Kohlberg Kravis Roberts 10-Qquarter ended 2026-09-30

Executive Summary

KKR earns investment-management fees and investment returns serving fund investors, while Global Atlantic sells retirement and insurance products to individuals and institutions. Its expansion extends beyond traditional private equity into credit, real assets, insurance and long-term company holdings. Q3 showed stronger fee earnings and asset-management profits, but weaker insurance profitability and investment marks: total segment earnings rose 23% while GAAP income before taxes fell 31%. For investors, the opportunity is a growing fee-paying investment base; the challenge is distinguishing that recurring growth from asset-sale gains, valuation swings and insurance costs.

What's Happening in the Business

KKR’s diversification is changing where it deploys capital. Traditional private equity now represents less than 25% of assets under management, versus more than 70% in 2010. During 9M, real-assets investment increased to $24.0B from $19.2B, while private-equity investment declined to $10.7B from $15.2B. Credit and liquid strategies remained the largest deployment destination at $31.4B, up 11%. These shifts broaden the sources of future fees and returns, although management cautions that investment timing is volatile.

The fee base continued expanding. Fee-paying assets under management reached $648B, up 1.5% Q/Q, supported by fundraising and Global Atlantic inflows. Management-fee growth also reflected appreciation in private-equity and infrastructure K-Series vehicles and funds added through the Arctos acquisition. Arctos closed on 5/4/2026 for accounting consideration of $560M; its post-acquisition results were immaterial.

Global Atlantic generated more new business without improving current profitability. Institutional-channel volumes reached $7.78B, more than double the prior year, while individual retirement volumes rose 7.4% to $3.29B. However, reserve growth, funding costs and unfavorable assumption changes outweighed higher investment income. Lower reported premiums therefore did not signal an across-the-board retreat in customer demand.

Key Financial Highlights

• Revenue mix: Asset Management and Strategic Holdings generated $1.76B in Q3, up 1.0%, and $5.99B over 9M, up 6.5%; Insurance generated $2.80B, down 26%, and $8.61B, up 6.3%.
• Asset Management earnings: Fee Related Earnings reached $1.32B, up 27%. Realized investment income rose to $150M from $4.4M, primarily from selling BridgeBio Pharma shares, while realized performance income fell 35% to $602M. The quarter therefore combined recurring fee growth with a concentrated realization benefit.
• Investment marks: Asset Management and Strategic Holdings investment-activity results swung from a $1.20B Q3 gain to a $(229)M loss, including a $230M partnership impairment. Strategic Holdings separately benefited from dividends and an Atlantic Aviation sale gain.
• Insurance economics: Over 9M, segment net investment income rose 8.4% to $5.80B, but net insurance costs increased 13% to $4.47B. The reserve assumption review contributed a $23M unfavorable impact versus a $63.9M favorable impact previously.
• Cash-flow scope: 9M OCF was $7.14B versus total net income (incl. noncontrolling interests) of $2.64B. Consolidated funds and insurance vehicles introduce substantial third-party flows, so this is not a clean measure of cash available to KKR shareholders.

Risk Assessment

• Insurance asset-liability exposure: Securities in unrealized-loss positions carried $9.65B of gross losses, while insurance contractholder deposits net of withdrawals turned negative; unexpected withdrawals could challenge Global Atlantic’s expectation that it can hold securities until recovery.
• Credit deterioration: Mortgage and other loans at least 90 days past due or in foreclosure rose to $696M from $318M, concentrated in commercial mortgages, increasing the threat of further provisions and losses.
• Valuation and realizations: $124B of Level III assets depend on significant unobservable inputs, exposing investment income and carried interest to valuation revisions and difficult exit markets.

This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.

What to Watch

• Fee-base expansion: Fee-paying assets reached $648B; subsequent growth accompanied by higher management fees would validate diversification, while redemptions or weak fundraising would undermine it.
• Insurance growth economics: Institutional new-business volumes more than doubled, but operating earnings fell; later filings should show whether that business adds investment income faster than insurance and funding costs.
• Earnings repeatability: BridgeBio Pharma and Atlantic Aviation sales supported segment results this quarter; sustained fee and holding-company income would strengthen earnings quality, while dependence on intermittent sales would weaken it.