 2023.

Sentiment

Score: 9

Explanation: The document presents a very positive outlook with strong growth across key metrics, successful strategic acquisitions, and increased dividends. The company's future outlook is also optimistic, making it a highly positive report from an investment perspective.

Positives

• KKR experienced strong growth in Fee Related Earnings, Total Operating Earnings, and Adjusted Net Income.
• The acquisition of Global Atlantic is complete, adding a significant insurance component to KKR's business.
• The company successfully raised a substantial amount of new capital.
• Assets Under Management and Fee Paying Assets Under Management both saw double-digit growth.
• The dividend was increased, indicating confidence in future performance.
• The company has a diversified investment strategy across private equity, real assets, and credit.
• KKR's strategic holdings are expected to contribute significantly to earnings in the coming years.
• The company has a strong financial profile with an 'A' rating from S&P and Fitch.

Negatives

• Adjusted Net Income (ANI) for the last twelve months (LTM) decreased by 2% year-over-year.
• Net realized performance income decreased to $415.6 million in the LTM from $678.9 million in the prior LTM.
• Net realized investment income decreased to $490.9 million in the LTM from $813.1 million in the prior LTM.
• The company's expenses increased significantly due to the inclusion of Global Atlantic.
• There was a decrease in uncalled commitments from $106 billion to $98 billion.

Risks

• The company's performance is subject to market fluctuations and economic conditions.
• Changes in interest rates could impact the insurance business.
• The company's strategic holdings are subject to market and operational risks.
• There is a risk that the company may not achieve its projected growth targets for the Strategic Holdings segment.
• The company's performance is dependent on its ability to raise new capital and deploy it effectively.
• The company's performance is dependent on its ability to manage the investments in and operations of acquired companies and businesses.
• The company's performance is dependent on its ability to retain and motivate key personnel.

Future Outlook

KKR is well-positioned for long-term, sustained growth with three avenues: Asset Management, Insurance, and Strategic Holdings. The company expects Strategic Holdings Operating Earnings to reach $300+ million by 2026, $600+ million by 2028, and $1+ billion by 2030. Total Operating Earnings are expected to approximate 70% of Total Segment Earnings over time.

Management Comments

• We had a solid quarter with 20%+ year-overyear growth in Fee Related Earnings, Total Operating Earnings and Adjusted Net Income and raised $31 billion of new capital.
• We closed on the acquisition of the remaining stake in Global Atlantic and are now reporting our financial results through three segments: Asset Management, Insurance and Strategic Holdings.
• With three avenues for long-term, sustained growth as detailed at our April Investor Day we are well positioned for the years ahead.

Industry Context

This announcement reflects a trend in the alternative asset management industry towards diversification and expansion into insurance and strategic holdings. KKR's move to integrate Global Atlantic and create a Strategic Holdings segment aligns with this trend, aiming to create more stable and recurring revenue streams.

Comparison to Industry Standards

• KKR's 13% year-over-year growth in AUM is comparable to other large alternative asset managers like Blackstone and Apollo, which have also seen strong growth in recent years.
• The integration of Global Atlantic is similar to moves by other firms like Apollo, which has also expanded into the insurance sector to diversify its revenue streams.
• KKR's focus on perpetual capital is a strategy also employed by firms like Brookfield, which aims to create a more stable and predictable capital base.
• The growth in fee-related earnings is a key metric for alternative asset managers, and KKR's 22% year-over-year increase is a strong result compared to industry averages.
• KKR's strategic holdings segment is a unique approach, but similar to the private equity arms of large financial institutions that are looking to generate long term value from their investments.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and the company's strong financial performance.
• Employees will benefit from the company's growth and success.
• Customers will benefit from the company's expanded offerings and capabilities.
• Suppliers will benefit from the company's increased activity and investment.
• Creditors will benefit from the company's strong financial position.

Next Steps

• KKR will continue to focus on growing its three segments: Asset Management, Insurance, and Strategic Holdings.
• The company will continue to deploy capital across its various investment strategies.
• KKR will continue to monitor the performance of its strategic holdings and look for opportunities to grow this segment.
• The company will continue to evaluate opportunities for strategic acquisitions and partnerships.

Key Dates

Keywords

Asset Management, Insurance, Private Equity, Credit, Real Assets, Global Atlantic, Fee Related Earnings, Adjusted Net Income, Assets Under Management, Capital Raising, Strategic Holdings