KKR & Co. Inc. (KKR)

[cyclone]

KKR's earnings more than double on higher management fees, asset sales

By Chibuike Oguh
November 2, 2021 6:07 PM +07

Nov 2 (Reuters) - KKR & Co Inc (KKR.N) said on Tuesday its third quarter distributable earnings more than doubled to $925.1 million, driven by strong growth in management fees and profit from asset sales in its private equity business.

KKR and other private equity firms have benefited from a flurry of mergers and acquisitions as the global economy recovers from the pandemic. Its peers Blackstone Inc (BX.N) and Carlyle Group Inc (CG.O) reported record earnings last month due to strong asset sales. read more

KKR said its after-tax distributable earnings per share doubled to $1.05, exceeding the average Wall Street analyst forecast of 93 cents, according to Refinitiv.

During the quarter, KKR said it generated $448 million as income from asset sales such as the divestment of its stake in supplement maker The Bountiful Company to the Swiss food giant Nestle SA (NESN.S) in a $5.75 billion deal.

KKR said it invested $24 billion to buy new assets, including a majority stake Indian cosmetics firm Vini Cosmetics for $625 million and the acquisition of several apartment buildings such as The District at Scottsdale in Arizona.

Under generally accepted accounting principles (GAAP), KKR said its net income rose 7% to $1.1 billion, largely due to revenue from its insurance subsidiary, Global Atlantic.

More details in https://www.reuters.com/business/finance...021-11-02/

[cyclone]

KKR boosts renewable power presence with $2.2 bln deal for ContourGlobal

Reporting by Sinchita Mitra in Bengaluru; Editing by Aditya Soni
May 17, 2022 2:12 PM GMT+7

May 17 (Reuters) - U.S. private-equity firm KKR (KKR.N) has agreed to buy London-listed power generation company ContourGlobal (GLO.L) for 1.75 billion pounds ($2.16 billion) in an effort to expand its presence in renewable energy.

Under the deal announced on Tuesday, KKR will pay 263.6 pence for each share of ContourGlobal. That represents a 36% premium to the company's closing price on Monday.

ContourGlobal, which operates 138 thermal and renewable power plants across Europe, Latin America, North America and Africa, will recommend that its shareholders accept the offer, KKR said.

The company will add to KKR's infrastructure investments that span industries such as renewables, utilities, transportation, water and communications.

More details in https://www.reuters.com/markets/deals/kk...022-05-17/

[weijian]

In the last Berkshire's AGM, my interest was pipped by Ajit Jain's criticism of private equity (PE) taking away his re-insurance business and he was happy to stay away. I therefore decided to take a look at the listed PE firms and it seems like only KKR makes an operating profit from its AUM business, while the others like Apollo Global Mgt and TPG have operating losses. Apollo Global Mgt and TPG only made net profits after the income/gains from its balance sheet investments topped its AUM operating losses.

From FY22-24, KKR insurance arm Global Atlantic's combined ratio was 180%, meaning for for every 100dollar in premiums it took, it costs 180dollars to underwrite (distribution costs + payouts). But after accounting for net investment income, Global Atlantic has a slight profit. In the larger context of the entire KKR group, it is minting money as it has a profitable AUM business (earns more in fees than it pays to GP employees) and a very captive insurance arm whom buys the products that it originates from its AUM business.

Inside the private equity-insurance nexus

Given that private equity groups are asset managers, the first thing control provides is the ability to appoint your own asset management arm to manage the assets. For a chunky fee.

For example, according to Securities and Exchange Commission filings, Global Atlantic Group paid KKR $536mn in 2024, while Athene Annuity and Life Company paid $1.3bn in management fees to Apollo. This is a handy captive, or at least semi-captive, stream of business.

You know who has a structural bid for these types of assets? That’s right, life and annuity insurers. Fixed income claims with credit ratings, that can be securitised on-balance sheet, and maybe reinsured — what’s not to like?

Does it really matter to anyone that private equity firms are gobbling up US life insurers, engaging in large-scale securitisation of their balance sheets, reinsuring liabilities in Bermuda, directing them to use affiliates to manage the assets, lending a fair chunk of the assets to portfolio companies, and making a ton of money in the process?

After all, it’s not only private equity-sponsored firms that engage in regulatory arbitrage balance sheet optimisation. It’s not unusual for any insurer to choose an affiliate to manage its portfolio. In fact, several of the world’s biggest asset managers are in practice subsidiaries of insurance companies — such as Legal & General’s LGIM, Prudential’s PGIM and Allianz’s Pimco. Lots of US life insurers have been using Bermuda to do funded reinsurance. And it’s not unknown for non-PE firms to pile into private credit, or even to lend to affiliated companies.

All that said, we can see why regulators and worrywart investors are taking a closer look at the whole nexus. And only time will tell as to how the mix of private credit, CLOs and offshore reinsurance delivers for PE-linked insurers the next time there is a downturn in the credit cycle, or some exogenous event that causes a jump in policy cancellations — and in the process testing the assumption that illiquidity is fine and dandy.

https://archive.ph/9Va0O