KKR Reports Strong Earnings Despite Private Equity Deal Slowdown

KKR Stock

KKR & Co. (NYSE:KKR) has posted better-than-expected earnings in the third quarter, bolstered by growth in its insurance unit, which helped offset a decline in private equity asset sales. As the broader private equity industry grapples with a slowdown in deal activity, alternative asset managers like KKR are turning to other business segments to maintain their financial performance.

The New York-based firm reported a 6.6% decline in distributable earnings compared to the same period last year, which was a smaller drop than analysts had anticipated. This better-than-expected performance can be attributed to a significant 24% increase in earnings from KKR’s insurance unit, which offset a more than one-third decrease in carried interest at its private equity division.

Following this positive financial report, KKR’s shares rose by 3.7% to $61.56 at 9:53 a.m. in New York.

KKR is not the only investment giant leaning on the resilience of non-deal-related business segments. Firms like Carlyle Group Inc. and Apollo Global Management Inc. are also relying on strong performances from areas such as credit and insurance to mitigate the impact of the industrywide slowdown in deal activity. In KKR’s case, the company has been meeting investor demand for direct lending strategies, raising an impressive $24 billion in new capital for its credit segment in the first nine months of the year. This figure is six times greater than what the company raised for its private equity segment.

KKR’s Co-Chief Executive Officers, Joseph Bae, and Scott Nuttall, expressed confidence in the diversity and growth of their business, stating, “Our results demonstrate the durability, diversity, and growth in our business. We are raising and deploying capital across all our businesses and regions.”

Fee-related earnings for the firm increased by 2.9% to $558 million, primarily due to higher management fees. While this figure fell slightly short of the $570 million predicted by analysts, it still reflects positive financial performance.

KKR managed to raise $14 billion in the three months ending September 30, contributing to total assets under management of $528 billion, a 6.5% increase since the same period last year. The firm also achieved successful final closes for its Next Generation Technology III and Global Impact II funds during the current quarter.

On the operational side, KKR’s asset management arm saw operating earnings decline by 9.3% to $869 million during the quarter, primarily due to fewer asset sales. In contrast, Global Atlantic, an insurance company in which KKR holds a majority stake, reported a 24% increase in operating earnings, reaching $210 million.

KKR’s shares have gained 28% year-to-date, although this slightly lags behind larger competitors like Blackstone Inc. and Apollo Global Management Inc.

Additional highlights from KKR’s third-quarter report include:

  • A 5% gain in KKR’s traditional private equity portfolio.
  • 3% gains in both the leveraged credit and alternative credit portfolios.
  • The firm had $99 billion of capital available for investment at the end of the quarter.

Featured Image: Freepik @ thongden_studio

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