KKR’s Q4 earnings beat analyst estimates

By Doug Bailey

Global fund manager KKR said a surge in management fees, assets under management, and new business growth in its insurance subsidiary, boosted fourth earnings that vastly blew past Wall Street estimates.

The corporation announced after tax earnings per share of $0.92, exceeding analyst estimates by $0.08 per share. Management fees, dubbed a “real bright spot” by KKR executives, rose to $706 million, up 5% compared to the previous quarter, 19% from last year’s fourth quarter, and up $28% year-over-year, to $2.7 billion from $2.12 billion. Total annual revenue $1.48 billion was up nearly 54% from last year.

Still the good news wasn’t enough to save the bottom line as asset sales declines in its private equity portfolio and lower transaction fees in its capital market division, pushed after-tax distributable earnings down 41%. The distributable earnings, which is the cash available to pay dividends to shareholders, fell to $822 million from $1.4 billion a year earlier.

Investment performance for the quarter was generally flat but KKR executives weren’t deterred by the otherwise strong showing.

“We continue to feel very good about the returns we’ve been generating on behalf of our clients,” said Craig Larson, head of investor relations at KKR. In terms of our balance sheet investments, performance was flat in the quarter and down 5% for the year, again, against a volatile backdrop.”

Private equity firms faced hurdles

KKR and many other private equity firms have had difficulty selling assets last year due to market fluctuations, inflation, impending recession and international pressures. KKR said its income from carried interest, which consists of profit from asset divestments, fell 66% to $194 million in the fourth quarter.

But KKR’s insurance segment was another bright spot. Global Atlantic generated $165 million of operating earnings, driven by an increase in invested assets from new business growth alongside a continued rotation into higher-yielding assets. This resulted in after-tax earnings of $822 million, or $0.92 per share.

“Going back to July 2020 at the announcement of the Global Atlantic acquisition, their assets under management was $72 billion,” said Rob Lewin, KKR’s chief financial officer. “Today, it’s close to $140 billion. So it’s grown about 2 times in the last 2.5 years.”

Lewin said KKR raised $81 billion of capital last year, the second most active year in its history.”

“All against a much more complex market backdrop and without significant contributions from our flagship strategies,” he said. “Over 70% of our fundraising last year came in our real assets and credit businesses, strategies that are often front of mind for our clients in rising interest rate as well as inflationary environments.”

KKR stock fell more than 1% Wednesday and was at $58.25 per share before the closing bell.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].