KKR beats on profit as Berkshire-style unit cushions Global Atlantic slump

Earnings snapshot

KKR put up a stronger third quarter than Wall Street expected. The firm's preferred profit metric, adjusted net income, climbed to $1.65 billion, or $1.78 per share, beating the $1.57 consensus from a Bloomberg survey. Fee-related earnings, the portion driven by management and other fees, increased to $1.32 billion and also exceeded forecasts. Total operating earnings rose to $1.74 billion, ahead of estimates.

The stock gained as much as 2.8 percent to $99.19 in New York trading. Heading into the release, shares were down 24 percent this year amid questions about private credit and whether firms can exit investments and hand cash back to investors.

Assets under management reached $804 billion, up 11 percent in the quarter but a touch below the $814.8 billion expectation. KKR raised $25 billion of fresh capital and deployed $20 billion.

Strategic Holdings vs Global Atlantic

The Berkshire-inspired Strategic Holdings unit did the heavy lifting. Earnings for the unit were over three times higher than a year ago, reaching $191.6 million, helped by higher dividends from the portfolio. KKR said Strategic Holdings is central to its long-term plan and holds 19 companies. The firm forecasts the unit will produce in excess of $350 million of earnings in 2026, compared with about $232 million last year.

That strength helped counter a softer showing at Global Atlantic. Earnings at the insurance arm fell 24 percent, pressured by a $26 million item tied to its annual actuarial review and by expenses rising faster than investment income. A year ago, Global Atlantic booked a $41 million benefit.

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The company said it expects the deal to close before year end and to contribute $2 billion, or more than $2 per share, to fourth quarter adjusted net income.

Capital returns and management comments

KKR anticipates sending more than $40 billion back to clients this year, an amount that would surpass its prior peak by over 50 percent. From June 30 through Nov. 4, the firm bought back 6.2 million shares for $567 million at an average price of $92, and last week it authorized another $500 million of repurchases.

Co Chief Executive Officers Joe Bae and Scott Nuttall lead the firm.

Portfolio marks were mixed. The value of private equity holdings was flat in the quarter, infrastructure rose 4 percent, and alternative credit gained 3 percent. Opportunistic real estate declined 2 percent.

What it means for your portfolio

In plain English: fee and operating strength, plus Strategic Holdings, outweighed the insurance drag this quarter. The USI sale sets up a sizable fourth quarter boost to adjusted profit, and a larger capital return program indicates confidence in cash generation.

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