KKR & Co, Inc the global investment management firm that focuses on private equity, real estate and private credit and lending has in the past 7 years developed the strategy of owning insurance companies, namely Global Atlantic and using the insurance premiums proceeds as long-term investment capital for its private equity, real estate and private credit, according to Wolfteam Ltd.'s analysis.
The problem with private equity, real estate and private credit and the pension funds, endowments and insurance companies investing in such funds is that the capital is not completely permanent. The aforementioned institutional investors want their capital back in 7 to 10 years, usually.
So KKR & Co and other private equity funds by default operate in the mid-term by structuring funds with 7 to 10 years life span. This limits their investment results' potential.
KKR & Co decided to buy into Global Atlantic and use the insurance premiums as permanent capital for private equity, real estate and private credit of foreign funds and its proprietary investments. Here is the distribution of KKR & Co assets under management:
• AUM of $601 billion, up 16% year-over-year, with $32 billion of organic new capital raised in the quarter and $108 billion in the
LTM
• Fee Paying AUM of $487 billion, up 16% year-over-year, with $29 billion of organic new capital raised in the quarter and $109
billion in the LTM
• Perpetual Capital of $250 billion, up 25% year-over-year driven primarily by the organic growth of Global Atlantic. Perpetual
capital represents 42% of AUM and 50% of FPAUM
So called perpetual assets under management are the insurance premiums from KKR's Global Atlantic insurance subsidiary, which go also into private equity, real estate and private credit but are sort of a proprietary form of investment, This investment business model is modeled after the resounding success of Berkshire Hathaway, owned to a large part and managed by Warren Buffett. Berkshire Hathaway surpassed 1 trln. USD in market capitalization this past Friday.
So KKR's Global Atlantic makes for the lion share of KKR's revenue, before netting due to GAAP:
GAAP Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders was $0.7 billion for the quarter and
$1.4 billion YTD.
($ in thousands, except per share data) 2Q'23 2Q'24 2Q'23 YTD 2Q'24 YTD
Revenues
Asset Management and Strategic Holdings $ 1,451,344 $ 1,560,449 $ 2,577,378 $ 3,516,917
Insurance 2,175,174 2,611,461 4,176,622 10,311,731
Total Revenues $ 3,626,518 $ 4,171,910 $ 6,754,000 $ 13,828,648
Expenses
Asset Management and Strategic Holdings $ 970,293 $ 1,222,960 $ 1,781,801 $ 2,840,929
Insurance 2,152,189 2,723,369 4,200,764 10,418,344
Total Expenses $ 3,122,482 $ 3,946,329 $ 5,982,565 $ 13,259,273
Total Investment Income (Loss) - Asset Management and Strategic Holdings $ 946,977 $ 984,624 $ 1,088,013 $ 2,003,881
Income Tax E xpens e (B enefit) 324,955 216,969 473,702 486,170
R edeemable Noncontrolling Interes ts (1,740) 29,666 (9,043) 62,344
Noncontrolling Interes ts 266,086 295,644 193,083 674,602
P referred S tock D ividends 17,249 — 34,499 —
Net Income (Loss) - KKR Common Stockholders $ 844,463 $ 667,926 $ 1,167,207 $ 1,350,140
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock
Basic $ 0.98 $ 0.75 $ 1.36 $ 1.52
Diluted $ 0.94 $ 0.72 $ 1.32 $ 1.45
Weighted Average Shares of Common Stock Outstanding
Basic 861,553,274 887,394,513 861,332,121 886,200,169
Diluted 912,147,881 932,046,386 913,068,567 928,593,777
The Global Atlantic stable, almost perpetual stream of insurance premiums makes KKR very successful boasting 110 billion USD in market capitalization.
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