KKR & Co. reported growth in its insurance unit that eased a decline in private equity asset sales in the third quarter, as alternative-asset managers rely on other businesses amid an industrywide deal slowdown.
The New York firm’s distributable earnings fell 6.6% from a year earlier, a smaller decline than expected that was helped by a 24% jump in earnings from its insurance unit. That offset carried interest at its private equity division dropping by more than a third.
KKR shares rose 3.7% to $61.56 at 9:53 a.m. in New York.
Investing giants including Carlyle Group Inc. and Apollo Global Management Inc. are leaning on resilient performance from the non-deals sides of their businesses such as credit and insurance. KKR has been tapping investor demand for direct lending strategies, raising $24 billion of organic new capital in its credit segment in the first nine months of the year — six times what it has raised in private equity.
“Our results demonstrate the durability, diversity and growth in our business,” KKR Co-Chief Executive Officers Joseph Bae and Scott Nuttall said in a statement Tuesday. “We are raising and deploying capital across all our businesses and regions.”
Fee-related earnings rose 2.9% to $558 million on higher management fees, short of the $570 million that analysts predicted.
KKR raised $14 billion for the three months ended Sept. 30, helping boost total assets under management to $528 billion, an increase of 6.5% since the end of last year’s third quarter. The firm held final closes for its Next Generation Technology III and Global Impact II funds during the current quarter.
Operating earnings for KKR’s asset-management arm declined 9.3% during the quarter to $869 million due to fewer asset sales, while operating earnings for Global Atlantic, the insurance company in which KKR controls a majority stake, rose 24% to $210 million.
Shares of KKR have gained 28% this year, slightly trailing larger competitors Blackstone Inc. and Apollo Global Management Inc.
Other third-quarter highlights:
- KKR’s traditional private equity portfolio gained 5%
- The leveraged credit and alternative credit portfolios each gained 3%
- The firm had $99 billion of capital available to invest at quarter-end
--With assistance from Erin Fuchs.
(Adds shares in third paragraph)